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Scripps Networks Interactive (NYSE:SNI)

Q4 2010 Earnings Call

February 10, 2011 10:00 am ET

Executives

Joseph NeCastro - Chief Administrative Officer and Chief Financial Officer

John Lansing - President of Scripps Networks LLc

Lori Hickok - Executive Vice President of Finance

Kenneth Lowe - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Mark Kroeger - Senior Vice President of Corporate Communications and Investor Relati ons

Analysts

Andrew Kim - Macquarie Research

Michael Morris - Davenport & Company, LLC

Jessica Cohen - BofA Merrill Lynch

Eric Handler - MKM Partners LLC

John Janedis -

Benjamin Swinburne - Morgan Stanley

Michael Nathanson - Sanford Bernstein

Anthony DiClemente - Barclays Capital

Benjamin Mogil - Stifel, Nicolaus & Co., Inc.

Jason Bazinet - Citigroup Inc

David Bank - RBC Capital Markets

Alexia Quadrani - JP Morgan Chase & Co

Douglas Mitchelson - Deutsche Bank AG

Matthew Harrigan - Wunderlich Securities Inc.

Marla Backer - Soleil

Brian Karimzad - Goldman Sachs Group Inc.

Thomas Eagan - Collins Stewart LLC

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Scripps Networks Interactive Fourth Quarter Earnings Report. [Operator Instructions] I would now like to turn the conference over to your host, Senior Vice President of Investor Relations, Mr. Mark Kroeger. Please go ahead.

Mark Kroeger

Thanks, Anna, and good morning, all, and thanks for joining us. We'll start the conference call today with comments from Ken Lowe, our Chairman, President and CEO; and Joe NeCastro, Chief Financial Officer and Chief Administrative Officer. Our prepared remarks should take about 20 minutes, then we'll open it up for questions. Also on the call is John Lansing, President of Scripps Networks' Operating Division; and Lori Hickok, Executive Vice President of Finance.

Let me remind you, if you prefer to listen in via the Internet, go to our website, click on Investor Relations and find the microphone icon on the landing page. Additionally, on the page under the microphone icon, you'll find our fourth quarter earnings presentation materials that we will be referring to during the prepared remarks portion of our call. An audio archive will be available on the site later today and we'll leave it there for a few weeks so you can access it at your convenience.

Let me remind you that our discussion this morning will contain certain forward-looking statements. Actual results may differ from those predicted, and some of the factors that may cause results to differ are set forth in our publicly-filed documents, including our Form 10-K. And with that, I'll turn it over to Ken.

Kenneth Lowe

Okay, thank you, Mark. Good morning, everyone. Thanks as always for joining us. We appreciate your interest in Scripps Networks Interactive, and let me just say right up front that your company had a very good fourth quarter and an outstanding 2010. The list of accomplishments is really quite impressive: Healthy double-digit growth and advertising revenue; unsurpassed growth in affiliate fee revenue, thanks to new and vastly improved distribution agreements that were in place for the year; the seamless integration of the Travel Channel, a smart acquisition that proved to be accretive to shareholders in year one; the immediate success of the Cooking Channel, already a must-have network for our distribution partners and intense foodies everywhere; the amazing turnaround domestically and abroad at Shopzilla, which has expanded and improved its portfolio of online comparison shopping businesses; the tremendous success of the Food Network Magazine, a clear favorite on America's newsstands and a real tribute to the marketing power of our brand; the successful launch of Food Network's In The Kitchen app, which immediately became one of iTunes' top downloads. Since November, we've received 200,000 downloads and still counting; the successful and high-profile launch of the Food Network in the United Kingdom and at about 50 other promising markets around the globe; and last, but by no means least, the perennial popularity of HGTV and Food Network as preferred television destinations for creative, innovative, entertaining and inspiring programming that focuses 24/7 on all things home and food.

Make no mistake about it, Scripps Networks Interactive is rapidly growing as a dynamic media company. Now we know that viewership growth paused a bit in the fourth quarter, but there are plenty of positive signs that the momentum is building for a great 2011. We've carved out and totally claimed a unique competitive advantage as America's leader in delivering top-quality lifestyle programming and content on television, and on any media platform consumers and advertisers might choose. So it should come as no surprise to anyone that there's much more to come. At HGTV, we know our viewers love their homes. That's why this year, we'll be adding more than a dozen new titles and limited series, including four brand-new daytime shows. You'll see new faces, with more than a dozen new personalities, design experts, home-improvement experts, real estate pros, all with a passion for making our homes and home life the best that they can be. We'll be building on our most popular franchises. We'll be taking Selling New York to L.A. and House Hunters on Vacation. We're making big improvements to Design Star and All American Handyman, the shows that draw our biggest audiences each year. Between the two, we'll have 13 consecutive weeks of highly-rated and entertaining competition programming this summer. And we're going to be even more interactive. The one question we always get from our viewers is, "Can HGTV come and do that to my house?" So we are, with a new show called HGTV'd. We're going to roll up to viewers' homes in a big truck and give them the makeover of a lifetime. It should be really exciting. Our guiding principles at HGTV? Fun, excitement, wish fulfillment and a fair amount of voyeurism. Come on, admit it. You know you like to see inside other people's homes. Everyone does. And there'll be more of that in 2011 on HGTV. We think it's going to be a fantastic year for the network.

At Food Network, we're all about innovation. We have our sights on stretching the boundaries of the food genre on television and on other new platforms. Watch for new shows with titles like Restaurant: Impossible, which is, by the way, is already on the air and a hit; Heat Seekers; Killer Foods, Fat Chef, Tough Cookies, Chocolate Nuts, Halloween Wars and many, many more to come. A lot of fun and excitement on the Food Network. And also watch for new shows from stellar talents like Bobby Flay and Duff Goldman. And watch for a seamless 52 weeks of original specials in primetime every Sunday night. And watch for us to build on fan favorites like Chopped, with an all-star showdown, and a new and improved version of the ever popular Next Food Network Star. Food Network and the food television genre have risen to unimaginable heights, and we see no reason why we can't keep right on growing. We couldn't be more enthusiastic about the exciting new lineup our creative team at Food network has in store for 2011. Over at Travel Channel, we're well on our way to creating a whole new sense of surprise, excitement and innovation. We have 20 new series ready to debut this year, with great titles like Bike NYC, Sand Guys, Mancation and Dare You To Go There. And we'll be building on our four sturdy cornerstones: Anthony Bourdain, Andrew Zimmern, Adam Richman and our popular Ghost Adventures franchise. Look for new episodes and interesting new perspectives from these proven hits and compelling personalities. And we're re-energizing Travel Channel with new concepts and talents. We think we're definitely on the right track in redefining the travel content genre for television and other media platforms.

