NOTE 1. BASIS OF PRESENTATION

Basis of Presentation

The Merger is reflected in the unaudited pro forma financial statements as being accounted for under the acquisition method of accounting. Under the acquisition method, the stock settled portion of the total estimated purchase price as described in Note 2 will be measured using the market closing price of Discovery Series C common stock at the closing date. This may result in a merger consideration value that is different from that assumed for purposes of preparing these unaudited pro forma financial statements. Discovery will record all assets, liabilities and non-controlling interests assumed at their respective acquisition-date fair values.

As indicated in Note 3 to the unaudited pro forma financial statements, Discovery has made certain adjustments to the historical book values of the assets, liabilities and non-controlling interests of Scripps to reflect preliminary estimates of fair value necessary to prepare the unaudited pro forma financial statements, with the excess of the purchase price over the fair value of the net assets of Scripps recorded as goodwill. In the opinion of Discovery's management, all adjustments necessary to present fairly the unaudited pro forma condensed combined financial information have been made. Discovery will perform a detailed review of Scripps' accounting policies in connection with the completion of the acquisition and, therefore, while all adjustments necessary to conform Scripps' and Discovery's financial statements may not have yet been identified, Discovery has made estimates based on the best available information. As a result, amounts used in these unaudited pro forma financial statements will differ from the ultimate amounts once Discovery has determined the final allocation of the merger consideration, completed the detailed valuation analysis and calculations necessary to finalize the required purchase price allocations, and identified any additional necessary conforming accounting policy changes for Scripps. Accordingly, the actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein. The unaudited pro forma financial statements are based on available information and certain assumptions that Discovery's management believes are reasonable.

The unaudited pro forma financial statements also do not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the acquisition, the total expected costs to integrate the operations of Discovery and Scripps, or the total expected costs necessary to achieve such cost savings, operating synergies and revenue enhancements.

Certain reclassifications have been made to the historical presentation of Scripps to conform to the presentation used in the unaudited pro forma financial statements (See Note 3, footnote a). These reclassifications have no impact on the historical operating income, income from continuing operations, income from continuing operations attributable to the company, total assets, liabilities or shareholders’ equity reported by Discovery or Scripps. Upon consummation of the acquisition, further review of Scripps' financial statements may result in additional reclassifications to conform to Discovery's presentation.

NOTE 2. ESTIMATED MERGER CONSIDERATION AND PRELIMINARY PURCHASE PRICE ALLOCATION

On February 26, 2018 , the U.S. Department of Justice notified the Company that it had closed its investigation into Discovery's proposed acquisition of Scripps in a cash-and-stock transaction. The estimated merger consideration for the acquisition totals $12.0 billion , including cash of $8.8 billion and stock of $3.2 billion based on the Series C common stock price as of March 1, 2018 . In addition, the Company will assume and exchange Scripps' net debt of approximately $2.5 billion . The transaction is expected to close on March 6, 2018 .

As of the close of trading on March 1, 2018 (the trading day three days prior to the anticipated closing date of the Merger), the volume weighted average price of the Discovery Series C common stock on the NASDAQ Global Select Market measured cumulatively over the 15 trading days ending on (and including) the third trading day prior to the completion of the merger was $22.8471 and Discovery has elected to exercise in full the cash top-up option pursuant to the Merger Agreement. Therefore, assuming the closing of the Merger on the anticipated closing date, the merger consideration will consist of (i) for Scripps shareholders electing the mixed consideration or not making an election, $65.82 in cash and 1.0584 shares of Discovery Series C common stock for each Scripps share, (ii) for Scripps shareholders electing the cash consideration, $90.00 in cash for each Scripps share and (iii) for Scripps shareholders electing the stock consideration, 3.9392 shares of Discovery Series C common stock for each Scripps share, subject to the terms and conditions set forth in the Merger Agreement including, in the case of Scripps shareholders making the cash or stock election, the proration procedures set forth in the Merger Agreement to the extent cash or stock is oversubscribed. Outstanding employee equity awards or share-based awards that vest upon the change of control will be acquired with a similar combination of cash and shares of Discovery Series C common stock pursuant to terms specified in the Merger Agreement. The total merger consideration will fluctuate based upon changes in the number of Scripps common shares, stock options, and other equity-based awards outstanding on the closing date. Discovery will also pay certain transaction costs incurred by Scripps. The post-closing impact of the formula was intended to result in Scripps’

* Reflects per share value of Discovery stock to be received by Scripps based on the DISCK stock price of $22.85 in accordance with the plan of merger.

** Reflects per share value of Discovery stock to be received by Scripps based on the DISCK stock price of $22.70 as of March 1, 2018 . The final purchase price per share and corresponding total consideration will be determined on the date of closing.

