0000912057-01-536431.txt : 20011029
0000912057-01-536431.hdr.sgml : 20011029
ACCESSION NUMBER: 0000912057-01-536431
CONFORMED SUBMISSION TYPE: 8-K
PUBLIC DOCUMENT COUNT: 3
CONFORMED PERIOD OF REPORT: 20011024
ITEM INFORMATION: Financial statements and exhibits
ITEM INFORMATION:
FILED AS OF DATE: 20011024
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: USA NETWORKS INC
CENTRAL INDEX KEY: 0000891103
STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833]
IRS NUMBER: 592712887
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 8-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-20570
FILM NUMBER: 1764897
BUSINESS ADDRESS:
STREET 1: 152 WEST 57TH ST
CITY: NEW YORK
STATE: NY
ZIP: 10019
BUSINESS PHONE: 2123147300
MAIL ADDRESS:
STREET 1: 152 WEST 57TH ST
CITY: NEW YORK
STATE: NY
ZIP: 10019
FORMER COMPANY:
FORMER CONFORMED NAME: HSN INC
DATE OF NAME CHANGE: 19970111
FORMER COMPANY:
FORMER CONFORMED NAME: SILVER KING COMMUNICATIONS INC
DATE OF NAME CHANGE: 19940420
8-K
1
a2061764z8-k.txt
8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 24, 2001
USA NETWORKS, INC.
(Exact name of Registrant as specified in charter)
Delaware 0-20570 59-2712887
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
152 West 57th Street, New York, NY 10019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 314-7300
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
99.1 Press Release of USA Networks, Inc. dated October 24, 2001.
99.2 Forward-Looking Financial Information.
ITEM 9. REGULATION FD DISCLOSURE
On October 24, 2001, the Registrant issued a press release announcing
its results for the quarter ended September 30, 2001. The full text of this
press release, appearing in Exhibit 99.1 hereto and forward-looking financial
information, appearing in Exhibit 99.2 hereto, are furnished pursuant to
Regulation FD.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
USA NETWORKS, INC.
By: /s/ Julius Genachowski
---------------------------------
Name: Julius Genachowski
Title: Senior Vice President and
General Counsel
Date: October 24, 2001
EXHIBIT INDEX
Exhibit No. Description
99.1 Press Release of USA Networks, Inc. dated October 24, 2001.
99.2 Forward-Looking Financial Information.
EX-99.1
3
a2061764zex-99_1.txt
EXHIBIT 99.1
Exhibit 99.1
[GRAPHIC OMITTED]
USA NETWORKS INC
FOR IMMEDIATE RELEASE OCTOBER 24, 2001
14% EBITDA GROWTH FROM USA'S OPERATING BUSINESSES
INTERNET COMMERCE GROUP INCREASES REVENUE BY 70% AND EBITDA BY 88% IN Q3
USA PLANS FOR 15% GROWTH IN 2002 AMIDST A TOUGH ENVIRONMENT
NEW YORK, October 24, 2001 - USA Networks, Inc. (NASDAQ: USAI) reported results
today for its quarter ended September 30, 2001. Highlights are presented on a
pro forma comparative basis to the same period last year.
o USA's OPERATING BUSINESSES increased EBITDA by 14% to $245.6 million on
15% higher revenue of $1.221 billion. These results are within the
range of expectations set forth by the company following the national
tragedy. Prior to the events of 9/11, the Operating Businesses were on
track to exceed their original guidance of 25% EBITDA growth.
o CABLE AND STUDIOS increased revenue by 19% to $398.2 million and EBITDA
by 31% to $155.2 million. Approximately half this growth resulted from
a favorable adjustment relating to affiliate fees. And contributing to
Studios USA's performance is the unprecedented franchise breadth of LAW
& ORDER, which now has three primetime dramas on NBC.
o HSN grew its revenue in the United States by 8% to $396.4 million and
decreased EBITDA by 9% to $48.9 million. Its Q3 results were impacted
by a dramatic, but relatively short-lived, decline in viewership
following the national tragedy. HSN.com increased revenue by 246% to
$33 million in Q3, and now represents nearly 10% of HSN's on air sales.
o HSN's performance in Germany was disappointing in part due to operating
challenges associated with the addition of 4 live hours of programming
earlier this year. Its EBITDA fell to a loss of $5 million, on 4% lower
revenue in Q3.
o HOTEL RESERVATIONS NETWORK had a record quarter, increasing revenue by
60% to $151.2 million and EBITDA by 57% to $21.8 million. HRN expanded
into 25 new cities and increased its number of affiliates to nearly
22,800 during Q3.
o TICKETMASTER increased ticketing EBITDA by 14% to $19 million on 7%
higher revenue of $133.9 million. Online ticket sales accounted for
31.9% of total tickets sold by Ticketmaster, compared to 25.6% in Q3
'00.
o MATCH, one of the company's top-growth assets, increased EBITDA by 152%
to $5.8 million on 64% higher revenue.
o USA INTERNET COMMERCE GROUP grew revenue by 70% to $240.4 million and
EBITDA by 88% to $44.6 million. The group is comprised of HSN.com,
Hotel Reservations Network, Ticketmaster.com and Match.com.
o USA plans for its Operating Businesses to grow revenue and EBITDA by
15% in 2002. Whereas for the fourth quarter, Operating Business EBITDA
is expected to decline by 12% to 16% on flatish revenue growth, due
mostly to the continuing affects of the national tragedy, including an
accelerated downward impact on the advertising market.
MEDIA RELEASE
152 West 57th Street, 42nd Floor New York, New York 10019 212.314.7300
Fax 212.314.7309
2 of 9
FINANCIAL RESULTS
On a comparative pro forma basis, USA reported the following, excluding
discontinued operations (USA Broadcasting):
ACTUAL PRO FORMA
($ IN MILLIONS) Q3 01 Q3 00 GROWTH
------ ------- ------
REVENUES - OPERATING BUSINESSES
Cable and studios...................... $ 398.2 $ 336.0 19%
Electronic retailing - U.S............. 396.4 368.8 8%
Electronic retailing - Germany......... 60.0 62.7 (4%)
Ticketing.............................. 133.9 124.9 7%
Hotel reservations..................... 151.2 94.6 60%
Teleservices........................... 72.6 70.2 4%
Personals.............................. 12.5 7.6 64%
Intersegment elimination............... (4.1) --
--------- --------
SUB-TOTAL - OPERATING.............. 1,220.7 1,064.9 15%
Euro exchange rate fluctuation (a)..... (9.1) (8.9)
REVENUES - EMERGING BUSINESSES
Citysearch and related................. 11.1 14.0
Styleclick............................. 0.9 5.3
Electronic Commerce Solutions.......... 4.8 7.2
HSN - other international.............. 6.2 4.4
USA Films.............................. 16.0 14.5
TRIO, NWI, Crime and emerging media.... 5.8 8.6
-------- --------
SUB-TOTAL - EMERGING............... 44.8 53.9
-------- -------- -----
TOTAL.............................. $1,256.3 $1,109.9 13%
======== ======== =====
EBITDA - OPERATING BUSINESSES
Cable and studios...................... $ 155.2 $ 118.5 31%
Electronic retailing - U.S............. 48.9 53.9 (9%)
Electronic retailing - Germany......... (5.0) 5.8 (185%)
Ticketing.............................. 19.0 16.7 14%
Hotel reservations..................... 21.8 13.9 57%
Teleservices........................... 7.9 11.1 (29%)
Personals.............................. 5.8 2.3 152%
Corporate and other.................... (8.1) (6.3)
--------- --------- -----
SUB-TOTAL - OPERATING.............. 245.6 215.8 14%
Euro exchange rate fluctuation (a)..... 0.9 (0.9)
EBITDA - EMERGING BUSINESSES
Citysearch and related................. (10.8) (16.3)
Styleclick............................. (1.8) (8.7)
Electronic Commerce Solutions.......... (12.6) (8.0)
HSN - other international.............. (7.5) (4.6)
USA Films.............................. 0.4 (5.8)
TRIO, NWI, Crime and emerging media.... (3.1) (0.3)
Intersegment elimination............... (1.8) --
-------- --------
SUB-TOTAL - EMERGING............... (37.1) (43.8)
Restructuring and one-time charges (b). (12.3) --
-------- --------
TOTAL.............................. $ 197.1 $ 171.2 15%
======== ======== =====
o Does not include pro forma results for Expedia, the acquisition of which
is expected to close by year-end 2001.
o Excludes results from USA Broadcasting, the sale of which to Univision was
announced in December 2000.
o Presented as if the acquisition of Styleclick had occurred at the
beginning of the periods presented.
o EBITDA is defined as net income plus (1) provision for income taxes, (2)
minority interest, (3) interest income and expense, (4) depreciation and
amortization, (5) amortization of cable distribution fees ($10 million &
$8.8 million, respectively), and (6) amortization of non-cash
distribution, marketing, and compensation expenses.
