Scripps Networks Interactive Inc. (NYSE: SNI) today reported operating
results for the third quarter 2009.
Results for the three-month period ended Sept. 30 reflect strong
affiliate fee revenue growth and improved advertising sales at the
company’s flagship cable television networks, Food Network and HGTV.
Consolidated revenue for the quarter was flat relative to the prior year
period at $364 million. Total revenue from the company’s portfolio of
Lifestyle Media television networks, Web sites and other related
businesses was up 4.3 percent for the period compared with last year.
Consolidated expenses for the quarter decreased 4.5 percent year over
year.
Third quarter net income attributable to Scripps Networks Interactive
was $65.3 million, or 39 cents per share, compared with $57.3 million,
or 35 cents, in the third quarter 2008. In the third quarter 2008, net
income was reduced by 3 cents per share due to a $4.5 million charge
that resulted from a re-measurement of the company’s deferred tax
liabilities. The re-measurement was related to the company’s spinoff
from its former parent.
In the third quarter 2009, consolidated segment profit was up 7.9
percent to $144 million from $134 million in the prior-year period. (See
Note 2 for a definition of segment profit). The company generated $157
million in cash from continuing operations.
Led by HGTV and Food Network, revenue at the company’s Lifestyle Media
business segment grew 4.3 percent to $326 million. Lifestyle Media
advertising revenue grew slightly while affiliate fee revenue was up 16
percent on higher rates for HGTV and expanding distribution of all of
the company’s television networks.
Other television networks operated by Scripps Networks Interactive
include DIY Network, Great American Country (GAC) and Fine Living
Network (FLN). The company announced in October that it is rebranding
FLN to the new Cooking Channel. The rebranding is expected to be
completed sometime during the third quarter of 2010.
Non-programming expenses at the Lifestyle Media segment were down 3.3
percent, while programming amortization costs were up 7.0 percent. Total
expenses for the segment were up 1.2 percent for the quarter. The
company has said that it expects programming amortization expenses to
increase by 9 to 11 percent for the full year. Non-programming costs are
expected to be flat to down slightly for the year.
Lifestyle Media segment profit during the third quarter grew 8.3 percent
to $150 million from the prior year period.
Revenue from the company’s Interactive Services business segment, which
includes online comparison shopping services Shopzilla and BizRate, was
$39.0 million during the third quarter compared with $52.1 million
during the same period in 2008. The company’s initiatives to reposition
and differentiate Shopzilla’s products continue to show positive trends.
The number of product offers available to consumers has nearly doubled
since the last holiday season, and leads to Shopzilla merchant partners
in the quarter grew 19 percent year over year. The lead volume metric is
important because it measures the value Shopzilla is delivering to its
direct merchant partners, as well as the level of engagement that
consumers are having with the core content on its branded comparison
shopping Web sites at BizRate.com and Shopzilla.com.
Interactive Services expenses were down 20 percent as a result of
actions the company has taken to establish a lower cost structure for
the business.
Interactive Services segment profit was $6.4 million in the third
quarter compared with $11.5 million during the same period a year
earlier. The company expects Shopzilla segment profit to be above $30
million for the full year.
“Scripps Networks Interactive had a solid third quarter, delivering
revenue and segment profit growth in the midst of the challenging
macro-economic environment,” said Kenneth W. Lowe, chairman, president
and chief executive officer. “An improving advertising market for cable
television networks and double-digit growth in affiliate fee revenue
drove the company’s consolidated results.
“At our Lifestyle Media businesses, Food Network and HGTV continued to
perform exceptionally well, attracting ever-growing numbers of engaged
viewers and solidifying their competitive positions as television’s
leading destinations for food- and home-oriented lifestyle content,”
Lowe said. “Audience growth has been particularly robust at Food
Network, which for the first time in its history ranked among the Top-10
U.S. cable networks.
“At our Interactive Services businesses, BizRate and Shopzilla generated
segment profit in line with our expectations in large part due to the
lower cost structure we’ve achieved. Initiatives under way to improve
the online shopping experience for both consumers and merchants also are
driving positive trends, including an increase in the number of
qualified leads we’re sending to our merchant partners.”
The reporting of quarterly financial results comes a day after the
company announced it will enter into a joint venture with Cox
Communications Inc., by which it will acquire a controlling interest in
the Travel Channel. The two companies Thursday signed a definitive
agreement that, upon completion, will result in Scripps Networks
Interactive owning 65 percent of the Travel Channel and Cox
Communications retaining a 35 percent stake in the network.
