media and entertainment handbook - fitch ratings98b19f6a-79a3-4ff9-96fb... · media and...

Volume II 2015-2016

Media and Entertainment Handbook Fitchs Comprehensive Credit Profile Analysis of Issuers within the Media & Entertainment Sector

Corporates

October 13, 2015

Company Summaries

Investment Grade Bertelsmann SE & Co. KGaA ...............................................................................................................1 CBS Corporation ...................................................................................................................................7 Cox Enterprises, Inc. ..........................................................................................................................19 Discovery Communications LLC .........................................................................................................30 The Dun & Bradstreet Corporation .....................................................................................................41 IHS ......................................................................................................................................................52 Interpublic Group of Companies, Inc. .................................................................................................59 McGraw Hill Financial, Inc. .................................................................................................................70 NBCUniversal Media LLC ...................................................................................................................81 Pitney Bowes Inc. ...............................................................................................................................90 RELX (fka Reed Elsevier PLC) .........................................................................................................101 Scripps Networks Interactive ............................................................................................................108 Sky plc .............................................................................................................................................. 114 Thomson Reuters Corporation .........................................................................................................120 Time Warner Inc. ..............................................................................................................................131 Twenty-First Century Fox, Inc. ..........................................................................................................143 Verisk Analytics, Inc. .........................................................................................................................155 Viacom Inc. .......................................................................................................................................165 The Walt Disney Company ...............................................................................................................177 WPP plc ............................................................................................................................................190

Non-Investment Grade AMC Entertainment Inc. ....................................................................................................................197 Cinemark Holdings, Inc. ....................................................................................................................208 Gray Television Inc. ..........................................................................................................................214 Houghton Mifflin Harcourt Publishers Inc. ........................................................................................218 iHeartCommunications, Inc. (Including Clear Channel Worldwide Holdings, Inc.) ...........................226 Lamar Media Corporation .................................................................................................................251 Liberty Interactive LLC/QVC Inc. ......................................................................................................255 Media General, Inc. ..........................................................................................................................267 Netflix, Inc. ........................................................................................................................................271 Nexstar Broadcasting Group, Inc. .....................................................................................................275 Nielsen Holdings N.V. .......................................................................................................................279 Regal Entertainment Group ..............................................................................................................294 R.R. Donnelley & Sons Company .....................................................................................................304 Sinclair Broadcast Group, Inc. ..........................................................................................................318 Sirius XM Radio Inc. .........................................................................................................................322 TEGNA, Inc. (Formerly Gannett Company) ......................................................................................326 The Tribune Media Company ...........................................................................................................336 Univision Communications, Inc. ........................................................................................................346 Warner Music Group Corp. ...............................................................................................................357

AnalystsDavid Peterson+1 312 [email protected]

Jack Kranefuss+1 212 [email protected]

Brian Yoo, CFA+1 212 908-9175 [email protected]

Rachael Shanker+1 212 [email protected]

Leena Mancheril+1 212 [email protected]

Mike Simonton, CFA+1 312 [email protected]

Editorial AdvisorsEditorialMichael Sykes, Lead EditorAmanda Muller, Desktop Publishing SpecialistStephanie Deshpande, Production Manager

PublisherJohn Forde

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Company Summaries Bertelsmann SE & Co. KGaA. October 13, 2015

Bertelsmann SE & Co. KGaA.Key Rating DriversManaging Leverage Spike: M&A continues to be a major part of Bertelsmanns strategy. The acquisition of e-learning businesses and the minority buyout at magazines division Gruner+Jahr (G+J) caused a leverage spike at end-2014, which the company addressed by issuing EUR1.3 billion hybrid bonds that qualify for a 50% equity credit under Fitch Ratings methodology. Fitch recognises that the company is going through a reorganisation and expects funds flow

from operations (FFO) adjusted net leverage to approach 1.5x in 2016 as restructuring costs fall.

Stable Cash Generation: The companys underlying operating cash flow has remained stable, while FCF of EUR140 million in 2014 (EUR380 million in 2013) was affected by restructuring costs and negative working capital changes. Bertelsmann has a modest dividend policy that should allow the company to deleverage in the next two years. Fitch expects low single-digit EBITDA growth in 2015 and 2016 as a result of acquisitions and efficiency gains, along with lower restructuring costs, to support an increase in FCF.

RTL Underpins Profile: Bertelsmanns financial profile is underpinned by its 75% holding in RTL Group. RTL is Europes largest free-to-air TV broadcaster and in 2014 accounted for 56% of group EBITDA. RTL runs leading TV channels in Germany, France and the Netherlands and owns production arm Fremantle. Other core businesses are a 53% stake in books publisher Penguin Random House (PRH), magazine publisher G+J and services provider Arvato.

Digital and Creative Challenge: The digitalisation of content is a medium- to long-term risk, but Fitch recognises the company is addressing this risk with its restructuring efforts and repositioning of its business portfolio. RTL and PRH are successfully running digital platforms, and the buyout of minorities at G+J should facilitate ongoing restructuring of the magazines business, where EBITDA has declined at a 16% CAGR over the past three years.

Shareholder-Driven Portfolio: Bertelsmann has an unusual mix of media-related businesses with no immediate synergies. The collective rationale of these assets is a reflection of Bertelsmanns ownership structure, with shareholders using Bertelsmann as a portfolio manager of majority-owned assets. The group is owned by the Mohn Family (19.1%) and by a nonprofit operating foundation (80.9%). The structure adds conservatism to the companys risk profile for investments, its financing strategy and dividend policy.

Rating SensitivitiesLimited Headroom at BBB+: Any upward movement in the rating is unlikely given the companys operational profile, despite conservative financial metrics.

Negative Drivers: Downgrade guidelines include FFO adjusted net leverage (including profit participation certificates) sustainably above 2.0x (2014 pro forma for the hybrid issuance: 2.1x) and an erosion of the core media business as a result of adverse industry trends and operating performance. M&A-induced leverage is considered in the context of how value accretive deals are likely to be and the timing set by management to deleverage to more conservative levels.

Liquidity and Debt StructureStrong Liquidity: Bertelsmann used EUR1.3 billion of cash at end-2014 to repay EUR430 million of bonds maturing in the first half of 2015, before issuing EUR1.3 billion of hybrids in the second quarter. Bertelsmann has access to a syndicated loan facility of EUR1.2 billion maturing in 2019 and faces EUR1.0 billion in debt maturities in 20162017.

Ratings

Security ClassCurrent Rating

Bertelsmann SE & Co. KGaA.Long-Term Foreign-Currency IDR BBB+Senior Unsecured BBB+Short-Term IDR F2

IDR Issuer Default Rating.

Rating OutlookLong-Term Foreign-Currency IDR Stable

AnalystsTajesh Tailor+44 203 [email protected]

Anna Martinez+44 203 [email protected]

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Portfolio Summary Bertelsmann SE & Co. KGaA(As of Dec. 31, 2014)

BPO Business process outsourcing.Source: Company filings, company website.

RTL Group(75% Owned)

Leading European Entertainment Network

TV Channels 52Radio Stations 29

TV Portfolio RTL Television in Germany, M6 in France, the RTL channels in the Netherlands, Belgium, Luxembourg, Croatia, and Hungary, and Antena 3 in Spain,

Radio RTL France, Germany, Belgium,Netherlands, Spain, Luxembourg

Joint Venture RTL CBS Asia Entertainment NetworkInterests National Media Group Russia

Penguin Random House(53% Owned)

Publishing houses include Doubleday, Viking and Alfred A. Knopf (United States); Ebury, Hamish Hamilton and Jonathan Cape (UK); Plaza & Jans and Alfaguara

(Spain) and Sudamericana (Argentina)

Independent imprints and publishing houses ~250Annual print titles released >15,000Annual digital titles released >70,000

Gruner + Jahr Printing/Publishing(100% Owned)

Countries >20Media/Magazine/Digital Offerings >500

Publications Stern, Brigitte, Geo, Capital, Gala, Eltern, P.M., Essen & Trinken, National Geographic

Interests 59.9% Motor Presse Stuttgart

Arvato-Bertelsmann(100% Owned)

Global BPO Services Provider

Services: Marketing/CRM, e-commerce, supply chain management/distribution, financial, IT platforms, digital marketing solutions

Be Printers(100% Owned)

Printing: Magazines, catalogs, brochures, books and calendars

Services: Media creation and digital solutions

Printing Tech: Gravure, web and sheet offset and digital

United States 19%

Germany 35%

France 14%

Other7%

Rest of Europe

25%

Revenues by Geographic Region Bertelsmann (As of Dec. 31, 2014)

Source: Company filings.

Services25%

Rights and

Licenses11%

Revenues by Segment Bertelsmann(As of Dec. 31, 2014)


Products/Merchandise

39%

Advertising25%

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Event Risk Dashboard Bertelsmann

Continued on next page. Source: Company filings, Fitch Ratings.

Event Risk SummaryLevel of Risk

LBO LSecular MCorporate Governance/Ownership MChange in Financial Policies MAcquisition HDivestiture LStructural Subordination Risk MLitigation Risk LRegulatory Risk MContingent Liabilities L

H High. M Medium. L Low.

LBO Risk Low Bertelsmann is 100% privately owned/controlled by Germanys Mohn family. Too large to LBO for most private equity funds. Bonds include a change of control put tied to a ratings downgrade a poison pill or mitigant to a leveraged bid.

Secular Risk Medium RTL Group Pan-European commercial TV broadcasting accounted for 56% of 2014 divisional EBITDA; a sector exposed to audience fragmentation; increasing pervasion of pay-TV and OTT content.

RTL though has leading and stable market share in a number of markets. Non-English-speaking OTT content so far appears less prevalent and therefore a reduced threat to its markets.

Other divisions, inlcuding Penguin Random House (leading book publisher) and Gruner & Jahr (magazines), continue to face the online threat and transition to digital. Bertelsmann is going through a period of transformation and reorganization of its business mix to address these risks.

Financial Policy Medium Public policies include a leverage factor test (lease, pension and profit participation certificate adjusted debt to EBITDA) below 2.5x and EBITDA to financial expense test of more than 4.0x. Leverage has spiked towards the end of 2014 as a result of M&A and restructuring efforts management are though likely to manage the metric below the target within an acceptable timeframe (1824 months) and have issued hybrid debt in 2Q15 to manage their balance sheet.

Debt is mainly raised in the form of public bonds and private placements the bonds include no financial covenants.

