Q4 2016 Real-Time Call Brief

Highlights

In 2016, we reported record revenue which increased 13% to $3.4 billion.

Our consolidated advertising revenue increased 17% to $2.4 billion and U.S. networks advertising revenue increased nearly 10% surpassing $2 billion for the first time ever.

We also reported adjusted segment profit of $1.4 billion reaching a new milestone.

For Powerhouse brand HGTV 2016 was its highest rated and most watched year even, surpassing last year's record breaking ratings by 6%.

We saw positive ratings traction at Food Network in December with sales prime ratings increasing 2% for adults and 4% for women.

Travel Channel also grew its ratings 14% for the important millennial demographics, compared to the previous quarter.

Sales prime ratings increased 11% for adults 25 to 54 and 27% for women 25 to 54 versus a year ago.

Impressions delivery also was up at cooking channel improving 17% versus prior year and a great American country the fourth quarter mark the networks fourth consecutive quarter for double-digit growth with ratings up 42% and impressions up 35%.

In the fourth quarter, Scripps Lifestyle Studios achieved approximately 2.4 billion video views across all digital platform.

On average, we had 790 million video views each month in the fourth quarter, representing an 89% improvement over the third quarter of 2016.

For the entire year, Scripps Lifestyle Studios delivered more than 5 billion total video views, surpassing 2015 video views by nearly 700%.

Overall, Scripps Lifestyle Studios produced about 5,000 new content videos and that's equivalent to approximately 125 programming hours.

In January alone visitors were up 22% from December getting 2 million for the month.

And 2017 is off to a good start for the entire Scripps Lifestyle Studios team as they were 805 million video views across all digital platforms in January and that's up 6% from December.

In the fourth quarter ratings, for TVN Group improved 5% in the key 16 to 49 commercial audience.

Consolidated revenues in the fourth quarter increased 4% to $889 million.

The revenue growth along with a slight increase in programming expense first consolidated adjusted segment profit up 3%.

Our consolidated adjusted diluted earnings per share decreased to $1.02 compared with the $1.35 in the prior year.

In total, the EPS impacts on the year-over-year swings in foreign currency impact settlement was $0.51 per diluted share.

Also excluded from our fourth quarter 2016 adjusted diluted earnings per share, that included in our reported earnings per share number, was a $0.54 per share non-cash goodwill and related intangible assets write down.

These are related to the international acquisitions of TCI and the Asian Food Channel, also impacting the number was a $0.07 per share non-cash investment write-down.

Now looking at our operating segment, our U.S. Networks revenue increased 4%.

Advertising revenues increased 9% year-over-year in the fourth quarter due to CPM pricing increases combined with ratings improvement.

Scatter pricing was strong during the quarter with CPM up high-teens year-over-year and up mid to high 20% over the broadcast upfront.

Scatter versus scatter CPM pricing is up mid to high teens year-over-year and up low to mid-20s over the broadcast upfront.

Distribution revenue for the U.S. Networks decreased 3%, contributing to this expected decrease was a previously reported rate equalization impacting 2016.

Adjusted segment profit for the U.S. Networks increased 5% compared with the prior year quarter.

In local currency, the revenues increased 3% compared with the same time year ago.

On a reported basis, International Networks revenues increased 2% to $165 million.

International adjusted segment profit increased 2% to $41 million compared with the fourth quarter of 2015.

UKTV, Food Network, HGTV and DIY Network in Canada and some TVN minority investments; these international properties now comprise the majority of our equity income and in total equity and earnings of affiliates was $16 million, up from $11 million in the prior year.

We finished the fourth quarter at approximately 2.6 times gross leverage, down from 2.8 times at the end of last quarter and down to 3.2 times at the end of 2015.

Also last week, we announced for the seventh consecutive year an increase in our dividend, raising at 20% to $1.20 per share annually.

We will also continue to evaluate the opportunity to repurchase our shares under the existing Board authorized repurchased program, which has $1.5 billion remaining.

We expect 2017 revenue growth to be approximately 6%.

We should realize high single-digit percentage growth in the first half of the year and a slowdown in the second half.

For SG&A expenses and consistent with our long-term strategic focus to deliver content that is consumer on variety, our platforms devices and distribution platforms, we plan to invest an incremental $30 million to $40 million in various growth initiative.

As a result of our anticipated revenue growth partially offset by increase support cost, we expect adjusted segment profit to increase approximately 3%.

Excluding the incremental investment and future growth, we would expect adjusted segment profit to increase approximately 6% for 2016 and consistent with our revenue growth.

We expect depreciation and amortization expense to be in the range of $155 million to $160 million.

We expect interest expense to be approximately $100 million and we expect our tax rate to be in the 30% to 32% for the year.