The Travel Channel transaction, which will be structured as a leveraged
joint venture, is expected to be completed by or before January 2010.
Here are third-quarter results by operating segment:
Lifestyle Media
Total Lifestyle Media revenue was $326 million, up 4.3 percent.
Affiliate fee revenue grew 16 percent to $81.1 million. Advertising
revenue was $237 million, up 0.5 percent.
Total expenses increased 1.2 percent. Programming expenses increased 7.0
percent to $79.8 million. Non-programming costs decreased3.3
percent to $95.3 million.
Lifestyle Media segment profit was $150 million compared with $139
million in the prior-year period.
Operating revenue at HGTV was $153 million, up 6.4 percent. HGTV now
reaches 99 million subscribers compared with about 97 million at the end
of the third quarter 2008.
Food Network operating revenue was $119 million, up 5.1 percent. Food
Network reaches 99 million subscribers, up from about 97 million at the
end of the third quarter 2008.
Revenue at DIY Network was up 11 percent to $17.7 million. DIY can be
seen in about 52 million households, up from about 48 million households
a year ago.
Fine Living Network (FLN) revenue was $11.2 million, down 13 percent,
reflecting lower-than-anticipated audience levels since becoming a rated
network at the beginning of the year. Fine Living reaches 56 million
households vs. 52 million households last year.
Revenue at Great American Country (GAC) increased 9.5 percent to $6.4
million. Great American Country can be seen in about 57 million homes
compared with about 54 million homes a year ago.
Revenue from the Lifestyle Media segment’s interactive businesses (SN
Digital) was $17.5 million, down 8.4 percent.
Interactive Services
Interactive Services revenue was $39.0 million compared with $52.1
million.
Segment expenses decreased 20 percent to $32.6 million.
Segment profit was $6.4 million compared with $11.5 million.
Conference call
The senior management team of Scripps Networks Interactive will discuss
the company’s third quarter results and proposed Travel Channel
acquisition during a telephone conference call at 10 a.m. ET 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 1-800-288-8976 (U.S.)
or 612-332-0342 (international) approximately ten minutes before the
start of the call. Callers will need the name of the call, “Scripps
Networks Interactive,” 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 p.m. ET Nov. 6 until 11:59 p.m. ET
Nov. 13. 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 122842. 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
2008 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 Inc. 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 Web sites and broadband vertical
channels. The company’s media portfolio includes: Lifestyle Media, with
popular lifestyle television and Internet brands HGTV, Food Network, DIY
Network, Fine Living Network (FLN) and country music network Great
American Country (GAC); and Interactive Services,with leading
online search and comparison shopping services BizRate and Shopzilla.
SCRIPPS NETWORKS INTERACTIVE, INC. |
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS |
(unaudited) |
|
|
Three months ended |
|
|
|
|
Nine months ended |
|
|
|
|
|
September 30, |
|
|
|
|
September 30, |
|
|
(in thousands, except per share data) |
|
|
2009 |
|
|
2008 |
|
Change |
|
|
2009 |
|
|
2008 |
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues |
|
$ |
364,461 |
|
$ |
364,187 |
|
0.1 % |
|
$ |
1,111,509 |
|
$ |
1,145,358 |
|
(3.0)% |
Costs and expenses |
|
|
(220,197) |
|
|
(230,468) |
|
(4.5)% |
|
|
(661,879) |
|
|
(682,224) |
|
(3.0)% |
Depreciation and amortization of intangible assets |
|
|
(20,666) |
|
|
(16,683) |
|
23.9 % |
|
|
(58,570) |
|
|
(48,655) |
|
20.4 % |
Gains (losses) on disposal of PP&E |
|
|
(898) |
|
|
|
|
|
|
|
(967) |
|
|
(835) |
|
15.8 % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
