Scripps Networks Interactive reports full year and fourth quarter 2016 operating results

Full Year 2016 Financial Highlights:

  • Record consolidated operating revenues of $3.4 billion, an increase of 12.7%;
  • Record consolidated advertising revenues of $2.4 billion, an increase of 17.2%;
  • Consolidated operating income of $1.1 billion, an increase of 4.0%; and
  • Consolidated adjusted segment profit(1) of $1.4 billion, an increase of 10.1%.

KNOXVILLE, Tenn., Feb. 21, 2017 (GLOBE NEWSWIRE) -- Scripps Networks Interactive, Inc. (Nasdaq:SNI) today reported full year and fourth quarter 2016 operating results.

For 2016, the company reported record consolidated advertising revenues of $2.4 billion, an increase of 17.2%. In the U.S., advertising revenues increased 9.6% and surpassed $2.0 billion for the first time ever, driven by improved ratings for all six U.S. networks in total day for the C-3 viewing window. Scripps Networks Interactive was the only U.S. media group to achieve this. Notably, HGTV, DIY Network and Cooking Channel had their highest-rated and most watched year ever. HGTV also finished the year ranked third among all cable networks for total adults.

Reaching new audiences and monetizing content on emerging digital platforms continues to be a strategic focus of the company. In 2016, revenues for the digital businesses improved 9.4% compared to the prior year. Contributing to this growth is Scripps Lifestyle Studios’ focus on increasing social media and online engagement. In 2016, Scripps Lifestyle Studios delivered more than 5 billion total video views across various digital platforms.

TVN, Poland’s leading multi-platform media business, continued to see growth across the entire portfolio and grew its ratings 3.5% with its key audience at TVN Group for the full year. In January 2017, the company launched HGTV in Poland, the network’s first full launch in Europe and the largest HGTV international launch to date. HGTV has already secured a strong position, earning the second highest market share for lifestyle channels in Poland, behind only TVN Style.

“2016 was an extraordinary year for Scripps Networks Interactive. We achieved record levels of revenue and significantly improved our earnings. We increased ratings and engagement with audiences across our linear and digital platforms and expanded our international reach to new markets,” said Kenneth W. Lowe, Chairman, President and Chief Executive Officer. “This standout performance is a direct result of our relentless focus on operational execution and the deliberate investment we’ve made in programming, international businesses and in Scripps Lifestyle Studios.

“Looking ahead to 2017 and beyond, we continue to be focused on sustainable long-term growth, driven by the strength of our inspiring brands and content, and growing our reach across different platforms and geographies. We have the right strategic priorities and team to continue delivering increased shareholder value.”

Full Year 2016 Consolidated Results
Consolidated operating revenues for 2016 were $3.4 billion, an increase of 12.7% compared with the prior-year. Advertising revenues were $2.4 billion, an increase of 17.2%, and distribution revenues were $894.4 million, an increase of 2.2% compared with the prior-year.

Full year 2016 consolidated operating income was $1.1 billion, an increase of 4.0% from the prior-year. Included in the increase is a non-cash accounting adjustment related to the write-down of goodwill and related intangible assets for certain international investments acquired in 2012 and 2013. Consolidated adjusted segment profit(1) was $1.4 billion, an increase of 10.1%. The year-over-year improvement in both operating income and consolidated adjusted segment profit(1) was primarily due to the growth in revenues and the inclusion of TVN for the full year, partially offset by an increase in programming amortization.

Consolidated net income attributable to Scripps Networks Interactive in 2016 increased 11.0% to $673.6 million, or $5.18 per diluted share. Consolidated adjusted net income(1) increased 7.0% to $686.8 million, and consolidated adjusted diluted earnings per share(1) increased to $5.29. The improvement in consolidated adjusted net income(1) was primarily due to the growth in operating revenues and the inclusion of TVN. This was partially offset by the combination of favorable and unfavorable tax settlements in 2015 and 2016 respectively, higher interest expense, lower equity in earnings of affiliates, due to the sale of Fox Sports South in 2016 and a non-cash charge related to the write-down of an equity-method investment.

Fourth Quarter 2016 Consolidated Results
Consolidated operating revenues for the fourth quarter of 2016 were $888.7 million, an increase of 4.3% over the prior-year period. Advertising revenues were $641.5 million, an increase of 7.5%, and distribution revenues were $221.2 million, a decrease of 2.1%, over the prior-year period.

