EX-99 2 d400897dex99.htm EX-99 EX-99

Exhibit 99

 

LOGO

Scripps Networks Interactive, Inc. reports second quarter 2017 preliminary results

KNOXVILLE, Tenn. — July 31, 2017 — Scripps Networks Interactive, Inc. (Nasdaq: SNI) today reported second quarter 2017 preliminary results through income from operations before income taxes. The company will be reporting final results, including, taxes, net income and earnings per share in its 10-Q filing at a later date.

Second Quarter 2017 Preliminary Consolidated Results

Consolidated operating revenues for the second quarter of 2017 were $925.0 million, an increase of 3.6% over the prior year period. Advertising revenues were $663.0 million, an increase of 2.5%, and distribution revenues were $239.7 million, an increase of 7.3% over the prior year period.

Consolidated income from operations before income taxes in the second quarter 2017 was $400.8 million, an increase of 20.8% compared with the prior year period. The increase was primarily driven by an increase in foreign currency transaction gains and a decrease in interest expense compared with the prior year quarter, along with a loss on the sale of investments in the second quarter of 2016. Consolidated adjusted segment profit(1) was $412.8 million, a decrease of 1.6%, compared with the prior year quarter. The decrease was primarily due to the expected increase in programming and selling, general and administrative costs compared with the prior year period. These expenditures were partially offset by the growth in operating revenues in the quarter.


SCRIPPS NETWORKS INTERACTIVE, INC.

PRELIMINARY CONSOLIDATED SELECTED FINANCIAL INFORMATION (UNAUDITED)

(in thousands)

 

     Three months ended June 30,     Six months ended June 30,  
     2017     2016     % Change
Fav /
(Unfav)
    2017     2016     % Change
Fav /
(Unfav)
 

Operating revenues:

            

Advertising

   $ 663,034     $ 646,648       2.5   $ 1,259,749     $ 1,218,503       3.4

Distribution

     239,685       223,446       7.3     478,065       451,514       5.9

Other

     22,327       22,677       (1.5 )%      42,352       39,632       6.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     925,046       892,771       3.6     1,780,166       1,709,649       4.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

            

Cost of services, excluding depreciation and amortization

     299,851       286,999       (4.5 )%      578,890       566,666       (2.2 )% 

Selling, general and administrative

     212,397       191,133       (11.1 )%      419,767       389,954       (7.6 )% 

Depreciation

     13,660       16,089       15.1     28,620       33,386       14.3

Amortization

     25,058       25,654       2.3     49,255       56,716       13.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     550,966       519,875       (6.0 )%      1,076,532       1,046,722       (2.8 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     374,080       372,896       0.3     703,634       662,927       6.1

Interest expense, net

     (24,203     (33,175     27.0     (48,455     (66,920     27.6

Equity in earnings of affiliates

     20,973       21,712       (3.4 )%      41,422       47,390       (12.6 )% 

(Loss) gain on derivatives

     (3,672     8,267       (144.4 )%      (6,008     11,033       (154.5 )% 

Gain (loss) on sale of investments

     1,416       (16,373     108.6     1,416       191,824       (99.3 )% 

Miscellaneous, net

     32,181       (21,672     248.5     59,721       (15,606     482.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations before income taxes

   $ 400,775     $ 331,655       20.8   $ 751,730     $ 830,648       (9.5 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Second Quarter 2017 Preliminary Segment Results

U.S. Networks’ operating revenues for the second quarter of 2017 were $779.0 million, an increase of 3.6% compared with the prior year quarter. Advertising revenues were $552.7 million, an increase of 2.2%. This improvement reflects the continued strength in pricing in the U.S. advertising market for our lifestyle brands, partially offset by a decline in impressions delivered and advertising inventory mix shifts in the quarter. U.S. Networks’ distribution revenues increased by 8.1% to $211.9 million. This increase was driven by negotiated annual rate increases and revenues generated from over-the-top and non-linear distribution platforms, partially offset by subscriber declines compared to the prior year quarter.

U.S. Networks’ income from operations before income taxes for the second quarter of 2017 was $390.0 million, flat compared with the prior year quarter. U.S. Networks’ adjusted segment profit(1) was $398.7 million, a decrease of 1.5%, compared with the prior year quarter. The decrease was primarily driven by an expected increase in expenses, partially offset by the growth in operating revenues.