(a) In order to present comparable results for HSN Germany, the results have
been translated from Euros to U.S. dollars at a constant exchange rate.
(b) Represents non-recurring costs related to restructuring operations,
employee terminations and benefits.
-- More --
3 of 9
BUSINESS MIX
66% of USA's Q3 revenue came from direct consumer transactions, 20% was derived
from subscriptions and production fees, and 14% was advertising-related. The
operating businesses reported the following:
ACTUAL PRO FORMA
($ IN MILLIONS) Q3 01 Q3 00 GROWTH MIX
------ ------- ------ ---
REVENUES - OPERATING BUSINESSES
Entertainment................................... $ 398.2 $ 336.0 19% 33%
Electronic retailing............................ 456.4 431.5 6% 37%
Information and Services........................ 370.2 297.3 25% 30%
Intersegment elimination........................ (4.1) -- 0%
-------- -------- --- ----
TOTAL....................................... $1,220.7 $1,064.9 15% 100%
======== ======== === ====
EBITDA - OPERATING BUSINESSES
Entertainment................................... $155.2 $118.5 31% 63%
Electronic retailing............................ 43.9 59.7 (26%) 18%
Information and Services........................ 54.5 44.0 24% 22%
Corporate and other............................. (8.1) (6.3) (3%)
-------- -------- --- ----
TOTAL....................................... $245.6 $215.8 14% 100%
======== ======== === ====
CASH NET INCOME AND EARNINGS PER SHARE
PRO FORMA (a) (b)
Q3 01 (a) Q3 00
----- ------
Fully converted cash net income per share....... 0.10 0.10
Fully converted earnings per share.............. (0.01) (0.02)
Cash net income per share....................... 0.13 0.16
Basic loss per share............................ (0.08) (0.08)
(a) Amounts based on net income before gain on sale of broadcasting stations
in Q3 '01 and before loss from discontinued operations in Q3 '00 of $14.4
million.
(b) Excluding one-time income / (expense) of ($18.9 million), pre-tax in Q3
'01, and $74.1 million, pre-tax, in Q3 `00.
Universal and Liberty own a significant portion of their interests in USA
through USA subsidiaries. This structure can cause USA to record net losses in
situations where net income would otherwise have been recorded if their
ownership were entirely in USA common stock. Fully converted earnings and fully
converted cash net income reflect the impact as if all shares exchangeable into
common stock had been exchanged during the period.
-- More --
4 of 9
ENTERTAINMENT HIGHLIGHTS
USA NETWORK grew EBITDA by 31% to $113.7 million on 7% higher revenue of
$214.0 million. Approximately half of USA's growth was attributable to a
special $16 million adjustment relating to affiliate fees.
o USA tied as basic cable's second highest rated network in primetime, with
a 1.7 average rating in Q3 '01.
o Excluding WWF from Q3 `00, USA increased its primetime delivery by 16% in
Adults 18-49 and 12% in A25-54. In Sales Prime (7-11 pm), USA increased
delivery by 18% in A18-49 and 15% in A25-54 excluding WWF from Q3 `00.
o The PRIMETIME MOVIE increased delivery of Adults 25-54 by 22%.
o Sunday Prime averaged a 1.6 rating, up 23% from the comparative period.
o The DAYTIME MOVIE increased its rating by 33% versus Q3 `00.
o The 2001 U.S. OPEN averaged a 1.9 rating in primetime, a 36% increase from
last year. The Sampras /Agassi quarterfinal match on September 5 drew 3.4
million household viewers, becoming the most watched tennis telecast ever
on cable.
SCI FI increased EBITDA by 6% to $23.9 million on 2% lower revenue of $63.1
million.
o SCI FI averaged a 0.8 rating in primetime and increased its average
household delivery by 5% to 609,000, a Q3 record.
o SCI FI continues to have the highest concentration of adult viewers 25-54
of any network on television, while ranking in the top 10 among basic
cable networks in its delivery of Adults, Women and Men 25-54 and 18-49.
o SCI FI is the #1 provider of original scripted series in cable primetime.
STUDIOS USA, net, grew EBITDA by 99% to $17.6 million on 71% higher revenue of
$121.1 million.
o 20.7 million watched LAW & ORDER's season premiere, a 16% increase from
last season and its 12-year best premiere.
o LAW & ORDER: SPECIAL VICTIMS UNIT, only in its third season, recently
broke into the Top 10 among all primetime series and its season premiere
delivered 18% more viewers than its 2000 premiere.
o LAW & ORDER: CRIMINAL INTENT premiered as NBC's highest rated show on
Sunday night.
o THE DISTRICT, in its second season on CBS, continues as the highest rated
network show in Saturday primetime.
o CROSSING OVER WITH JOHN EDWARD is averaging 2.4 rating in syndication, the
top rated new first-run series show in '01.
o Studios USA is a leading producer of primetime and first-run syndicated
programming, including two of the top four syndicated talk shows and two
of the top seven primetime dramas.
-- More --
5 of 9
ENTERTAINMENT HIGHLIGHTS (CONTINUED)
CABLE AND STUDIOS:
Q3 01 Q3 00 GROWTH
----- ----- ------
Revenue ($ IN MILLIONS):
USA Network................................. $214.0 $200.5 7%*
SCI FI...................................... 63.1 64.6 (2%)
Studios, net................................ 121.1 71.0 71%
------ ------ -----
Total................................. $398.2 $336.0 19%
====== ====== =====
EBITDA ($ IN MILLIONS):
USA Network................................. $113.7 $87.2 31%*
SCI FI...................................... 23.9 22.4 6%
Studios, net................................ 17.6 8.8 99%
------ ------ -----
Total................................. $155.2 $118.5 31%
====== ====== =====
Households (IN MILLIONS @ 9/30):
USA Network................................. 84.3 79.4 7%
SCI FI...................................... 74.7 65.1 15%
Advertising and other revenue / affiliate revenue:
USA Network mix............................. 55:45 58:42
SCI FI mix.................................. 61:39 63:37
* USA's revenue would have declined by 2%, and EBITDA would have increased by
12%, had it not been for a special $16 million adjustment to affiliate fees.
USA FILMS
USA Films' upcoming release MONSOON WEDDING was awarded the Golden Lion (the top
prize) at the 2001 Venice Film Festival. USA Films' theatrical releases in Q3
were WET HOT AMERICAN SUMMER, SESSION 9 and MAYBE BABY. USA Home Entertainment
announced direct-to-video releases PRANCER RETURNS and the 2-DVD set ULTIMATE
JORDAN, following Michael Jordan's announced return to professional basketball.
-- More --
6 of 9
ELECTRONIC RETAILING HIGHLIGHTS
HSN's EBITDA declined by 9% to $48.9 million on 8% higher revenue of $396.4
million in the United States. Its Q3 results were impacted by a dramatic, but
relatively short-lived, decline in viewership following the national tragedy.
o HSN ceased its live programming shortly after the September 11th attacks
and aired live news programming from USA Cable's NWI. During the respite,
HSN developed the HSN Firefighter's and Police Officer's Family Fund,
raising over $250,000 for the families of injured and fallen heroes.
o HSN added approximately 641,000 new customers during the quarter and
reduced the number of fulfillment related customer service calls by 8%.
o HSN's new distribution facility in Fontana, California is expected to
reduce shipping times by as much as one-third to west coast customers.
o HSN.com increased revenue by 246% to $33 million in Q3, and now represents
10% of HSN's on air sales.
o Off-air sales (continuity and upsells) increased by 55% in Q3.
o In a contextualized commerce test with ABC, both networks sold products
that were embedded into the storylines of ALL MY CHILDREN. The test
generated sales-per-minute at a rate 10 times higher than HSN's average.
