Scripps Networks Interactive Inc. (SNI) yesterday reported mixed financial results for the second quarter of 2011. Quarterly consolidated revenue of $534 million was up 12% year over year, but fell below the Zacks Consensus Estimate of $540 million.
Quarterly GAAP net income from continuing operation was $177.3 million or 78 cents per share compared with a net income of $133.5 million or 58 cents per share in the prior-year quarter. The second-quarter 2011 EPS of 78 cents was well above the Zacks Consensus Estimate of 70 cents.
Consolidated costs and expenses were $260 million in the reported quarter, up 1.2% year over year. Despite the rise in expenses, gross margin, in the reported quarter was 51.3% compared with 46.4% in the prior-year quarter. Quarterly operating income rose 28.6% year over year to $251.9 million.
During the first half of 2011, Scripps Networks generated $365.6 million of cash from operations compared with $217.3 million in the prior-year period. Free cash flow (cash flow from operations less capital expenditures) in the reported period was $340.7 million compared with $193.6 million in the year-ago period.
At the end of the second quarter of 2011, Scripps Networks had $773.4 million of cash & marketable securities and $884.5 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 0.32 compared with 0.32 at the end of fiscal 2010.
Lifestyle Media Segment
Quarterly total revenue of $527.4 million was an improvement of 11% year over year. Among the sub-segments, Advertising revenue was $372.9 million, up 12.5% year over year, Affiliates fee revenue was $146.3 million, up 5.6% year over year, and Other revenue was $8.1 million, up 57.3% year over year. Total segment profit was $274.1 million, up 23.5% year over year.
Brand wise, HGTV revenue was $189.2 million, up 8.9% year over year. Total subscriber base is at present 99.9 million, up 0.9% year over year. Food Network revenue was $187.5 million, up 8.2% year over year. Total subscriber base is 100.6 million, up 0.7% year over year. Travel Channel revenue was $70.3 million, up 14.9% year over year. Total subscriber base was 96 million, down 0.2% year over year.
DIY Network revenue was $29 million, up 27.3% year over year. Total subscriber base came in at 54.3 million, up 1.5% year over year. Cooking Channel revenue was $15.9 million, up 17% year over year. Total subscriber base is now 58 million, up 1% year over year.
Great American Country revenue was $5.9 million, down 30.6% year over year. Total subscriber base is 60.2 million, up 2.9% year over year. SN Digital revenue was $27.4 million, up 28% year over year. Other revenue was $2.2 million, up 29.5% year over year.
Quarterly total revenue of $6.6 million was up 87.5% year over year. However, segment loss was $14.8 million, down 2.1% 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%.
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.