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Discovery Communications Reports Full Year And Fourth Quarter 2012 Results

February 14, 2013

SILVER SPRING, Md., Feb. 14, 2013 /PRNewswire/ —

Full Year 2012 Financial Highlights:

  • Revenues increased 8% to $4.487 billion
  • Adjusted OIBDA increased 9% to $2.095 billion
  • Repurchased 28.5 million shares for an aggregate purchase price of $1.38 billion

Discovery Communications, Inc. (“Discovery” or the “Company”) (NASDAQ: DISCA, DISCB, DISCK) today reported financial results for the full year and fourth quarter ended December 31, 2012.

David Zaslav, Discovery’s President and Chief Executive Officer said, “Discovery’s commitment to investing in our brands and developing new and diverse growth opportunities produced another year of strong operating momentum and financial results in 2012. The appeal of our content resulted in larger audiences across the globe, enabling us to deliver consistently healthy advertising growth both domestically and internationally, while we further leveraged our valuable programming across emerging distribution platforms worldwide. At the same time, the strength of our balance sheet allowed us to make several strategic investments that we believe further bolster our asset portfolio, while also returning over $1.3 billion to shareholders this year. We head into 2013 with significant momentum, having just delivered the highest fourth quarter domestic viewership in our history, and will continue to invest in strategic growth initiatives so that we can deliver sustained long-term financial results and shareholder value.”

Fourth Quarter Results

Fourth quarter revenues of $1,200 million increased $94 million, or 8%, over the fourth quarter a year ago, led by 15% growth at International Networks and 4% growth at U.S. Networks. Adjusted Operating Income Before Depreciation and Amortization ((1)) (“OIBDA”) grew 9% to $545 million, as a 17% increase at International Networks, despite the adverse impact of foreign currency fluctuations, and a 7% increase at U.S. Networks, more than offset strategic transaction related costs recognized in the quarter. Excluding foreign currency fluctuations, fourth quarter revenues increased 9% and Adjusted OIBDA increased 11%.

Fourth quarter net income from continuing operations available to Discovery Communications, Inc. stockholders of $224 million ($0.61 per diluted share) decreased $112 million compared to $336 million ($0.86 per diluted share) for the fourth quarter a year ago as the strong operating performance and improved equity earnings in the current year were more than offset primarily by higher taxes and increased mark-to-market equity-based compensation. The higher taxes were largely due to foreign tax credits recognized a year ago as well as an increase in tax reserves in the fourth quarter of 2012.

Free cash flow was $304 million for the fourth quarter, a decrease of $20 million from the fourth quarter of 2011, as improved operating performance was more than offset by higher content investment, interest and cash taxes. Free cash flow is defined as cash provided by operating activities less acquisitions of property and equipment.

Full Year Results

Full year 2012 revenues of $4,487 million increased $319 million, or 8%, over 2011 revenues, primarily driven by 13% growth at International Networks and 5% growth at U.S. Networks. Adjusted OIBDA grew 9% to $2,095 million, driven by an 8% increase at U.S. Networks and a 12% increase at International Networks. Excluding foreign currency fluctuations, full year revenues increased 9% and Adjusted OIBDA increased 12%.

Full year 2012 net income from continuing operations available to Discovery Communications, Inc. stockholders of $954 million ($2.51 per diluted share) decreased $181 million compared to $1,135 million ($2.80 per diluted share) a year ago as the strong operating performance in the current year was more than offset by the prior year inclusion of a $102 million, net of tax, gain from the contribution of the Discovery Health network to the OWN: Oprah Winfrey Network (“OWN”) joint venture as well as the recognition of foreign tax credits a year ago. Current year results also included increased mark-to-market equity-based compensation, higher interest expense and lower equity earnings as the Company began recording 100% of OWN’s net losses in 2012.

Free cash flow was $1,022 million for the full year, a decrease of $20 million from full year 2011, as better operating performance was more than offset by higher content investment, cash taxes and interest.