Corp. Governance/Ownership Medium Although privately owned, Bertelsmanns legal structure was changed in 2012 to a KGaA (partnership limited by shares) a possible precursor to an IPO (while not diluting the Mohn family voting rights). A public listing would increase transparency and reporting detail.

The company reports under IFRS with a good level of disclosure although quarterly announcements lack divisional breakdown/detail.

German jurisdiction is regarded as positive from a governance perspective.

0.5

1.0

1.5

2.0

2.5

3.0

2010 2011 2012 2013 2014

Source: Company filings, Fitch Ratings.

Leverage Trend(x)

3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 3/15

Source: Fitch Ratings.

Bertelsmann Rating History

BB+

BBB

BBB

BBB+

A

A

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Event Risk Dashboard Bertelsmann (Continued)


Litigation Summary Low Bertelsmann reported EUR111 million of litigation provisions at December 2014. Of this the majority related to RTL. While not immaterial, the size of the provision does not present ratings presssure in the context of annual pre-dividend FCF in excess of EUR500 million.

Structural Subordination Risk Medium Debt is managed centrally and almost entirely raised at the parent level or through U.S. finance subsidiary Bertelsmann U.S. Finance LLC guranteed by the parent. TV group RTL is seperately listed and does have the ability to raise stand-alone finance gross debt EUR57 million. at December 2014. Fitch does not consider this approach to funding to be likely to change.

Contingent Liabilities Risk Low Reported contingent liabilities mainly relate to RTL and Penguin Random House relating to content supply agreements and payment commitments to authors.

Fitch is not aware of material outstanding ownership contingencies such as put options against the group.

Regulation Summary Medium Bertelsmanns growth strategy includes scaling up its digital media presence M&A will inevitably involve regulatory/antitrust clearance.

As the leading commercial TV broadcaster in a number of European markets, RTL is viewed as being under meaningful regulatory scrutiny with its market position inhibiting any major consolidating M&A.

Acquisition Risk Medium Divestiture Risk Low(EUR Mil.) Acquisitions/Investments Divestitures2014 820 30 2013 501 12 2012 88 (9)2011 241 4 2010 205 154 Bertelsmann continue its portfolio restructuring having spun-off and closed a number of low margin businesses over the past several years, its growth strategy includes a desire to scale up its digital media activities and push into emerging markets. Recent transactions include the merger of Randon House with Penguin to form leading book publisher Penguin Random House and a number of smaller e-learning acquisitions, as part of the groups aim to expand into education. Following the end-2014 spike in leverage, management has shown financial discipline with the issuance of a hybrid bond which helped remove some ratings pressure. Potential further M&A-induced leverage spikes would be viewed on the merits of any deal and actions set out to restore leverage metrics management are regarded as prudent and would be expected to address resulting leverage spikes as they have in the past.

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Bertelsmann Management SE(Executive Board)

Organizational Chart Bertelsmann SE & Co. KGaA Corporate Structure(EUR Mil., As of Dec. 31, 2014)

(Intercompany Loan EUR500 Mil.)

Note: Bertelsmann SE & Co. KGaA is a privately held Kommanditgesellschaft auf Aktien (KGaA; partnership limited by shares). 80.9% of the share capital in Bertelsmann SE & Co. KGaA is held indirectly by foundations (Bertelsmann Stiftung, Reinhard Mohn Stiftung, BVG Stiftung), and 19.1% is held indirectly by the Mohn family. All voting rights at the General Meeting of Bertelsmann SE & Co. KGaA and Bertelsmann Management SE (general partner) are controlled by Bertelsmann Verwaltungsgesellschaft (BVG). Approximately 95% of all debt issued by the group is issued by Bertelsmann directly. RTL, which is majority owned by Bertelsmann, has the capacity to issue its own debt and arrange its own credit facilities. However, Bertelsmann does not provide any guarantee over that debt. RTL has proved to be a highly cash-generative business with a policy to finance itself through internally generated cash. Although RTL has its own treasury operations, it is funded through intercompany loans from Bertelsmann; a feature that avoids third-party structural subordination and a policy that is expected to continue. At FY14 RTL had a EUR500 million 2.713% term loan due 2023 and a EUR1.0 billion (undrawn) revolving and swingline facility available through the parent.Source: Bertelsmann Annual Report 2014, Fitch Ratings.

The Mohn Family

Bertelsmann SE & Co. KGaAIDR: BBB+/Stable Outlook

(53%) (100%) (100%) (75.1%)

(19.1%)

FoundationsBertelsmann

Verwaltungsgesllschaft (BVG)(100% Voting Rights)

Penguin RandomHouse Publishing

Revenue 3,324EBIT 374Margin (%) 11

Arvato


Gruner & Jahr


RTL Group Bertelsmann(Free Float: 24.9%)

Revenue 5,808EBIT 1,128Margin (%) 19

(100%)

(80.9%)

FY 2014 EBITDA 2,374

DueOctober 2015 430September 2016 785May 2019 60November 2019 100August 2022 741October 2024 496June 2032 100

Bonds 2,710

2019 1,200RCF 1,200

Profit Participation Notes 413Total Debt 3,123

Be Printers

Revenue 996EBIT 29Margin (%) 3

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Financial Summary Bertelsmann SE & Co. KGaA(EUR Mil., Years Ending Dec. 31) 2011 2012 2013 2014ProfitabilityRevenue 15,368 16,065 16,179 16,675 Revenue Growth (%) 2.0 4.5 0.7 3.1 Operating EBIT 1,755 1,732 1,717 1,150 Operating EBITDA 2,243 2,210 2,311 2,374 Operating EBITDA Margin (%) 14.6 13.8 14.3 14.2 FFO Return on Adjusted Capital (%) 14.3 13.4 N.A. N.A.Free Cash Flow Margin (%) 3.8 4.6 2.3 2.0 Coverages (x)FFO Gross Interest Coverage 5.5 5.4 4.5 6.4 Operating EBITDA/Gross Interest Expense 8.6 8.6 8.3 10.7 FFO Fixed-Charge Coverage (Including Rents) 3.1 3.1 3.0 3.6 FCF Debt Service Coverage 1.0 1.9 0.5 0.6 Cash Flow from Operations/Capex 2.5 3.1 2.4 1.9 Debt Leverage of Cash Flow (x)Total Debt with Equity Credit/Operating EBITDA 1.8 1.9 1.6 1.4 Total Debt Less Unrestricted Cash/Operating EBITDA 1.0 0.7 0.5 0.9 Debt Leverage Including Rentals (x)Annual Hire Lease Rent Costs for Long-Term Assets (Reported and/or Estimate) 293 289 226 247 Gross Lease-Adjusted Debt/Operating EBITDAR 2.5 2.6 2.2 2.1 Gross Lease-Adjusted Debt/FFO + Interest + Rentals 3.6 3.9 3.7 3.2 FFO Adjusted Net Leverage 2.6 2.3 1.9 2.4 FCF/Lease Adjusted Debt (%) 9.3 11.3 6.8 6.3 Debt Leverage Including Leases and Pension Adjustment (x)Pension and Lease-Adjusted Debt /EBITDAR + Pension Cost 3.2 3.4 2.2 2.0 Balance Sheet SummaryReadily Available Cash 1,764 2,658 2,705 1,329 Restricted/Not Readily Available Cash N.A. N.A. N.A. N.A.Short-Term Debt 597 264 1,168 654 Long-Term Senior Debt 3,389 4,025 2,631 2,777 Subordinated Debt N.A. N.A. N.A. N.A.Equity Credit N.A. N.A. N.A. N.A.Total Debt with Equity Credit 3,986 4,289 3,799 3,431 Off-Balance-Sheet Debt 2,344 2,312 1,808 1,976 Lease-Adjusted Debt 6,330 6,601 5,607 5,407 Fitch-Identified Pension Deficit 1,738 2,146 N.A. N.A.Pension-Adjusted Debt 8,068 8,747 5,607 5,407 Cash Flow SummaryOperating EBITDA 2,243 2,210 2,311 2,374 Gross Cash Interest Expense (262) (257) (280) (221)Cash Tax (338) (385) (305) (387)Associate Dividends (272) (213) (380) (385)Other Items Before FFO (Including Interest Receivable) (141) (199) (321) (163)Funds from Operations 1,230 1,156 1,025 1,218 Change in Working Capital 47 216 57 (116)Cash Flow from Operations 1,277 1,372 1,082 1,102 Total Non-Operating/Nonrecurring Cash Flow N.A. N.A. N.A. N.A.Capex (507) (447) (457) (582)Dividends Paid (180) (180) (245) (180)FCF 590 745 380 340 Net (Acquisitions)/Divestitures (165) 5 (358) (930)Net Equity Proceeds/(Buybacks) (177) (12) 1,410 N.A.Other Cash Flow Items (351) (354) (895) (18)Total Change in Net Debt (103) 385 537 (608)Working CapitalAccounts Receivable Days 69 73 N.A. N.A.Inventory Days 104 97 N.A. N.A.Accounts Payable Days 233 271 N.A. N.A.

N.A. Not available. Source: Fitch Ratings.

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Company Summaries CBS Corporation October 13, 2015

AnalystsDavid Peterson+1 312 [email protected]

Brian Yoo, CFA+1 212 [email protected]

CBS CorporationKey Rating DriversRatings Incorporate Leverage Target: CBS Corporations (CBS) leverage target of between 2.5x and 2.75x is in line with Fitchs 2.75x gross leverage target for the current ratings. Fitch expects that CBS will increase debt levels gradually within the context of its leverage target. CBSs content-centric business strategy, which focuses on more stable and recurring revenue streams and positions the company to reduce its exposure to more volatile advertising revenues can, in Fitchs view, support the companys leverage target.

Rational Capital Structure Strategy: Fitch anticipates that CBS will maintain a rational approach to managing its balance sheet and gradually increase its leverage to its target. Capital allocation will continue to prioritize investment in content creation and programming while preserving its historically conservative financial policy and participating in merger and acquisition activity.

Shareholder Returns to Continue: Share repurchases continue to be the centerpiece of CBSs capital allocation strategy. Shareholder returns that exceed FCF generation are incorporated in the current ratings to the extent that leverage remains below Fitchs 2.75x total leverage threshold.

Revenue Mix Improving: Growing content licensing and distribution, affiliate and subscription revenues are improving CBSs revenue mix and are in line with the companys long-term objective to increase non-advertising revenue sources. However CBSs exposure to advertising revenues, at 50%, is relatively high compared to other diversified media companies.

