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8-K - 8-K - Scripps Networks Interactive, Inc. | d431179d8k.htm |
EXHIBIT 99
PRESS RELEASE
Scripps Networks Interactive reports third quarter financial results
| Revenues of $566 million, up 12 percent |
| Segment profit of $251 million, up 15 percent |
| Income from continuing operations of $0.78 per share, up 20 percent |
For immediate release
Nov. 1, 2012
KNOXVILLE, Tenn. Scripps Networks Interactive, Inc. (NYSE: SNI) today reported operating results for the third quarter 2012.
Consolidated revenues for the quarter increased 12 percent to $566 million from the prior-year period. Results for the three-month period ended Sept. 30 reflect strong advertising revenue of $377 million, up 10 percent, and affiliate fee revenue of $175 million, up 18 percent year-over-year.
Expenses for the quarter increased 11 percent from the prior-year period to $315 million. The increase was driven primarily by higher employee costs and investments in planned domestic and international growth initiatives. Also contributing to the increase was higher marketing and promotional expenses to drive viewership at all of the companys lifestyle television networks.
Total segment profit increased 15 percent to $251 million. (See note 2 for a definition of segment profit).
Third quarter income from continuing operations attributable to Scripps Networks Interactive was $118 million, or $0.78 per diluted share, compared with $105 million, or $0.65 per diluted share, in the third quarter 2011.
Our positive third quarter results demonstrate in a powerful way the ubiquitous nature of our popular lifestyle brands, said Kenneth W. Lowe, chairman, president and chief executive officer of Scripps Networks Interactive. Our networks and related businesses engage millions of media consumers every day, not just on television, but on smart phones, tablets, newsstands and in thousands of retail outlets across America. Weve established ourselves as clear leaders in our ability to influence consumer purchasing decisions in the home, food and travel categories. And in the process, weve created tremendous value for our shareholders, Lowe said.
Revenues by network were as follows:
| Food Network was $199 million, up 11 percent. |
| HGTV was $195 million, up 8.1 percent. |
| Travel Channel was $68.9 million, up 10 percent. |
| DIY Network was $29.9 million, up 26 percent. |
| Cooking Channel was $21.6 million, up 31 percent. |
| Great American Country (GAC) was $6.9 million, up 15 percent. |
Revenue from the companys digital businesses, which include its network-branded websites, was $27.7 million, up 12 percent.
Conference call
The senior management team of Scripps Networks Interactive will discuss the companys third quarter results during a telephone conference call at 10 a.m. ET today. Scripps Networks Interactive will offer a live webcast of the conference call. To access the webcast, visit www.scrippsnetworksinteractive.com and follow the Investors link at the top of the page. The webcast link can be found next to the microphone icon on the investor relations landing page.
To access the conference call by telephone, dial 800-230-1085 (U.S.) or 612-288-0337 (international) approximately ten minutes before the start of the call. Callers will need the name of the call, SNI Third Quarter Earnings Call, to be granted access. Callers also will be asked to provide their name and company affiliation. The media and general public are granted access to the conference call on a listen-only basis.
A replay line will be open from 12:30 p.m. ET Nov. 1 until 11:59 p.m. ET Nov. 15. The domestic number to access the replay is 800-475-6701 and the international number is 320-365-3844. The access code for both numbers is 266000. A replay of the conference call also will be available online. To access the audio replay, visit www.scrippsnetworksinteractive.com approximately four hours after the call, choose Investors then follow the Audio Archives link on the top right side of the investor relations landing page.
Forward-looking statements
This press release contains certain forward-looking statements related to the companys businesses that are based on managements current expectations. Forward-looking statements are subject to certain risks, trends and uncertainties, including changes in advertising demand and other economic conditions that could cause actual results to differ materially from the expectations expressed in forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. The companys written policy on forward-looking statements can be found on page F-3 of its 2011 Form 10-K filed with the Securities and Exchange Commission.
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 companys 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.
