09 February 2012
  • Revenues of $553 million, up 10 percent
  • Segment profit of $257 million, up 14 percent
  • Income from continuing operations of $0.84, compared with $0.73 in the prior year

KNOXVILLE, Tenn.--(BUSINESS WIRE)--Feb. 9, 2012-- Scripps Networks Interactive Inc. (NYSE: SNI) today reported operating results for the fourth quarter 2011.

Consolidated revenues for the quarter increased 10 percent to $553 million from the prior-year period. Results for the three-month period ended Dec. 31 reflect strong double-digit growth in advertising revenue of $394 million, up 11 percent, and affiliate fee revenue of $147 million, up 5.7 percent year-over-year.

Consolidated expenses for the quarter increased 6.1 percent from the prior-year period to $296 million. The increase was attributable to higher programming amortization expense and fees related to the company's investment in the UKTV partnership.

Fourth-quarter segment profit for the company increased to $257 million, up 14 percent compared with the fourth quarter 2010. (See note 3 for a definition of segment profit).

Fourth-quarter income from continuing operations attributable to Scripps Networks Interactive was $135 million, or $0.84 per share, compared with $123 million, or $0.73 per share, in the fourth quarter 2010.

"The high level of engagement our focused lifestyle networks have created with media consumers, and the value our television and interactive brands deliver to advertisers as preferred marketing platforms, is reflected in the company's strong fourth-quarter operating results," said Kenneth W. Lowe, chairman, president and chief executive officer of Scripps Networks Interactive. "Our consistent track record of double-digit revenue and segment profit growth continued during the three-month period, and contributed to a very good 2011."

Revenues by network are as follows:

  • Food Network, $204 million, up 15 percent.
  • HGTV, $191 million, up 8.1 percent.
  • Travel Channel, $67.2 million, down 1.4 percent.
  • DIY Network, $26.9 million up 18 percent.
  • Cooking Channel, $17.8 million, up 14 percent.
  • Great American Country (GAC), $6.6 million, down 15 percent.

Revenue from the Lifestyle Media segment's digital businesses, which includes its network-branded Web sites, was $30.4 million, up 4.1 percent.

Full-year Results

Consolidated operating revenue in 2011 was $2.1 billion, up 10 percent from the prior year. Advertising revenue was $1.4 billion, up 11 percent from the prior year. Affiliate fee revenue was $589 million, up 6.1 percent from the prior year.

Segment profit increased to $977 million, up 17 percent from the prior year.

Consolidated income from continuing operations attributable to Scripps Networks Interactive was $473 million, or $2.86 per share compared with $398 million, or $2.37 per share from the prior year.

2012 Full-year Guidance

The company provided the following outlook for 2012.

Total revenue is expected to increase 8 percent to 10 percent.

Programming expenses are expected to increase 13 percent to 15 percent to help drive increased viewership across all of the company's networks.

Non-programming expenses are expected to increase 10 to 12 percent. This increase is related to the company's marketing strategy to increase viewership across its networks. It also includes accelerated investments in developing international, interactive and digital businesses.

Other items

  • Depreciation and amortization, $100 million to $110 million.
  • Interest expense, $45 million to $50 million.
  • Effective tax rate, 30 percent to 32 percent.
  • Noncontrolling share of net income, $170 million to $180 million.
  • Capital expenditures, $60 million to $70 million.

Conference call

The senior management team of Scripps Networks Interactive will discuss the company's fourth quarter results during a telephone conference call at 10 a.m. EST today. Scripps Networks Interactive will offer a live webcast of the conference call. To access the webcast, visit www.scrippsnetworksinteractive.com and follow the Investor Relations link at the top of the page. The webcast link can be found next to the microphone icon.

To access the conference call by telephone, dial 800-230-1951 (U.S.) or 612-332-0335 (international) approximately ten minutes before the start of the call. Callers will need the name of the call, "Fourth Quarter Earnings Call," to be granted access. Callers also will be asked to provide their name and company affiliation. The media and general public are granted access to the conference call on a listen-only basis.