Fourth quarter 2016 consolidated operating income was $227.8 million, a decrease of 17.2% from the prior-year period. The decline was driven by the previously mentioned non-cash accounting adjustment. Consolidated adjusted segment profit(1) was $340.5 million, an increase of 3.4%. The improvement was primarily due to the growth in operating revenues.

Consolidated net income attributable to Scripps Networks Interactive in the fourth quarter of 2016 was $52.1 million, or $0.40 per diluted share compared with $164.7 million, or $1.27 per diluted share for the prior-year period. The decline was primarily driven by the previously mentioned non-cash accounting adjustment, tax effects and non-cash write-down of an equity-method investment. Also contributing to the decline was foreign currency transaction exchange losses primarily due to the strengthening of the U.S. dollar. Fourth quarter consolidated adjusted net income(1) decreased to $133.7 million, and consolidated adjusted diluted earnings per share(1) decreased to $1.02. This decrease was primarily due to the previously mentioned tax effects and foreign exchange losses.

Fourth Quarter 2016 Segment Results

Segment Profit and Adjusted Segment Profit - Q4 2016 and 2015
U.S. Networks International Networks Corporate and Other Consolidated
Three months ended Three months ended Three months ended Three months ended
December 31, December 31, December 31, December 31,
(in thousands)2016 2015 2016 2015 2016 2015 2016 2015
Operating income (loss) 301,441 284,123 (42,584) 19,448 (31,106) (28,480) 227,751 275,091
Depreciation 15,285 14,842 3,240 4,649 (722) 969 17,803 20,460
Amortization 10,079 10,106 30,876 12,274 - - 40,955 22,380
Goodwill write-down - - 57,878 - - - 57,878 -
Segment profit (loss) (1)$326,805 $309,071 $49,410 $36,371 $(31,828)$(27,511)$344,387 $317,931
TVN transaction and integration expenses - 11 32 3,593 996 1,893 1,028 5,497
TVN purchase price accounting impact - - (8,501) - - - (8,501) -
Restructuring costs - 1,286 - - - 1,639 - 2,925
Reorganization costs 1,779 3,041 - - 1,815 31 3,594 3,072
Adjusted segment profit (loss) (1)$328,584 $313,409 $40,941 $39,964 $(29,017)$(23,948)$340,508 $329,425

U.S. Networks’ operating revenues for the fourth quarter of 2016 were $730.6 million, an increase of 4.1% compared with the prior-year quarter. Advertising revenues were $523.3 million, an increase of 9.4%. This improvement reflects the continued strength in the U.S. advertising market for our lifestyle brands and overall ratings improvement in the quarter. U.S. Networks’ distribution revenues decreased by 3.1% to $193.4 million. This decline was driven by the previously disclosed rate equalization and our strategic decision not to extend certain SVOD agreements, as well as subscriber declines compared to the prior year quarter. This decline was partially offset by annual rate increases and revenues generated from new over-the-top and non-linear distribution platforms.

U.S. Networks’ operating income for the fourth quarter of 2016 was $301.4 million, an increase of 6.1% compared with the prior-year quarter. U.S. Networks’ adjusted segment profit(1) was $328.6 million, an increase of 4.8%, reflecting the growth in operating revenues.

International Networks’ operating revenues for the fourth quarter of 2016 were $165.4 million, an increase of 1.5% compared with the prior-year quarter. Revenues at TVN increased 2.8% in local currency for the quarter. International Networks’ operating loss was $42.6 million compared with operating income of $19.4 million in the prior-year quarter, a result of the previously mentioned non-cash accounting adjustment. Adjusted segment profit(1) for International Networks was $40.9 million compared to $40.0 million in the fourth quarter of 2015, reflecting the increase in operating revenues.

(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
The company will provide full year 2017 guidance on its earnings call. Details on how to access the call are included below.

Conference Call Information
The senior management team of Scripps Networks Interactive will discuss the company’s full year and fourth quarter 2016 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 800-230-1059 (U.S.), or 612-234-9959 (international) approximately ten minutes before the start of the call. Callers will need the name of the call, "Scripps Networks Interactive Fourth 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 February 21 until 11:59 p.m. ET on March 7. To access the replay, dial 800-475-6701 (U.S.), or 320-365-3844 (international). The access code for both numbers is 415521.

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 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 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.

