23 February 2016

Double digit growth in full year revenues and segment profit, driven by strength in advertising and expanding international business

Full year 2015 financial highlights:

  • Revenues increased 13.2 percent to $3.0 billion
  • Segment profit increased 11.0 percent to $1.2 billion
  • Adjusted segment profit increased 12.9 percent to $1.3 billion
  • Net income attributable to SNI increased 21.5 percent to $4.66 per diluted share
  • Adjusted net income attributable to SNI increases 24.7 percent to $4.94 per diluted share

KNOXVILLE, Tenn.--(BUSINESS WIRE)--Feb. 23, 2016-- Scripps Networks Interactive, Inc. (NYSE: SNI) today reported full-year and fourth-quarter 2015 operating results.

The company reported an increase of more than 13 percent in annual revenues over the prior year, with segment profit up 11 percent over the same period. The performance was driven by strong advertiser demand for Scripps Networks Interactive's brands in the United States fueling higher pricing, as well as the continued growth in the company's international networks including Poland's leading multi-platform media business TVN.

The company's portfolio of brands including HGTV and Food Network continue to deliver consistent audience growth into 2016, with all six U.S. networks increasing impressions in January compared to the same period in 2015.

"These results exemplify the strong and consistent execution of our strategy at Scripps Networks Interactive. Our core television lifestyle networks are growing in demand by viewers and advertisers, while our international expansion continues to make a significant contribution to the overall robust health of the company, "said Kenneth W. Lowe, Chairman, President and Chief Executive Officer. "We continue to build on the success of our powerful lifestyle media brands, and every day we are increasing the number of connections those brands make with consumers around the world. As a result, we're well positioned to maximize the value we can generate from the audiences we deliver across multiple platforms."

Total Year Results

Consolidated operating revenues in 2015 were a record $3.0 billion, an increase of 13.2 percent over the prior year. Advertising revenue was $2.1 billion, an increase of 13.6 percent over the prior year, primarily driven by higher demand and pricing in the U.S. market and growth in our international business. Affiliate fee revenue was $875.0 million, an increase of 9.5 percent over the prior year, primarily due to negotiated rate increases and international expansion.

Segment profit was $1.2 billion, an increase of 11.0 percent compared with the prior year (see non-GAAP financial measures note for a definition of segment profit). This was driven by revenue growth, cost structure improvements as a result of our restructuring and early retirement program and international expansion. These improvements were partially offset by increases in programming expenses as well as TVN transaction and integration costs and expenses associated with restructuring and reorganization. Adjusted segment profit was $1.3 billion, up 12.9 percent over the prior year.(a)

Consolidated net income attributable to Scripps Networks Interactive was $606.8 million, or $4.66 per diluted share, compared with $545.3 million, or $3.83 per diluted share for the prior year period. This increase was primarily due to improved operating performance and international expansion. Full year 2015 adjusted net income attributable to Scripps Networks Interactive was $642.0 million, or $4.94 per diluted share, a 24.7 percent increase compared with the prior year.(b)

Fourth-quarter Results

Consolidated operating revenues for the fourth quarter of 2015 were $851.8 million, an increase of 27.3 percent over the prior-year period. Results for the three-month period ended Dec. 31 2015 reflect advertising revenue of $596.5 million, up 31.5 percent, and affiliate fee revenue of $225.8 million, up 11.8 percent, over the prior-year period.

Total segment profit was $317.9 million, an increase of 21.5 percent, compared with the prior year, reflecting the strong revenue growth, operating efficiencies as a result of the restructuring and early retirement program and international expansion. These improvements were partially offset by higher programming expense as well as TVN transaction and integration costs and expenses associated with restructuring and reorganization. Adjusted segment profit was $329.4 million, an increase of 19.3 percent, compared with the prior year.(c)

Net income attributable to Scripps Networks Interactive was $164.7 million, or $1.27 per diluted share, compared with $131.8 million, or $0.96 per diluted share for the prior year period. This increase was primarily due to improved operating performance and international expansion. Fourth quarter adjusted net income attributable to Scripps Networks Interactive was $175.3 million, or $1.35 per diluted share, an increase of 32.4 percent, compared with 2014.(d)

         