A replay line will be open from 12:30 p.m. EST Feb. 9 until 11:59 p.m. EST Feb. 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 233451. A replay of the conference call will also be available online. To access the audio replay, visit www.scrippsnetworksinteractive.com approximately four hours after the call, choose Investor Relations then follow the Audio Archives link on the left side of the page.

Forward-looking statements

This press release contains certain forward-looking statements related to the company's businesses that are based on management's current expectations. Forward-looking statements are subject to certain risks, trends and uncertainties, including changes in advertising demand and other economic conditions that could cause actual results to differ materially from the expectations expressed in forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. The company's written policy on forward-looking statements can be found on page F-3 of its 2010 Form 10-K filed with the Securities and Exchange Commission.

The company undertakes no obligation to publicly update any forward-looking statements to reflect events or circumstances after the date the statement is made.

About Scripps Networks Interactive

Scripps Networks Interactive is one of the leading developers of lifestyle-oriented content for television and the Internet, where on-air programming is complemented with online video, social media areas and e-commerce components on companion websites and broadband vertical channels. The company's media portfolio includes popular lifestyle television and Internet brands HGTV, Food Network, Travel Channel, DIY Network, Cooking Channel and country music network Great American Country.

 
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)   Three months ended     Twelve months ended  
December 31, December 31,
(in thousands, except per share data)     2011     2010   Change       2011     2010   Change
   
Operating revenues $ 553,489 $ 505,291 9.5 % $ 2,072,048 $ 1,882,693 10.1 %
Costs and expenses (296,030) (279,073) 6.1 % (1,094,767) (1,047,553) 4.5 %

Depreciation and amortization of intangible assets

(23,609) (21,747) 8.6 % (90,080) (91,351) (1.4)%

Gains (losses) on disposal of property and equipment

   

(666)

    (250)           (603)     (1,511)   (60.1)%
 
Operating income 233,184 204,221 14.2 % 886,598 742,278 19.4 %
Interest expense (9,773) (8,621) 13.4 % (36,121) (35,167) 2.7 %
Equity in earnings of affiliates 20,094 8,644 49,811 30,126 65.3 %
Miscellaneous, net     6,316     (922)           (17,188)     (1,576)    
 

Income from continuing operations before income taxes

249,821 203,322 22.9 % 883,100 735,661 20.0 %
Provision for income taxes     (71,586)     (55,388)   29.2 %       (246,452)     (219,427)   12.3 %
 

Income from continuing operations, net of tax

178,235 147,934 20.5 % 636,648 516,234 23.3 %

Income (loss) from discontinued operations, net of tax

  -     7,451           (61,252)     12,775    
 
Net income 178,235 155,385 14.7 % 575,396 529,009 8.8 %

Net income attributable to noncontrolling interests

    (43,234)     (24,772)   74.5 %       (163,838)     (118,037)   38.8 %
Net income attributable to SNI   $ 135,001   $ 130,613   3.4 %     $ 411,558   $ 410,972   0.1 %
Diluted income per share:

Income from continuing operations attributable to SNI common shareholders

$ 0.84 $ 0.73 $ 2.86 $ 2.37

Income (loss) from discontinued operations attributable to SNI common shareholders

    0.00     0.04           (0.37)     0.08    

Net income attributable to SNI common shareholders per diluted share of common stock

 

$ 0.84 $ 0.77 $ 2.49 $ 2.45

Weighted average diluted shares outstanding

    160,399     169,220           165,572     168,009    
 
Net income per share amounts may not foot since each is calculated independently.
 
See notes to results of operations.
 
