Discovery Communications Reports Second Quarter 2014 Results

         Discovery Communications Reports Second Quarter 2014 Results  PR Newswire  SILVER SPRING, Md., July 31, 2014  SILVER SPRING, Md., July31, 2014 /PRNewswire/ --  Second Quarter 2014 Financial Highlights:    oRevenues increased 10% to $1,610 million   oAdjusted OIBDA increased 6% to $694 million   oNet Income available to Discovery Communications, Inc. increased 26% to     $379 million   oAdjusted Earnings per Diluted Share for the last twelve months increased     35% to $3.62   oRepurchased 6.7 million shares of common stock for $503 million  Discovery Communications Announces Acquisition of Espresso Education, the Leading Provider of Primary School Digital Education Content in the U.K.  Discovery Communications, Inc. ("Discovery" or the "Company") (NASDAQ: DISCA, DISCB, DISCK) today reported financial results for the second quarter ended June30, 2014.  David Zaslav, Discovery's President and Chief Executive Officer, said, "The operating strength across Discovery's organic businesses, along with increased contributions from strategic acquisitions, led to sustained financial momentum during the second quarter. Our persistent focus on building a broad and deep content portfolio to leverage the opportunities across our unique distribution platform is driving viewership and revenue growth worldwide as pay-tv continues to evolve. Going forward, investing in compelling programing remains a priority as we integrate our recent acquisitions and build new avenues of growth so we can deliver additional long term value to our shareholders."  Second Quarter Results  Second quarter revenues of $1,610 million increased $143 million, or 10%, over the second quarter a year ago, as 23% growth at International Networks was partially offset by a 2% decline at U.S. Networks, primarily due to additional revenues from licensing agreements in the prior year. Adjusted Operating Income Before Depreciation and Amortization^(1) ("OIBDA") increased 6% to $694 million, as International Networks were up 19% while U.S. Networks were down 1% due to the impact of licensing agreements. Excluding the impact of the Eurosport transaction^(2),foreign currency fluctuations and licensing agreements, total Company revenues increased 9% and Adjusted OIBDA increased 11%.  Second quarter net income available to Discovery Communications, Inc. of $379 million ($1.09 per dilutedshare)^(3) increased $79 million, or 26%, compared to$300 million ($0.82 per diluted share) for the second quarter a year ago, primarily due to the strong operating performance in the current quarter. The current quarter results also reflect a $31 million gain associated with the sale of HowStuffWorks, a $29 million gain associated with the consolidation of Eurosport and a $15 million increase in equity earnings. Adjusted Earnings Per Diluted Share^(4) ("Adjusted EPS"), which excludes the impact of the amortization of acquisition related intangible assets, was $1.16 per diluted share in the second quarter of this year compared with $0.91 per diluted share in the same period a year ago. For the last twelve months, Adjusted EPS was $3.62, up 35% compared with $2.69 in the prior twelve months.  (1) See the full definition of Adjusted Operating Income Before Depreciation     and Amortization on page 5. (2) The Company completed its acquisition of a controlling stake in Eurosport     International ("Eurosport") in May 2014. See page 12 for a reconciliation    to results excluding Eurosport. (3) All per share amounts are calculated using Net Income Available to     Discovery Communications, Inc. stockholders. See table on page 13 for the    reconciliation. (4) See the full definition of Adjusted Earnings Per Diluted Share on page 5.     Note that the purchase price amortization related to Eurosport is still    preliminary and could be revised once finalized.  Free cash flow was $202 million for the second quarter, a decrease of $109 million, or down 35% from the second quarter of 2013, as increased operating performance was more than offset by higher tax payments, as well as higher content and interest payments. Free cash flow is defined as cash provided by operating activities less purchases of property and equipment.  SEGMENT RESULTS  (dollars in           Three Months Ended June 30,  Six Months Ended June 30, millions)                       2014       2013      Change  2014      2013      Change Revenues: U.S. Networks         $  777     $ 793     (2)  %  $ 1,485   $ 1,479   —     % International         802        652       23   %  1,473     1,096     34    % Networks Education             31         24        29   %  63        51        24    % Corporate and         —          (2)       NM      —         (3)       NM Eliminations Total Revenues        $  1,610   $ 1,467   10   %  $ 3,021   $ 2,623   15    % Adjusted OIBDA: U.S. Networks         $  466     $ 472     (1)  %  $ 849     $ 849     —     % International         297        249       19   %  518       436       19    % Networks Education             6          4         50   %  12        11        9     % Corporate and         (75)       (72)      (4)  %  (160)     (143)     (12)  % Eliminations Total Adjusted OIBDA  $  694     $ 653     6    %  $ 1,219   $ 1,153   6     %    U.S. Networks  (dollars in          Three Months Ended June 30,  Six Months Ended June 30, millions)                      2014        2013     Change  2014       2013       Change Revenues: Distribution         $  319      $ 348    (8)  %  $ 638      $ 656      (3)  % Advertising          446         426      5    %  819        782        5    % Other                