Business News

Scripps Networks Interactive Reports Third Quarter Results

Friday 31. October 2008 - Scripps Networks Interactive Inc. (NYSE:SNI) today reported third-quarter operating results, reflecting solid revenue growth at its lifestyle television networks and online comparison shopping services.

The company’s consolidated third-quarter net income was $57.3 million, or 35 cents a share, compared with $57.9 million, or 35 cents a share for the same period in 2007. For comparison purposes, third-quarter 2007 results include 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 as a separate publicly traded company. Charges related to the spin-off reduced net income by $9.2 million, or 6 cents a share, in the third quarter. (See Note 1 to results of operations for a description of the transition charges.)

Scripps Networks Interactive’s consolidated third-quarter revenue increased 8.9 percent to $375 million compared with $344 million during the same period a year ago.

Consolidated earnings for the three-month period ending Sept. 30 include operating results from the company’s Lifestyle Media segment, which includes HGTV, Food Network, DIY Network, Fine Living Network, Great American Country and a growing portfolio of related lifestyle brands that deliver content on the 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 percent year over year to $312 million. Segment profit increased 5.1 percent to $144 million. (See Note 2 to results of operations for a definition of segment profit.)

Lifestyle Media financial performance was favorably affected during the third quarter by increased television advertising sales, strong viewership trends and growth in overall affiliate fee revenue.

Revenue for the Interactive Services segment grew 14.7 percent to $62.6 million. Segment profit was $12.8 million compared with $8.7 million during the same period a year earlier.

The growth at Interactive Services is attributable to increased user traffic and higher referral fee revenue at Shopzilla, and an increase in energy switching activity during the period in the United Kingdom for uSwitch.

“Even in a challenging economic environment, Scripps Networks Interactive delivered a solid third quarter,” said Kenneth W. Lowe, chairman, president and chief executive officer. “The momentum we’ve created at our national lifestyle networks sustained our continued growth and it appears likely that it will carry us across the finish line for the full year, fulfilling the expectations we set 12 months ago.

“The company’s fundamentals were strong during the period with respectable ad sales growth and positive viewership trends,” Lowe said. “We continue to build our dominance in the food and shelter categories and engage audiences with original, quality television programming and online content.

“Prime-time viewership at Food Network was the highest in the network’s history during the quarter, with solid gains among younger viewers,” Lowe said. “DIY Network’s prime time audience reached all-time highs, and Fine Living viewership is growing nicely as we set the stage for the network becoming a Nielsen-rated service in January. We’re also seeing the benefits of improved HGTV affiliate sales agreements and growing household distribution for DIY and Fine Living.

“At Interactive Services, Shopzilla performed exceptionally well in its emerging European markets while holding the line in an increasingly difficult retail shopping environment in the United States. And at uSwitch, increased energy switching activity in the United Kingdom contributed to the positive results.”

Here are third-quarter results by segment:

Lifestyle Media


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 $129 million. Employee costs were up 22 percent to $44.4 million. Expense growth during the period is attributable in part to an expansion of the company’s interactive content services and accelerated marketing and promotion spending at Food Network, DIY Network and Fine Living.

Lifestyle Media segment profit was $144 million, up 5.1 percent from $137 million in the prior-year period.

Operating revenue at HGTV was up 5.1 percent to $143 million. HGTV now reaches more than 97 million domestic subscribers compared with about 96 million at the end of the third quarter 2007.

Food Network operating revenue increased 8.8 percent to $113 million. Food Network reaches more than 97 million domestic subscribers, up from about 96 million at the end of the third quarter 2007.

Revenue at DIY Network was $16.0 million, up 28.3 percent. DIY can be seen in about 48 million households, up from about 47 million households a year ago.

Fine Living revenue increased 24.0 percent to $12.9 million. Fine Living reaches 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 homes compared with about 51 million homes a year ago.

SN Digital revenue grew 7.4 percent to $19.1 million. SN Digital is the segment’s multi-platform programmer of interactive content in the home, food and 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

Interactive Services revenue was up 14.7 percent to $62.6 million for the third quarter compared with $54.6 million in the third quarter 2007. Both Shopzilla and uSwitch achieved double-digit revenue growth in the quarter.

Segment profit for Interactive Services was up 47.1 percent to $12.8 million compared with $8.7 million in the third quarter of 2007.

Guidance

The company currently anticipates that fourth quarter total revenue for Lifestyle Media will be up mid-single digits, year over year. Expenses are expected to be up mid- to high-single digits as the company continues to invest in its interactive content businesses and expand internationally.

Interactive Services, which includes Shopzilla and uSwitch, is expected to generate segment profit of about $16 to $18 million in the fourth quarter.

Fourth-quarter earnings per share from continuing operations, excluding transition-related charges, are expected to be between 50 to 52 cents. Excluding a non-cash impairment charge that was recorded for uSwitch, earnings per share from continuing operations during the fourth quarter of 2007 were 50 cents.

The company also provided its fourth-quarter forecast for other items as follows:

— Corporate expenses: $10 to $12 million in the fourth quarter, excluding costs related to the spinoff.

— Minority interest: $25 to $26 million.
— Capital expenditures: About $30 million.
— Tax rate: 33 to 34 percent.