Segment Results

Three months ended Twelve months ended
December 31, December 31,
(in thousands)       2015     2014     Change 2015     2014     Change
Segment operating revenues
U.S. Networks $ 701,797 $ 649,519 8.0 % $ 2,716,663 $ 2,588,357 5.0 %
International Networks 163,019 27,284 497.5 % 327,891 90,180 263.6 %
Corporate and other         (13,063 )   (7,651 ) (70.7 )%   (26,327 )   (13,081 ) (101.3 )%
Total segment operating revenues       $ 851,753 $ 669,152 27.3 % $ 3,018,227 $ 2,665,456 13.2 %
Segment profit (loss)
U.S. Networks $ 309,071 $ 305,622 1.1 % $ 1,337,189 $ 1,268,417 5.4 %
International Networks 36,371 (8,027 ) 553.1 % 30,893 (41,854 ) 173.8 %
Corporate and other         (27,511 )   (35,816 ) 23.2 %   (122,391 )   (104,802 ) (16.8 )%
Total segment profit       $ 317,931 $ 261,779 21.5 % $ 1,245,691 $ 1,121,761 11.0 %
 

U.S. Networks operating revenues for the fourth quarter of 2015 were $701.8 million, an increase of 8.0 percent, driven by both advertising revenue and affiliate fee growth. Total advertising revenue was $478.4 million, an increase of 7.8 percent, reflecting further strengthening of advertiser demand for our lifestyle network brands. Affiliate fee revenue was $199.6 million, an increase of 4.6 percent, primarily driven by annual negotiated rate increases, expanded distribution for DIY Network and Cooking Channel and incremental broadband distribution.

U.S. Networks segment profit was $309.1 million, an increase of 1.1 percent. This reflects strong revenue growth and operating improvements due to the restructuring and early retirement program. These improvements were offset by an increase in program amortization related to the premiere of a record number of new programs, coupled with higher than normal program write-offs primarily related to the repositioning of the Travel Channel brand and vision under new leadership. Adjusted segment profit was $313.4 million, a decrease of 1.3 percent.(c)

International Networks operating revenues for the fourth quarter of 2015 were $163.0 million, an increase of $135.7 million compared with the fourth quarter of last year, primarily due to the consolidation of TVN operations.

International Networks segment profit was $36.4 million, an increase of $44.4 million, compared with a loss of $8.0 million in the fourth quarter of 2014, primarily due to the consolidation of TVN operations.

Corporate and Other included a segment loss of $27.5 million in the fourth quarter of 2015 compared with a segment loss of $35.8 million in the prior year fourth quarter, an improvement of 23.2 percent. This improvement reflects increased operating efficiencies achieved as a result of the restructuring and early retirement program. Adjusted Corporate and Other segment loss was $23.9 million, compared with $33.5 million, a 28.5 percent improvement over the prior year fourth quarter.(c)

(a) - refer to Adjusted Segment Profit - Total Year 2015 and 2014 table

(b) - refer to Adjusted Net Income - Total Year 2015 and Adjusted Net Income - Total Year 2014 tables

(c) - refer to Adjusted Segment Profit - Q4 2015 and 2014 table

(d) - refer to Adjusted Net Income - Q4 2015 and Adjusted Net Income - Q4 2014 tables

2016 Full-year Guidance

The company will provide full year guidance on their earnings conference call.

Conference call

The senior management team of Scripps Networks Interactive will discuss the company's fourth quarter 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 follow the Investors link at the top of the page. The webcast link can be found next to the microphone icon on the investor relations landing page.

To access the conference call by telephone, dial (877) 209-9922 (U.S.) or (612) 332-0802 (international) approximately ten minutes before the start of the call. Callers will need the name of the call, "SNI Fourth Quarter Earnings Report," to be granted access. Callers also will be asked to provide their name and company affiliation. The media and general public are granted access to the conference call on a listen-only basis.

A replay line will be open from 12:15 p.m. on Feb. 23 until 11:59 p.m. ET on March 8. The domestic number to access the replay is (800) 475-6701, and the international number is (320) 365-3844. The access code for both numbers is 384375.