SEGMENT RESULTS

    (dollars in millions)         Three Months Ended December 31, Twelve Months Ended December 31,
                                  ------------------------------- --------------------------------
                                  2012                            2011 Change                      2012  2011         Change
                                  ----                            ---- ------                      ----  ----         ------

    Revenues:
       U.S. Networks                                    $703                    $677                  4%      $2,748         $2,619     5%
       International Networks                            462                     401                 15%       1,637          1,455    13%
       Education                                          35                      29                 21%         105             95    11%
       Corporate and Eliminations                          -                      (1)                NM           (3)            (1)   NM
                                                         ---                     ---                             ---            ---
    Total Revenues                                    $1,200                  $1,106                  8%      $4,487         $4,168     8%
                                                      ======                  ======                          ======         ======

    Adjusted OIBDA:
       U.S. Networks                                    $415                    $388                  7%      $1,622         $1,495     8%
       International Networks                            201                     172                 17%         721            645    12%
       Education                                          13                       8                 63%          27             25     8%
       Corporate and Eliminations                        (84)                    (69)              (22%)        (275)          (249) (10%)
                                                         ---                     ---                            ----           ----
    Total Adjusted OIBDA                                $545                    $499                  9%      $2,095         $1,916     9%
                                                        ====                    ====                          ======         ======

U.S. Networks

    (dollars in millions) Three Months Ended December 31, Twelve Months Ended December 31,
                          ------------------------------- --------------------------------
                           2012                          2011 Change                       2012  2011         Change
                           ----                          ---- ------                       ----  ----         ------
    Revenues:
       Distribution                           $288                   $282                     2%      $1,222         $1,180     4%
       Advertising                             397                    364                     9%       1,456          1,337     9%
       Other                                    18                     31                  (42%)          70            102  (31%)
                                               ---                    ---                                ---            ---
    Total Revenues                            $703                   $677                     4%      $2,748         $2,619     5%
                                              ====                   ====                             ======         ======

    Adjusted OIBDA                            $415                   $388                     7%      $1,622         $1,495     8%

    Adjusted OIBDA Margin                       59%                    57%                                59%            57%

Fourth Quarter Results

U.S. Networks’ revenues in the fourth quarter of 2012 increased 4% to $703 million driven by advertising and distribution revenue growth. Advertising revenue increased 9% primarily as a result of higher delivery and increased pricing, partially offset by the absence of non-recurring revenue items in the fourth quarter a year ago. Distribution revenue grew 2% largely from higher rates and subscriber growth primarily from networks carried on the digital tier, partially offset by additional licensing revenue in the fourth quarter of 2011. Excluding non-recurring advertising revenue items from the prior year’s quarter, advertising revenue grew 10% and excluding the impact from licensing revenue, distribution revenue grew 5%, compared to the fourth quarter a year ago. Other revenue decreased $13 million primarily due to lower revenue from services provided to unconsolidated equity method investees.

Adjusted OIBDA increased 7% to $415 million primarily reflecting 4% revenue growth and flat operating expenses as higher content amortization was offset by additional content costs in the fourth quarter of 2011 from a change in amortization rates at certain networks and higher content impairment charges. Excluding non-recurring revenue items and the additional content costs in the prior year, Adjusted OIBDA increased 5%.

Full Year Results

U.S. Networks’ revenues for the full year 2012 increased 5% to $2,748 million primarily driven by advertising and distribution growth. Advertising revenue increased 9% primarily as a result of higher pricing and increased delivery partially offset by the absence of non-recurring revenue items recognized in the prior year. Distribution revenue grew 4% largely from higher rates and subscriber growth primarily from networks carried on the digital tier, partially offset by additional licensing revenue in the prior year. Other revenue decreased $32 million primarily due to lower revenue from services provided to unconsolidated equity method investees.

Adjusted OIBDA increased 8% to $1,622 million primarily reflecting 5% revenue growth and flat operating expenses as increased content amortization in the current year was offset by additional content costs in the prior year from higher content impairment charges and changes in amortization rates at certain networks. Additionally, higher personnel costs were offset by lower expenses from services provided to unconsolidated equity method investees.

