CINCINNATI, Oct. 29 /PRNewswire-FirstCall/ -- Scripps Networks InteractiveInc. (NYSE: SNI) today reported third-quarter operating results, reflectingsolid revenue growth at its lifestyle television networks and onlinecomparison shopping services.
The company's consolidated third-quarter net income was $57.3 million, or35 cents a share, compared with $57.9 million, or 35 cents a share for thesame period in 2007. For comparison purposes, third-quarter 2007 resultsinclude an estimate of Scripps Networks Interactive's portion of The E. W.Scripps Company's corporate expenses.
On July 1, Scripps Networks Interactive was spun off from E. W. Scripps asa separate publicly traded company. Charges related to the spin-off reducednet income by $9.2 million, or 6 cents a share, in the third quarter. (SeeNote 1 to results of operations for a description of the transition charges.)
Scripps Networks Interactive's consolidated third-quarter revenueincreased 8.9 percent to $375 million compared with $344 million during thesame period a year ago.
Consolidated earnings for the three-month period ending Sept. 30 includeoperating results from the company's Lifestyle Media segment, which includesHGTV, Food Network, DIY Network, Fine Living Network, Great American Countryand a growing portfolio of related lifestyle brands that deliver content onthe Internet and mobile media platforms, and its Interactive Services segment,which includes online comparison shopping brands Shopzilla and uSwitch.
Third-quarter revenue for the Lifestyle Media segment grew 7.8 percentyear over year to $312 million. Segment profit increased 5.1 percent to $144million. (See Note 2 to results of operations for a definition of segmentprofit.)
Lifestyle Media financial performance was favorably affected during thethird quarter by increased television advertising sales, strong viewershiptrends and growth in overall affiliate fee revenue.
Revenue for the Interactive Services segment grew 14.7 percent to $62.6million. Segment profit was $12.8 million compared with $8.7 million duringthe same period a year earlier.
The growth at Interactive Services is attributable to increased usertraffic and higher referral fee revenue at Shopzilla, and an increase inenergy switching activity during the period in the United Kingdom for uSwitch.
"Even in a challenging economic environment, Scripps Networks Interactivedelivered a solid third quarter," said Kenneth W. Lowe, chairman, presidentand chief executive officer. "The momentum we've created at our nationallifestyle networks sustained our continued growth and it appears likely thatit will carry us across the finish line for the full year, fulfilling theexpectations we set 12 months ago.
"The company's fundamentals were strong during the period with respectablead sales growth and positive viewership trends," Lowe said. "We continue tobuild our dominance in the food and shelter categories and engage audienceswith original, quality television programming and online content.
"Prime-time viewership at Food Network was the highest in the network'shistory during the quarter, with solid gains among younger viewers," Lowesaid. "DIY Network's prime time audience reached all-time highs, and FineLiving viewership is growing nicely as we set the stage for the networkbecoming a Nielsen-rated service in January. We're also seeing the benefits ofimproved HGTV affiliate sales agreements and growing household distributionfor DIY and Fine Living.
"At Interactive Services, Shopzilla performed exceptionally well in itsemerging European markets while holding the line in an increasingly difficultretail shopping environment in the United States. And at uSwitch, increasedenergy switching activity in the United Kingdom contributed to the positiveresults."
Here are third-quarter results by segment:
Lifestyle Media advertising revenue increased 5.4 percent to $236 million.Affiliate fee revenue was $69.9 million, up 15.6 percent.
Programming, marketing and other expenses increased 8.0 percent to $129million. Employee costs were up 22 percent to $44.4 million. Expense growthduring the period is attributable in part to an expansion of the company'sinteractive content services and accelerated marketing and promotion spendingat Food Network, DIY Network and Fine Living.
Lifestyle Media segment profit was $144 million, up 5.1 percent from $137million in the prior-year period.
Operating revenue at HGTV was up 5.1 percent to $143 million. HGTV nowreaches more than 97 million domestic subscribers compared with about 96million at the end of the third quarter 2007.
Food Network operating revenue increased 8.8 percent to $113 million. FoodNetwork reaches more than 97 million domestic subscribers, up from about 96million at the end of the third quarter 2007.