SCRIPPS NETWORKS INTERACTIVE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three months ended December 31, Year ended December 31,
2016 2015 % Change 2016 2015 % Change
Fav / (Unfav)Fav / (Unfav)
Operating revenues:
Advertising$641,475 $596,516 7.5%$2,416,403 $2,062,530 17.2%
Distribution 221,151 225,818 (2.1)% 894,367 874,984 2.2%
Other 26,075 29,419 (11.4)% 90,665 80,713 12.3%
Total operating revenues 888,701 851,753 4.3% 3,401,435 3,018,227 12.7%
Operating expenses:
Cost of services, excluding depreciation and amortization 328,355 322,973 (1.7)% 1,193,228 987,357 (20.9)%
Selling, general and administrative 215,959 210,849 (2.4)% 806,733 785,179 (2.7)%
Depreciation 17,803 20,460 13.0% 71,559 73,112 2.1%
Amortization 40,955 22,380 (83.0)% 123,442 68,647 (79.8)%
Goodwill write-down 57,878 - NM 57,878 - NM
Total operating expenses 660,950 576,662 (14.6)% 2,252,840 1,914,295 (17.7)%
Operating income 227,751 275,091 (17.2)% 1,148,595 1,103,932 4.0%
Interest expense, net (29,912) (27,806) (7.6)% (129,441) (108,047) (19.8)%
Equity in earnings of affiliates 15,519 11,289 37.5% 71,382 80,916 (11.8)%
Gain on derivatives 4,008 3,088 29.8% 17,868 50,256 (64.4)%
Gain on sale of investments - - NM 191,824 - NM
Miscellaneous, net (28,120) 17,946 (256.7)% (22,450) (5,193) (332.3)%
Income from operations before income taxes 189,246 279,608 (32.3)% 1,277,778 1,121,864 13.9%
Provision for income taxes 96,937 76,706 (26.4)% 430,330 343,391 (25.3)%
Net income 92,309 202,902 (54.5)% 847,448 778,473 8.9%
Less: net income attributable to non-controlling interests (40,216) (38,194) (5.3)% (173,853) (171,645) (1.3)%
Net income attributable to SNI$52,093 $164,708 (68.4)%$673,595 $606,828 11.0%
Net income attributable to SNI common shareholders per share of common stock:
Basic$0.40 $1.27 (68.5)%$5.20 $4.68 11.1%
Diluted$0.40 $1.27 (68.5)%$5.18 $4.66 11.1%
Weighted average shares outstanding:
Basic 129,661 129,211 129,529 129,665
Diluted 130,350 129,728 130,104 130,255


SCRIPPS NETWORKS INTERACTIVE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and par value amounts)
December 31,
2016 2015
ASSETS
Current assets:
Cash and cash equivalents $122,937 $223,444
Accounts receivable, net of allowances: 2016 - $26,118; 2015 - $12,569 808,133 816,679
Programs and program licenses 591,378 588,999
Prepaid expenses and other current assets 135,651 98,759
Total current assets 1,658,099 1,727,881
Programs and program licenses (less current portion) 500,022 522,899
Investments 699,481 807,630
Property and equipment, net of accumulated depreciation: 2016 - $354,435; 2015 - $299,153 286,399 293,230
Goodwill, net 1,642,169 1,804,748
Intangible assets, net 1,092,682 1,262,664
Deferred income taxes 175,291 91,954
Other non-current assets 146,151 161,308
Total Assets $6,200,294 $6,672,314
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $42,223 $35,308
Accrued liabilities 152,480 159,969
Employee compensation and benefits 123,506 115,266
Program rights payable 70,403 68,892
Deferred revenue 77,987 96,040
Current portion of debt 249,932 499,174
Total current liabilities 716,531 974,649
Debt (less current portion) 2,952,454 3,511,098
Other non-current liabilities 302,881 250,391
Total liabilities 3,971,866 4,736,138
Commitments and contingencies (Note 20)
Redeemable non-controlling interests (Note 17) 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 - 95,491,477 shares; 2015 - 94,838,600 shares 954 948
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 1,293 1,287
Additional paid-in capital 1,390,411 1,347,491
Retained earnings 871,766 305,386
Accumulated other comprehensive loss (363,701) (130,233)
SNI shareholders’ equity 1,899,769 1,523,931
Non-controlling interest (Note 17) 328,659 313,245
Total equity 2,228,428 1,837,176
Total Liabilities and Equity $6,200,294 $6,672,314


