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8-K - FORM 8-K - Scripps Networks Interactive, Inc.d721193d8k.htm

Exhibit 99

 

LOGO

Scripps Networks Interactive reports first quarter financial results

 

    Revenues of $644 million, up 8.3 percent

 

    Segment profit of $271 million, up 9.4 percent

 

    Net income attributable to Scripps Networks Interactive of $0.87 per share

For immediate release

May 8, 2014

KNOXVILLE, Tenn. — Scripps Networks Interactive Inc. (NYSE: SNI) today reported operating results for the first quarter 2014.

Consolidated revenues for the quarter increased 8.3 percent to $644 million from the prior-year period. Results for the three-month period ended March 31 reflect strong advertising revenue of $434 million, up 10 percent, and affiliate fee revenue of $201 million, up 7.2 percent year-over-year.

Costs of services and selling, general and administrative expenses for the quarter increased 7.5 percent from the prior-year period to $373 million. The increase was driven primarily by higher programming amortization at the company’s lifestyle television networks.

Total segment profit increased 9.4 percent to $271 million. (See reconciliation of non-GAAP financial measures for a definition of segment profit.)

First quarter net income attributable to Scripps Networks Interactive was $128 million, or $0.87 per diluted share. First quarter 2013 net income was $108 million, or $0.72, which included unfavorable tax adjustments totaling $0.05 per diluted share.

“Scripps Networks Interactive once again delivered strong results demonstrating the strength of our lifestyle brands as valuable advertising platforms,” said Kenneth W. Lowe, chairman, president and chief executive officer of Scripps Networks Interactive. “We continue to balance investment in our brands by developing compelling content that engages millions of media consumers across a range of platforms and geographies. This has established Scripps Networks Interactive as the leader in influencing consumer purchasing decisions in the home, food and travel categories.”

Segment results

Lifestyle media revenues in the first quarter of 2014 increased 7.6 percent to $623 million driven by advertising and affiliate fee revenue growth. Total advertising revenue for the lifestyle media segment grew 8.9 percent to $426 million. Affiliate fee revenue grew 6.3 percent to $190 million due to higher rates and the benefit of our online video distribution agreements.

Lifestyle media segment profit increased 11 percent to $311 million reflecting the strong revenue growth and lower than expected program amortization.

Corporate and other revenues, which are primarily international operations, increased 41 percent to $21.0 million, due primarily to the April 2013 acquisition of Asian Food Channel and the launch of our uLive business.

Corporate and other segment loss increased 22 percent to $40.2 million, driven primarily by continued investments in international operations and uLive.com.


    

Three months ended

March 31,

       

(in thousands)

   2014     2013     Change  

Segment operating revenues:

      

Lifestyle Media

   $ 623,481      $ 579,482        7.6

Corporate and other

     20,995        14,903        40.9

Intersegment eliminations

     (727    
  

 

 

   

 

 

   

 

 

 

Total operating revenues

   $ 643,749      $ 594,385        8.3
  

 

 

   

 

 

   

 

 

 

Segment profit (loss):

      

Lifestyle Media

   $ 310,977      $ 280,572        10.8

Corporate and other

     (40,243     (33,098     21.6
  

 

 

   

 

 

   

 

 

 

Total segment profit

   $ 270,734      $ 247,474        9.4
  

 

 

   

 

 

   

 

 

 

Share repurchase program

For the quarter ended March 31, the company repurchased 3.1 million shares under its stock repurchase program, for an aggregate purchase price of $250 million. As of March 31, $1.4 billion remains available for repurchase under the company’s share repurchase program.

Conference call

The senior management team of Scripps Networks Interactive will discuss the company’s first 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 612-234-9959 (international) approximately ten minutes before the start of the call. Callers will need the name of the call, “SNI First 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, May 8 until 11:59 p.m. ET, May 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 324139. 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 2013 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 engaging lifestyle content in the home, food and travel categories for television, the Internet and emerging platforms. The company’s lifestyle media portfolio comprises popular television and Internet brands HGTV, DIY Network, Food Network, Cooking Channel, Travel Channel and Great American Country, which collectively reach more than 170 million consumers each month. Companion websites complement on-air programming with video and social media that inform and inspire. The company’s global networks reach millions of consumers across North and South America, Asia, Europe, the Middle East and Africa. Scripps Networks Interactive is headquartered in Knoxville, Tenn. For more information, please visit http://www.scrippsnetworksinteractive.com.

# # #

Contact: Scripps Networks Interactive, Inc.