International Networks

    (dollars in millions) Three Months Ended December 31, Twelve Months Ended December 31,
                          ------------------------------- --------------------------------
                                                          2012                             2011  Change    2012    2011  Change
                                                          ----                             ----  ------    ----    ----  ------

    Revenues:
       Distribution                                       $253                             $225      12%   $984    $890      11%
       Advertising                                         185                              160      16%    580     514      13%
       Other                                                24                               16      50%     73      51      43%
                                                           ---                              ---             ---     ---
    Total Revenues                                        $462                             $401      15% $1,637  $1,455      13%
                                                          ====                             ====          ======  ======

    Adjusted OIBDA                                        $201                             $172      17%   $721    $645      12%

    Adjusted OIBDA Margin                                   44%                              43%             44%     44%

Fourth Quarter Results

International Networks’ revenues for the fourth quarter increased 15% to $462 million primarily led by distribution revenue growth of 12% and advertising revenue growth of 16%. Excluding the impact of foreign currency fluctuations, total revenues increased 18%. Distribution revenue, excluding foreign currency fluctuations as well as lower launch support amortization, grew 12% mainly from increased subscribers in Latin America and CEEMEA. Advertising revenue in local currency terms was up 18% during the fourth quarter primarily from higher pricing across most regions and strong growth on new and existing free to air networks in Western Europe. Other revenue was $8 million higher primarily due to revenue from a production company acquired in the fourth quarter of 2011.

Adjusted OIBDA increased 17% to $201 million reflecting the 15% revenue growth, partially offset by a 10% increase in operating expenses. Excluding the impact of foreign currency and higher content impairment charges taken in the fourth quarter a year ago, Adjusted OIBDA grew 18% as the 18% revenue growth was partially offset by increased operating expenses primarily from higher content amortization, marketing and personnel costs.

Full Year Results

International Networks’ revenues for the full year increased 13% to $1,637 million primarily led by distribution revenue growth of 11% and advertising revenue growth of 13%. Excluding the impact of foreign currency fluctuations, total revenues increased 18%. Distribution revenue, excluding foreign currency fluctuations and lower launch support amortization, grew 12% mainly from increased subscribers in Latin America, CEEMEA and Asia Pacific. Advertising revenue in local currency terms was up 19% during the full year 2012 primarily from higher pricing across most regions and strong growth on new and existing free to air networks in Western Europe. Other revenue was $22 million higher primarily due to revenue from a production company acquired in the fourth quarter of 2011.

Adjusted OIBDA increased 12% to $721 million reflecting the 13% revenue growth, partially offset by a 9% increase in operating expenses. Excluding the impact of foreign currency, Adjusted OIBDA grew 18% as the revenue growth was partially offset by higher operating expenses primarily due to higher content amortization and increased personnel costs.

Education

    (dollars in millions) Three Months Ended December 31, Twelve Months Ended December 31,
                          ------------------------------- --------------------------------
                                  2012                    2011            Change           2012  2011  Change
                                  ----                    ----            ------           ----  ----  ------

    Revenues                       $35                     $29                        21%  $105   $95         11%

    Adjusted OIBDA                 $13                      $8                        63%   $27   $25          8%

    Adjusted OIBDA Margin           37%                     28%                              26%   26%

Fourth Quarter Results

Education revenue for the fourth quarter increased $6 million to $35 million and Adjusted OIBDA increased $5 million to $13 million, mainly reflecting increased licensing fees as well as higher subscription and corporate partnership revenue.

Full Year Results

Education revenue for full year 2012 increased 11% to $105 million and Adjusted OIBDA increased 8%, driven by increased licensing fees as well as higher subscription and corporate partnership revenue, partially offset by increased personnel costs.

Corporate and Eliminations

Adjusted OIBDA decreased $15 million when compared to the fourth quarter a year ago and decreased $26 million compared to full year 2011, primarily due to strategic transaction costs.

STOCK REPURCHASE

During the quarter, the Company, pursuant to its existing stock repurchase program, repurchased 4.14 million shares of its common stock for an aggregate purchase price of approximately $234 million, including 3.77 million shares of its Series C common stock at an average price of $55.96 per share and 0.37 million shares of its Series A common stock at an average price of $60.44 per share. For the full year 2012, the Company repurchased a total of 28.53 million shares of its common stock for an aggregate purchase price of approximately $1,380 million, including 26.54 million shares of its Series C common stock at an average price of $47.88 per share and 1.99 million shares of its Series A common stock at an average price of $54.67 per share.

