The improved Lifestyle Media results, however, were offset by lowerrevenues at Shopzilla and uSwitch, the online comparison shopping brands thatcomprise the company's Interactive Services business segment.
The Lifestyle Media segment includes HGTV, Food Network, DIY Network, FineLiving Network, Great American Country and SN Digital, the segment's growingportfolio of online lifestyle content businesses.
Total company revenue for Scripps Networks Interactive for the three-monthperiod ending
The company recorded a net loss during the fourth quarter of
Excluding these non-cash impairment charges, the company's consolidatednet income for the fourth quarter 2008 was
Consolidated net income for the fourth quarter includes the effect of a
In 2007, the company recorded a non-cash charge of
For comparison purposes, prior-year results include an estimatedallocation of Scripps Networks Interactive's corporate expenses paid byThe
During the fourth quarter 2008, financial performance at the company'sLifestyle Media segment was favorably affected by growth in advertising sales,strong viewership trends, particularly at Food Network and DIY Network, andgrowth in affiliate fee revenue. Lifestyle Media revenue grew 7.0 percentduring the fourth quarter to
Revenue from the Lifestyle Media segment's SN Digital interactivebusinesses grew 12 percent during the fourth quarter to
Revenue from the company's Interactive Services business segment was
"Led by HGTV and Food Network, the company had a very good fourth quarter,especially when considering the strong macro-economic headwinds we werefacing," said
"All of our television networks grew during the three-month period, as wewere able to leverage the unique, engaged and growing audiences each brandaggregates," Lowe said. "Strong double-digit revenue growth at our newernetworks demonstrates the success we're having establishing these valuablebrands. And at SN Digital, we finished the year on a definite high note withdouble-digit revenue growth. Our resolve to be the leading provider of foodand shelter lifestyle content on any and all media platforms clearly isgaining momentum.
"At our Interactive Services businesses, fourth quarter results reflectthe weakening economy, particularly as it relates to the exposure Shopzillahas to the challenging retail spending environment and changing competitiveforces within the online comparison shopping marketplace." Lowe said."Interactive Services results also were affected by lower energy switchingactivity at uSwitch during the fourth quarter, which followed an extendedperiod of robust switching during the first three quarters of the year. Goingforward, we expect operating results at our Interactive Services segment toremain under pressure as we execute our competitive repositioning ofShopzilla."
Here are fourth-quarter results by operating segment:
Lifestyle Media advertising revenue increased 3.3 percent to
Programming expenses increased 9.7 percent to
Lifestyle Media segment profit was
Operating revenue at HGTV was up 4.2 percent to
Food Network operating revenue increased 5.1 percent to
Revenue at DIY Network was
Fine Living Network revenue increased 16 percent to
Revenue at Great American Country was
Revenue from the Lifestyle Media segment's interactive businesses(SN Digital) grew 12 percent to
Interactive Services revenue was
Segment profit was
Consolidated operating revenue in 2008 grew 10 percent to
Excluding non-cash charges, the company's consolidated net income for thefull-year 2008 was
Including the effects of non-cash charges, 2008 consolidated net incomewas
Following are full-year results by operating segment:
Total Lifestyle Media revenue increased 11 percent to
Total Interactive Services revenue increased 8.6 percent to
Total company capital expenditures were
The senior management team of Scripps Networks Interactive will discussthe company's fourth quarter results during a telephone conference call at
To access the conference call by telephone, dial 1-800-230-1951 (U.S.) or612-332-0530 (international) approximately ten minutes before the start of thecall. Callers will need the name of the call, "fourth quarter earningsreport," to be granted access. Callers also will be asked to provide theirname and company affiliation. The media and general public are granted accessto the conference call on a listen-only basis.
A replay line will be open from
This press release contains certain forward-looking statements related tothe company's businesses that are based on management's current expectations.Forward-looking statements are subject to certain risks, trends anduncertainties, including changes in advertising demand and other economicconditions that could cause actual results to differ materially from theexpectations expressed in forward-looking statements. All forward-lookingstatements should be evaluated with the understanding of their inherentuncertainty. The company's written policy on forward-looking statements can befound on page 23 of its Form 10 information statement that was filed
The company undertakes no obligation to publicly update anyforward-looking statements to reflect events or circumstances after the datethe statement is made.
