Scripps Networks Interactive Reports Fourth Quarter Financial Results

Scripps Networks Interactive Reports Fourth Quarter Financial Results

  • Revenues of $605 million, up 9.2 percent

  • Segment profit of $266 million, up 3.3 percent

  • Income from continuing operations of $2.02 per share, including adjustments

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

Consolidated revenues for the quarter increased 9.2 percent to $605 million from the prior-year period. Results for the three-month period ended Dec. 31 reflect solid advertising revenue of $414 million, up 5.1 percent, and affiliate fee revenue of $174 million, up 18 percent year-over-year.


Expenses for the quarter increased 14 percent from the prior-year period to $339 million. The increase was driven primarily by higher employee costs and investments in planned domestic and international growth initiatives. Also contributing to the increase was higher programming amortization and marketing expenses to drive viewership at all of the company's lifestyle television networks.

Total segment profit increased 3.3 percent to $266 million. (See note 2 for a definition of segment profit.)

Fourth quarter income from continuing operations attributable to Scripps Networks Interactive was $306 million, or $2.02 per diluted share, compared with $135 million, or $0.84 in the fourth quarter of 2011. Included in the fourth quarter 2012 figure are:

  • Favorable tax adjustments of $202 million, or $1.33 per diluted share; and

  • Asset impairment charges of $22 million, net of tax, or $0.15 per diluted share.

In the prior-year period, net income from continuing operations included favorable tax adjustments of $10.5 million, or $0.07 per diluted share.

Excluding these items in both the current and prior-year periods, fourth quarter 2012 income from continuing operations attributable to Scripps Networks Interactive was $0.84, compared with $0.77 in the fourth quarter of 2011. (See note 1.)

"Our solid fourth-quarter and full-year operating results demonstrate the popularity and superior marketing power of our lifestyle television networks and related interactive businesses," said Kenneth W. Lowe, chairman, president and chief executive officer of Scripps Networks Interactive. "Since the launch of HGTV in 1994, our lifestyle media businesses have generated 18 consecutive years of growth, creating tremendous value for our shareholders, delivering uncommon value to our advertisers and distributors and engaging media consumers at the highest levels. Underpinning the company's success is our commitment to remain focused on lifestyle content categories that touch and inspire the everyday lives of media consumers."

Revenues by network were as follows:

  • Food Network, $215 million, up 5.2 percent.

  • HGTV, $200 million, up 5.1 percent.

  • Travel Channel, $71.1 million, up 5.9 percent.

  • DIY Network, $30.4 million, up 13 percent.

  • Cooking Channel, $24.7 million, up 38 percent.

  • Great American Country (GAC), $7.6 million, up 16 percent.

Revenue from the company's digital businesses, which include its network-branded websites, was $33.2 million, up 9.1 percent.

Full-year Results

Consolidated operating revenue in 2012 was $2.3 billion, up 11 percent from the prior year. Advertising revenue was $1.6 billion, up 9.0 percent from the prior year. Affiliate fee revenue was $688 million, up 17 percent from the prior year.

Segment profit increased to $1.0 billion, up 6.5 percent from the prior year.

Consolidated income from continuing operations attributable to Scripps Networks Interactive was $681 million, or $4.44 per share, compared with $473 million, or $2.86 per share in 2011. Consolidated income from continuing operations and per share amounts reflect the items disclosed in note 1 to the results of operations.

2013 Full-year Guidance

The company provided the following outlook for 2013.

Total revenue is expected to increase 7 percent to 9 percent.

Cost of services are expected to increase 12 percent to 14 percent.

Selling, general and administrative expenses are expected to increase 7 percent to 9 percent.

Other items:

  • Depreciation and amortization, $115 million to $125 million.

  • Interest expense, $50 million to $55 million.

  • Effective tax rate, 28 percent to 30 percent.

  • Noncontrolling share of net income, $175 million to $185 million.

  • Capital expenditures, $65 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. 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 Investors link at the top of the page. The webcast link can be found next to the microphone icon on the investor relations landing page.

To access the conference call by telephone, dial 800-230-1092 (U.S.) or 612-288-0337 (international) approximately ten minutes before the start of the call. Callers will need the name of the call, "SNI 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. ET Feb. 7 until 11:59 p.m. ET Feb. 21. 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 279208. A replay of the conference call also will be available online. To access the audio replay, visit www.scrippsnetworksinteractive.com approximately four hours after the call, choose Investors then follow the Audio Archives link on the top right side of the investor relations landing 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 2011 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 Food Network, HGTV, Travel Channel, DIY Network, Cooking Channel and country music network Great American Country.