122,700 |
|
|
117,036 |
|
4.8 % |
|
|
390,093 |
|
|
413,644 |
|
(5.7)% |
Interest expense |
|
|
(285) |
|
|
(2,199) |
|
(87.0)% |
|
|
(1,021) |
|
|
(13,309) |
|
(92.3)% |
Equity in earnings of affiliates |
|
|
4,873 |
|
|
5,418 |
|
(10.1)% |
|
|
12,834 |
|
|
14,177 |
|
(9.5)% |
Losses on repurchases of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
(26,380) |
|
|
Miscellaneous, net |
|
|
(1,321) |
|
|
1,113 |
|
|
|
|
(721) |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes |
|
|
125,967 |
|
|
121,368 |
|
3.8 % |
|
|
401,185 |
|
|
388,143 |
|
3.4 % |
Provision for income taxes |
|
|
(41,544) |
|
|
(43,841) |
|
(5.2)% |
|
|
(130,449) |
|
|
(145,759) |
|
(10.5)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax |
|
|
84,423 |
|
|
77,527 |
|
8.9 % |
|
|
270,736 |
|
|
242,384 |
|
11.7 % |
Income (loss) from discontinued operations, net of tax |
|
|
676 |
|
|
(879) |
|
|
|
|
(1,885) |
|
|
741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
85,099 |
|
|
76,648 |
|
11.0 % |
|
|
268,851 |
|
|
243,125 |
|
10.6 % |
Less: net income attributable to noncontrolling interests |
|
|
(19,779) |
|
|
(19,321) |
|
2.4 % |
|
|
(63,879) |
|
|
(66,021) |
|
(3.2)% |
Net income attributable to SNI |
|
$ |
65,320 |
|
$ |
57,327 |
|
13.9 % |
|
$ |
204,972 |
|
$ |
177,104 |
|
15.7 % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to SNI common shareholders |
|
$ |
0.39 |
|
$ |
0.35 |
|
|
|
$ |
1.26 |
|
$ |
1.07 |
|
|
Income (loss) from discontinued operations, net of tax, attributable to SNI common shareholders |
|
|
0.00 |
|
|
(0.01) |
|
|
|
|
(0.01) |
|
|
0.00 |
|
|
Net income attributable to SNI common shareholders |
|
$ |
0.39 |
|
$ |
0.35 |
|
|
|
$ |
1.24 |
|
$ |
1.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average diluted shares outstanding (1) |
|
|
165,736 |
|
|
164,472 |
|
|
|
|
164,760 |
|
|
164,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to SNI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
64,644 |
|
$ |
58,206 |
|
|
|
$ |
206,857 |
|
$ |
176,363 |
|
|
Income (loss) from discontinued operations, net of tax |
|
|
676 |
|
|
(879) |
|
|
|
|
(1,885) |
|
|
741 |
|
|
Net income attributable to SNI |
|
$ |
65,320 |
|
$ |
57,327 |
|
|
|
$ |
204,972 |
|
$ |
177,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For comparison purposes, results in the first half of 2008 include estimates of Scripps Networks Interactive's portion of The E. W. Scripps Company's corporate expenses for those periods. Such estimates are not representative of our costs as a stand-alone company. |
|
(1) |
For the periods presented prior to July 1, 2008, 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. |
|
SCRIPPS NETWORKS INTERACTIVE, INC. |
CONSOLIDATED BALANCE SHEETS |
(unaudited) |
|
As of |
|
|
September 30, |
|
|
December 31, |
(in thousands, except per share data) |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
11,120 |
|
$ |
9,970 |
Short-term investments |
|
162,883 |
|
|
2,703 |
Accounts and notes receivable (less allowances: 2009- $4,561; 2008- $5,014) |
|
331,689 |
|
|
368,593 |
Programs and program licenses |
|
236,443 |
|
|
238,319 |
Assets of discontinued operations |
|
23,256 |
|
|
22,068 |
Other current assets |
|
15,697 |
|
|
13,651 |
Total current assets |
|
781,088 |
|
|
655,304 |
Investments |
|
43,222 |
|
|
40,279 |
Property, plant and equipment, net |
|
207,072 |
|
|
191,414 |
Goodwill |
|
424,213 |
|
|
424,213 |
Other intangible assets, net |
|
90,017 |
|
|
103,628 |
Programs and program licenses (less current portion) |
|
222,172 |
|
|
235,967 |
Unamortized network distribution incentives |
|
80,283 |
|
|
107,796 |
Other non-current assets |
|
17,794 |
|
|
14,607 |
Total Assets |
$ |
1,865,861 |
|
$ |
1,773,208 |
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
$ |
6,720 |
|
$ |
13,231 |
Program rights payable |
|
17,111 |
|
|
15,240 |
Customer deposits and unearned revenue |
|
14,682 |
|
|
11,045 |