Contact:
Mark Kroeger, Scripps Networks Interactive, Inc., 865-560-5007
E-mail: mark.kroeger@scrippsnetworks.com
Mike Gallentine, Scripps Networks Interactive, Inc., 865-560-4473
E-mail: mgallentine@scrippsnetworks.com
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SCRIPPS NETWORKS INTERACTIVE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) | Three months ended September 30, |
Nine months ended September 30, |
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(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 | ||||||||||||||||||
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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 | ) | ||||||||||||||||||
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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 | % | ||||||||||||
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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 | ) | ||||||||||||||||||||
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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 | % | ||||||||||||
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Net income attributable to SNI |
$ | 118,410 | $ | 98,603 | 20.1 | % | $ | 375,677 | $ | 276,557 | 35.8 | % | ||||||||||||
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Income from continuing operations attributable to SNI common shareholders per basic share of common stock |
$ | 0.79 | $ | 0.65 | $ | 2.46 | $ | 2.03 | ||||||||||||||||
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Income from continuing operations attributable to SNI common shareholders per diluted share of common stock |
$ | 0.78 | $ | 0.65 | $ | 2.44 | $ | 2.02 | ||||||||||||||||
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Weighted average basic shares outstanding |
149,985 | 161,789 | 152,731 | 166,318 | ||||||||||||||||||||
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Weighted average diluted shares outstanding |
151,201 | 162,276 | 153,905 | 167,314 | ||||||||||||||||||||
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Net income per share amounts may not foot since each is calculated independently.
SCRIPPS NETWORKS INTERACTIVE, INC.
CONSOLIDATED BALANCE SHEETS
As of | ||||||||
(unaudited) (in thousands, except per share data) |
September 30, 2012 |
December 31, 2011 |
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ASSETS |
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Current assets: |
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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 | ||||||
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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 | ||||||
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Total Assets |
$ | 3,899,973 | $ | 3,961,670 | ||||
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LIABILITIES AND EQUITY |
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Current liabilities: |
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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 | ||||||
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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 | ||||||
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Total liabilities |
1,869,963 | 1,865,275 | ||||||
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Redeemable noncontrolling interest |
115,722 | 162,750 | ||||||
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Equity: |
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SNI shareholders equity: |
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Preferred stock, $.01 parauthorized: 25,000,000 shares; none outstanding |
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Common stock, $.01 par: |
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Class Aauthorized: 240,000,000 shares; issued and outstanding: 2012115,461,988 shares; 2011122,828,359 shares |
1,155 | 1,228 | ||||||
Votingauthorized: 60,000,000 shares; issued and outstanding: 201234,317,173 shares; 201134,317,173 shares |
343 | 343 | ||||||
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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 | ) | ||||
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Total SNI shareholders equity |
1,630,909 | 1,678,726 | ||||||
Noncontrolling interest |
283,379 | 254,919 | ||||||
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Total equity |
1,914,288 | 1,933,645 | ||||||
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Total Liabilities and Equity |
$ | 3,899,973 | $ | 3,961,670 | ||||
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SCRIPPS NETWORKS INTERACTIVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) | Nine months ended September 30, |
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(in thousands) |
2012 | 2011 | ||||||
Cash Flows from Operating Activities: |
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Net income |
$ | 505,182 | $ | 397,161 | ||||
Loss (income) from discontinued operations |
61,252 | |||||||
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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: |
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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 | |||||
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Cash provided by (used in) continuing operating activities |
433,597 | 532,192 | ||||||
Cash provided by (used in) discontinued operating activities |
13,253 | |||||||
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Cash provided by (used in) operating activities |
433,597 | 545,445 | ||||||
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Cash Flows from Investing Activities: |
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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 | |||||
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Cash provided by (used in) continuing investing activities |
(155,258 | ) | (582,737 | ) | ||||
Cash provided by (used in) discontinued investing activities |
10,000 | 141,786 | ||||||
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Cash provided by (used in) investing activities |
(145,258 | ) | (440,951 | ) | ||||
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Cash Flows from Financing Activities: |
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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 | ) | |||||
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Cash provided by (used in) financing activities |
(609,255 | ) | (339,488 | ) | ||||
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Effect of exchange rate changes on cash and cash equivalents |
62 | 399 | ||||||
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Increase (decrease) in cash and cash equivalents |
(320,854 | ) | (234,595 | ) | ||||
Cash and cash equivalents: |
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Beginning of year |
760,092 | 549,897 | ||||||
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End of period |
$ | 439,238 | $ | 315,302 | ||||
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Supplemental Cash Flow Disclosures: |
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Interest paid, excluding amounts capitalized |
$ | 39,599 | $ | 32,689 | ||||
Income taxes paid |
254,746 | 137,382 | ||||||
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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.
