Third Quarter 2016 Financial Highlights:
- Consolidated operating revenues of $803.1 million, a 3.5% increase;
- U.S. Networks’ advertising revenues of $477.5 million, a 6.6% increase;
- Consolidated net income per diluted share attributable to SNI of $1.12, a 16.8% increase; and
- Consolidated adjusted net income(1) per diluted share of $1.26, a 13.5% increase.
KNOXVILLE, Tenn., Nov. 07, 2016 (GLOBE NEWSWIRE) -- Scripps Networks Interactive, Inc. (Nasdaq:SNI) today reported third quarter 2016 operating results.
Consolidated operating revenues increased 3.5% during the quarter. Consolidated operating income declined 4.8%, and consolidated adjusted segment profit(1) fell 2.1% compared with the prior-year period, as anticipated. The U.S. Networks segment continued to benefit from a strong advertising market.
Ratings grew across five of the six U.S. networks during the third quarter of 2016, despite coverage of the Olympics and the U.S. election. HGTV saw its highest-rated third quarter ever in all key demographics. Travel Channel completed its fourth consecutive quarter of year-over-year ratings growth. Cooking Channel and DIY Network each delivered their best-rated quarters ever, while Great American Country saw its highest-rated third quarter since 2007. Food Network continued to perform well with millennials, earning a top 10 ranking for the quarter among ad-supported networks.
TVN, Poland’s leading multi-platform media business, realized mid-single digit revenue growth in local currency for the third quarter compared with the prior-year. In addition, TVN Group was the only major network group in Poland to increase their market share during the quarter, achieving a 23% share against a strong competitive environment that included the Olympics and soccer broadcasts. Ratings at TVN Group improved 3.0% year-over-year with its target audience.
"Scripps Networks Interactive delivered solid revenue growth at both our U.S. and international business segments, helping drive a double-digit improvement in net income,” said Kenneth W. Lowe, president, chairman and CEO. “Our successful strategy to focus on our differentiated lifestyle brands in the home, food and travel genres continues to pay off. Our popular networks are available on more platforms and reaching more new audiences than before, positioning the company for continued growth.”
Third Quarter Consolidated Results
Consolidated operating revenues for the third quarter were $803.1 million, an increase of 3.5% compared with the prior-year period. Consolidated advertising revenues were $556.4 million, an increase of 5.4%, and consolidated distribution revenues were $221.7 million, a decrease of 1.4%, compared with the prior-year period.
Third quarter consolidated operating income was $257.9 million, a decrease of 4.8% from the prior-year period. Consolidated adjusted segment profit(1) was $317.6 million, a decrease of 2.1%. The year-over-year decline in both consolidated operating income and consolidated adjusted segment profit(1) was primarily due to the expected timing of programming premieres leading to the growth in programming expenses for the U.S. Networks. Programming expense growth is expected to slow in the fourth quarter of 2016 due to the shift in show premieres.
Third quarter consolidated net income attributable to Scripps Networks Interactive was $146.0 million, or $1.12 per diluted share, compared with $124.6 million, or $0.96 per diluted share, in the same period of the prior year. Third quarter consolidated adjusted net income(1) increased 13.8% to $163.9 million, and consolidated adjusted diluted earnings per share(1) increased 13.5% to $1.26. The improvement in consolidated adjusted diluted earnings per share(1) during the third quarter was primarily due to the growth in operating revenues along with gains realized on foreign currency transactions and lower interest expense, partially offset by lower equity in earnings of affiliates, primarily a result of the sale of the company’s investment in Fox Sports South in the first quarter 2016.
Third Quarter Segment Results
| Segment Profit and Adjusted Segment Profit - Q3 2016 and 2015 | ||||||||||||||||||||||||
| U.S. Networks | International Networks | Corporate and Other | Consolidated | |||||||||||||||||||||
| Three months ended | Three months ended | Three months ended | Three months ended | |||||||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||
| (in thousands) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
| Operating income (loss) | $ | 298,808 | $ | 306,738 | $ | (14,854 | ) | $ | (5,962 | ) | $ | (26,037 | ) | $ | (29,780 | ) | $ | 257,917 | $ | 270,996 | ||||
| Depreciation | 16,894 | 13,417 | 3,090 | 4,011 | 257 | 931 | 20,241 | 18,359 | ||||||||||||||||
| Amortization | 10,098 | 10,098 | 15,673 | 12,834 | - | - | 25,771 | 22,932 | ||||||||||||||||
| Loss (gain) on disposal of property and equipment | 209 | 28 | (80 | ) | 13 | - | (1 | ) | 129 | 40 | ||||||||||||||
| Segment profit (loss) (1) | $ | 326,009 | $ | 330,281 | $ | 3,829 | $ | 10,896 | $ | (25,780 | ) | $ | (28,850 | ) | $ | 304,058 | $ | 312,327 | ||||||
| TVN transaction and integration expenses | - | 48 | 11,168 | 553 | 851 | 7,783 | 12,019 | 8,384 | ||||||||||||||||
| Restructuring costs | - | 856 | - | - | - | 1,932 | - | 2,788 | ||||||||||||||||
| Reorganization costs | 1,267 | 794 | - | - | 237 | - | 1,504 | 794 | ||||||||||||||||
| Adjusted segment profit (loss) (1) | $ | 327,276 | $ | 331,979 | $ | 14,997 | $ | 11,449 | $ | (24,692 | ) | $ | (19,135 | ) | $ | 317,581 | $ | 324,293 | ||||||
U.S. Networks’ operating revenues for the third quarter of 2016 were $686.3 million, an increase of 3.8%. Advertising revenues for U.S. Networks were $477.5 million, an increase of 6.6%. This improvement reflects the continued strength in the U.S. advertising market for our lifestyle brands and overall ratings improvement. U.S. Networks’ distribution revenues decreased by 2.5% to $194.3 million as a result of the previously disclosed rate equalization of certain distributor agreements caused by industry consolidation, and subscriber declines. These were partially offset by annual rate increases and growth in emerging distribution platforms.