A replay of the conference call will also be available online. To access the audio replay, 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, including changes in advertising demand and other economic conditions that could cause actual results to differ materially from the expectations expressed in forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. The company's written policy on forward-looking statements can be found on page F-3 of its 2014 Form 10-K filed with the Securities and Exchange Commission. 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 (NYSE: SNI) is one of the leading developers of engaging lifestyle content in the home, food and travel categories for television, the Internet and emerging platforms. The company's lifestyle media portfolio comprises popular television and Internet brands HGTV, DIY Network, Food Network, Cooking Channel, Travel Channel and Great American Country, which collectively engage more than 190 million U.S. consumers each month. International operations include TVN, Poland's premier multi-platform media company; UKTV, an independent commercial joint venture with BBC Worldwide; Asian Food Channel, the first pan-regional TV food network in Asia; and lifestyle channel Fine Living. The company's global networks and websites reach millions of consumers across North and South America, Asia, 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     Twelve months ended
December 31, December 31,
(Unaudited)         2015       2014     Change   2015       2014     Change
Operating revenues:
Advertising $ 596,516 $ 453,510 31.5 % $ 2,062,530 $ 1,816,388 13.6 %
Network affiliate fees, net 225,818 202,020 11.8 % 874,984 799,178 9.5 %
Other         29,419   13,622 116.0 %   80,713   49,890 61.8 %
Total operating revenues         851,753   669,152 27.3 %   3,018,227   2,665,456 13.2 %

Cost of services, excluding depreciation and amortization of intangible assets

322,973 200,478 61.1 % 987,357 778,896 26.8 %
Selling, general and administrative 210,849 206,895 1.9 % 785,179 764,799 2.7 %
Depreciation and amortization of intangible assets 41,277 31,498 31.0 % 137,596 128,582 7.0 %
Loss (gain) on disposal of property and equipment         1,563   (177 ) NM   4,163   870 378.5 %
Total operating expenses         576,662   438,694 31.4 %   1,914,295   1,673,147 14.4 %
Operating income 275,091 230,458 19.4 % 1,103,932 992,309 11.2 %
Interest expense, net (27,806 ) (15,789 ) (76.1 )% (108,047 ) (52,687 ) 105.1 %
Equity in earnings of affiliates 11,289 18,521 (39.0 )% 80,916 85,631 (5.5 )%
Gain on derivatives 3,088 5,246 (41.1 )% 50,256 2,810 NM
Miscellaneous, net         17,946   (4,519 ) NM   (5,193 )   (212 ) NM
Income from operations before income taxes 279,608 233,917 19.5 % 1,121,864 1,027,851 9.1 %
Provision for income taxes         76,706   55,868 37.3 %   343,391   301,043 14.1 %
Net income 202,902 178,049 14.0 % 778,473 726,808 7.1 %
Less: net income attributable to non-controlling interests         (38,194 )   (46,203 ) 17.3 %   (171,645 )   (181,533 ) (5.4 )%
Net income attributable to SNI       $ 164,708 $ 131,846 24.9 % $ 606,828 $ 545,275 11.3 %
Net income attributable to SNI common shareholders per basic share of common stock       $ 1.27 $ 0.96 32.4 % $ 4.68 $ 3.86 21.3 %
Net income attributable to SNI common shareholders per diluted share of common stock       $ 1.27 $ 0.96 32.2 % $ 4.66 $ 3.83 21.5 %
Weighted average basic shares outstanding         129,211 136,876 129,665 141,297
Weighted average diluted shares outstanding         129,728 137,708 130,255 142,193
 
     
SCRIPPS NETWORKS INTERACTIVE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and par value amounts) As of December 31,
2015   2014
ASSETS
Current assets:
Cash and cash equivalents $ 223,444 $ 878,164
Accounts receivable, net of allowances: 2015 - $12,569; 2014 - $7,889 816,679 629,775
Programs and program licenses 588,999 477,575
Other current assets   98,759   110,816
Total current assets 1,727,881 2,096,330
Investments 807,630 463,344
Property and equipment, net of accumulated depreciation: 2015 - $299,153; 2014 - $278,552 293,230 226,246
Goodwill 1,804,748 573,119
Other intangible assets, net 1,262,664 595,881
Programs and program licenses (less current portion) 522,899 469,083
Deferred income taxes 91,954 79,096
Other non-current assets   161,308   154,382
Total Assets $ 6,672,314 $ 4,657,481
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 35,308 $ 21,499
Current portion of debt 499,174 883,895
Program rights payable 68,892 36,138
Deferred revenue 96,040 47,929
Employee compensation and benefits 115,266 73,185
Accrued marketing and advertising 11,437 3,765
Other accrued liabilities   148,532   90,444
Total current liabilities   974,649   1,156,855
Debt (less current portion) 3,511,098 1,485,359
Other liabilities (less current portion)   250,391   234,429
Total liabilities   4,736,138   2,876,643
Commitments and contingencies (Note 20)        
Redeemable non-controlling interests (Note 16)   99,000   96,251
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: 2015 - 94,838,600 shares; 2014 - 97,789,910 shares