$2 Billion Retransmission Fees by 2020: CBS expects its retransmission consent/reverse compensation revenue will grow to $1 billion by 2016 and to exceed $2 billion by 2020. Fitch believes that the combination of escalators built into existing agreements and anticipated rate increases in new deals firmly place CBS on a path to achieve its revenue goals. This revenue stream provides a stable and recurring element to CBSs revenue base, which mitigates some of the volatility associated with advertising revenues. Additionally, the high margin of these revenues strengthens the companys operating profile.

Rating SensitivitiesLimited Upside Ratings Momentum: Positive rating action would likely coincide with CBS adopting a more conservative financial policy with a gross leverage target of 2.25x or lower. Moreover, Fitch needs to observe meaningful progress in CBSs efforts to transform its revenue mix and reduce its reliance on cyclical advertising revenues. Meanwhile, CBS will need to demonstrate that its operating profile can sustain itself amid ongoing competitive pressures, changing media consumption patterns and evolving technology platforms.

Downside Case: Negative rating actions are more likely to coincide with discretionary actions including the company adopting a more aggressive financial strategy that increases leverage beyond 3x or event-driven M&A activity that drives leverage beyond 3.5x in the absence of a credible deleveraging plan. Additionally, negative rating actions could result should Fitch begin to observe a negative impact from alternative content distribution platforms and other forms of entertainment that is significantly larger than Fitchs expectations.

Ratings


CBS Corp.Long-Term IDR BBBSenior Unsecured BBBShort-Term IDR F2Commercial Paper F2CBS BroadcastingLong-Term IDR BBBSenior Unsecured BBB


Rating OutlookStable

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Portfolio Summary CBS Corporation (As of June 30, 2015)

O&O Owned and operated.Source: Company filings, company website.

Entertainment Local BroadcastingCBS Television NetworkCBS Entertainment CBS NewsCBS Sports The CW (50/50 JV)

CBS Television Studios CSI: Crime Scene Investigation (CBS), NCIS (CBS), The Good Wife (CBS), Madam Secretary (CBS) and Scorpion (CBS)

Syndication: Hawaii Five-O, Criminal Minds, Blue Bloods, The Good Wife, NCIS and NCIS: Los Angeles, Wheel of Fortune, Jeopardy!, Entertainment Tonight, Inside Edition, The Insider, Dr. Phil , Rachael Ray, Hot Bench and Judge Judy

CBS Global Distribution GroupU.K. and Ireland (49% interest in JV with AMC Networks, Inc.)Europe, Middle East, Africa (30% int. in JV with AMC Networks, Inc.)POP (formerly TVGN) (50/50 JV with Lionsgate)Australia (33% int. in JV with Ten Network Holdings Limited)Southeast Asia (30% int. in JV with RTL Group)

CBS Films2015 2014Love the Coopers AfflictedThe DUFF What If

GambitPride

CBS InteractiveCBS.com Last.fmCBS All Access MetacriticCBS Audience Network MetrolyricsCBS News MaxPrepsCBS Sports MP3.comCBS Sports.com Fantasy mySimonCBS Sports.com College Network Onlylady.comChow.com PCHome.netCNET Radio.comCNET Content Solutions SmartplanetCNET News TechRepublicCNET Download.com TV.comComic Vine TV GuideGamekult Xcar.com.cnGamespot ZDNetGameFAQs Zol.com.cnGiant Bomb

30 O&O Stations

Station LocationMarket

RankWCBS-TV New York, NY 1WLNY-TV New York, NY 1KCAL-TV Los Angeles, CA 2KCBS-TV Los Angeles, CA 2WBBM-TV Chicago, IL 3KYW-TV Philadelphia, PA 4WPSG-TV Philadelphia, PA 4KTVT-TV Dallas-Fort Worth, TX 5KTXA-TV Dallas-Fort Worth, TX 5KPIX-TV San Francisco-Oakland-San Jose, CA 6KBCW-TV San Francisco-Oakland-San Jose, CA 6WBZ-TV Boston, MA 7WSBK-TV Boston, MA 7WUPA-TV Atlanta, GA 9WKBD-TV Detroit, MI 12WWJ-TV Detroit, MI 12WTOG-TV Tampa-St. Petersburg-Sarasota, FL 13KSTW-TV Seattle-Tacoma, WA 14WCCO-TV Minneapolis-St. Paul, MN 15

KCCO-TV (Satellites) Alexandria, MN KCCW-TV (Satellites) Walker, MN

WFOR-TV Miami-Ft. Lauderdale, FL 16WBFS-TV Miami-Ft. Lauderdale, FL 16KCNC-TV Denver, CO 17KOVR-TV Sacramento-Stockton-Modesto, CA 20KMAX-TV Sacramento-Stockton-Modesto, CA 20KDKA-TV Pittsburgh, PA 23WPCW-TV Pittsburgh, PA 23WJZ-TV Baltimore, MD 26WBXI-CA Indianapolis, IN 27

Radio Stations (In Top 25 Markets)Location No. of Stations Market RankNew York, NY 7 1Los Angeles, CA 6 2Chicago, IL 7 3San Francisco, CA 6 4Dallas-Fort Worth, TX 6 5Houston, TX 6 6Washington, D.C. 6 7Philadelphia, PA 6 8Atlanta, GA 3 9Boston, MA 5 10Miami-Ft. Lauderdale, FL 3 11Detroit, MI 6 12Seattle-Tacoma, WA 4 13Phoenix, AZ 3 14Minneapolis, MN 3 16San Diego, CA 2 17Baltimore, MD 4 21St. Louis, MO 3 22Riverside-San Bernardino, CA 4 25Total Top 25 Markets 89 Total Radio Stations (26 Markets) 117

Cable NetworksShowtime Networks (76 million subs in 2014)CBS Sports Network (55 million subs in 2014)Smithsonian Networks (70% Owned Venture; 30 million subs in 2014)

Publishing

Simon & Schuster

In 2014, Simon & Schuster published 294 New York Times bestsellers inhardcover, paperback and electronic formats, collectively, including 29 New York Times #1 bestsellers.

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U.S.87%

United Kingdom

2%

Europe 5%

Canada2%

Asia2%Other2%

Revenues by Geographic Region CBS Corporation(As of Dec. 31, 2014)


Cable Networks

15%

Revenues by Segment CBS Corporation(As of Dec. 31, 2014)


Entertainment59%

Publishing6%

Local Broadcasting

20%

Cable Networks

28%

EBITDA by Segment CBS Corporation(As of Dec. 31, 2014)


Entertainment41%

Publishing3%

LocalBroadcasting

28%

Note: Revenues and EBITDA do not include corporate or eliminations.

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Event Risk Dashboard CBS Corporation

O&O Owned and operated. IDR Issuer Default Rating. Continued on next page. Source: Company filings, Fitch Ratings.


LBO LSecular MCorporate Governance/Ownership HChange in Financial Policies MAcquisition MDivestiture LStructural Subordination Risk MCovenant Breach LLitigation Risk MRegulatory Risk MContingent Liabilities M

H High. M Medium. L Low.

LBO Risk Low Current enterprise value (EV) too large for an LBO. Concentrated ownership (Summer Redstone/National Amusements, Inc. has approximately 80% voting control, approximately 7% economic stake) reduces the risk of private equity-led LBO. However, a Redstone privatization is not out of the question.

Solid FCF, but exposed to cyclical factors. Change of control put provides some risk mitigation for holders of recent issuances.

Strong equity performance reduces incentive to become private.

Secular Risk Medium Risk concentrated in local broadcasting (approx. 30% of EBITDA as of FY 2014). Threat of emerging distribution platforms to the network and O&Os. Showtime app and CBS All Access may offset risk of subscriber losses in a digital world.

Syndication model remains intact, digital delivery a benefit. Moderate growth at network; retransmission a growth driver. Risk toward the lower end of medium, but not in low.

Financial Policy Medium Fitch expects the company to have a rational approach to managing its leverage and maintain a conservative financial policy to its capital structure in the context of capital allocation strategy and participating in merger and acquisition activity.

CBS stated a 2.5x2.75x leverage target. Fitch previously established a 2.75x target for CBS at the current BBB IDR, but given the companys focus on a more stable and recurring content-based revenue mix, Fitch believes current ratings have capacity to accomodate new leverage target.

Like most investment-grade names, there are no limitations on dividends, acquisitions or share buybacks.

For CBS, this risk is mitigated by the companys consistent financial policy since the Viacom split, and its credit-friendly actions since the downturn.

CBS cut its dividend during the downturn to preserve liquidity, though this was out of necessity.

Fitch believes the downturn made management more conservative. Ratings have sufficient capacity to accommodate the expansion of CBSs share repurchase authorization to $6 billion.

Bank facility contains a 4.5x leverage covenant. Fitch believes risk of a change in financial policy on succession is mitigated by expected involvement of current management team.

Note: Ratings represent combined CBS/Viacom before 2006.Source: Fitch Ratings.

CBS Corporation Rating History

BB+

BBB

BBB

BBB+

A

A

1.5

2.0

2.5

3.0

3.5

4.0

2007 2008 2009 2010 2011 2012 2013 2014 LTMJune2015


Leverage Trend(x)

0

10

20

30

40

50

60

70

80

Source: Bloomberg.

CBS Corporation Stock Price(July 2007June 2015)

($/Share)

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Event Risk Dashboard CBS Corporation (Continued)

O&O Owned and operated. IDR Issuer Default Rating. Note: In event risk analysis, Fitch separates the assessment of the potential actions a company is able to take from what it may do. Source: Company filings, Fitch Ratings.

Structural Subordination Risk Medium Upstream guarantee from CBS Operations Inc., which comprises approximately 40%50% of EBITDA.

$46 million of operating company debt at CBS Broadcasting Inc. as of June 30, 2015.

No material limitations on subsidiary guarantees. No restrictions on additional debt.

Stock Repurchase Authorization and Activity($ Mil.)

Starting Authorized Share Buyback

New Authorized Share Buyback

Share Buy Activity

Ending Authorized Share Buyback

YTD June 30, 2015 4,819.0 (1,800.0) 3,001.0 2014 5,431.0 3,000.0 (3,612.0) 4,819.0 2013 2,511.0 5,100.0 (2,201.0) 5,431.0 2012 1,981.0 1,700.0 (1,170.0) 2,511.0 2011 1,500.0 1,500.0 (1,019.0) 1,981.0 2010 649.4 1,500.0 1,500.0 2009 649.4 649.4 2008 649.4 649.4 2007 579.8 3,100.0 (3,030.4) 649.4 2006 579.8 579.8 Debt-funded buybacks during periods of relative economic stability are factored into ratings to the extent leverage remains below Fitchs 2.75x target for BBB. Like most investment-grade companies, there are no restrictions on the amount of share buyback activity. CBS completed a $1.5 billion repurchase of its Class B common through an accelerated share repurchase (ASR) transaction during the first quarter of 2014. On July 25, 2013 the company announced a $5.1 billion increase to the existing share repurchase authorization bringing total availability to $6.0 billion. On Aug. 7, 2014, the company annouced an additional increase in the amount available under the program from $3 billion to $6 billion.