At our premium tier channels in the home and food categories, the story is very much the same. DIY Network and the Cooking Channel are popular with media consumers who really want to take a deeper dive into home improvement and culinary programming, and they're delivering uncommon value to our advertising and distribution partners. Our creative teams have strengthened programming schedules for 2011 and will be building brand awareness at both networks, as we work to widen the moat around our competitive advantage in these lucrative content categories. And at Great American Country, we're going to be leveraging our advantage as America's leading pure country music TV channel to explore country living as a lifestyle category. So, get ready for the rodeo and some other fun new ideas from our inspired team in Nashville.

And finally, we remain very excited about our other big growth opportunity, namely international. And while we haven't announced any significant deals, we remain very focused, interactively evaluating promising opportunities. So there you have it. Scripps Networks Interactive has been rapidly growing now for 16 consecutive years. And that growth will continue, thanks in large part to the popularity of our power brands, HGTV and Food Network; the opportunity to completely define another lifestyle category at Travel Channel; the opportunity to export our networks and expertise around the globe; and the unique interactive utility of all our content on mobile platforms and social network media. They all bode well for the company's future. We have a singular advantage in the marketplace because we own all of our content and we're in great position to capitalize on new video platforms as they emerge. And, in particular, working with our distribution partners on their promising TV Everywhere projects. So as managers of this great company, let me assure you that we're committed as we have been from the start, to creating long-term value for our shareholders. We have a proven track record of consistent growth, as reflected in the tremendous value that's been created at SNI over the years. And the good news is, there's more to come. So with that, let me turn it over to Joe to review the quarter and comment on the outlook that we provided this morning. Joe?

Joseph NeCastro

Thanks, Ken. Good morning, everyone. I'm sure you've seen our press release by now, so as is our custom, I won't go over the numbers in detail. I'm going to focus my remarks on the fourth quarter and provide some color on what drove our very positive results. Starting with a consolidated view, here are the headlines. Revenue was up 33% and was up 20% X travel. Total segment profit was up 63% and as a result, attributable net income grew 35% to $0.77 per share or $0.68 on a normalized basis. EPS for the quarter includes a favorable tax adjustment that added $0.09 per share and a $0.03 per share increase related to the contribution of the Cooking Channel to the Food Network partnership. We contributed the Cooking Channel to the partnership in 2010, which diluted our partners at stake in lieu of cash contribution. Our partners' share of income for the period was reduced accordingly and a benefit accrues to us for now. If the Tribune ultimately chooses to contribute cash, which we believe they will, the minority stake would be restored to its previous level.

Looking at the full year 2010, the highlights are that revenue was up 34% and was up 19% X travel. Total segment profit was up 45%. And attributable net income of $2.45 per share compared favorably with $1.81 per share in 2009. So a very strong quarter and a great year. The key revenue drivers for the fourth quarter were strong advertising sales, up 23% as reported, and up 11% excluding the Travel Channel. Robust 61% growth in affiliate fee revenues. It was up 39% X travel. And 38% growth in referral fees and other revenues from our online comparison shopping businesses. Advertising sales during the period benefited from a healthy scatter advertising market, combined with the success we've had monetizing the audience growth we've aggregated at all of our networks. Scattered pricing across the networks during the quarter was, on average, up in the mid-to-high teens over the prior-year period and up mid- to high-20s over 2009 upfront pricing. Looking to the first quarter, scattered pricing continues to be up strong, and it was up mid-to-high teens over 2010 and up mid-20s over the most recent upfront. Additionally, as another sign of the strength of the advertising market for 2011, we experienced a very strong calendar market, where one didn't even materialize in either 2010 or 2009. We're seeing strength in nearly every advertising category, with food, consumer packaged goods and retail leading the charge. The recovery in automotive and financial also contributed to our improved ad sales results. The growth in affiliate revenues reflects the success we've had in late 2009, negotiating new care agreements for both HGTV and Food Network. As we've stated on earlier calls, under the current affiliate fee agreements, we realized by design a substantial increase in rates in the first year of the new contracts. Consequently, affiliate fee revenue growth will moderate considerably this year from the robust increase we achieved in 2010.

Now that said, we're still expecting decent growth in affiliate fee revenue for 2011. Going deeper now into Lifestyle Media results, Food Network and HGTV benefited during the quarter from their dominant competitive positions in their respective content categories, and from their sizable audiences. Our premium tier networks, likewise, are capitalizing on growing distribution, increasing viewership and a strong scatter advertising marketplace. In total, Lifestyle Media revenue was up 32% to more than $500 million in the quarter compared with last year. Excluding Travel Channel results, revenues were up 17% from the prior year. Lifestyle Media segment profit was up a very hefty 48% and the margin increased to 49%, up 500 basis points from the fourth quarter of last year. An outstanding performance by the networks. Travel Channel is proving to be a definite win for the company and for its shareholders. We remain very positive about the direction the channel is heading. As Ken mentioned, we're very enthusiastic about the new programming that we'll be unveiling starting in the second quarter, which should further improve the network's operating results. Reported Travel Channel revenue growth may look a bit anemic in the fourth quarter, but that's due to some one-off adjustments that increased the prior year results. The underlying business at Travel was quite strong, with ad revenues up more than 20% on a pro-forma basis. As Ken said, acquiring this great asset last year was clearly the right decision for the company. And similarly, Cooking Channel's performance during the fourth quarter affirmed our decision to re-brand Fine Living. Total revenues for the network were up 52%, excluding the amortization of incentives that we negotiated with our distribution partners. Net of these launch amortization, reported revenues for the brand were up about 28%. As a reminder, the launch incentives for Cooking totaled about $40 million. We will continue to amortize them for the next few years. At Shopzilla, as Ken mentioned, we gained considerable momentum in the fourth quarter. After restating the business in 2009 and into early 2010, we focused on optimizing the core Comparison Shopping business, while expanding and diversifying the company's opportunities to connect to buyers and sellers. The outstanding results in the fourth quarter are attributable to continued expansion of Shopzilla's share in Europe and a return to growth in the company's domestic Comparison Shopping business.

Fourth quarter year-over-year growth in Europe was 64%, while domestic revenues grew 30%, both very, very strong results. Revenue from newer business lines was quite strong as well, with our Syndication business up 40%, and Beso.com up significantly compared to last year. We're very encouraged about the improving performance at our Interactive Services segment and have high expectations for continued growth this year.