*** The total assumed share issuance of Discovery Series C common stock to Scripps shareholders is 139 million shares, comprised of 138 million shares converted from outstanding Scripps common stock at the share conversion ratio in the table above, plus 1 million in Scripps share-based compensation awards that will convert to Discovery Series C common stock.

Balances reflect rounding of dollar and share amounts to millions, which may result in differences for recalculated amounts compared with the amounts presented above.

Preliminary Purchase Price Allocation

The Merger will be accounted for as a business combination using the acquisition method of accounting in accordance with ASC Topic 805, which will establish a new basis of accounting for all identifiable assets acquired and liabilities assumed at fair value as of the date control is obtained. Accordingly, the costs to acquire such interests will be allocated to the underlying net assets based on their respective fair values, including noncontrolling interests. Any excess of the purchase price over the estimated fair value of the net assets acquired will be recorded as goodwill.

The following table summarizes the allocation of the preliminary purchase price as of December 31, 2017 (in millions):

The allocation of purchase price is preliminary at this time, and will remain preliminary until Discovery finalizes the valuation of the net assets acquired, which is not expected to be substantially complete until after the Merger has closed. The final allocation of the purchase price is dependent on a number of factors, including the final determination of fair value of all tangible and intangible assets acquired and liabilities assumed, including noncontrolling interests, as of the closing date of the Merger. Such final adjustments, including changes to amortizable tangible and intangible assets, may be material. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments.

The unaudited pro forma financial statements do not reflect:

The following are details of the adjustments made to the Scripps statement of operations for the year ended December 31, 2017 (in millions).

Scripps' historical numbers have been rounded to conform with Discovery's presentation (in millions).

(b) Cash and cash equivalents

Reflects adjustments to cash and cash equivalents for the impacts of cash proceeds and expenditures directly attributable to the Merger as follows (in millions).

During the year ended December 31, 2017, Discovery and Scripps recorded transaction costs of $68 million and $29 million, respectively, which have been eliminated from the unaudited pro forma condensed combined statement of operations. The transaction costs in the table above refer to estimated amounts not yet incurred and unpaid amounts as of December 31, 2017.

(c) Content rights, net

Reflects an adjustment of $ 554 million to present all produced and coproduced content as noncurrent.

(d) Goodwill, net

To record the preliminary value of goodwill created as a result of the Merger ( $6.5 billion ) and to eliminate the historical goodwill of Scripps ( $1.8 billion ). See Note 2 for an explanation of the calculation of goodwill recorded.

(e) Intangible assets, net and depreciation and amortization

Reflects an adjustment as follows: an $8.0 billion net increase to intangible assets to reflect the preliminary allocation of the purchase price to the fair value of Scripps' intangible assets ( $9.1 billion fair value, less $1.1 billion historical intangible assets of Scripps). A preliminary estimate of amortization for these intangibles is reflected in the unaudited pro forma condensed combined statement of operations using the straight-line amortization method as noted below (in millions, except years).

Due to limited information available, the detailed valuation studies necessary to arrive at the required estimates of the fair values for these assets and useful lives is not yet complete. Changes to the fair values of these assets and liabilities could have a material impact on the accompanying unaudited pro forma financial statements and will also result in changes to goodwill and deferred tax liabilities. A 10% change in the valuation of intangible assets would cause a corresponding increase or decrease in amortization expense of approximately $113 million for the year ended December 31, 2017, based on the estimated useful lives used above. The final estimated useful lives could range from 1 to 12 years for advertiser relationships and trademarks and trade names, and from 12 to 17 years for affiliate relationships. The ad backlog asset is expected to be amortized to expense over the first 12 months following completion of the acquisition.

(f) Equity method investments, including note receivable

Reflects adjustments of $133 million for an increase in the fair value of equity method investments. The balance also includes Scripps' $662 million in historical equity method investments and $103 million in notes receivable from equity method investees.

(g) Deferred revenues

Reflects a fair value adjustment to reduce Scripps historical deferred revenues balance by $45 million , or 30% , as of December 31, 2017. Due to limited information, this reduction to the book value of Scripps historical deferred revenues balance is based on a preliminary assessment performed by Discovery to determine a best estimate of the fair value of the obligation on the acquisition date.

(h) Noncurrent portion of debt and interest expense

Discovery will finance the cash portion of the merger with proceeds from approximately $8.8 billion in new par value debt comprised of approximately $6.8 billion in senior notes that were issued on September 21, 2017 at a weighted-average interest rate of 3.9% and a planned $2.0 billion delayed draw on the unsecured term loan facility that was entered into on August 11, 2017. The interest rates on the terms loans are based, at the Company's option, on either adjusted LIBOR plus a margin, or an alternate base rate plus a margin.

