Scripps Networks Interactive Reports Second Quarter Financial Results

Scripps Networks Interactive Reports Second Quarter Financial Results

  • Revenues of $665 million, up 11 percent
  • Segment profit of $320 million, up 12 percent
  • Net income attributable to SNI of $1.08 per share, up 16 percent

KNOXVILLE, Tenn.--(BUSINESS WIRE)-- Scripps Networks Interactive, Inc. (NYS: SNI) today reported operating results for the second quarter 2013.

"The growth story at Scripps Networks Interactive continued during the second quarter, driven by the tremendous popularity of our lifestyle television networks with media consumers, advertisers and content distributors," said Kenneth W. Lowe, chairman, president and chief executive officer. "We've succeeded in creating a valuable portfolio of networks — as well as industry-leading websites and apps — that attract a highly engaged audience of food, home and travel enthusiasts. Those distinctly unique attributes drive our company's consistently solid operating results."

Consolidated revenues for the quarter increased 11 percent to $665 million from the prior-year period. Results for the three-month period ended June 30 reflect strong advertising revenue of $462 million, up 11 percent, and affiliate fee revenue of $189 million, up 11 percent year over year.

Expenses for the quarter increased 9.2 percent from the prior-year period to $345 million. The increase was driven by program amortization expenses as the company invests to drive viewership at all of its lifestyle television networks. Also contributing to the increase were increased investments in international growth initiatives.

Total segment profit increased 12 percent to $320 million. (Seereconciliation of non-GAAP financial measures for a definition of segment profit.)

Second quarter net income attributable to Scripps Networks Interactive was $160 million, or $1.08 per diluted share, compared with $142 million, or $0.93 per diluted share, in the second quarter 2012.


Segment results

(in thousands)

Three months ended

Six months ended

June 30,June 30,
    2013  2012     2013  2012  Change
Segment operating revenues:
Lifestyle Media$647,117$591,0169.5%$1,228,162$1,119,5999.7%

Corporate and other / intersegment eliminations

    18,011    9,970   80.7%   31,351    16,732   87.4%
Total operating revenues   $665,128   $600,986   10.7%  $1,259,513   $1,136,331   10.8%
Segment profit (loss):
Lifestyle Media$347,895$310,41912.1%$630,030$575,0569.6%
Corporate and other    (28,214)   (25,738)  9.6%   (62,875)   (51,140)  22.9%
Total segment profit   $319,681   $284,681   12.3%  $567,155   $523,916   8.3%

Lifestyle media revenues in the second quarter of 2013 increased 9.5 percent to $647 million driven by advertising and affiliate fee revenue growth. Advertising revenue increased 10 percent to $456 million primarily as a result of the strong advertising market. Affiliate fee revenue grew 9.5 percent to $182 million due to higher rates, a reduction of launch fee amortization and the benefit of digital distribution arrangements.

Lifestyle media segment profit increased 12 percent to $348 million reflecting 9.5 percent revenue growth, partially offset by higher program amortization expense.

Corporate and other revenues, which are primarily international operations, increased 81 percent to $18.0 million. This increase was largely due to the April 30, 2012, acquisition of Travel Channel International and the April 12, 2013, acquisition of Asian Food Channel.

Corporate and other segment loss increased 9.6 percent to $28.2 million. This increase was driven primarily by continued investments in international operations and digital business initiatives.

2013 Full-year Guidance

The company also updated 2013 full-year guidance for the following items:

  • Total revenue is now expected to increase 9 percent to 10 percent due to ongoing strength in the advertising market. The previous range was 7 percent to 9 percent.
  • Selling, general and administrative expenses are now expected to increase 9 percent to 11 percent due to acquisition of the Asian Food Channel and other international investments. The previous range was 7 percent to 9 percent.

The company reiterated all other guidance:

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

Share repurchase program

For the quarter ended June 30, the company repurchased 1.5 million shares under its stock repurchase program, for an aggregate purchase price of $100 million. As of June 30, the company had $650 million remaining in the $1 billion stock repurchase program.

Conference call

The senior management team of Scripps Networks Interactive will discuss the company's second 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, 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 800-288-9626 (U.S.) or 612-332-0634 (international) approximately ten minutes before the start of the call. Callers will need the name of the call, "SNI Second 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 Aug. 8 until 11:59 p.m. ET Aug. 22. 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 297234. A replay of the conference call also will be available online. To access the audio replay, 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 2012 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 world's leading developers of lifestyle-oriented content for television and the Internet, generating more than 2,000 hours a year of original on-air programming. The company's television programming can be seen in 170 countries across all seven continents. Its media portfolio includes popular lifestyle and Internet brands HGTV, Food Network, Travel Channel, DIY Network, Cooking Channel and Great American Country.

(unaudited)Three months ended    Six months ended  
June 30,June 30,
(in thousands, except per share data)   2013  2012  Change  2013  2012  Change
Operating revenues$665,128$600,98610.7%$1,259,513$1,136,33110.8%

Cost of services, excluding depreciation and amortization of intangible assets

Selling, general and administrative(176,770)(165,402)6.9%(359,930)(323,731)11.2%

Depreciation and amortization of intangible assets

Gains (losses) on disposal of property and equipment    (499)   (27)      (1,475)   (86)   
Operating income289,628258,71611.9%509,426473,3767.6%
Interest expense(12,197)(13,247)(7.9)%(24,342)(25,427)(4.3)%
Equity in earnings of affiliates25,41021,11420.3%45,99235,02731.3%
Miscellaneous, net    3,643    3,868   (5.8)%   282    11,022    
Income from operations before income taxes306,484270,45113.3%531,358493,9987.6%
Provision for income taxes    (96,141)   (79,028)  21.7%   (169,828)   (145,624)  16.6%
Net income210,343191,4239.9%361,530348,3743.8%
Net income attributable to noncontrolling interests    (50,614)   (49,059)  3.2%   (93,982)   (91,107)  3.2%
Net income attributable to SNI   $159,729   $142,364   12.2%  $267,548   $257,267   4.0%

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

   $1.09   $0.94      $1.81   $1.67    

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

   $1.08   $0.93      $1.79   $1.66    
Weighted average basic shares outstanding    147,132    152,086       147,967    154,102    
Weighted average diluted shares outstanding    148,259    153,438       149,069