SCRIPPS NETWORKS INTERACTIVE, INC.
CONSOLIDATED BALANCE SHEETS
  As of
December 31,   December 31,
2011 2010
(in thousands, except per share data)     (unaudited)      
 
ASSETS
Current assets:
Cash and cash equivalents $ 760,092 $ 549,897
Accounts and notes receivable (less allowances: 2011- $5,000; 2010- $4,788) 553,022 505,392
Programs and program licenses 336,305 271,204
Assets of discontinued operations 262,268
Other current assets     66,549     82,114
Total current assets 1,715,968 1,670,875
Investments 455,267 48,536
Property and equipment, net 219,845 214,131
Goodwill 510,484 510,484
Other intangible assets, net 556,095 598,080
Programs and program licenses (less current portion) 299,089 252,522
Unamortized network distribution incentives 46,239 82,339
Other non-current assets     158,683     11,465
Total Assets   $ 3,961,670   $ 3,388,432
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 12,482 $ 9,672
Program rights payable 50,402 26,256
Customer deposits and unearned revenue 52,814 27,125
Employee compensation and benefits 49,920 47,902
Accrued marketing and advertising costs 6,838 7,277
Liabilities of discontinued operations 44,046
Other accrued liabilities     60,443     61,797
Total current liabilities 232,899 224,075
Deferred income taxes 100,002 81,960
Long-term debt 1,383,945 884,395
Other liabilities (less current portion)     148,429     117,708
Total liabilities     1,865,275     1,308,138
Redeemable noncontrolling interests     162,750     158,148
Equity:
SNI shareholders' equity:

Preferred stock, $.01 par - authorized: 25,000,000 shares; none outstanding Common stock, $.01 par:

Class A - authorized: 240,000,000 shares; issued and outstanding: 2011 - 122,828,359 shares; 2010 - 133,288,144 shares

1,228 1,332

Voting - authorized: 60,000,000 shares; issued and outstanding: 2011 - 34,317,173 shares; 2010 - 34,359,113 shares

    343     344
Total 1,571 1,676
Additional paid-in capital 1,346,429 1,371,050
Retained earnings 364,073 414,972
Accumulated other comprehensive income (loss)     (33,347)     (11,525)
Total SNI shareholders' equity 1,678,726 1,776,173
Noncontrolling interest     254,919     145,973
Total equity     1,933,645     1,922,146
Total Liabilities and Equity   $ 3,961,670   $ 3,388,432
     
SCRIPPS NETWORKS INTERACTIVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve months ended
December 31,
2011 2010
(in thousands)     (unaudited)      
Cash Flows from Operating Activities:
Net income $ 575,396 $ 529,009
Loss (income) from discontinued operations       61,252     (12,775)
Income from continuing operations, net of tax 636,648 516,234
Depreciation and intangible assets amortization 90,080 91,351
Amortization of network distribution costs 42,353 34,002
Program amortization 429,935 400,835
Equity in earnings of affiliates (49,811) (30,126)
Program payments (521,243) (393,539)
Capitalized network distribution incentives (6,872) (45,881)
Dividends received from equity investments 39,420 29,194
Deferred income taxes 34,300 (14,098)
Stock and deferred compensation plans 26,920 23,556
Changes in certain working capital accounts:
Accounts receivable (48,029) (96,974)
Other assets 628 393
Accounts payable 2,806 (16,449)
Accrued employee compensation and benefits 39 9,231
Accrued income taxes 21,497 (70,870)
Other liabilities 23,131 8,493
Other, net       (6,140)     3,227
Cash provided by (used in) continuing operating activities 715,662 448,579
Cash provided by (used in) discontinued operating activities       13,253     38,917
Cash provided (used in) by operating activities       728,915     487,496
Cash Flows from Investing Activities:
Additions to property and equipment (54,113) (54,785)
Purchase of long-term investments (402,217) (1,225)
Purchase of note receivable due from UKTV (137,308)
Purchase of noncontrolling interests (3,400) (14,400)
Other, net       1,881     1,409
Cash provided by (used in) continuing investing activities (595,157) (69,001)
Cash provided by (used in) discontinued investing activities       141,786     (22,176)
Cash provided by (used in) investing activities       (453,371)     (91,177)
Cash Flows from Financing Activities:
Proceeds from long-term debt 599,390
Payments on long-term debt (100,000)
Dividends paid (61,788) (50,080)
Dividends paid to noncontrolling interest (70,500) (111,703)
Noncontrolling interest capital contribution 52,804
Repurchase of Class A common stock (500,048)
Proceeds from stock options 24,491 65,230
Other, net       (10,075)     (4,729)
Cash provided by (used in) financing activities       (65,726)     (101,282)
Effect of exchange rate changes on cash and cash equivalents       377     490
Increase (decrease) in cash and cash equivalents 210,195 295,527
Cash and cash equivalents:
Beginning of year       549,897     254,370
End of period     $ 760,092   $ 549,897
Supplemental Cash Flow Disclosures:
Interest paid, excluding amounts capitalized $ 32,847 $ 20,011
Income taxes paid       184,114     294,702