Our tax provision in the third quarter of 2011 includes favorable adjustments attributed to reaching agreements with certain tax authorities for positions taken in prior period returns and adjustments to foreign income items, state apportionment factors and credits reflected in our filed tax returns. Net income attributable to SNI was increased $14.5 million, $.09 per share.
During the second quarter of 2011, our Board of Directors approved the sale of our Shopzilla business and its related online comparison shopping brands. We received consideration totaling approximately $160 million upon finalizing the sale of the business on May 31, 2011. The results of operations for this business have been retrospectively presented as discontinued operations within our consolidated financial statements for all periods. Discontinued operations in the second quarter of 2011 reflect a loss on divestiture of $53.3 million related to the sale of the Shopzilla business. No income tax benefit related to the capital losses attributed to the sale was recognized. Year-to-date net income attributable to SNI was decreased $.31 per share.
In August 2010, we contributed the Cooking Channel to the Food Network Partnership (the Partnership). At the close of our 2010 fiscal year, the noncontrolling owner had not made a required pro-rata capital contribution to the Partnership and as a result its ownership interest was diluted from 31 percent to 25 percent. Accordingly, following the Cooking Channel contribution, profits from the partnership were allocated to the noncontrolling owner at its reduced ownership percentage. In February 2011, the noncontrolling owner made the pro-rata contribution to the Partnership and its ownership interest was returned to the pre-dilution percentage as if the contribution had been made as of the date of the Cooking Channel contribution. The retroactive impact of restoring the noncontrolling owners interest in the Partnership increased net income attributed to noncontrolling interest $8.0 million in the first quarter of 2011. Year-to-date net income attributable to SNI was decreased $4.7 million, $.03 per share.
2. SEGMENT INFORMATION
We determine our business segments based upon our management and internal reporting structure. We manage our operations through one reportable operating segment, Lifestyle Media.
Lifestyle Media includes our national television networks, Food Network, HGTV, Travel Channel, DIY Network, Cooking Channel and Great American Country (GAC). Lifestyle Media also includes websites that are associated with the aforementioned television brands and other Internet-based businesses serving food, home and travel related categories. The Food Network and Cooking Channel are included in the Food Network Partnership of which we own approximately 69%. We also own 65% of Travel Channel. Each of our networks is distributed by cable and satellite distributors and telecommunication service providers.
The results of businesses not separately identified as reportable segments are included within our corporate and other caption. Corporate and other includes the results of the lifestyle-oriented channels we operate in Europe, the Middle East, Africa and Asia, operating results from the international licensing of our national networks programming, and other interactive and digital business initiatives that are not associated with our Lifestyle Media or international businesses.
Our chief operating decision maker evaluates the operating performance of our business segments and makes decisions about the allocation of resources to our business segments using a measure we call segment profit. Segment profit excludes interest, income taxes, depreciation and amortization, divested operating units, restructuring activities, investment results and certain other items that are included in net income determined in accordance with accounting principles generally accepted in the United States of America (GAAP). Refer to Note 4Non-GAAP Financial Measures, for reconciliations to GAAP measures.
