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Scripps Networks Interactive reports third quarter 2016 financial results

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 measureCost 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 measureCost 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 measureCost 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 measureCost 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%


Contact: Scripps Networks Interactive, Inc. Investors: Mike Gallentine, 865-560-4473, mgallentine@scrippsnetworks.com Media: Dylan Jones, 865-560-5068, DJones@scrippsnetworks.com, or Lee Hall, 865-560-3853, LHall@scrippsnetworks.com

Source:Scripps Networks Interactive, Inc.