Revenue at DIY Network was $16.0 million, up 28.3 percent. DIY can be seenin about 48 million households, up from about 47 million households a yearago.
Fine Living revenue increased 24.0 percent to $12.9 million. Fine Livingreaches nearly 52 million households vs. 49 million households last year.
Revenue at Great American Country was $5.9 million vs. $6.1 million,year-over-year. Great American Country can be seen in about 54 million homescompared with about 51 million homes a year ago.
SN Digital revenue grew 7.4 percent to $19.1 million. SN Digital is thesegment's multi-platform programmer of interactive content in the home, foodand quality living categories. SN Digital brands include HGTV.com,FoodNetwork.com, DIYNetwork.com, FineLiving.com, GACTV.com, Recipezaar.com,HGTVPro.com, FrontDoor.com and Ecologue.com.
Interactive Services revenue was up 14.7 percent to $62.6 million for thethird quarter compared with $54.6 million in the third quarter 2007. BothShopzilla and uSwitch achieved double-digit revenue growth in the quarter.
Segment profit for Interactive Services was up 47.1 percent to $12.8million compared with $8.7 million in the third quarter of 2007.
The company currently anticipates that fourth quarter total revenue forLifestyle Media will be up mid-single digits, year over year. Expenses areexpected to be up mid- to high-single digits as the company continues toinvest in its interactive content businesses and expand internationally.
Interactive Services, which includes Shopzilla and uSwitch, is expected togenerate segment profit of about $16 to $18 million in the fourth quarter.
Fourth-quarter earnings per share from continuing operations, excludingtransition-related charges, are expected to be between 50 to 52 cents.Excluding a non-cash impairment charge that was recorded for uSwitch, earningsper share from continuing operations during the fourth quarter of 2007 were 50cents.
The company also provided its fourth-quarter forecast for other items asfollows:
-- Corporate expenses: $10 to $12 million in the fourth quarter, excludingcosts related to the spinoff.
-- Minority interest: $25 to $26 million. -- Capital expenditures: About $30 million. -- Tax rate: 33 to 34 percent.
The senior management team at Scripps Networks Interactive will discussthe company's third quarter results during a telephone conference call at 10a.m. EDT today. Scripps Networks Interactive will offer a live audio webcastof the conference call. To access the webcast, visitwww.scrippsnetworksinteractive.com choose "Investor Relations," and look forthe "Upcoming Events" section.
To access the conference call by telephone, dial 1-800-762-7308 (U.S.) or480-629-9025 (international) approximately 10 minutes before the start of thecall. Callers will need the name of the call ("third quarter earnings report")to be granted access. Callers also will be asked to provide their name andcompany affiliation. The media and general public are granted access to theconference call on a listen-only basis.
A replay line will be open from 12 p.m. EDT Oct. 29 until 11:59 p.m. ESTNov. 5. The domestic number to access the replay is 1-800-475-6701 and theinternational number is 1-320-365-3844. The access code for both numbers is965371.
A replay of the conference call will be archived and available online foran extended period of time following the call. To access the audio replay,visit www.scrippsnetworksinteractive.com approximately four hours after thecall, choose "Investor Relations," then follow the "Audio Archives" link onthe left side of the page.
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 June 11,2008, with the Securities and Exchange Commission, and on page F-15 of itsmost recent Form 10Q.
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. is the leading developer oflifestyle-oriented content for television and the Internet, where on-airprogramming is complemented with online video, social media areas ande-commerce components on companion Web sites and broadband vertical channels.The company's media portfolio includes: Lifestyle Media, with popularlifestyle television and Internet brands HGTV, Food Network, DIY Network, FineLiving Network and country music network Great American Country (GAC); andInteractive Services, with leading online search and comparison shoppingservices, Shopzilla and uSwitch.
