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8-K - Q1 2017 EARNINGS RELEASE - Scripps Networks Interactive, Inc.sni-8k_20170331.htm

Exhibit 99

 

Scripps Networks Interactive reports first quarter 2017 operating results

 

 

First Quarter 2017 Financial Highlights:

 

Consolidated operating revenues of $855.1 million, an increase of 4.7%;

 

Consolidated income from operations before income taxes of $351.0 million; and

 

Consolidated adjusted segment profit(1) of $368.7 million.

 

KNOXVILLE, Tenn. — May 4, 2017 — Scripps Networks Interactive, Inc. (Nasdaq: SNI) today reported first quarter 2017 operating results.

 

Consolidated operating revenues increased 4.7% to $855.1 million in the first quarter of 2017. Driving the growth was a 4.3% increase in advertising revenues demonstrating our networks’ effectiveness as advertising platforms; and a 4.5% increase in distribution revenues validating our networks as must haves for our distribution partners. Consolidated income from operations before income taxes was $351.0 million, compared with $499.0 million in the prior year period, which included a gain of $208.2 million from the sale of the company’s investment in a regional sports network. Consolidated adjusted segment profit(1) was $368.7 million compared to $346.8 million in the prior year quarter, an increase of 6.3%.

 

For the first quarter of 2017, HGTV delivered its second highest rated quarter in network history, with only the first quarter of 2016 having ever seen higher ratings. Food Network’s ratings were even year-over-year among adults 25-54. Travel Channel improved its adult 25-54 sales prime rating by 9%, marking the network’s highest rated quarter since 2014. Cooking Channel delivered its tenth straight quarter of ratings that grew or matched year-ago delivery while both DIY Network and Great American country grew their ratings for all key demographics.

 

The company’s digital operations continue to grow. Scripps Lifestyle Studios has ramped up its operations, delivering nearly 2.9 billion total video views across various digital platforms, up nearly 450% from the prior year quarter. Additionally, Scripps Lifestyle Studios, created more than 1,000 content videos in the first quarter of 2017.

 

TVN, Poland’s leading multi-platform media business, continued to see growth across the entire portfolio and grew its ratings nearly 6% with its key audience during the first quarter. HGTV in Poland, which launched in January, continues to deliver strong ratings and remains one of the most popular lifestyle networks in the country. HGTV is the number two lifestyle network in the country among women 16 to 49, second only to our own TVN Style.

 

“The momentum we saw in 2016 has continued into 2017. Underpinning our success is our unwavering focus on lifestyle content that creates a unique viewing environment and inspires the lives of our viewers and fans each day,” said Kenneth W. Lowe, Chairman, President and Chief


 

Executive Officer. “Over the last several months, we finalized long-term agreements with some of our distribution partners, continuing with yesterday’s announcement regarding Hulu’s new virtual product offering. As we broaden our reach globally, and on new platforms and digital channels, the enduring relationships that we have built with viewers is paying off in the form of consistent, long-term value creation for advertisers, distributors and shareholders.”

 

First Quarter 2017 Consolidated Results

As previously noted, consolidated operating revenues for the first quarter of 2017 were $855.1 million, an increase of 4.7% over the prior year period. Advertising revenues were $596.7 million, an increase of 4.3%, and distribution revenues were $238.4 million, an increase of 4.5%, over the prior year period.

 

First quarter 2017 consolidated income from operations before income taxes was $351.0 million, compared with $499.0 million in the prior year period. As previously mentioned, the prior year quarter includes the sale of the company’s investment in a regional sports network. Consolidated adjusted segment profit(1) was $368.7 million, an increase of 6.3%, compared with $346.8 million in the prior year quarter. The improvement was primarily due to the growth in operating revenues coupled with the timing of certain expenditures compared with the prior year period.

 

Consolidated net income attributable to Scripps Networks Interactive in the first quarter of 2017 was $199.9 million, or $1.53 per diluted share, compared with $290.9 million, or $2.24 per diluted share, for the prior year period. As previously mentioned, the prior year results reflect the sale of an investment in a regional sports network. First quarter consolidated adjusted net income(1) was $199.9 million, or $1.53 per diluted share compared with $167.0 million, or $1.29 per diluted share, for the prior year period. The increase was primarily driven by the growth in operating income coupled with decreases in depreciation and amortization expense, interest expense and an increase in foreign currency transaction gains compared with the prior year quarter.