The Company has repurchased 56.69 million shares of Series C common stock and 1.99 million shares of Series A common stock under its $4.0 billion stock repurchase program to date at an aggregate purchase price of approximately $2.37 billion and $109 million respectively. In the aggregate, including the 13.73 million preferred shares acquired from Advance/Newhouse Programming Partnership, the Company has repurchased 17% of the outstanding shares of its capital stock since buyback activity was authorized in 2010. Under the stock repurchase program, management is authorized to purchase shares from time to time through open market purchases at prevailing prices or privately negotiated transactions, subject to market conditions and other factors.

OTHER ITEMS

In December 2012, the Company announced a definitive agreement with the ProSiebenSat.1 Group to purchase the Nordic television and radio business operations for a total enterprise value of approximately $1.7 billion. The transaction is expected to close in the first quarter of 2013.

On December 21, 2012, the Company acquired 20% equity ownership interests in Eurosport and a portfolio of TF1 pay television channels network for a total of $264 million, including transaction costs.

FULL YEAR 2013 OUTLOOK

For the full year ending December 31, 2013, Discovery Communications, Inc. expects total revenue between $5.575 billion and $5.700 billion, Adjusted OIBDA between $2.425 billion and $2.525 billion, and net income available to Discovery Communications, Inc. stockholders of $1.200 billion to $1.300 billion. Our outlook assumes the acquisition of the SBS Nordic operations closes during the first quarter of 2013, incorporates current foreign exchange rates for revenues and expenses and the current share price for mark-to-market equity-based compensation calculations.

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 OIBDA. Adjusted OIBDA is defined as revenues less costs of revenues and selling, general and administrative expenses excluding: (i) mark-to-market equity-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 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 equity-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. The Company also excludes 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.

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, and not as a substitute for, operating income, net income 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 8:30 a.m. ET to discuss its fourth quarter and full year results. To listen to the call, visit http://www.discoverycommunications.com or dial 1-866-700-6293 inside the U.S. or 1-617-213-8835 outside of the U.S., using the following passcode: 38272747.

Cautionary Statement Concerning Forward-Looking Statements

This press release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are 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 17, 2012. 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 2013 outlook, plans for stock repurchases and statements regarding the anticipated completion of pending acquisitions. The Company expressly disclaims any obligation or undertaking to update or revise 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.
                                                                          CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                   (unaudited; in millions, except per share amounts)

                                                                                                                 Three Months Ended           Twelve Months Ended
                                                                                                                    December 31,                 December 31,
                                                                                                                    ------------                 ------------
                                                                                                                          2012           2011                       2012    2011
                                                                                                                          ----           ----                       ----    ----

    Revenues:
    Distribution                                                                                                          $541           $507                     $2,206  $2,070
    Advertising                                                                                                            582            524                      2,037   1,852
    Other                                                                                                                   77             75                        244     246
                                                                                                                           ---            ---                        ---     ---
    Total revenues                                                                                                       1,200          1,106                      4,487   4,168
                                                                                                                         -----          -----                      -----   -----

    Costs and expenses:
        Costs of revenues, excluding depreciation and amortization                                                         328            316                      1,218   1,176
        Selling, general and administrative                                                                                359            316                      1,291   1,171
        Depreciation and amortization                                                                                       30             29                        117     117
        Restructuring and impairment charges                                                                                 2             23                          6      30
        Gain on disposition                                                                                                  -              -                          -    (129)
                                                                                                                           ---            ---                        ---    ----
    Total costs and expenses                                                                                               719            684                      2,632   2,365
                                                                                                                           ---            ---                      -----   -----

    Operating income                                                                                                       481            422                      1,855   1,803

    Interest expense                                                                                                       (64)           (54)                      (248)   (208)
    Other expense, net                                                                                                     (12)           (22)                       (89)    (32)
                                                                                                                           ---            ---                        ---     ---

    Income from continuing operations before income taxes                                                                  405            346                      1,518   1,563
    Provision for income taxes                                                                                            (181)            (9)                      (562)   (427)
                                                                                                                          ----            ---                       ----    ----

    Income from continuing operations, net of taxes                                                                        224            337                        956   1,136
    Loss from discontinued operations, net of taxes                                                                          -              -                        (11)     (3)
                                                                                                                           ---            ---                        ---     ---

