Discovery Communications Reports First Quarter 2013 Results

         Discovery Communications Reports First Quarter 2013 Results

PR Newswire

SILVER SPRING, Md., May 7, 2013

SILVER SPRING, Md., May 7, 2013 /PRNewswire/ --

First Quarter 2013 Financial Highlights:

  oRevenues increased 7% to $1,156 million
  oAdjusted OIBDA decreased to $498 million (up 8% excluding licensing
    agreements and foreign currency)
  oNet income increased 4% to $231 million

Discovery Communications, Inc. ("Discovery" or the "Company") (NASDAQ: DISCA,
DISCB, DISCK) today reported financial results for the first quarter ended
March 31, 2013.

David Zaslav, Discovery's President and Chief Executive Officer said, "The
significant operating momentum Discovery generated throughout 2012 continued
unabated in the first quarter with more and more audiences around the globe
viewing our unique programming. The sustained investment we have made in
developing compelling content, along with the quality of our brands,
translated into further market share gains, with record first quarter
viewership at our domestic networks and 16% audience growth across our
international portfolio. As we continue to invest in the organic growth
opportunities our diverse distribution platform provides, we have also
completed several strategic acquisitions which we expect will further broaden
our asset mix around the world and bolster our long-term growth prospects.
2013 is off to a great start and with continued focus on strong operating
execution, we anticipate building on the financial success we have achieved
over the last several years while delivering significant shareholder value."

First Quarter Results

First quarter revenues of $1,156 million were up $71 million, or 7%, compared
to the first quarter a year ago, led by 17% growth at International Networks
and 1% growth at U.S. Networks which included the impact of additional
licensing revenues in the prior year. Adjusted Operating Income Before
Depreciation and Amortization ^(1) ("OIBDA") declined by 2% to $498 million,
as an 8% increase at International Networks was offset by a decrease of 5% at
U.S. Networks due to the additional licensing revenue in last year's quarter.
Excluding the impact of licensing agreements and foreign currency, total
company revenues increased 12% and Adjusted OIBDA increased 8%.

First quarter net income available to Discovery Communications, Inc.
stockholders of $231 million ($0.63 per diluted share) increased $10 million
compared to $221 million ($0.57 per diluted share) for the first quarter a
year ago, primarily due to the strong underlying operating performance in the
current year's quarter as well as a $92 million gain associated with the
consolidation of Discovery Japan and $46 million of improved equity earnings,
partially offset by higher taxes, increased mark-to-market equity-based
compensation and $59 million of losses from hedging activities primarily
associated with the acquisition of the SBS Nordic operations.

Free cash flow was $105 million for the first quarter, a decrease of $122
million from the first quarter of 2012, due to higher content investment as
well as increased tax and long-term incentive compensation payments. 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 millions)         Three Months Ended March 31,
                                 2013        2012   Change
Revenues:
 U.S. Networks              $  686      $  681    1%
 International Networks        444         380    17%
 Education                     27          24     13%
 Corporate and Eliminations    (1)         —      NM
Total Revenues                $  1,156    $  1,085  7%
Adjusted OIBDA:
 U.S. Networks              $  377      $  395    (5%)
 International Networks        184         171    8%
 Education                     7           6      17%
 Corporate and Eliminations    (70)        (64)   (9%)
Total Adjusted OIBDA          $  498      $  508    (2%)



U.S. Networks
(dollars in millions) Three Months Ended March 31,
                         2013       2012    Change
Revenues:
 Distribution       $  308     $  337     (9%)
 Advertising           356        329     8%
 Other                 22         15      47%
Total Revenues        $  686     $  681     1%
Adjusted OIBDA        $  377     $  395     (5%)
Adjusted OIBDA Margin    55%        58%

First Quarter Results

U.S. Networks' revenues in the first quarter of 2013 increased 1% to $686
million, as advertising growth was mostly offset by a decline in distribution
revenue. Advertising revenue increased 8% primarily as a result of higher
delivery and increased pricing. Distribution revenue decreased 9% as higher
rates and subscriber growth primarily from networks carried on the digital
tier were more than offset by additional revenues from licensing agreements in
the first quarter of 2012. Excluding the $45 million impact from licensing
revenues, distribution revenues grew 6% and total revenues grew 8% compared
with the first quarter a year ago.

Adjusted OIBDA decreased 5% to $377 million, primarily reflecting the impact
of licensing agreements in the prior year as well as higher operating
expenses, mainly due to increased content amortization and personnel costs.
Excluding the impact of licensing agreements, Adjusted OIBDA grew 6% over last
year's first quarter.