The approximately $2.5 billion of Scripps long-term debt to be assumed upon completion of the Merger was adjusted to fair value using observed trades or executable quotes as of February 23, 2018 and discounted cash flow methodology when observable prices were not available.

* On July 30, 2017, the Company obtained a commitment letter from a financial institution for a $9.6 billion unsecured bridge term loan facility that could have been used to complete the Scripps transaction. No amounts were drawn under the bridge loan commitment. Following the execution of the Term Loans and the issuance of the Senior Notes, the commitment was terminated. The Company incurred $40 million of debt issuance costs, which were fully amortized as a component of interest expense following the issuance of the Senior Notes. Additionally, the Company incurred $5 million of upfront and commitment fees on the Term Loans which were also amortized as a component of

interest expense during the period ended December 31, 2017. There were no borrowings made on the Term Loans as of December 31, 2017. A pro forma adjustment has been reflected to eliminate the non-recurring impact of such debt issuances costs.

(i) Deferred income taxes

Represents the required adjustment for the deferred income tax impact of this non-taxable Merger transaction, which was calculated using a blended 23% U.S. federal, state and local statutory tax rate, net of federal tax benefit, multiplied by the fair value adjustments made to assets acquired and liabilities assumed, excluding goodwill, as calculated below (in millions):

(j) Equity

Reflects adjustments to eliminate Scripps' historical equity balances and record estimated consideration at fair value (in millions).

(k) Preferred stock modification

As disclosed in the Current Report on Form 8-K filed on July 30, 2017, Discovery entered into a Preferred Share Exchange Agreement (the “Exchange Agreement”) with Advance/Newhouse Programming Partnership (“ANPP”), pursuant to which Discovery agreed to issue a number of shares of a newly designated Discovery Series A-1 preferred stock, and a number of shares of a newly designated Discovery Series C-1 preferred stock, (collectively, the "New Preferred Stock") to ANPP in exchange for all of ANPP’s shares of Discovery Series A preferred stock and all of ANPP’s shares of Discovery Series C preferred stock, respectively (the "Exchange"). The terms of the Exchange resulted in ANPP’s aggregate voting and economic rights before the Exchange being equal to their aggregate voting and economic rights after the Exchange. The terms of the Exchange Agreement also provided that certain of the shares of Discovery Series C-1 preferred stock received by ANPP in the Exchange (including the Discovery Series C common stock into which such shares are convertible) are subject to transfer restrictions on the terms set forth in the Exchange Agreement. While subject to transfer restrictions, such shares may be pledged in certain bona fide financing transactions, but may not be pledged in connection with hedging or similar transactions.

On August 7, 2017, upon the terms set forth in the Exchange Agreement, Discovery and ANPP completed the Exchange. Immediately following the Exchange, ANPP’s beneficial ownership of the aggregate number of shares of Discovery’s Series A Common Stock (the “Series A Common Stock”) and Series C Common Stock (the “Series C Common Stock”), into which the New Preferred Stock received by ANPP in the Exchange are convertible, remained unchanged as follows:

Prior to the Exchange Agreement the Series A Preferred Stock had a carrying value of $108 million as a class of securities and each share of Series A Preferred Stock was convertible into one share of Series A Common Stock and one share of Series C Common Stock (referred to as the “embedded Series C Common Stock”). Through its ownership of the Series A Preferred Stock, ANPP had the right to elect three directors (the “preferred directors”) and maintained special voting rights on certain matters, including but not limited to blocking rights for material acquisitions, the issuance of debt securities and the issuance of equity securities (collectively, the “preferred rights”). Additionally, ANPP had certain transfer restrictions with respect to its governance rights. Prior to the Exchange Agreement, the Series C preferred stock was considered the economic equivalent of Series C common stock.

Following the Exchange, Series A-1 Preferred Stock and Series C-1 Preferred Stock are convertible into Series A Common Stock and Series C Common Stock, respectively, independently by class of security. The aforementioned preferred rights and transfer restrictions are retained as features of the Series A-1 Preferred Stock in addition to a right of first offer in favor of Discovery should ANPP desire to sell 80% or more of such shares in a “Permitted Transfer” (as defined in the Discovery charter). Following the Exchange, Series C-1 Preferred Stock is considered the economic equivalent of Series C common stock and also maintains certain transfer restrictions.

Discovery considers the legal exchange of the Series A Preferred Stock for Series A-1 Preferred Stock and Series C-1 Preferred Stock to be a modification to the conversion option of the Series A Preferred Stock. Previously, conversion required simultaneous conversion into Series A common stock and Series C common stock. The terms of the Series A-1 Preferred Stock and Series C-1 Preferred Stock allow for the independent conversion of the Series C-1 Preferred Stock without the conversion of Series A-1 Preferred Stock. However, ANPP’s aggregate voting, economic and preferred rights before the Exchange are equal to their aggregate voting, economic and preferred rights after the Exchange. Additionally, the Exchange resulted in the exchange of legal form preferred stock for new legal form preferred stock.