Employee compensation and benefits liabilities |
|
33,996 |
|
|
35,259 |
Accrued marketing and advertising costs |
|
10,133 |
|
|
16,695 |
Liabilities of discontinued operations |
|
8,464 |
|
|
10,905 |
Other accrued liabilities |
|
49,844 |
|
|
66,277 |
Total current liabilities |
|
140,950 |
|
|
168,652 |
Deferred income taxes |
|
123,544 |
|
|
131,903 |
Long-term debt |
|
|
|
|
80,000 |
Other liabilities (less current portion) |
|
119,420 |
|
|
104,239 |
Total liabilities |
|
383,914 |
|
|
484,794 |
Redeemable noncontrolling interest |
|
5,200 |
|
|
9,400 |
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: 2009 - 129,261,498 shares; 2008 - 127,184,107 shares |
|
1,293 |
|
|
1,272 |
Voting - authorized: 60,000,000 shares; issued and outstanding: 2009 - 36,338,226 shares; 2008 - 36,568,226 shares |
|
363 |
|
|
366 |
Total |
|
1,656 |
|
|
1,638 |
Additional paid-in capital |
|
1,257,919 |
|
|
1,219,930 |
Retained earnings (deficit) |
|
47,192 |
|
|
(120,774) |
Accumulated other comprehensive income |
|
36,916 |
|
|
31,487 |
Total SNI shareholders' equity |
|
1,343,683 |
|
|
1,132,281 |
Noncontrolling interests |
|
133,064 |
|
|
146,733 |
Total equity |
|
1,476,747 |
|
|
1,279,014 |
Total Liabilities and Equity |
$ |
1,865,861 |
|
$ |
1,773,208 |
|
|
|
|
|
|
SCRIPPS NETWORKS INTERACTIVE, INC. |
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS |
(unaudited) |
|
|
Nine months ended |
|
|
|
September 30, |
(in thousands) |
|
|
2009 |
|
|
2008 |
Cash Flows from Operating Activities: |
|
|
|
|
|
|
Net income |
|
$ |
268,851 |
|
$ |
243,125 |
Loss (income) from discontinued operations, net of tax |
|
|
1,885 |
|
|
(741) |
Income from continuing operations, net of tax |
|
|
270,736 |
|
|
242,384 |
Adjustments to reconcile income from continuing operations, net of tax, to net cash flows from operating activities: |
|
|
|
|
|
|
Depreciation and other intangible assets amortization |
|
|
58,570 |
|
|
48,655 |
Programs and program licenses costs |
|
|
229,043 |
|
|
211,099 |
Program payments |
|
|
(211,500) |
|
|
(212,503) |
Amortization of network distribution costs |
|
|
28,305 |
|
|
24,875 |
Capitalized network distribution incentives |
|
|
(5,571) |
|
|
(3,885) |
Losses on repurchases of debt |
|
|
|
|
|
26,380 |
Equity in earnings of affiliates |
|
|
(12,834) |
|
|
(14,177) |
Dividends received from equity investments |
|
|
17,098 |
|
|
5,655 |
Stock and deferred compensation plans |
|
|
15,557 |
|
|
19,980 |
Deferred income taxes |
|
|
(4,616) |
|
|
35,309 |
Prepaid and accrued pension expense |
|
|
7,159 |
|
|
3,948 |
Changes in certain working capital accounts: |
|
|
|
|
|
|
Accounts receivable |
|
|
36,970 |
|
|
22,647 |
Other assets |
|
|
(297) |
|
|
(2,913) |
Accounts payable |
|
|
(6,517) |
|
|
(5,567) |
Accrued employee compensation and benefits |
|
|
(1,334) |
|
|
380 |
Accrued income taxes |
|
|
2,371 |
|
|
29,184 |
Other liabilities |
|
|
(25,106) |
|
|
(10,103) |
Other, net |
|
|
7,075 |
|
|
14,101 |
Net cash provided by (used in) continuing operating activities |
|
|
405,109 |
|
|
435,449 |
Net cash provided by (used in) discontinued operating activities |
|
|
(4,302) |
|
|
12,176 |
Net operating activities |
|
|
400,807 |
|
|
447,625 |
Cash Flows from Investing Activities: |
|
|
|
|
|
|
Acquisitions of property, plant and equipment |
|
|
(57,852) |
|
|
(42,844) |
Increase in short-term investments |
|
|
(159,762) |
|
|
(369) |
Purchase of subsidiary companies, noncontrolling interest, and long-term investments |
|
|
|
(9,315) |
Other, net |
|
|
(5,087) |
|
|
1,278 |
Net cash provided by (used in) continuing investing activities |
|
|
(222,701) |
|
|
(51,250) |
Net cash provided by (used in) discontinued investing activities |
|
|
(858) |
|
|
(2,365) |
Net investing activities |
|
|
(223,559) |
|
|
(53,615) |
Cash Flows from Financing Activities: |
|
|
|
|
|
|
Increase in long-term debt |
|
|
|
|
|
135,000 |
Payments on long-term debt |
|
|
(80,000) |
