09 August 2016
U.S. Networks' advertising revenues surpass $500 million in a quarter for the first time in the company's history

Second quarter 2016 financial highlights:

  • Consolidated operating revenues of $892.8 million, a 21.9% increase;
  • U.S. Networks advertising revenue of $541.0 million, an 8.9% increase;
  • Consolidated operating income of $372.9 million, a 12.3% increase; and
  • Adjusted segment profit(1) of $419.3 million, a 13.9% increase.

KNOXVILLE, Tenn., Aug. 09, 2016 (GLOBE NEWSWIRE) -- Scripps Networks Interactive, Inc. (Nasdaq:SNI) today reported second quarter 2016 operating results.

Consolidated operating revenues increased 21.9% during the second quarter of 2016. Consolidated operating income grew 12.3%, and consolidated adjusted segment profit(1) was up 13.9% compared with the prior-year period. The U.S. Networks segment continued to benefit from a strong advertising market. The inclusion of TVN, Poland's leading multi-platform media business, drove the growth in the company's International Networks segment. TVN realized mid-single digit revenue growth in local currency for the quarter compared with the prior-year.

Total day ratings for adults 25-54 improved across all six U.S. networks while total impressions grew in the low single-digits. HGTV sustained its strong ratings performance, achieving its highest rated second quarter ever among all key demographics. Food Network's ratings for total day 25-54 viewers grew 4% compared to the prior year quarter. Travel Channel continued along its growth trajectory, posting double-digit ratings growth. DIY Network and Cooking Channel each saw ratings reach record levels, and Great American Country grew its ratings more than 50%. TVN was ranked the No. 1 channel amongst viewers in its target audience, generating high single-digit improvement over the prior year.

"Scripps Networks Interactive generated another quarter of strong operating performance," said Kenneth W. Lowe, president, chairman and CEO. "I am particularly proud that we achieved our first ever $500 million quarter in U.S. ad sales, and that the importance advertisers place on our networks has continued with a record breaking upfront. TVN has proven to be a transformative acquisition for the company, converting our International Networks segment into a growing and profitable endeavor. Thanks to the launch of Scripps Lifestyle Studios, digital engagement is at its highest level ever, particularly on social platforms where our audience has grown considerably, driving a substantial increase in digital revenues. Our company remains well positioned to excel in the evolving media landscape."

Second Quarter Consolidated Results
Consolidated operating revenues for the quarter were $892.8 million, an increase of 21.9% compared with the prior-year period. Consolidated advertising revenues were $646.6 million, an increase of 28.6%, and consolidated distribution revenues were $223.4 million, an increase of 3.8%, compared with the prior-year period.

Second quarter consolidated operating income was $372.9 million, an increase of 12.3% from the prior-year period. Consolidated adjusted segment profit(1) was $419.3 million, an increase of 13.9%. The year-over-year improvement in consolidated operating income and consolidated adjusted segment profit(1) was driven by the increase in operating revenues, which reflects the inclusion of TVN and the growth in advertising revenues from U.S. Networks, offset primarily by increased international operating expenses as a result of the inclusion of TVN and additional programming costs for U.S. Networks.

Second quarter consolidated net income attributable to Scripps Networks Interactive was $184.6 million, or $1.42 per diluted share, compared with $193.7 million, or $1.49 per diluted share, in the same period of the prior year. The decline in consolidated net income was primarily driven by the large gain on derivatives related to the TVN acquisition recognized in the second quarter of last year, additional interest expense recorded in the second quarter of this year associated with the financing for the acquisition of TVN as well as the assumed debt of TVN and the loss on investment realized in the second quarter of this year. Second quarter consolidated adjusted net income(1) increased 7.2% to $205.1 million, and consolidated adjusted diluted earnings per share(1) increased 7.5% to $1.58. The improvement in consolidated adjusted diluted earnings per share(1) during the second quarter was primarily due to improved operating performance, partially offset by an increase in interest expense and lower equity in earnings of affiliates as a result of the sale of the company's investment in Fox Sports South in the first quarter 2016.

Second Quarter Segment Results

Segment Profit and Adjusted Segment Profit - Q2 2016 and 2015  
  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) 2016   2015   2016   2015   2016   2015   2016   2015  
Operating income (loss) $ 378,401   $ 374,429   $ 18,623   $ (13,072 ) $ (24,128 ) $ (29,322 ) $ 372,896   $ 332,035  
Depreciation   12,716     12,848     3,114     949     259     1,001     16,089     14,798  
Amortization   10,022     10,021     15,632     1,619     -     -     25,654     11,640  
Loss on disposal of property and equipment   -     34     -     9     -     1     -     44  
Segment profit (loss) (1) $ 401,139   $ 397,332   $ 37,369   $ (10,495 ) $ (23,869 ) $ (28,320 ) $ 414,639   $ 358,517  
TVN transaction and integration expenses   17     63     (18 )   435     736     3,723     735     4,221  
Restructuring costs   -     3,082     -     -     -     2,238     -     5,320  
Reorganization costs   3,713     -     -     -     214     -     3,927     -  
Adjusted segment profit (loss) (1) $ 404,869   $ 400,477   $ 37,351   $ (10,060 ) $ (22,919 ) $ (22,359 ) $ 419,301   $ 368,058  
                                                 

U.S. Networks' operating revenues for the second quarter of 2016 were $752.3 million, an increase of 5.2%, driven by advertising revenue growth. Advertising revenues for U.S. Networks, which surpassed $500 million in a single quarter for the first time in the company's history, were $541.0 million, an increase of 8.9%. This improvement reflects the continued strength in the U.S. advertising market for our lifestyle brands along with a low single-digit improvement in impressions. Predominantly as a result of the previously disclosed one-time rate equalization of certain distributor agreements caused by industry consolidation, distribution revenues for U.S. Networks decreased by 3.6% to $196.1 million. Continued erosion in subscribers across the industry also impacted revenue, though the declines were partially offset by negotiated rate increases and additional distribution from new over-the-top entrants.

U.S. Networks' operating income for the second quarter of 2016 was $378.4 million, an increase of 1.1%. U.S. Networks' adjusted segment profit(1) was $404.9 million, an increase of 1.1%. This improvement reflects the increase in advertising revenues, offset by an increased investment in programming.

International Networks' operating revenues for the second quarter of 2016 were $147.0 million compared with $22.1 million in the prior-year quarter. International Networks' operating income was $18.6 million, and adjusted segment profit(1) was $37.4 million in the second quarter of 2016 compared with operating losses of $13.1 million and adjusted segment losses(1) of $10.1 million in the second quarter of 2015, primarily due to the inclusion of TVN.

Corporate and Other included an operating loss of $24.1 million compared with a loss of $29.3 million in the prior-year quarter. Corporate and Other adjusted segment loss(1) was $22.9 million, compared with an adjusted segment loss(1) of $22.4 million in the prior-year second quarter.

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

Guidance
All guidance is based on current management expectations for consolidated company performance. Based on results seen to date, the company is reiterating all of its previously issued guidance.

Conference Call Information
The senior management team of Scripps Networks Interactive will discuss the company's second quarter 2016 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 800-230-1059 (U.S.) or 612-288-0337 (international) approximately ten minutes before the start of the call. Callers will need the name of the call, "SNI Second Quarter Earnings Report," and must provide their name and company affiliation. The media and general public may access the conference call on a listen-only basis.

A replay line will be open from 12 p.m. on August 9 until 11:59 p.m. ET on August 23. 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 396788.

A replay of the conference call will also be available online. To access the audio replay online, visit

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