U.S. Networks’ operating income for the third quarter of 2016 was $298.8 million, a decrease of 2.6%. U.S. Networks’ adjusted segment profit(1) was $327.3 million, a decrease of 1.4%, reflecting an increase in programming expenses due to the timing of program premieres, offsetting the increase in advertising revenues.
International Networks’ operating revenues for the third quarter of 2016 were $123.2 million, an increase of 3.8% compared with the prior-year third quarter. International Networks’ operating loss was $14.9 million compared with an operating loss of $6.0 million in the prior year quarter. Adjusted segment profit(1) was $15.0 million in the third quarter of 2016 compared with adjusted segment profit(1) of $11.4 million in the third quarter of 2015, reflecting the increase in operating revenues.
Corporate and Other included an operating loss of $26.0 million compared with a loss of $29.8 million in the prior-year third quarter. Corporate and Other adjusted segment loss(1) was $24.7 million, compared with an adjusted segment loss(1) of $19.1 million in the prior-year period.
(1) This earnings release includes several metrics, including consolidated segment profit, adjusted segment profit, adjusted net income, adjusted net income per diluted share and free cash flow that are not calculated in accordance with Generally Accepted Accounting Principles in the United States of America ("GAAP"). See the Non-GAAP Financial Measures section of this press release for discussion of consolidated segment profit, adjusted segment profit, adjusted net income, adjusted net income per diluted share and free cash flow and a reconciliation to their respective most comparable financial measure calculated in accordance with GAAP.
Guidance
All guidance is based on current management expectations for consolidated company performance. Based on results seen to date, the company is reiterating all of its previously issued guidance.
Conference Call Information
The senior management team of Scripps Networks Interactive will discuss the company’s third quarter 2016 results during a telephone conference call at 11 a.m. ET today. Scripps Networks Interactive will offer a live webcast of the conference call. To access the webcast, visit www.scrippsnetworksinteractive.com and follow the Investors link at the top of the page. The webcast link can be found next to the microphone icon on the investor relations landing page.
To access the conference call by telephone, dial 800-230-1074 (U.S.) or 612-234-9960 (international) approximately ten minutes before the start of the call. Callers will need the name of the call, "Scripps Networks Interactive Third Quarter Earnings," and must provide their name and company affiliation. The media and general public may access the conference call on a listen-only basis.
A replay line will be open from 1 p.m. on November 7 until 11:59 p.m. ET on November 21. The domestic number to access the replay is 800-475-6701, and the international number is 320-365-3844. The access code for both numbers is 404399.
A replay of the conference call will also be available online. To access the audio replay online, visit www.scrippsnetworksinteractive.com approximately four hours after the call, choose the Investors page, then follow the Audio Archives link at the top of the Investor Relations page.
Forward-Looking Statements
This press release contains certain forward-looking statements related to the Company’s businesses that are based on management’s current expectations. Forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from the expectations expressed in forward-looking statements, including changes in advertising demand and other economic conditions as well as other reasons described in our Securities and Exchange Commission filings, including those set forth in the Risk Factors section and under the caption entitled “Forward-Looking Statements” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our most recently filed Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. The Company undertakes no obligation to publicly update any forward-looking statements to reflect events or circumstances after the date the statement is made.