    Net income                                                                                                             224            337                        945   1,133
    Net income attributable to noncontrolling interests                                                                      -             (1)                        (2)     (1)
                                                                                                                           ---            ---                        ---     ---

    Net income available to Discovery Communications, Inc.                                                                $224           $336                       $943  $1,132
    stockholders

    Income per share from continuing operations available to
    Discovery Communications, Inc. stockholders:
    Basic                                                                                                                $0.61          $0.86                      $2.54   $2.83
                                                                                                                         =====          =====                      =====   =====
    Diluted                                                                                                              $0.61          $0.86                      $2.51   $2.80
                                                                                                                         =====          =====                      =====   =====

    Loss per share from discontinued operations available to
    Discovery Communications, Inc. stockholders:
    Basic                                                                                                           $        -        $     -                     $(0.03) $(0.01)
                                                                                                                  ===      ===      ===   ===                     ======  ======
    Diluted                                                                                                         $        -        $     -                     $(0.03) $(0.01)
                                                                                                                  ===      ===      ===   ===                     ======  ======

    Net income per share available to Discovery
    Communications, Inc. stockholders:
    Basic                                                                                                                $0.61          $0.86                      $2.51   $2.82
                                                                                                                         =====          =====                      =====   =====
    Diluted                                                                                                              $0.61          $0.86                      $2.48   $2.80
                                                                                                                         =====          =====                      =====   =====
    Weighted average shares outstanding:
    Basic                                                                                                                  366            391                        376     401
                                                                                                                           ===            ===                        ===     ===
    Diluted                                                                                                                369            393                        380     405
                                                                                                                           ===            ===                        ===     ===

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

                         December 31,                         December 31,
                                 2012                                 2011
                                 ----                                 ----

    ASSETS
    Current
     assets:
    Cash and
     cash
     equivalents                                      $1,201                $1,048
     Receivables,
     net                                               1,130                 1,042
    Content
     rights,
     net                                                 122                    93
    Deferred
     income
     taxes                                                74                    73
    Prepaid
     expenses
     and other
     current
     assets                                              203                   175
                                                         ---                   ---
    Total
     current
     assets                                            2,730                 2,431

    Noncurrent
     content
     rights,
     net                                               1,555                 1,302
    Property
     and
     equipment,
     net                                                 388                   379
    Goodwill                                           6,399                 6,291
    Intangible
     assets,
     net                                                 611                   571
    Equity
     method
     investments                                       1,095                   807
    Other
     noncurrent
     assets                                              152                   132
                                                         ---                   ---
    Total
     assets                                          $12,930               $11,913
                                                     =======               =======

    LIABILITIES
     AND EQUITY
    Current
     liabilities:
    Accounts
     payable                                             $71                   $53
    Accrued
     expenses
     and other
     current
     liabilities                                         721                   554
    Deferred
     revenues                                            123                   113
    Current
     portion of
     long-term
     debt                                                 31                    26
                                                         ---                   ---
    Total
     current
     liabilities                                         946                   746

    Long-term
     debt                                              5,212                 4,219
    Deferred
     income
     taxes                                               272                   337
    Other
     noncurrent
     liabilities                                         207                    92
                                                         ---                   ---
    Total
     liabilities                                       6,637                 5,394

    Equity:
    Preferred
     stock                                                 2                     2
    Common
     stock                                                 3                     3
    Additional
     paid-in
     capital                                           6,689                 6,505
    Treasury
     stock, at
     cost                                             (2,482)               (1,102)
    Retained
     earnings                                          2,075                 1,132
    Accumulated
     other
     comprehensive
     income
     (loss)                                                4                   (23)
                                                         ---                   ---
        Total
         Discovery
         Communications,
         Inc.
         stockholders'
         equity                                        6,291                 6,517
         Noncontrolling
         interests                                         2                     2
                                                         ---                   ---
    Total
     equity                                            6,293                 6,519
                                                       -----                 -----
    Total
     liabilities
     and equity                                      $12,930               $11,913
                                                     =======               =======

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

                                                                                                                        Twelve Months Ended
                                                                                                                           December 31,
                                                                                                                         -------------------
                                                                                                                                 2012          2011
                                                                                                                                 ----          ----