 

First Quarter 2017 Segment Results

Consolidated Segment Profit and Consolidated Adjusted Segment Profit - Q1 2017 and 2016

 

 

U.S. Networks

 

International Networks

 

Corporate and Other

 

Consolidated

 

 

Three months ended

 

Three months ended

 

Three months ended

 

Three months ended

 

 

March 31,

 

March 31,

 

March 31,

 

March 31,

 

(in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Income (loss) from operations before income taxes

$

369,763

 

$

554,680

 

$

33,615

 

$

28,044

 

$

(52,423

)

$

(83,731

)

$

350,955

 

$

498,993

 

Interest (expense) income, net

 

(120

)

 

(17

)

 

147

 

 

(6,867

)

 

(24,279

)

 

(26,861

)

 

(24,252

)

 

(33,745

)

Equity in earnings of affiliates

 

5,243

 

 

7,732

 

 

15,206

 

 

17,946

 

 

-

 

 

-

 

 

20,449

 

 

25,678

 

(Loss) gain on derivatives

 

-

 

 

-

 

 

-

 

 

-

 

 

(2,336

)

 

2,766

 

 

(2,336

)

 

2,766

 

Gain on sale of investments

 

-

 

 

208,197

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

208,197

 

Miscellaneous, net

 

2,483

 

 

3,487

 

 

19,903

 

 

31,058

 

 

5,154

 

 

(28,479

)

 

27,540

 

 

6,066

 

Operating income (loss)

 

362,157

 

 

335,281

 

 

(1,641

)

 

(14,093

)

 

(30,962

)

 

(31,157

)

 

329,554

 

 

290,031

 

Depreciation

 

11,499

 

 

14,195

 

 

2,872

 

 

2,841

 

 

589

 

 

261

 

 

14,960

 

 

17,297

 

Amortization

 

9,918

 

 

10,021

 

 

14,279

 

 

21,041

 

 

-

 

 

-

 

 

24,197

 

 

31,062

 

Consolidated segment profit (loss) (1)

 

383,574

 

 

359,497

 

 

15,510

 

 

9,789

 

 

(30,373

)

 

(30,896

)

 

368,711

 

 

338,390

 

TVN transaction and integration expenses

 

-

 

 

-

 

 

-

 

 

(13

)

 

-

 

 

1,368

 

 

-

 

 

1,355

 

Restructuring costs

 

-

 

 

(29

)

 

-

 

 

-

 

 

-

 

 

(281

)

 

-

 

 

(310

)

Reorganization costs

 

-

 

 

3,806

 

 

-

 

 

-

 

 

-

 

 

3,519

 

 

-

 

 

7,325

 

Consolidated adjusted segment profit (loss) (1)

$

383,574

 

$

363,274

 

$

15,510

 

$

9,776

 

$

(30,373

)

$

(26,290

)

$

368,711

 

$

346,760

 

 


 

U.S. Networks’ operating revenues for the first quarter of 2017 were $736.9 million, an increase of 4.9% compared with the prior year quarter. Advertising revenues were $512.1 million, an increase of 5.1%. This improvement reflects the continued strength in pricing in the U.S. advertising market for our lifestyle brands partially offset by a decline in impressions delivered along with advertising inventory mix shifts in the quarter. U.S. Networks’ distribution revenues increased by 4.5% to $211.1 million. This increase was driven by negotiated annual rate increases and revenues generated from new over-the-top distribution platforms, partially offset by subscriber declines compared to the prior year quarter.

 

U.S. Networks’ income from operations before income taxes for the first quarter of 2017 was $369.8 million compared with $554.7 million in the prior year quarter. The decrease was driven by the sale of a regional sports network in the first quarter of 2016. U.S. Networks’ adjusted segment profit(1) was $383.6 million, an increase of 5.6%, compared to $363.3 million in the prior year quarter, primarily driven by the growth in operating revenues, partially offset by a moderate increase in expenses.

 

International Networks’ operating revenues for the first quarter of 2017 were $125.5 million, an increase of 3.5% compared with the prior year quarter. Revenues at TVN increased 4.1% in local currency for the quarter. International Networks’ income from operations before income taxes was $33.6 million compared with $28.0 million in the prior year quarter. Adjusted segment profit(1) for International Networks was $15.5 million compared to $9.8 million in the first quarter of 2016, reflecting the increase in operating revenues, coupled with a decrease in expenses.