948 978

Common voting shares - authorized: 60,000,000 shares; issued and outstanding: 2015 - 33,850,481; 2014 - 34,317,171 shares

  339   343
Total common stock 1,287 1,321
Additional paid-in capital 1,347,491 1,359,023
Retained earnings 305,386 79,994
Accumulated other comprehensive loss   (130,233 )   (57,891 )
Total SNI shareholders' equity 1,523,931 1,382,447
Non-controlling interest (Note 16)   313,245   302,140
Total equity   1,837,176   1,684,587
Total Liabilities and Equity $ 6,672,314 $ 4,657,481
 
     
SCRIPPS NETWORKS INTERACTIVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) For the years ended December 31,
2015     2014
Cash Flows from Operating Activities:
Net income $ 778,473 $ 726,808
Depreciation and amortization of intangible assets 137,596 128,582
Program amortization 783,456 621,210
Equity in earnings of affiliates (80,916 ) (85,631 )
Gain on derivatives (50,256 ) (2,810 )
Program payments (875,554 ) (725,582 )
Dividends received from equity investments 93,624 104,185
Deferred income taxes (24,678 ) 7,175
Share-based compensation 29,568 35,474
Changes in working capital accounts (excluding the effects of acquisition):
Accounts receivable, net (79,070 ) (10,932 )
Other assets (12,702 ) (2,188 )
Accounts payable (1,501 ) 3,593
Deferred revenue 44,040 (19,258 )
Accrued / refundable income taxes 41,201 (18,947 )
Other liabilities 32,360 9,548
Other, net   (1,427 )   6,347
Cash provided by operating activities   814,214   777,574
Cash Flows from Investing Activities:
Additions to property and equipment (52,480 ) (53,775 )
Collections on note receivable 4,655 4,481
Purchases of long-term investments (35,023 ) (17,042 )
Purchases of subsidiary companies, net of cash acquired (539,309 ) -
Foreign currency call option premium (16,000 ) -
Settlement on derivatives 65,824 -
Other, net   (32,167 )   (12,001 )
Cash used in investing activities   (604,500 )   (78,337 )
Cash Flows from Financing Activities:
Proceeds from debt 3,180,764 1,189,555
Repayments of debt (1,930,000 ) (195,000 )
Deferred loan costs (14,491 ) (9,026 )
Extinguishment of debt (652,104 ) -
Purchase of non-controlling interests (853,853 ) -
Dividends paid (118,857 ) (112,943 )
Dividends paid to non-controlling interests (189,539 ) (216,860 )
Repurchase of class A common shares (288,502 ) (1,198,962 )
Proceeds from stock options 9,207 39,605
Other, net   (19,598 )   (1,361 )
Cash used in financing activities   (876,973 )   (504,992 )
Effect of exchange rate changes on cash and cash equivalents   12,539   (2,452 )

(Decrease) increase in cash and cash equivalents

(654,720 ) 191,793
Cash and cash equivalents:
Beginning of year   878,164   686,371
End of year $ 223,444 $ 878,164
Supplemental Cash Flow Disclosures:
Interest paid, excluding amounts capitalized $ 95,336 $ 45,917
Income taxes paid $ 318,920 $ 309,519
 

NON-GAAP FINANCIAL MEASURES

Our Chief Operating Decision Maker evaluates the operating performance of our businesses and makes decisions about the allocation of resources to the businesses using a measure we call segment profit. Segment profit excludes interest, income taxes, depreciation and amortization, divested operating units, investment results and certain other items that are included in net income determined in accordance with accounting principles generally accepted in the United States of America ("GAAP").

Items excluded from segment profit generally result from decisions made in prior periods or from decisions made by corporate executives rather than the managers of the businesses. Depreciation and amortization charges are the result of decisions made in prior periods regarding the allocation of resources and are, therefore, excluded from this measure. Financing, tax structure and divestiture decisions are generally made by corporate executives. Excluding these items from the performance measure of our businesses enables us to evaluate operating performance based upon current economic conditions and decisions made by the managers of those businesses in the current period.

In the fourth quarter of 2014, we modified our management reporting structure related to the operating results from our uLive business. In conjunction with this change in reporting structure, we now report the results of uLive within U.S. Networks rather than within Corporate and Other.