12          19       (37) %  28         41         (32) % Total Revenues       $  777      $ 793    (2)  %  $ 1,485    $ 1,479    —    % Adjusted OIBDA       $  466      $ 472    (1)  %  $ 849      $ 849      —    % Adjusted OIBDA       60      %   60    %          57      %  57      % Margin  U.S. Networks' revenues in the second quarter of 2014 decreased 2% to $777 million as advertising growth was more than offset by a decline in distribution and other revenue. Advertising revenues increased 5% mainly due to higher pricing. Distribution revenues decreased 8% as higher rates were more than offset by additional revenues from licensing agreements in the second quarter of 2013. Other revenues declined by $7 million due to a decrease in content production contracts as well as lower representative fees . Excluding the impact of licensing agreements, distribution revenues grew 6% and total revenues grew 4% over the prior year's quarter.  Adjusted OIBDA decreased slightly to $466 million, primarily reflecting the impact of licensing agreements in the prior year. Excluding the impact of licensing agreements, Adjusted OIBDA grew 8% over last year's second quarter, reflecting the 4% revenue growth as well as lower marketing costs.  International Networks  (dollars in          Three Months Ended June 30,  Six Months Ended June 30, millions)                      2014        2013     Change  2014       2013       Change Revenues: Distribution         $  373      $ 314    19   %  $ 711      $ 589      21  % Advertising          397         322      23   %  713        474        50  % Other                32          16       100  %  49         33         48  % Total Revenues       $  802      $ 652    23   %  $ 1,473    $ 1,096    34  % Adjusted OIBDA       $  297      $ 249    19   %  $ 518      $ 436      19  % Adjusted OIBDA       37      %   38    %          35      %  40      % Margin  International Networks' revenues for the second quarter increased 23% to $802 million, as advertising revenues were up 23% and distribution revenues were up 19%. Excluding Eurosport and foreign currency fluctuations, total revenues were up 14%. Advertising revenues, excluding Eurosport, were up 17% in local currency terms, primarily due to increased pricing and volume in Western Europe, Latin America and CEEMEA as well as from eight additional days due to the timing of the closing of the SBS Nordic acquisition. Distribution revenues, excluding Eurosport, grew 10% in local currency terms, mainly from increased subscribers and higher rates in Latin America and subscriber growth in CEEMEA and as well as due to the timing of the SBS Nordic acquisition. Other revenues increased 22% excluding Eurosport and foreign currency fluctuations due to additional revenues from new production studios.  Adjusted OIBDA increased 19% to $297 million on a reported basis and was up 15% excluding Eurosport and foreign currency fluctuations, reflecting the 14% revenue growth partially offset by a 13% increase in operating expenses. The higher operating expenses were primarily due to increased content expense, production costs associated with production studios and personnel costs.  Education  (dollars in millions)  Three Months Ended June 30,  Six Months Ended June 30,                        2014        2013     Change  2014       2013    Change Revenues               $  31       $  24    29  %   $  63      $ 51    24  % Adjusted OIBDA         $  6        $  4     50  %   $  12      $ 11    9   % Adjusted OIBDA Margin  19     %    17    %          19     %   22   %  Education revenues for the second quarter increased by $7 million due to higher streaming, licensing and digital textbook revenues as well as additional revenues due to a business combination. Adjusted OIBDA increased by $2 million compared to the second quarter of 2013, as the revenue growth was partially offset by investment in new products as well as integration costs associated with the business combination.  Corporate and Eliminations  Adjusted OIBDA decreased by $3 million compared to the second quarter a year ago, primarily due to the acceleration of certain equity-based compensation expense as well as higher professional fees.  STOCK REPURCHASE  During the quarter, the Company, pursuant to its existing stock repurchase program, repurchased 6.7 million shares of its Series C common stock for an aggregate purchase price of $503 million at an average price of $74.85 per share. Following the quarter, from July 1, 2014 through July 28, 2014, the Company repurchased 1.4 million shares of its Series C common stock for approximately $109 million.  The Company has repurchased 81.5 million shares of Series C common stock and 2.8 million shares of its Series A common stock under its stock repurchase program to date at an aggregate purchase price of approximately $4.4 billion. In aggregate, including the 17.73 million preferred shares acquired from Advance/Newhouse Programming Partnership ("ANPP") and from Advance Programming Holdings, LLC, the Company has repurchased 24% of its outstanding shares since buyback activity was authorized in 2010.  Under the stock repurchase program, management is authorized to purchase shares of common stock from time to time through open market purchases at prevailing prices or privately negotiated purchases or pursuant to one or more accelerated stock repurchase agreements or other derivative arrangements as permitted by securities laws and other legal requirements and subject to stock price, business and market conditions and other factors.  