International Networks’ operating revenues for the second quarter of 2017 were $153.3 million, an increase of 4.2% compared with the prior year quarter. International Networks’ income from operations before income taxes was $43.3 million compared with $48.1 million in the prior year quarter, while adjusted segment profit(1) was $38.8 million compared with $37.4 million in the prior year quarter.


Second Quarter 2017 Preliminary Consolidated Balance Sheet Highlights

 

    Cash and cash equivalents totaled $131.6 million and $122.9 million at June 30, 2017 and December 31, 2016, respectively.

 

    Debt totaled $3.0 billion and $3.2 billion at June 30, 2017 and December 31, 2016, respectively.

 

(1)  This press release includes several metrics, including consolidated segment profit (loss) and consolidated adjusted segment profit (loss) that are not calculated in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”). See the Non-GAAP Financial Measures section of this press release for discussion of consolidated segment profit (loss) and consolidated adjusted segment profit (loss) and a reconciliation to their respective most comparable financial measure calculated in accordance with GAAP.

Guidance

As a result of the ratings and impression softness in the U.S. market, we now expect 2017 revenue growth to be approximately 4%, down from the previously issued growth of approximately 6%. Additionally, as a result of our anticipated revenue growth, offset by increased programming, selling, general and administrative expenses, we now expect segment profit to be approximately flat for the year, down from the previously issued growth of approximately 3%. All our other guidance remains unchanged.

Forward-Looking Statements

This press release contains certain forward-looking statements related to the company’s businesses that are based on management’s current expectations. Forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from the expectations expressed in forward-looking statements, including changes in advertising demand and other economic conditions as well as other reasons described in our Securities and Exchange Commission filings, including those set forth in the Risk Factors section and under the caption entitled “Forward-Looking Statements” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our most recently filed Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. The company undertakes no obligation to publicly update any forward-looking statements to reflect events or circumstances after the date the statement is made.

About Scripps Networks Interactive

Scripps Networks Interactive, Inc. (Nasdaq: SNI) is one of the leading developers of engaging lifestyle content in the home, food and travel categories for television, the Internet and emerging platforms. The company’s lifestyle media portfolio includes leading TV and entertainment brands HGTV, Food Network, Travel Channel, DIY Network, Cooking Channel and Great American Country. Its digital division Scripps Lifestyle Studios, creates compelling content for online, social and mobile platforms. International operations include TVN, Poland’s premier multi-platform media company; UKTV, an independent commercial joint venture with BBC Worldwide; Asian Food Channel, the first pan-regional TV food network in Asia; and lifestyle channel Fine Living Network. The company’s global networks and websites reach millions of consumers across North and South America, Asia-Pacific, Europe, the Middle East and Africa. Scripps Networks Interactive is headquartered in Knoxville, Tenn. For more information, please visit http://www.scrippsnetworksinteractive.com.


# # #

Contact: Scripps Networks Interactive, Inc.

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

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

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


Non-GAAP Financial Measures

In addition to results prepared in accordance with GAAP provided in this press release, the company has also presented consolidated segment profit (loss) and consolidated adjusted segment profit (loss).

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

The company uses segment profit (loss) to assess the operating results and performance of its businesses and makes decisions about the allocation of resources to businesses using this financial measure. The company believes segment profit (loss) is relevant to investors because it allows them to analyze and evaluate the operating performance of its segments consistent with management. Depreciation and amortization charges are a result of decisions made in prior periods regarding the allocation of resources and are, therefore, excluded from segment profit (loss). Also excluded from segment profit (loss) are financing, tax structuring and acquisition and divestiture decisions, which are generally made by corporate executives. Excluding these items from the performance measure of our businesses enables management to evaluate operating performance based on current economic conditions and decisions made by the managers of the businesses in the current period.

The company defines consolidated adjusted segment profit (loss) as segment profit (loss), excluding the impact of items not routine in nature. The company believes consolidated adjusted segment profit (loss) is 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.

