Scripps Networks' Q3 net income drops 15% ahead of Discovery merger

fixer upper
HGTV, home to "Fixer Upper," was able to hang onto its No. 1 position among ad-supported cable networks for women ages 25-54 in sales prime.

Scripps Networks Interactive saw its third-quarter net income fall 15.2% to $124.1 million and its consolidated income fall 9.4% to $233.5 million due in part to merger related expenses as its Discovery tie-up progresses.

The programmer also cited higher marketing costs, higher programming costs and lower foreign currency transaction gains, partially offset by the growth in operating revenues, as culprits for its sinking income.

Third-quarter operating revenues at Scripps totaled $825.5 million, up 2.8% annually. Within that total, advertising revenues reached $567.4 million, up 2%, and distribution revenues reached $233.1 million, up 5.1%.

“At a time of rapid transformation in the media industry, we continue to execute on our strategic goals to strengthen the core business, expand our reach and monetize audiences,” said Kenneth W. Lowe, chairman, president and CEO of Scripps Networks, in a statement. “We continue to be excited to merge with Discovery Communications in an unmatched opportunity to satisfy consumers’ desires for new and innovative content and to offer more engaging experiences across the world and on emerging channels and platforms.”

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Scripps’ U.S. networks revenues rose slightly to $692.4 million during the quarter, as advertising revenues fell slightly to $474.8 million and distribution revenues rose 4.7% to $203.5 million. The company said the increase was due to higher annual rates and increased OTT distribution revenues, which helped to fight off falling subscriber numbers.

U.S. networks’ operations income dropped 4.4% to $293 million and adjusted segment profit fell 5.7% to $308.6 million. Scripps pegged both declines on an expected increase in programming and marketing costs, which was slightly offset by the growth in operating revenues.

While Scripps said HGTV was able to hang onto its No. 1 position among ad-supported cable networks for women ages 25-54 in sales prime, it said the network’s ratings fell 7% for adult viewers ages 25-54 in sales prime. Food Network’s sales prime ratings for adults ages 25-54 were also down 7% but Travel Channel saw a 5% gain in its sales prime ratings for adults ages 25-54.