|
|
(506,303) |
Bond redemption premium payment |
|
|
|
|
|
(22,517) |
Dividends paid to SNI common shareholders |
|
|
(37,006) |
|
|
(12,234) |
Dividends paid to noncontrolling interest |
|
|
(79,482) |
|
|
(74,033) |
Change in parent company investment, net |
|
|
|
|
|
96,457 |
Proceeds from stock option exercises |
|
|
22,819 |
|
|
5,194 |
Other, net |
|
|
(2,490) |
|
|
(1,056) |
Net financing activities from continuing operations |
|
|
(176,159) |
|
|
(379,492) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
61 |
|
|
(2,134) |
Increase (decrease) in cash and cash equivalents |
|
|
1,150 |
|
|
12,384 |
Cash and cash equivalents: |
|
|
|
|
|
|
Beginning of year |
|
|
9,970 |
|
|
12,532 |
End of period |
|
$ |
11,120 |
|
$ |
24,916 |
Supplemental Cash Flow Disclosures: |
|
|
|
|
|
|
Interest paid, excluding amounts capitalized |
|
$ |
729 |
|
$ |
12,169 |
Income taxes paid |
|
|
125,575 |
|
|
75,716 |
Notes to Results of Operations
1. OTHER CHARGES AND CREDITS
As a result of the distribution of Scripps Networks Interactive, Inc. to
the shareholders of The E. W. Scripps Company, SNI employees holding
share-based equity awards, including share options and restricted
shares, have received modified awards in our Company’s stock. Under
share-based payment accounting principles, the adjustment to the
outstanding share based equity awards is considered a modification and
incremental share-based compensation expense is recognized to the extent
that the fair value of the awards immediately prior to the modification
is less than the fair value of the awards immediately after the
modification. Our third quarter 2008 results include a non-cash charge
of $4.9 million related to the modification of these stock-based awards.
Net income was reduced by $3.2 million.
In connection with the separation of the Company from E. W. Scripps, our
deferred tax balances were re-measured to reflect the enacted state tax
rates applicable to our tax jurisdictions as a stand-alone company. The
re-measurement of our deferred tax liability balances resulted in a
one-time charge to our tax provision in the third quarter of 2008 that
reduced net income by $4.5 million and increased our quarterly effective
tax rate by 3.7 percent.
In the second quarter of 2008, E. W. Scripps redeemed their outstanding
notes which were previously allocated to us in our combined financial
statements. The associated loss on extinguishment from such redemption,
which was not expected to be deductible for income tax purposes, was
allocated to us in our statement of operations resulting in a reduction
to year-to-date net income of $26.4 million, $.16 per share.
2. SEGMENT INFORMATION
We determine our business segments based upon our management and
internal reporting structure. Our reportable segments are strategic
businesses that offer different products and services.
Lifestyle Media includes our national television networks, HGTV, Food
Network, DIY, FLN, and SN Digital which includes Web sites that are
associated with the aforementioned television brands and other
Internet-based businesses serving food or shelter related categories
such as RecipeZaar.com, HGTVPro.com, and FrontDoor.com. Our networks
also operate domestically and internationally through licensing
agreements with other entities. We own approximately 69% of Food Network
and approximately 94% of Fine Living Network (“FLN”). Each of our
networks is distributed by cable, telecommunications, and satellite
distributors.
Interactive Services includes our online comparison shopping service,
Shopzilla, and its related online comparison shopping brand, BizRate.
Shopzilla and BizRate are product comparison shopping services that help
consumers find products offered for sale on the Web by online retailers.
Shopzilla and BizRate also operate a Web-based consumer feedback network
which collects millions of consumer reviews of stores and products each
year.
