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      

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