    OPERATING ACTIVITIES
    Net income                                                                                                                   $945        $1,133
    Adjustments to reconcile net income to cash provided by operating activities:
    Equity-based compensation expense                                                                                             154            99
    Depreciation and amortization                                                                                                 117           119
    Content amortization and impairment expense                                                                                   865           846
    Loss (gains) on dispositions                                                                                                    6          (129)
    Equity in losses and distributions from investee companies                                                                    106            65
    Deferred income tax (benefit) expense                                                                                         (70)           40
    Other, net                                                                                                                     32            69
        Changes in operating assets and liabilities:
       Receivables, net                                                                                                           (59)         (179)
       Content rights                                                                                                          (1,091)         (884)
       Accounts payable and accrued liabilities                                                                                   171             6
       Equity-based compensation liabilities                                                                                      (45)         (126)
       Income tax receivable                                                                                                      (11)           72
       Other, net                                                                                                                 (21)          (31)
    Cash provided by operating activities                                                                                       1,099         1,100

    INVESTING ACTIVITIES
    Purchases of property and equipment                                                                                           (77)          (58)
    Business acquisitions, net of cash acquired                                                                                  (149)          (26)
    Distributions from equity method investees                                                                                     17            21
    Investments in and advances to equity method investees                                                                       (404)         (151)
    Other investing activities, net                                                                                               (30)            -
                                                                                                                                  ---           ---
    Cash used in investing activities                                                                                            (643)         (214)

    FINANCING ACTIVITIES
    Borrowings from long term debt, net of discount and issuance costs                                                            981           639
    Principal repayments of capital lease obligations                                                                             (22)          (20)
    Repurchases of common stock                                                                                                (1,380)         (997)
    Proceeds from issuance of common stock in connection with equity-based plans                                                   81            60
    Excess tax benefits from equity-based compensation                                                                             38            28
    Other financing activities, net                                                                                                (3)           (7)
                                                                                                                                  ---           ---
    Cash used in financing activities                                                                                            (305)         (297)

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

    NET CHANGE IN CASH AND CASH EQUIVALENTS                                                                                       153           582
     Cash and cash equivalents, beginning of period                                                                             1,048           466
                                                                                                                                -----           ---
    CASH AND CASH EQUIVALENTS, END OF PERIOD                                                                                   $1,201        $1,048
                                                                                                                               ======        ======

                                                                                       DISCOVERY COMMUNICATIONS, INC.
                                                                                        SUPPLEMENTAL FINANCIAL DATA
                                                                             RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE
                                                                                       DEPRECIATION AND AMORTIZATION
                                                                                          (unaudited; in millions)

                                         Three Months Ended December 31, 2012
                                         ------------------------------------
                                   Adjusted                                Depreciation                            Amortization of            Mark-to-Market          Other (a)       Operating
                                   Operating                                   and                                 Deferred Launch             Equity-Based                            Income
                                 Income Before                             Amortization                              Incentives                Compensation
                               Depreciation and
                                 Amortization
                                 ------------

    U.S. Networks                                        $415                                  $(4)                                      $(2)                $     -             $(1)           $408
    International Networks                                201                                  (13)                                       (3)                      -               -             185
    Education                                              13                                   (1)                                        -                       -               -              12
    Corporate and Eliminations                            (84)                                 (12)                                        -                     (27)             (1)           (124)
                                                          ---                                  ---                                       ---                     ---             ---            ----
           Total                                         $545                                 $(30)                                      $(5)                   $(27)            $(2)           $481
                                                         ====                                 ====                                       ===                    ====             ===            ====

                                       Three Months Ended December 31, 2011
                                       ------------------------------------
                                   Adjusted                                                                        Amortization of            Mark-to-Market          Other (a)       Operating
                                   Operating                                                                 Deferred Launch Incentives        Equity-Based                            Income
                                 Income Before                             Depreciation                                                        Compensation
                               Depreciation and                                and
                                 Amortization                              Amortization
                                 ------------                              ------------