Covenant Breach Risk Low(x)

Covenant Level

Fitch Estimated Level as of 6/30/15

% EBITDA Cushion

Consolidated Leverage 4.5 2.5 75Covenant calculation per definition in companys bank agreement.

Litigation Risk Medium CBS is a defendant in new and existing cases involving asbestos manufactured by Westinghouse prior to the 1970s. CBS continues to make payments related to settled and decided-at-trial cases. The companys payments net of insurance are expected to be easily managed by FCF.

At Dec. 31, 2014, there were approximately 41,100 asbestos claims pending (versus 45,150 at Dec. 31, 2013). During 2014, there were 3,880 new claims and 7,930 closed claims.

Total net cost for settlement and defense in 2014 was approximately $11 million and in 2013 was $29 million.

Fitch believes future annual payments should not materially exceed 2014 levels and believes this is manageable given the companys FCF.

Regulatory Risk Medium Portfolio governed by FCC's media ownership laws. Relaxation of ownership laws could drive higher M&A. Tightening of laws could drive forced divestitures. Fitch expects newspaper/broadcast cross-ownership rules to be eased, but other ownership regulations not likely to be changed. No impact on CBS.

The passage of stricter antipiracy legislation would be beneficial to content companies, although piracy would remain an issue.

Congress could revisit performance royalty payments for terrestrial broadcasters, which could pressure radio margins by 3%4%.

Fitch does not expect the FCC to step in on any future retransmission or reverse compensation battles with a material impact.

Contingent Liabilities LowUnion Workforce Writers, directors and other talent are unionized work stoppage could materially impact content pipeline.

Directors Guild, Screen Actors Guild and Producer-Writers Guild collective bargaining agreements (CBAs) expire in 2017.

The risk of NFL content being interrupted by a players strike is pushed until 2022, when the current deal expires.

Pensions Pension plan was 21% ($1.1 billion) underfunded at Dec. 31, 2014. Contributions will be manageable in context of FCF.

Acquisition Risk Medium Divestiture Risk Low($ Mil.) Acquisition Divestiture YTD June 30, 2015 59.0 2014 27.0 7.02013 32.0 193.02012 146.0 49.0 2011 75.0 22.0 2010 11.3 18.3 2009 26.1 131.0 2008 2,035.3 198.2 No limitations on acquisitions or divestitures. CBS completed the previously announced split-off of CBS Outdoor Americas, Inc. on July 16, 2014.

Potential TV/radio station footprint pruning small acquisitions or divestitures. Potential to buy smaller cable pure-play, although current equity multiples plus premium a hurdle.

Corporate Governance/Ownership High There is a dual-class stock structure, and Chairman Sumner Redstone has 79.6% voting control, through his ownership of Class A shares (Class B, the majority of shares outstanding, are nonvoting). This concentrated ownership always poses elevated risk to bondholders.

However, Fitch gained incremental comfort around this risk given Redstones 2009 sale of nonvoting stock and other asset sales, which settled the majority of his personal debts without harming CBS creditors.

The executive compensation incentive structure reduces event risk, as it is creditor-friendly, driven by OBIDA and FCF (pre-dividend).

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Corporate Governance Overview CBS Corporation

PRSUs Performance-based restricted stock units. TRSUs Time-based restricted stock units. Continued on next page. Source: Company filings, Bloomberg, Fitch Ratings.

Fiscal 2014 Management Compensation($)

Named Executive Officer (NEO) Salary BonusStock

AwardsOption

AwardsNon-Equity

Incentive Plan All Other TotalSumner M. Redstone Exec. Chairman and Founder 1,756,731 9,000,000 21,078 52,149 10,829,958 Leslie Moonves President and CEO 3,513,461 25,000,000 14,499,972 9,999,994 2,771,924 1,390,294 57,175,645 Joseph R. Ianniello COO 2,509,615 8,970,000 8,199,864 6,799,972 270,482 280,795 27,030,728 Lawrence P. Tu Senior Exec. VP and Chief Legal Officer 1,204,615 3,000,000 3,713,605 1,399,991 2,026,859 11,345,070 Anthony G. Ambrosio Senior Exec. VP, Chief HR Officer and Chief Admin. Officer 878,365 1,400,000 1,049,946 699,996 313,724 118,605 4,460,636

Board of DirectorsIndepen- Compensation Other Current Current

Name Age dence Term Tenure Cash Stock All Others Total Committees Directorships PositionDavid R. Andelman

75 N May 2015May 2016

2000 100,000 200,012 7,500 307,512 None National Amusements Senior partner Lourie & Cutler, P.C. (Law Firm)

Joseph A. Califano Jr.

83 Y May 2015May 2016

2003 138,000 200,012 7,500 345,512 Nominating and corporate governance (chair)

None Founder and Chairman Emeritus The National Center on Addiction and Substance Abuse at Columbia U.

William S. Cohen

74 Y May 2015May 2016

2003 118,000 200,012 7,500 325,512 Compensation None Chairman and CEO the Cohen Group (Consulting Firm)

Gary L. Countryman

75 Y May 2015May 2016

2007 144,000 200,012 7,500 351,512 Audit (chair and financial expert), nominating and corporate governance

None Chairman Emeritus of The Liberty Mutual Group

Charles K. Gifford

72 Y May 2015May 2016

2006 150,000 200,012 7,500 357,512 Compensation (chair), nominating and corporate governance

Bank of America Corporation; Eversource Energy

Chairman Emeritus of Bank of America Corporation

Leonard Goldberg

81 N May 2015May 2016

2007 100,000 200,012 4,000 304,012 None None President Mandy Films, Inc. and Panda Productions, Inc.

Bruce S. Gordon

69 Y May 2015May 2016

2006 118,000 200,012 7,500 325,512 Compensation Northrop Grumman Corporation; The ADT Corporation

Former president and CEO the National Association for the Advancement of Colored People (NAACP)

Linda M. Griego

67 Y May 2015May 2016

2007 110,000 200,012 7,500 317,512 Audit AECOM Technology Corporation; The American Funds (4 Funds)

President and CEO Griego Enterprises, Inc.

Arnold Kopelson

80 Y May 2015May 2016

2007 100,000 200,012 7,500 307,512 None None Co-president Kopelson Entertainment

Leslie Moonves

65 N May 2015May 2016

2006 None None President and CEO CBS

Doug Morris

76 Y May 2015May 2016

2007 118,000 200,012 318,012 Compensation None CEO Sony Music Entertainment

Shari Redstone

60 N May 2015May 2016

1994 100,000 200,012 7,500 307,512 None National Amusements; Viacom; MovieTickets.com

President National Amusements; co-founder and managing partner Advancit Capital

Sumner M. Redstone Chairman

91 N May 2015May 2016

1986 None National Amusements; Viacom;

CEO National Amusements

Frederic V. Salerno

71 Y May 2015May 2016

2007 110,000 200,012 7,500 317,512 Audit Akamai Technologies, Inc.; FCB Financial Holdings, Inc. Intercontinental- Exchange, Inc.; Viacom Inc.

Retired vice chairman and CFO Verizon Communications Inc.

Management Compensation Target BreakdownBase Salary Between 10% and 26% of targeted total compensation.Annual Incentive Bonus awards are determined based on individual performance factors, including contributions to the achievement of financial goals and attainment

of strategic objectives, and take into account individual bonus targets. Targets were: Moonves $15 million, a portion of bonus amount payable is subject to a payment schedule based on level of achievement ranging from 80% to 108%; Redstone $5 million; Ianniello 300% of base salary; Tu 200%; Ambrosio 125%.

Long-Term Incentives A significant portion of the total compensation opportunity for the NEOs (other than Redstone) is linked to stock price performance (with equity awards targeted at 47%60% of total compensation for 2014). For 2014, Ianniello, Tu and Ambrosio received awards: options (40%), PRSUs (30%) and TRSUs (30%). Ianniello also received $4.0 million in options and $4.0 million in TRSUs; Moonves PRSUs (50%) and TRSUs (50%) plus 548,546 options.

Stock Ownership Guidelines CEO 5x base salary; NEOs 2x to 3x base salary

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Corporate Governance Overview CBS Corporation (Continued)

aOIBDA Operating income before depreciation and amortization. bMost recent filings on Bloomberg as of June 2015. PRSU Performance-based restricted stock unit. TRSU Time-based restricted stock unit. Source: Company filings, Bloomberg, Fitch Ratings.

Corporate Governance HighlightsClass A are voting shares; Class B are nonvoting shares.CBS Corporation is a controlled company due to National Amusements owning approx. 79.6% of the Class A common stock and approx. 7.9% of the Class A and Class B on a combined basis.Sumner Redstone is controlling shareholder of National Amusements.Despite controlled status, 9 of 14 board members are independent.Related-party transactions: 1) National Amusements, the companys controlling stockholder, is also the controlling stockholder of Viacom Inc. (Viacom). Sumner M. Redstone, the controlling stockholder, chairman of the board and CEO of National Amusements, serves as the executive chairman of the board for both companies. 2) During 2014, the company, entered into transactions with Viacom and its subsidiaries. The company licenses its television products and leases its production facilities to Viacoms media networks businesses. Viacom also distributes certain of the companys television products in the home entertainment market. The companys total revenues from these transactions were $183 million for the year ended Dec. 31, 2014. As of Dec. 31, 2014, Viacom owed the company approximately $183 million, and the company owed Viacom approx. $1.5 million. 3) The company, during 2014, contributed to CASA-Columbia, approx. $50,000. 4) In November 1995, the company entered into an agreement with Gabelli Asset Management Company (GAMCO). GAMCO manages certain assets for qualified U.S. pension plans sponsored by the company. For 2014, the company paid GAMCO approx. $223,000 for such investment management services. Clawback policy is in placeAuditor: PricewaterhouseCoopers LLC

Equity Holdings Non-Employee Directors and NEOs(000) Class A Class BHolder Shares % of Total Shares % of Total Anthony G. Ambrosio

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The CBS Television NetworkCBS Television StudiosCBS Television DistributionCBS Studios InternationalCBS FilmsCBS Interactive

Showtime NetworksThe Movie ChannelFlixCBS Sports NetworkSmithsonian Channel

117 Radio Stations in 26 Markets30 O&O TV Stations

Simon & Schuster, Pocket Books, ScribnerAtria Books

Organizational Structure CBS Corporation($ Mil., As of June 30, 2015 Pro Forma for July Issuance)

aPro forma for the issuance of $800 million senior notes due 2026. IDR Issuer Default Rating. O&O Owned and operated.Source: Company filings, Fitch Ratings.

