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8-K - FULL YEAR 2016 EARNINGS RELEASE - Scripps Networks Interactive, Inc.sni-8k_20170221.htm

Exhibit 99

 

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

 

Record full year revenues driven by strength in U.S. advertising and expanding international business

 

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 — 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.

 

# # #

 

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 December 31,

 

Year ended December 31,

 

 

2016

 

2015

 

% Change

Fav / (Unfav)

 

 

2016

 

 

2015

 

% Change

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 measure

Cost 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 measure

Cost 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 measure

Cost 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 measure

Cost 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

%