Notes to Results of Operations

1. OTHER CHARGES AND CREDITS

UKTV - In August 2011, the Company announced that SNI would be acquiring a 50-percent equity interest in UKTV for £239 million and £100 million to acquire the outstanding preferred stock and debt due to Virgin Media, Inc. from UKTV. To minimize the cash flow volatility resulting from British Pound to U.S. dollar currency exchange rate changes, we subsequently entered into foreign currency forward contracts that effectively set the U.S. dollar value for the transaction. We settled these foreign currency exchange forward contracts around the September 30, 2011 closing of the transaction and recognized losses from the contracts totaling $25.3 million. These losses reported within the "Miscellaneous" caption in our consolidated statements of operations reduced year-to-date net income attributable to SNI $15.7 million, $.10 per share.

Operating results in 2011 include transaction related costs of $6.5 million associated with our acquisition of a 50-percent equity interest in UKTV. Net income attributable to SNI was decreased $4.0 million, $.02 per share.

Income Tax Adjustments - Our tax provision in the fourth quarter of 2011 includes a favorable tax adjustment primarily attributed to expiring statutes of limitations in certain tax jurisdictions and the related reduction of our liability for uncertain tax positions. Net income attributable to SNI was increased $10.5 million, $.07 per share. In the third quarter of 2011, we recorded $14.5 million of favorable income tax adjustments attributed to reaching agreements with certain tax authorities for positions taken in prior period returns and adjustments to foreign income items, state apportionment factors and credits reflected in our filed tax returns. These 2011 income tax adjustments increased year-to-date net income attributable to SNI by $25.0 million, $.15 per share.

During the fourth quarter of 2010, we reached agreement with certain state tax authorities on income tax positions taken in our prior period tax returns. The settlements and related reduction of our liability for uncertain tax positions provided an income tax benefit of $15.7 million in the fourth quarter, increasing net income attributable to SNI by $.09 per share. Our third quarter 2010 tax provision also included a favorable $4.3 million adjustment attributed to changes in both estimated foreign tax credits and state apportionment factors reflected in our filed tax returns. These 2010 income tax adjustments increased year-to-date net income attributable to SNI by $20.0 million, $.12 per share.

Food Network Partnership noncontrolling interest - During 2010 we completed the rebranding of the Fine Living Network ("FLN") to the Cooking Channel and subsequently contributed the membership interest of the Cooking Channel to the Food Network Partnership (the "Partnership") in August of 2010. In accordance with the terms of the Partnership agreement, the noncontrolling interest owner was required to make a pro-rata capital contribution to maintain its proportionate interest in the Partnership. At the close of our 2010 fiscal year, the noncontrolling owner had not made the required $52.8 million contribution and as a result its ownership interest in the Partnership was diluted from 31 percent to 25 percent. Accordingly, following the Cooking Channel contribution, profits were allocated to the noncontrolling owner at its reduced ownership percentage, reducing net income attributed to noncontrolling interest by $8.0 million in the fourth quarter of 2010. Net income attributable to SNI in 2010 was increased $4.7 million, $.03 per share.