Turning to international development, I really don't have much new to report other than to say we continue to make good progress attracting new Food Network fans in the U.K. We're also evaluating a number of development opportunities around the world. For example, we recently launched Food Network in South Africa and Iceland, and are seeing very promising ratings performance already. As for the balance sheet, we're maintaining our strong cash position, preferring at present the flexibility it affords us, as we consider growth opportunities. As we've said on numerous occasions, our capital structure's under continuous review for us, especially as cash continues to accumulate.

Finally, we've provided our guidance for full-year 2011. You can see the complete updated guidance in the press release and the presentation deck that we provided. But let me go over it quickly here. As the overall economic recovery has continued to gain momentum and our overall confidence in business trends has increased, we would like to resume providing guidance for total Lifestyle Media revenue. Accordingly, based on current trends and business plans, we expect total revenue should increase between 10% and 12% in 2011. Looking at Lifestyle Media segment expenses. Programming costs will likely be up 6% to 9% as we invest to enhance the competitive leadership we've achieved with Food and HGTV, and to accelerate our strategy to define the travel TV genre. And we expect non-programming expenses to be flat to down 2%. Let me remind you that we had about $39 million in one-time expenses in 2009. Interactive Services profit is expected to be between $50 million and $55 million, as our restaging takes firm hold. And finally, international operating losses for the full year are expected to be in the range of $5 million to $10 million. That could change obviously, depending on opportunities we may identify and act upon as the year progresses.

Now looking at other items, capital spending is expected to be between $75 million and $85 million this year. Now this reflects a shift of some capital spending into 2011 from 2010, which was a little lighter than we originally expected. If you remember, we originally provided 2010 CapEx guidance of $95 million to $100 million and spent only $78 million in the year. Effective tax rate will be up from last year's unusually low rate to a more normal 32% to 34%. Depreciation and amortization is expected to be between $125 million and $135 million. We expect interest expense to be between $33 million and $35 million. And finally, we're expecting noncontrolling interest share of net income to be in the $125 million to $135 million range. Again, that estimate could vary depending on how and when the Cooking Channel dilution with Tribune is resolved. And that's it for our prepared remarks. Thanks for your attention. Operator, we are ready to take questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from John Janedis with UBS.

John Janedis -

Joe, can you talk a little bit more about the components of that 10% to 12% guidance for the Lifestyle Media segment? Meaning, do both advertising and affiliate fees grow with that double-digit rate?

Joseph NeCastro

No. I think, John, what we're trying to make clear was that the growth in the affiliate fees will moderate as we go forward. After that first year jump, especially at Food Network with the renewals. So, we would expect that the affiliate fee growth will be more modest, probably in the mid-single digits. And then advertising revenue, of course, will be double digits.

John Janedis -

Just related to the affiliate fees, on the subscriber side, I think your total subs were down just slightly, sequentially. Was that due to any change maybe in the packages offered by the MSOs? And if not or if it is, is that a trend that you expect to continue or reverse this year?

John Lansing

No, John. This is John. Not a trend at all. Just a very small variance and I can't really put my finger exactly on what it is, but looking at the numbers that we're seeing coming in for January, it looks like it's still -- everything is at or above where it was at the end of the year.

John Janedis -

And one last one just for Joe, is the option for Tribune to contribute cash to the partnership open-ended? And if not, is there any kind of date where they have to decide to contribute that cash?

Joseph NeCastro

John, that's a matter for negotiation. We don't really want to comment on that. But it's not our intention to leave it open-ended.

Operator

Our next question comes from Alexia Quadrani with JP Morgan.

Alexia Quadrani - JP Morgan Chase & Co

A lot of great information on new programming on a lot of your cable networks launching this year. Can we just drill that a little bit more on that in terms of the timing? I'm trying to get to the softness in ratings and trying to get a better sense of when we may see a bit of a change in that trend, in terms of when a lot of this programming is going to launch, or I guess anything else out there that you may think may have an impact on the ratings you've been seeing.

Kenneth Lowe

Sure, Alexia. Some of it has already launched. In fact, HGTV had its highest rated day in the history of the network on January 1 with a very successful day, and continues to see some success with new series, Cash & Cari and Selling New York, as Ken mentioned. Food Network is doing very well in the first part of the first quarter with Restaurants: Impossible and the new series of Chopped. And Worst Cooks in America is doing very, very well. The programming rollout for Food Network, in particular, will include 52 weeks of primetime original Sunday specials. First time that we've done that. And a very large slate of new series that'll be introduced through the second and third quarters, and into the fourth quarter of next year as well. Travel Channel is the one that will probably see the programming rollout come slightly later than HGTV and Food. The beginning of their new programming will start rolling out at the end of the first quarter, but the bulk of it will be in the late second and most of it in the third quarter.

Alexia Quadrani - JP Morgan Chase & Co

And just two quick questions on the Travel Channel. First off, I think a bunch of your -- or some of your affiliate agreements are up for renewal in 2012. Could you give us a sense if that's the bulk of them or if they're pretty spread out? And also, just staying on Travel for a second. The migration away from direct response to more premium advertising inventory, has that continued and sort of where are we, versus sort of what's considered normal for the other networks?

Kenneth Lowe

2012, 2013 and into 2014, the affiliate agreements are spread through there fairly evenly. No one year carries the majority of the renewals. In terms of the advertising, the team -- the ad sales team there has done a really good job through the second, third and fourth quarters of lowering the representation of DR and the total inventory ad sales picture. And for the first quarter, I think it will be somewhere in the 10% to 15% range, coming off of when we inherited the network and took over ad sales it was upwards of 30% to 35%.

Alexia Quadrani - JP Morgan Chase & Co

And should we say high-single digits is sort of the norm in terms of where sort of your more mature networks are?

Kenneth Lowe

Yes.

Operator

Our next question is Anthony DiClemente with Barclays Capital.

Anthony DiClemente - Barclays Capital

I guess, this question is for John. I'm not sure if you could do this, but I'm wondering if there's a way that you can talk about the advertising revenue results in the fourth quarter in terms of what would they have been had you not been in a make-good situation from audience deficiencies? How much of an impact was make-goods in the fourth quarter? And then looking forward, can you comment on the comparison of the make-goods impact in the 1Q here, as opposed to 4Q?

