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November 4, 2011
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Scripps Networks Interactive Inc. (SNI) reported mixed financial results for the third quarter of 2011. Quarterly consolidated revenue of $503.7 million was up 7.9% year over year, but fell below the Zacks Consensus Estimate of $510 million.
Quarterly GAAP net income from continuing operation was $98.6 million or 65 cents per share compared with a net income of $101.7 million or 61 cents per share in the prior-year quarter. The third-quarter 2011 EPS of 65 cents was exactly in line with the Zacks Consensus Estimate.
Consolidated costs and expenses were $285.3 million in the reported quarter, up 14 % year over year. Quarterly operating income rose 0.4% year over year to $195.8 million. Operating margin in the reported quarter was 38.9% compared with 41.8% in the prior-year quarter. In the previous quarter, Scripps Networks repurchased 2.4 million shares of common stocks for approximately $100 million.
During the first nine months of 2011, Scripps Networks generated $545.5 million of cash from operations compared with $345.5 million in the prior-year period. Free cash flow (cash flow from operations less capital expenditures) in the reported period was $508.1 million compared with $309.8 million in the year-ago period.
At the end of the third quarter of 2011, Scripps Networks had $770.4 million of cash & marketable securities and $984.5 million of outstanding debt on its balance sheet compared with $598.4 million of cash & marketable securities and $884.4 million of outstanding debt at the end of fiscal 2010. At the end of the reported quarter, the debt-to-capitalization ratio was 0.34 compared with 0.32 at the end of fiscal 2010.
Lifestyle Media Segment
Quarterly total revenue of $496.3 million was an improvement of 7.3% year over year. Among the sub segments, Advertising revenue was $342.9 million, up 8.4% year over year, Affiliates fee revenue was $146.4 million, up 5.4% year over year, and Other revenue was $7 million, down 2% year over year. Total segment profit was $218.5 million, up 0.8% year over year.
Brand wise, HGTV revenue was $180.7 million, up 4.1% year over year. Total subscriber base is at present 98.6 million, up 1% year over year. Food Network revenue was $180 million, up 12.2% year over year. Total subscriber base came in at 99.4 million, down 1% year over year. Travel Channel revenue was $62.6 million, up 0.4% year over year. Total subscriber base was 94.6 million, down 1.6% year over year.
DIY Network revenue was $23.7 million, up 3.7% year over year. Total subscriber base came in at 53.5 million, down 0.9% year over year. Cooking Channel revenue was $16.6 million, up 35.6% year over year. Total subscriber base is at present 57.4 million, down 1.2% year over year. Great American Country revenue was $6.1 million, down 20.5% year over year. Total subscriber base is 59.2 million, down 0.7% year over year. SN Digital revenue was $24.7 million, up 14.6% year over year. Other revenue was $2.1 million, up 16.8% year over year.
Corporate Segment
Quarterly total revenue of $7.5 million was up 70.4% year over year. However, segment loss was $17.3 million, up 9.6% year over year.
Future Financial Guidance
Management has provided guidance for full-year 2011. At the Lifestyle Media segment, total revenue is anticipated to increase by 10% -12%. Programming expenses will likely witness 6%-9% inflation. Non-Programming expenses will be flat to down by 2%.
Recommendation
We maintain our long-term Neutral recommendation on Scripps Networks. Currently, it holds a short-term Zacks #3 Rank (Hold) on the stock.Scripps Network competes with Discovery Communications Inc. (DISCA) among others.
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