Business News

Scripps Networks Interactive Reports First Quarter Financial Results

Monday 11. May 2009 - Scripps Networks Interactive Inc. (NYSE:SNI) today reported operating results for the first quarter 2009.

Results for the three-month period ended March 31 reflect strong affiliate fee revenue growth and effective cost controls at the company’s lifestyle television networks, offset by lower advertising revenue and a challenging economic and competitive environment for the company’s online comparison shopping services.

Consolidated revenue for the quarter decreased 7.0 percent year over year to $361 million, with the decline attributable primarily to less favorable operating results at the company’s Shopzilla and uSwitch comparison shopping subsidiaries. During the first quarter the company disclosed that consolidated results for the period would be affected by a competitive repositioning at Shopzilla.

Total first-quarter expenses decreased 5.4 percent year over year.

Consolidated net income attributable to Scripps Networks Interactive for the first quarter was $60.1 million, or 37 cents per share compared with $66.5 million, or 41 cents in the first quarter 2008. Net income reported for the first quarter 2008 includes an estimate of corporate expenses based on amounts reported by the former parent company of Scripps Networks Interactive. Scripps Networks Interactive was spun off from The E. W. Scripps Company on July 1, 2008. Corporate expenses for the current period include about $3.7 million in one-time costs related to the spin-off.

Total segment profit for the company during the three-month period was $139 million compared with $154 million in the prior-year period. (See Note 1 for a definition of segment profit). During the first quarter 2009 the company generated $163 million in cash from operating activities and $91.9 million in free cash flow.

From the company’s Lifestyle Media business segment, which includes HGTV and Food Network, total revenue for the period was $311 million, which was even with the prior-year quarter. Affiliate fee revenue increased 17 percent year over year on improved rates for HGTV and expanding distribution of all of the company’s television networks. Other television brands operated by the company include DIY Network, Fine Living Network (FLN) and Great American Country (GAC). For the full year, the company now expects affiliate fee revenue to increase 12 to 14 percent.

Advertising revenue from the Lifestyle Media segment decreased 4.6 percent in the first quarter, reflecting weaker pricing in the scatter advertising marketplace relative to strong growth in the prior year. The company expects advertising revenue to continue to be under pressure at least through the first half due to the ongoing effects of the current economic recession.

The company reduced segment expenses even as it continued to invest in new, original programming during the period to build viewership and increase audience market share at all of its networks. Total Lifestyle Media expenses for the quarter declined 1.7 percent as a result of a general hiring freeze initiated during the fourth quarter 2008; reduced spending on marketing and promotions during the first quarter of 2009; and other expense controls initiated by the company.

Lifestyle Media segment profit increased 1.9 percent during the first quarter to $146 million compared with $143 million during the prior year.

Revenue from the company’s Interactive Services business segment, which includes Shopzilla and uSwitch, was $50.6 million during the first quarter compared with $77.5 million during the same period in 2008.

In addition to the competitive repositioning at Shopzilla, Interactive Services results were held back by lower consumer demand for retail products; an unfavorable foreign exchange environment; and the effects of a less-favorable sponsored-link revenue-sharing agreement with Google. Reduced energy rates in the United Kingdom during the quarter also led to lower energy-switching activity at uSwitch.

Interactive Services expenses declined 23 percent during the first quarter as the company continued to scale the businesses to match market conditions.

Interactive Services segment profit was $7.0 million in the first quarter compared with $21.0 million during the same period a year earlier. The company expects Interactive Services segment profit to be about $35 million for the full year.

“The company’s operating performance during the first quarter demonstrates the durability and recession-resistant nature of cable and satellite television networks and, in particular, the strength and popularity of our unique lifestyle brands,” said Kenneth W. Lowe, chairman, president and chief executive officer of Scripps Networks Interactive. “In the midst of the most challenging economic environment in a generation, our leading lifestyle networks are performing solidly, with growing audiences, expanding distribution and financial results that defy some daunting headwinds.

“At our Interactive Services businesses, we’re making progress repositioning Shopzilla as a consumer-centric service that also provides great value for online merchants,” Lowe said. “We’re focusing on consumer satisfaction, enhancing the comprehensiveness of search results and providing a measurable return on investment for retailers who pay us for leads. Our deliberate decision to put Shopzilla on a firmer competitive footing, however, means we’ll be sacrificing margin in the near term in exchange for longer-term sustainability of the business.

“Looking ahead, we’re optimistic, but cautious about the future,” Lowe said. “We expect macro-economic issues to continue weighing on all of our businesses, but are encouraged by early signs of improvement. In the meantime, we’re going to be investing in the health and vitality of our core brands, advancing our various growth strategies and keeping a tight rein on expenses. We’re confident that when the economy recovers, our Lifestyle Media brands will be stronger than ever and that our Interactive Services businesses will be competitively viable and poised for growth.”

Here are first-quarter results by operating segment:

Lifestyle Media


Lifestyle Media affiliate fee revenue grew 17 percent to $79.1 million. Advertising revenue was $225 million, down 4.6 percent.

Total expenses were down 1.7 percent. Programming expenses increased 9.5 percent to $71.2 million. Non-programming costs decreased 8.8 percent to $93.4 million.

Lifestyle Media segment profit was $146 million compared with $143 million in the prior-year period.

Operating revenue at HGTV was $144 million, up 1.7 percent. HGTV now reaches 98 million subscribers compared with about 96 million at the end of the first quarter 2008.

Food Network operating revenue was $116 million, down 2.5 percent. Food Network reaches 98 million subscribers, up from about 96 million at the end of the first quarter 2008.

Revenue at DIY Network was up 8.1 percent to $15.3 million. DIY can be seen in about 51 million households, up from about 47 million households a year ago.

Fine Living Network (FLN) revenue was $11.7 million, down 6.7 percent. Fine Living reaches 55 million households vs. 50 million households last year.

Revenue at Great American Country (GAC) increased 6.1 percent to $6.1 million. Great American Country can be seen in about 56 million homes compared with about 53 million homes a year ago.

Revenue from the Lifestyle Media segment’s interactive businesses (SN-Digital) was $15.7 million, down 6.2 percent.

Interactive Services

Interactive Services revenue was $50.6 million compared with $77.5 million.

Interactive Services expenses decreased 23 percent to 43.5 million.

Segment profit was $7.0 million compared with $21.0 million.