About Scripps Networks Interactive
Scripps Networks Interactive (Nasdaq:SNI) is one of the leading developers of engaging lifestyle content in the home, food and travel categories for television, the Internet and emerging platforms. The company's lifestyle media portfolio comprises popular television and Internet brands HGTV, DIY Network, Food Network, Cooking Channel, Travel Channel and Great American Country, which collectively engage more than 190 million U.S. consumers each month. International operations include TVN, Poland’s premier multi-platform media company; UKTV, an independent commercial joint venture with BBC Worldwide; Asian Food Channel, the first pan-regional TV food network in Asia; and lifestyle channel Fine Living. The company’s global networks and websites reach millions of consumers across North and South America, Asia-Pacific, Europe, the Middle East and Africa. Scripps Networks Interactive is headquartered in Knoxville, Tenn. For more information, please visit http://www.scrippsnetworksinteractive.com.
| SCRIPPS NETWORKS INTERACTIVE, INC. | ||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||
| 2016 | 2015 | % Change | 2016 | 2015 | % Change | |||||||||||||
| Operating revenues: | ||||||||||||||||||
| Advertising | $ | 556,425 | $ | 527,855 | 5.4 | % | $ | 1,774,928 | $ | 1,466,014 | 21.1 | % | ||||||
| Distribution | 221,702 | 224,941 | (1.4 | )% | 673,216 | 649,166 | 3.7 | % | ||||||||||
| Other | 24,958 | 23,326 | 7.0 | % | 64,590 | 51,294 | 25.9 | % | ||||||||||
| Total operating revenues | 803,085 | 776,122 | 3.5 | % | 2,512,734 | 2,166,474 | 16.0 | % | ||||||||||
| Operating expenses: | ||||||||||||||||||
| Cost of services, excluding depreciation and amortization | 298,207 | 270,150 | 10.4 | % | 864,873 | 664,384 | 30.2 | % | ||||||||||
| Selling, general and administrative | 200,820 | 193,645 | 3.7 | % | 590,774 | 574,330 | 2.9 | % | ||||||||||
| Depreciation | 20,241 | 18,359 | 10.3 | % | 53,869 | 50,052 | 7.6 | % | ||||||||||
| Amortization | 25,771 | 22,932 | 12.4 | % | 82,487 | 46,267 | 78.3 | % | ||||||||||
| Loss (gain) on disposal of property and equipment | 129 | 40 | 222.5 | % | (113 | ) | 2,600 | (104.3 | )% | |||||||||
| Total operating expenses | 545,168 | 505,126 | 7.9 | % | 1,591,890 | 1,337,633 | 19.0 | % | ||||||||||
| Operating income | 257,917 | 270,996 | (4.8 | )% | 920,844 | 828,841 | 11.1 | % | ||||||||||
| Interest expense, net | (32,609 | ) | (50,439 | ) | (35.3 | )% | (99,529 | ) | (80,182 | ) | 24.1 | % | ||||||
| Equity in earnings of affiliates | 8,473 | 23,392 | (63.8 | )% | 55,863 | 69,627 | (19.8 | )% | ||||||||||
| Gain on derivatives | 2,827 | 4,037 | (30.0 | )% | 13,860 | 47,168 | (70.6 | )% | ||||||||||
| Gain on sale of investments | - | - | NM | 191,824 | - | NM | ||||||||||||
| Miscellaneous, net | 21,276 | (9,543 | ) | (322.9 | )% | 5,670 | (23,198 | ) | (124.4 | )% | ||||||||
| Income from operations before income taxes | 257,884 | 238,443 | 8.2 | % | 1,088,532 | 842,256 | 29.2 | % | ||||||||||
| Provision for income taxes | 76,043 | 75,110 | 1.2 | % | 333,393 | 266,685 | 25.0 | % | ||||||||||
| Net income | 181,841 | 163,333 | 11.3 | % | 755,139 | 575,571 | 31.2 | % | ||||||||||
| Less: net income attributable to non-controlling interests | (35,844 | ) | (38,774 | ) | 7.6 | % | (133,637 | ) | (133,451 | ) | 0.1 | % | ||||||
| Net income attributable to SNI | $ | 145,997 | $ | 124,559 | 17.2 | % | $ | 621,502 | $ | 442,120 | 40.6 | % | ||||||
| Net income attributable to SNI common shareholders per share of common stock: | ||||||||||||||||||
| Basic | $ | 1.13 | $ | 0.96 | 16.8 | % | $ | 4.80 | $ | 3.41 | 40.9 | % | ||||||
| Diluted | $ | 1.12 | $ | 0.96 | 16.8 | % | $ | 4.78 | $ | 3.39 | 41.0 | % | ||||||
| Weighted average shares outstanding: | ||||||||||||||||||
| Basic | 129,586 | 129,177 | 129,485 | 129,817 | ||||||||||||||
| Diluted | 130,124 | 129,704 | 130,022 | 130,434 | ||||||||||||||
| SCRIPPS NETWORKS INTERACTIVE, INC. | ||||||||
| CONSOLIDATED BALANCE SHEETS (Unaudited) | ||||||||
| (in thousands, Except share and par value amounts) | ||||||||
| As of | ||||||||
| September 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 329,573 | $ | 223,444 | ||||