International Networks
(dollars in millions) Three Months Ended March 31,
                         2013       2012    Change
Revenues:
 Distribution       $  275     $  239     15%
 Advertising           152        124     23%
 Other                 17         17      0%
Total Revenues        $  444     $  380     17%
Adjusted OIBDA        $  184     $  171     8%
Adjusted OIBDA Margin    41%        45%

First Quarter Results

International Networks' revenues for the first quarter increased 17% to $444
million primarily led by advertising revenue growth of 23% and distribution
revenue growth of 15%. Excluding foreign currency fluctuations, total
revenues were up 18%. Distribution revenue in local currency terms grew 16%
mainly from increased subscribers across a majority of international regions,
most notably Latin America, as well as from additional contributions due to
the consolidation of Discovery Japan. Advertising revenue excluding foreign
currency was up 25% primarily due to higher pricing and increased viewership
across most international markets as well as from contributions from newly
acquired networks in Western Europe.

Adjusted OIBDA increased 8% to $184 million, reflecting the 17% revenue growth
partially offset by a 24% increase in operating expenses. The higher
operating expenses were primarily due to increased content amortization and
personnel costs as well as expenses associated with consolidating Discovery
Japan and the acquisition of new networks in Western Europe. Excluding
foreign currency, Adjusted OIBDA was up 13% over the prior year's quarter.

Education
(dollars in millions) Three Months Ended March 31,
                         2013       2012    Change
Revenues              $  27      $  24      13%
Adjusted OIBDA        $  7       $  6       17%
Adjusted OIBDA Margin    26%        25%

First Quarter Results

Education revenues increased $3 million and Adjusted OIBDA increased $1
million from the first quarter of 2012, mainly reflecting increased streaming
volumes as well as higher digital textbook sales.

Corporate and Eliminations

For the first quarter of 2013 Adjusted OIBDA decreased $6 million, primarily
due to increased compensation expense and additional costs associated with the
acquisition of the SBS Nordic operations.

OTHER ITEMS

In March 2013, Discovery Communications, LLC, a subsidiary of the Company,
completed the issuance of $350 million 3.250% Senior Notes due 2023 and $850
million 4.875% Senior Notes due 2043, for total net proceeds of $1.2 billion.
The Company intends to use the net proceeds for general corporate purposes.

On April 9, 2013 the Company completed the previously announced acquisition of
the SBS Nordic operations from ProSiebenSat.1 Group for approximately $1.8
billion.

STOCK REPURCHASE

Following the quarter, from April 1, 2013 through May 1, 2013 the Company,
pursuant to its existing stock repurchase program, repurchased 2.25 million
shares of its Series C common stock at an average price of $70.80 per share
for an aggregate purchase price of approximately $159 million. Additionally,
the Company repurchased 4 million shares of Series C convertible preferred
stock for $256 million, or $64.10 per share, from Advance Programming
Holdings, LLC on April 5, 2013.

The Company has repurchased 58.94 million shares of Series C common stock and
1.99 million shares of its Series A common stock under its $4.0 billion stock
repurchase program to date at an aggregate purchase price of approximately
$2.64 billion. In aggregate, including the 17.73 million preferred shares
acquired outside of the stock repurchase program from Advance/Newhouse and
Advance Programming, LLC, the Company has repurchased 18% of the shares
outstanding 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.

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 updated outlook incorporates the later closing of the SBS
transaction, 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 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 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 and
losseson 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. The Company excludes mark-to-market
equity-based compensation, exit and restructuring charges, certain impairment
charges, and gains and losseson 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, but 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 first quarter results. To listen to the call, visit
http://www.discoverycommunications.com or dial 1-800-510-0219 inside the U.S.
and 1-617-614-3451 outside of the U.S., using the following passcode:
64541599.

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/A filed with the SEC on February 19, 2013.
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 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.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; in millions, except per share amounts)
                                                            Three Months Ended
                                                            March 31,
                                                            2013       2012
Revenues:
Distribution                                                $  583     $ 576
Advertising                                                    508       453
Other                                                          65        56
Total revenues                                                 1,156     1,085
Costs and expenses:
 Costs of revenues, excluding depreciation and              342       296
amortization
 Selling, general and administrative                        367       311
 Depreciation and amortization                              32        29
 Restructuring charges                                      1         1
Total costs and expenses                                       742       637
Operating income                                               414       448
Interest expense                                               (68)      (55)
Losses from equity investees, net                              (2)       (48)
Other income (expense), net                                    33        (2)
Income from continuing operations before income taxes          377       343
Provision for income taxes                                     (146)     (120)
Income from continuing operations, net of taxes                231       223
Loss from discontinued operations, net of taxes                -         (1)
Net income                                                     231       222
Net income attributable to noncontrolling interests            -         (1)
Net income available to Discovery Communications,
Inc.                                                        $  231     $ 221

stockholders
Basic earnings per share available to Discovery

Communications, Inc. stockholders:
Continuing operations                                       $  0.64    $ 0.58
Net Income                                                  $  0.64    $ 0.57
Diluted earnings per share available to Discovery