Discovery valued the securities immediately prior to and immediately after the Exchange and determined that the Exchange increased the fair value of ANPP’s preferred stock by $35 million from $3.340 billion to $3.375 billion , or 1.05% , which was not considered significant in the context of the total value of the preferred stock. On the basis of the qualitative and quantitative factors noted above, Discovery does not believe the Exchange is considered significant and does not reflect an extinguishment of the previously issued preferred stock for accounting purposes. Accordingly, Discovery has accounted for the exchange of the previously issued preferred stock as a modification, which is measured as the increase in fair value of the preferred stock, or $35 million .

In connection with the Exchange Agreement, ANPP also entered into a voting agreement with Discovery and Scripps (the “ANPP Voting Agreement”). The ANPP Voting Agreement required that ANPP vote its shares of Discovery Series A Preferred Stock to approve the issuance of shares of Series C common stock in connection with the Merger as contemplated by the Merger Agreement. As the $35 million of incremental value was transferred to ANPP in exchange for consent with respect to the Scripps transaction, the Company determined that the incremental amount should be expensed as merger transaction costs. The expense of $35 million is considered non-recurring and therefore has been eliminated from selling, general and administrative expenses in the unaudited pro forma condensed combined statement of operations.

(l) Noncontrolling interests

The preliminary fair value of the noncontrolling interests of Scripps, using equally weighted income and market valuation approaches, is $2.1 billion . A pro forma adjustment of $1.7 billion was recorded to reflect the fair value of $2.1 billion and the elimination of the historical carrying value of $333 million .

(m) Income tax expense

Reflects the income tax effect of the pro forma adjustments, which was calculated using a blended 37% U.S. federal, state and local statutory tax rate, net of federal tax benefit. The assumed rate is based on the statutory rates applicable in 2017. The effective tax rate of the combined company could be significantly different from what is presented in these unaudited pro forma financial statements for a variety of reasons, including post-acquisition activities, and the impact of the tax reform legislation enacted in the United States on December 22, 2017, which is generally effective in 2018.

(n) Net loss per share

Discovery's net loss per share calculation follows the two-class method, which distinguishes between the classes of securities based on the proportionate participation rights of each security type in Discovery's undistributed income. Discovery's Series A, B and C common stock and the Series C-1 convertible preferred stock are treated as one class for purposes of applying the two-class method, because they have substantially equal rights and share equally on an as-converted basis with respect to income and loss available to Discovery. In connection with the acquisition, Scripps' shareholders will receive, in part, stock consideration in the form of Discovery's Series C common stock (Note 2). Net loss per share adjustments to the unaudited pro forma financial statements reflect adjustments to Discovery's two-class method calculation for net loss per share based on the stock consideration to be received by Scripps' shareholders. Pro forma combined weighted average shares outstanding amounts also reflect the impact of the stock consideration to be received by Scripps' shareholders in connection with the Merger.

For the year ended December 31, 2017, pro forma combined basic net loss per share is calculated using the historical Discovery weighted average shares outstanding during the period plus the assumed issuance of 139 million Discovery Series C common stock to Scripps shareholders (see Note 2). On January 1, 2017, loss per share was calculated using undistributed income available to Discovery common stockholders.

The pro forma combined weighted average loss per basic shares outstanding was calculated as follows (in millions, except per share amounts).

Pro forma combined weighted average loss per share outstanding with dilution was calculated as follows (in millions, except per share amounts).

The weighted-average number of shares outstanding for the computation of diluted loss per share does not include 2 million of Discovery's share-based awards, as the effects of these potentially outstanding shares would be anti-dilutive.

(o) Other income (expense), net

In conjunction with the Merger, the Company entered into $4 billion notional amount of interest rate contracts used to economically hedge a portion of the senior notes issued on September 21, 2017. These interest rate contracts were settled on September 21, 2017 and did not receive hedging designation. The Company recognized a $98 million loss in connection with these interest rate contracts, which has been reflected as a component of other (expense) income, net on the Company's consolidated statement of operations. Also reflected as a component of other (expense) income is interest income of $21 million earned as of December 31, 2017 on the cash proceeds of the $6.8 billion senior notes issued on September 21, 2017. A pro forma adjustment of $77 million has been reflected to eliminate the net non-recurring impact of the loss on the interest rate contracts and interest income earned on the proceeds from the debt issued to finance the Scripps acquisition.