| Accounts receivable, net of allowances: 2016 - $20,625; 2015 - $12,569 | 777,794 | 816,679 | ||||||
| Programs and program licenses | 617,970 | 588,999 | ||||||
| Prepaid expenses and other current assets | 74,749 | 98,759 | ||||||
| Total current assets | 1,800,086 | 1,727,881 | ||||||
| Programs and program licenses (less current portion) | 517,196 | 522,899 | ||||||
| Investments | 746,066 | 807,630 | ||||||
| Property and equipment, net of accumulated depreciation: 2016 - $343,525; 2015 - $299,153 | 286,392 | 293,230 | ||||||
| Goodwill | 1,806,720 | 1,804,748 | ||||||
| Intangible assets, net | 1,190,996 | 1,262,664 | ||||||
| Deferred income taxes | 148,692 | 91,954 | ||||||
| Other non-current assets | 151,626 | 161,308 | ||||||
| Total Assets | $ | 6,647,774 | $ | 6,672,314 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 28,092 | $ | 35,308 | ||||
| Accrued liabilities | 161,145 | 159,969 | ||||||
| Employee compensation and benefits | 91,749 | 115,266 | ||||||
| Program rights payable | 67,430 | 68,892 | ||||||
| Deferred revenue | 102,733 | 96,040 | ||||||
| Current portion of debt | 749,747 | 499,174 | ||||||
| Total current liabilities | 1,200,896 | 974,649 | ||||||
| Debt (less current portion) | 2,832,971 | 3,511,098 | ||||||
| Other non-current liabilities | 279,760 | 250,391 | ||||||
| Total liabilities | 4,313,627 | 4,736,138 | ||||||
| Redeemable non-controlling interests (Note 14) | 4,500 | 99,000 | ||||||
| Equity: | ||||||||
| SNI shareholders’ equity: | ||||||||
| Preferred stock, $0.01 par - authorized: 25,000,000 shares; none outstanding | — | — | ||||||
| Common stock, $0.01 par: | ||||||||
| Class A Common Shares - authorized: 240,000,000 shares; issued and outstanding: 2016 - 95,257,360 shares; 2015 - 94,838,600 shares | 952 | 948 | ||||||
| Common Voting Shares - authorized: 60,000,000 shares; issued and outstanding: 2016 - 33,850,481 shares; 2015 - 33,850,481 shares | 339 | 339 | ||||||
| Total common stock | 1,291 | 1,287 | ||||||
| Additional paid-in capital | 1,378,168 | 1,347,491 | ||||||
| Retained earnings | 826,795 | 305,386 | ||||||
| Accumulated other comprehensive loss | (178,573 | ) | (130,233 | ) | ||||
| SNI shareholders’ equity | 2,027,681 | 1,523,931 | ||||||
| Non-controlling interest (Note 14) | 301,966 | 313,245 | ||||||
| Total equity | 2,329,647 | 1,837,176 | ||||||
| Total Liabilities and Equity | $ | 6,647,774 | $ | 6,672,314 | ||||
| SCRIPPS NETWORKS INTERACTIVE, INC. | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | ||||||||
| (in thousands) | ||||||||
| Nine months ended September 30, | ||||||||
| 2016 | 2015 | |||||||
| Operating Activities: | ||||||||
| Net income | $ | 755,139 | $ | 575,571 | ||||
| Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
| Depreciation | 53,869 | 50,052 | ||||||
| Amortization | 82,487 | 46,267 | ||||||
| Program amortization | 673,797 | 526,825 | ||||||
| Program payments | (703,123 | ) | (588,052 | ) | ||||
| Equity in earnings of affiliates | (55,863 | ) | (69,627 | ) | ||||
| Share-based compensation | 29,352 | 29,443 | ||||||
| Gain on derivatives | (13,860 | ) | (47,168 | ) | ||||
| Gain on sale of investments | (191,824 | ) | — | |||||
| Dividends received from equity investments | 52,090 | 68,278 | ||||||
| Deferred income taxes | (44,656 | ) | (43,261 | ) | ||||
| Changes in working capital accounts (excluding the effects of acquisition): | ||||||||
| Accounts receivable, net | 36,974 | (45,450 | ) | |||||
| Other assets | (9,043 | ) | 11,231 | |||||
| Accounts payable | (6,808 | ) | 5,154 | |||||
| Deferred revenue | 6,851 | 39,743 | ||||||
| Accrued / refundable income taxes | 72,354 | 93,748 | ||||||
| Other liabilities | (9,854 | ) | (15,157 | ) | ||||
| Other, net | (5,214 | ) | 20,301 | |||||
| Cash provided by operating activities | 722,668 | 657,898 | ||||||
| Investing Activities: | ||||||||
| Additions to property and equipment | (47,909 | ) | (32,091 | ) | ||||
| Collections of note receivable | 3,134 | 3,498 | ||||||
| Purchases of investments | (10,211 | ) | (32,584 | ) | ||||
| Sale of investments | 226,484 | — | ||||||
| Purchase of subsidiary companies, net of cash acquired | (450 | ) | (539,309 | ) | ||||
| Investment in intangible | (11,634 | ) | — | |||||
| Foreign currency call option premium | — | (16,000 | ) | |||||
