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 Scripps reports fourth quarter results(NYSE: SSP)
For immediate release
Thu, February 2, 2006CINCINNATI – The E. W. Scripps Company today reported fourth quarter operating results, including strong revenue and segment profit growth at its national lifestyle television networks and at Shopzilla, the online comparison shopping service that Scripps acquired in June 2005.
Consolidated operating revenue for Scripps during the fourth quarter 2005 grew 17 percent year-over-year to $707 million. On a pro forma basis, as if Scripps had owned Shopzilla in 2004, operating revenue increased 12 percent.
However, the company recorded a $90.6 million non-cash, after-tax charge in the fourth quarter reflecting a write-down of goodwill and other intangible assets related to its Shop At Home electronic commerce subsidiary. The write-down is the result of continuing operating losses at Shop At Home and a longer than previously anticipated path to profitability. Scripps is in the process of exploring strategic alternatives for Shop At Home.
As a result, Scripps reported a net loss of $603,000 for the fourth quarter 2005 compared with net income of $91.3 million, or 55 cents per share during the same quarter a year ago. Excluding the Shop At Home charge, fourth quarter 2005 earnings per share were 54 cents.
Fourth quarter 2005 net loss also includes the non-cash effect of the decision earlier in the year to consolidate newspaper production operations in Denver. Earnings were reduced 4 cents per share reflecting the shortened useful life and subsequent higher depreciation expense for production equipment that will be replaced in Denver.
The company’s consolidated fourth quarter results benefited from continued strong financial performance at the company’s Scripps Networks division, which includes HGTV, Food Network, DIY Network, Fine Living and Great American Country.
Scripps Networks segment profit in the fourth quarter was up 34 percent year-over-year to $122 million. Segment profit excludes depreciation, amortization of intangible assets, interest, income taxes, investment results and certain other items that are included in net income. Total revenue for the Scripps Networks division increased 21 percent to $247 million. Advertising revenue at Scripps Networks was up 27 percent to $202 million.
At Shopzilla, the online comparison shopping service acquired by Scripps in June 2005, segment profit for the fourth quarter was $20.3 million on revenue of $63.2 million. In the fourth quarter of 2004 Shopzilla recorded $5.6 million of segment profit on $25.1 million of revenue.
At the company’s newspapers, total revenue increased 3.7 percent to $192 million. Advertising revenue at newspapers managed solely by Scripps was up 5.1 percent to $155 million.
Newspaper division segment profit during the fourth quarter was $55.4 million compared with $69.1 million during the same period last year. Much of the decline is attributable to the higher depreciation expense in Denver, which reduced the company’s equity in income from the Denver Newspaper Agency by $11.3 million. Scripps, which owns the Rocky Mountain News, and MediaNews Group, which owns The Denver Post, are partners in a joint operating agreement in Denver. Each shares 50 percent of the combined profits from the two newspapers.
At the Scripps Television Station Group, total revenue was down 9.5 percent to $89.4 million during the fourth quarter, primarily because of the decline in political advertising revenue. Political advertising revenue during the fourth quarter was
$2.5 million compared with $21.0 million during the closing weeks of the 2004 national election campaigns.
Broadcast television segment profit was down 25 percent in the fourth quarter 2005 to $29.9 million.
At Shop At Home, fourth quarter revenue rose 1.7 percent to $90.9 million. The segment loss at Shop at Home in the fourth quarter was $10.4 million.
“Scripps Networks and Shopzilla delivered outstanding financial performance during the fourth quarter, but the good news at our fastest growing businesses was tempered by our need to write-down goodwill and other intangible assets at Shop At Home,” said Kenneth W. Lowe, president and chief executive officer for Scripps.
“Despite our best efforts, we haven’t been able to secure consistently strong channel positions on cable systems across the country, which has hindered retail sales and profitability at Shop At Home,” Lowe said. “While Internet sales are growing at a rapid pace, product sales generated by our television broadcasts have lagged because of the challenges we’ve had gaining affordable access to permanent, high-quality cable distribution for the network. Those factors, among others, prompted us to write down our investment during the fourth quarter and undertake a deliberate and careful assessment of strategic alternatives for Shop At Home. Our intention going forward is to maximize the value of Shop At Home for the benefit of our shareholders.”