Our chief operating decision maker evaluates the operating performance
of 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. Refer to Note 4—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
determined and reconciliation to our results of operations is as follows:
(in thousands) |
|
|
Three months ended |
|
|
|
|
Nine months ended |
|
|
|
|
|
September 30, |
|
|
|
|
September 30, |
|
|
|
|
|
2009 |
|
|
2008 |
|
Change |
|
|
2009 |
|
|
2008 |
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lifestyle Media |
|
$ |
325,511 |
|
$ |
312,000 |
|
4.3 % |
|
$ |
986,727 |
|
$ |
972,059 |
|
1.5 % |
Interactive Services |
|
|
38,983 |
|
|
52,101 |
|
(25.2)% |
|
|
124,885 |
|
|
173,213 |
|
(27.9)% |
Corporate/Intersegment eliminations |
|
|
(33) |
|
|
86 |
|
|
|
|
(103) |
|
|
86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
$ |
364,461 |
|
$ |
364,187 |
|
0.1 % |
|
$ |
1,111,509 |
|
$ |
1,145,358 |
|
(3.0)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lifestyle Media |
|
$ |
150,461 |
|
$ |
138,975 |
|
8.3 % |
|
$ |
468,902 |
|
$ |
457,109 |
|
2.6 % |
Interactive Services |
|
|
6,376 |
|
|
11,468 |
|
(44.4)% |
|
|
20,675 |
|
|
42,264 |
|
(51.1)% |
Corporate |
|
|
(12,573) |
|
|
(16,724) |
|
(24.8)% |
|
|
(39,947) |
|
|
(36,239) |
|
10.2 % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment profit |
|
|
144,264 |
|
|
133,719 |
|
7.9 % |
|
|
449,630 |
|
|
463,134 |
|
(2.9)% |
Depreciation and amortization of intangible assets |
|
|
(20,666) |
|
|
(16,683) |
|
23.9 % |
|
|
(58,570) |
|
|
(48,655) |
|
20.4 % |
Gains (losses) on disposal of PP&E |
|
|
(898) |
|
|
|
|
|
|
|
(967) |
|
|
(835) |
|
15.8 % |
Interest expense |
|
|
(285) |
|
|
(2,199) |
|
(87.0)% |
|
|
(1,021) |
|
|
(13,309) |
|
(92.3)% |
Equity in earnings of affiliates |
|
|
4,873 |
|
|
5,418 |
|
(10.1)% |
|
|
12,834 |
|
|
14,177 |
|
(9.5)% |
Losses on repurchases of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
(26,380) |
|
|
Miscellaneous, net |
|
|
(1,321) |
|
|
1,113 |
|
|
|
|
(721) |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes |
|
$ |
125,967 |
|
$ |
121,368 |
|
3.8 % |
|
$ |
401,185 |
|
$ |
388,143 |
|
3.4 % |
Corporate costs for the first six months of 2008 reflect an estimate of
SNI’s portion of The E. W. Scripps Company’s corporate expenses.
Included in Corporate expenses are one-time costs related to the
separation that totaled $7.2 million in the third quarter of 2008, $0.8
million in the third quarter of 2009, and $6.5 million for the
year-to-date period of 2009.
3. SUPPLEMENTAL FINANCIAL INFORMATION
Our Lifestyle Media division earns revenue primarily from the sale of
advertising time in our national television networks’ programming,
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 Web sites (SN Digital).