 

(1) This earnings release includes several metrics, including consolidated segment profit (loss), consolidated adjusted segment profit (loss), adjusted net income (loss), adjusted net income (loss) 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 (loss), consolidated adjusted segment profit (loss), adjusted net income (loss), adjusted net income (loss) 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 first quarter 2017 operating results during a telephone conference call at 10 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 select the Investors page. The webcast link can be found in the “Upcoming Events” section 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 First Quarter Earnings," and must provide their name and


 

company affiliation. The media and public may access the conference call on a listen-only basis.

 

An audio replay will be available from 12 p.m. ET on May 4 until 11:59 p.m. ET on May 18. To access the replay, dial 800-475-6701 (U.S.), or 320-365-3844 (international). The access code for both numbers is 420966.

 

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, Inc. (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 includes leading TV and entertainment brands HGTV, Food Network, Travel Channel, DIY Network, Cooking Channel and Great American Country. Its digital division Scripps Lifestyle Studios creates compelling content for online, social and mobile platforms. 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 Network. 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.

 

# # #

 

Contact: Scripps Networks Interactive, Inc.

Investors: Mike Gallentine, 865-560-4473, MGallentine@scrippsnetworks.com;

Media: Dylan Jones, 865-560-5068, DJones@scrippsnetworks.com; or

Kristin Alm, 865-560-4316, KAlm@scrippsnetworks.com

 



 

SCRIPPS NETWORKS INTERACTIVE, INC.

 

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(in thousands, except per share data)

 

 

 

Three months ended March 31,

 

 

 

2017

 

 

2016

 

% Change

Fav / (Unfav)

 

Operating revenues:

 

 

 

 

 

 

 

 

 

Advertising

$

596,715

 

$

571,855

 

 

4.3

%

Distribution

 

238,380

 

 

228,068

 

 

4.5

%

Other

 

20,025

 

 

16,955

 

 

18.1

%

Total operating revenues

 

855,120

 

 

816,878

 

 

4.7

%

Operating expenses:

 

 

 

 

 

 

 

 

 

Cost of services, excluding depreciation and amortization

 

279,039

 

 

279,667

 

 

0.2

%

Selling, general and administrative

 

207,370

 

 

198,821

 

 

(4.3

)%

Depreciation

 

14,960

 

 

17,297

 

 

13.5

%

Amortization

 

24,197

 

 

31,062

 

 

22.1

%

Total operating expenses

 

525,566

 

 

526,847

 

 

0.2

%

Operating income

 

329,554

 

 

290,031

 

 

13.6

%

Interest expense, net

 

(24,252

)

 

(33,745

)

 

28.1

%

Equity in earnings of affiliates

 

20,449

 

 

25,678

 

 

(20.4

)%

(Loss) gain on derivatives

 

(2,336

)

 

2,766

 

 

(184.5

)%

Gain on sale of investments

 

-

 

 

208,197

 

NM

 

Miscellaneous, net

 

27,540

 

 

6,066

 

 

354.0

%

Income from operations before income taxes

 

350,955

 

 

498,993

 

 

(29.7

)%

Provision for income taxes

 

101,140

 

 

159,047

 

 

36.4

%

Net income

 

249,815

 

 

339,946

 

 

(26.5

)%

Less: net income attributable to non-controlling interests

 

(49,915

)

 

(49,049

)

 

(1.8

)%

Net income attributable to SNI

$

199,900

 

$

290,897

 

 

(31.3

)%

 

 

 

 

 

 

 

 

 

 

Net income attributable to SNI Class A Common and Common Voting shareholders per share of common stock:

 

 

 

 

 

 

 

 

 

Basic

$

1.54

 

$

2.25

 

 

(31.6

)%

Diluted

$

1.53

 

$

2.24

 

 

(31.8

)%

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

129,921

 

 

129,295

 

 

 

 

Diluted

 

130,743

 

 

129,790

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

SCRIPPS NETWORKS INTERACTIVE, INC.

