Scripps Networks Interactive, Inc. (SNI) today reported encouraging first quarter 2010 financial results. Quarterly GAAP net income was $72.5 million or 43 cents per share, compared to a net income of $60.1 million or 38 cents per share in the prior-year quarter. However, excluding one-time special items, Scripps Networks’ first-quarter EPS was 50 cents, significantly above the Zacks Consensus Estimate of 43 cents.
 
Consolidated revenue of $469.4 million was an improvement of 32% year over year and also better than the Zacks Consensus Estimate of $451 million. Interestingly, even excluding the contribution from newly acquired Travel Channel, organic revenue increased 16% year-over-year.
 
These fabulous performances were mainly attributable to double-digit growth in advertising and affiliate-fee revenue at the company’s flagship Lifestyle Media business and higher total segment profit.
 
Operating income was $143.6 million, up 18.9% year over year. In the reported quarter, total segment profit (excluding special items) was $202 million, up a whopping 41.3% year over year.
 
During the first quarter of 2010, Scripps Networks generated $159.1 million of cash from operations compared to $162.4 million in the prior-year quarter. Free cash flow (cash flow from operations less capital expenditures) in the same quarter was $142.7 million, compared to $145.2 million in the year-ago quarter.
 
At the end of the first quarter 2010, Scripps Networks had $321 million of cash $884.3 million of debt outstanding on its balance sheet compared to $254.4 million of cash and $884.2 million of outstanding debt at the end of fiscal 2009.
 
Lifestyle Media Segment
 
Total revenue of $429 million was an improvement of 38% year over year. Out of this, Advertising revenue was $287.3 million, up 27.9% year over year, Affiliates fee revenue was $135.9 million, up 71.9% year over year, and Other revenue was $5.4 million, down 23.4% year over year. Excluding the contribution from the Travel Channel, Lifestyle Media segment generated $371 million, up 20% year over year.
 
Total expense was $242 million, up 47% year-over-year. Out of this, Programming expense was $89.5 million, up 26% year over year and Non-Programming expense was $153 million, up 64% year over year. Total segment profit was $186 million, up 28% year over year. However, excluding one-time charges, total segment profit was up 45% year over year.
 
Brand wise, HGTV revenue was $161.6 million, up 12.3% year over year. Total subscriber base is now 99 million (up 1% year over year). Food Network revenue was $151.9 million, up 30.7% year over year. Total subscriber base is now 99.7 million (up 1.4% year over year). Travel Channel revenue was $56.9 % and total subscriber base was 95.7 million (1.8% year over year).
 
DIY Network revenue was $18.7 million, up 21.7% year over year. Total subscriber base is now 53.4 million (up 5.3% year over year). Fine Living Network revenue was $13.8 million, up 17.7% year over year. Total subscriber base is now 57 million (up 3.1% year over year). Great American Country revenue was $6.4 million, up 5.3% year over year. Total subscriber base is now 58.5 million (up 4.5% year over year). SN Digital revenue was $18 million, up 15.2% year over year.
 
Interactive Services Segment
 
Quarterly total revenue of $37.6 million was down 16.6% year over year. Operating expenses were $32.7 million down 14% year over year. However, segment profit was $4.9 million, down 30% year over year.
 
Future Financial Guidance
 
Management has provided guidance for full fiscal 2010. Total affiliate fee revenue is expected to be $530 million – 540 million. Travel Channel represents about $100 million of the total affiliate fee revenue. Interactive Services Segment profit from the company’s Shopzilla comparison shopping business is expected to be $33 million – $35 million.
 
Programming expenses are expected to be $380 million – 400 million. Travel Channel programming expense will be $50 million. Non-programming expenses are expected to be $545 million -560 million, including one-time transition costs related to the Travel Channel.
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