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Scripps Networks Interactive reports fourth quarter financial results

Feb. 5, 2009
 

CINCINNATI – Scripps Networks Interactive Inc. today reported fourth-quarter operating results reflecting solid revenue growth at its Lifestyle Media television networks and related lifestyle Internet businesses.

The improved Lifestyle Media results, however, were offset by lower revenues at Shopzilla and uSwitch, the online comparison shopping brands that comprise the company’s Interactive Services business segment.

The Lifestyle Media segment includes HGTV, Food Network, DIY Network, Fine Living Network, Great American Country and SN Digital, the segment’s growing portfolio of online lifestyle content businesses.

Total company revenue for Scripps Networks Interactive for the three-month period ending Dec. 31 was up 3.5 percent to $412 million compared with $398 million during the same fourth-quarter period a year ago.

The company recorded a net loss during the fourth quarter of $154 million, or 94 cents per share, compared with a net loss of $299 million, or $1.83 per share, for the same period in 2007. Results for both periods include the effects of writedowns related to asset impairment.

Excluding these non-cash impairment charges, the company’s consolidated net income for the fourth quarter 2008 was 55 cents per share compared with 50 cents in 2007.

Consolidated net income for the fourth quarter includes the effect of a $244 million, or $1.49 per share, non-cash charge against earnings for impairment of goodwill. The charge is a result of the changing environment for online comparison shopping services and the subsequent strategic repositioning of Shopzilla for long-term profit growth.

In 2007, the company recorded a non-cash charge of $411 million, reducing net income by $382 million, or $2.33 per share, in the fourth quarter for impairment of goodwill and other intangible assets for its uSwitch subsidiary in the United Kingdom. (See Note 1 to results of operations for a description of charges and credits.)

For comparison purposes, prior-year results include an estimated allocation of Scripps Networks Interactive’s corporate expenses paid by The E. W. Scripps Company. On July 1, 2008, Scripps Networks Interactive was spun off from E. W. Scripps as a separate publicly traded company. The prior year’s estimated corporate expenses are not representative of what corporate expenses are for Scripps Networks Interactive as an independent company.

During the fourth quarter 2008, financial performance at the company’s Lifestyle Media segment was favorably affected by growth in advertising sales, strong viewership trends, particularly at Food Network and DIY Network, and growth in affiliate fee revenue. Lifestyle Media revenue grew 7.0 percent during the fourth quarter to $340 million compared with $318 million in 2007. Segment profit was $176 million compared with $175 million during the prior year. (See Note 2 for a description of segment profit.)

Revenue from the Lifestyle Media segment’s SN Digital interactive businesses grew 12 percent during the fourth quarter to $25 million. SN Digital properties include related Web sites for each of the television networks, plus other lifestyle content sites such as HGTVPro.com, RecipeZaar.com and FrontDoor.com.

Revenue from the company’s Interactive Services business segment was $71.4 million compared with $79.8 million in 2007. Segment profit was $18.9 million compared with $24.7 million during the same period a year earlier. Interactive Services results were held back by an overall decline in online retail shopping activity at Shopzilla, lower sponsored-link revenue at Shopzilla, and lower energy switching activity at uSwitch in the U.K.

“Led by HGTV and Food Network, the company had a very good fourth quarter, especially when considering the strong macro-economic headwinds we were facing,” said Kenneth W. Lowe, chairman, president and chief executive officer of Scripps Networks Interactive. “The vitality of our lifestyle television networks is evident in their consistently solid performance, even when times are difficult.

“All of our television networks grew during the three-month period, as we were able to leverage the unique, engaged and growing audiences each brand aggregates,” Lowe said. “Strong double-digit revenue growth at our newer networks demonstrates the success we’re having establishing these valuable brands. And at SN Digital, we finished the year on a definite high note with double-digit revenue growth. Our resolve to be the leading provider of food and shelter lifestyle content on any and all media platforms clearly is gaining momentum.