Sumner M. Redstone Public

CBS Corporation(IDR BBB/Stable Outlook)

(Short-Term Debt F2)

8% Equity/80% Voting 92% Equity/20% Voting

Amount Outstanding RatingSenior Unsecured Notes due 20162045a 8,394 BBB$2.5 Billion Credit Facility due 2019 BBBCommercial Paper 394 F2Capital Lease Obligations 91 Other Debt and Adjustments (8) Total Debt 8,872 Consolidated Debt 8,918 EBITDA 3,201 Leverage Ratio (x) 2.8

CBS Broadcasting Inc.IDR BBB/Stable Outlook

CBS Operations Inc. Other Nonguarantor AffiliatesAmountOutstanding Rating

Senior Unsecured Notes 2023a 46 BBB

Guarantee100%100%

Showtime Networks CBS Television StudiosSimon & Schuster 11 Full-Power Broadcast TV Stations CW Network Interest

Entertainment Cable Networks Local Broadcasting Publishing

Business Segments

AmountLTM Revenues 8,309EBITDA 1,455EBITDA Margin (%) 17.5

AmountLTM Revenues 2,176EBITDA 997EBITDA Margin (%) 45.8

AmountLTM Revenues 2,756EBITDA 965EBITDA Margin (%) 35.0

AmountLTM Revenues 778EBITDA 107EBITDA Margin (%) 13.8

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Debt and Covenant Synopsis CBS CorporationIndenture Indenture Bank Facility

OverviewDocument Date Indenture dated May 15, 1995 as

supplemented.Indenture dated June 22, 2001, as amended and restated Nov. 3, 2008, and first supplemental indenture dated April 5, 2010.

Amended and restated credit agreement dated Dec. 2, 2014.

Maturity Date Various Various $2.5 billion due December 2019Description of Debt 7.625% due 2016; 7.875% due 2030 1.95% due 2017; 4.625% due 2018;

2.300% due 2019; 5.750% due 2020; 4.300% due 2021; 3.375% due 2022; 3.700% due 2024; 3.500% due 2025; 4.000% due 2026; 5.500% due 2033; 5.900% due 2040; 4.85% due 2042; 4.900% due 2044; 4.6% due 2046.

Unsecured revolving credit agreement.

Financial CovenantsConsolidated Leverage (Maximum)

4.5x

Senior Secured Leverage (Maximum)

Interest Coverage (Minimum)

Acquisitions/DivestituresChange-of-Control Provision

No material provision noted. Recent offerings include change-of-control repurchase event language at 50% of voting stock.

No material provision noted.

Sale-of-Assets Restriction

Company can sell or convey assets that comprise up to 80% of consolidated revenue.

Company can sell or convey assets that comprise up to 80% of consolidated revenue.


Limitation on Acquisitions

No material provision noted. No material provision noted. No material provision noted.

Debt RestrictionsAdditional Debt Restriction


Limitation on Secured Debt

Standard carveouts plus up to 15% of total assets.

Standard carveouts plus up to 15% of total assets.

Standard carveouts plus up to $30 million. Subsidiary debt up to the greater of 5% of assets and $500 million.

Restricted Payments No material provision noted. No material provision noted. No material provision noted.

OtherCross Default No material provision noted. No material provision noted. Final debt maturity payments in excess of

$250 million.Cross Acceleration With debt in excess of $100 million

($250 million on certain issuances through supplemental indentures).

No material provision noted. On any accelerated debt in excess of $250 million.

Material Adverse Change



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Pension Screenera CBS Corp.2015 At Risk Shortfall? No Estimated Pension Outflow

Greater than 10%?No

($ Mil., Unless Noted; All Data Represents Worldwide Pensions) 12/31/13 12/31/14Plan AssetsFair Value of Plan Assets 4,228.0 4,224.0 Fixed Income as Percent of Portfolio (%) 69.4 75.0 Equity as Percent of Portfolio (%) 26.4 21.9 Cash/Short-Term Investments as Percent of Portfolio (%) 1.6 1.1 Other as Percent of Portfolio (%) 2.7 2.0 Level 3 Plan Assets 59.0 59.0 Actual Return on Plan Assets 182.0 402.0 Employer Contributions 203.0 50.0

Obligations and CostsProjected Benefit Obligation (PBO) 5,069.0 5,323.0 Discount Rate (%) 4.9 4.1 Expected Return on Plan Assets (%) 6.5 6.5 Compensation Increases (%) 3.0 3.0 Benefits Paid (416.0) (396.0)Net Periodic Cost/(Income) 67.0 70.0 Service Cost 40.0 31.0 Expected Return 274.0 262.0 Interest Cost 213.0 237.0

Leverage ScreenerPBO (Under)/Overfunded Status (841.0) (1099.0)Pension Funded Status (%) 83.4 79.4 Level 3 Plan Assets/Plan Assets (%) 1.4 1.4 Total Debt/Operating EBITDA (x) 1.6 2.1 (Total Debt + PBO Liability)/EBITDAP (x) 1.8 2.4 (Adjusted Total Debt + PBO Liability)/EBITDARP (x) 1.9 2.5 Cash/PBO Liability (x) 0.5 0.4

Cash Flow Screener2015 At Risk Shortfall (80%) 0.0 34.4 Service Cost 40.0 31.0 PBO Underfunded Status/Seven Years 120.1 157.0 Total Estimated Pension Outflows 204.1 235.0 Estimated Pension Outflows/(FFO + Pension Contribution) (%) 6.5 10.3aBased on GAAP financial information. GAAP differs from PPA- and ERISA-based calculations, which are used to determine funding levels and requirements. Amounts above may include nonqualified and/or international plans with different funding requirements. Does not factor in tax deductibility of contributions. Assumes no election of extended amortization schedules permitted under the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PRA). Source: Company filings, Fitch Ratings.

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Debt Structure CBS Corporation($ Mil., As of June 30, 2015, Pro Forma for July 2015 Issuance)Debt Instrument AmountCommercial Paper 394 $2.5 Billion Credit Facility due 2019 7.625% Senior Debentures due 2016 200 1.950% Senior Notes due 2017 4004.625% Senior Notes due 2018 3002.300% Senior Notes due 2019 6005.750% Debentures due 2020 5004.300% Senior Notes due 2021 3003.375% Senior Notes due 2022 7007.875% Senior Debentures due 2023 1877.125% Senior Notes due 2023 463.700% Senior Notes due 2024 6003.500% Senior Notes due 2025 6004.000% Senior Notes due 2026a 8007.875% Senior Debentures due 2030 8275.500% Senior Debentures due 2033 4315.900% Senior Notes due 2040 3004.850% Senior Notes due 2042 5004.900% Senior Notes due 2044 5504.600% Senior Notes due 2045 600Capital Leases 91Total Debt 8,926aPro forma for issuance of $800 million senior notes in July 2015. Source: Company filings, Fitch Ratings.

Scheduled Debt Maturities CBS Corporation($ Mil., As of June 30, 2015, Pro Forma for July 2015 Issuance)

AmountDec. 31, 2015 394 Dec. 31, 2016 200Dec. 31, 2017 400Dec. 31, 2018 300Dec. 31, 2019 600Thereafter 6,940Total 8,835

Note: Excludes $91 million of capital lease obligation. Source: Company filings.

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Financial Summary CBS Corporation($ Mil., Years Ending Dec. 31) 2010 2011 2012 2013 2014

LTM Ended 6/30/15

ProfitabilityOperating EBITDA 2,594.9 3,263.0 3,641.0 3,965.0 3,409.0 3,201.0 Operating EBITDA Margin (%) 18.5 22.9 25.8 25.9 24.7 23.8 FFO Return on Adjusted Capital (%) 15.9 17.4 18.9 21.0 18.1 12.8 FCF Margin (%) 9.3 9.0 9.0 8.4 19.3 5.6 Coverages (x)FFO Interest Coverage 4.2 5.7 7.2 8.6 7.0 5.6 Operating EBITDA/Gross Interest Expense 4.9 7.5 9.1 10.6 9.4 9.2 FFO Fixed-Charge Coverage 2.5 3.0 3.8 4.3 4.8 5.0 FCF Debt Service Coverage 3.5 1.9 4.0 1.9 3.0 1.5 Cash Flow from Operations/Capex 5.9 6.6 7.2 7.6 5.9 8.2 Leverage (x)Long-Term Secured Debt/Operating EBITDA Long-Term Secured Debt/FFO Total Debt with Equity Credit/Operating EBITDA 2.3 1.8 1.6 1.6 2.1 2.5 FFO Adjusted Leverage 2.8 2.5 2.3 2.1 3.0 4.9 Total Adjusted Debt/Operating EBITDAR 2.5 2.0 1.8 1.8 2.3 3.1 FCF/Total Adjusted Debt (%) 16.8 16.5 16.7 16.3 32.6 7.6 Balance SheetShort-Term Debt 27.3 24.0 18.0 496.0 636.0 414.0 Long-Term Senior Secured Debt Long-Term Senior Unsecured Debt 5,973.5 5,958.0 5,904.0 5,940.0 6,510.0 7,686.0 Long-Term Subordinated Debt Other Debt Equity Credit Total Debt with Equity Credit 6,000.8 5,982.0 5,922.0 6,436.0 7,146.0 8,100.0 Off-Balance-Sheet Debt 1,805.5 1,746.0 1,646.0 1,447.6 1,003.8 1,844.0 Total Adjusted Debt with Equity Credit 7,806.3 7,728.0 7,568.0 7,883.6 8,149.8 9,944.0 Cash FlowFunds From Operations 1,678.7 2,046.0 2,481.0 2,877.0 2,175.0 1,639.0 Change in Working Capital (6.6) (297.0) (662.0) (833.0) (965.0) (141.0)Cash Flow from Operations 1,672.1 1,749.0 1,819.0 2,044.0 1,210.0 1,498.0 Total Non-Operating/Nonrecurring Cash Flow 63.0 (26.0) (188.0) 1,947.0 (254.0)Capex (284.3) (265.0) (254.0) (270.0) (206.0) (183.0)Dividends (141.7) (206.0) (276.0) (300.0) (292.0) (302.0)FCF 1,309.1 1,278.0 1,263.0 1,286.0 2,659.0 759.0 Net Acquisitions and Divestitures 7.0 (53.0) (97.0) 161.0 (20.0) 35.0 Net Debt Proceeds (1,047.7) (19.0) (36.0) 458.0 700.0 1,849.0 Net Equity Proceeds (30.3) (940.0) (969.0) (2,039.0) (3,312.0) (2,745.0)Other (Investing and Financing) (474.8) (86.0) (113.0) (177.0) 4.0 (62.0)Total Change in Cash (236.7) 180.0 48.0 (311.0) 31.0 (164.0)Ending Cash and Securities Balance 480.0 660.0 708.0 397.0 428.0 320.0 Short-Term Marketable Securities Income StatementRevenue 14,059.8 14,245.0 14,089.0 15,284.0 13,806.0 13,481.0 Revenue Growth 8.0 1.3 (1.1) 8.5 (9.7) (7.6)Operating EBIT 2,032.6 2,715.0 3,166.0 3,508.0 3,128.0 2,928.0 Gross Interest Expense 528.8 436.0 402.0 376.0 363.0 350.0