John Lansing

I think I can get at that Anthony. One way to think about the fourth quarter is that, minus the liability, the ad sales performance for the fourth would have looked very much like the third. So the impact was one that was measurable. But the good news is that going into the first quarter, we are seeing Food Network and HGTV now hitting their estimates. I have very little concern now that there will be any liability to speak of. And the ratings, by the way, on Food Network and HGTV, while still below prior-year levels, are significantly above December levels, and December was the highest-rated month of the quarter for us. So the sequential trend of October, November, December, January, and now February, shows a steadily improving ratings picture and that's before even the bulk of the new original programming and new premieres begin to hit. So the trend line is very, very positive. And I have to tell you, just the programs themselves and what we're seeing and what's coming through the door, really exciting programs. And I am very optimistic that the positive trend that we've seen on the ratings will continue into February and beyond.

Andrew Kim - Macquarie Research

Just to follow-up on that is, when you saw kind of the ratings pause begin to come forth, is there something in the competition, John, that you saw that was of particular concern? And as you move forward, in terms of strategy versus competition, whether it be Bravo, TLC or History, is there anything you could tell us about the competition and how you're kind of planning that programming line up against it?

John Lansing

Just for context, Food Network for the full year was equal to its all-time high record breaking ratings year of 2009. And in terms of its rank in primetime viewing of adults 25 to 54, Food Network simply went from rank of number 10 down to a rank of number 11. So there was not a significant shift in the competitive landscape at all. The quarter itself had a couple of interesting competitive events that went against some of our programming. But it was really a moment in time. It wasn't a trend. And in fact, the trend indicates that Food Network continues to be a top 11, top 12, top 10 rated network as it is with the -- as the peers around it begin to shift places as well. HGTV is beginning to show growth against last year as well. And so the TV business is a competitive business. It always has been. And the one advantage that we have is that we are the only 24/7 Food Network, and now cooking Channel, in the competitive environment. And so the genre is ours. We own it. And as a result, we drive not only a high level of audience, but also a high quality of audience in terms of upscale, women and in terms of the engagement that we are selling with our audiences. And so that's the reason that our ad sales tend to be at the top, at or near the top in terms of performance to peers. It's the quality of the audience as well as the ratings themselves, and that's continuing to be the case.

Operator

Next is Eric Handler with MKM Partners.

Eric Handler - MKM Partners LLC

With regard to your international operations, does your guidance assume that there's no other new deals being signed in the year? And how many negotiations are you in with various parties to expand from your current positions?

Joseph NeCastro

Eric, this is Joe. The guidance does assume no new transactions or joint ventures or investments for the year ahead. And we'd rather not comment on exactly what we're doing there, but suffice to say, we're very busy and we're looking at a number of opportunities.

Operator

Next, we have Tom Eagan with Collins Stewart.

Thomas Eagan - Collins Stewart LLC

On TV Everywhere, if you could give us a little more color on what operators you're working with in rolling that out? And then, more specifically, with the prospect of viewers watching your channel not on television, what you're hearing from your advertisers regarding their interest in being on those platforms?

Kenneth Lowe

We're working with all of the distributors on their various forms of TV Everywhere or also termed authentication. We believe it's -- and so, it is something that we're not only working with them, but we believe that it's the best strategy for keeping the business model as vibrant as it is. In terms of the advertisers, there's a lot of interest among our advertisers in the new platforms in terms of interactivity. To that extent, we've partnered with some of our affiliate partners to develop some next-generation interactive advertising programs that have been well received. And we're always working with our advertisers, of course, with a 360-degree solution if you will, through our digital properties and through our app development to meet their needs and create custom solutions based on the platform. So it's something we pay a lot of attention to and it goes hand-in-hand with the engagement, if you will, that our advertisers enjoy with our audiences in terms of their response to advertising. And we work with them to try to build upon that.

Thomas Eagan - Collins Stewart LLC

So in terms of any impact to advertising with any higher CPMs being on the other platforms, do you think that's more of a driver for 2012 versus '11?

Kenneth Lowe

Honestly, it's not big enough to be a driver at this point. It's really about packaging linear and nonlinear together to create an overall marketing solution. And that helps drive the CPMs on the linear as well.

Operator

And next, we have Doug Mitchelson with Deutsche Bank.

Douglas Mitchelson - Deutsche Bank AG

If Tribune does re-up on the Cooking Channel, what would the full-year delta be for minorities, so we can sort of plan ahead as to what we think that annual expense should be?

Joseph NeCastro

Doug, this is Joe. I'd rather not comment on that right now. I mean, I don't really want to get into that delta because if you wanted to, you can sort of derive some estimate of the profitability in the network, frankly. And I think that's probably not right. We don't go there, if you will. But, suffice it to say, it's not going to be a material shift. There's a relatively modest delta there.

Douglas Mitchelson - Deutsche Bank AG

The guidance for 2011 came in a lot lower than we had expected. So I just figured maybe we can take last year's number and just grow it at a reasonable pace and maybe get the right answer.

Joseph NeCastro

That's probably not a bad approach.

Douglas Mitchelson - Deutsche Bank AG

On the way package inventory, given the comments that 1Q is in line with delivery requirements, did you handle the make-goods in the fourth quarter as they were incurred? Or is there a liability that carries forward that to the extent you end up beating ratings at some point, you can actually catch up on the make-good liability?

Joseph NeCastro

Yes. Essentially the money's on the sidelines and we can catch up with it going forward over several quarters.

Douglas Mitchelson - Deutsche Bank AG

Just sort of cumulative through as it's packaged on the entire season, right?

Joseph NeCastro

That's correct.

Douglas Mitchelson - Deutsche Bank AG

Last, wasn't it comment on the balance sheet I think, so far and just sort of curious as you think about the potential to buy in the food minority, and/or stock repurchases at some point. One, where is your latest thought in terms of the appropriate target leverage for the company? And two, any sort of sense on timing on either of those items? Would that be something you would anticipate maybe could happen in 2011?

Joseph NeCastro

This is Joe again, Doug. Certainly, it's within the realm of possibility in 2011. We could do something there. I think the repurchase of the travel will not happen for a couple of years. That's contractual and that's not out for another three or four years, probably four years. And in terms of the other opportunity, I think that would be relevant would be the Tribune piece of Food that might or might not become available in a shorter timeframe. There's no specific timeline for that and that's sort of driven by events there. So those two things, the relationship between that and any potential return of capital, obviously related. And I think we're obviously keeping a close eye on the proceedings around Tribune and any sort of indication they may have or what they're willing to give us on their future plans are very important for us. So we're going to be cautious about it. We don't have a target leverage ratio that we think about. We will always be very conservative, I think, on the balance sheet. We prefer to remain as flexible as possible, within reason. But we're obviously in a cash accumulation position at the moment. So I think that all indicates that it's top of mind for us and that certainly doesn't escape our board. And as we said in our remarks, it's under our continuous review.

