SNI Scripps Networks Interactive, (delisted)

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K/A

(Amendment No. 1)

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): JULY 1, 2015

 

SCRIPPS NETWORKS INTERACTIVE, INC.

(Exact name of Registrant as Specified in Its Charter)

 

 

Registrant’s Telephone Number, Including Area Code: (865) 694-2700

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

 

 

 

 

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Explanatory Note

 

This amendment to Scripps Networks Interactive, Inc.’s (the “Company”) Current Report on Form 8-K filed on July 8, 2015 (the “Original Filing”) is being filed solely for the purpose of amending the Original Filing to correct certain typographical errors in the pro forma financial information included as an exhibit to the Original Filing, including interest expense, income tax provision, net income and earnings per share for the three months ended March 31, 2015 and for the year ended December 31, 2014.

Item 8.01 Other Events.

 

The annual financial statements of N-Vision, which were prepared under International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) are included in the Company’s Current Report on Form 8-K dated May 18, 2015.

 

On May 18, 2015, the Company filed a Current Report on Form 8-K to file, among other things, certain pro forma financial information of the Company relating to the Transaction.  Filed as Exhibit 99.1 hereto is REVISED pro forma financial information reflecting corrections to certain figures included in the July 8, 2015 filing.

Item 9.01 Financial Statements and Exhibits.

(b) Pro forma financial information.

The unaudited pro forma condensed combined balance sheet of Scripps Networks Interactive, Inc. as of March 31, 2015 and the REVISED unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2015 and for the year ended December 31, 2014 are filed as Exhibit 99.1 hereto

(d) Exhibits.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

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Exhibit Index

 

 

Exhibit 99.1

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined balance sheet of the Company as of March 31, 2015 gives effect to (i) the N-Vision Acquisition, (ii) the Company Financing, (iii) the N-Vision Debt Refinancing and (iv) the TVN Tender Offer, each as more fully described below, as if they each occurred as of March 31, 2015. The following unaudited pro forma condensed combined statements of operations of the Company for the three-month period ended March 31, 2015 and the year ended December 31, 2014 similarly give effect to the N-Vision Acquisition, the Company Financing, the N-Vision Debt Refinancing and the TVN Tender Offer, as if they each occurred at the beginning of the period on January 1, 2014. The N-Vision Acquisition, the Company Financing, the N-Vision Debt Refinancing and the TVN Tender Offer are collectively referred to as the “Transactions.”

The unaudited pro forma condensed combined financial information has been derived from, and should be read in conjunction with, the Company’s historical audited and interim unaudited consolidated financial statements, including the notes thereto, and N-Vision’s historical audited consolidated financial statements, including the notes thereto. The financial statements of the Company are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 and the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015. The annual financial statements of N-Vision, which were prepared under International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) are included in the Company’s Current Report on Form 8-K dated May 18, 2015. The historical interim financial information of N-Vision was derived from N-Vision’s unaudited interim consolidated financial statements which are not included or incorporated by reference herein.

The unaudited pro forma condensed combined financial information includes unaudited pro forma adjustments that are factually supportable and directly attributed to the Transactions. In addition, with respect to the unaudited pro forma condensed combined statements of operations, the unaudited pro forma adjustments are expected to have a continuing impact on the consolidated results. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed combined financial information.

The unaudited pro forma adjustments are based upon available information and certain assumptions that the Company’s management believe are reasonable. The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative of the Company’s financial position or results of operations that would have occurred had the events been consummated as of the dates indicated. In addition, the unaudited pro forma condensed combined financial information is not necessarily indicative of the Company’s future financial condition or operating results.

The N-Vision Acquisition

The N-Vision Acquisition reflects the Company’s purchase on July 1, 2015 of all the outstanding shares of N-Vision for a purchase price of approximately €584 million in cash, which equates to approximately $634 million using foreign currency exchange rates in effect as of March 31, 2015. The purchase price paid in connection with the N-Vision Acquisition was funded with available cash and cash equivalents raised in the Company Financing (as defined below). The Company also assumed approximately €865 million principal amount of debt as part of the N-Vision Acquisition, which equates to approximately $940 million of debt using foreign currency exchange rates in effect as of March 31, 2015.

The Company Financing

In order to fund the cost of the N-Vision Acquisition, the N-Vision Debt Refinancing and the TVN Tender Offer, as well as to increase the Company’s financial capacity for general corporate and working capital purposes, the Company entered into a series of financing transactions.