SCRIPPS NETWORKS INTERACTIVE, INC. RESULTS OF OPERATIONS (in thousands, except per share data) Three months ended Nine Months ended September 30, September 30, 2008 2007 Change 2008 2007 Change Operating revenues $374,711 $343,976 8.9% $1,179,117 $1,043,548 13.0% Costs and expenses (239,677) (210,028) 14.1% (709,432) (638,324) 11.1% Depreciation and amortization of intangible assets (18,635) (20,226) (7.9)% (54,602) (64,744) (15.7)% Gains (losses) on disposal of PP&E (368) (835) (632) 32.1% Operating income 116,399 113,343 2.7% 414,248 339,848 21.9% Interest expense (1,569) (8,810)(82.2)% (12,679) (29,108) (56.4)% Equity in earnings of affiliates 5,418 3,613 50.0% 14,177 12,135 16.8% Gains (losses) on repurchases of debt 928 (26,380) 1,245 Miscellaneous, net 917 573 60.0% 2,186 Income from continuing operations before income taxes and minority interest 121,165 109,647 10.5% 389,366 326,306 19.3% Provision for income taxes (44,517) (34,216) 30.1% (146,241) (101,328) 44.3% Income from continuing operations before minority interest 76,648 75,431 1.6% 243,125 224,978 8.1% Minority interest (19,321) (17,974) 7.5% (66,021) (56,809) 16.2% Income from continuing operations 57,327 57,457 (0.2)% 177,104 168,169 5.3% Income from discontinued operations, net of tax 441 4,223 Net income $57,327 $57,898 (1.0)% $177,104 $172,392 2.7% Net income per diluted share of common stock (1): Income from continuing operations $0.35 $0.35 $1.08 $1.03 Income from discontinued operations 0.00 0.00 0.00 0.03 Net income per diluted share of common stock $0.35 $0.35 $1.08 $1.05 Weighted average diluted shares outstanding (1) 164,472 163,466 164,472 163,466
For comparison purposes third quarter 2007 results include an estimate ofScripps Networks Interactive's portion of The E.W. Scripps Company's prioryear corporate expenses. Such estimate may not be representative of costs wewill incur as a stand-alone company.
(1) For the quarter and year-to-date periods of 2007, diluted EPS wascomputed using the number of common shares outstanding on the spin-off-date.
Net income per share amounts may not foot since each is calculatedindependently.
See notes to results of operations. Notes to Results of Operations 1. OTHER CHARGES AND CREDITS Net income was affected by the following:
2008 - As a result of the distribution of Scripps Networks Interactive,Inc. ("SNI") to the shareholders of The E. W. Scripps Company ("E. W.Scripps"), SNI employees holding share-based equity awards, including shareoptions and restricted shares, have received modified awards in our Company'sstock. Under Financial Accounting Standard ("FAS") 123(R), the adjustment tothe outstanding share based equity awards is considered a modification andincremental share-based compensation expense is recognized to the extent thatthe fair value of the awards immediately prior to the modification is lessthan the fair value of the awards immediately after the modification. In thethird quarter of 2008, we recorded a non-cash charge of $4.9 million relatedto the modification of these stock-based awards. Net income was reduced by$3.2 million, $.02 per share.
In connection with the separation of the Company from E. W. Scripps, ourdeferred tax balances were re-measured to reflect the enacted state tax rateswe expect to apply as a stand-alone company. The re-measurement of ourdeferred tax liability balances resulted in a one-time charge to our taxprovision in the third quarter of 2008 that reduced net income by $4.5million, $.03 per share and increased our quarterly effective tax rate by 3.7percent.
In the second quarter of 2008, E. W. Scripps redeemed their outstandingnotes which were previously allocated to us in our combined financialstatements. The associated loss on extinguishment from such redemption, whichis not expected to be deductible for income tax purposes, has been allocatedto us in our statement of operations resulting in a reduction to year-to-datenet income of $26.4 million, $.16 per share.
2007 - Due to changes in a distribution agreement at our Shopzillabusiness, we wrote down intangible assets during the first quarter of 2007 toreflect that certain components of the contract were not continued. Thisresulted in a charge to amortization of $5.2 million that reduced year-to-datenet income $3.3 million, $.02 per share.
Shopzilla also incurred $5.0 million related to a transition in leadershipin the first quarter of 2007. Year-to-date net income was reduced $3.2million, $.02 per share.
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 owns and operates five national television networks,Internet businesses and other electronic content services primarily in theUnited States. Lifestyle Media also includes a 7.25% interest in FOX-BRVSouthern Sports Holdings, which comprises the Sports South and Fox Sports NetSouth regional television networks. Our networks also operate internationallythrough licensing agreements and joint ventures with foreign entities.