In February 2011, the noncontrolling owner made the $52.8 million pro-rata contribution to the Partnership and its ownership interest was returned to the pre-dilution percentage as if this pro-rata contribution had been made as of the date of the Cooking Channel contribution. The retroactive impact from restoring the noncontrolling owner's interest in the Partnership increased net income attributed to noncontrolling interest $8.0 million in the first quarter of 2011. Year-to-date net income attributable to SNI in 2011was decreased $4.7 million, $.03 per share.

Travel Channel and other costs - Operating results in the fourth quarter of 2010 include $2.3 million of transition costs following our acquisition of a controlling interest in the Travel Channel in December of 2009. Net income attributable to SNI for the fourth quarter of 2010 was reduced $0.9 million, $.01 per share.

For the year-to-date period of 2010, these Travel Channel transition costs were $29.9 million. Year-to-date operating results in 2010 also include $11.0 million of marketing and legal expenses incurred to support the company's affiliate agreement renewal negotiations for Food Network and HGTV. These items reduced year-to-date net income attributable to SNI $17.8 million, $.11 per share.

2. DISCONTINUED OPERATIONS

During the second quarter of 2011, our Board of Directors approved the sale of our Shopzilla business and its related online comparison shopping brands. We received consideration totaling approximately $160 million upon finalizing the sale of the business on May 31, 2011. The Shopzilla business' assets, liabilities and results of operations have been retrospectively presented as discontinued operations within our consolidated financial statements for all periods.

                         
(in thousands)   Three months ended Twelve months ended
December 31,     December 31,
      2011     2010       2011     2010  
 
Operating revenues   $ -   $ 67,750     $ 87,492   $ 184,469  
 

Income (loss) from discontinued operations, before tax:

Shopzilla:
Income (loss) from operations $ - $ 12,120 $ (2,468 ) $ 4,243
Loss from divestiture     -     -       (54,827 )   -  
Total Shopzilla - 12,120 (57,295 ) 4,243
uSwitch     -     -       -     714  

Income (loss) from discontinued operations, before tax

- 12,120 (57,295 ) 4,957
Income tax expense (benefit)     -     4,669       3,957     (7,818 )

Income (loss) from discontinued operations, net of tax

  $ -   $ 7,451     $ (61,252 ) $ 12,775  

Discontinued operations in 2011 reflect a loss on divestiture of $54.8 million related to the sale of the Shopzilla business. No income tax benefit related to the capital losses attributed to the sale has been recognized. Net income attributable to SNI was decreased $.33 per share. If Shopzilla achieves certain performance targets in 2012, we will receive $5 million in contingent cash consideration.

The income tax benefit recorded in 2010 includes a reduction in the valuation allowance on the deferred tax asset resulting from the sale of our uSwitch business in December of 2009. The reduction in the valuation allowance is attributed to the partial utilization of the uSwitch capital loss against capital gains that were generated in periods prior to the Company's separation from The E. W. Scripps Company ("E. W. Scripps"). In accordance with the tax allocation agreement with E. W. Scripps, we were notified in the second quarter of 2010 that these capital gains were available for use by SNI. The income tax benefit increased income from discontinued operations $9.3 million. Net income attributable to SNI was increased $.06 per share.

3. SEGMENT INFORMATION

We determine our business segments based upon our management and internal reporting structure. Our reportable segment, Lifestyle Media, is a strategic business that offers different products and services.

Lifestyle Media includes our national television networks, HGTV, Food Network, Travel Channel, DIY Network, Cooking Channel and Great American Country ("GAC"). Lifestyle Media also includes websites that are associated with the aforementioned television brands and other Internet-based businesses serving food, home and travel related categories. The Food Network and Cooking Channel are included in the Food Network Partnership of which we own approximately 69%. We also own 65% of Travel Channel. Each of our networks is distributed by cable and satellite distributors and telecommunication service providers.