Supplemental information for Lifestyle Media is as follows:
(in thousands) |
|
|
Three months ended |
|
|
|
|
Nine months ended |
|
|
|
|
|
September 30, |
|
|
|
|
September 30, |
|
|
|
|
|
2009 |
|
|
2008 |
|
Change |
|
|
2009 |
|
|
2008 |
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues by brand: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HGTV |
|
$ |
152,547 |
|
$ |
143,391 |
|
6.4 % |
|
$ |
459,925 |
|
$ |
447,738 |
|
2.7 % |
Food Network |
|
|
118,591 |
|
|
112,874 |
|
5.1 % |
|
|
363,218 |
|
|
358,359 |
|
1.4 % |
DIY |
|
|
17,684 |
|
|
16,006 |
|
10.5 % |
|
|
51,133 |
|
|
47,338 |
|
8.0 % |
FLN |
|
|
11,185 |
|
|
12,873 |
|
(13.1)% |
|
|
33,888 |
|
|
39,637 |
|
(14.5)% |
GAC |
|
|
6,449 |
|
|
5,890 |
|
9.5 % |
|
|
19,274 |
|
|
18,088 |
|
6.6 % |
SN Digital |
|
|
17,529 |
|
|
19,137 |
|
(8.4)% |
|
|
54,012 |
|
|
56,846 |
|
(5.0)% |
Other/intersegment eliminations |
|
|
1,526 |
|
|
1,829 |
|
(16.6)% |
|
|
5,277 |
|
|
4,053 |
|
30.2 % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues by type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising |
|
$ |
236,598 |
|
$ |
235,523 |
|
0.5 % |
|
$ |
722,177 |
|
$ |
742,270 |
|
(2.7)% |
Affiliate fees, net |
|
|
81,055 |
|
|
69,877 |
|
16.0 % |
|
|
240,174 |
|
|
206,991 |
|
16.0 % |
Other |
|
|
7,858 |
|
|
6,600 |
|
19.1 % |
|
|
24,376 |
|
|
22,798 |
|
6.9 % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscribers (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HGTV |
|
|
|
|
|
|
|
|
|
|
98,800 |
|
|
97,400 |
|
1.4 % |
Food Network |
|
|
|
|
|
|
|
|
|
|
99,300 |
|
|
97,500 |
|
1.8 % |
DIY |
|
|
|
|
|
|
|
|
|
|
52,100 |
|
|
48,300 |
|
7.9 % |
FLN |
|
|
|
|
|
|
|
|
|
|
55,700 |
|
|
51,800 |
|
7.5 % |
GAC |
|
|
|
|
|
|
|
|
|
|
57,200 |
|
|
54,000 |
|
5.9 % |
(1) |
Subscriber counts are according to the Nielsen Homevideo Index of homes that receive cable networks, with the exception of FLN in 2008, which was not yet rated by Nielsen and represented comparable amounts calculated by us. |
4. NON-GAAP FINANCIAL MEASURES
In addition to the results prepared in accordance with GAAP provided in
this release, the Company has presented segment profit and free cash
flow. A reconciliation of segment profit to operating income determined
in accordance with accounting principles generally accepted in the
United States of America for each business segment is as follows:
(in thousands) |
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
122,700 |
|
$ |
117,036 |
|
$ |
390,093 |
|
$ |
413,644 |
Depreciation and amortization of intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Lifestyle Media |
|
|
9,821 |
|
|
6,996 |
|
|
27,432 |
|
|
20,640 |
Interactive Services |
|
|
10,489 |
|
|
9,625 |
|
|
30,430 |
|
|
27,846 |
Corporate |
|
|
356 |
|
|
62 |
|
|
708 |
|
|
169 |
Losses (gains) on disposal of PP&E: |
|
|
|
|
|
|
|
|
|
|
|
|
Lifestyle Media |
|
|
516 |
|
|
|
|
|
571 |
|
|
764 |
Interactive Services |
|
|
382 |
|
|
|
|
|
396 |
|
|
|
Corporate |
|
|
|
|
|
|
|
|
|
|
|
71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment profit |
|
$ |
144,264 |
|
$ |
133,719 |
|
$ |
449,630 |
|
$ |
463,134 |
The Company defines free cash flow as cash provided by operating
activities less dividends paid to noncontrolling interests and
acquisitions of property, plant 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 |
|
|
Nine months ended |
|
|
September 30, |
|
|
September 30, |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
$ |
144,264 |
|
$ |
133,719 |
|
$ |
449,630 |
|
$ |
463,134 |
Income taxes paid |
|
(39,894) |
|
|
(4,220) |
|
|
(125,575) |
|
|
(75,716) |
Interest paid |
|
(186) |
|
|
(1,963) |
|
|
(729) |
|
|
(12,169) |
Working capital and other |
|
53,014 |
|
|
88,781 |
|
|
81,783 |
|
|
60,200 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by continuing operating activities |
|
157,198 |
|
|
216,317 |
|
|
405,109 |
|
|
435,449 |
Dividends paid to noncontrolling interest |
|
(9,671) |
|
|
(17,850) |
|
|
(79,482) |
|
|
(74,033) |
Acquisitions of property, plant and equipment |
|
(17,441) |
|
|
(19,281) |
|
|
(57,852) |
|
|
(42,844) |
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow |
$ |
130,086 |
|
$ |
179,186 |
|
$ |
267,775 |
|
$ |
318,572 |
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.
Scripps Networks Interactive Inc.
Mark Kroeger, 513-824-3227
E-mail:
mark.kroeger@scrippsnetworks.com