Interactive Services includes our online comparison shopping services,Shopzilla and uSwitch. Shopzilla operates a product comparison shoppingservice that helps consumers find products offered for sale on the Web byonline retailers. Shopzilla also operates BizRate, a Web-based consumerfeedback network which collects millions of consumer reviews of stores andproducts each year. uSwitch operates an online comparison service that helpsconsumers compare prices and arrange for the purchase of a range of essentialhome services including gas, electricity, home phone, broadband providers andpersonal finance products, primarily in the United Kingdom.
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 United States of America.
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 Nine months ended September 30, September 30, 2008 2007 Change 2008 2007 Change Segment operating revenues: Lifestyle Media $312,000 $289,376 7.8% $972,059 $867,003 12.1% Interactive Services 62,625 54,589 14.7% 206,972 176,545 17.2% Corporate 86 86 Total operating revenues $374,711 $343,965 8.9% $1,179,117 $1,043,548 13.0% Segment profit (loss): Lifestyle Media $144,393 $137,434 5.1% $471,286 $430,014 9.6% Interactive Services 12,783 8,665 47.5% 48,815 15,071 Corporate (16,724) (8,549) 95.6% (36,239) (27,726) 30.7% Depreciation and amortization of intangibles (18,635) (20,226) (7.9)% (54,602) (64,744) (15.7)% Gain (losses) on disposal of PP&E (368) (835) (632) 32.1% Interest expense (1,569) (8,810) (82.2)% (12,679) (29,108) (56.4)% Gains (losses) on repurchases of debt 928 (26,380) 1,245 Miscellaneous, net 917 573 60.0% 2,186 Income from continuing operations before income taxes and minority interests $121,165 $109,647 10.5% $389,366 $326,306 19.3%
Certain items required to reconcile segment profitability to consolidatedresults of operations determined in accordance with accounting principlesgenerally accepted in the United States of America are attributed toparticular business segments. Significant reconciling items attributable toeach business segment are as follows:
(in thousands) Three months ended Nine months ended September 30, September 30, 2008 2007 2008 2007 Depreciation: Lifestyle Media $5,917 $5,044 $17,931 $14,524 Interactive Services 6,904 5,399 19,766 14,219 Corporate 62 222 169 682 Total depreciation $12,883 $10,665 $37,866 $29,425 Amortization of intangibles: Lifestyle Media $1,079 $824 $2,709 $2,445 Interactive Services 4,673 8,737 14,027 32,874 Total amortization of intangibles $5,752 $9,561 $16,736 $35,319 Losses (gains) on disposal of PP&E Lifestyle Media $1 $764 $69 Interactive Services 356 552 Corporate 11 71 11 Losses (gains) on disposal of PP&E $368 $835 $632 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 Nine months ended September 30, September 30, 2008 2007 Change 2008 2007 Change Operating revenues by brand: HGTV $143,391 $136,397 5.1% $447,738 $406,775 10.1% Food Network 112,874 103,755 8.8% 358,359 314,972 13.8% DIY 16,006 12,478 28.3% 47,338 35,888 31.9% Fine Living 12,873 10,385 24.0% 39,637 31,976 24.0% GAC 5,890 6,085 (3.2)% 18,088 18,363 (1.5)% SN Digital 19,137 17,812 7.4% 56,846 53,098 7.1% Other/intersegment eliminations 1,829 2,464 4,053 5,931 Operating revenues by type: Advertising $235,523 $223,401 5.4% $742,270 $673,678 10.2% Affiliate fees, net 69,877 60,427 15.6% 206,991 176,951 17.0% Other 6,600 5,548 19.0% 22,798 16,374 39.2% Subscribers(1): HGTV 97,400 95,800 1.7% Food Network 97,500 95,600 2.0% DIY 48,300 47,700 1.3% Fine Living 51,800 49,600 4.4% GAC 54,000 50,700 6.5% (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 estimate by us.
SOURCE Scripps Networks Interactive Inc.
CONTACT: Mark Kroeger, Scripps Networks Interactive Inc.,+1-513-824-3227, firstname.lastname@example.org