Items excluded from segment profit generally result from decisions made in prior periods or from decisions made by corporate executives rather than the managers of the business segments. Depreciation and amortization charges are the result of decisions made in prior periods regarding the allocation of resources and are therefore excluded from the measure. Financing, tax structure and divestiture decisions are generally made by corporate executives. Excluding these items from our business segment performance measure enables us to evaluate business segment operating performance for the current period based upon current economic conditions and decisions made by the managers of those business segments in the current period.
Information regarding the operating performance of our business segments and a reconciliation to our results of operations is as follows:
Three months ended September 30, |
Nine months ended September 30, |
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(in thousands) |
2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||||
Segment operating revenues: |
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Lifestyle Media |
$ | 551,917 | $ | 496,257 | 11.2 | % | $ | 1,671,516 | $ | 1,497,163 | 11.6 | % | ||||||||||||
Corporate and other /intersegment eliminations |
14,269 | 7,487 | 90.6 | % | 31,001 | 21,396 | 44.9 | % | ||||||||||||||||
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Total operating revenues |
$ | 566,186 | $ | 503,744 | 12.4 | % | $ | 1,702,517 | $ | 1,518,559 | 12.1 | % | ||||||||||||
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Segment profit (loss): |
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Lifestyle Media |
$ | 273,033 | $ | 235,741 | 15.8 | % | $ | 848,089 | $ | 769,205 | 10.3 | % | ||||||||||||
Corporate and other |
(21,967 | ) | (17,270 | ) | 27.2 | % | (73,107 | ) | (49,383 | ) | 48.0 | % | ||||||||||||
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Total segment profit |
251,066 | 218,471 | 14.9 | % | 774,982 | 719,822 | 7.7 | % | ||||||||||||||||
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 | ||||||||||||||||||
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 | ) | ||||||||||||||||||
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Income from continuing operations before income taxes |
$ | 222,461 | $ | 169,723 | 31.1 | % | $ | 716,459 | $ | 633,279 | 13.1 | % | ||||||||||||
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Operating results from our international operations and the costs associated with other interactive and digital business initiatives increased the segment loss at corporate and other by $5.4 million in the third quarter of 2012 and $17.2 million for the year-to-date period of 2012 compared with $2.1 million in the third quarter of 2011 and $4.3 million for the year-to-date period of 2011.
3. SUPPLEMENTAL FINANCIAL INFORMATION
Our Lifestyle Media division earns revenue primarily from the sale of advertising time on our national television networks, affiliate fees paid by cable and satellite television operators that carry our network programming, the licensing of its content to third parties, the licensing of its brands for consumer products such as books and kitchenware, and from the sale of advertising on our Lifestyle Media affiliated websites.
Supplemental information for Lifestyle Media is as follows:
Three months ended | Nine months ended | |||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||
(in thousands) |
2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||||
Operating revenues by brand: |
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Food Network |
$ | 198,872 | $ | 180,008 | 10.5 | % | $ | 616,162 | $ | 541,539 | 13.8 | % | ||||||||||||
HGTV |
195,363 | 180,663 | 8.1 | % | 586,073 | 541,193 | 8.3 | % | ||||||||||||||||
Travel Channel |
68,893 | 62,579 | 10.1 | % | 209,254 | 194,881 | 7.4 | % | ||||||||||||||||
DIY Network |
29,852 | 23,693 | 26.0 | % | 91,221 | 76,080 | 19.9 | % | ||||||||||||||||
Cooking Channel |
21,643 | 16,580 | 30.5 | % | 63,863 | 47,781 | 33.7 | % | ||||||||||||||||
GAC |
6,945 | 6,063 | 14.5 | % | 16,927 | 18,423 | (8.1 | )% | ||||||||||||||||
