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Scripps Networks Interactive Reports Third Quarter Financial Results

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 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 websites and broadband vertical channels. The company’s media portfolio includes popular lifestyle television and Internet brands Food Network, HGTV, Travel Channel, DIY Network, Cooking Channel and country music network Great American Country.

   
SCRIPPS NETWORKS INTERACTIVE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)   Three months ended   Nine months ended
September 30, September 30,
(in thousands, except per share data)     2012     2011     Change     2012     2011     Change
 
Operating revenues $ 566,186 $ 503,744 12.4 % $ 1,702,517 $ 1,518,559 12.1 %

Cost of services, excluding depreciation and amortization of intangible assets

(156,297 ) (147,563 ) 5.9 % (444,981 ) (383,271 ) 16.1 %
Selling, general and administrative (158,823 ) (137,710 ) 15.3 % (482,554 ) (415,466 ) 16.1 %

Depreciation and amortization of intangible assets

(28,978 ) (22,736 ) 27.5 % (79,432 ) (66,471 ) 19.5 %
Gains (losses) on disposal of property and equipment     (16 )   82           (102 )   63      
 
Operating income 222,072 195,817 13.4 % 695,448 653,414 6.4 %
Interest expense (12,518 ) (9,157 ) 36.7 % (37,945 ) (26,348 ) 44.0 %
Equity in earnings of affiliates 11,240 7,035 59.8 % 46,267 29,717 55.7 %
Miscellaneous, net     1,667     (23,972 )         12,689     (23,504 )    
 
Income from continuing operations before income taxes 222,461 169,723 31.1 % 716,459 633,279 13.1 %
Provision for income taxes     (65,653 )   (33,183 )   97.9 %     (211,277 )   (174,866 )   20.8 %
 
 
Income from continuing operations, net of tax 156,808 136,540 14.8 % 505,182 458,413 10.2 %

Income (loss) from discontinued operations, net of tax

        (6,552 )             (61,252 )    
Net income 156,808 129,988 20.6 % 505,182 397,161 27.2 %

Net income attributable to noncontrolling interests

    (38,398 )   (31,385 )   22.3 %     (129,505 )   (120,604 )   7.4 %
Net income attributable to SNI   $ 118,410   $ 98,603     20.1 %   $ 375,677   $ 276,557     35.8 %
 

Income from continuing operations attributable to SNI common shareholders per basic share of common stock

  $ 0.79   $ 0.65         $ 2.46   $ 2.03      
 

Income from continuing operations attributable to SNI common shareholders per diluted share of common stock

  $ 0.78   $ 0.65         $ 2.44   $ 2.02      
 
Weighted average basic shares outstanding     149,985     161,789           152,731     166,318      
 
Weighted average diluted shares outstanding     151,201     162,276           153,905     167,314      
 
Net income per share amounts may not foot since each is calculated independently.
 
 
SCRIPPS NETWORKS INTERACTIVE, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)

As of

September 30,

 

December 31,

 

2012 2011

(in thousands, except per share data)

       
 
ASSETS
Current assets:
Cash and cash equivalents $ 439,238 $ 760,092

Accounts receivable (less allowances: 2012- $5,344; 2011- $5,000)

530,178 553,022
Programs and program licenses 392,141 336,305
Other current assets     71,203       66,549  
Total current assets 1,432,760 1,715,968
Investments 477,551 455,267
Property and equipment, net 223,205 219,845
Goodwill 573,482 510,484
Other intangible assets, net 648,243 556,095
Programs and program licenses (less current portion) 367,642 299,089
Unamortized network distribution incentives 27,842 46,239
Other non-current assets     149,248       158,683  
Total Assets   $ 3,899,973     $ 3,961,670  
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 9,422 $ 12,482
Program rights payable 42,422 50,402
Customer deposits and unearned revenue 38,276 52,814
Employee compensation and benefits 47,694 49,920
Accrued marketing and advertising costs 7,662 6,838
Other accrued liabilities     64,440       60,443  
Total current liabilities 209,916 232,899
Deferred income taxes 65,935 100,002
Long-term debt 1,384,148 1,383,945
Other liabilities (less current portion)     209,964       148,429  
Total liabilities     1,869,963       1,865,275  
Redeemable noncontrolling interest     115,722       162,750  
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: 2012 - 115,461,988 shares; 2011 - 122,828,359 shares