| Settlement of derivatives | 14,474 | 63,305 | ||||||
| Other, net | (8,228 | ) | (36,336 | ) | ||||
| Cash provided by (used in) investing activities | 165,660 | (589,517 | ) | |||||
| Financing Activities: | ||||||||
| Proceeds from debt | — | 3,050,764 | ||||||
| Repayments of debt | (390,000 | ) | (1,944,525 | ) | ||||
| Debt issuance costs | — | (14,491 | ) | |||||
| Extinguishment of debt | (52,864 | ) | (404,294 | ) | ||||
| Purchase of non-controlling interests | (99,000 | ) | (853,853 | ) | ||||
| Dividends paid to non-controlling interests | (143,557 | ) | (154,948 | ) | ||||
| Dividends paid | (97,092 | ) | (89,144 | ) | ||||
| Repurchases of Class A Common Shares | — | (288,502 | ) | |||||
| Proceeds from stock options | 6,900 | 8,073 | ||||||
| Other, net | (4,783 | ) | 356 | |||||
| Cash used in financing activities | (780,396 | ) | (690,564 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (1,803 | ) | (8,629 | ) | ||||
| Increase (decrease) in cash and cash equivalents | 106,129 | (630,812 | ) | |||||
| Cash and cash equivalents - beginning of period | 223,444 | 878,164 | ||||||
| Cash and cash equivalents - end of period | $ | 329,573 | $ | 247,352 | ||||
| Supplemental Cash Flow Disclosures: | ||||||||
| Interest paid, excluding amounts capitalized | $ | 54,090 | $ | 68,311 | ||||
| Income taxes paid | $ | 309,536 | $ | 258,270 | ||||
Non-GAAP Financial Measures
In addition to results prepared in accordance with GAAP provided in this press release, the Company has also presented consolidated segment profit, adjusted segment profit, adjusted net income, adjusted net income per diluted share and free cash flow.
The Company evaluates the operating performance of its segments and uses a financial measure referred to as segment profit. Segment profit is defined as operating income (loss) excluding depreciation, amortization and loss (gain) on disposal of property and equipment. Because segment profit is based on operating income (loss), it excludes interest expense, equity in earnings of affiliates, gain (loss) on derivatives, gain (loss) on sale of investments, other miscellaneous non-operating expenses and income taxes.
The Company uses segment profit to assess the operating results and performance of its segments and makes decisions about the allocation of resources to segments using this financial measure. The Company believes segment profit is relevant to investors because it allows them to analyze and evaluate the operating performance of its segments consistent with management. Items excluded from segment profit generally result from decisions made in prior periods and/or by corporate executives rather than the mangers of the segments. Depreciation and amortization charges are a result of decisions made in prior periods regarding the allocation of resources and are, therefore, excluded from segment profit. Also excluded from segment profit are financing, tax structuring and acquisition and divestiture decisions, which are generally made by corporate executives. Excluding these items from the performance measure of our segments enables management to evaluate operating performance based on current economic conditions and decisions made by segment managers in the current period.
The Company defines adjusted segment profit and adjusted net income as segment profit and net income, respectively, excluding the impact of items not routine in nature and defines adjusted net income per diluted share as net income per diluted share excluding the impact of items not routine in nature. The Company believes adjusted segment profit, adjusted net income and adjusted net income per diluted share are relevant to investors because it allows them to analyze the performance of segments excluding the impact of items not routine in nature or core to regular business operations.
The Company defines free cash flow as cash provided by operating activities less dividends paid to non-controlling interests and additions to property and equipment. The Company measures free cash flow as believes it is an important indicator for management and investors as to its liquidity, including the ability to reduce debt, make strategic investments and return capital to shareholders.