Digital Businesses |
27,726 | 24,695 | 12.3 | % | 78,446 | 71,470 | 9.8 | % | ||||||||||||||||
Other |
2,623 | 2,081 | 26.0 | % | 9,767 | 6,512 | 50.0 | % | ||||||||||||||||
Intrasegment eliminations |
(105 | ) | (197 | ) | (716 | ) | ||||||||||||||||||
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Operating revenues by type: |
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Advertising |
$ | 374,583 | $ | 342,876 | 9.2 | % | $ | 1,145,017 | $ | 1,037,529 | 10.4 | % | ||||||||||||
Network affiliate fees, net |
168,353 | 146,411 | 15.0 | % | 500,816 | 436,817 | 14.7 | % | ||||||||||||||||
Other |
8,981 | 6,970 | 28.9 | % | 25,683 | 22,817 | 12.6 | % | ||||||||||||||||
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Subscribers (1): |
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Food Network |
99,100 | 99,400 | (0.3 | )% | ||||||||||||||||||||
HGTV |
98,400 | 98,600 | (0.2 | )% | ||||||||||||||||||||
Travel Channel |
94,200 | 94,600 | (0.4 | )% | ||||||||||||||||||||
DIY Network |
57,100 | 53,500 | 6.7 | % | ||||||||||||||||||||
Cooking Channel |
59,200 | 57,400 | 3.1 | % | ||||||||||||||||||||
GAC |
61,700 | 59,200 | 4.2 | % | ||||||||||||||||||||
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(1) | Subscriber counts are according to the Nielsen Homevideo Index of homes that receive cable networks. |
4. NON-GAAP FINANCIAL MEASURES
In addition to the results prepared in accordance with GAAP provided in this release, the Company has presented segment profit. A reconciliation of segment profit to operating income determined in accordance with GAAP for each business segment is as follows:
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(in thousands) |
2012 | 2011 | 2012 | 2011 | ||||||||||||
Operating income |
$ | 222,072 | $ | 195,817 | $ | 695,448 | $ | 653,414 | ||||||||
Depreciation and amortization of intangible assets: |
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Lifestyle Media |
26,602 | 22,226 | 73,919 | 64,931 | ||||||||||||
Corporate and other |
2,376 | 510 | 5,513 | 1,540 | ||||||||||||
Losses (gains) on disposal of property and equipment: |
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Lifestyle Media |
17 | (82 | ) | 103 | (63 | ) | ||||||||||
Corporate and other |
(1 | ) | (1 | ) | ||||||||||||
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Total segment profit |
$ | 251,066 | $ | 218,471 | $ | 774,982 | $ | 719,822 | ||||||||
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The Company defines free cash flow as cash provided by operating activities less dividends paid to noncontrolling interests and acquisitions of property and equipment. The Company measures free cash flow as it believes it is an important indicator for management and investors as to the Companys liquidity, including its ability to reduce debt, make strategic investments and return capital to shareholders. A reconciliation of free cash flow is as follows:
Three months ended | Nine months ended | |||||||||||||||
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(in thousands) |
2012 | 2011 | 2012 | 2011 | ||||||||||||
Segment profit |
$ | 251,066 | $ | 218,471 | $ | 774,982 | $ | 719,822 | ||||||||
Income taxes paid |
(100,154 | ) | (54,689 | ) | (254,746 | ) | (137,382 | ) | ||||||||
Interest paid |
(15,154 | ) | (16,503 | ) | (39,599 | ) | (32,689 | ) | ||||||||
Working capital and other |
51,544 | 32,618 | (47,040 | ) | (17,559 | ) | ||||||||||
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Cash provided by continuing operating activities |
187,302 | 179,897 | 433,597 | 532,192 | ||||||||||||
Dividends paid to noncontrolling interests |
(15,341 | ) | (13,996 | ) | (148,181 | ) | (58,676 | ) | ||||||||
Additions to property and equipment |
(14,968 | ) | (12,480 | ) | (34,058 | ) | (37,355 | ) | ||||||||
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Free cash flow |
$ | 156,993 | $ | 153,421 | $ | 251,358 | $ | 436,161 | ||||||||
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Since segment profit and free cash flow are non-GAAP measures, they should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance reported in accordance with GAAP.