Q3 01 Q3 00 GROWTH
----- ----- ------
Units shipped (IN MILLIONS).......................... 8.8 8.6 2%
Gross profit %....................................... 32.0% 34.6%
Return rate.......................................... 19.4% 19.8%
Average price point.................................. $48.15 $48.02
Product mix:
Homegoods................................... 52% 48%
Jewelry..................................... 24% 26%
Health / Beauty............................. 10% 12%
Apparel / Accessories....................... 14% 14%
HSN cable / DBS homes (IN MILLIONS @ 9/30)........... 71.5 64.9 10%
HSN total homes (IN MILLIONS @ 9/30)................. 82.8 75.9 9%
HSN - GERMANY / OTHER INTERNATIONAL
o HSN's performance in Germany was disappointing in part due to operating
challenges associated with the addition of 4 live hours of programming
earlier this year. Its EBITDA fell to a loss of $5 million, on 4%
lower revenue.
o Home Shopping Europe has launched a new service in the United Kingdom,
initially reaching 5.6 million households.
o HSN is the world's most distributed television retailer with services in 8
languages reaching more than 160 million homes in 14 countries.
-- More --
7 of 9
ELECTRONIC RETAILING HIGHLIGHTS (CONTINUED)
TV HOUSEHOLDS
---------------------------- LIVE HOURS
9/01 9/00 GROWTH DAILY 9/01 STAKE
---- ---- ------ ---------- -----
Consolidated Services: (IN MILLIONS @ 9/30)
Germany (includes Austria / Switzerland).............. 29.5 28.8 0.7 20 hours 42%
Home Shopping Espanol (U.S. / Puerto Rico)............ 5.9 5.1 0.8 18 hours 100%
Home Shopping Espanol (Mexico)........................ 2.4 -- 2.4 4 hours 100%
Unconsolidated Services:
TVSN (China).......................................... 28.8 22.4 6.4 5 hours 21%
Shop Channel (Japan) ................................. 10.9 8.6 2.3 12 hours 30%
Italy................................................. 9.4 -- 9.4 10 hours 33%
Belgium / The Netherlands............................. 2.5 -- 2.5 8 hours 47%
France / Belgium...................................... 1.7 1.4 0.3 8 hours 47%
U.K. (launched on 10/17/01)........................... 5.6 -- 5.6 12 hours 47%
INFORMATION & SERVICES HIGHLIGHTS
TICKETMASTER grew ticketing EBITDA by 14% to $19 million on 7% higher revenue
of $133.9 million, despite the negative impact the events of September 11th
had on ticketing sales and events surrounding that date.
o Online ticket sales accounted for 31.9% of total tickets sold by
Ticketmaster, compared to 25.6% in Q3 '00.
o MATCH.COM increased the number of paying subscribers to more than 250,000,
a 61% increase from 12/00. Match.com earned a record $5.8 million in
EBITDA in Q3.
o CITYSEARCH and its related properties topped more than 100 million monthly
pageviews in July and August.
o Citysearch introduced its "Anything/Anywhere" search engine, broadly
expanding the local content available on the site.
o Citysearch's "Best Of" logged more than 3 million votes as users helped to
define the best of their city.
o Ticketmaster is the world's leading ticketing and access company.
Q3 01 Q3 00 GROWTH
----- ----- ------
Number of tickets sold (IN MILLIONS)............ 19.3 20.2 (5%)
Gross value of tickets sold (IN MILLIONS)....... $788 $782 1%
Revenue per ticket.............................. $6.20 $5.67 9%
Share of tickets sold online.................... 31.9% 25.6%
Top-selling events in Q3 '01.................... Ringling Brothers, Tool, Neil Diamond, WWF, Aerosmith and
the New York Yankees.
-- More --
8 of 9
INFORMATION & SERVICES HIGHLIGHTS (CONTINUED)
HOTEL RESERVATIONS NETWORK increased EBITDA by 57% to $21.8 million on 60%
higher revenue of $151.2 million, its best quarter in its 10-year history.
o HRN expanded into 25 new cities and sold more than 1.2 million room nights
during Q3.
o HRN now has approximately 22,800 mostly-exclusive affiliates under
contract.
o HRN is the #1 provider of discount hotel accommodations worldwide.
Q3 01 Q3 00 GROWTH
----- ----- ------
Hotel room nights sold.......................... 1,227,422 716,600 71%
Affiliates (including TravelNow)................ 22,793 13,400 70%
Properties...................................... 3,890 2,100 85%
Cities served (AS OF 9/30)...................... 171 83 106%
PRECISION RESPONSE decreased EBITDA by 29% to $7.9 million on 4% higher revenue
of $72.6 million.
o PRC's business continues to be adversely affected by an economy-related
slowdown in the outsourcing of customer care programs.
o Precision Response Corporation is a global leader in Customer Relationship
Management (CRM) and outsourced customer care.
SHARES OUTSTANDING, MARKET CAPITALIZATION, NET DEBT
As of October 15, 2001, USA had outstanding 738.2 million shares, including
exchangeable securities, with an aggregate market capitalization of
approximately $15 billion. USA has no net debt and $420 million in consolidated
net cash, including that of its public subsidiaries and an advance receivable to
Universal. Net cash, excluding new investments, is expected to increase to
approximately $700 million by year-end, pro forma for the receipt of additional
cash proceeds from the sale of USA Broadcasting to Univision.
STATEMENTS OF OPERATIONS
The actual results are not comparable due to:
1) the acquisition of Precision Response in April, 2000;
2) the acquisition of Styleclick.com in August 2000; and
3) Ticketmaster's acquisition of TicketWeb in May 2000.
-- More --
9 of 9
ANALYST CONFERENCE CALL
USA Networks, Inc. will audiocast its conference call with analysts and
investors discussing the company's third quarter financial results on Wednesday,
October 24, 2001, at 11:00 a.m. Eastern Time (ET). The live audiocast is open to
the public at WWW.USANETWORKS.COM/INVESTOR.RELATIONS. A replay of the audiocast
will begin approximately one hour after its completion at
WWW.USANETWORKS.COM/INVESTOR.RELATIONS.
IMPORTANT DISCLOSURES / LEGEND AND FORWARD LOOKING STATEMENTS / FOOTNOTES
USA and Expedia have filed a joint prospectus/proxy statement and will file
other relevant documents concerning USA's acquisition of Expedia with the
Securities and Exchange Commission ("SEC"). INVESTORS ARE URGED TO READ THE
JOINT PROSPECTUS/PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE
FILED IN THE FUTURE WITH THE SEC BECAUSE THOSE DOCUMENTS CONTAIN IMPORTANT
INFORMATION. Investors will be able to obtain such documents free of charge at
the SEC's website at www.sec.gov. In addition, such documents may also be
obtained free of charge by contacting USA Networks, Inc., 152 West 57th Street,
New York, New York, 10019, Attention: Investor Relations, or Expedia, Inc.,
13810 SE Eastgate Way, Suite 400, Bellevue, WA 98005, Attention: Investor
Relations.
This press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are necessarily estimates reflecting the best judgment of the senior
management of USA and involve a number of risks and uncertainties that could
cause actual results to differ materially from those suggested by the
forward-looking statements. These forward-looking statements should, therefore,
be considered in light of various important factors, including those set forth
herein and in the documents USA files with the Securities and Exchange
Commission. Important factors that could cause actual results to differ
materially from estimates or projections contained in the forward-looking
statements include, without limitation: material adverse changes in economic
conditions generally or in the markets served by USA, material changes in
inflation, future regulatory and legislative actions affecting USA's operating
areas, competition from others, product demand and market acceptance, the
ability to protect proprietary information and technology or to obtain necessary
licenses on commercially reasonable terms, the ability to expand into and
successfully operate in foreign markets, and obtaining and retaining skilled
workers and key executives. The words "estimate," "project," "intend," "expect,"
"believe" and similar expressions are intended to identify forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. USA does not
undertake any obligation to update or revise these forward-looking statements,
whether as a result of new information, future events or any other reason.