Investors: Mike Gallentine, 865-560-4473, mgallentine@scrippsnetworks.com

Media: Lee Hall, 865-560-3853, LHall@scrippsnetworks.com


SCRIPPS NETWORKS INTERACTIVE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(unaudited)   

Three months ended

March 31,

       

(in thousands, except per share data)

   2014     2013     Change  

Operating revenues

   $ 643,749      $ 594,385        8.3

Cost of services, excluding depreciation and amortization of intangible assets

     (181,138     (163,751     10.6

Selling, general and administrative

     (191,877     (183,160     4.8

Depreciation and amortization of intangible assets

     (31,294     (26,700     17.2

Gains (losses) on disposal of property and equipment

     152        (976  
  

 

 

   

 

 

   

 

 

 

Operating income

     239,592        219,798        9.0

Interest expense

     (12,431     (12,145     2.4

Equity in earnings of affiliates

     22,261        20,582        8.2

Miscellaneous, net

     273        (3,361  
  

 

 

   

 

 

   

 

 

 

Income from operations before income taxes

     249,695        224,874        11.0

Income tax provision

     (76,906     (73,687     4.4
  

 

 

   

 

 

   

 

 

 

Net income

     172,789        151,187        14.3

Net income attributable to noncontrolling interests

     (44,493     (43,368     2.6
  

 

 

   

 

 

   

 

 

 

Net income attributable to SNI

   $ 128,296      $ 107,819        19.0
  

 

 

   

 

 

   

 

 

 

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

   $ 0.88      $ 0.72     
  

 

 

   

 

 

   

 

 

 

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

   $ 0.87      $ 0.72     
  

 

 

   

 

 

   

 

 

 

Weighted average basic shares outstanding

     146,322        148,813     
  

 

 

   

 

 

   

 

 

 

Weighted average diluted shares outstanding

     147,440        149,901     
  

 

 

   

 

 

   

 

 

 


SCRIPPS NETWORKS INTERACTIVE, INC.

CONSOLIDATED BALANCE SHEETS

 

(unaudited)    As of  

(in thousands, except share and par value amounts)

   March 31,
2014
    December 31,
2013
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 509,137      $ 686,371   

Accounts receivable (less allowances: 2014- $8,108; 2013- $6,853)

     592,205        619,619   

Programs and program licenses

     453,286        423,949   

Deferred income taxes

     53,260        41,140   

Other current assets

     37,010        90,231   
  

 

 

   

 

 

 

Total current assets

     1,644,898        1,861,310   

Investments

     501,542        488,198   

Property and equipment, net

     242,812        246,350   

Goodwill

     574,849        574,582   

Other intangible assets, net

     641,819        655,009   

Programs and program licenses (less current portion)

     436,948        413,057   

Deferred income taxes

     52,701        39,075   

Other non-current assets

     161,261        160,866   
  

 

 

   

 

 

 

Total Assets

   $ 4,256,830      $ 4,438,447   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities:

    

Accounts payable

   $ 24,594      $ 18,278   

Current portion of debt

     884,881     

Program rights payable

     38,986        30,412   

Customer deposits and unearned revenue

     51,558        70,427   

Employee compensation and benefits

     47,530        67,188   

Accrued marketing and advertising costs

     6,833        11,053   

Other accrued liabilities

     113,304        81,341   
  

 

 

   

 

 

 

Total current liabilities

     1,167,686        278,699   

Debt (less current portion)

     499,675        1,384,488   

Other liabilities (less current portion)

     229,211        223,368   
  

 

 

   

 

 

 

Total liabilities

     1,896,572        1,886,555   
  

 

 

   

 

 

 

Redeemable noncontrolling interest

     131,670        133,000   
  

 

 

   

 

 

 

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: 2014 - 109,568,940 shares; 2013 - 111,891,667 shares

     1,096        1,119   

Voting - authorized: 60,000,000 shares; issued and outstanding: 2014 - 34,317,171 shares; 2013 - 34,317,171 shares

     343        343   
  

 

 

   

 

 

 

Total

     1,439        1,462   

Additional paid-in capital

     1,452,184        1,447,496   

Retained earnings

     543,724        662,574   

Accumulated other comprehensive income (loss)

     (8,828     (12,529
  

 

 

   

 

 

 

Total SNI shareholders’ equity

     1,988,519        2,099,003   

Noncontrolling interest

     240,069        319,889   
  

 

 

   

 

 

 

Total equity

     2,228,588        2,418,892   
  

 

 

   

 

 

 

Total Liabilities and Equity

   $ 4,256,830      $ 4,438,447   
  

 

 

   

 

 

 


SCRIPPS NETWORKS INTERACTIVE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(unaudited)   

Three months ended

March 31,

 

(in thousands)

   2014     2013  

Cash Flows from Operating Activities:

    

Net income

   $ 172,789      $ 151,187   

Depreciation and amortization of intangible assets

     31,294        26,700   

Program amortization

     140,998        127,791   

Equity in earnings of affiliates

     (22,261     (20,582

Program payments

     (185,438     (144,722

Dividends received from equity investments

     15,802        17,640   

Deferred income taxes

     (25,557     58,196   

Stock and deferred compensation plans

     17,677        20,395   

Changes in certain working capital accounts:

    

Accounts receivable

     27,514        (5,861

Other assets

     (4,044     (6,457

Accounts payable

     6,281        13,487   

Accrued employee compensation and benefits

     (22,993     (23,141

Accrued / refundable income taxes

     90,739        27,055   

Other liabilities

     (29,374     5,403   

Other, net

     4,859        20,978   
  

 

 

   

 

 

 