 

In May 2015, the Company amended its existing Revolving Credit Facility (the “Old Revolving Credit Facility”) with a group of banks to provide, among other things, for increased borrowing availability and an extended term (the “Amended Revolving Credit Facility” and collectively, the “Bank Credit Facility Financing”). The Amended Revolving Credit Facility now permits borrowings of up to $900 million from the former $650 million limit, with the option to increase the borrowing availability by an additional $250 million. Additionally, the Company extended the maturity date of the Amended Revolving Credit Facility by one year to a scheduled maturity of March 31, 2020, with the exception of $32.5 million which remains scheduled to mature on March 31, 2019. Borrowings under the Amended Revolving Credit Facility bear interest based on the Company’s credit ratings, with drawn amounts bearing interest at Libor plus 125 basis points and undrawn amounts bearing interest at 15 basis points. The Amended Revolving Credit Facility continues to contain certain affirmative and negative covenants, including a restriction on the incurrence of additional indebtedness and maintenance of a maximum leverage ratio. There are no mandatory reductions in borrowing availability throughout the term.

 

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In addition, in June 2015, the Company issued $1.5 billion aggregate principal amount of long-term debt, consisting of the following debt securities: (i) $600 million in aggregate principal amount of Senior Notes due 2020 (the “2020 Notes”) at an interest rate of 2.800%, (ii) $400 million in aggregate principal amount of Senior Notes due 2022 (the “2022 Notes”) at an interest rate of 3.500%, and (iii) $500 million in aggregate principal amount of Senior Notes due 2025 (the “2025 Notes”) at an interest rate of 3.950% (collectively, the “Public Debt Financing”). Aggregate net proceeds raised under the Public Debt Financing were approximately $1.483 billion.

Finally, in June 2015, the Company borrowed $250 million under a new, senior unsecured term loan agreement with a group of banks (the “Bank Term Loan” and collectively, the “Bank Term Loan Financing”). The Bank Term Loan is due in full upon its maturity in June 2017, but the Company has the right to prepay it, in whole or in part, at any time. The Bank Term Loan bears interest based on the Company’s credit ratings, which currently equates to an annual interest rate of Libor plus 100.0 basis points. The Bank Term Loan contains certain affirmative and negative covenants, including a restriction on the incurrence of additional indebtedness and maintenance of a maximum leverage ratio.  

The Public Debt Financing, together with both the Bank Credit Facility Financing and the Bank Term Loan Financing, are referred to herein as the “Company Financing.”

The N-Vision Debt Refinancing

The N-Vision Debt Refinancing reflects the Company’s planned redemption of over half of the outstanding indebtedness of N-Vision and its subsidiaries to be assumed in the N-Vision Acquisition (the “N-Vision Debt Refinancing”). In particular, the Company intends to redeem approximately $491 million principal amount of debt, based on foreign currency exchange rates in effect as of March 31, 2015, consisting of: (i) €110 million principal amount of Senior Notes due 2018, (ii) €43 million principal amount of Senior Notes due 2020, and (iii) €300 million principal amount of Senior PIK Toggle Notes due 2021 (collectively, the “N-Vision Assumed Debt Securities”). The aggregate redemption cost of the N-Vision Assumed Debt Securities is expected to be approximately $567 million excluding accrued interest, based on foreign currency exchange rates in effect as of March 31, 2015. The aggregate redemption cost of the N-Vision Assumed Debt Securities is expected to be funded with available cash and cash equivalents to be raised in the Company Financing, and the Company intends to fund the aggregate redemption cost by N-Vision with related intercompany loans. After the N-Vision Debt Refinancing, approximately €412 million principal amount of indebtedness will be outstanding, consisting of €387 million principal amount of Senior Notes due 2020 and a €16 million revolving credit facility.

The TVN Tender Offer

TVN is owned 52.7% by N-Vision and 47.3% through a public common-stock equity interest listed on the Warsaw Stock Exchange. Pursuant to Polish takeover law, the Company is required to commence a tender offer to the public shareholders to acquire additional TVN common shares owned by the public within three months from the closing date of the N-Vision Acquisition (the “TVN Tender Offer”), increasing the Company’s ownership in TVN to a minimum of up to 66%. The Company also has the option of increasing the TVN Tender Offer to acquire 100% of the remaining public ownership in TVN.

 

The Company’s Board of Directors has authorized management, in its discretion, to offer to purchase up to 100% of the outstanding public shares of TVN. On June 9, 2015, the Company publicly announced its intention to purchase the full 47.3% public ownership in TVN, and de-list it from the Warsaw Stock Exchange.  No price for the tender offer has been set at this time.