Consolidated segment profit (loss) and consolidated adjusted segment profit (loss) are non-GAAP measures and should be considered in addition to, but not as a substitute for, income from operations before income taxes and other measures of financial performance reported in accordance with GAAP. Since consolidated segment profit (loss) and consolidated adjusted segment profit (loss) 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 - Q2 2017 and 2016

 

    U.S. Networks     International Networks     Corporate and Other     Consolidated  
    Three months ended     Three months ended     Three months ended     Three months ended  
    June 30,     June 30,     June 30,     June 30,  
(in thousands)   2017     2016     2017     2016     2017     2016     2017     2016  

Income (loss) from operations before income taxes

  $ 389,950     $ 389,925     $ 43,316     $ 48,068     $ (32,491   $ (106,338   $ 400,775     $ 331,655  

Interest (expense) income, net

    (144     (69     206       (7,076     (24,265     (26,030     (24,203     (33,175

Equity in earnings of affiliates

    7,846       9,014       13,127       12,698       —         —         20,973       21,712  

(Loss) gain on derivatives

    —         —         —         —         (3,672     8,267       (3,672     8,267  

(Loss) gain on sale of investments

    —         (16,373     1,416       —         —         —         1,416       (16,373

Miscellaneous, net

    3,481       18,952       7,896       23,823       20,804       (64,447     32,181       (21,672
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

    378,767       378,401       20,671       18,623       (25,358     (24,128     374,080       372,896  

Depreciation

    9,961       12,716       3,045       3,114       654       259       13,660       16,089  

Amortization

    9,994       10,022       15,064       15,632       —         —         25,058       25,654  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment profit (loss)

    398,722       401,139       38,780       37,369       (24,704     (23,869     412,798       414,639  

TVN transaction and integration expenses

    —         17       —         (18     —         736       —         735  

Reorganization costs

    —         3,713       —         —         —         214       —         3,927  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted segment profit (loss)

  $ 398,722     $ 404,869     $ 38,780     $ 37,351     $ (24,704   $ (22,919   $ 412,798     $ 419,301  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment Profit and Adjusted Segment Profit - Year-to-Date 2017 and 2016

 

    U.S. Networks     International Networks     Corporate and Other     Consolidated  
    Six months ended     Six months ended     Six months ended     Six months ended  
    June 30,     June 30,     June 30,     June 30,  
(in thousands)   2017     2016     2017     2016     2017     20\16     2017     2016  

Income (loss) from op1erations before income taxes

  $ 759,713     $ 944,606     $ 76,931     $ 76,111     $ (84,914   $ (190,069   $ 751,730     $ 830,648  

Interest (expense) income, net

    (264     (86     353       (13,943     (48,544     (52,891     (48,455     (66,920

Equity in earnings of affiliates

    13,089       16,746       28,333       30,644       —         —         41,422       47,390  

(Loss) gain on derivatives

    —         —         —         —         (6,008     11,033       (6,008     11,033  

Gain on sale of investments

    —         191,824       1,416       —         —         —         1,416       191,824  

Miscellaneous, net

    5,964       22,440       27,799       54,880       25,958       (92,926     59,721       (15,606
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

    740,924       713,682       19,030       4,530       (56,320     (55,285     703,634       662,927  

Depreciation

    21,460       26,911       5,917       5,955       1,243       520       28,620       33,386  

Amortization

    19,912       20,043       29,343       36,673       —         —         49,255       56,716  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment profit (loss)

    782,296       760,636       54,290       47,158       (55,077     (54,765     781,509       753,029  

TVN transaction and integration expenses

    —         17       —         (31     —         2,104       —         2,090  

Restructuring costs

    —         (29     —         —         —         (281     —         (310

Reorganization costs

    —         7,519       —         —         —         3,732       —         11,252  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted segment profit (loss)

  $ 782,296     $ 768,143     $ 54,290     $ 47,127     $ (55,077   $ (49,210   $ 781,509     $ 766,061  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Segment Profit – 2017 Full Year Guidance Reconciliation

 

     Estimated Guidance
(in thousands)    Year ending December 31,
2017

Income from operations before income taxes

   $1,277,000 – $1,295,000

Interest expense, net

   (95,000) – (100,000)

Equity in earnings of affiliates

   55,000 – 65,000

Loss on derivatives

   (5,000) – (10,000)

Gain on sale of investments

   2,000 – 5,000

Miscellaneous, net

   55,000 – 65,000
  

 

Operating income

   1,265,000 – 1,270,000

Depreciation & amortization

   155,000 – 160,000
  

 

Segment profit

   $1,420,000 – $1,430,000