Discovery Communications Reports Full Year and Fourth Quarter 2008 Results

Full Year 2008 Financial Highlights:

-- Revenues increased to $3.44 billion
-- Adjusted OIBDA increased to $1.31 billion
-- Net income from continuing operations increased to $274 million
-- Free Cash Flow increased to $467 million

(Silver Spring, Md.) 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, 2008. The discussion below assumes the transaction between Discovery Holding Company (“DHC”), Discovery Communications Holding LLC (“DCH”), and Advance/Newhouse Programming Partnership that resulted in Discovery becoming a public company, as described in the Other Items section on page 5, occurred on January 1, 2007, and as such includes 100% of Discovery Communications’ results for both 2008 and 2007. Please see the as adjusted financial statements beginning on page 14 for an explanation of why management believes this presentation is appropriate.

David Zaslav, Discovery’s President and Chief Executive Officer, said, “This past year was one of significant accomplishment for Discovery, as we delivered strong operating performances across our businesses and successfully transitioned to a fully public company. Strategically, we strengthened the programming and development at our fully distributed channels and finished the year with double-digit ratings growth in the fourth quarter among key demos at Discovery Channel and TLC. We also established new identities for several of our emerging networks and continued our international expansion, increasing our subscriber base overseas by 16%. Most importantly, our strategic initiatives were achieved while strongly growing revenues and Adjusted OIBDA, in what are increasingly challenging times. As we execute our 2009 operating plan in a difficult economic climate, our stable foundation of contracted and growing subscription revenues, diversified international expansion and stringent focus on costs give us confidence that we will outperform the marketplace and continue to grow moving forward.”

Fourth Quarter Results
Fourth quarter revenues of $904 million increased $1 million over the as adjusted fourth quarter a year ago as 8% growth at U.S. Networks was mostly offset by a 23% decline in Commerce, Education and Other as well as a 4% decline at International Networks, primarily the result of a $33 million impact from foreign currency fluctuations. Adjusted Operating Income Before Depreciation and Amortization (“OIBDA”) grew to $362 million, an increase of $222 million versus the fourth quarter a year ago, mainly driven by an increase of $188 million at U.S. Networks and an increase of $26 million, or 32%, at International Networks. The prior year results included a content impairment charge of $139 million, primarily at U.S. Networks. Excluding the impact of the content impairment charge, Adjusted OIBDA increased $64 million or 23% from the prior year. Adjusted OIBDA margin, excluding the impact of the content impairment charge, increased to 38% for the fourth quarter, up from 31% in the same period a year ago. Adjusted OIBDA is defined as revenue less (i) cost of revenues and selling, general and administrative expense excluding marked to market share-based compensation expense under our long-term incentive plans, (ii) restructuring and impairment charges, (iii) depreciation and amortization, including amortization of deferred launch incentives, and (iv) gains on asset and business dispositions.

Fourth quarter net income from continuing operations of $105 million ($0.25 per share) grew $113 million versus the as adjusted loss from continuing operations of $8 million ($0.03 per share) a year ago.

Free cash flow was $128 million for the fourth quarter, an increase of $24 million from the as adjusted results in the same period for 2007. Free cash flow is defined as cash flows from operating activities less acquisitions of property and equipment.

Full Year Results
Full year 2008 revenues of $3,443 million increased 10% or $302 million over the as adjusted revenues for 2007, primarily driven by 10% growth at U.S. Networks and 12% growth at International Networks. Adjusted OIBDA increased 49% to $1,310 million led by 37% growth at U.S. Networks and 52% growth at International Networks. The prior year results included a content impairment charge of $139 million, primarily at U.S. Networks. Excluding the impact of the content impairment charge, Adjusted OIBDA increased $216 million or 21% from the prior year and Adjusted OIBDA margin grew to 38% in 2008 from 28% in 2007.

Full year net income from continuing operations of $274 million ($0.85 per share) grew $123 million versus the as adjusted results of $151 million ($0.54 per share) a year ago. The increased results primarily reflect the higher Adjusted OIBDA as well as a $69 million benefit in the current year related to the unrealized change in the fair value of the marked to market share-based compensation, which was an expense of $141 million in the prior year.

Free cash flow was $467 million for 2008, an increase of $295 million from as adjusted results in 2007.