The financial, statistical and other information contained in this press release
and its attachments is unaudited. USA Network and SCI FI ratings and household
delivery data per NMR Galaxy Explorer for NHI defined periods versus comparable
periods. Subscriber counts based on Nielsen People Meter Installed Sample,
September `01 vs. `00. All ratings within each network's coverage area. Studios'
syndicated program ratings per NSS (GAA % where applicable), and broadcast
network data per NTI for comparable time periods. Subject to qualifications.
Online retail market data per PhocusWright (2001). Internet and television
retailing market information sources include, but are not limited to Boston
Consulting Group / Shop.org (May 2001), Jupiter (December 2000, August 2000,
December 1999), Forrester (July 2000), and various other published industry and
Wall Street analyst research. Operating metrics in this press release are pro
forma for the pending transactions.
ABOUT USA NETWORKS, INC.
USA Networks, Inc. (NASDAQ: USAI), is focused on the new convergence of
entertainment, information and direct selling. The Company is organized within
two groups, the Entertainment Group and the Interactive Group, comprised of
interrelated business divisions which include the following assets: USA
Entertainment's USA Network, SCI FI Channel, TRIO, NWI, Crime, Studios USA, and
USA Films; and USA Interactive's HSN, HSN International, HSN Interactive,
Ticketmaster (NASDAQ: TMCS), which operates Citysearch and Match.com, Hotel
Reservations Network (NASDAQ: ROOM), Electronic Commerce Solutions, Styleclick
(NASDAQ: IBUY) and Precision Response Corporation.
CONTACTS: USA COMMUNICATIONS: USA INVESTOR RELATIONS:
Adrienne Becker Roger Clark
212-314-7254 212-314-7400
USA NETWORKS, INC. AND SUBSIDIARIES
Business Segment Information - Continuing Operations
Unaudited
( $ IN THOUSANDS )
THREE MONTHS ENDED SEPTEMBER 30,
ACTUAL PRO FORMA (A) ACTUAL
------------ ------------- -----------
2001 2000 2000
------------ ------------- -----------
REVENUES - OPERATING BUSINESSES
Cable and studios $ 398,211 $ 336,047 $ 336,047
Electronic retailing - U.S. 396,435 368,773 368,773
Electronic retailing - Germany 59,952 62,741 62,741
Ticketing 133,897 124,929 124,929
Hotel reservations 151,242 94,619 94,619
Teleservices 72,610 70,162 70,162
Match 12,477 7,600 7,600
Intersegment Elimination (4,128) -- --
----------- ----------- -----------
SUB-TOTAL 1,220,696 1,064,871 1,064,871
Euro's exchange rate fluctuation (c) (9,134) (8,900) (8,900)
REVENUES - EMERGING BUSINESSES
Citysearch 11,079 13,962 13,962
Styleclick 901 5,291 5,147
Electronic Commerce Solutions 4,817 7,174 7,174
HSN - international and other 6,194 4,444 4,444
USA Films 15,995 14,468 14,468
Trio, NWI, Crime, other emerging media 5,784 8,591 8,591
----------- ----------- -----------
SUB-TOTAL 44,770 53,930 53,786
----------- ----------- -----------
TOTAL $ 1,256,332 $ 1,109,901 $ 1,109,757
=========== =========== ===========
EBITDA - OPERATING BUSINESSES (B) -- --
Cable and studios $ 155,198 $ 118,453 $ 118,453
Electronic retailing - U.S. 48,898 53,798 53,798
Electronic retailing - Germany (4,955) 5,799 5,799
Ticketing 19,020 16,655 16,655
Hotel reservations 21,776 13,907 13,907
Teleservices 7,879 11,120 11,120
Match 5,801 2,300 2,300
Corporate and other (8,061) (6,195) (6,195)
----------- ----------- -----------
SUB-TOTAL 245,556 215,837 215,837
Euro's exchange rate fluctuation (c) 946 (877) (877)
EBITDA - EMERGING BUSINESSES
Citysearch (10,791) (16,264) (16,264)
Styleclick (1,785) (8,734) (7,290)
Electronic Commerce Solutions (12,628) (8,001) (8,001)
HSN - international and other (7,456) (4,620) (4,620)
USA Films 446 (5,819) (5,819)
Trio, NWI, Crime, other emerging media (3,057) (339) (339)
Intersegment Elimination (1,837) -- --
----------- ----------- -----------
SUB-TOTAL (37,108) (43,777) (42,333)
----------- ----------- -----------
Restructuring charge and one-time items (d) (12,250) -- --
----------- ----------- -----------
TOTAL $ 197,144 $ 171,183 $ 172,627
=========== =========== ===========
(a) Presented as if the acquisition of Styleclick had occurred at the
beginning of the period presented.
(b) EBITDA is defined as net income plus, (1) provision for income taxes, (2)
minority interest, (3) interest income and expense, (4) depreciation and
amortization, (5) amortization of cable distribution fees of $9,986 and
$8,845, respectively, and (6) amortization of non-cash distribution and
marketing expense and non-cash compensation expense.
(c) In order to present comparable results for HSN Germany, the results have
been translated from Euros to U.S. dollars at a constant exchange rate.
(d) Represents non-recurring costs related to restructuring operations,
employee terminations and benefits.
USA NETWORKS, INC. AND SUBSIDIARIES
Business Segment Information - Continuing Operations
Unaudited
( $ IN THOUSANDS )
NINE MONTHS ENDED SEPTEMBER 30,
ACTUAL PRO FORMA (A) ACTUAL
----------- ------------- -----------
2001 2000 2000
----------- ------------- -----------
REVENUES - OPERATING BUSINESSES
Cable and studios $ 1,280,065 $ 1,105,688 $ 1,105,688
Electronic retailing - U.S. 1,163,629 1,071,202 1,071,202
Electronic retailing - Germany 219,007 185,677 185,677
Ticketing 447,904 395,909 395,909
Hotel reservations 394,830 227,964 227,964
Teleservices 228,926 210,023 140,374
Match 31,686 21,978 21,978
Intersegment Elimination (10,659) -- --
----------- ----------- -----------
SUB-TOTAL 3,755,388 3,218,441 3,148,792
Euro's exchange rate fluctuation (c) (36,613) (23,457) (23,457)
REVENUES - EMERGING BUSINESSES
Citysearch 35,852 36,798 36,798
Styleclick 7,358 19,445 17,556
Electronic Commerce Solutions 15,560 15,634 15,634
HSN - international and other 18,225 11,901 11,901
USA Films 129,562 65,548 65,548
Trio, NWI, Crime, other emerging media 18,125 12,862 12,862
----------- ----------- -----------
SUB-TOTAL 224,682 162,188 160,299
----------- ----------- -----------
TOTAL $ 3,943,457 $ 3,357,172 $ 3,285,634
=========== =========== ===========
EBITDA - OPERATING BUSINESSES (B) -- --
Cable and studios $ 489,907 $ 396,580 $ 396,580
Electronic retailing - U.S. 155,840 162,048 162,048
Electronic retailing - Germany 6,554 19,199 19,199
Ticketing 84,774 75,606 75,606
Hotel reservations 58,592 35,004 35,004
Teleservices 28,079 32,508 23,047
Match 8,909 4,862 4,862
Corporate and other (24,173) (28,902) (28,902)
----------- ----------- -----------
SUB-TOTAL 808,482 696,905 687,444
Euro's exchange rate fluctuation (c) (982) (2,486) (2,486)
Nonrecurring charges (d) -- (1,498) (1,498)
EBITDA - EMERGING BUSINESSES
Citysearch (33,593) (51,453) (51,453)
Styleclick (18,063) (34,593) (23,628)
Electronic Commerce Solutions (27,723) (19,847) (19,847)
HSN - international and other (21,364) (8,570) (8,570)
USA Films 43 (5,971) (5,971)
Trio, NWI, Crime, other emerging media (7,110) (4,602) (4,602)
Intersegment Elimination (5,786) -- --
----------- ----------- -----------
SUB-TOTAL (113,596) (125,036) (114,071)
----------- ----------- -----------
Restructuring charge and one-time items (e) (17,023) -- --
----------- ----------- -----------
TOTAL $ 676,881 $ 567,885 $ 569,389
=========== =========== ===========
(a) Presented as if the acquisitions of Precision Response and Styleclick had
occurred at the beginning of the period presented.