 

The accompanying unaudited pro forma condensed combined financial information reflects the Company’s announced intention to acquire the full 47.3% interest in TVN, and increase the Company’s aggregate ownership in TVN to 100%. As such, the purchase price for the TVN Tender Offer is expected to be approximately $852 million, based on an estimated 160.9 million shares to be acquired at an assumed purchase price of 20.00 Zloty (“PLN”) per share, translated using foreign currency exchange rates in effect as of March 31, 2015. TVN’s shares closed at 19.18 PLN on the Warsaw Stock Exchange on June 30, 2015. The Company intends to fund the TVN Tender Offer with available cash and cash equivalents raised in the Company Financing and approximately $355 million of borrowings under its Amended Revolving Credit Facility.

 

 

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Purchase Price Allocation

The N-Vision Acquisition and the TVN Tender Offer will be accounted for as business combinations using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”), which will establish a new basis of accounting for all identifiable assets acquired and liabilities assumed at fair value as of the date control is obtained. Accordingly, the cost to acquire such interests will be allocated to the underlying net assets in proportion to their respective fair values, including to the non-controlling interest in the equity of TVN held by the public and to be acquired, in whole or in part, in the TVN Tender Offer. Any excess of the purchase price over the estimated fair value of the net assets acquired will be recorded as goodwill. As more fully described in the notes to the unaudited pro forma condensed combined financial information, a preliminary allocation of the excess of cost over the fair value of net tangible assets acquired has been made to identifiable intangible assets in the amounts of approximately $70 million to finite-lived customer relationships; $300 million to indefinite-lived brands and trademarks; $55 million to finite-lived brands and trademarks; $150 million to finite-lived acquired network distribution rights; $250 million to finite-lived broadcast licenses; and $1.152 billion to goodwill. In addition, approximately $852 million was allocated to the non-controlling interest in the equity of TVN held by the public. The allocation of purchase price is preliminary at this time, and will remain as such until the Company finalizes the valuation of the net assets acquired, which is not expected to be substantially completed until the Fall of 2015. The final allocation of the purchase price is dependent on a number of factors, including the final valuation of the fair value of all tangible and intangible assets acquired and liabilities assumed as of the closing dates of the N-Vision Acquisition and the TVN Tender Offer when additional information will be available. Such final adjustments, including changes to amortizable tangible and intangible assets, may be material.

Acquisition-related transaction costs are expensed as incurred and generally include costs for legal, tax, accounting, banking, consulting and other services that are direct, incremental costs of the acquisition. The Company estimates acquisition-related transaction costs to be approximately $35 million for the N-Vision Acquisition and the TVN Tender Offer. Approximately $12 million of those transaction costs were included cumulatively in the Company’s and N-Vision’s historical financial statements for the three-month period ended March 31, 2015 and the year ended December 31, 2014. The remaining $23 million of those estimated costs will

be recorded in subsequent periods when the closing of the N-Vision acquisition and the TVN Tender Offer occur. As acquisition-related transaction costs are not expected to have a continuing impact on the combined entity, such costs have been eliminated from the unaudited pro forma condensed combined statements of operations for all periods. However, pro forma effect has been given to the incurrence of all acquisition-related transaction costs in the unaudited pro forma condensed combined balance sheet as of March 31, 2015.

The consummation of the TVN Tender Offer remains subject to the satisfaction of customary closing conditions, including the acceptance of the terms of the offer by TVN’s tendering shareholders.

Sources and Uses of Proceeds

The following table presents a summary of the expected sources and uses of proceeds from the Company Financing (in millions):

 

 

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Interest Rate Sensitivity

As of March 31, 2015, on a pro forma basis after giving effect to the N-Vision Acquisition, the Company Financing, the N-Vision Debt Refinancing and the TVN Tender Offer, the Company would have had approximately $974 million in principal of variable-rate indebtedness. As such, the Company’s financing costs are sensitive to changes in interest rates. For each 0.125% increase or decrease in interest rates, the Company’s annual interest expense would increase or decrease by approximately $1.2 million, and net income would decrease or increase, respectively, by approximately $0.8 million.

 

 

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Scripps Networks Interactive, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet

March 31, 2015

 

 

 

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Scripps Networks Interactive, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

Three Months Ended March 31, 2015

 

 

 

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Scripps Networks Interactive, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

Year Ended December 31, 2014

 

 

 

 

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Notes to the Unaudited Pro Forma Condensed Combined Financial
Information

The adjustments to conform financial information from IFRS to US GAAP reflect the de-recognition of certain liabilities and costs and related tax consequences recorded by N-Vision in anticipation of the closing of the N-Vision Acquisition, which would not be recognized under US GAAP until the closing of the N-Vision Acquisition actually occurs.