Cash provided by (used in) operating activities

     218,286        268,069   
  

 

 

   

 

 

 

Cash Flows from Investing Activities:

    

Additions to property and equipment

     (9,195     (17,505

Collections (funds advanced) on note receivable

     1,250        3,872   

Purchase of long-term investments

     (3,167     (171

Other, net

     522        (20,948
  

 

 

   

 

 

 

Cash provided by (used in) investing activities

     (10,590     (34,752
  

 

 

   

 

 

 

Cash Flows from Financing Activities:

    

Dividends paid

     (29,323     (22,330

Dividends paid to noncontrolling interests

     (125,520     (89,865

Repurchase of Class A common stock

     (250,062     (145,050

Proceeds from stock options

     22,342        13,074   

Other, net

     (2,534     (4,329
  

 

 

   

 

 

 

Cash provided by (used in) financing activities

     (385,097     (248,500
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     167        (1,118
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (177,234     (16,301

Cash and cash equivalents:

    

Beginning of year

     686,371        437,525   
  

 

 

   

 

 

 

End of period

   $ 509,137      $ 421,224   
  

 

 

   

 

 

 

Supplemental Cash Flow Disclosures:

    

Interest paid, excluding amounts capitalized

   $ 15,359      $ 15,754   

Income taxes refunded

     (313     (32,507
  

 

 

   

 

 

 


NON-GAAP FINANCIAL MEASURES

Our chief operating decision maker evaluates the operating performance of our business segments and makes decisions about the allocation of resources to our business segments using a measure we call segment profit. Segment profit excludes interest, income taxes, depreciation and amortization, divested operating units, restructuring activities, investment results and certain other items that are included in net income determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Items excluded from segment profit generally result from decisions made in prior periods or from decisions made by corporate executives rather than the managers of the business segments. Depreciation and amortization charges are the result of decisions made in prior periods regarding the allocation of resources and are therefore excluded from the measure. Financing, tax structure and divestiture decisions are generally made by corporate executives. Excluding these items from our business segment performance measure enables us to evaluate business segment operating performance for the current period based upon current economic conditions and decisions made by the managers of those business segments in the current period.

A reconciliation of segment profit to operating income determined in accordance with GAAP for each business segment is as follows:

 

    

Three months ended

March 31,

 

(in thousands)

   2014     2013  

Operating income

   $ 239,592      $ 219,798   

Depreciation and amortization of intangible assets:

    

Lifestyle Media

     25,345        23,316   

Corporate and other

     5,949        3,384   

Losses (gains) on disposal of property and equipment:

    

Lifestyle Media

     (152     976   
  

 

 

   

 

 

 

Total segment profit

   $ 270,734      $ 247,474  
  

 

 

   

 

 

 

We define free cash flow as cash provided by operating activities less dividends paid to noncontrolling interests and acquisitions of property and equipment. We measure free cash flow as we believe it is an important indicator for management and investors as to our liquidity, including our ability to reduce debt, make strategic investments and return capital to shareholders. A reconciliation of free cash flow is as follows:

 

    

Three months ended

March 31,

 

(in thousands)

   2014     2013  

Segment profit

   $ 270,734      $ 247,474   

Income taxes refunded

     313        32,507   

Interest paid

     (15,359     (15,754

Working capital and other

     (37,402     3,842  
  

 

 

   

 

 

 

Cash provided by operating activities

     218,286        268,069   

Dividends paid to noncontrolling interests

     (125,520     (89,865

Additions to property and equipment

     (9,195     (17,505
  

 

 

   

 

 

 

Free cash flow

   $ 83,571      $ 160,699  
  

 

 

   

 

 

 

Since segment profit and free cash flow are non-GAAP measures, they should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance reported in accordance with GAAP.


SUPPLEMENTAL FINANCIAL INFORMATION

Our lifestyle media division earns revenue primarily from the sale of advertising time on our national television networks, affiliate fees paid by cable and satellite television operators that carry our network programming, the licensing of our content to third parties, the licensing of our brands for consumer products such as books and kitchenware, and from the sale of advertising on our lifestyle media affiliated websites.

Supplemental information for lifestyle media is as follows:

 

    

Three months ended

March 31,

       

(in thousands)

   2014     2013     Change  

Operating revenues by brand:

      

Food Network

   $ 218,973      $ 207,583        5.5

HGTV

     227,215        205,367        10.6

Travel Channel

     79,741        76,639        4.0

DIY Network

     35,142        31,788        10.6

Cooking Channel

     28,298        26,186        8.1

Great American Country

     7,104        6,403        10.9

Digital Businesses

     23,935        22,595        5.9

Other

     3,260        3,896        (16.3 )% 

Intrasegment eliminations

     (187     (975  
  

 

 

   

 

 

   

 

 

 

Total segment operating revenues

   $ 623,481      $ 579,482        7.6
  

 

 

   

 

 

   

 

 

 

Operating revenues by type:

      

Advertising

   $ 425,998      $ 391,211        8.9

Network affiliate fees, net

     190,171        178,963        6.3

Other

     7,312        9,308        (21.4 )%