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS ( UNAUDITED )

 

(in thousands, except share and par value amounts)

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

2017

 

2016

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

107,673

 

 

$

122,937

 

Accounts receivable, net of allowances: 2017 - $27,828; 2016 - $26,118

 

 

784,514

 

 

 

808,133

 

Programs and program licenses, net

 

 

617,982

 

 

 

591,378

 

Prepaid expenses and other current assets

 

 

65,677

 

 

 

135,651

 

Total current assets

 

 

1,575,846

 

 

 

1,658,099

 

Programs and program licenses, net (less current portion)

 

 

499,147

 

 

 

500,022

 

Investments

 

 

734,482

 

 

 

699,481

 

Property and equipment, net of accumulated depreciation: 2017 - $348,627; 2016 - $354,435

 

 

302,042

 

 

 

286,399

 

Goodwill, net

 

 

1,666,131

 

 

 

1,642,169

 

Intangible assets, net

 

 

1,101,450

 

 

 

1,092,682

 

Deferred income taxes

 

 

176,446

 

 

 

175,291

 

Other non-current assets

 

 

147,048

 

 

 

146,151

 

Total Assets

 

$

6,202,592

 

 

$

6,200,294

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

30,316

 

 

$

42,223

 

Accrued liabilities

 

 

191,518

 

 

 

152,480

 

Employee compensation and benefits

 

 

52,708

 

 

 

123,506

 

Program rights payable

 

 

67,011

 

 

 

70,403

 

Deferred revenue

 

 

68,731

 

 

 

77,987

 

Current portion of debt

 

 

249,967

 

 

 

249,932

 

Total current liabilities

 

 

660,251

 

 

 

716,531

 

Debt (less current portion)

 

 

2,803,592

 

 

 

2,952,454

 

Other non-current liabilities

 

 

313,587

 

 

 

302,881

 

Total liabilities

 

 

3,777,430

 

 

 

3,971,866

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Scripps Networks Interactive ("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: 2017 - 95,905,309 shares; 2016 - 95,491,477 shares

 

 

959

 

 

 

954

 

Common Voting Shares - authorized: 60,000,000 shares; issued and outstanding: 2017 - 33,850,481 shares; 2016 - 33,850,481 shares

 

 

339

 

 

 

339

 

Total common stock

 

 

1,298

 

 

 

1,293

 

Additional paid-in capital

 

 

1,417,404

 

 

 

1,390,411

 

Retained earnings

 

 

1,035,764

 

 

 

871,766

 

Accumulated other comprehensive loss

 

 

(296,371

)

 

 

(363,701

)

SNI shareholders’ equity

 

 

2,158,095

 

 

 

1,899,769

 

Non-controlling interest  (Note 13)

 

 

267,067

 

 

 

328,659

 

Total equity

 

 

2,425,162

 

 

 

2,228,428

 

Total Liabilities and Equity

 

$

6,202,592

 

 

$

6,200,294

 

 



 

SCRIPPS NETWORKS INTERACTIVE, INC.

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ( UNAUDITED )

 

 

 

 

 

 

 

 

(in thousands)

 

Three months ended March 31,

 

 

 

2017

 

 

2016

 

Operating Activities:

 

 

 

 

 

 

 

 

Net income

 

$

249,815

 

 

$

339,946

 

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

14,960

 

 

 

17,297

 

Amortization

 

 

24,197

 

 

 

31,062

 

Program amortization

 

 

216,577

 

 

 

218,941

 

Program payments

 

 

(243,294

)

 

 

(245,754

)

Equity in earnings of affiliates

 

 

(20,449

)

 

 

(25,678

)

Share-based compensation

 

 

20,113

 

 

 

17,709

 

Loss (gain) on derivatives

 

 

2,336

 

 

 

(2,766

)

Gain on sale of investments

 

 

-

 

 

 

(208,197

)

Dividends received from equity investments

 

 

6,873

 

 

 

12,222

 

Deferred income taxes

 

 

(4,348

)

 

 

(17,197

)

Changes in working capital accounts:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

28,580

 

 

 

55,447

 

Other assets

 

 

9,361

 

 

 

(8,078

)

Accounts payable

 

 

(13,873

)

 

 

12,496

 

Deferred revenue

 

 

(9,183

)

 

 

(9,563

)

Accrued / refundable income taxes

 

 

98,487

 

 

 

171,938

 

Other liabilities

 

 

(59,204

)

 

 

(45,312

)

Other, net

 

 

(19,685

)

 

 

8,154

 

Cash provided by operating activities

 

 

301,263

 

 

 

322,667

 

Investing Activities:

 

 

 

 

 

 

 

 

Additions to property and equipment

 

 

(24,827

)

 

 

(11,345

)

Collections of note receivable

 

 

1,558

 

 

 

1,179

 

Purchases of investments

 

 

(260

)

 

 

 

Sale of investments

 

 

 

 

 

225,000

 

Settlement of derivatives

 

 

(2,336

)

 

 

3,592

 

Other, net

 

 

214

 

 

 