Consolidated segment profit, adjusted segment profit, adjusted net income, adjusted net income per diluted share and free cash flow are non-GAAP measures and should be considered in addition to, but not as a substitute for, operating income, net income, net income per diluted share, cash flow from operating activities and other measures of financial performance reported in accordance with GAAP. Since consolidated segment profit, adjusted segment profit, adjusted net income, adjusted net income per diluted share and free cash flow are not measures of financial performance calculated in accordance with GAAP, these non-GAAP measures may not be comparable to similar measures with similar titles used by other companies. Supplemental schedules providing a reconciliation of the non-GAAP measure to its respective most comparable financial measure in accordance with GAAP are included within this press release on the following pages.
| Segment Profit and Adjusted Segment Profit - Q3 2016 and 2015 | ||||||||||||||||||||||||
| U.S. Networks | International Networks | Corporate and Other | Consolidated | |||||||||||||||||||||
| Three months ended | Three months ended | Three months ended | Three months ended | |||||||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||
| (in thousands) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
| Operating income (loss) | $ | 298,808 | $ | 306,738 | $ | (14,854 | ) | $ | (5,962 | ) | $ | (26,037 | ) | $ | (29,780 | ) | $ | 257,917 | $ | 270,996 | ||||
| Depreciation | 16,894 | 13,417 | 3,090 | 4,011 | 257 | 931 | 20,241 | 18,359 | ||||||||||||||||
| Amortization | 10,098 | 10,098 | 15,673 | 12,834 | - | - | 25,771 | 22,932 | ||||||||||||||||
| Loss (gain) on disposal of property and equipment | 209 | 28 | (80 | ) | 13 | - | (1 | ) | 129 | 40 | ||||||||||||||
| Segment profit (loss) (1) | $ | 326,009 | $ | 330,281 | $ | 3,829 | $ | 10,896 | $ | (25,780 | ) | $ | (28,850 | ) | $ | 304,058 | $ | 312,327 | ||||||
| TVN transaction and integration expenses | - | 48 | 11,168 | 553 | 851 | 7,783 | 12,019 | 8,384 | ||||||||||||||||
| Restructuring costs | - | 856 | - | - | - | 1,932 | - | 2,788 | ||||||||||||||||
| Reorganization costs | 1,267 | 794 | - | - | 237 | - | 1,504 | 794 | ||||||||||||||||
| Adjusted segment profit (loss) (1) | $ | 327,276 | $ | 331,979 | $ | 14,997 | $ | 11,449 | $ | (24,692 | ) | $ | (19,135 | ) | $ | 317,581 | $ | 324,293 | ||||||
| Segment Profit and Adjusted Segment Profit - Year-to-Date 2016 and 2015 | ||||||||||||||||||||||||
| U.S. Networks | International Networks | Corporate and Other | Consolidated | |||||||||||||||||||||
| Nine months ended | Nine months ended | Nine months ended | Nine months ended | |||||||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||
| (in thousands) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
| Operating income (loss) | $ | 1,012,490 | $ | 953,472 | $ | (10,324 | ) | $ | (27,797 | ) | $ | (81,322 | ) | $ | (96,834 | ) | $ | 920,844 | $ | 828,841 | ||||
| Depreciation | 43,763 | 40,977 | 9,329 | 6,089 | 777 | 2,986 | 53,869 | 50,052 | ||||||||||||||||
| Amortization | 30,141 | 30,059 | 52,346 | 16,208 | - | - | 82,487 | 46,267 | ||||||||||||||||
| Loss (gain) on disposal of property and equipment | 251 | 3,609 | (364 | ) | 22 | - | (1,031 | ) | (113 | ) | 2,600 | |||||||||||||
| Segment profit (loss) | $ | 1,086,645 | $ | 1,028,117 | $ | 50,987 | $ | (5,478 | ) | $ | (80,545 | ) | $ | (94,879 | ) | $ | 1,057,087 | $ | 927,760 | |||||
| TVN transaction and integration expenses | 17 | 111 | 11,136 | 990 | 2,956 | 21,697 | 14,109 | 22,798 | ||||||||||||||||
| Restructuring costs | (29 | ) | 7,278 | - | - | (281 | ) | 5,845 | (310 | ) | 13,123 | |||||||||||||
| Reorganization costs | 8,786 | 794 | - | - | 3,969 | - | 12,755 | 794 | ||||||||||||||||
| Adjusted segment profit (loss) (1) | $ | 1,095,419 | $ | 1,036,300 | $ | 62,123 | $ | (4,488 | ) | $ | (73,901 | ) | $ | (67,337 | ) | $ | 1,083,641 | $ | 964,475 | |||||
| Adjusted Net Income - Q3 2016 | ||||||||||||||||||||||||