(b) EBITDA is defined as net income plus, (1) provision for income taxes, (2)
minority interest, (3) interest income and expense, (4) depreciation and
amortization, (5) amortization of cable distribution fees of $29,384 and
$25,335, respectively, and (6) amortization of non-cash distribution and
marketing expense and non-cash compensation expense.
(c) In order to present comparable results for HSN Germany, the results have
been translated from Euros to U.S. dollars at a constant exchange rate.
(d) Represents one-time credits recognized in Q1 '00 by HSN in connection
with a favorable settlement of litigation relating to an HSN broadcasting
affiliation agreement ($4,661) and a cable affiliation agreement
($1,647). In addition, as part of a resignation agreement with a senior
executive, the Company recorded a one-time compensation expense related
to a consulting arrangement.
(e) Represents non-recurring costs related to consolidating Styleclick's
operations in Chicago and the shutdown of the Firstauction.com website,
as well as non-recurring costs related to restructuring operations,
employee terminations and benefits.
USA NETWORKS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Unaudited
( $ IN THOUSANDS, EXCEPT PER SHARE DATA )
THREE MONTHS ENDED SEPTEMBER 30,
ACTUAL PRO FORMA (A) ACTUAL
----------- ------------- -----------
2001 2000 2000
----------- ------------- -----------
Revenues, net $ 1,256,332 $ 1,109,901 $ 1,109,757
Operating costs and expenses:
Costs related to revenues 746,661 669,148 669,087
Other costs and expenses 312,527 269,570 268,043
Amortization of non cash distribution and marketing expense (b) 5,218 2,692 2,692
Amortization of non cash compensation expense (c) 1,268 1,235 1,235
Amortization of cable distribution fees 9,986 8,845 8,845
Depreciation and amortization 142,948 141,702 137,012
----------- ----------- -----------
Total operating costs and expenses 1,218,608 1,093,192 1,086,914
----------- ----------- -----------
Operating income 37,724 16,709 22,843
Interest expense, net (10,131) (8,240) (8,178)
Other, net (12,943) 69,920 69,920
----------- ----------- -----------
Earnings before income taxes and minority interest 14,650 78,389 84,585
Income tax expense (21,901) (25,612) (27,452)
Minority interest (33,192) (66,708) (63,005)
----------- ----------- -----------
Net loss from continuing operations (d) $ (40,443) $ (13,931) $ (5,872)
=========== =========== ===========
Net loss from continuing operations, excluding one-time charges and -- --
non-operating gains $ (29,612) $ (30,497) $ (22,438)
=========== =========== ===========
Fully converted net earnings from continuing operations,
excluding one-time charges and non-operating gains $ (4,874) $ (12,905) $ (1,444)
=========== =========== ===========
Weighted average basic shares 376,415 367,799 367,799
=========== =========== ===========
Weighted average fully converted shares 737,568 728,952 728,952
=========== =========== ===========
EPS FROM CONTINUING OPERATIONS
Basic loss per share $ (.11) $ (.04) $ (.02)
=========== =========== ===========
Basic loss per share, excluding one-time charges
and non-operating gains $ (.08) $ (.08) $ (.06)
=========== =========== ===========
Fully converted earnings per share, excluding
one-time charges $ (.01) $ (.02) $ (.00)
=========== =========== ===========
EBITDA (E) $ 197,144 $ 171,183 $ 172,627
=========== =========== ===========
(a) Presented as if the acquisition of Styleclick had occurred at the
beginning of the period presented.
(b) Amortization of warrants and stock issued in exchange for distribution and
marketing services.
(c) Expense relates to the Company's bonus stock purchase program and
restricted stock awards.
(d) Q3 '01 excludes the gain on sale of of broadcasting stations, the sale of
which to Univision was announced in December 2000 The Company estimates
the gain will be in the $425 million - $450 million range and will be
disclosed in the Company's 10-Q. Q3 '00 excludes the results of USA
Broadcasting. The results for the discontinued operations was an after tax
loss of $14,367.
(e) EBITDA is defined as net income plus, (1) provision for income taxes, (2)
minority interest, (3) interest income and expense, (4) depreciation and
amortization, (5) amortization of cable distribution fees of $9,986and
$8,845, respectively, and (6) amortization of non-cash distribution and
marketing expense and non-cash compensation expense.
USA NETWORKS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Unaudited
( $ IN THOUSANDS, EXCEPT PER SHARE DATA )
NINE MONTHS ENDED SEPTEMBER 30,
PRO FORMA (A) ACTUAL PRO FORMA (A)(B) ACTUAL
------------- ----------- ---------------- -----------
2001 2001 2000 2000
------------- ----------- ---------------- -----------
Revenues, net $ 3,943,457 $ 3,943,457 $ 3,357,172 $ 3,285,634
Operating costs and expenses:
Costs related to revenues 2,378,486 2,378,486 2,011,081 1,956,591
Other costs and expenses 888,090 888,090 778,206 759,654
Amortization of non cash distribution and marketing expense (c) 19,866 19,866 4,566 4,566
Amortization of non cash compensation expense (d) 5,431 5,431 7,391 7,391
Amortization of cable distribution fees 29,384 29,384 25,335 25,335
Depreciation and amortization 427,077 427,077 419,936 369,970
----------- ----------- ----------- -----------
Total operating costs and expenses 3,748,334 3,748,334 3,246,515 3,123,507
----------- ----------- ----------- -----------
Operating income 195,123 195,123 110,657 162,127
Interest expense, net (34,462) (34,462) (24,702) (23,955)
Other, net (33,196) (33,196) 67,354 67,360
----------- ----------- ----------- -----------
Earnings before income taxes and minority interest 127,465 127,465 153,309 205,532
Income tax expense (69,579) (71,191) (80,093) (86,523)
Minority interest (127,526) (124,378) (139,170) (145,300)
----------- ----------- ----------- -----------
Loss from continuing operations (e) $ (69,640) $ (68,104) $ (65,954) $ (26,291)
=========== =========== =========== ===========
Net loss from continuing operations, excluding one-time charges and
non-operating gains $ (56,075) $ (54,539) $ (78,672) $ (39,009)
=========== =========== =========== ===========
Fully converted net earnings from continuing operations,
excluding one-time charges and non-operating gains $ 34,463 $ 36,005 $ (22,665) $ 38,927
=========== =========== =========== ===========
Weighted average basic shares 373,227 373,227 363,980 355,184
=========== =========== =========== ===========
Weighted average fully converted shares 759,661 759,661 725,133 743,960
=========== =========== =========== ===========
EPS FROM CONTINUING OPERATIONS
Basic loss per share $ (.19) $ (.18) $ (.18) $ (.07)
=========== =========== =========== ===========
Basic loss per share, excluding one-time charges
and non-operating gains $ (.15) $ (.15) $ (.22) $ (.11)
=========== =========== =========== ===========
Fully converted earnings per share, excluding
one-time charges $ .05 $ .05 $ (.03) $ .05
=========== =========== =========== ===========
EBITDA (F) $ 676,881 $ 676,881 $ 567,885 $ 569,389
=========== =========== =========== ===========
(a) Presented as if the merger of Ticketmaster and TMCS had occurred at the
beginning of the period presented. The merger has no impact on revenues or
EBITDA. Pro forma results reflect the impact of the merger on minority
interest and income taxes.
(b) Presented as if the acquisitions of Precision Response and Styleclick had
occurred at the beginning of the period presented.
(c) Amortization of warrants and stock issued in exchange for distribution and
marketing services.
(d) Expense relates to the Company's bonus stock purchase program and
restricted stock awards.