1,217

 

Cash (used in) provided by investing activities

 

 

(25,651

)

 

 

219,643

 

Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from debt

 

 

110,000

 

 

 

 

Repayments of debt

 

 

(260,000

)

 

 

(325,000

)

Purchases of non-controlling interests

 

 

 

 

 

(99,000

)

Dividends paid to non-controlling interests

 

 

(111,509

)

 

 

(89,346

)

Dividends paid

 

 

(39,096

)

 

 

(32,288

)

Proceeds from stock options

 

 

12,385

 

 

 

4,905

 

Other, net

 

 

(5,226

)

 

 

(15,356

)

Cash used in financing activities

 

 

(293,446

)

 

 

(556,085

)

Effect of exchange rate changes on cash and cash equivalents

 

 

2,570

 

 

 

7,129

 

Decrease in cash and cash equivalents

 

 

(15,264

)

 

 

(6,646

)

Cash and cash equivalents - beginning of period

 

 

122,937

 

 

 

223,444

 

Cash and cash equivalents - end of period

 

$

107,673

 

 

$

216,798

 

Supplemental Cash Flow Disclosures:

 

 

 

 

 

 

 

 

Interest paid, excluding amounts capitalized

 

$

3,530

 

 

$

2,387

 

Income taxes paid

 

$

8,599

 

 

$

10,549

 



 

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 (loss), consolidated adjusted segment profit (loss), adjusted net income (loss), adjusted net income (loss) per diluted share and free cash flow.

 

The company evaluates the operating performance of its businesses and uses a financial measure referred to as segment profit (loss). Consolidated segment profit (loss) is the aggregate of the segment profit for each of our two reportable segments. Segment profit (loss) is defined as income (loss) from operations before income taxes, excluding depreciation, amortization, goodwill write-downs, 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, which are included in net income (loss) determined in accordance with GAAP.

 

The company uses segment profit (loss) to assess the operating results and performance of its businesses and makes decisions about the allocation of resources to businesses using this financial measure. The company believes segment profit (loss) is relevant to investors because it allows them to analyze and evaluate the operating performance of its segments consistent with management. 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 (loss). Also excluded from segment profit (loss) 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 businesses enables management to evaluate operating performance based on current economic conditions and decisions made by the managers of the businesses in the current period.

 

The company defines consolidated adjusted segment profit (loss) and adjusted net income (loss) as segment profit (loss) and net income (loss), respectively, excluding the impact of items not routine in nature and defines adjusted net income (loss) per diluted share as net income (loss) per diluted share excluding the impact of items not routine in nature. The company believes consolidated adjusted segment profit (loss), adjusted net income (loss) and adjusted net income (loss) 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 (loss), consolidated adjusted segment profit (loss), adjusted net income (loss), adjusted net income (loss) per diluted share and free cash flow are non-GAAP measures and should be considered in addition to, but not as a substitute for, income (loss) from operations before income taxes, net income (loss), net income (loss) per diluted share, cash flow from operating activities and other measures of financial performance reported in accordance with GAAP. Since consolidated segment profit (loss), consolidated adjusted segment profit (loss), adjusted net income (loss), adjusted net income (loss) 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.

 


 

Consolidated Segment Profit and Consolidated Adjusted Segment Profit - Q1 2017 and 2016

 

 

U.S. Networks

 

International Networks

 

Corporate and Other

 

Consolidated

 

 

Three months ended

 

Three months ended

 

Three months ended

 

Three months ended

 

 

March 31,

 

March 31,

 

March 31,

 

March 31,

 

(in thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Income (loss) from operations before income taxes

$

369,763

 

$

554,680

 

$

33,615

 

$

28,044

 

$

(52,423

)

$

(83,731

)

$

350,955

 

$

498,993

 

Interest (expense) income, net

 

(120

)

 

(17

)

 

147

 

 

(6,867

)

 

(24,279

)

 

(26,861

)

 

(24,252

)

 

(33,745

)

Equity in earnings of affiliates

 

5,243

 

 

7,732

 

 

15,206

 

 

17,946

 

 

-

 

 

-

 

 

20,449

 

 

25,678

 

(Loss) gain on derivatives

 

-

 

 

-

 

 

-

 

 

-

 

 

(2,336

)

 

2,766

 

 

(2,336

)

 

2,766

 

Gain on sale of investments

 

-

 

 

208,197

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

208,197

 

Miscellaneous, net

 

2,483

 

 

3,487

 