1,155 1,228

Voting - authorized: 60,000,000 shares; issued and outstanding: 2012 - 34,317,173 shares; 2011 - 34,317,173 shares

    343       343
Total 1,498 1,571
Additional paid-in capital 1,381,362 1,346,429
Retained earnings 272,750 364,073
Accumulated other comprehensive income (loss)     (24,701 )     (33,347 )
Total SNI shareholders' equity 1,630,909 1,678,726
Noncontrolling interest     283,379       254,919  
Total equity     1,914,288       1,933,645  
Total Liabilities and Equity   $ 3,899,973     $ 3,961,670  
 
 
SCRIPPS NETWORKS INTERACTIVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

  Nine months ended
September 30,
(in thousands)  

 

2012     2011  
 
Cash Flows from Operating Activities:
Net income $ 505,182 $ 397,161
Loss (income) from discontinued operations         61,252  
 
Income from continuing operations, net of tax 505,182 458,413
Depreciation and amortization of intangible assets 79,432 66,471
Amortization of network distribution costs 18,397 31,634
Program amortization 355,850 313,349
Equity in earnings of affiliates (46,267 ) (29,717 )
Program payments (478,931 ) (375,485 )
Capitalized network distribution incentives (2,948 ) (6,752 )
Dividends received from equity investments 45,096 28,299
Deferred income taxes (53,164 ) (1,357 )
Stock and deferred compensation plans 30,838 19,347
Changes in certain working capital accounts:
Accounts receivable 30,837 (9,090 )
Other assets (10,619 ) (1,643 )
Accounts payable (5,381 ) (1,104 )
Accrued employee compensation and benefits 417 (5,271 )
Accrued income taxes (11,660 ) 25,221
Other liabilities (19,727 ) 12,077
Other, net     (3,755 )   7,800  
Cash provided by (used in) continuing operating activities 433,597 532,192
Cash provided by (used in) discontinued operating activities         13,253  
Cash provided by (used in) operating activities     433,597     545,445  
 
Cash Flows from Investing Activities:
Additions to property and equipment (34,058 ) (37,355 )
Purchase of long-term investments (410,759 )
Purchase of note receivable due from UKTV (134,077 )
Collections (funds advanced) on note receivable 13,613
Purchase of subsidiary companies, net of cash acquired (119,036 )
Purchase of noncontrolling interest (3,400 )
Other, net     (15,777 )   2,854  
Cash provided by (used in) continuing investing activities (155,258 ) (582,737 )
Cash provided by (used in) discontinued investing activities     10,000     141,786  
Cash provided by (used in) investing activities     (145,258 )   (440,951 )
 
Cash Flows from Financing Activities:
Increase in long-term debt 100,000
Dividends paid (55,032 ) (45,778 )
Dividends paid to noncontrolling interests (148,181 ) (58,676 )
Noncontrolling interest capital contribution 52,804
Repurchase of Class A common stock (500,251 ) (400,000 )
Proceeds from stock options 89,019 18,667
Other, net     5,190     (6,505 )
Cash provided by (used in) financing activities     (609,255 )   (339,488 )
Effect of exchange rate changes on cash and cash equivalents     62     399  
Increase (decrease) in cash and cash equivalents (320,854 ) (234,595 )
Cash and cash equivalents:
Beginning of year     760,092     549,897  
 
End of period   $ 439,238   $ 315,302  
 
Supplemental Cash Flow Disclosures:
Interest paid, excluding amounts capitalized $ 39,599 $ 32,689
Income taxes paid     254,746     137,382  
 

Notes to Results of Operations

1. OTHER CHARGES AND CREDITS

In August 2011, the Company announced that SNI would be acquiring a 50-percent equity interest in UKTV for £239 million and £100 million to acquire the outstanding preferred stock and debt due to Virgin Media, Inc. from UKTV. To minimize the cash flow volatility resulting from British Pound to U.S. dollar currency exchange rate changes, we subsequently entered into foreign currency forward contracts that effectively set the U.S. dollar value for the transaction. We settled these foreign currency exchange forward contracts around the September 30, 2011 closing of the transaction and recognized losses from the contracts totaling $25.3 million. These losses reported within the “Miscellaneous” caption in our consolidated statements of operations reduced net income attributed to SNI $15.7 million, $.10 per share.

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