Douglas Mitchelson - Deutsche Bank AG

And I guess if I could just throw in one last one in there. In terms of the single-digit affiliate revenue growth guidance, can you give us a sense of what you're assuming for pay TV sub-growth? Are you assuming nothing there? I'm just sort of curious to the components of that beyond the price increases and the contracts.

Lori Hickok

This is Lori. I think, you can look at the universal net, pretty much the Digital, we assume a little more growth than we do on the more mature non-digital network.

Douglas Mitchelson - Deutsche Bank AG

So like 1% just sort of industry growth in the Digital, a little bit higher than that?

Lori Hickok

Yes.

Douglas Mitchelson - Deutsche Bank AG

And continue to benefit from the [indiscernible] gaining share in terms of the mix.

Lori Hickok

Yes.

Operator

And Next, we have Jason Bazinet with Citi.

Jason Bazinet - Citigroup Inc

I just have one high-level question. I think the buy side has this view that if ratings do begin to diminish a bit, it could be several years before ratings improve. And I understood the comments you made earlier in the call, but can you just give us any sort of historical context of times in the past where you've seen sort of audience delivery not meet whatever your commitments were, and how long it took to just sort of turn the ship?

John Lansing

If you looked at the long-term trend line of ratings on, say HGTV or Food, what you'd see is a very quiet steady growth interspersed with minor interruptions and dips that are just part of the typical TV competitive landscape. And as I mentioned earlier, the sequential growth coming out of November through December, January and now February indicates that we're already climbing out of that. And it makes sense that we've increased our investment in programming for this very reason. And we have a handle on what's happening competitively and we have the advantage of having networks that are very tightly focused around two really interesting categories, Home and Food. And while sometimes the competition comes from other networks in our categories, at the end of the day, people that are really interested in the Home and Food categories have only one option for 24/7 cable networks, and that's us. So that advantage, I think, is what keeps us in a steady more or less pattern of ratings, up and down. And there's never a great variance one way or the other.

Operator

Next we have Michael Nathanson at Nomura.

Michael Nathanson - Sanford Bernstein

When you look at historically, the correlation between your advertising growth and your ratings growth, it appears to be historically very weak, a very weak correlation. But looking at the change this quarter, the deceleration of that growth, it looks like something has changed. So I wanted to know why historically it's been a very low correlation and I've asked you this in the past. And what happened in the fourth quarter? Is there a difference in the sellout ratios or DRs were much lower? So why has that correlation now come to matter more in the fourth quarter?

Kenneth Lowe

Say more about your correlation question, I'm not exactly understanding what you're point is.

Michael Nathanson - Sanford Bernstein

Well, we'd asked in the past, in any given quarter, we took a look at your ratings growth and then we looked at your ad growth and it'd be very little -- you couldn't derive ad growth based on the ratings growth of the company. I mean, I just think -- we've asked in the past, I think Ken and Joe would agree that sometimes it's been a hard time you're getting to ad growth just looking at ratings growth. So there's other factors in place, right? Sellout, pricing. So in this fourth quarter, where ratings were a problem, and some of us would have believed that there will be other levers to pull that may have driven a higher revenue outcome. So I wondered why wasn't that the case in the fourth quarter? Was sellout especially high in the fourth quarter versus other quarters previously?

Joseph NeCastro

Michael, this is Joe. Let me start off and John should add some color to this. But I do think, and this is something that needs to be part of our answer, was that we were relatively conservative on our estimates for ratings. And the criticism, or the concern there, is always that you leave money on the table. And I think we historically, played a little wider margin for error. I think as time has progressed, and we've gotten more confident in the ratings and we've seen stronger and stronger ratings, and that sort of smooth trend line that John referred to, we priced more closely to -- and I think that may be a strong word, but we certainly promised impressions that were closer to the actual ratings. And we actually would make mid-course adjustments in those. And so, there was -- I think we were tracking more closely between ratings, delivery and our ability to monetize those. And so the downside is, of course, exactly what you saw in the fourth quarter, and that is that if you are pricing for all of your impressions delivery and according to your estimates, then if you miss them, then you're going to see an immediate hit. The upside of course is that we've been able to avoid leaving a lot of money on the table as we've done.

Michael Nathanson - Sanford Bernstein

And then when you look at your guidance for this year on revenues, on advertising and in programming costs, what is your assumption then for the ratings outlook? Are we assuming a stable view or a share-gaining view?

Kenneth Lowe

There's an assumption of impressions growth in all of our networks for this year. And as I said earlier, we are already with HGTV and Food and Travel, at or near enough to those estimates that our concerns are not really that great at all in terms of meeting the estimates. Does that answer your question?

Thomas Eagan - Collins Stewart LLC

Yes, totally. And then the last one will be on the subscriber counts you guys put out on Page 13, I know that Nielsen subscriber counts. I wonder what would the actual subscriber count, how different are they from what you get paid on versus what Nielsen reports? And are these lagging numbers? How far -- is this third quarter's numbers? So give me a little sense of -- everyone looks at that page and tries to figure out what's actually going on, but I wonder what's the real underlying number?

Lori Hickok

Well, the number is lower. Obviously Nielsen's a higher number but the trends are comparable. So basically the delta is usually the same, but typically they're lower, and that's true industry-wide.

Michael Nathanson - Sanford Bernstein

Is this your fourth quarter assumption? Their fourth quarter number basically? Or was it a third quarter number for Nielsen?

Lori Hickok

Must be the fourth quarter.

Michael Nathanson - Sanford Bernstein

So is there a shift at the end of the quarter?

Kenneth Lowe

Right.

Operator

Next, we have Brian Karimzad with Goldman Sachs.

Brian Karimzad - Goldman Sachs Group Inc.

Just to dig a little more. I know we've talked about competitive issues within your categories but just out of curiosity, what has Mike's team told you about perhaps the impact the NFL had on your viewership over the last three or four months, given how strong that is and how much of your viewing happens to happen on Sundays when that hits its peak?

Kenneth Lowe

Just briefly, Brian, we have seen in fact the NFL have more of a competitive impact on our channels, particularly Food Network, than we have in the past, interestingly. And so that's a trend that we're watching carefully.