    U.S. Networks                                        $388                                  $(3)                                      $(3)                 $    -            $(21)           $361
    International Networks                                172                                  (10)                                      (10)                      -              (1)            151
    Education                                               8                                   (1)                                        -                       -               -               7
    Corporate and Eliminations                            (69)                                 (15)                                        -                     (12)             (1)            (97)
                                                          ---                                  ---                                       ---                     ---             ---             ---
           Total                                         $499                                 $(29)                                     $(13)                   $(12)           $(23)           $422
                                                         ====                                 ====                                      ====                    ====            ====            ====

    (a)            For the three months ended
                   December 31, 2012, amount
                   represents restructuring
                   charges of $2 million. For the
                   three months ended December 31,
                   2011, amounts represent asset
                   impairments of $20 million and
                   restructuring charges of $3
                   million.

                                                                                       DISCOVERY COMMUNICATIONS, INC.
                                                                                        SUPPLEMENTAL FINANCIAL DATA
                                                                             RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE
                                                                                       DEPRECIATION AND AMORTIZATION
                                                                                      (unaudited; amounts in millions)

                                        Twelve Months Ended December 31, 2012
                                        -------------------------------------
                                   Adjusted                                Depreciation                            Amortization of            Mark-to-Market         Other (a)       Operating
                                   Operating                                   and                                 Deferred Launch             Equity-Based                           Income
                                 Income Before                             Amortization                              Incentives                Compensation
                               Depreciation and
                                 Amortization
                                 ------------

    U.S. Networks                                      $1,622                                 $(13)                                      $(9)                $    -             $(3)           $1,597
    International Networks                                721                                  (47)                                      (11)                     -              (1)              662
    Education                                              27                                   (2)                                        -                      -               -                25
    Corporate and Eliminations                           (275)                                 (55)                                        -                    (97)             (2)             (429)
                                                         ----                                  ---                                       ---                    ---             ---              ----
           Total                                       $2,095                                $(117)                                     $(20)                  $(97)            $(6)           $1,855
                                                       ======                                =====                                      ====                   ====             ===            ======

                                      Twelve Months Ended December 31, 2011
                                      -------------------------------------
                                   Adjusted                                                                        Amortization of            Mark-to-Market         Other (a)       Operating
                                   Operating                                                                 Deferred Launch Incentives        Equity-Based                           Income
                                 Income Before                             Depreciation                                                        Compensation
                               Depreciation and                                and
                                 Amortization                              Amortization
                                 ------------                              ------------

    U.S. Networks                                      $1,495                                 $(15)                                     $(10)                $    -            $105            $1,575
    International Networks                                645                                  (43)                                      (42)                     -              (3)              557
    Education                                              25                                   (3)                                        -                      -               -                22
    Corporate and Eliminations                           (249)                                 (56)                                        -                    (43)             (3)             (351)
                                                         ----                                  ---                                       ---                    ---             ---              ----
           Total                                       $1,916                                $(117)                                     $(52)                  $(43)            $99            $1,803
                                                       ======                                =====                                      ====                   ====             ===            ======

    (a)            For the twelve months ended
                   December 31, 2012 amounts
                   represent restructuring charges
                   of $6 million.  For the twelve
                   months ended December 31, 2011,
                   amounts represent a pre-tax
                   gain of $129 million as a
                   result of contributing
                   Discovery Health to the OWN
                   joint venture and asset
                   impairments of $20 million and
                   restructuring charges of $10
                   million.

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

    CALCULATION OF FREE CASH FLOW
                                          Three Months Ended December 31,                 Twelve Months Ended December 31,
                                          -------------------------------                 --------------------------------
                                           2012             2011              Change                2012            2011   Change
                                           ----             ----              ------                ----            ----   ------

    Cash provided by operating activities          $328                         $340                       $(12)            $1,099  $1,100   $(1)
    Acquisition of property and equipment           (24)                         (16)                        (8)               (77)    (58)  (19)
                                                    ---                          ---                        ---                ---     ---   ---
    Free cash flow                                 $304                         $324                       $(20)            $1,022  $1,042  $(20)
                                                   ====                         ====                       ====             ======  ======  ====