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Company Summaries Cox Enterprises, Inc. October 13, 2015

AnalystsJack Kranefuss+1 212 [email protected]

Constance McKay+1 312 [email protected]

Cox Enterprises, Inc.Key Rating DriversLimited Flexibility Within Ratings: Fitch expects Cox Enterprises, Inc. (CEI) to focus on reducing leverage following the $4.6 billion acquisition of Dealertrack Technologies and to return to levels more in line with its current rating. Acquisitions will remain a part of the companys strategy as it seeks to grow and diversify. Fitch notes that pro forma leverage is elevated and that there is limited flexibility to accommodate a shift in CEIs capital allocation policy to favor investments outside its core business and shareholder-friendly activities.

Cable Business Anchors Ratings: Ratings reflect the size and strong competitive position of Cox Communications Inc. (CCI), the companys largest business segment and the third-largest multichannel video programming distributor (MVPD) in the U.S. The operating leverage inherent in CCIs cable business along with stable capital intensity enable the company to generate consistent levels of FCF before dividends to CEI, and provide CEI with significant financial flexibility.

Consistent Capital Allocation Policy: CEIs capital allocation strategy places a high priority on investment in its core businesses (CCI, Cox Auto and Cox Media Group). The absence of a formal dividend policy creates uncertainty and elevates event risk and there is limited flexibility within the current ratings to accommodate a shift in the companys capital allocation policy. Future dividend payments will likely be made within the context of the companys leverage target, current ratings, anticipated FCF generation, and the scale and scope of internal or external investment opportunities.

Cable Competition a Concern: Rating concerns center on CCIs ability to adapt to changing competitive dynamics and maintain its relative market position given the challenging competitive environment. In addition, the mature video service product, along with the tepid economic and housing recovery and, to a lesser extent, competition from alternative distribution platforms, will likely hinder CCIs ability to grow its subscriber base. This, together with ongoing programming cost inflation, may thwart margin expansion.

Diverse Businesses, but Challenges Remain: The ratings recognize the diversification and market-leading positions of CEIs businesses, while acknowledging that some of these businesses remain exposed to moderate cyclical and secular pressures. Fitch expects Cox Media Groups organic growth to remain challenged as television stability and increasing retransmission revenue is offset by pressures on newspapers, Valpak and, to a lesser extent, radio. The companys ongoing efforts to streamline and consolidate the business, and its recent efforts to focus on larger markets, could drive moderate margin improvement.

Rating SensitivitiesUpgrade Unlikely: Fitch does not anticipate further ratings upside. An upgrade would only come with a commitment to, and a credible rationale for, a substantially tighter leverage target, which is not expected.

Negative Rating Trigger: Such an action could occur if CEI does not reduce total leverage below 3.0x over a 1224-month timeframe.

Ratings


Cox Enterprises, Inc.Long-Term IDR BBB+Senior Unsecured BBB+Short-Term IDR F2Cox Communications, Inc.Long-Term IDR BBB+Senior Unsecured BBB+Short-Term IDR F2



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COX Media Group

Portfolio Summary Cox Enterprises, Inc. (As of June 30, 2015)

aIn 2014, Cox announced the formation of COX Automotive, bringing together its automotive businesses Manheim, Inc. and AutoTrader Group, Inc. bProduct or service has some international presence or is a sole international operation. cIn June 2015, Cox announced that it will acquire Dealertrack Technologies (Dealertrack) for approximately $4.6 billion. Dealertrack acquisition is expected to close in 4Q15. Dealertrack provides software-as-a-service for all major segments of the automotive retail industry, including dealers, lenders, OEMs, third-party retailers, agents and aftermarket providers. JV Joint venture.Source: Company filings, company website.

CommunicationsCox Communications

COX Automotivea

Portfolio of more than 20 wholesale + retail automotive brands

Auto Auction and Wholesale ServicesManheimb ExportTrader.comDealer-Auction.comb go Auto ExchangeDeal Shield Read Auto Transport

Financial ServicesNEXTGEAR Capitalb go Financial

MediaAutotrader Kelley Blue BookHAYSTAK BitAutob

JingZhenGub Motors.co.ukb

SoftwareVAuto VinSolutionsHomeNet Auto Manheim Retail Svcsb

Modixb RMS Automotiveb

XtimeDealertrackc

Other Equity Ownership

Bitauto Holdings Limited (21.3%)TCM Parent, LLC Travel Channel and travelchannel.com (JV, 35%)GFC Lending, LLC (49%)CIBT Investment Holdings, LLC; CIBT Solutions, Inc. (27.6%)True North Ventures, LLC (24.9%)InSite, LLC (45%)COX Innovation Fund

Cox Television Cox NewspapersCox Television (14 Broadcast Stations) Daily Newspapers (7)

Rank The Atlanta Journal-Constitution (GA)WFXT-TV, Boston, MA 8 FOX Dayton Daily News (OH)WSB-TV, Atlanta, GA 9 ABC Springfield News-Sun (OH)KIRO, Seattle, WA 14 CBS Journal-News (OH)WFTV, Orlando, FL 19 ABC The Palm Beach Post (FL)WRDQ-TV, Orlando, FL 19 Independent The Palm Beach Daily News (FL)WPXI-TV, Pittsburgh, PA 22 NBC Austin American-Statesman (TX)WSOC-TV, Charlotte, NC 22 ABCWAXN/TV64, Charlotte, NC 22 Independent Weekly Newspapers WFOX/WJAX-TV, Jacksonville, FL 47 FOX/CBS (11 non-daily publications)WFOX-DT, Jacksonville, FL 47 MeTVWHBQ-TV, Memphis, TN 50 FOX InternetKOKI-TV, Tulsa, OK 60 FOX Gamut (fka Cox Digital Solutions)KMYT-TV, Tulsa, OK 60 MyNetwork Kudzu.comWHIO-TV, Dayton, OH 64 CBS Savings.com

Cox Radio (42 of 59 Stations) Other/Related OperationsLocation Rank No. of Stations COXRepsLong Island, NY 20 3 Cox Target Media, Inc.Houston, TX 6 4 ValpakAtlanta, GA 8 7 VideaMiami, FL 11 4Tampa, FL 19 6San Antonio, TX 27 7Orlando, FL 33 7Jacksonville, FL 49 6Memphis, TN 51 1Dayton, OH 64 4Tulsa, OK 66 5Athens, GA N.A. 6Total 59

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Revenues by Segment Cox Enterprises, Inc.(As of Dec. 31, 2014)


Automotive28%

CoxMedia Group

11%Communications61%

EBITDA by Segment Cox Enterprises, Inc.(As of Dec. 31, 2014)


Automotive20%

CoxMedia Group

5%

Communications75%

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Event Risk Dashboard Cox Enterprises Inc.

Continued on next page. Source: Company filings, Fitch Ratings.

Secular Risk Medium Stagnating subscriber growth and margin pressure in video offset by growth in HSD. Cord cutting not expected to have a significant impact over the next several years. Cox Media Group (CMG) secularly challenged, particularly newspapers and Valpak. Moderate secular pressures at radio; broadcast TV slightly better positioned. Strong growth at Autotrader.

Corporate Governance/Ownership High Privately-held company, owned and controlled by founding family. 40% of the board of directors comprises insiders (Cox family, management). Compensation incentives are not available.

Financial Policy Medium Fitch believes financial policy event risk is present at most investment-grade media names that have control of their balance sheets.

Private ownership adds incremental risk. For Cox, the risk is mitigated by the owners (familys) commitment to investment-grade ratings, and commitment to and execution on deleveraging post the 2004 LBO.

Management committed to capital structure reflective of strong investment-grade ratings.

Dividends are limited to $250 million if leverage >5.0x; no limitations on acquisitions.

The recent announcement of the acquisition of Dealertrack for $4.6 billion temporaily increases Coxs leverage from 2.6x to 3.3x. Management has stated it is committed to investment-grade ratings.

Fitch expects the companys capital allocation policy will remain consistent with the current ratings. Fitch acknowledges that the absence of a formal dividend policy creates uncertainity and elevates event risk.

Bank facility contains a 5x leverage covenant. Consolidated debt used in the leverage calculation is reduced by cash that will be used to refinance debt obligations scheduled to mature within 90 days.

Structural Subordination Risk High Majority of the debt is already at the operating cable subsidiary, CCI. No upstream guarantees. Issuance not expected at Manheim or CMG as it would likely be at higher funding costs.


LBO LSecular MCorporate Governance/Ownership HChange in Financial Policies MAcquisition MDivestiture MStructural Subordination Risk HCovenant Breach LLitigation Risk LRegulatory Risk MContingent Liabilities MH High. M Medium. L Low.

LBO Risk Low Already private 2004 LBO Source: Fitch Ratings.

Cox Enterprises Inc. Rating History

BB+

BBB

BBB

BBB+

A

A

2.0

2.5

3.0

3.5

2007 2008 2009 2010 2011 2012 2013 2014 LTMMarch2015


Leverage Trend

(x)

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Event Risk Dashboard Cox Enterprises Inc. (Continued)

MVPD Multichannel video programming distributor. Note: Event risk describes typically unforeseen or difficult to predict events. Fitch separates the assessment of the potential actions a company is able to take, from our expectations of what it will actually do. Source: Company filings, Fitch Ratings.