Brian Karimzad - Goldman Sachs Group Inc.

And then in terms of the new programming on HG and Food, any sense for how the number of new hours of programming there compares versus last year? And then just give us a sense for what the insight was that went behind this new programming versus what we saw launched early last year, which maybe didn't quite pan out as expected?

Kenneth Lowe

Well, on HGTV, last year we launched a blizzard of series in the second quarter and frankly, it was so much at one time with our audience that I think some of it just didn't have a chance to stick as we had hoped. So on HGTV, the number of hours is roughly the same. But spreading out the new series across the entire year will, I think, moderate that effect and give us a chance to continue to build slowly and steadily with that audience. And it's already proving to be the case. Food Network, we are adding hours of programming. It's just become a more competitive network as a top 10, top 11 network. And we feel the need to add that investment and we believe that investment will pay off. If you remember, we did the same thing about three years ago in terms of Food Network and saw that spurt of growth that we had in '08, '09 and into '10. And so we'll be adding hours on Food. And as I said earlier, that includes an original special for all 52 Sundays of this year, plus a number of new series on top of premieres of existing series that are successful going forward. And you'll see most of that begin in late second and into the third quarter. And of course, Travel Channel is a situation where Laureen Ong and that team really didn't even take over and have their team assembled until the early part of the third quarter last year, and they immediately begun working on the series that were already successful on the network, including Man v. Food and Bert the Conqueror and some others. And they've turned in a third quarter that was the all-time record quarter for that network, just based on re-tooling some of the existing series. And at the same time, they're planning for a new slate for 2011, and that new slate looks very good. And it's -- the numbers of hours are significantly higher than have been put on that channel in years past. And as I said earlier, we'll begin to see those roll out at the latter half of the first quarter and into the second and third.

Operator

And next we have Marla Backer with Hudson Square.

Marla Backer - Soleil

I wanted to actually drill down a little bit on Travel Channel. Given that 2010 was still very much a transitional year, the revenue growth on the channel seem to lag the revenue growth on more established, more mature channels. And I'm wondering, once you begin to launch these new programming, these new series, part of it is the affiliate revenue. There's new opportunity for affiliate revenue to really go up significantly near-term. Correct me if I'm wrong on that. So right now, we're really looking at ratings and advertising as the key drivers. What do you think, in terms of -- how should we be thinking about Travel Channel in terms of revamping the programming? How much of the programming do you think we should think of as being sort of new to the audience?

Kenneth Lowe

Well, in terms of the revenue growth last year, keep in mind that we didn't pick up selling the network until end of the second quarter of last year. And as we did, we realized we had a network that had upwards of 35% being sold into the DR marketplace. And so we had to aggressively begin marketing that with our other networks, and our ad sales teams did a fantastic job, by the way, beginning to reduce that DR, replace it with higher quality advertisers, more premium advertisers. And the ad growth actually, we're very pleased with the ad growth at the end of the year on Travel Channel. I thought the team did a great job. In terms of the programming, you will, I think, see three or four of the most familiar components of Travel Channel. It will be new and improved, including Adam Richman, Anthony Bourdain, really, two of the key, and Andrew Zimmern. Their series have all been re-energized. In some cases, even reformatted. And they'll have, I think, a much more attractive marketing message to go along with those. And then next to that is a slate of programs that will be focused on developing new personalities, experimenting with new formats, keeping in the travel category, but really concentrating on building an audience around those strong, as we call them, tent poles of the network, the existing series.

Marla Backer - Soleil

And do you have any celebrities whose contracts are coming up, not only on the Travel Channel, but on some of your other channels? Is there any risk in the near-term that you might lose someone? Or is that your cost of programming that might collapse because of contract re-negotiations?

Kenneth Lowe

In a word, no. There are always contracts coming up, but there's nothing at risk at this moment that I'm aware of.

Marla Backer - Soleil

And last question, it just seems to me anecdotally that the food genre seems to be getting even more competitive. I know it's been competitive for a while, but it just seems to be getting even more competitive. A, do you think that, that is the case? And B, if so, do you think that, that may have been a factor in the rating softness early in the fourth quarter?

Kenneth Lowe

Your observation is one that I agree with wholeheartedly. The Food category has been very competitive over the last three to five years, based on one-off food-related competition programs on a number of networks that we compete with. And when you think about it, the Food categories, you might argue that it's beginning to divide up into subcategories, whether it's competition or how-to, cooking, docu-soaps, et cetera. And that's part and parcel the reason why we determined that it made strategic good sense to re-brand Fine Living to the Cooking Channel, to take advantage of the competitive trend on an offensive basis, but also defensively to widen the moat for Scripps Networks and managing and controlling the Food category with the only, as I've said before, the only 24/7 destination, now two 24/7 destinations in the category. So part of the answer is that it's broadening to new genres within Food and that we're responding to that, both in our programming and our formats, but also in the expansions in the Cooking Channel.

Operator

Next is Ben Swinburne with Morgan Stanley.

Benjamin Swinburne - Morgan Stanley

So you get a lot of good commentary on your guidance for the year. I think you said advertising. I think this was the first question, is advertising expectations are for double-digit growth for 2011. And you said Q1 ratings have improved from Q4. We've heard that scatter's strong, at least from your peers. And I'm just wondering if you could give us a sense for where Q1 is looking right now? Could you be back at the Q3 sort of high-teens level pro forma growth on the advertising side, given your comments so far?

Kenneth Lowe

Yes, in that comment specifically on the quarter that we're in, in terms of growth, but I think the components that you've outlined are right. The market is strong, the calendar marketplace is stronger than last year's upfront. The scatter is up mid-teens in pricing and mid-twenties compared to last year's upfront and we are in an improving ratings environment. And so I think it's fair to say sequentially that I believe that things are improving coming out of the fourth quarter. I just can't really comment on how much.

Benjamin Swinburne - Morgan Stanley

So we should see -- at a minimum, we'll see a sequential acceleration in growth, but it remains to be seen how high at this point.

Kenneth Lowe

That's fair.

Benjamin Swinburne - Morgan Stanley

And just trying to get an understanding on this. I know you're limited into the details you can give us on the minority interest calculation, but just -- I guess I'll give you what my sort of basic understanding of what's happened is. You've contributed Cooking. The cash infusion or capital infusion from Tribune has not occurred. So they were diluted down. It just seems like the; a 6% reduction for them in ownership of the partnership, and again these are my numbers, is in the kind of $300 million value range. I'm assuming some values ascribed to Cooking, although I'm not sure how that fair value calculation is done. But you said at the outset, you expect them to contribute that capital. And it seems like, given the percentage dilution of the partnership, at least in market value, that's a pretty healthy cash contribution coming in. I'm just sort of trying to get a little bit of help as to some of the math or at least the logic behind the moving pieces here.