“At our Interactive Services businesses, fourth quarter results reflect the weakening economy, particularly as it relates to the exposure Shopzilla has to the challenging retail spending environment and changing competitive forces within the online comparison shopping marketplace.” Lowe said. “Interactive Services results also were affected by lower energy switching activity at uSwitch during the fourth quarter, which followed an extended period of robust switching during the first three quarters of the year. Going forward, we expect operating results at our Interactive Services segment to remain under pressure as we execute our competitive repositioning of Shopzilla.”

Here are fourth-quarter results by operating segment:

Lifestyle Media
Lifestyle Media advertising revenue increased 3.3 percent to $263 million. Affiliate fee revenue was $70.4 million, up 21 percent.

Programming expenses increased 9.7 percent to $68.7 million. Non-programming costs increased 13 percent to $96.6 million. The increase in non-programming costs is attributable primarily to the company’s strategic investment in its interactive lifestyle businesses (SN Digital).

Lifestyle Media segment profit was $176 million compared with $175 million in the prior-year period.

Operating revenue at HGTV was up 4.2 percent to $149 million. HGTV now reaches 98 million subscribers compared with about 96 million at the end of the fourth quarter 2007.

Food Network operating revenue increased 5.1 percent to $128 million. Food Network reaches 98 million subscribers, up from about 96 million at the end of the fourth quarter 2007.

Revenue at DIY Network was $16.7 million, up 28 percent. DIY can be seen in about 49 million households, up from about 47 million households a year ago.

Fine Living Network revenue increased 16 percent to $12.8 million. Fine Living reaches nearly 54 million households vs. 50 million households last year.

Revenue at Great American Country was $7.1 million, up 16 percent. Great American Country can be seen in about 55 million homes compared with about 53 million homes a year ago.

Revenue from the Lifestyle Media segment’s interactive businesses (SN Digital) grew 12 percent to $25.0 million.

Interactive Services
Interactive Services revenue was $71.4 million for the fourth quarter compared with $79.8 million in the same period 2007.

Segment profit was $18.9 million compared with $24.7 million in the fourth quarter of 2007.

Full-year results
Consolidated operating revenue in 2008 grew 10 percent to $1.6 billion from $1.4 billion in the prior year.

Excluding non-cash charges, the company’s consolidated net income for the full-year 2008 was $1.63 per share compared with $1.56 per share in 2007.

Including the effects of non-cash charges, 2008 consolidated net income was $23.6 million, or 14 cents per share, compared with a net loss of $126 million, or 77 cents per share in 2007. Net income in 2008 was reduced by $244 million, or $1.49 per share, as a result of the non-cash writedown of goodwill at Shopzilla. Net income in 2007 was reduced by $382 million, or $2.33 per share, as a result of a non-cash writedown of goodwill and other intangible assets at uSwitch.

Following are full-year results by operating segment:

Total Lifestyle Media revenue increased 11 percent to $1.3 billion from $1.2 billion the prior year. Segment profit increased 7.0 percent to $648 million. Advertising revenue grew 8.3 percent to $1.0 billion. Affiliate fee revenue was up 18 percent to $277 million. Segment costs and expenses increased 14 percent to $680 million.

Total Interactive Services revenue increased 8.6 percent to $278 million from $256 million the prior year. Segment profit increased 70 percent to $67.7 million compared with $39.8 million the previous year.

Total company capital expenditures were $81 million vs. $74 million in 2007.

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. EST today. Scripps Networks Interactive will offer a live webcast of the conference call. To access the webcast, visit http://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 1-800-230-1951 (U.S.) or 612-332-0530 (international) approximately ten minutes before the start of the call. Callers will need the name of the call, “fourth quarter earnings report,” 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. EST Feb. 5 until 11:59 p.m. EST Feb. 12. The domestic number to access the replay is 1-800-475-6701 and the international number is 1-320-365-3844. The access code for both numbers is 983918. A replay of the conference call will also be available online. To access the audio replay, visit http://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 23 of its Form 10 information statement that was filed June 11, 2008, with the Securities and Exchange Commission, and on page F-21 of its most recent Form 10Q.

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 the leading developer 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 and country music network Great American Country (GAC); and Interactive Services, with leading online search and comparison shopping services BizRate, Shopzilla and uSwitch.