    RECONCILIATION OF 2013 OUTLOOK TO GAAP MEASURES

                                                                                                        Full Year 2013
                                                                                                        --------------
    Net income available to Discovery Communications, Inc. stockholders                                         $1,200 To $1,300
    Interest expense, net                                                                                          305 To    295
    Depreciation and amortization                                                                                  135 To    125
    Other expense, including amortization of deferred launch incentives, mark-to-market equity-based               785 To    805
      compensation, asset impairment, exit and restructuring costs, gains (losses) on business
      disposition, gains (losses) on sale of securities, equity earnings (losses) in unconsolidated
      affiliates, unrealized and realized gains (losses) from derivatives, income tax expense, net loss
      (income) attributable to noncontrolling interests, and stock dividends to preferred interests
    Adjusted OIBDA                                                                                              $2,425 To $2,525
                                                                                                                ======    ======

    NET INCOME AVAILABLE TO DISCOVERY COMMUNICATIONS, INC. STOCKHOLDERS

                                                                           Three Months             Twelve Months
                                                                        Ended December 31,       Ended December 31,
                                                                        ------------------       ------------------
                                                                           2012            2011    2012              2011
                                                                           ----            ----    ----              ----

    Income from continuing operations, net of taxes                        $224            $337    $956            $1,136
    Net income attributable to noncontrolling interests                       -              (1)     (2)               (1)
                                                                            ---             ---     ---               ---

    Net income from continuing operations available to Discovery            224             336     954             1,135
    Communications, Inc. stockholders
    Loss from discontinued operations, net of taxes                           -               -     (11)               (3)
                                                                            ---             ---     ---               ---

    Net income available to Discovery Communications, Inc. stockholders    $224            $336    $943            $1,132
                                                                           ====            ====    ====            ======

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

    BORROWINGS
                                           December 31,
                                           2012
                                          ------------
    3.70% Senior Notes, semi-annual
     interest, due June 2015                                $850
    5.625% Senior Notes, semi-annual interest,
     due August 2019                                         500
    5.05% Senior Notes, semi-annual interest, due
     June 2020                                             1,300
    4.375% Senior Notes, semi-annual interest,
     due June 2021                                           650
    3.30% Senior Notes, semi-annual interest due
     May 2022                                                500
    6.35% Senior Notes, semi-annual interest, due
     June 2040                                               850
    4.95% Senior Notes, semi-annual interest due
     May 2042                                                500
    Capital lease obligations                                110
                                                             ---
    Total long-term debt                                   5,260
    Unamortized discount                                     (17)
                                                             ---
    Long-term debt, net                                    5,243
    Current portion of long-term debt                        (31)
                                                             ---
    Noncurrent portion of long-term debt                  $5,212
                                                          ======

    EQUITY-BASED COMPENSATION
                                                                                   December 31, 2012
                                                                                   -----------------
                                                                     Total Units Outstanding          Weighted                  Vested Units                      Weighted
                                                        Long-Term         (in millions)                Average                   Outstanding                      Average
                                                     Incentive Plans                                 Grant Price                (in millions)                   Grant Price
                                                     ---------------                                 -----------                ------------                    -----------

    Discovery Appreciation Plan                                                               3.1                       $34.78                              --              $           --

    Stock Appreciation Rights                                                                 1.8                        41.13                              --                          --

    Stock Options                                                                             9.0                        28.53                             5.4                       21.08

    Performance-based Restricted Stock Units                                                  2.1                        39.23                              --                          --

    Service-based Restricted Stock Units                                                      0.8                        40.82                              --                          --
                                                                                              ---                                                          ---
          Total Equity-based Compensation Plans                                              16.8                       $32.96                             5.4                      $21.08
                                                                                             ----                                                          ---

    SHARE COUNT ROLL FORWARD                                                                                     Common                       Preferred                       Total
    ------------------------                                                                                     ------                       ---------                       -----
    (Basic shares, in millions)
    Total shares outstanding as of December 31, 2011                                                                    260.37                          127.46                      387.83
      Shares repurchased                                                                                                (28.53)                             --                      (28.53)
      Shares issued - equity-based compensation                                                                           4.92                              --                        4.92
      Conversion of shares                                                                                                8.41                           (8.41)                         --
                                                                                                                          ----                           -----                         ---
    Total shares outstanding as of December 31, 2012                                                                    245.17                          119.05                      364.22

SOURCE Discovery Communications, Inc.


Source: PR Newswire