On May 22, 2014, the Company entered into a share repurchase agreement with ANPP to repurchase their shares of the Company's Series C convertible preferred stock, on a quarterly basis, in proportion to the company's repurchases under its stock repurchase program in a manner that is intended to maintain ANPP's current ownership percentage of the Company. The first purchases under this agreement are expected to take place in the third quarter of 2014.  OTHER ITEMS  On May 8, 2014, Discovery and Liberty Global plc ("Liberty Global") announced the formation of a joint venture to acquire All3Media, a leading international production company. The acquisition will be funded by contributions of approximately $153 million from each of Discovery and Liberty Global and additional equity and non-recourse credit facilities raised at All3Media.  On May 20, 2014, the Company announced a special dividend of one share of Series C Common Stock payable on each share of Series A Common Stock, Series B Common Stock or Series C Common Stock outstanding as of July 28, 2014. The dividend is expected to be paid on August 6, 2014.  On May 30, 2014, the Company completed the previously announced acquisition of a controlling interest in Eurosport International, increasing its stake from 20% to 51% for approximately $349 million, which resulted in a gain of $29 million included in Other Income.  On May 30, 2014, Discovery sold HowStuffWorks for $45 million, which resulted in a pre-tax gain on disposition of $31 million.  FULL YEAR 2014 OUTLOOK  For the full year ending December 31, 2014, Discovery Communications, Inc. expects total revenue between $6.45 billion and $6.525 billion, Adjusted OIBDA between $2.6 billion and $2.65 billion, net income available to Discovery Communications, Inc. between $1.225 billion and $1.275 billion and Adjusted net income available to Discovery Communications, Inc.^(5) ("Adjusted net income") between $1.34 billion and $1.4 billion. Our outlook incorporates current foreign exchange rates for revenues and expenses and the current share price for mark-to-market equity-based compensation calculations.  (5) See the full definition of Adjusted net income on page 5.  NON-GAAP FINANCIAL MEASURES  Adjusted OIBDA, Adjusted Net Income, Adjusted Earnings Per Share 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, Adjusted net income, Adjusted EPS 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 and losseson business and asset dispositions.  Beginning January 1, 2014, the Company reclassified foreign currency gains (losses), net due to transaction settlements and re-measurement of working capital items from selling, general and administrative expense, which is a component of operating income, to other income (expense), net. Prior period amounts have been reclassified to conform to the current year presentation. The total foreign currency reclassifications were a gain of $15 million for the three months ended June 30, 2013.   The Company uses Adjusted OIBDA 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 this measure 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 Adjusted net income as net income excluding the impact of amortization of acquisition-related intangible assets and defines Adjusted EPS as earnings excluding the impact of amortization of acquisition-related intangible assets per diluted share. The Company believes Adjusted net income and Adjusted EPS are relevant to investors because these metrics allow them to evaluate the performance of the Company's operations exclusive of the non-cash amortization of acquisition-related intangible assets that impact the comparability of results from period to 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, Adjusted net income, Adjusted EPS 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, earnings per diluted share and other measures of financial performance reported in accordance with GAAP. Please review the supplemental financial schedules beginning on page 10 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 second quarter results. To listen to the call, visit http://discoverycommunications.com or dial 1-800-901-5213 inside the U.S. and 1-617-786-2962 outside of the U.S., using the following passcode: DISCA.  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. These forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties and on information available to the Company as of the date hereof. 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 20, 2014. 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, statements regarding investing in our brands, strategic growth initiatives, plans for stock repurchases and the full year 2014 outlook. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.    DISCOVERY COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited; in millions, except per share amounts)                         Three Months Ended June 30,  Six Months Ended June 30,                         2014             2013        2014          2013 Revenues: Distribution            $   692          $  662      $  1,349      $  1,245 Advertising             844              749         1,533         1,257 Other                   74               56          139           121 Total revenues          1,610            1,467       3,021         2,623 Costs and expenses: Costs of revenues, excluding depreciation  515              437         997           779 and amortization Selling, general and    406              394         815           759 administrative Depreciation and        75               78          158           110 amortization Restructuring charges   5                9           8             10 Gain on disposition     (31)             —           (31)          — Total costs and         970              