Stock Repurchase Activity($ Mil.) Share Buyback ActivityYTD June 2015 2014 81.02013 18.02012 38.5 2011 13.0 2010 21.0 2009 88.0 The company is private. Share buybacks are related to employee death or termination, and purchases of remainder interests in certain trusts owned by Cox family members, which contain shares.

There are no restrictions on share buybacks at current leverage metrics.

Regulatory Risk Medium Fitch does not expect the FCC to force MVPDs to offer a la carte pricing. Fitch believes the FCCs February 2015 reclassification of broadband as a utility under Title II of the Communications Act could potentially be a long-run negative for MVPDs. However, a number of legal and legislative challenges to this issue are pending.

CMG subject to FCCs media ownership laws. Relaxation of ownership laws could drive higher M&A. Tightening of laws could drive forced divestitures. Fitch expects newspaper/broadcast cross-ownership rules to be eased, but other ownership regulations not likely to be changed. CEI has shrunk its newspaper portfolio in recent years and Fitch does not expect significant M&A from this.

Acquisition Risk Medium Divestiture Risk Medium($ Mil.) Acquisition DivestitureYTD June 2015 179.4 2014 490.1 39.1 2013 100.5 239.1 2012 608.9 63.1 2011 161.8 54.3 2010 819.0 127.1 2009 90.4 118.9 No limitations on acquisitions or divestitures. Moderate acquisitions and divestitures at CMG as company focuses on larger markets.

Cox Automotive, Inc., a wholly owned subsidiary of CEI, announced the acquisiton of Dealertrack Technologies for $4.6 billion. The acquisition is expected to close in 4Q15.

Small cable acquisitions to fill holes; big transactions not expected.

Covenant Breach Risk Low

(x)Covenant

Level

Fitch Estimated Level as of

6/30/15EBITDA

Cushion (%)Consolidated Leverage 5.0 2.7 86Note: 2x Interest coverage does not apply if ratings are mid BBB or higher, as defined. Covenant calculation per definition in companys bank agreement.

Litigation Risk Low Currently Fitch views litigation event risk as low.

Contingent Liabilities MediumPensions Pension plan was 50% ($1.8 billion) underfunded at Dec. 31, 2014. CEI contributed $41 million towards its pension plan in 2014, compared to $293 million in 2013.

Fitch views this as manageable within the companys FCF profile.Other Contingencies As part of the 2009 sale of Travel Channel to Scripps, Scripps has guaranteed the 3.55% 2015 notes issued by Travel Channel. CEI has agreed to indemnify Scripps for payments made in respect of the guarantee.

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Pension Screenera Cox Enterprises, Inc.2015 At Risk Shortfall? Yes Estimated Pension Outflow

Greater than 10%?Yes

($ Mil., Unless Noted; All Data Represents Worldwide Pensions) 12/31/13 12/31/14Plan AssetsFair Value of Plan Assets 3,568.2 3,448.2 Fixed Income as Percent of Portfolio (%) 29.0 18.8 Equity as Percent of Portfolio (%) 52.0 56.2 Cash/Short-Term Investments as Percent of Portfolio (%) 2.0 1.9 Other as Percent of Portfolio (%) 17.0 23.1 Level 3 Plan Assets 1,064.9 1,192.5 Actual Return on Plan Assets 488.1 135.4 Employer Contributions 293.1 41.1 Estimated Qualified Contributions Next Yearb 0.0 0.0

Obligations and CostsProjected Benefit Obligation (PBO) 4,715.6 6,049.9 Discount Rate (%) 5.2 4.1 Expected Return on Plan Assets (%) 9.0 9.0 Compensation Increases (%) 4.8 4.3 Benefits Paid (131.4) (296.5)Net Periodic Cost/(Income) 352.2 203.9 Service Cost 211.4 174.4 Expected Return 264.2 303.2 Interest Cost 223.4 251.6

Leverage ScreenerPBO (Under-)/Overfunded Status (1,147.4) (2,601.7)Pension Funded Status (%) 75.7 57.0 Level 3 Plan Assets/Plan Assets (%) 29.8 34.6 Total Debt/Operating EBITDA (x) 2.6 2.2 (Total Debt + PBO Liability)/EBITDAP (x) 2.6 2.6 (Adjusted Total Debt + PBO Liability)/EBITDARP (x) 2.7 2.7 Cash/PBO Liability (x) 1.3 0.1

Cash Flow Screener2015 At Risk Shortfall (80%) 204.3 1,391.8 Service Cost 211.4 174.4 PBO Underfunded Status/Seven Years 163.9 371.7 Total Estimated Pension Outflows 375.3 546.1 Estimated Pension Outflows/(FFO + Pension Contribution) (%) 10.4 14.0aBased on GAAP financial information. GAAP differs from PPA- and ERISA-based calculations, which are used to determine funding levels and requirements. Amounts above may include nonqualified and/or international plans with different funding requirements. Does not factor in tax deductibility of contributions. Assumes no election of extended amortization schedules permitted under the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PRA). bEstimated by Fitch based on publicly disclosed information, unless expressly publicly stated. Source: Company filings, Fitch Ratings.

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Debt Structure Cox Enterprises, Inc.($ Mil., As of June 30, 2015, Pro Forma for Debt Related to DealerTrack Acquisition)Debt Instrument AmountCox Enterprises, Inc. (CEI)CEI Commercial Paper CEI Promissory Notes due 2017 54.6 CEI Revolving Credit Facility due 2019 2,000.0 CEI Private Placement Notes due 2027 175.0 CEI Demand Notes (1.43%) 300.0 IWG II Holdings, LLC term loan due 2020 (5.75%) 112.5 NextGeara Capital, Inc. United Kingdom Revolving Credit (1.75%) 78.5 Intercompany Payable 695.5 Capitalized Lease Obligations 71.2 Others 30.9 Restricted CEI 3,518.3 CEI 2.5 year Delayed Draw Term Loanb 2,000.0 Pro Forma Restricted Debt 5,518.3

Cox Communications, Inc. (CCI)CCI Revolving Credit Facility due 2019 Notes and Debentures due 20142043 9,154.2 Medium-Term Notes due 20182028 199.8 Capitalized Lease Obligations 784.6 Others 213.4 Total CCI Debt 10,352.0

NextGear Floorplan Funding Facilityb 2,305.1 Less Intercompany Payable (695.5)Others 2.4 Consolidated Debt 15,482.3 CEI 2.5-Year Delayed Draw Term Loanc 2,000.0 Pro Forma Consolidated Debt 17,482.3 NextGear Floorplan Funding Facilityb (2,305.1)Pro Forma Adjusted Consolidated Debt 15,177.2 aNextGear is a wholly owned subsidiary of Cox Automotive, Inc. bObligations collateralized by finance receivables. cDealerTrack financing. Source: Company filings.

Scheduled Debt Maturities Cox Enterprises, Inc.($ Mil., As of June 30, 2015, Pro Forma)Maturity AmountDec. 31, 2015 900.0 Dec. 31, 2016 600.0 Dec. 31, 2017 54.6 Dec. 31, 2018 850.0 Thereafter 9,591.6 Total 11,996.2 NextGeara Capital, Inc. United Kingdom Revolving Credit (1.75%) 78.5 Capital Lease and Others 1,102.5 CEI 2.5-Year Delayed Draw Term Loanb 2,000.0 NextGear Floorplan Funding Facilityc 2,305.1 ProForma Consolidated Debt 17,482.2 aNextGear is a wholly owned subsidiary of Cox Automotive, Inc. bObligations collateralized by finance receivables. cDealerTrack financing. Source: Company filings.

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Cox Automotive Cox Media Groupd Cox Communications, Inc. (CCI)(IDR BBB+/Stable)

Organizational Structure Cox Enterprises, Inc.($ Mil., LTM as of June 30, 2015 Pro Forma for DealerTrack)

aIncludes $2.0 billion related to DealerTrack acquisition. bExcludes $2.3 billion in NextGear Floorplan Funding Facility. cIncludes estimated DealerTrack EBITDA of $190 million. dCox Media Group operations include Television, Cox Radio, Inc., Cox Reps, Newspapers, Cox Target Media and Kudzu. Cox Target Media includes Valpak and Savings.com. IDR Issuer Default Rating. Note: Segment EBITDA does not include corporate expenses. Source: Company filings, Fitch Ratings.

Cox Enterprises, Inc. (CEI)(IDR BBB+/Stable)

100% Wholly Owned Restricted Subsidiaries

Unrestricted Subsidiaries

No restrictions on dividends, loans, advances or investments if entitys leverage is less than or equal to 5x. Otherwise, dividends, etc. restricted to $250 million per year.

100%

Restricted CEI Debt (CEI ex. CCI)a 5,518 Consolidated Debta 17,482Adj. Consolidated Debtb 15,177

Restricted CEI EBITDA (CEI ex. CCI)c 1,469Consolidated EBITDAc 5,080

Restricted CEI Stand-Alone Leverage (x) 3.8Consolidated Leverage (x) 3.4 Adj. Consolidated Leverage (x) 3.0

AmountDebt (inc. NextGear Funding Facility 2,384EBITDAc 1,238Leverage (x) 1.9Adj. Leverage (x)b 0.1

AmountDebt EBITDA 192

AmountDebt 10,352EBITDA 3,611Leverage (x) 2.9

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Debt and Covenant Synopsis Cox Enterprises, Inc.Cox Enterprises Cox Communications

Bank Facility Private Placements Bank Facility IndentureOverviewIssue(s) $3.5 billion unsecured revolver

due March 28, 2019Various $3.5 billion unsecured revolver

due March 28, 2019Various

Description Either CEI or CCI may borrow up to $3.5 billion, provided that the aggregate amount outstanding under the facility does not exceed $3.5 billion. CEI and CCI are each severally, but not jointly, liable for their respective borrowing.

Either CEI or CCI may borrow up to $3.5 billion, provided that the aggregate amount outstanding under the facility does not exceed $3.5 billion. CEI and CCI are each severally, but not jointly, liable for their respective borrowing.

Financial Covenantsa Consolidated leverage less than or equal to 5.0x (subject to certain adjustments for debt issued to refinance debt scheduled to mature within 90 days); coverage greater than or equal to 2.0x (compliance with coverage is not necessary if ratings are mid-BBB or higher, as defined).

No material provision noted. Consolidated leverage less than or equal to 5.0x (subject to certain adjustments for debt issued to refinance debt scheduled to mature within 90 days); coverage greater than or equal to 2.0x (compliance with coverage is not necessary if ratings are mid-BBB or higher, as defined).