(e) Loss from continuing operations is calculated before the impact of the
cumulative effect of adoption of SOP 00-2, "Accounting by Producers and
Distributors of Films", of $9.2 million and the gain on sale of of
broadcasting stations, the sale of which to Univision was announced in
December 2000. The Company estimates the gain will be in the $475 million
- $500 million range and will be disclosed in the Company's 10-Q. Q3 '00
excludes the results of USA Broadcasting. The results for the discontinued
operations was an after tax loss of $41,407.
(f) EBITDA is defined as net income plus, (1) provision for income taxes, (2)
minority interest, (3) interest income and expense, (4) depreciation and
amortization, (5) amortization of cable distribution fees of $29,384 and
$25,335 respectively, and (6) amortization of non-cash distribution and
marketing expense and non-cash compensation expense.
USA NETWORKS, INC. AND SUBSIDIARIES
EPS AND CASH NET INCOME RECONCILIATION INFORMATION - CONTINUING OPERATIONS
UNAUDITED
( $ IN THOUSANDS, EXCEPT PER SHARE DATA )
THREE MONTHS ENDED SEPTEMBER 30,
ACTUAL PRO FORMA (A) ACTUAL
---------- ------------- ----------
2001 2000 2000
---------- ------------- ----------
BASIC LOSS PER SHARE:
Net loss ($ 40,443) ($ 13,931) ($ 5,872)
Impact of unusual items, net of tax and minority interest (b) 10,831 (16,566) (16,566)
--------- --------- ---------
BASIC LOSS, EXCLUDING UNUSUAL ITEMS (B) $ (29,612) $ (30,497) $ (22,438)
========= ========= =========
Weighted average basic shares 376,415 367,799 367,799
========= ========= =========
Basic loss per share: $ (.11) $ (.04) $ (.02)
========= ========= =========
Basic loss per share excluding unusual items (b) $ (.08) $ (.08) $ (.06)
========= ========= =========
CASH NET INCOME:
Net loss $ (40,443) $ (13,931) ($ 5,872)
Impact of goodwill amortization, net of tax and minority interest 79,119 89,243 76,042
--------- --------- ---------
CASH NET INCOME 38,676 75,312 70,170
Impact of unusual items, net of tax and minority interest (b) 10,831 (16,566) (16,566)
--------- --------- ---------
CASH NET INCOME, EXCLUDING UNUSUAL ITEMS (B) $ 49,507 $ 58,746 $ 53,604
========= ========= =========
Weighted average basic shares 376,415 367,799 367,799
========= ========= =========
Cash net income per share $ .10 $ .20 $ .19
========= ========= =========
Cash net income per share, excluding unusual items (b) $ .13 $ .16 $ .15
========= ========= =========
FULLY CONVERTED NET EARNINGS:
Net loss $ (40,443) $ (13,931) $ (5,872)
Impact of minority interest, net of tax 23,221 46,055 49,457
--------- --------- ---------
FULLY CONVERTED NET EARNINGS (17,222) 32,124 43,585
Impact of unusual items, net of tax and minority interest (b) 12,348 (45,029) (45,029)
--------- --------- ---------
FULLY CONVERTED NET EARNINGS, EXCLUDING UNUSUAL ITEMS (B) $ (4,874) $ (12,905) $ (1,444)
========= ========= =========
Weighted average fully converted shares 737,568 728,952 728,952
========= ========= =========
Fully converted earnings per share $ (.02) $ .04 $ .06
========= ========= =========
Fully converted earnings per share, excluding unusual items (b) $ (.01) $ (.02) $ (.00)
========= ========= =========
FULLY CONVERTED CASH NET INCOME:
Net loss $ (40,443) $ (13,931) $ (5,872)
Impact of minority interest, net of tax 23,221 46,055 49,457
Impact of goodwill amortization, net of tax and minority interest 79,119 89,243 76,042
--------- --------- ---------
FULLY CONVERTED CASH NET INCOME 61,897 121,367 119,627
Impact of unusual items, net of tax and minority interest (b) 12,348 (45,029) (45,029)
--------- --------- ---------
FULLY CONVERTED CASH NET INCOME, EXCLUDING UNUSUAL ITEMS (B) $ 74,245 $ 76,338 $ 74,598
========= ========= =========
Weighted average fully converted shares 737,568 754,750 754,750
========= ========= =========
Fully converted cash net income per share $ .08 $ .16 $ .16
========= ========= =========
Fully converted cash net income per share, excluding unusual items (b) $ .10 $ .10 $ .10
========= ========= =========
(a) Presented as if the acquisition of Styleclick had occurred at the beginning
of the period presented.
(b) Excludes one time charges and non-operating gains.
USA NETWORKS, INC. AND SUBSIDIARIES
EPS AND CASH NET INCOME RECONCILIATION INFORMATION -
CONTINUING OPERATIONS, BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE
UNAUDITED
( $ IN THOUSANDS, EXCEPT PER SHARE DATA )
NINE MONTHS ENDED SEPTEMBER 30,
PRO FORMA (A) ACTUAL PRO FORMA (A)(B) ACTUAL
------------- ----------- --------------- -------------
2001 2001 2000 2000
------------- ----------- --------------- -------------
BASIC LOSS PER SHARE:
Net loss ($ 69,640) ($ 68,104) ($ 65,954) ($ 26,291)
Impact of unusual items, net of tax and minority interest (c) 13,565 13,565 (12,718) (12,718)
---------- ---------- ---------- ----------
BASIC LOSS, EXCLUDING UNUSUAL ITEMS (C) $ (56,075) $ (54,539) $ (78,672) $ (39,009)
========== ========== ========== ==========
Weighted average basic shares 373,227 373,227 363,980 355,184
========== ========== ========== ==========
Basic loss per share: $ (.19) $ (.18) $ (.18) $ (.07)
========== ========== ========== ==========
Basic loss per share excluding unusual items (c) $ (.15) $ (.15) $ (.22) $ (.11)
========== ========== ========== ==========
FULLY CONVERTED NET EARNINGS:
Net loss $ (69,640) $ (68,104) $ (65,954) $ (26,291)
Impact of minority interest, net of tax 84,125 84,131 85,427 107,356
---------- ---------- ---------- ----------
FULLY CONVERTED NET EARNINGS 14,485 16,027 19,473 81,065
Impact of unusual items, net of tax and minority interest (c) 19,978 19,978 (42,138) (42,138)
---------- ---------- ---------- ----------
FULLY CONVERTED NET EARNINGS, EXCLUDING UNUSUAL ITEMS (C) $ 34,463 $ 36,005 $ (22,665) $ 38,927
========== ========== ========== ==========
Weighted average fully converted shares 759,661 759,661 725,133 743,960
========== ========== ========== ==========
Fully converted earnings per share $ .02 $ .02 $ .03 $ .11
========== ========== ========== ==========
Fully converted earnings per share, excluding unusual items (c) $ .05 $ .05 $ (.03) $ .05
========== ========== ========== ==========
(a) Presented as if the merger of Ticketmaster and TMCS had occurred at the
beginning of the period presented. The merger has no impact on revenues or
EBITDA. Pro forma results reflect the impact of the merger on minority
interest and income taxes.
(b) Presented as if the acquisitions of Styleclick and Precision Response Corp.
had occurred at the beginning of the period presented.
(c) Excludes one time charges and non-operating gains.
EX-99.2
4
a2061764zex-99_2.txt
EXHIBIT 99.2
Exhibit 99.2
USA PROVIDES INTERNAL BUDGET TO INVESTMENT COMMUNITY
As furnished to the Securities and Exchange Commission on October 24, 2001
USA Networks, Inc. (USA) has always been troubled, as we will explain below,
with the concept of "guidance" for future earnings. Nevertheless, we have gone
along with the way of the world in supplying guidance while attempting to do so
with greater detail than most.
Among our concerns is that over the years negotiating expectations externally
has moved from informal advisories into a cottage industry, first with
"whispers" and expectations managed - to a new world, post Reg FD, of extensive
filings and press releases if any material information is to be divulged.
This evolution has created its own sophisticated art form promoting and managing
expectations. Of course, this has nothing to do with actually operating a
business on a day-to-day basis, and is becoming at best a distraction from the
real work of a company...the `at worst' conjuring doesn't need detailing here.