| (in thousands, except per share data) | Three months ended September 30, 2016 | |||||||||||||||||||||||
| GAAP measure | Cost of services, excluding depreciation and amortization | Selling, general and administrative | Depreciation and amortization | Gain on Derivatives | Gain on sale of investments | Miscellaneous, net | Net income attributable to SNI (A) | Earnings per diluted share | ||||||||||||||||
| As reported | $ | 298,207 | $ | 200,820 | $ | 46,012 | $ | 2,827 | $ | - | $ | 21,276 | $ | 145,997 | $ | 1.12 | ||||||||
| TVN transaction and integration expenses | - | (12,019 | ) | - | - | - | - | 9,571 | 0.07 | |||||||||||||||
| Net gain on TVN derivative contracts | - | - | - | - | - | - | - | - | ||||||||||||||||
| Foreign currency effects due to TVN funds | - | - | - | - | - | - | - | - | ||||||||||||||||
| Restructuring costs | - | - | - | - | - | - | - | - | ||||||||||||||||
| Reorganization costs | (981 | ) | (523 | ) | - | - | - | - | 932 | 0.01 | ||||||||||||||
| TVN purchase price accounting impact | - | - | (11,973 | ) | - | - | - | 7,423 | 0.06 | |||||||||||||||
| Sale of investments | - | - | - | - | - | - | - | - | ||||||||||||||||
| As adjusted | $ | 297,226 | $ | 188,278 | $ | 34,039 | $ | 2,827 | $ | - | $ | 21,276 | $ | 163,923 | $ | 1.26 | ||||||||
| (A) Items tax effected at 38% statutory tax rate, with the exception of $11.2 million of TVN transaction and integration expenses, which has an effective tax rate of 19%. | ||||||||||||||||||||||||
| Adjusted Net Income - Q3 2015 | ||||||||||||||||||||||||
| (in thousands, except per share data) | Three months ended September 30, 2015 | |||||||||||||||||||||||
| GAAP measure | Cost of services, excluding depreciation and amortization | Selling, general and administrative | Depreciation and amortization | Gain on Derivatives | Gain on sale of investments | Miscellaneous, net | Net income attributable to SNI (A) | Earnings per diluted share | ||||||||||||||||
| As reported | $ | 270,150 | $ | 193,645 | $ | 41,291 | $ | 4,037 | $ | - | $ | (9,543 | ) | $ | 124,559 | $ | 0.96 | |||||||
| TVN transaction and integration expenses | - | (8,384 | ) | - | - | - | - | 5,198 | 0.04 | |||||||||||||||
| Net gain on TVN derivative contracts | - | - | - | 906 | - | - | 562 | - | ||||||||||||||||
| Foreign currency effects due to TVN funds | - | - | - | - | - | 5,284 | 5,284 | 0.04 | ||||||||||||||||
| Restructuring costs | (169 | ) | (2,619 | ) | (473 | ) | - | - | - | 2,022 | 0.02 | |||||||||||||
| Reorganization costs | - | (794 | ) | - | - | - | - | 492 | - | |||||||||||||||
| TVN purchase price accounting impact | - | - | (9,643 | ) | - | - | - | 5,979 | 0.05 | |||||||||||||||
| Sale of investments | - | - | - | - | - | - | - | - | ||||||||||||||||
| As adjusted | $ | 269,981 | $ | 181,848 | $ | 31,175 | $ | 4,943 | $ | - | $ | (4,259 | ) | $ | 144,096 | $ | 1.11 | |||||||
| (A) Items tax effected at 38% statutory tax rate with the exception of foreign currency effects due to TVN funds, which has an effective tax rate of 0%. | ||||||||||||||||||||||||
| Adjusted Net Income - Year-to-Date 2016 | ||||||||||||||||||||||||
| (in thousands, except per share data) | Nine months ended September 30, 2016 | |||||||||||||||||||||||
| GAAP measure | Cost of services, excluding depreciation and amortization | Selling, general and administrative | Depreciation and amortization | Gain on Derivatives | Gain on sale of investments | Miscellaneous, net | Net income attributable to SNI (A) | Earnings per diluted share | ||||||||||||||||
| As reported | $ | 864,873 | $ | 590,774 | $ | 136,356 | $ | 13,860 | $ | 191,824 | $ | 5,670 | $ | 621,502 | $ | 4.78 | ||||||||
| TVN transaction and integration expenses | (17 | ) | (14,092 | ) | - | - | - | - | 10,867 | 0.08 | ||||||||||||||
| Net gain on TVN derivative contracts | - | - | - | - | - | - | - | - | ||||||||||||||||
| Foreign currency effects due to TVN funds | - | - | - | - | - | - | - | - | ||||||||||||||||
| Restructuring costs | - | 310 | - | - | - | - | (192 | ) | - | |||||||||||||||
| Reorganization costs | (3,978 | ) | (8,777 | ) | - | - | - | - | 7,908 | 0.06 | ||||||||||||||