Change of Control Yes, Cox family must have majority control.

Yes, Cox family must own at least 50.1% of voting stock.

Yes, Cox family must have majority control.


Limitation on Liens Yes, the greater of $250 million or 15% of consolidated net worth.

Yes, less than 30% of net worth. Yes, the greater of $900 million or 15% of consolidated net worth.

Yes, the greater of $200 million or 15% of total CCI debt.

Cross Defaultb Yes, with payment defaults on other CEI debt greater than $100 million.

Yes, with payment defaults on other CEI debt greater than $25 million. Cross-acceleration provisions exist.

Yes, with payment defaults on other CCI debt greater than $200 million.

Yes, with final maturity payment defaults on other CCI debt greater than 5% of total CCI debt. Cross-acceleration provisions exist.

Dividend Restrictions $250 million/year if leverage is greater than 5.0x, otherwise no restrictions.

No material provision noted. $250 million per year if leverage is greater than 5.0x, otherwise no restrictions.


aAll financial covenants are calculated on a stand-alone basis. bRefers only to cross defaults within each entity. There are no cross defaults between Cox Enterprises and Cox Communications. CEI Cox Enterprises, Inc. CCI Cox Communications, Inc. Source: Company filings, Fitch Ratings.

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Financial Summary Cox Enterprises, Inc.($ Mil., Years Ending Dec. 31) 2010 2011 2012 2013 2014

LTM Ended 6/30/15

ProfitabilityOperating EBITDA 3,917.0 4,248.2 4,737.9 4,693.4 4,908.5 4,889.0 Operating EBITDA Margin (%) 26.7 28.8 31.0 29.6 28.7 27.9 FFO Return on Adjusted Capital (%) 18.8 18.7 18.5 20.1 21.4 18.4 FCF Margin (%) 9.7 10.7 5.0 9.8 11.2 11.2 Coverages (x)FFO Interest Coverage 5.4 6.4 6.6 6.5 7.8 7.3 Operating EBITDA/Gross Interest Expense 5.4 7.0 7.9 7.8 8.6 8.2 FFO Fixed-Charge Coverage 4.6 5.2 5.4 5.4 6.4 6.0 FCF Debt Service Coverage 1.1 0.9 1.1 2.4 0.8 0.8 Cash Flow from Operations/Capex 1.9 2.2 1.9 1.9 2.3 2.2 Leverage (x)Long-Term Secured Debt/Operating EBITDA 0.2 0.2 0.3 0.6 0.0 0.5 Long-Term Secured Debt/FFO 0.2 0.2 0.4 0.8 0.0 0.6 Total Debt with Equity Credit/Operating EBITDA 2.8 2.4 2.4 2.6 2.6 3.2 FFO Adjusted Leverage 2.8 2.7 2.9 3.2 3.0 3.6 Total Adjusted Debt/Operating EBITDAR 2.8 2.4 2.4 2.6 2.7 3.2 FCF/Total Adjusted Debt (%) 12.5 14.6 6.4 12.2 14.1 12.2 Balance SheetShort-Term Debt 207.0 175.7 231.1 296.9 2,604.0 2,496.7 Long-Term Senior Secured Debt 639.6 725.9 1,347.9 2,643.1 50.0 2,191.0 Long-Term Senior Unsecured Debt 9,964.5 9,283.1 9,722.9 9,279.8 10,289.3 10,557.1 Long-Term Subordinated Debt Other Debt 237.4 Equity Credit Total Debt with Equity Credit 10,811.1 10,184.7 11,301.8 12,219.8 12,943.3 15,482.3 Off-Balance-Sheet Debt 650.9 607.7 602.9 526.2 672.4 672.4 Total Adjusted Debt with Equity Credit 11,462.0 10,792.4 11,904.7 12,746.0 13,615.6 16,154.6 Cash FlowFunds From Operations 3,209.7 3,272.3 3,381.1 3,299.3 3,869.1 3,754.5 Change in Working Capital (108.1) (261.0) (366.0) (57.1) 268.2 659.1 Cash Flow from Operations 3,101.6 3,011.3 3,015.1 3,242.3 4,137.3 4,413.6 Total Non-Operating/Nonrecurring Cash Flow Capex (1,596.7) (1,377.8) (1,593.2) (1,685.4) (1,816.5) (2,024.1)Dividends (77.3) (61.6) (657.5) 0.0 (400.0) (425.0)FCF 1,427.6 1,571.9 764.4 1,556.9 1,920.8 1,964.5 Net Acquisitions and Divestitures (653.6) (104.7) (162.6) 205.6 (381.0) (557.2)Net Debt Proceeds (1,848.2) (770.4) 26.2 673.0 479.8 2,069.9 Net Equity Proceeds 499.5 (199.1) (42.7) (332.9) (2,237.5) (1,929.6)Other (Investing and Financing) (42.4) (116.4) (635.3) (975.9) (915.8) 600.2 Total Change in Cash (617.1) 381.3 (50.0) 1,126.7 (1,133.6) 2,147.8 Ending Cash and Securities Balance 11.9 392.8 342.8 1,469.4 335.8 2,439.3 Short-Term Marketable Securities Income StatementRevenue 14,673.7 14,739.1 15,285.8 15,881.3 17,089.0 17,495.8 Revenue Growth (%) (0.5) 0.5 3.7 3.9 7.6 6.5 Operating EBIT 1,859.0 2,233.9 2,684.5 2,295.5 2,691.4 2,512.2 Gross Interest Expense 725.0 605.4 602.7 600.6 572.4 600.0


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Company Summaries Discovery Communications LLC October 13, 2015

AnalystsJack Kranefuss+1 212 [email protected]

Rachael Shanker+1 212 [email protected]

Discovery Communications LLCKey Rating DriversAcquisition and Investment Fit Strategically: Recent acquisitions and investments are in line with Fitchs expectations for the ratings. Examples include $886 million of incremental investments in Eurosport since 2014, bringing Discoverys ownership to 100%, and this years $1.4 billion agreement to purchase for Eurosport the exclusive TV and multiplatform rights for the four Olympic Games from 2018 through 2024 covering 50 countries and territories and more than 700 million people. The transactions complement the companys global footprint and are consistent with its strategy to grow and improve its international operations.

Busines Investment: Fitch expects Discovery to continue to focus on investment in programming and bolt-on acquisitions. While large-scale M&A activity is not anticipated given the dearth of cable network assets available, there is room at the BBB level to absorb some midsized acquisitions if Fitch believed the company could credibly restore leverage to under 3x within a 12-month timeframe.

Shareholder Returns Continue: Fitch believes Discoverys credit profile has sufficient flexibility to accommodate share repurchase activity at the current ratings. Debt incurrence to fund share repurchase activity is incorporated into ratings up to Fitchs 3x leverage threshold for Discoverys BBB rating.

Solid Financial Flexibility: Discoverys solid FCF generation, strong credit protection metrics and minimal near-term scheduled maturities afford the company considerable financial flexibility at the current ratings. Fitch anticipates that Discovery is positioned to generate annual FCF of $1.3 billion, given the companys high operating margins, global distribution platform and low capital intensity associated with the cable programming business.

Rating Strengths: Discoverys ratings are supported by the companys strong core brands, particularly the Discovery and TLC brands, both of which reach nearly 100 million subscribers across the U.S. In addition, the ratings incorporate the revenue and growth prospects of the companys international business segment, global carriage, leverageable content, robust FCF and solid credit metrics.

Ratings Concerns: Ratings concerns center on the significant contribution of cyclical advertising revenue, a competitive landscape for similar programming, the volatility associated with hit-driven content and the companys dependence on the Discovery and TLC brands.

Rating SensitivitiesLimited Upside Ratings Momentum: An upgrade is unlikely over the medium term, given the companys stated willingness to operate at the top end of its leverage target and the limited depth of brands. Factors considered for an upgrade include an explicit commitment from management and a compelling rationale for Discovery to operate at a more conservative leverage metric and material viewership on new channel launches that will drive increased advertising and affiliate fees and enhance revenue diversity.

Downside Case: Negative ratings pressure could result from a more aggressive financial policy with leverage exceeding Fitchs 3.0x threshold in the absence of a credible plan to deleverage to less than 3x. Rating pressure could also result from meaningful customer defections to free viewing platforms or significant margin and FCF pressure from higher programming costs.

Ratings


Discovery Communications LLCLong Term IDR BBBSenior Unsecured Bank Facility BBBSenior Unsecured Notes BBBShort- Term IDR F2



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Cable Networks

Portfolio Summary Discovery Communications LLC(As of June 30, 2015)

aIn July 2015, TF1 exercised its put option to Discovery of the remaining 49% ownership stake in Eurosport for EUR491 million. As a result of this transaction, Discovery will own 100% of Eurosport. Source: Company filings and website.

Education

Discovery Education Streaming PLUSDiscovery Education Digital Techbook SeriesDiscovery Education Professional DevelopmentDiscovery Educator Network

Other

Discovery Digital MediaRevision3AnimalistTest TubeSourceFedThe DeFranco Network

The Studio GroupDiscovery StudiosDiscovery Consumer ProductsDiscovery Program SalesDiscovery Private NetworksDiscovery Music SourceDiscovery AccessbettyRAW

U.S. NetworksSubscribers

(Mil.)Discovery Channel 96TLC 94Animal Planet 94Investigation Discovery 86OWN: Oprah Winfrey Network 82Science Channel 75Discovery Family (60% stake, 40% Hasbro) 69Velocity 63American Heroes Channel 59Destination America 57Discovery Life 47Discovery en Espaol 6Discovery Familia 6

International NetworksDiscovery Channel 361Animal Planet 304TLC 302Eurosporta 130Investigation Discovery/ID Xtra 108Switchover Media 101Discovery Kids 89DMAX 84Discovery Science 83Eurosport 2a 66Discovery Home & Health 65Discovery Turbo/Discovery Turbo Xtra HD 61Fatafeat 55Quest 26DeeJay 25Discovery Real Time 25SBS Nordics 25Discovery World 21Discovery Max 19Shed 12Discovery History 11Discovery HD Showcase 11Eurosport Asia Pacifica 11Eurosport Newsa 10

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U.S. 49%

Non-U.S.51%

Revenues by Geographic Region Discovery Communications(As of Dec. 31, 2014)


U.S. Networks

47%

Revenues by Segment Discovery Communications(As of Dec. 31, 2014)


Educationand Other

3%

InternationalNetworks

50%

U.S. Net

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