As a result of the acquisition of N-Vision B.V. ("N-Vision"), the majority shareholder of TVN, the international operating segment that was previously not significant, has become significant. Therefore, the Company now has two reportable segments: U.S. Networks, previously referred to as Lifestyle Media, and International Networks.

As a result of the above-mentioned changes, certain prior period and prior year segment results have been recast to reflect the current presentation.

International Networks includes the lifestyle oriented channels available in the United Kingdom, Europe, Middle East, Africa, Asia-Pacific and Latin America. Additionally, International Networks includes TVN.

Corporate and Other includes the results of businesses not separately identified as reportable segments for external financial reporting purposes and will continue to be disclosed separately from the results of the U.S. Networks and International Networks segments. The Company generally does not allocate corporate employee-related overhead costs to its reportable segments, but rather classifies these expenses within Corporate and Other. However, certain corporate costs, including information technology, pension and other employee benefits and shared service functions, are allocated to our businesses. The allocations are generally amounts agreed upon by management, which may differ from amounts that would be incurred if such services were purchased separately by the businesses.

A reconciliation of segment profit to operating income determined in accordance with GAAP for each business segment is as follows:

 
Adjusted Segment Profit - Q4 2015 and 2014
        U.S. Networks    

International
Networks

    Corporate and Other     Consolidated
     

Three months ended
December 31,

Three months ended
December 31,

Three months ended
December 31,

Three months ended
December 31,

(in thousands)       2015     2014 2015     2014 2015     2014 2015     2014
Operating income $ 284,124 $ 277,929 $ 19,448 $ (10,970 ) $ (28,481 ) $ (36,501 ) $ 275,091 $ 230,458
Depreciation and amortization of intangible assets 24,083 27,932 16,484 2,950 710 616 41,277 31,498

Loss (gain) on disposal of property and equipment

        865   (238 )   439   (5 )   259   66   1,563   (177 )
Segment profit $ 309,072 $ 305,623 $ 36,371 $ (8,025 ) $ (27,512 ) $ (35,819 ) $ 317,931 $ 261,779
TVN transaction and integration expenses 11 - 3,593 - 1,893 - 5,497 -
Restructuring costs 1,286 12,041 - - 1,639 2,311 2,925 14,352
Reorganization costs 3,041 - - - 31 - 3,072 -
Contract termination costs         -   -   -   -   -   -   -   -
Adjusted segment profit       $ 313,410 $ 317,664 $ 39,964 $ (8,025 ) $ (23,949 ) $ (33,508 ) $ 329,425 $ 276,131
 
Adjusted Segment Profit - Total Year 2015 and 2014
        U.S. Networks

International
Networks

Corporate and Other Consolidated

Twelve months ended
December 31,

Twelve months
ended December 31,

Twelve months ended
December 31,

Twelve months ended
December 31,

(in thousands)       2015 2014 2015 2014 2015 2014 2015 2014
Operating income $ 1,237,595 $ 1,155,610 $ (8,348 ) $ (53,389 ) $ (125,315 ) $ (109,912 ) $ 1,103,932 $ 992,309
Depreciation and amortization of intangible assets 95,120 111,497 38,780 11,542 3,696 5,543 137,596 128,582
Loss (gain) on disposal of property and equipment         4,474   1,311   461   (5 )   (772 )   (436 )   4,163   870
Segment profit $ 1,337,189 $ 1,268,418 $ 30,893 $ (41,852 ) $ (122,391 ) $ (104,805 ) $ 1,245,691 $ 1,121,761
TVN transaction and integration expenses 122 - 4,583 - 23,589 - 28,294 -
Restructuring costs 8,564 12,041 - - 7,483 2,311 16,047 14,352
Reorganization costs 3,835 - - - 31 - 3,866 -
Contract termination costs         -   -   -   9,700   -   -   -   9,700
Adjusted segment profit       $ 1,349,710 $ 1,280,459 $ 35,476 $ (32,152 ) $ (91,288 ) $ (102,494 ) $ 1,293,898 $ 1,145,813
 

The table below reconciles certain non-GAAP measures with the most directly comparable GAAP financial measures: cost of services, excluding depreciation and amortization of intangible assets, selling general and administrative expenses, depreciation and amortization of intangible assets, miscellaneous, net, net income attributable to SNI and earnings per diluted share.