About Scripps Networks Interactive
SCRIPPS NETWORKS INTERACTIVE, INC. CONSOLIDATED AND COMBINED BALANCE SHEETS (unaudited) (in thousands, except per share data) As of December 31, 2008 2007 ASSETS Current assets: Cash and cash equivalents $9,970 $12,532 Short-term investments 2,703 Accounts and notes receivable (less allowances - 2008,
$5,480; 2007, $3,945) 372,736 364,824 Programs and program licenses 238,319 212,868 Other current assets 14,296 12,533 Total current assets 638,024 602,757 Investments 40,279 38,444 Property, plant and equipment, net 201,512 173,255 Goodwill and other intangible assets: Goodwill 424,213 665,154 Other intangible assets, net 110,810 129,385 Total goodwill and other intangible assets, net 535,023 794,539 Other assets: Programs and program licenses (less current portion) 235,967 261,607 Unamortized network distribution incentives 107,796 135,367 Other non-current assets 14,607 11,858 Total other assets 358,370 408,832 Total Assets $1,773,208 $2,017,827 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $14,960 $8,010 Program rights payable 15,240 16,555 Customer deposits and unearned revenue 11,045 15,018 Accrued liabilities: Employee compensation and benefits 35,451 28,780 Accrued marketing and advertising costs 18,671 17,587 Other accrued liabilities 70,927 58,630 Total current liabilities 166,294 144,580 Deferred income taxes 140,735 115,474 Long-term debt (less current portion) 80,000 503,361 Other liabilities (less current portion) 104,239 102,626 Total liabilities 491,268 866,041 Minority interests 146,733 138,498 Shareholders' equity: Preferred stock, $.01par - authorized: 25,000,000 shares; none outstanding Common stock, $.01par: Class A - authorized: 240,000,000 shares; issued and outstanding: 127,184,107 shares for 2008; 1,272 Voting - authorized: 60,000,000 shares; issued and outstanding: 36,568,226 shares for 2008 366 Total 1,638 Additional paid-in capital 1,222,856 Retained earnings (deficit) (120,774) Parent company's net investment 971,889 Accumulated other comprehensive income 31,487 41,399 Total shareholders' equity 1,135,207 1,013,288 Total Liabilities and Shareholders' Equity $1,773,208 $2,017,827 SCRIPPS NETWORKS INTERACTIVE, INC. CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share data) Three months ended December 31, 2008 2007 Change Operating revenues $411,520 $397,717 3.5 % Costs and expenses (230,638) (210,785) 9.4 % Depreciation and amortization of intangible assets (19,335) (21,950) (11.9)% Write-down of goodwill and intangible assets (243,700) (411,006) Gains (losses) on disposal of PP&E 47 (55) Operating income (loss) (82,106) (246,079) (66.6)% Interest expense (898) (7,662) (88.3)% Equity in earnings of affiliates 1,321 5,468 (75.8)% Gains (losses) on repurchases of debt Miscellaneous, net 1,636 520 Income (loss) from continuing operations before income taxes and minority interest (80,047) (247,753) (67.7)% Provision for income taxes (47,130) (25,059) 88.1 % Income (loss) from continuing operations before minority interest (127,177) (272,812) (53.4)% Minority interest (26,370) (25,725) 2.5 % Income (loss) from continuing operations (153,547) (298,537) (48.6)% Income (loss) from discontinued operations net of tax (262) Net income (loss) $(153,547) $(298,799) (48.6)% Net income (loss) per diluted share of common stock (1): Income (loss) from continuing operations $(0.94) $(1.83) Income (loss) from discontinued operations 0.00 (0.00) Net income (loss) per diluted share of common stock $(0.94) $(1.83) Weighted average basic shares outstanding (1) 163,338 163,466 Weighted average diluted shares outstanding (1) 163,338 163,466 Twelve months ended December 31, 2008 2007 Change Operating revenues $1,590,637 $1,441,265 10.4 % Costs and expenses (940,070) (849,109) 10.7 % Depreciation and amortization of intangible assets (73,937) (86,694) (14.7)% Write-down of goodwill and intangible assets (243,700) (411,006) Gains (losses) on disposal of PP&E (788) (687) 14.7 % Operating income (loss) 332,142 93,769 Interest expense (14,207) (36,770) (61.4)% Equity in earnings of affiliates 15,498 17,603 (12.0)% Gains (losses) on repurchases of debt (26,380) 1,245 Miscellaneous, net 2,266 2,706 (16.3)% Income (loss) from continuing operations before income taxes and minority interest 309,319 78,553 Provision for income taxes (193,371) (126,387) 53.0 % Income (loss) from continuing operations before minority interest 115,948 (47,834) Minority interest (92,391) (82,534) 11.9 % Income (loss) from continuing operations 23,557 (130,368) Income (loss) from discontinued operations, net of tax 3,961 Net income (loss) $23,557 $(126,407) Net income (loss) per diluted share of common stock (1): Income (loss) from continuing operations $0.14 $(0.80) Income (loss) from discontinued operations 0.00 0.02 Net income (loss) per diluted share of common stock $0.14 $(0.77) Weighted average basic shares outstanding (1) 163,245 163,466 Weighted average diluted shares outstanding (1) 164,131 163,466 For comparison purposes, first half 2008 and year-to-date and fourth quarter 2007 results include estimates of Scripps Networks Interactive's portion of The E. W. Scripps Company'scorporate expenses for those periods. Such estimates are not representative of our costs as a stand-alone company. (1) For the quarter and year-to-date periods of 2007, diluted EPS was computed using the number of common shares outstanding on the spin-off-date. Net income per share amounts may not foot since each is calculated independently. See notes to results of operations. Notes to Results of Operations 1. OTHER CHARGES AND CREDITS Net income was affected by the following:
Write-down of goodwill and other intangible assets
In accordance with Financial Accounting Standards ("FAS") 142 and FAS 144,we perform annual impairment tests on Goodwill and also perform impairmenttests on other long-lived assets whenever events or circumstances indicate thecarrying amounts of the assets may not be recoverable. An impairment chargeis recorded when the fair value of an asset is below its carrying value.
Our fourth quarter 2008 operating results include a write-down ofShopzilla goodwill that reduced net income
During 2007, falling energy prices in the
As a result of the distribution of
In the second quarter of 2008,
Other costs incurred in connection with the separation of the Company from
Income tax adjustments
In the fourth quarter of 2007, we changed our estimate of the realizablevalue of certain uSwitch tax benefits recorded in prior periods. Net incomewas reduced by
2. SEGMENT INFORMATION
We determine our business segments based upon our management and internalreporting structure. Our reportable segments are strategic businesses thatoffer different products and services.
Lifestyle Media includes five national television networks, Internetbusinesses and other electronic content services primarily in the
Interactive Services includes our online comparison shopping services,Shopzilla, BizRate and uSwitch. Shopzilla and BizRate are product comparisonshopping services that help consumers find products offered for sale on theWeb by online retailers. Shopzilla and BizRate also operate a Web-basedconsumer feedback network which collects millions of consumer reviews ofstores and products each year. uSwitch operates an online comparison servicethat helps consumers compare prices and arrange for the purchase of a range ofessential home services including gas, electricity, home phone, broadbandproviders and personal finance products, primarily in the
Our chief operating decision maker (as defined by FAS 131, "SegmentReporting") evaluates the operating performance of our business segments usinga measure we call segment profit. Segment profit excludes interest, incometaxes, depreciation and amortization, divested operating units, restructuringactivities, investment results and certain other items that are included innet income determined in accordance with accounting principles generallyaccepted in the
Items excluded from segment profit generally result from decisions made inprior periods or from decisions made by corporate executives rather than themanagers of the business segments. Depreciation and amortization charges arethe result of decisions made in prior periods regarding the allocation ofresources and are therefore excluded from the measure. Financing, taxstructure and divestiture decisions are generally made by corporateexecutives. Excluding these items from our business segment performancemeasure enables us to evaluate business segment operating performance for thecurrent period based upon current economic conditions and decisions made bythe managers of those business segments in the current period.