918         1,947         1,658 expenses Operating income        640              549         1,074         965 Interest expense        (83)             (80)        (164)         (148) Income (loss) from      8                (7)         21            (9) equity investees, net Other income, net       27               19          10            50 Income from continuing operations before       592              481         941           858 income taxes Provision for income    (208)            (181)       (326)         (327) taxes Net income              384              300         615           531 Net income attributable to         (2)              —           (2)           — noncontrolling interests Net income attributable to redeemable              (3)              —           (4)           — noncontrolling interests Net income available to Discovery            $   379          $  300      $  609        $  531 Communications, Inc. Net income per share available to Discovery Communications, Inc. stockholders: Basic                   $   1.10         $  0.83     $  1.75       $  1.47 Diluted                 $   1.09         $  0.82     $  1.74       $  1.45 Weighted average shares outstanding: Basic                   343              359         346           361 Diluted                 346              363         349           365    DISCOVERY COMMUNICATIONS, INC. CONSOLIDATED BALANCE SHEETS (unaudited; in millions)                                               June 30, 2014  December 31, 2013 ASSETS Current assets: Cash and cash equivalents                     $   372        $    408 Receivables, net                              1,525          1,371 Content rights, net                           318            277 Deferred income taxes                         81             73 Prepaid expenses and other current assets     275            281 Total current assets                          2,571          2,410 Noncurrent content rights, net                1,935          1,883 Property and equipment, net                   538            514 Goodwill                                      8,126          7,341 Intangible assets, net                        1,924          1,565 Equity method investments                     828            1,087 Other noncurrent assets                       183            179 Total assets                                  $   16,105     $    14,979 LIABILITIES AND EQUITY Current liabilities: Accounts payable                              $   226        $    141 Accrued liabilities                           945            992 Deferred revenues                             160            144 Current portion of debt                       1,029          17 Total current liabilities                     2,360          1,294 Noncurrent portion of debt                    6,045          6,482 Deferred income taxes                         769            637 Other noncurrent liabilities                  299            333 Total liabilities                             9,473          8,746 Redeemable noncontrolling interests           598            36 Equity: Preferred stock                               2              2 Common stock                                  3              3 Additional paid-in capital                    6,865          6,826 Treasury stock, at cost                       (4,300)        (3,531) Retained earnings                             3,499          2,892 Accumulated other comprehensive (loss)        (38)           4 income Total Discovery Communications, Inc.          6,031          6,196 stockholders' equity Noncontrolling interests                      3              1 Total equity                                  6,034          6,197 Total liabilities and equity                  $   16,105     $    14,979    DISCOVERY COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited; in millions)                                                      Six Months Ended June 30,                                                      2014          2013 Operating Activities Net income                                           $   615       $   531 Adjustments to reconcile net incometo cash provided by operating activities: Equity-based compensation expense                    33            84 Depreciation and amortization                        158           110 Content amortization and impairment expense          705           542 Gain on disposition                                  (31)          — Remeasurement gain on previously held equity         (29)          (92) interest Equity in (earnings) losses of investee companies, net of cash distributions                            (7)           13   Deferred income tax (benefit) expense                (73)          139 Launch amortization expense                          4             10 Loss from hedging instruments, net                   —             55 Other, net                                           18            18 Changes in operating assets and liabilities: Receivables, net                                     (46)          (90) Content rights                                       (806)         (680) Accounts payable and accrued liabilities             (12)          (83) Equity-based compensation liabilities                (81)          (61) Income tax receivable                                54            9 Other, net                                           (29)          (35) Cash provided by operating activities                473           470 Investing Activities Purchases of property and equipment                  (58)          (54) Business acquisitions, net of cash acquired          (321)         (1,832) Hedging instruments, net                             —             (55) Proceeds from disposition                            45            — Distributions from equity method investees           41            4 Investments in equity method investees, net          (9)           (26) Other investing activities, net                      (1)           (1) Cash used in investing activities                    (303)         (1,964) Financing Activities Borrowings from debt, net of discount and issuance   409           1,186 costs Commercial paper, net                                162           — Principal repayments of capital lease obligations    (9)           (17) Repurchases of common stock                          (769)         (265) Repurchases of preferred stock                       —             (256) Cash proceeds from equity-based plans, net           13            35 Other financing activities, net                      (7)           (3) Cash (used in) provided by financing activities      (201)         680 Effect of exchange rate changes on cash and cash     (5)           (12) equivalents Net change in cash and cash equivalents              (36)          (826) Cash and cash equivalents, beginning of period       408           1,201 Cash and cash equivalents, end of period             $   372       $   375    DISCOVERY COMMUNICATIONS, INC. SUPPLEMENTAL FINANCIAL DATA RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION (unaudited; in millions)                Three Months Ended June 30, 2014                Adjusted                                            Amortization                Operating                   of                              Depreciation                Mark-to-Market                Income                      Deferred                      Other   Operating                Before        and                         Equity-Based    (1)                                            Launch                                Income                Depreciation  Amortization                Compensation                and                         Incentives                 Amortization U.S. Networks  $   466       $   (3)       $   —         $    —          $ 31    $  494 International  297           (56)          (2)           —               (2)     237 Networks Education      6             (1)           —             —               (1)     4 Corporate and  (75)          (15)          —             (3)             (2)     (95) Eliminations Total          $   694       $   (75)      $   (2)       $    (3)        $ 26    $  640                Three Months Ended June 30, 2013                Adjusted                                            Amortization                Operating                   of                              Depreciation                Mark-to-Market                Income                      Deferred                      Other   Operating                Before        and                         Equity-Based    (1)                                            Launch                                Income                Depreciation  Amortization                Compensation                and                         Incentives                 Amortization U.S. Networks  $   472       $   (3)       $   (2)       $    —          $ (2)   $  465 International  249           (61)          (3)           —               (7)     178 Networks Education      4             —             —             —               —       4 Corporate and  (72)          (14)          —             (12)            —       (98) Eliminations Total          $   653       $   (78)      $   (5)       $    (12)       $ (9)   $  549 1) For the three months ended June 30, 2014, amount represents a gain on disposition of $31 million and restructuring charges of $5 million. For the three months ended June 30, 2013, amount represents restructuring charges of $9 million.    DISCOVERY COMMUNICATIONS, INC. SUPPLEMENTAL FINANCIAL DATA RECONCILIATION OF ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION (unaudited; in millions)                Six Months Ended June 30, 2014                Adjusted                Operating                                            Amortization                Income        Depreciation  of            Mark-to-Market                Before        and           Deferred      Equity-Based    Other    Operating                                                                          (1)      Income                Depreciation  Amortization  Launch        Compensation                 and                         Incentives                 Amortization U.S. Networks  $   849       $   (6)       $   —         $    —          $ 30     $  873 International  518           (120)         (4)           —               (3)      391 Networks Education      12            (3)           —             —               (2)      7 Corporate and  (160)         (29)          —             (6)             (2)      (197) Eliminations Total          $   1,219     $   (158)     $   (4)       $    (6)        $ 23     $  1,074                Six Months Ended June 30, 2013                Adjusted                Operating                                            Amortization                Income        Depreciation  of            Mark-to-Market                Before        and           Deferred      Equity-Based    Other    Operating                                                                          (1)      Income                Depreciation  Amortization  Launch        Compensation                 and                         Incentives                 Amortization U.S. Networks  $   849       $   (6)       $   (4)       $    —          $ (3)    $  836 International  436           (76)          (6)           —               (7)      347 Networks Education      11            (1)           —             —               —        10 Corporate and  (143)         (27)          —             (58)            —        (228) Eliminations Total          $   1,153     $   (110)     $   (10)      $    (58)       $ (10)   $  965 (1) For the six months ended June 30, 2014, amount represents a gain on disposition of $31 million and restructuring charges of $8 million. For the six months ended June 30, 2013, amount represents restructuring charges of $10 million.    