Kenneth Lowe

Ben, I think your logic is sound. Your numbers are not quite, but I really can't help you much on there. Obviously, these were all the considerations we made in arriving at the conclusion we did. And we did the calculation according to some precedent within the partnership. So that's probably all I can say at this point.

Benjamin Swinburne - Morgan Stanley

But when you say you expect them to contribute capital -- So you're expecting a cash infusion from them at some point in 2011, that will reset the ownership back?

Kenneth Lowe

That's correct.

Benjamin Swinburne - Morgan Stanley

And then just last on minority interest, I think you said to Doug you didn't expect a material change in minority interest expense. If there was a reversal back to the old ownership stake, is that because Cooking is just a lower margin network and that's been contributed, which is why you sort of year-on-year, it's not growing as quickly as it would if it was just Food?

Kenneth Lowe

No, the minority stake applies to the combination of Food and Cooking. And the comments around it materially had more to do with the timing. We do expect it to get resolved relatively quickly.

Benjamin Swinburne - Morgan Stanley

But my point is, you didn't have Cooking in the partnership for all of 2010. So on a year-on-year basis, the full year of Cooking in '11 and the partial year in '10.

Kenneth Lowe

That's correct.

Benjamin Swinburne - Morgan Stanley

Just lastly, maybe for Ken. I know you can't speak for the board and you've got a lot of things you're looking at in terms of investments, but is there anything shareholders should interpret from the decision to continue to build cash at the end of the year by $500 million of cash? I know the Tribune thing is out there, but that seems to be just sort of percolating in bankruptcy. Is there something out there imminent that makes this balance sheet and capital structure make sense? Or is there anything you're looking for specifically in terms of data points or milestones, which caused you or the board to put some of this balance sheet capacity to work --

Kenneth Lowe

No, not really. I think, to your point, we're mindful of maybe an opportunity with that remaining Food piece and have been for sometime. We don't see anything on the horizon of significance at this point. I mean, the Travel Channel rarely comes along and we were fortunate that we ended up as the acquirer in that particular situation as we've alluded to today. It's accretive in year one, so that was a good one. We have, Joe has mentioned from time to time, some international opportunities that while we didn't discuss today, we're looking on. But nothing of major significance. I do think we will continue to invest as we see opportunities in the Home and Food category as we've said in the past, somewhat on the interactive side. But right now, we feel like we're in a very good position and Joe has talked many times in past calls about our opinion on that. So nothing really on the horizon of significance, Ben.

Operator

And next we have Jessica Reif Cohen with Bank of America.

Jessica Cohen - BofA Merrill Lynch

Just a couple of follow-ups at this point. On authentication, do you view this as a service that would be in the home only on any device? Or is it truly anywhere on any device?

Kenneth Lowe

Jessica, we view it as in the home and part of the experience of the cable connection to both linear and non-linear, but not as a mobile service within the current construction of our affiliation agreements.

Jessica Cohen - BofA Merrill Lynch

On advertising, are there any categories that are weak?

Kenneth Lowe

Well, nothing that stands out in terms of our top categories that are weak. More notably is the improvement in financial and automotive year-over-year and over the last couple of years that we've seen those rise once again, and those are key categories for us. Other than that, not a lot of change.

Jessica Cohen - BofA Merrill Lynch

Based on that comment, I know it's early, but do you have any sense of what the 2011 upfront might look like?

Kenneth Lowe

No. It's early. I think the data points for us and for everybody are the strength in scatter and the strength in the calendar upfront continues. And if that holds up through the spring, when we get to the upfronts, and that should bode well for a solid upfront.

Jessica Cohen - BofA Merrill Lynch

And then the last question is on international, on a longer-term basis, do you have any incentive where your margins could settle out? Obviously you need to break even, but what are you thinking, in terms of what the contribution margin would be? And how much of your programming can be re-purposed or dug in the international market?

John Lansing

Jessica, this is Joe. I think that our objectives are to build a profitable business there, and we don't have any preconceived notions about the overall size of the business. I think I've indicated in the past, we think it can be sizable. I don't think it's possible to get to the level of some of the much earlier starters. But that said, you can build a very profitable business model regionally, and I don't expect that the margins would approach what they are domestically. And that's related to your second question about the cost of programming. I do think that there's a fair amount, in fact in the vast majority of our programming, could be used internationally. We have, over the years, bought global rights typically from producers. So that's not a limitation. I think it's more about sort of taste and market-specific factors that would drive to the programming that we use out of the library versus new programming that we would originate sort of in-country. But I don't think that's a limitation on us in any way. And the library is actually one of the most valuable assets as we think about the international taste for our programming. So anyway, I think lots of programming available could be very profitable business, again not 50% margins but reasonably high-margin business. And then hopefully, some meaningful opportunities in the near-term.

Operator

Next, we have Matthew Harrigan with Wunderlich securities.

Matthew Harrigan - Wunderlich Securities Inc.

I'm probably reaching here a little bit, but hopefully you'll at least find this entertaining. When you look at the phenomenon of broadband MSOs, with agnostic or in billable pricing as far as what you're getting, is that something that's fitted into your five-year model domestically? And then when you go overseas to markets like Europe, the dynamics of the pay TV business are so different in terms of the ARPUs and the consumer and what the programmers are getting, which is in some instances, is virtually nil. Is that something that you think could be more disruptive in margins like that than in the U.S.? And again, I realize this is a five-year question as opposed to even a two- or three-year question, but I'd be interested in getting your perspective.

Kenneth Lowe

Matt, help me out. Give me the first part of that again about the domestic MSOs?

Matthew Harrigan - Wunderlich Securities Inc.

Just In terms of people, then obviously the government would like this. Say an Amazon, getting access to programming on the same basis as a traditional MSO. And at the margin there and the applicability of that model in the U.S. market, and then the relative appeal over in Europe where you're getting paid, in some instances, nothing for your programming and the consumer is paying a very low ARPU in markets such as Germany. I realize this kind of an end-of-conference-call question, but I thought I'd toss it out there just to get your reaction.