Our chief operating decision maker evaluates the operating performance of our business segments and makes decisions about the allocation of resources to our business segments using a measure we call segment profit. Segment profit excludes interest, income taxes, depreciation and amortization, divested operating units, restructuring activities, investment results and certain other items that are included in net income determined in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Refer to Note 5-Non-GAAP Financial Measures, for reconciliations to GAAP measures.

Items excluded from segment profit generally result from decisions made in prior periods or from decisions made by corporate executives rather than the managers of the business segments. Depreciation and amortization charges are the result of decisions made in prior periods regarding the allocation of resources and are therefore excluded from the measure. Financing, tax structure and divestiture decisions are generally made by corporate executives. Excluding these items from our business segment performance measure enables us to evaluate business segment operating performance for the current period based upon current economic conditions and decisions made by the managers of those business segments in the current period.

Information regarding the operating performance of our business segments and a reconciliation to our results of operations is as follows:

               
(in thousands)   Three months ended   Twelve months ended
December 31,     December 31,
      2011     2010   Change       2011     2010   Change
   
Segment operating revenues:
Lifestyle Media $ 547,867 $ 500,981 9.4 % $ 2,045,030 $ 1,867,228 9.5 %
Corporate/intersegment eliminations     5,622     4,310   30.4 %       27,018     15,465   74.7 %
 
Total operating revenues   $ 553,489   $ 505,291   9.5 %     $ 2,072,048   $ 1,882,693   10.1 %
 
Segment profit (loss):
Lifestyle Media $ 280,729 $ 247,888 13.2 % $ 1,049,934 $ 903,572 16.2 %
Corporate     (23,270)     (21,670)   7.4 %       (72,653)     (68,432)   6.2 %
 
Total segment profit 257,459 226,218 13.8 % 977,281 835,140 17.0 %

Depreciation and amortization of intangible assets

(23,609) (21,747) 8.6 % (90,080) (91,351) (1.4)%

Gains (losses) on disposal of property and equipment

(666) (250) (603) (1,511) (60.1)%
Interest expense (9,773) (8,621) 13.4 % (36,121) (35,167) 2.7 %
Equity in earnings of affiliates 20,094 8,644 49,811 30,126 65.3 %
Miscellaneous, net     6,316     (922)           (17,188)     (1,576)    
 

Income from continuing operations before income taxes

  $ 249,821   $ 203,322   22.9 %     $ 883,100   $ 735,661   20.0 %

Corporate includes the results of the lifestyle-oriented channels we operate in Europe, the Middle East, Africa and Asia, operating results from the international licensing of our national networks' programming, and the costs associated with our international expansion initiatives.

Our continued investment in international expansion initiatives increased the segment loss at corporate by $3.1 million in the fourth quarter of 2011 and $7.4 million for the year-to-date period of 2011 compared with $3.9 million in the fourth quarter of 2010 and $11.3 million for the year-to-date period of 2010.

Corporate costs in 2011 also include transaction related costs of $6.5 million that were associated with our acquisition of a 50-percent equity interest in UKTV.

4. SUPPLEMENTAL FINANCIAL INFORMATION

Our Lifestyle Media division earns revenue primarily from the sale of advertising time on our national television networks, affiliate fees paid by cable and satellite television operators that carry our network programming, the licensing of its content to third parties, the licensing of its brands for consumer products such as books and kitchenware, and from the sale of advertising on our Lifestyle Media affiliated websites.