SCRIPPS NETWORKS INTERACTIVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) Year ended December 31,
2016 2015 2014
Operating Activities:
Net income $847,448 $778,473 $726,808
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation 71,559 73,112 73,849
Amortization 123,442 68,647 55,603
Goodwill write-down 57,878
Investment write-down 10,701
Program amortization 934,419 783,456 621,210
Program payments (915,486) (875,554) (725,582)
Equity in earnings of affiliates (71,382) (80,916) (85,631)
Share-based compensation 35,198 29,568 35,474
Gain on derivatives (17,868) (50,256) (2,810)
Gain on sale of investments (191,824)
Dividends received from equity investments 65,277 93,624 104,185
Deferred income taxes (10,427) (24,678) 7,175
Changes in working capital accounts (excluding the effects of acquisition):
Accounts receivable, net (2,462) (79,070) (10,932)
Other assets (17,657) (12,702) (2,188)
Accounts payable 8,887 (1,501) 3,593
Deferred revenue (17,150) 44,040 (19,258)
Accrued / refundable income taxes 29,480 41,201 (18,947)
Other liabilities 11,790 32,360 9,548
Other, net (2,997) (6,820) 17,716
Cash provided by operating activities 948,826 812,984 789,813
Investing Activities:
Additions to property and equipment (74,406) (52,480) (53,775)
Collections of note receivable 4,073 4,655 4,481
Purchases of investments (15,916) (35,023) (17,042)
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 18,482 65,824
Other, net (5,902) (32,167) (12,001)
Cash provided by (used in) investing activities 140,731 (604,500) (78,337)
Financing Activities:
Proceeds from debt 475,000 3,180,764 1,189,555
Repayments of debt (890,000) (1,930,000) (195,000)
Debt issuance costs (14,491) (9,026)
Early extinguishment of debt (380,648) (652,104)
Purchase of non-controlling interests (103,500) (853,853)
Dividends paid to non-controlling interests (157,687) (189,539) (216,860)
Dividends paid (129,725) (118,857) (112,943)
Repurchases of Class A Common Shares (288,502) (1,198,962)
Proceeds from stock options 15,110 9,207 39,605
Other, net (3,993) (18,368) (13,600)
Cash used in financing activities (1,175,443) (875,743) (517,231)
Effect of exchange rate changes on cash and cash equivalents (14,621) 12,539 (2,452)
(Decrease) increase in cash and cash equivalents (100,507) (654,720) 191,793
Cash and cash equivalents - beginning of period 223,444 878,164 686,371
Cash and cash equivalents - end of period $122,937 $223,444 $878,164
Supplemental Cash Flow Disclosures:
Interest paid, excluding amounts capitalized $131,158 $95,336 $45,917
Income taxes paid $408,275 $318,920 $309,519

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 businesses and uses a financial measure referred to as segment profit. Segment profit is defined as operating income (loss) excluding depreciation, amortization and goodwill write-downs. 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, which are included in net income determined in accordance with GAAP.

The Company uses segment profit 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 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. 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 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 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 - Q4 2016 and 2015
U.S. Networks International Networks Corporate and Other Consolidated
Three months ended Three months ended Three months ended Three months ended
December 31, December 31, December 31, December 31,
(in thousands)2016 2015 2016 2015 2016 2015 2016 2015
Operating income (loss) 301,441 284,123 (42,584) 19,448 (31,106) (28,480) 227,751 275,091
Depreciation 15,285 14,842 3,240 4,649 (722) 969 17,803 20,460
Amortization 10,079 10,106 30,876 12,274 - - 40,955 22,380
Goodwill write-down - - 57,878 - - - 57,878 -
Segment profit (loss) (1)$326,805 $309,071 $49,410 $36,371 $(31,828)$(27,511)$344,387 $317,931
TVN transaction and integration expenses - 11 32 3,593 996 1,893 1,028 5,497
TVN purchase price accounting impact - - (8,501) - - - (8,501) -
Restructuring costs - 1,286 - - - 1,639 - 2,925
Reorganization costs 1,779 3,041 - - 1,815 31 3,594 3,072
Adjusted segment profit (loss) (1)$328,584 $313,409 $40,941 $39,964 $(29,017)$(23,948)$340,508 $329,425