Kenneth Lowe

I think you're right in that internationally, there may be more likelihood in that there's less at risk. And I think certainly new programming entrants there have a harder time getting paid a lot for content because the markets are smaller and they tend to be more saturated. But we look when we enter in any new markets, we're doing assessments of the markets. We look at all of the potential opportunities for distributing programming and hopefully getting paid for it. But domestically, I think, I'll kick to John on the domestic side of that question, I think we're farther off on that.

John Lansing

Yes, the way we think about those platforms now is they're really more of a VOD competitor than they are a competitor or potential competitor in the linear service. I think lacking major sports rights and major big event television that we're a ways away from seeing that develop, but I think the video-on-demand aspect of it is here and now and very interesting.

Operator

And next is Michael Morris with Davenport.

Michael Morris - Davenport & Company, LLC

Two questions. First, on your guidance and the advertising component of that. And my question is how you see that playing out over the course of the year? And you spoke to seeing acceleration in the first quarter, given that you're no longer in a liability situation. And is the number that you're kind of seeing right now in the first quarter consistent with what's implied or what's being contemplated in your guidance for the full year? Or should we be thinking that that's going to slow down over the course of the year in the natural course of business? That's the first question. And then second, Ken, you mentioned adding some daytime shows to HG, I believe. And I'm curious if you can give us some more color on -- what percentage of your economics or how much of your economics come from the primetime day part right now? And how are you viewing other day parts and opportunity there? Is that a place for a lot of growth and investment as well?

Joseph NeCastro

Mike I'll take the first part of that. I would say that we don't expect any significant acceleration or deceleration in the overall view of the year. Obviously, that will be affected by what happens in the upfront as much as anything sort of related to last year's upfront, and you've heard the commentary on scatter. Our crystal balls are no better than yours in terms of the scatter marketplace. Maybe a little bit better than yours. But I think, normal seasonality patterns are probably more in what's in our forecast than any kind of acceleration or deceleration throughout the quarters.

Kenneth Lowe

Yes, and Michael, to your question about primetime. It generally represents about 50% of the revenue on the network, and then another 25% is made up of primetime access, which is 4:00 P.M. to 8:00 P.M. and the rest is daytime. But the investment for HGTV goes along the same lines as what Food Network has been successful in developing, some category-specific programming within daytime time periods to take advantage of those fans of the network that are looking for very specific categories, specific programming as Food has done with their In the Kitchen blog on weekdays and weekends during the daytime.

Operator

[Operator Instructions] And we do have next David Bank with RBC Capital Markets.

David Bank - RBC Capital Markets

You've been talking about sequential trends that have been improving in ratings. I think you've made it sort of clear. Can you quantify the target demo year-over-year ratings kind of decline peak level for Food and HGTV, and when it occurred? So, like, at the bottom, how much were they down and when? And then, can you quantify the current ratings, year-over-year comparison most recently, same thing target demo? And I'm assuming, from what you've said, that those are sort of the underlying assumptions for your guidance? And then -- sorry it's four parts. So, the last question is can you talk about what the ratings guarantees? I know you can't give them exactly, but the sort of order of magnitude for where make-goods kick in? Are they -- I guess I'll leave it open-ended like that.

Kenneth Lowe

So, one way to think about it is that programming and ratings don't begin and end with the quarter. And the quarter doesn't define much of anything if the trend line is positive. For the full year, for the Food Network was even to flat to 2009. And they're now growing. By the way, to be clear, their comps in January are very, very tough, so their improvement is sequential and they're still moving forward in terms of closing the gap to prior-year. But each month is showing sequential improvement. I can't really comment on, or quantify the level where the under-delivery and its relationship to revenue other than to say that the ad sales team did a terrific job selling the quarter. And as ratings improve, that revenue can still be realized and is being realized. And so the game isn't over yet as long as the improvement can continue. And that's the reason we're investing in programming and marketing, because we feel like that's something that we can accomplish going through this year.

David Bank - RBC Capital Markets

I guess as a follow-up then, is the majority of the improvement then based upon pricing as opposed to what your expectations are for audience gains or losses?

Kenneth Lowe

Yes. Well, it's just a combination. It's an equation that includes demand, pricing, ratings. And as we sit here today, there is a sequential improvement in all three components.

Operator

And next, we have Ben Mogil with Stifel Nicolaus.

Benjamin Mogil - Stifel, Nicolaus & Co., Inc.

Very quickly, following up on Eric Handler's question about international. Are you seeing sort of some of the delays in terms of rolling out things international? Is it sort of seller's expectations on the M&A side, or is it regulatory? Just kind of trying to get a sense of where you guys see the delays unexpected, if you will?

Kenneth Lowe

Ben, as you know, every market is different and certainly, those factors play a part in that. I think it has more to do with the attractiveness of the opportunities rather than it does on any specific regulatory delay or regulatory factors. And we are relatively cautious investors, and we're looking for good situations for us. So I wouldn't pin it on any one of those factors specifically. Just, we're being cautious. We're spending a lot of time on some of these opportunities and there's just nothing to report yet.

Operator

And next we have John Cornerike [ph] with Sadler Corporation [ph].

Unidentified Analyst

I may have missed this, but I don't understand the guidance on non-programming expenses. Program expenses are 40% of all expenses, therefore non-programming expenses are 60%. You're not cutting back headcounts, you're giving people raises. So how can non-programming expenses be down? I know there's $11 million of marketing and legal associated with the affiliation agreements that won't to be in their next year. But still, I don't understand why you're predicting flat to down non-programming expenses?

Joseph NeCastro

John, this is Joe. That's just relative to the actual number reported for last year. And I reminded people earlier that we had about $39 million in one-time expenses in the prior year.

Unidentified Analyst

But most of those were programming expenses.

Joseph NeCastro

No. These are non-programming one-time items. Travel, integration, et cetera.

Unidentified Analyst

And just quickly, international losses. I missed that. What was it for 2010?

Lori Hickok

Right around $10 million.

Joseph NeCastro

Yes, right around $10 million.

Operator

And we have no further questions in the queue.

Mark Kroeger

Thank you, Anna. This is Mark. I'll be here for the rest of the day if you have any follow-ups. Thank you. You can go ahead with instructions, Anna.

Operator

Ladies and gentlemen, this conference will be available for replay beginning at 12:30 P.M. Eastern time today, until February 24 at midnight. The replay access dial-in numbers are 1 (800) 475-6701, with the replay access code of 188897. The international number is 1 (320) 365-3844. With replay access code 188897. And that does conclude the conference for today. Thank you for participating and using AT&T's Executive Teleconferencing Service. You may now disconnect.

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