 
Adjusted Net Income - Q4 2015
(in thousands, except per share data)         Three months ended December 31, 2015
         

Cost of
services,
excluding
depreciation
and
amortization
of intangible
assets

     

Selling,
general and
administrative

     

Total cost of
services and
selling,
general and
administrative

     

Depreciation
and
amortization
of intangible
assets

     

Miscellaneous,
net

     

Net
income
attributable
to SNI (A)

     

Earnings
per
diluted
share

Reported GAAP measure       $ 322,973 $ 210,849 $ 533,822 41,277 17,946 $ 164,708 $ 1.27

TVN transaction and integration expenses

- (5,497 ) (5,497 ) - - 4,019 0.03
Net gain on TVN derivative contracts - - - - - - -
Foreign currency effects due to TVN funds - - - - - - -
Restructuring costs (191 ) (2,734 ) (2,925 ) (473 ) - 2,107 0.02
Reorganization costs (686 ) (2,386 ) (3,072 ) - - 1,905 0.01
Contract termination costs - - - - - - -
Gain on extinguishment of debt - - - - 5,319 (3,298 ) (0.03 )
TVN purchase price accounting impact         -   -   -   (9,489 )   -   5,883   0.05
Adjusted non-GAAP measure       $ 322,096 $ 200,232 $ 522,328 $ 31,315 $ 23,265 $ 175,324 $ 1.35
 

(A) Items tax effected at 38% statutory tax rate with the exception of $3,217 million of TVN transaction and integrations costs, which were effected at 19% tax rate, and foreign currency effects due to TVN funds which were not tax effected.

 
Adjusted Net Income - Q4 2014
(in thousands, except per share data)         Three months ended December 31, 2014
         

Cost of
services,
excluding
depreciation
and
amortization
of intangible
assets

     

Selling,
general and
administrative

     

Total cost of
services and
selling,
general and
administrative

     

Depreciation
and
amortization
of intangible
assets

     

Miscellaneous,
net

     

Net
income
attributable
to SNI (A)

     

Earnings
per
diluted
share

Reported GAAP measure       $ 200,478 $ 206,895 $ 407,373 31,498 (4,519 ) $ 131,846 $ 0.96
TVN transaction and integration expenses - - - - - - -
Net gain on TVN derivative contracts - - - - - - -
Foreign currency effects due to TVN funds - - - - - - -
Restructuring costs (3,872 ) (10,480 ) (14,352 ) - - 8,898 0.06
Reorganization costs - - - - - - -
Contract termination costs - - - - - - -
Gain on extinguishment of debt - - - - - - -
TVN purchase price accounting impact         -   -   -   -   -   -   -
Adjusted non-GAAP measure       $ 196,606 $ 196,415 $ 393,021 $ 31,498 $ (4,519 ) $ 140,744 $ 1.02
 
(A) Items tax effected at 38% statutory tax rate.
 
 
Adjusted Net Income - Total Year 2015
(in thousands, except per share data)         Twelve months ended December 31, 2015
         

Cost of
services,
excluding
depreciation
and
amortization
of intangible
assets

     

Selling,
general and
administrative

     

Total cost of
services and
selling,
general and
administrative

     

Depreciation
and
amortization
of intangible
assets

     

Miscellaneous,
net

     

Net
income
attributable
to SNI (A)

     

Earnings
per
diluted
share

Reported GAAP measure       $ 987,357 $ 785,179 $ 1,772,536 137,596 (5,193 ) $ 606,828 $ 4.66
TVN transaction and integration expenses (22 ) (28,272 ) (28,294 ) - - 18,154 0.14
Net gain on TVN derivative contracts - - - - - (27,418 ) (0.21 )
Foreign currency effects due to TVN funds - - - - 24,175 24,175 0.19
Restructuring costs (2,779 ) (13,268 ) (16,047 ) (1,893 ) - 11,123 0.09
Reorganization costs (686 ) (3,180 ) (3,866 ) - - 2,397 0.02
Contract termination costs - - - - - - -
Gain on extinguishment of debt - - - - 8,274 (5,130 ) (0.04 )
TVN purchase price accounting impact         -   -   -   (19,131 )   -   11,861   0.09
Adjusted non-GAAP measure       $ 983,870 $ 740,459 $ 1,724,329 $ 116,572 $ 27,256 $ 641,990 $ 4.94
 

(A) Items tax effected at 38% statutory tax rate with the exception of $3,217 million of TVN transaction and integrations costs, which were effected at 19% tax rate, and foreign currency effects due to TVN funds which were not tax effected.