Segment Profit and Adjusted Segment Profit - Year-to-Date 2016 and 2015
U.S. Networks International Networks Corporate and Other Consolidated
Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31,
(in thousands)2016 2015 2016 2015 2016 2015 2016 2015
Operating income (loss) 1,313,932 1,237,595 (52,908) (8,348) (112,429) (125,315) 1,148,595 1,103,932
Depreciation 59,298 59,428 12,205 10,760 56 2,924 71,559 73,112
Amortization 40,220 40,166 83,222 28,481 - - 123,442 68,647
Goodwill write-down - - 57,878 - - - 57,878 -
Segment profit (loss) (1)$1,413,450 $1,337,189 $100,397 $30,893 $(112,373)$(122,391)$1,401,474 $1,245,691
TVN transaction and integration expenses 17 122 11,168 4,583 3,953 23,589 15,138 28,294
TVN purchase price accounting impact - - (8,501) - - - (8,501) -
Restructuring costs (29) 8,564 - - (281) 7,483 (310) 16,047
Reorganization costs 10,565 3,835 - - 5,784 31 16,349 3,866
Adjusted segment profit (loss) (1)$1,424,003 $1,349,710 $103,064 $35,476 $(102,917)$(91,288)$1,424,150 $1,293,898


Adjusted Net Income - Q4 2016
(in thousands, except per share data)Three months ended December 31, 2016
GAAP measureCost of services, excluding depreciation and amortization Selling, general and administrative Depreciation and amortization Goodwill write-down Gain on derivatives Gain on sale of investments Miscellaneous, net Net income attributable to
SNI (A)
Earnings per diluted share
As reported$328,355 $215,959 $58,758 $57,878 $4,008 $- $(28,120)$52,093 $0.40
Goodwill write-down - - - (57,878) - - - 57,878 0.44
Intangible assets write-down - - (15,943) - - - - 13,233 0.10
Investments write-down - - - - - - 10,701 8,668 0.07
TVN transaction and integration expenses - (1,028) - - - - - 637 -
Reorganization costs (1,568) (2,026) - - - - - 2,228 0.02
Gain on extinguishment of debt - - - - - - (4,254) (3,446) (0.03)
TVN purchase price accounting impact 8,501 - (11,505) - - - - 2,433 0.02
As adjusted$335,288 $212,905 $31,310 $- $4,008 $- $(21,673)$133,724 $1.02
(A) Items tax effected at 38% statutory tax rate, with the exception of the following: $57.9 million goodwill write-down, which has a 0% effective tax rate; $15.9 million intangible assets write-down, which has a 17% effective tax rate; $4.3 million gain on extinguishment of debt, $3.0 million TVN purchase price accounting impact and $10.7 million investments write-down, which have a 19% effective tax rate.


Adjusted Net Income - Q4 2015
(in thousands, except per share data)Three months ended December 31, 2015
GAAP measureCost of services, excluding depreciation and amortization Selling, general and administrative Depreciation and amortization Goodwill write-down Gain on derivatives Gain on sale of investments Miscellaneous, net Net income attributable to
SNI (A)
Earnings per diluted share
As reported$322,973 $210,849 $42,840 $- $3,088 $- $17,946 $164,708 $1.27
TVN transaction and integration expenses - (5,497) - - - - - 4,019 0.03
Restructuring costs (191) (2,734) (473) - - - - 2,107 0.02
Reorganization costs (686) (2,386) - - - - - 1,905 0.01
Gain on extinguishment of debt - - - - - - (5,319) (3,298) (0.03)
TVN purchase price accounting impact - - (9,489) - - - - 5,883 0.05
As adjusted$322,096 $200,232 $32,878 $- $3,088 $- $12,627 $175,324 $1.35
(A) Items tax effected at 38% statutory tax rate with the exception of the following: $3.2 million TVN transaction and integration expenses, which have a 19% effective tax rate.