Information regarding the operating performance of our business segmentsdetermined in accordance with FAS 131 and reconciliation to our results ofoperations is as follows: (in thousands) Three months ended December 31, 2008 2007 Change Segment operating revenues: Lifestyle Media $340,254 $317,898 7.0 % Interactive Services 71,435 79,819 (10.5)% Corporate Intersegment eliminations (169) Total operating revenues $411,520 $397,717 3.5 % Segment profit (loss): Lifestyle Media $176,271 $175,000 0.7 % Interactive Services 18,871 24,680 (23.5)% Corporate (12,939) (7,280) 77.7 % Depreciation and amortization of intangibles (19,335) (21,950) (11.9)% Write-down of goodwill and intangible assets (243,700) (411,006) Gains (losses) on disposal of PP&E 47 (55) Interest expense (898) (7,662) (88.3)% Gains (losses) on repurchases of debt Miscellaneous, net 1,636 520 Income (loss) from continuing operations before income taxes and minority interests $(80,047) $(247,753) (67.7)% Twelve months ended December 31, 2008 2007 Change Segment operating revenues: Lifestyle Media $1,312,313 $1,184,901 10.8 % Interactive Services 278,407 256,364 8.6 % Corporate 86 Intersegment eliminations (169) Total operating revenues $1,590,637 $1,441,265 10.4 % Segment profit (loss): Lifestyle Media $647,557 $605,014 7.0 % Interactive Services 67,686 39,751 70.3 % Corporate (49,178) (35,006) 40.5 % Depreciation and amortization of intangibles (73,937) (86,694) (14.7)% Write-down of goodwill and intangible assets (243,700) (411,006) Gains (losses) on disposal of PP&E (788) (687) 14.7 % Interest expense (14,207) (36,770) (61.4)% Gains (losses) on repurchases of debt (26,380) 1,245 Miscellaneous, net 2,266 2,706 (16.3)% Income (loss) from continuing operations before income taxes and minority interests $309,319 $78,553
Certain items required to reconcile segment profitability to consolidatedresults of operations determined in accordance with accounting principlesgenerally accepted in the
Three months ended Twelve months ended December 31, December 31, 2008 2007 2008 2007 (in thousands) Depreciation: Lifestyle Media $6,399 $5,399 $24,330 $19,923 Interactive Services 6,972 6,104 26,738 20,323 Corporate 90 320 259 1,002 Total depreciation $13,461 $11,823 $51,327 $41,248 Amortization of intangibles: Lifestyle Media $1,270 $824 $3,979 $3,269 Interactive Services 4,604 9,303 18,631 42,177 Total amortization of intangibles $5,874 $10,127 $22,610 $45,446 Losses (gains) on disposal of PP&E: Lifestyle Media $(43) $103 $721 $172 Interactive Services (3) (36) (3) 516 Corporate (1) (12) 70 (1) Losses (gains) on disposal of PP&E $(47) $55 $788 $687 Write-down of goodwill and intangible assets $243,700 $411,006 $243,700 $411,006 3. SUPPLEMENTAL FINANCIAL INFORMATION
Our Lifestyle Media division earns revenue primarily from the sale ofadvertising time in our national television networks' programming, affiliatefees paid by cable and satellite television operators that carry our networkprogramming, the licensing of its content to third parties, the licensing ofits brands for consumer products such as books and kitchenware, and from thesale of advertising on our Lifestyle Media affiliated Web sites (SN Digital).
Supplemental information for Lifestyle Media is as follows: (in thousands) Three months ended December 31, 2008 2007 Change Operating revenues by brand: HGTV $148,846 $142,866 4.2 % Food Network 127,555 121,382 5.1 % DIY 16,667 12,991 28.3 % Fine Living 12,827 11,085 15.7 % GAC 7,087 6,133 15.6 % SN Digital 25,048 22,312 12.3 % Other/intersegment eliminations 2,224 1,129 97.0 % Operating revenues by type: Advertising $263,060 $254,543 3.3 % Affiliate fees, net 70,379 58,297 20.7 % Other 6,815 5,058 34.7 % Subscribers (1): HGTV Food Network DIY Fine Living GAC Twelve months ended December 31, 2008 2007 Change Operating revenues by brand: HGTV $596,584 $549,641 8.5 % Food Network 485,914 436,354 11.4 % DIY 64,005 48,879 30.9 % Fine Living 52,464 43,061 21.8 % GAC 25,175 24,496 2.8 % SN Digital 81,894 75,410 8.6 % Other/intersegment eliminations 6,277 7,060 (11.1)% Operating revenues by type: Advertising $1,005,330 $928,221 8.3 % Affiliate fees, net 277,370 235,248 17.9 % Other 29,613 21,432 38.2 % Subscribers (1): HGTV 97,700 95,800 2.0 % Food Network 97,900 95,800 2.2 % DIY 49,400 46,900 5.3 % Fine Living 53,900 49,900 8.0 % GAC 55,100 53,100 3.8 % (1) Subscriber counts are according to the Nielsen Homevideo Index of homes that receive cable networks, with the exception of Fine Living which is not yet rated by Nielsen and represent comparable amounts estimated by us.