April 6, 2017
VIA EDGAR
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Attention: Carlos Pacho, Senior Assistant Chief Accountant
Re: Scripps Networks Interactive, Inc.
Form 10-K for Fiscal Year Ended December 31, 2016
Filed February 24, 2017
File No. 001-34004
Ladies and Gentlemen:
Scripps Networks Interactive, Inc. (“SNI”, or the “Company”) hereby responds to the comments of the staff (the “Staff”) of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (the “SEC”) contained in your letter dated March 24, 2017 (the “Comment Letter”) regarding SNI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (the “2016 Form 10-K”). For the convenience of the Staff, we have set forth below the comments contained in the Comment Letter followed by SNI’s response.
Form 10-K for the fiscal year ended December 31, 2016
Selected Financial Data, page 22
COMMENT:
| 1. | Given that total segment profit is a non GAAP measure, its presentation on the face of the income statement is not appropriate. Refer to Question 104.04 of the Compliance and Disclosure Interpretations issued on May 17, 2016 and to Item 10(e)(1)(ii) of the Regulation S-K. Please revise. |
RESPONSE TO COMMENT 1
The Company has reviewed Item 10(e)(1)(ii) of Regulation S-K with respect to the guidance in Question 104.04 of the Compliance and Disclosure Interpretations on non GAAP financial measures. Although total segment profit, a non GAAP measure, was not presented on the face of the income statement, it was presented within the Selected Financial Data table. The Company agrees to modify its Selected Financial Data table to exclude total segment profit in future filings. The Company proposes the following presentation beginning in its next Annual Report on Form 10-K (using data for the fiscal year ended December 31, 2016):
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Five-Year Financial Highlights |
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| Year ended December 31, |
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(in thousands, except per share data and cash dividends) | 2016 |
| 2015 |
| 2014 |
| 2013 |
| 2012 |
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Summary of Operations |
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Operating revenues: |
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U.S. Networks | $ | 2,871,424 |
| $ | 2,716,663 |
| $ | 2,588,357 |
| $ | 2,466,061 |
| $ | 2,257,625 |
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International Networks |
| 557,052 |
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| 327,891 |
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| 90,180 |
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| 75,677 |
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| 49,444 |
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Corporate and Other |
| (27,041 | ) |
| (26,327 | ) |
| (13,081 | ) |
| (10,929 | ) |
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Total operating revenues | $ | 3,401,435 |
| $ | 3,018,227 |
| $ | 2,665,456 |
| $ | 2,530,809 |
| $ | 2,307,182 |
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Net income attributable to SNI common shareholders | $ | 673,595 |
| $ | 606,828 |
| $ | 545,275 |
| $ | 505,070 |
| $ | 681,478 |
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Per Share Data |
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Net income attributable to SNI common shareholders per share of common stock |
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Basic | $ | 5.20 |
| $ | 4.68 |
| $ | 3.86 |
| $ | 3.43 |
| $ | 4.48 |
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Diluted | $ | 5.18 |
| $ | 4.66 |
| $ | 3.83 |
| $ | 3.40 |
| $ | 4.44 |
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Cash dividends declared | $ | 1.00 |
| $ | 0.92 |
| $ | 0.80 |
| $ | 0.60 |
| $ | 0.48 |
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Balance Sheet Data |
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Total assets | $ | 6,200,294 |
| $ | 6,672,314 |
| $ | 4,657,481 |
| $ | 4,438,447 |
| $ | 4,138,798 |
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Total debt | $ | 3,202,386 |
| $ | 4,010,272 |
| $ | 2,369,254 |
| $ | 1,384,488 |
| $ | 1,384,216 |
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29. Segment Information, page 91
COMMENT:
| 2. | We note that you reconcile your segment measure of profit or loss, Segment Profit (Loss), to total consolidated operating income. Please revise to reconcile this measure to consolidated income from operations before income taxes in accordance with ASC 280-10-50-30. |
RESPONSE TO COMMENT 2
The Company had considered the guidance in ASC 280-10-50-30 prior to filing the 2016 Annual Report on Form 10-K by disclosing a narrative description of those items excluded from operating income that are included within income (loss) from operations before income taxes. In response to the Staff’s comment, the Company will reconcile segment profit (loss) to income (loss) from operations before income taxes in future filings. The Company proposes the following presentation beginning in its next Quarterly Report on Form 10-Q (using data for the three months ended March 31, 2016):
| Three months ended March 31, 2016 |
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(in thousands) |
| U.S. Networks |
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| International Networks |
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| Corporate and Other |
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| Consolidated |
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Operating revenues: |
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Advertising |
| $ | 487,285 |
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| $ | 84,570 |
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| $ | — |
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| $ | 571,855 |
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Distribution |
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| 202,096 |
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| 25,972 |
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| — |
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| 228,068 |
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Other |
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| 12,814 |
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| 10,796 |
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| (6,655 | ) |
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| 16,955 |
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Total operating revenues |
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| 702,195 |
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| 121,338 |
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| (6,655 | ) |
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| 816,878 |
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Cost of services, excluding depreciation and amortization |
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| 203,359 |
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| 81,058 |
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| (4,750 | ) |
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| 279,667 |
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Selling, general and administrative |
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| 139,339 |
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| 30,491 |
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| 28,991 |
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| 198,821 |
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Segment profit |
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| 359,497 |
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| 9,789 |
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| (30,896 | ) |
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| 338,390 |
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Depreciation |
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| 14,195 |
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| 2,841 |
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| 261 |
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| 17,297 |
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Amortization |
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| 10,021 |
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| 21,041 |
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| — |
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| 31,062 |
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Operating income (loss) |
| $ | 335,281 |
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| $ | (14,093 | ) |
| $ | (31,157 | ) |
| $ | 290,031 |
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Interest expense, net |
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| (17 | ) |
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| (6,867 | ) |
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| (26,861 | ) |
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| (33,745 | ) |
Equity in earnings of affiliates |
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| 7,732 |
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| 17,946 |
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| — |
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| 25,678 |
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Gain on derivatives |
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| — |
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| — |
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| 2,766 |
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| 2,766 |
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Gain on sale of investments |
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| 208,197 |
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| — |
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| — |
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| 208,197 |
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Miscellaneous, net |
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| 3,487 |
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| 31,058 |
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| (28,479 | ) |
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| 6,066 |
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Income from operations before income taxes |
| $ | 554,680 |
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| $ | 28,044 |
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| $ | (83,731 | ) |
| $ | 498,993 |
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Additions to property and equipment: |
| $ | 8,671 |
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| $ | 2,674 |
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| $ | — |
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| $ | 11,345 |
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*****
We appreciate your time and attention to this matter. If you would like to discuss our response, please let us know. In the meantime, should you need any further information, please contact Lori Hickok, Chief Financial Officer, by phone at (865) 560-4036 or by email at lhickok@scrippsnetworks.com.
Very truly yours,
/s/ Lori A. Hickok
Lori A. Hickok
Chief Financial Officer