SCRIPPS NETWORKS INTERACTIVE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

Three months ended

Twelve months ended

December 31,

December 31,

(in thousands, except per share data)

2012

2011

Change

2012

2011

Change

Operating revenues

$

604,665

$

553,489

9.2 %

$

2,307,182

$

2,072,048

11.3 %

Cost of services, excluding depreciation and amortization of intangible assets

(165,855)

(143,594)

15.5 %

(610,836)

(526,865)

15.9 %

Selling, general and administrative

(172,919)

(152,436)

13.4 %

(655,473)

(567,902)

15.4 %

Depreciation and amortization of intangible assets

(28,159)

(23,609)

19.3 %

(107,591)

(90,080)

19.4 %

Write-down of goodwill

(19,663)

(19,663)

Gains (losses) on disposal of property and equipment

856

(666)

754

(603)

Operating income

218,925

233,184

(6.1)%

914,373

886,598

3.1 %

Interest expense

(12,869)

(9,773)

31.7 %

(50,814)

(36,121)

40.7 %

Equity in earnings of affiliates

14,597

20,094

(27.4)%

60,864

49,811

22.2 %

Miscellaneous, net

651

6,316

13,340

(17,188)

Income from continuing operations before income taxes

221,304

249,821

(11.4)%

937,763

883,100

6.2 %

Income tax benefit (provision)

123,170

(71,586)

(88,107)

(246,452)

(64.2)%

Income from continuing operations, net of tax

344,474

178,235

93.3 %

849,656

636,648

33.5 %

Income (loss) from discontinued operations, net of tax

(61,252)

Net income

344,474

178,235

93.3 %

849,656

575,396

47.7 %

Net income attributable to noncontrolling interests

(38,673)

(43,234)

(10.5)%

(168,178)

(163,838)

2.6 %

Net income attributable to SNI

$

305,801

$

135,001

$

681,478

$

411,558

65.6 %

Income from continuing operations attributable to SNI common shareholders per basic share of common stock

$

2.03

$

0.85

$

4.48

$

2.87

Income from continuing operations attributable to SNI common shareholders per diluted share of common stock

$

2.02

$

0.84

$

4.44

$

2.86

Weighted average basic shares outstanding

150,546

159,727

152,180

164,657

Weighted average diluted shares outstanding

151,711

160,399

153,327

165,572

Net income per share amounts may not foot since each is calculated independently.

SCRIPPS NETWORKS INTERACTIVE, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

As of

December 31,

December 31,

2012

2011

(in thousands, except per share data)

ASSETS

Current assets:

Cash and cash equivalents

$

437,525

$

760,092

Accounts receivable (less allowances: 2012- $5,514; 2011- $5,000)

565,298

553,022

Programs and program licenses

395,017

336,305

Deferred income taxes

26,338

1,799

Other current assets

60,098

64,750

Total current assets

1,484,276

1,715,968

Investments

489,703

455,267

Property and equipment, net

237,308

219,845

Goodwill

551,821

510,484

Other intangible assets, net

678,500

556,095

Programs and program licenses (less current portion)

371,856

299,089

Deferred income taxes

148,501

Other non-current assets

176,833

204,922

Total Assets

$

4,138,798

$

3,961,670

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

12,633

$

12,482

Program rights payable

36,274

50,402

Customer deposits and unearned revenue

44,903

52,814

Employee compensation and benefits

56,553

49,920

Accrued marketing and advertising costs

10,689

6,838

Other accrued liabilities

91,577

60,443

Total current liabilities

252,629

232,899

Deferred income taxes

100,002

Long-term debt

1,384,216

1,383,945

Other liabilities (less current portion)

237,402

148,429

Total liabilities

1,874,247

1,865,275

Redeemable noncontrolling interest

136,500

162,750

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: 2012 - 114,570,332 shares; 2011 - 122,828,359 shares

1,146

1,228

Voting - authorized: 60,000,000 shares; issued and outstanding: 2012 - 34,317,173 shares; 2011 - 34,317,173 shares

343

343

Total

1,489

1,571

Additional paid-in capital

1,405,699

1,346,429

Retained earnings

452,598

364,073

Accumulated other comprehensive income (loss)

(38,862)

(33,347)

Total SNI shareholders' equity

1,820,924

1,678,726

Noncontrolling interest

307,127

254,919

Total equity

2,128,051

1,933,645

Total Liabilities and Equity

$

4,138,798

$

3,961,670

SCRIPPS NETWORKS INTERACTIVE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Twelve months ended

December 31,

2012

2011

(in thousands)

(unaudited)

Cash Flows from Operating Activities:

Net income

$

849,656

$

575,396

Loss (income) from discontinued operations