Supplemental information for Lifestyle Media is as follows:

                       
(in thousands)   Three months ended       Twelve months ended  
December 31, December 31,
      2011     2010   Change       2011     2010   Change
   
Operating revenues by brand:
 
Food Network $ 204,066 $ 177,957 14.7 % $ 745,605 $ 663,530 12.4 %
HGTV 190,576 176,335 8.1 % 731,769 685,237 6.8 %
Travel Channel 67,174 68,102 (1.4)% 262,055 248,510 5.5 %
DIY 26,915 22,839 17.8 % 102,995 87,140 18.2 %
Cooking Channel/FLN (1) 17,829 15,656 13.9 % 65,610 55,281 18.7 %
GAC 6,581 7,735 (14.9)% 25,004 30,267 (17.4)%
Digital Businesses 30,420 29,223 4.1 % 101,890 90,216 12.9 %
Other 4,416 3,821 15.6 % 10,928 9,133 19.7 %
Intrasegment eliminations     (110)     (687)           (826)     (2,086)    
 
Operating revenues by type:
 
Advertising $ 392,615 $ 352,804 11.3 % $ 1,430,144 $ 1,287,956 11.0 %
Network affiliate fees, net 145,361 138,007 5.3 % 582,178 551,424 5.6 %
Other     9,891     10,170   (2.7)%       32,708     27,848   17.5 %
 
Subscribers (2):
 
Food Network 99,600 100,100 (0.5)%
HGTV 98,900 99,400 (0.5)%
Travel Channel 94,900 95,600 (0.7)%
DIY 56,500 53,500 5.6 %
Cooking Channel/FLN (1) 58,200 57,100 1.9 %
GAC                       62,200     59,300   4.9 %
 
(1) The Cooking Channel, a replacement for FLN, premiered on May 31, 2010.
(2) Subscriber counts are according to the Nielsen Homevideo Index of homes that receive cable networks.

5. NON-GAAP FINANCIAL MEASURES

In addition to the results prepared in accordance with GAAP provided in this release, the Company has presented segment profit. A reconciliation of segment profit to operating income determined in accordance with GAAP for each business segment is as follows:

                 
(in thousands)   Three months ended       Twelve months ended
December 31, December 31,
      2011     2010         2011     2010
   
Operating income $ 233,184 $ 204,221 $ 886,598 $ 742,278

Depreciation and amortization of intangible assets:

Lifestyle Media 23,099 21,233 88,030 89,469
Corporate 510 514 2,050 1,882
Losses (gains) on disposal of property and equipment:
Lifestyle Media 532 250 469 1,511
Corporate     134               134      
 
Total segment profit   $ 257,459   $ 226,218       $ 977,281   $ 835,140

The Company defines free cash flow as cash provided by operating activities less dividends paid to noncontrolling interests and acquisitions of property and equipment. The Company measures free cash flow as it believes it is an important indicator for management and investors as to the Company's liquidity, including its ability to reduce debt, make strategic investments and return capital to shareholders. A reconciliation of free cash flow is as follows:

             
(in thousands)   Three months ended   Twelve months ended
December 31,     December 31,
      2011     2010         2011     2010
   
 
Segment profit $ 257,459 $ 226,218 $ 977,281 $ 835,140
Income taxes paid (46,732) (81,109) (184,114) (294,702)
Interest paid (158) (256) (32,847) (20,011)
Working capital and other     (27,099)     (7,973)         (44,658)     (71,848)
 
Cash provided by continuing operating activities 183,470 136,880 715,662 448,579
Dividends paid to noncontrolling interest (11,824) (15,047) (70,500) (111,703)
Additions to property and equipment     (16,758)     (19,130)         (54,113)     (54,785)
 
Free cash flow   $ 154,888   $ 102,703       $ 591,049   $ 282,091

Since segment profit and free cash flow are non-GAAP measures, they should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance reported in accordance with GAAP.

Source: Scripps Networks Interactive Inc.

Scripps Networks Interactive Inc.
Mark Kroeger, 865-560-5007
mark.kroeger@scrippsnetworks.com
or
Mike Gallentine, 865-560-4473
m.gallentine@scrippsnetworks.com

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