Communications, Inc. stockholders:
Continuing operations                                       $  0.63    $ 0.57
Net Income                                                  $  0.63    $ 0.57


Weighted average shares outstanding:
Basic                                                          363       386
Diluted                                                        367       390



DISCOVERY COMMUNICATIONS, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited; in millions)
                                                       March 31,  December 31,
                                                       2013       2012
ASSETS
Current assets:
Cash and cash equivalents                              $ 2,360    $   1,201
Receivables, net                                         1,148        1,130
Content rights, net                                      127          122
Deferred income taxes                                    74           74
Prepaid expenses and other current assets                304          203
Total current assets                                     4,013        2,730
Noncurrent content rights, net                           1,583        1,555
Property and equipment, net                              377          388
Goodwill                                                 6,501        6,399
Intangible assets, net                                   680          611
Equity method investments                                1,105        1,095
Other noncurrent assets                                  162          152
Total assets                                           $ 14,421   $   12,930
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable                                       $ 67       $   71
Accrued expenses and other current liabilities           912          721
Deferred revenues                                        100          123
Current portion of long-term debt                        22           31
Total current liabilities                                1,101        946
Long-term debt                                           6,407        5,212
Deferred income taxes                                    428          272
Other noncurrent liabilities                             210          207
Total liabilities                                        8,146        6,637
Redeemable noncontrolling interest                       33           -


Equity:
Preferred stock                                          2            2
Common stock                                             3            3
Additional paid-in capital                               6,716        6,689
Treasury stock, at cost                                  (2,482)      (2,482)
Retained earnings                                        2,052        2,075
Accumulated other comprehensive (loss) income            (51)         4
 Total Discovery Communications, Inc. stockholders'   6,240        6,291
equity
 Noncontrolling interest                              2            2
Total equity                                             6,242        6,293
Total liabilities and equity                           $ 14,421   $   12,930



DISCOVERY COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in millions)
                                                  Three Months Ended March 31,
                                                  2013             2012
OPERATING ACTIVITIES
Net income                                        $    231         $   222
Adjustments to reconcile net income to cash
provided by operating activities:
Equity-based compensation expense                      60              41
Depreciation and amortization                          32              30
Content amortization and impairment expense            231             207
Remeasurement gain on previously held equity           (92)            -
interest
Equity in losses and distributions from investee       4               58
companies
Deferred income tax expense (benefit)                  134             (22)
Other, net                                             69              11
 Changes in operating assets and liabilities:
 Receivables, net                                    (20)            (29)
 Content rights                                      (301)           (226)
 Accounts payable and accrued liabilities            (70)            (23)
 Equity-based compensation liabilities               (59)            (24)
 Income tax receivable                               (62)            20
 Other, net                                          (26)            (17)
Cash provided by operating activities                  131             248
INVESTING ACTIVITIES
Purchases of property and equipment                    (26)            (21)
Business acquisition, net of cash acquired             (60)            -
Investments in foreign exchange contracts              (39)            -
Distribution from equity method investee               -               17
Investments in and advances to equity method           (25)            (38)
investees
Cash used in investing activities                      (150)           (42)
FINANCING ACTIVITIES
Borrowings from long term debt, net of discount        1,186           -
and issuance costs
Principal repayments of capital lease obligations      (11)            (10)
Repurchases of common stock                            -               (288)
Tax settlements associated with equity-based           (22)            (3)
plans
Proceeds from issuance of common stock in              16              58
connection with equity-based plans
Excess tax benefits from equity-based                  13              30
compensation
Cash provided by (used in) financing activities        1,182           (213)
Effect of exchange rate changes on cash and cash       (4)             3
equivalents
NET CHANGE IN CASH AND CASH EQUIVALENTS                1,159           (4)
Cash and cash equivalents, beginning of period        1,201           1,048
CASH AND CASH EQUIVALENTS, END OF PERIOD          $    2,360       $   1,044



DISCOVERY COMMUNICATIONS, INC.