Adjusted Net Income - Year-to-Date 2016
(in thousands, except per share data)Year ended December 31, 2016
GAAP measureCost of services, excluding depreciation and amortization Selling, general and administrative Depreciation and amortization Goodwill write-down Gain on derivatives Gain on sale of investments Miscellaneous, net Net income attributable to
SNI (A)
Earnings per diluted share
As reported$1,193,228 $806,733 $195,001 $57,878 $17,868 $191,824 $(22,450)$673,595 $5.18
Goodwill write-down - - - (57,878) - - - 57,878 0.44
Intangible assets write-down - - (15,943) - - - - 13,233 0.10
Investments write-down - - - - - - 10,701 8,668 0.07
TVN transaction and integration expenses (17) (15,121) - - - - - 11,505 0.09
Restructuring costs - 310 - - - - - (192) -
Reorganization costs (5,546) (10,803) - - - - - 10,136 0.08
Gain on extinguishment of debt - - - - - - (6,650) (5,387) (0.04)
TVN purchase price accounting impact 8,501 - (53,295) - - - - 36,283 0.28
Sale of investments - - - - - (191,824) - (118,931) (0.91)
As adjusted$1,196,166 $781,119 $125,763 $- $17,868 $- $(18,399)$686,788 $5.29
(A) Items tax effected at 38% statutory tax rate, with the exception of the following: $11.2 million TVN transaction and integration expenses, which have a 19% effective tax rate; $57.9 million goodwill write-down, which has a 0% effective tax rate; $15.9 million intangible assets write-down, which has a 17% effective tax rate; and $6.7 million gain on extinguishment of debt, $44.8 million TVN purchase price accounting impact and $10.7 million investments write-down, which have a 19% effective tax rate.


Adjusted Net Income - Year-to-Date 2015
(in thousands, except per share data)Year ended December 31, 2015
GAAP measureCost of services, excluding depreciation and amortization Selling, general and administrative Depreciation and amortization Goodwill write-down Gain on derivatives Gain on sale of investments Miscellaneous, net Net income attributable to
SNI (A)
Earnings per diluted share
As reported$987,357 $785,179 $141,759 $- $50,256 $- $(5,193)$606,828 $4.66
TVN transaction and integration expenses (22) (28,272) - - - - - 18,154 0.14
Net gain on TVN derivative contracts - - - - 27,418 - - (27,418) (0.21)
Foreign currency effects due to TVN funds - - - - - - 24,175 24,175 0.19
Restructuring costs (2,779) (13,268) (1,893) - - - - 11,123 0.09
Reorganization costs (686) (3,180) - - - - - 2,397 0.02
Gain on extinguishment of debt - - - - - - (8,274) (5,130) (0.04)
TVN purchase price accounting impact - - (19,131) - 11,861 0.09
As adjusted$983,870 $740,459 $120,735 $- $77,674 $- $10,708 $641,990 $4.94
(A) Items tax effected at 38% statutory tax rate with the exception of the following: $3.2 million TVN transaction and integration expenses, which have a 19% effective tax rate; and $24.2 million foreign currency effects due to TVN funds, which have a 0% effective tax rate.


Free Cash Flow - 2016 and 2015
Year ended December 31,
(in thousands) 2016 2015
Cash provided by operating activities$948,826 $812,984
Dividends paid to non-controlling interests (157,687) (189,539)
Additions to property and equipment (74,406) (52,480)
Free cash flow$716,733 $570,965


Operating Revenues by Network – 2016 and 2015
Three months ended December 31, Year ended December 31,
(in thousands)2016 2015 % Change 2016 2015 % Change
Network
HGTV$269,390 $250,298 7.6%$1,089,616 $1,007,706 8.1%
Food Network 245,034 231,995 5.6% 932,617 891,578 4.6%
Travel Channel 78,968 78,259 0.9% 321,209 309,157 3.9%
DIY Network 39,344 39,909 (1.4)% 167,944 167,421 0.3%
Cooking Channel 37,004 35,571 4.0% 141,218 134,783 4.8%
Great American Country 6,857 7,498 (8.5)% 29,496 30,487 (3.3)%
Digital Businesses 43,424 41,914 3.6% 149,815 136,932 9.4%
Other 10,797 16,978 (36.4)% 41,259 42,953 (3.9)%
Intrasegment eliminations (173) (625) 72.3% (1,750) (4,354) 59.8%
Total segment operating revenues$730,645 $701,797 4.1%$2,871,424 $2,716,663 5.7%
Type
Advertising$523,330 $478,356 9.4%$2,029,095 $1,851,574 9.6%
Distribution 193,404 199,635 (3.1)% 785,849 800,134 (1.8)%
Other 13,911 23,806 (41.6)% 56,480 64,955 (13.0)%
$730,645 $701,797 4.1%$2,871,424 $2,716,663 5.7%

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

Source:Scripps Networks Interactive, Inc.