| TVN purchase price accounting impact | - | - | (41,790 | ) | - | - | - | 25,910 | 0.20 | |||||||||||||||
| Sale of investments | - | - | - | - | (191,824 | ) | - | (118,931 | ) | (0.91 | ) | |||||||||||||
| As adjusted | $ | 860,878 | $ | 568,215 | $ | 94,566 | $ | 13,860 | $ | - | $ | 5,670 | $ | 547,064 | $ | 4.21 | ||||||||
| (A) Items tax effected at 38% statutory tax rate, with the exception of $11.2 million of TVN transaction and integration expenses, which has an effective tax rate of 19%. | ||||||||||||||||||||||||
| Adjusted Net Income - Year-to-Date 2015 | ||||||||||||||||||||||||
| (in thousands, except per share data) | Nine months ended September 30, 2015 | |||||||||||||||||||||||
| GAAP measure | Cost of services, excluding depreciation and amortization | Selling, general and administrative | Depreciation and amortization | Gain on Derivatives | Gain on sale of investments | Miscellaneous, net | Net income attributable to SNI (A) | Earnings per diluted share | ||||||||||||||||
| As reported | $ | 664,384 | $ | 574,330 | $ | 96,319 | $ | 47,168 | $ | - | $ | (23,198 | ) | $ | 442,120 | $ | 3.39 | |||||||
| TVN transaction and integration expenses | (22 | ) | (22,776 | ) | - | - | - | - | 14,135 | 0.11 | ||||||||||||||
| Net gain on TVN derivative contracts | - | - | - | (44,222 | ) | - | - | (27,418 | ) | (0.21 | ) | |||||||||||||
| Foreign currency effects due to TVN funds | - | - | - | - | - | 24,176 | 24,176 | 0.19 | ||||||||||||||||
| Restructuring costs | (2,588 | ) | (10,535 | ) | (1,420 | ) | - | - | - | 9,017 | 0.07 | |||||||||||||
| Reorganization costs | - | (794 | ) | - | - | - | - | 492 | - | |||||||||||||||
| TVN purchase price accounting impact | - | - | (9,643 | ) | 5,979 | 0.05 | ||||||||||||||||||
| Sale of investments | - | - | - | - | - | - | - | - | ||||||||||||||||
| As adjusted | $ | 661,774 | $ | 540,225 | $ | 85,256 | $ | 2,946 | $ | - | $ | 978 | $ | 468,501 | $ | 3.60 | ||||||||
| (A) Items tax effected at 38% statutory tax rate with the exception of foreign currency effects due to TVN funds, which has an effective tax rate of 0%. | ||||||||||||||||||||||||
| Free Cash Flow - 2016 and 2015 | ||||||
| Nine months ended September 30, | ||||||
| (in thousands) | 2016 | 2015 | ||||
| Cash provided by operating activities | $ | 722,668 | $ | 657,898 | ||
| Dividends paid to non-controlling interests | (143,557 | ) | (154,948 | ) | ||
| Additions to property and equipment | (47,909 | ) | (32,091 | ) | ||
| Free cash flow | $ | 531,202 | $ | 470,859 | ||
Operating Revenues by Network – 2016 and 2015
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||
| (in thousands) | 2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||
| Network | ||||||||||||||||||
| HGTV | $ | 265,758 | $ | 248,323 | 7.0 | % | $ | 820,226 | $ | 757,408 | 8.3 | % | ||||||
| Food Network | 217,383 | 214,216 | 1.5 | % | 687,583 | 659,583 | 4.2 | % | ||||||||||
| Travel Channel | 75,590 | 73,252 | 3.2 | % | 242,241 | 230,898 | 4.9 | % | ||||||||||
| DIY Network | 40,091 | 41,138 | (2.5 | )% | 128,600 | 127,512 | 0.9 | % | ||||||||||
| Cooking Channel | 34,422 | 33,487 | 2.8 | % | 104,214 | 99,212 | 5.0 | % | ||||||||||
| Great American Country | 7,119 | 7,524 | (5.4 | )% | 22,639 | 22,989 | (1.5 | )% | ||||||||||
| Digital Businesses | 36,503 | 36,308 | 0.5 | % | 106,391 | 95,018 | 12.0 | % | ||||||||||
| Other | 10,359 | 8,604 | 20.4 | % | 30,462 | 25,975 | 17.3 | % | ||||||||||
| Intrasegment eliminations | (962 | ) | (1,990 | ) | 51.7 | % | (1,577 | ) | (3,729 | ) | 57.7 | % | ||||||
| Total segment operating revenues | $ | 686,263 | $ | 660,862 | 3.8 | % | $ | 2,140,779 | $ | 2,014,866 | 6.2 | % | ||||||
| Type | ||||||||||||||||||
| Advertising | $ | 477,501 | $ | 447,788 | 6.6 | % | $ | 1,505,765 | $ | 1,373,218 | 9.7 | % | ||||||
| Distribution | 194,276 | 199,228 | (2.5 | )% | 592,445 | 600,499 | (1.3 | )% | ||||||||||
| Other | 14,486 | 13,846 | 4.6 | % | 42,569 | 41,149 | 3.5 | % | ||||||||||
| $ | 686,263 | $ | 660,862 | 3.8 | % | $ | 2,140,779 | $ | 2,014,866 | 6.2 | % | |||||||