While anyone interested wants to know how a company will perform as far into the
future as possible, the truth is that no one knows the future. Companies make
budgets with all sorts of assumptions and expectations, with base goals, stretch
goals, with the best of thinking and intentions...but, that's all they are:
planning budgets, subject to review based on real time information.
The process USA follows as part of its normal business practices is to
rigorously analyze each area of USA's operations, every profit and cost center,
every future capital expenditure, and roll them up into operating budgets for
the next year. Planning an overall budget for 2002 and beyond is particularly
difficult at this time due to ever deteriorating economic times and as a result
of the events of September 11th and thereafter, which have, only temporarily one
hopes, changed the way in which people in our country live their lives, spend
their money and feel about the future.
So, because of all these uncertainties, both internally and externally, USA has
decided to change its approach to the "guidance" ritual. For this and subsequent
years, USA will provide the investment community with our actual internal
budget, broken down by business segments. USA believes there's no better way to
let the investing community understand our goals and challenges than by bringing
the external world inside the company through the disclosure of USA's internal
budget. It's how we manage the company and it's a far more productive process
than attempting to manage the street.
READ IMPORTANT FOOTNOTES AND DISCLAIMER USA Operating Budget 10/24/01
AS FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 24, 2001
Page 1 of 6
USA NETWORKS, INC.
REVENUE - OPERATING BUDGET
(PRO FORMA $ IN MILLIONS) Growth
---------------------------------
2000 2001 2002 2003 '00 - '01 '01 - '02 '02 - '03
-------- -------- -------- -------- --------- --------- ---------
OPERATING BUSINESSES
Advertising & other A $ 467 $ 454 $ 407 $ 484 -3% -10% 19%
Affiliate fees 341 369 401 425 8% 9% 6%
-------- -------- -------- -------- ----- ---- ----
USA Network 808 823 808 909 2% -2% 13%
Advertising & other A,I 181 170 194 221 -6% 14% 14%
Affiliate fees 96 101 120 130 5% 19% 8%
-------- -------- -------- -------- ------ ----- -----
SCI FI 277 271 314 351 -2% 16% 12%
Studios USA, net B 446 528 521 577 18% -1% 11%
-------- -------- -------- -------- ------- ------ ------
Network and Studios 1,531 1,622 1,643 1,837 6% 1% 12%
HSN - U.S. 1,430 1,555 1,843 2,070 9% 19% 12%
HSN - Germany 260 294 374 450 13% 27% 20%
Ticketing 519 578 620 680 11% 7% 10%
Hotel Reservations 328 510 700 980 55% 37% 40%
Expedia H 157 280 360 470 79% 29% 31%
Precision Response 282 303 352 440 7% 16% 25%
Match.com 29 45 60 80 54% 33% 33%
-------- -------- -------- -------- ------- ------ ------
SUBTOTAL 4,535 5,187 5,952 7,007 14% 15% 18%
EMERGING BUSINESSES
Citysearch & related 51 47 50 70 -7% 6% 40%
HSN - Other International 21 27 45 60 27% 67% 33%
Trio, NWI, Crime, other emerging 20 24 30 50 18% 25% 67%
ECS / Styleclick 49 45 74 117 -7% 64% 58%
USA Films C 86 176 184 227 104% 5% 23%
-------- -------- -------- -------- ------- ------ ------
Subtotal 227 319 383 524 41% 20% 37%
Non-recurring items E -- 16 -- --
Foreign exchange conversion F (35) (58) (91) (110)
Disengaged HSN homes D 103 108 -- --
Intersegment elimination -- (12) (32) (32)
-------- -------- -------- -------- ------- ------ ------
TOTAL $4,830 $5,560 $6,212 $7,389 15% 12% 19%
======== ======== ======== ======== ======= ====== ======
BY GROUP -- Operating Businesses
Entertainment A $1,531 $1,622 $1,643 $1,837 6% 1% 12%
Electronic Retailing 1,690 1,849 2,217 2,520 9% 20% 14%
Information & Services 1,315 1,716 2,092 2,650 30% 22% 27%
-------- -------- -------- -------- ------- ------ ------
Total Operating Businesses $4,535 $5,187 $5,952 $7,007 14% 15% 18%
-------- -------- -------- -------- ------- ------ ------
READ IMPORTANT FOOTNOTES AND DISCLAIMER USA Operating Budget 10/24/01
AS FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 24, 2001
Page 2 of 6
USA NETWORKS, INC.
EBITDA - OPERATING BUDGET
(PRO FORMA $ IN MILLIONS) Growth
--------------------------------
2000 2001 2002 2003 '00 - '01 '01 - '02 02 - '03
-------- -------- -------- -------- --------- --------- --------
OPERATING BUSINESSES
USA Network A $ 395 $ 424 $ 391 $ 444 7% -8% 14%
SCI FI I 102 106 124 161 5% 17% 30%
Studios USA, net 51 69 83 90 36% 20% 8%
------- -------- -------- -------- ------- -------- -------
Network and Studios 548 600 598 695 9% 0% 16%
HSN - U.S. 215 216 285 350 0% 32% 23%
HSN - Germany 28 12 38 47 -59% 230% 24%
Ticketing 100 105 125 145 5% 19% 16%
Hotel Reservations 53 73 87 120 40% 19% 38%
Expedia H (44) 42 60 85 195% 43% 42%
Precision Response 44 37 41 61 -14% 9% 50%
Match.com 6 14 20 30 122% 43% 50%
Corporate and other (28) (33) (34) (36) -21% -2% -6%
------- -------- -------- -------- ------ ------- ------
SUBTOTAL 922 1,066 1,220 1,497 16% 15% 23%
Emerging Businesses
Citysearch & related (64) (45) (30) (13)
HSN - Other International (14) (26) (20) (20)
Trio, NWI, Crime, other emerging (7) (15) (35) (25)
ECS / Styleclick (71) (49) (19) (6)
USA Films C (7) 2 (28) (35)
------- -------- -------- -------- ------- ------- -------
Subtotal (163) (133) (132) (99) 18% 1% 25%
Non-recurring items E (6) (1) - -
Foreign exchange conversion F (4) (4) (9) (11)
Disengaged HSN homes D 15 15 - -
Intersegment elimination - (7) (22) (22)
------- -------- -------- -------- ------ ------- -------
TOTAL $ 765 $ 936 $1,057 $1,365 22% 13% 29%
======= ======== ======== ======== ====== ======= =======
BY GROUP -- Operating Businesses
Entertainment A $ 548 $ 600 $ 598 $ 695 9% 0% 16%
Electronic Retailing 244 228 323 397 -7% 42% 23%
Information & Services 158 272 333 441 72% 22% 33%
Corporate & other (28) (33) (34) (36) 21% -2% -6%
------- -------- -------- -------- ------ ------- -------
Total Operating Businesses $ 922 $1,066 $1,220 $1,497 16% 15% 23%
------- -------- -------- -------- ------ ------- -------
A A very weak advertising market is anticipated to continue through at least
the first half of 2002.
B Studios USA's 2001 revenue was favorably impacted by the syndication sale of
LAW & ORDER to TNT.
C USA Films' 2001 results were favorably impacted by the release of TRAFFIC.
D Reflects results generated by homes lost by HSN following disengagement of
USA Broadcasting to Univision. For further information, see separate HSN
DISENGAGEMENT section.
E 2001 and 2000 non-recurring items reflect income and expense items. For
2001, income of $16 million related to a special adjustment relating to
affiliate fees was recorded, impacting both revenue and EBITDA.
Offsetting this, $17 million of expense was recorded for non-recurring
costs related to restructuring operations, employee terminations, and
benefits. For 2000, $6 million of expense relates to one-time expenses
of the Ticketmaster and TMCS merger, an executive consulting arrangement
as part of a resignation agreement, offset by a one-time credit
recognized by HSN in connection with a favorable settlement.
F To present comparable results for HSN Germany, the results have been
translated from Euros to U.S. dollars at a constant exchange rate.
H Expedia estimates are pro forma USA's acquisition of Expedia, which is
expected to close in Q4 2001.
I SCI FI's 2002 advertising growth is expected to be favorably impacted by the
miniseries TAKEN in the fourth quarter.