DISCOVERY COMMUNICATIONS, INC. SUPPLEMENTAL FINANCIAL DATA RECONCILIATION OF NEWLY ACQUIRED BUSINESSES^(1) (unaudited; amounts in millions)               Three months ended June 30,               2014                        2014           2013               International   2014        International  International                Networks As     Newly       Networks Ex-   Networks       %                               Acquired                                  Change               Reported                    Acquisitions   As Reported                               Businesses Revenues:             $    373        $   29      $   344        $   314        10  % Distribution             397             18          $   379        322            18  % Advertising  Other      32              8           $   24         16             50  % Total         $    802        $   55      $   747        $   652        15  % Revenues Adjusted      $    297        $   16      $   281        $   249        13  % OIBDA               Three months ended June 30,               2014                                       2013                               2014               TotalCompany               2014 Total     TotalCompany                               Newly                                     %               As Reported     Acquired    Company Ex-    As Reported    Change                                           Acquisitions                               Businesses Revenues:             $    692        $   29      $   663        $   662        —   % Distribution             844             18          $   826        749            10  % Advertising  Other      74              8           $   66         56             18  % Total         $    1,610      $   55      $   1,555      $   1,467      6   % Revenues Adjusted      $    694        $   16      $   678        $   653        4   % OIBDA               Six months ended June 30,               2014                        2014           2013               International   2014                                           International  International               Networks As     Newly                      Networks As    %                               Acquired    Networks Ex-                  Change               Reported                    Acquisitions   Reported                               Businesses Revenues:             $    711        $   75      $   636        $   589        8   % Distribution             713             146         $   567        474            20  % Advertising  Other      49              13          $   36         33             9   % Total         $    1,473      $   234     $   1,239      $   1,096      13  % Revenues Adjusted      $    518        $   35      $   483        $   436        11  % OIBDA               Six months ended June 30,               2014                                       2013                               2014               Total Company               2014 Total     Total Company                               Newly       Company Ex-                   %               As Reported     Acquired    Acquisitions   As Reported    Change                                Businesses Revenues:             $    1,349      $   75      $   1,274      $   1,245      2   % Distribution             1,533           146         $   1,387      1,257          10  % Advertising  Other      139             13          $   126        121            4   % Total         $    3,021      $   234     $   2,787      $   2,623      6   % Revenues Adjusted      $    1,219      $   35      $   1,184      $   1,153      3   % OIBDA (1) For the three months ended June 30, 2014 newly acquired businesses include Eurosport International, in which Discovery took a controlling stake in May 2014, and for the six months ended June 30, 2014 newly acquired businesses include Eurosport International and first quarter results from SBS Nordic, which Discovery acquired in April 2013. This reconciliation does not take into account other one-time items such as foreign exchange and licensing revenues.    DISCOVERY COMMUNICATIONS, INC. SUPPLEMENTAL FINANCIAL DATA SELECTED FINANCIAL DETAIL (unaudited; in millions) CALCULATION OF FREE CASH FLOW                         Three Months Ended June 30,  Six Months Ended June 30,                         2014       2013    Change    2014       2013    Change Cash provided by        $  232     $ 339   $ (107)   $  473     $ 470   $ 3 operating activities Purchases of property   (30)       (28)    (2)       (58)       (54)    (4) and equipment Free cash flow          $  202     $ 311   $ (109)   $  415     $ 416   $ (1)    RECONCILIATION OF 2014 OUTLOOK TO GAAP MEASURES                                                           Full Year 2014 Adjusted net income available to Discovery                $ 1,340  To $ 1,400 Communications, Inc. stockholders Less Amortization of acquisition-related intangible       115      To 125 assets, net of tax Net income