SUPPLEMENTAL FINANCIAL DATA

RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE

DEPRECIATION AND AMORTIZATION

(unaudited; in millions)
              Three Months Ended March 31, 2013
              Adjusted

              Operating                 Amortization
                           Depreciation of           Mark-to-Market
              Income                                                Other Operating
              Before       and          Deferred     Equity-Based   ^(a)
                                        Launch                            Income
              Depreciation Amortization              Compensation
              and                       Incentives

              Amortization
U.S. Networks $  377      $  (3)     $  (2)     $    —      $    $  371
                                                                    (1)
International 184          (15)         (3)          —              —     166
Networks
Education     7            (1)          —            —              —     6
Corporate and (70)         (13)         —            (46)           —     (129)
Eliminations
 Total  $  498      $ (32)      $  (5)     $  (46)      $    $  414
                                                                    (1)



              Three Months Ended March 31, 2012
              Adjusted
                           
              Operating                 Amortization
                                       of           Mark-to-Market
              Income                                                Other Operating
              Before       Depreciation Deferred     Equity-Based   ^(a)
                                        Launch                            Income
              Depreciation and                       Compensation
              and                       Incentives
                           Amortization
              Amortization
U.S. Networks $  395      $  (3)     $  (2)     $    —      $    $  389
                                                                    (1)
International 171          (11)         (3)          —              —     157
Networks
Education     6            —            —            —              —     6
Corporate and (64)         (15)         —            (25)           —     (104)
Eliminations
 Total  $  508      $ (29)      $  (5)     $  (25)      $    $  448
                                                                    (1)
(a) For the three months ended March 31, 2013 and for the three months ended
March 31, 2012, amount represents

 restructuring charges of $1 million.



DISCOVERY COMMUNICATIONS, INC.

SUPPLEMENTAL FINANCIAL DATA

(unaudited; in millions)
CALCULATION OF FREE CASH FLOW
                                             Three Months Ended March 31,
                                             2013       2012      Change
Cash provided by operating activities        $  131     $  248    $ (117)
Acquisition of property and equipment           (26)       (21)     (5)
Free cash flow                               $  105     $  227    $ (122)



RECONCILIATION OF 2013 OUTLOOK TO GAAP MEASURES
                                                            Full Year 2013
Net income available to Discovery                           $ 1,200 To $ 1,300
Communications, Inc. stockholders
Interest expense, net                                         310   To   300
Depreciation and amortization                                 135   To   125
Other expense, including amortization of deferred launch
incentives, mark-to-market equity-based 

compensation, asset impairment, exit and restructuring
costs, gains (losses) on business

disposition, gains (losses) on sale of securities, equity   780   To   800
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



DISCOVERY COMMUNICATIONS, INC.

SUPPLEMENTAL FINANCIAL DATA

SELECTED FINANCIAL DETAIL

(unaudited; in millions)
BORROWINGS
                                                                     March 31,
                                                                     2013
3.70% Senior Notes, semi-annual interest, due June 2015              $  850
5.625% Senior Notes, semi-annual interest, due August                   500
2019
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
3.25% Senior Notes, semi-annual interest, due April 2023                350
6.35% Senior Notes, semi-annual interest, due June 2040                 850
4.95% Senior Notes, semi-annual interest, due May 2042                  500
4.875% Senior Notes, semi-annual interest, due April 2043               850
Capital lease obligations                                               97
Total long-term debt                                                    6,447
Unamortized discount                                                    (18)
Long-term debt, net                                                     6,429
Current portion of long-term debt                                       (22)
Noncurrent portion of long-term debt                                 $  6,407



EQUITY-BASED COMPENSATION
                        March 31, 2013
                       Total Units    Weighted     Vested Units   Weighted

Long-Term               Outstanding    Average      Outstanding    Average

Incentive Plans         (in millions)  Grant Price  (in millions)  Grant Price
Unit Awards             1.7            $   37.90    -              $  -
Stock Appreciation      3.3                55.10    -                 -
Rights
Stock Options           9.4                32.92    5.7               22.25
Performance-based       1.7                43.57    0.3               32.39
Restricted Stock Units
Service-based           0.8                51.40    -                 -
Restricted Stock Units
 Total
Equity-based            16.9           $   39.70    6.0            $  22.76
Compensation Plans



SHARE COUNT ROLL FORWARD                             Common  Preferred  Total
(Basic shares, in millions)
Total shares outstanding as of December 31,          245.17  119.05     364.22
2012
Shares issued – equity-based compensation            0.83    -          0.83
Total shares outstanding as of March 31, 2013        246.00  119.05     365.05



SOURCE Discovery Communications, Inc.

Website: http://www.discoverycommunications.com
Contact: Corporate Communications: Michelle Russo (240) 662-2901,
michelle_russo@discovery.com; Investor Relations: Craig Felenstein (212)
548-5109, craig_felenstein@discovery.com