 

19,903

 

 

31,058

 

 

5,154

 

 

(28,479

)

 

27,540

 

 

6,066

 

Operating income (loss)

 

362,157

 

 

335,281

 

 

(1,641

)

 

(14,093

)

 

(30,962

)

 

(31,157

)

 

329,554

 

 

290,031

 

Depreciation

 

11,499

 

 

14,195

 

 

2,872

 

 

2,841

 

 

589

 

 

261

 

 

14,960

 

 

17,297

 

Amortization

 

9,918

 

 

10,021

 

 

14,279

 

 

21,041

 

 

-

 

 

-

 

 

24,197

 

 

31,062

 

Consolidated segment profit (loss) (1)

 

383,574

 

 

359,497

 

 

15,510

 

 

9,789

 

 

(30,373

)

 

(30,896

)

 

368,711

 

 

338,390

 

TVN transaction and integration expenses

 

-

 

 

-

 

 

-

 

 

(13

)

 

-

 

 

1,368

 

 

-

 

 

1,355

 

Restructuring costs

 

-

 

 

(29

)

 

-

 

 

-

 

 

-

 

 

(281

)

 

-

 

 

(310

)

Reorganization costs

 

-

 

 

3,806

 

 

-

 

 

-

 

 

-

 

 

3,519

 

 

-

 

 

7,325

 

Consolidated adjusted segment profit (loss) (1)

$

383,574

 

$

363,274

 

$

15,510

 

$

9,776

 

$

(30,373

)

$

(26,290

)

$

368,711

 

$

346,760

 

 

 

Adjusted Net Income - Q1 2016

 

(in thousands, except per share data)

Three months ended March 31, 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

$

279,667

 

$

198,821

 

$

48,359

 

$

2,766

 

$

208,197

 

$

6,066

 

$

290,897

 

$

2.24

 

TVN transaction and integration expenses

 

-

 

 

(1,355

)

 

-

 

 

-

 

 

-

 

 

-

 

 

840

 

 

0.01

 

Restructuring costs

 

-

 

 

310

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(192

)

 

-

 

Reorganization costs

 

(1,707

)

 

(5,618

)

 

-

 

 

-

 

 

-

 

 

-

 

 

4,542

 

 

0.03

 

Sale of investments

 

-

 

 

-

 

 

-

 

 

-

 

 

(208,197

)

 

-

 

 

(129,082

)

 

(0.99

)

As adjusted

$

277,960

 

$

192,158

 

$

48,359

 

$

2,766

 

$

-

 

$

6,066

 

$

167,005

 

$

1.29

 

(A) Items tax effected at 38% statutory tax rate.

 

 

 

Free Cash Flow - 2017 and 2016

 

 

 

 

 

 

 

Three months ended March 31,

 

(in thousands)

 

2017

 

 

2016

 

Cash provided by operating activities

$

301,263

 

$

322,667

 

Dividends paid to non-controlling interests

 

(111,509

)

 

(89,346

)

Additions to property and equipment

 

(24,827

)

 

(11,345

)

Free cash flow

$

164,927

 

$

221,976

 

 

 

 

 

 

 

 


 

Operating Revenues by Network – 2017 and 2016

 

Three months ended March 31,

 

(in thousands)

2017

 

2016

 

% Change

 

Network

 

 

 

 

 

 

 

 

 

HGTV

$

286,076

 

$

271,715

 

 

5.3

%

Food Network

 

243,363

 

 

229,298

 

 

6.1

%

Travel Channel

 

82,265

 

 

80,767

 

 

1.9

%

DIY Network

 

40,480

 

 

41,513

 

 

(2.5

)%

Cooking Channel

 

36,590

 

 

32,969

 

 

11.0

%

Great American Country

 

7,183

 

 

7,286

 

 

(1.4

)%

Digital Businesses

 

30,231

 

 

28,972

 

 

4.3

%

Other

 

11,201

 

 

10,160

 

 

10.2

%

Intrasegment eliminations

 

(500

)

 

(485

)

 

(3.1

)%

Total segment operating revenues

$

736,889

 

$

702,195

 

 

4.9

%

Type

 

 

 

 

 

 

 

 

 

Advertising

$

512,055

 

$

487,285

 

 

5.1

%

Distribution

 

211,140

 

 

202,096

 

 

4.5

%

Other

 

13,694

 

 

12,814

 

 

6.9

%

 

$

736,889

 

$

702,195

 

 

4.9

%