 
Adjusted Net Income - Total Year 2014
(in thousands, except per share data)         Twelve months ended December 31, 2014
         

Cost of
services,
excluding
depreciation
and
amortization
of intangible
assets

     

Selling,
general and
administrative

     

Total cost of
services and
selling,
general and
administrative

     

Depreciation
and
amortization
of intangible
assets

     

Miscellaneous,
net

     

Net
income
attributable
to SNI (A)

     

Earnings
per
diluted
share

Reported GAAP measure       $ 778,896 $ 764,799 $ 1,543,695 128,582 (212 ) $ 545,275 $ 3.83
TVN transaction and integration expenses - - - - - - -
Net gain on TVN derivative contracts - - - - - - -
Foreign currency effects due to TVN funds - - - - - - -
Restructuring costs (3,872 ) (10,480 ) (14,352 ) - - 8,898 0.06
Reorganization costs - - - - - - -
Contract termination costs - (9,700 ) (9,700 ) - - 9,700 0.07
Gain on extinguishment of debt - - - - - - -
TVN purchase price accounting impact         -   -   -   -   -   -   -
Adjusted non-GAAP measure       $ 775,024 $ 744,619 $ 1,519,643 $ 128,582 $ (212 ) $ 563,873 $ 3.96
 

(A) Items tax effected at 38% statutory rate with the exception of contract termination costs, which were not tax effected.

We define free cash flow as cash provided by operating activities less dividends paid to non-controlling interests and acquisitions of property and equipment. We measure free cash flow as we believe it is an important indicator for management and investors as to our liquidity, including our ability to reduce debt, make strategic investments and return capital to shareholders. A reconciliation of free cash flow is as follows:

 
Free Cash Flow - 2015 and 2014
      Twelve months ended
December 31,
(in thousands)       2015     2014
Segment profit $ 1,245,691 $ 1,121,761
Income taxes paid 318,920 309,519
Interest paid 95,336 45,917
Working capital and other         17,221   (11,249 )
Cash provided by operating activities 814,214 777,574
Dividends paid to non-controlling interests (189,539 ) (216,860 )
Additions to property and equipment         (52,480 )   (53,775 )
Free cash flow       $ 572,195 $ 506,939
 

Since segment profit, adjusted segment profit, adjusted net income and free cash flow are non-GAAP measures, they should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance reported in accordance with GAAP.

SUPPLEMENTAL FINANCIAL INFORMATION

U.S. Networks earns revenue primarily from the sale of advertising time on our national television networks and interactive platforms, affiliate fees paid by cable and television systems and telecommunication service providers and other distributors that carry our network programming and the licensing of our content to third parties and brands for consumer products, such as videos, books, kitchenware and tools.

Supplemental information for U.S. Networks is as follows:

Operating Revenues by Network - 2015 and 2014

         
Three months ended Twelve months ended
December 31, December 31,
(in thousands)       2015     2014     Change   2015       2014     Change
Network
HGTV $ 250,298 $ 231,131 8.3 % $ 1,007,706 $ 938,475 7.4 %
Food Network 231,995 219,707 5.6 % 891,578 888,533 0.3 %
Travel Channel 78,259 75,718 3.4 % 309,157 314,199 (1.6 )%
DIY Network 39,908 36,816 8.4 % 167,421 152,094 10.1 %
Cooking Channel 35,571 31,829 11.8 % 134,783 120,835 11.5 %
Great American Country 7,498 7,532 (0.5 )% 30,487 30,154 1.1 %
Digital Businesses 41,914 37,841 10.8 % 136,932 122,062 12.2 %
Other 16,978 11,123 52.6 % 42,953 27,547 55.9 %
Intrasegment eliminations         (624 )   (2,178 ) 71.3 %   (4,354 )   (5,542 ) 21.4 %
Total segment operating revenues       $ 701,797 $ 649,519 8.0 % $ 2,716,663 $ 2,588,357 5.0 %
Type
Advertising 478,356 443,648 7.8 % 1,851,574 1,787,647 3.6 %
Network affiliate fees, net 199,635 190,891 4.6 % 800,134 755,950 5.8 %
Other         23,806   14,980 58.9 %   64,955   44,760 45.1 %
        $ 701,797 $ 649,519 8.0 % $ 2,716,663 $ 2,588,357 5.0 %
 

Source: Scripps Networks Interactive, Inc.

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

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