available to Discovery Communications, Inc.    1,225    To 1,275 stockholders Interest expense, net                                     340      To 330 Depreciation and amortization                             355      To 345 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 earnings (losses) in unconsolidated 565      To 575 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                                            $ 2,600  To $ 2,650    NET INCOME AVAILABLE TO DISCOVERY COMMUNICATIONS, INC. STOCKHOLDERS                         Three Months Ended June 30,  Six Months Ended June 30,                         2014            2013         2014            2013 Net Income              $   384         $   300      $   615         $  531 Net income attributable to noncontrolling       (2)             —            (2)             — interests Net income attributable to redeemable           (3)             —            (4)             — noncontrolling interests Net income available to Discovery               379             300          609             531 Communications, Inc. Redeemable noncontrolling interest (2)             (3)          (1)             (1) adjustments to redemption value Stock dividends to      (1)             —            (1)             — preferred interests Net income available to Discovery               $   376         $   297      $   607         $  530 Communications, Inc. stockholders    DISCOVERY COMMUNICATIONS, INC. SUPPLEMENTAL FINANCIAL DATA SELECTED FINANCIAL DETAIL (unaudited; in millions) CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED NET EARNINGS PER DILUTED SHARE                       Three Months Ended June 30,    Six Months Ended June 30,                       2014         2013     Change   2014     2013     Change Net Income available to Discovery          $   379      $ 300    $ 79     $ 609    $ 531    $ 78 Communications, Inc. Amortization of acquisition-related   26           33       (7)      60       34       26 intangible assets, net of tax Adjusted Net Income   $   405      $ 333    $ 72     $ 669    $ 565    $ 104                       Three Months Ended June 30,    Six Months Ended June 30,                       2014         2013     Change   2014     2013     Change Diluted earnings per share available to Discovery             $   1.09     $ 0.82   $ 0.27   $ 1.74   $ 1.45   $ 0.29 Communications, Inc. stockholders Amortization of acquisition-related   0.07         0.09     (0.02)   0.17     0.09     0.08 intangible assets, net of tax Adjusted earnings     $   1.16     $ 0.91   $ 0.25   $ 1.91   $ 1.54   $ 0.37 per diluted share                       Last Twelve Months Ended June                       30,                       2014         2013     Change Diluted earnings per share available to Discovery             $   3.26     $ 2.60   $ 0.66 Communications, Inc. stockholders Amortization of acquisition-related   0.36         0.09     0.27 intangible assets, net of tax Adjusted earnings     $   3.62     $ 2.69   $ 0.93 per diluted share    DISCOVERY COMMUNICATIONS, INC. SUPPLEMENTAL FINANCIAL DATA SELECTED FINANCIAL DETAIL (unaudited; in millions) BORROWINGS                                                                  June 30, 2014 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 2.375% Senior Notes, euro denominated, annual interest, due      409 March 2022 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                                        171 Commercial paper                                                 162 Total debt                                                       7,092 Unamortized discount                                             (18) Debt, net                                                        7,074 Current portion of debt                                          (1,029) Noncurrent portion of debt                                       $   6,045    EQUITY-BASED COMPENSATION                              June 30, 2014                              Total Units  Weighted     Vested Units   Weighted Long-Term                              Outstanding  Average      Outstanding    Average Incentive Plans                              (in       Grant Price  (in millions)  Grant                              millions)                                Price Unit Awards                  0.6          $41.17       —              $— Stock Appreciation Rights    6.0          74.74        —              — Stock Options                7.9          42.57        5.8            32.87 Performance-based            2.3          64.20        0.5            35.29 Restricted Stock Units Service-based Restricted     0.9          68.04        —              — Stock Units Total Equity-based           17.7         $57.53       6.3            $33.06 Compensation Plans    SHARE COUNT ROLL FORWARD                          Common   Preferred  Total (Basic shares, in millions) Total shares outstanding as of December 31, 2013  234.30   114.50     348.80 Shares repurchased                                (10.13)  —          (10.13) Shares issued – equity-based compensation         0.99     —          0.99 Preferred stock dividend                          —        0.05       0.05 Total shares outstanding as of June 30, 2014      225.16   114.55     339.71    Logo- http://photos.prnewswire.com/prnh/20131107/PH12718LOGO-a  SOURCE Discovery Communications, Inc.  Website: http://discoverycommunications.com Contact: Corporate Communications, Catherine Frymark, (240) 662-2934, catherine_frymark@discovery.com; Investor Relations, Craig Felenstein, (212) 548-5109, craig_felenstein@discovery.com  
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