READ IMPORTANT FOOTNOTES AND DISCLAIMER USA Operating Budget 10/24/01
AS FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 24, 2001
Page 3 of 6
USA NETWORKS, INC.
FREE CASH FLOW - OPERATING BUDGET
(PRO FORMA $ IN MILLIONS) 2000 2001 2002
-------- ------ ------
Total EBITDA $ 765 $ 936 $1,057
Capital expenditures (191) (140) (177)
Programming payments in excess of amortization (153) (93) (104)
Taxes, including distributions to LLC partJers (89) (44) (129)
Cable distribution fees (65) (59) (67)
Cash interest (64) (42) (36)
HSN disengagement costs K -- (5) (53)
Other, net L,M (241) (439) (145)
-------- ------- -------
$ (39) $ 114 $ 346
======== ======= =======
P&L - OPERATING BUDGET
(PRO FORMA $ IN MILLIONS) 2000 2001 2002 2003
-------- ------- ------- --------
Total EBITDA $ 765 $ 936 $1,057 $1,365
Amortization of goodwill N -- -- -- --
Depreciation / other amortization (319) (283) (293) (353)
Disengagement costs -- (5) (36) (18)
Interest income / (expense) (30) (27) (22) (24)
Other income / (expense) 47 (37) (21) (20)
-------- ------- ------- --------
Pre-tax net income 463 583 686 951
Income tax expense (136) (96) (110) (142)
Minority interest expense (322) (370) (396) (535)
-------- ------- ------- --------
Net income 5 118 180 273
======== ======= ======= ========
Average shares outstanding 423 431 431 431
-------- ------- ------- --------
EPS - diluted 0.01 0.27 0.42 0.63
======== ======= ======= ========
Fully converted EPS:
Pre-tax net income 463 583 686 951
Income tax expense (276) (216) (243) (317)
Minority interest expense 36 (34) (50) (78)
-------- ------- ------- --------
Net income $ 223 $ 334 $ 392 $ 556
======== ======= ======= ========
Average shares outstanding 784 792 792 792
-------- ------- ------- --------
EPS - diluted $ 0.28 $ 0.42 $ 0.50 $ 0.70
======== ======= ======= ========
J If the LLC structure were eliminated, 2002 tax payments would increase $136
million due to timing.
K For further information, see separate HSN DISENGAGEMENT section.
L 2001 excludes anticipated $690 million proceeds, net of tax, from sale of USA
Broadcasting to Univision.
M Includes investments, acquisitions, changes in working capital, and other
items.
N All years presented as if new accounting rules for goodwill amortization were
in place in order to present comparable information.
READ IMPORTANT FOOTNOTES AND DISCLAIMER USA Operating Budget 10/24/01
AS FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 24, 2001
Page 4 of 6
USA NETWORKS, INC.
OPERATING BUDGET
BUSINESS OUTLOOK for the YEAR 2002
We anticipate that our operating businesses will grow their revenue and EBITDA
by 15% in 2002. All of our operating businesses anticipate growing quite
significantly (at an average growth of over 20%), other than the USA Network,
which we anticipate will be particularly hit hard in the present advertising
environment. If advertising recovers more quickly than we anticipate, our EBITDA
may very well be higher, although it's possible that, in such a case, we'd
reinvest in the business and spend more on original programming. On the other
hand, it's more than possible that, in the present economic environment and with
ever changing world events, our EBITDA growth could be less than anticipated;
however, even under the worst circumstances, we expect we will do what's
necessary to make sure we don't perform at a level less than 2001 (which we
believe will end up with EBITDA growth for USA's operating businesses of 16%
over 2000).
It's also anticipated that the first six months of 2002 will be comparatively
worse than the second six months of the year. So it is possible that USA's
EBITDA numbers for the first and second quarters of 2002 will show negative
comparisons to the same quarters in 2001.
BUSINESS OUTLOOK for the FOURTH QUARTER 2001
For the fourth quarter, we expect EBITDA from our Operating Businesses to
decline by 12% to 16%, on flattish revenue growth, as compared to Q4 2000. This
weak quarterly performance is due largely to the continuing effects of the
national tragedy, including an accelerated downward impact on the advertising
market. HSN, however, has returned to its normal level of business, and,
therefore anticipates positive performance in the fourth quarter, but it's sales
results may be negatively affected by reduced computer sales (which contributed
almost $50m in sales during Q4 '00).
HSN DISENGAGEMENT
USA announced the sale of its broadcast television stations to Univision for
$1.1 billion in December 2000. The majority of these stations are located in the
largest markets in the country and air HSN on a 24-hour basis. As of January
2002, HSN will have switched its distribution in these markets directly to cable
carriage. As a result, HSN will lose approximately 12 million homes and
accordingly, HSN's operating results will be affected. Fortunately, sales from
broadcast only homes are very, very low in comparison to sales from cable homes.
So HSN's loses attributable to this disengagement is limited. HSN anticipates
losing sales, which translates on a pro forma basis for 2001, of $108 million
and EBITDA of $15 million. These anticipated loses are consistent with previous
disclosures in USA's 10k filing, in which it was stated that disengagement loses
would equal approximately 6% of HSN's sales and EBITDA.
Since the affect of disengagement is a one-time event, and in order to show
HSN's results on a meaningful comparative basis, the revenue and EBITDA that
were generated by the "lost" homes in prior periods will be pro forma eliminated
from HSN's core results in these prior periods.
In addition, in order to effectively transfer HSN's distribution to cable (which
has been accomplished), USA will incur charges of approximately $100 million in
the form of payments to cable operators and related marketing expenses. These
disengagement costs will not impact EBITDA. Approximately $5 million of these
costs will be incurred in 2001 and $53 million in 2002. In effect, this
approximately $100 million payment will reduce USA's pre-tax proceeds from the
Univision transaction to $1 billion. USA believes that its disengagement costs
increased to the higher end of USA's anticipated range of costs, since USA was
required to achieve a certain portion of disengagement after the Univision
announcement and with specified end-dates for continuing broadcast distribution.
READ IMPORTANT FOOTNOTES AND DISCLAIMER USA Operating Budget 10/24/01
AS FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 24, 2001
Page 5 of 6
USA NETWORKS, INC.
OPERATING BUDGET
IMPORTANT
This business outlook contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are necessarily estimates reflecting the best judgment of the senior
management of USA and involve a number of risks and uncertainties that could
cause actual results to differ materially from those suggested by the
forward-looking statements. These forward-looking statements should, therefore,
be considered in light of various important factors, including those set forth
herein and in the documents USA files with the Securities and Exchange
Commission. Important factors that could cause actual results to differ
materially from estimates or projections contained in the forward-looking
statements include, without limitation: material adverse changes in economic
conditions generally or in the markets served by USA, material changes in
inflation, future regulatory and legislative actions affecting USA's operating
areas, competition from others, product demand and market acceptance, the
ability to protect proprietary information and technology or to obtain necessary
licenses on commercially reasonable terms, the ability to expand into and
successfully operate in foreign markets, and obtaining and retaining skilled
workers and key executives. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. USA
does not undertake any obligation to update or revise these forward-looking
statements, whether as a result of new information, future events or any other
reason.
USA and Expedia, Inc. have filed a preliminary joint prospectus/proxy statement
and will file other relevant documents concerning USA's acquisition of Expedia
with the Securities and Exchange Commission (SEC). INVESTORS ARE URGED TO READ
THE JOINT PROSPECTUS/PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED OR
TO BE FILED IN THE FUTURE WITH THE SEC BECAUSE THOSE DOCUMENTS CONTAIN IMPORTANT
INFORMATION. Investors will be able to obtain such documents free of charge at
the SEC's website at www.sec.gov. In addition, such documents may also be
obtained free of charge by contacting USA Networks, Inc., 152 West 57th Street,
New York, New York, 10019, Attention: Investor Relations, or Expedia, Inc.,
13810 SE Eastgate Way, Suite 400, Bellevue, WA 98005, Attention: Investor
Relations.
* * *
READ IMPORTANT FOOTNOTES AND DISCLAIMER USA Operating Budget 10/24/01
AS FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 24, 2001
Page 6 of 6