The reclassifications to conform to the Company’s basis of presentation have no effect on the net equity of N-Vision and primarily relate to (i) reclassifications of non-current deferred tax assets to a current deferred tax asset designation based on the application of US GAAP and when such assets are expected to be realized, (ii) reclassifications of certain assets classified as intangible assets to property and equipment, and (iii) the reclassification of interest payables and debt-issuance costs classified within debt to other current and non-current assets and liability accounts.

 

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A reconciliation of N-Vision’s financial position as presented in its historical financial statements to its financial position as presented in the unaudited pro forma condensed combined balance sheet is presented below:

N-Vision B.V.

Consolidated Balance Sheet

March 31, 2015

 

 

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(i) the issuance of $1.5 billion of public debt, net of approximately $4.0 million of original    issuance discounts; and

 

(ii) borrowings of $250 million under the Bank Term Loan.

 

 

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(i)  a decrease of $854.325 million relating to the purchase price expected to be paid in connection with the TVN Tender Offer, based on the acquisition of approximately 160.9 million shares at an assumed purchase price of 20.00 PLN per share translated at a foreign currency exchange rate of 3.776 PLN per 1 USD in effect as of March 31, 2015, including the payment of $2 million of transaction-related costs, offset in part by

(ii) an increase of $354.673 million relating to borrowings under the Amended Revolving Credit Facility;

(b)   An increase in long-term debt of $354.673 million relating to borrowings under the Amended Revolving Credit Facility used to fund a portion of the purchase price; and

 

 

 

The reclassifications to conform to the Company’s basis of presentation have no effect on net income and primarily relate to (i) reclassifications of depreciation and amortization expense to separately presented line items, (ii) reclassifications of income from associates and joint ventures accounted for under the equity method from above operating income to below operating income, and (iii) the reclassification of incremental costs related to the N-Vision Acquisition to a component within selling, general and administrative expenses.

The adjustments to conform financial information from IFRS to US GAAP reflect the de-recognition of certain liabilities, costs and related tax consequences recorded by N-Vision in anticipation of the closing of the N-Vision Acquisition, which would not be recognized under US GAAP until the closing of the N-Vision Acquisition actually occurs.

 

 

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A reconciliation of N-Vision’s operating results as presented in its historical financial statements to its operating results as presented in the unaudited pro forma condensed combined statements of operations is presented below:

N-Vision B.V.

Consolidated Statement of Operations

Three Months Ended March 31, 2015

 

 

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N-Vision B.V.

Consolidated Statement of Operations

Year Ended December 31, 2014

 

 

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For the three-month period ended March 31, 2015

(iv)    an increase in interest expense of $0.625 million relating to the $250 million of borrowings under the Bank Term Loan at an interest rate of 1.000%;

For the year ended December 31, 2014

(iv)    an increase in interest expense of $2.500 million relating to the $250 million of borrowings under the Bank Term Loan at an interest rate of 1.000%;

 

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For the three-month period ended March 31, 2015

 

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For the year ended December 31, 2014

 

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For the three-month period ended March 31, 2015

(a)   A net increase in interest expense of $1.135 million consisting of:

(i) an increase of $1.268 million relating to the $354.673 million of borrowings under the Amended Revolving Credit Facility at an interest rate of 1.43%, partially offset by

(ii) a decrease of $0.133 million relating to a reduction in annual commitment fees payable on lower availability associated with the $354.673 million of borrowings under the Amended Revolving Credit Facility at a 0.15% rate.

(b)  A decrease of $13.425 million in net income attributable to non-controlling interests as the 47.3% non-controlling interest in TVN is expected to be purchased by the Company; and

(c)  A decrease in the provision for income taxes of $0.431 million related to the $1.135 million aggregate effect on pretax income from the aforementioned pro forma adjustments, at an effective statutory tax rate of 38%.

For the year ended December 31, 2014

(a)   A net increase in interest expense of $4.469 million consisting of:

(i) an increase of $5.001 million relating to the $354.673 million of borrowings under the Amended Revolving Credit Facility at an interest rate of 1.41%, partially offset by

(ii) a decrease of $0.532 million relating to a reduction in annual commitment fees payable on lower availability associated with the $354.673 million of borrowings under the Amended Revolving Credit Facility at a 0.15% rate.

(b)  A decrease of $23.468 million in net income attributable to non-controlling interests as the 47.3% non-controlling interest in TVN is expected to be purchased by the Company; and

(c)  A decrease in the provision for income taxes of $1.654 million related to the $4.469 million aggregate effect on pretax income from the aforementioned pro forma adjustments, at an effective statutory tax rate of 37%.