“At Scripps Networks, the popularity of our lifestyle television brands, especially HGTV and Food Network, continue to reap significant benefits for the company and its shareholders,” Lowe said. “Revenue and segment profit growth at HGTV and Food reflect the tremendous popularity of both networks and the success we’ve had developing a schedule of entertaining and informative programming that resonates with viewers. We continued to build these powerful brands during the fourth quarter, including the launch in December of a video-rich broadband channel called HGTVKitchenDesign.com. Scripps Networks continues to be our shining star.”
“We’re also encouraged by the exceptional financial performance at our newest business, Shopzilla,” Lowe said. “Shopzilla directly benefited during the holiday season from the growing number of consumers who are doing their shopping online. Revenue and segment profit at Shopzilla were up sharply during the fourth quarter, exceeding our expectations and reaffirming for us our belief that online consumers are quickly discovering its power as an easy-to-use shopping service.”
“At newspapers managed solely by Scripps, revenue from local and classified advertising sales grew at a respectable pace, demonstrating, in part, the success we’re having with new print and online products we’ve launched in many of our markets,” Lowe said. “Excluding our JOA newspapers, the segment profit generated by our newspaper division was essentially flat to the previous year, a positive story relative to rest of the industry.”
“Local and national advertising at our local television stations also grew during the quarter, but overall revenue was down because of the relative absence of political advertising this year compared to last,” Lowe said. “We’re expecting solid 2006 results with the return of political advertising, the Super Bowl on ABC and the Winter Olympics on NBC.”
Here are fourth quarter results by segment:
Scripps Networks
Scripps Networks segment profit was $122 million, up 34 percent from $91.0 million in the prior year period.
Scripps Networks advertising revenue increased 27 percent to $202 million. Affiliate fee revenue was $41.8 million, up 2.8 percent. The modest growth in affiliate fee revenue during the quarter reflects the favorable impact on fourth quarter 2004 of completing several renewal agreements with cable television operators.
Programming, marketing and other expenses increased 8.0 percent to $98.1 million. Employee costs were up 18 percent to $30.3 million.
HGTV contributed $81.7 million to segment profit, up 28 percent from the year-ago period. HGTV revenue grew 17 percent to $119 million. HGTV now reaches about 89 million domestic subscribers, compared with 87 million at the end of the fourth quarter 2004.
Food Network contributed $65.8 million to segment profit, up 29 percent from the fourth quarter last year. Food Network revenue grew 18 percent to $102 million. Food Network reaches about 88 million domestic subscribers, up from 86 million at the end of the fourth quarter 2004.
Revenue at DIY was $11.5 million compared with $8.8 million in 2004. DIY contributed $1.3 million to segment profit compared with $2.3 million in the fourth quarter 2004. DIY can be seen in about 34 million households, up from about 31 million a year ago.
Fine Living revenue increased to $7.5 million from $5.1 million the previous year. Fine Living contributed $121,000 to segment profit compared with a segment loss of $2.9 million in 2004. Fine Living reaches about 29 million households vs. 25 million at this time a year ago.
Revenue at Great American Country was $4.7 million. Great American Country contributed $136,000 to segment profit during the quarter. Great American Country can be seen in about 39 million homes compared with 37 million a year ago.
Newspapers
Total newspaper segment profit was $55.4 million, compared with $69.1 million in the prior year period. The decline is primarily attributable to the consolidation of production operations in Denver and the resulting decrease in equity in income from the Denver Newspaper Agency. Segment profit at newspapers managed solely by Scripps was $55.6 million compared with $55.7 million in 2004.
Advertising revenue at newspapers managed solely by Scripps was $155 million, up
5.1 percent. Advertising revenue broken down by category was:
Circulation revenue was $31.9 million, down 2.2 percent.
Newsprint expense increased 6.8 percent on a 13 percent increase in newsprint prices.
Shopzilla
Revenue at Shopzilla was $63.2 million for the fourth quarter. Segment profit was
$20.3 million.
Broadcast Television
Broadcast television revenue decreased 9.5 percent to $89.4 million.
Revenue broken down by category was:
Broadcast television cash expenses were $59.3 million, even with the prior year period.
Broadcast television segment profit decreased 25 percent to $29.9 million from $39.8 million in the prior year period.
Shop At Home
Shop At Home Network revenue was $90.9 million, up 1.7 percent from the year-ago period.
Shop At Home reported a segment loss of $10.4 million vs. a segment loss of
$8.0 million in the same period a year ago.
The network reached an average 57 million full-time equivalent homes during the quarter compared with 54 million last year. The revenue per average full-time equivalent home during the trailing twelve-month period ended Dec. 31, 2005, was $6.60 compared with $5.82 for the year-ago period.
Licensing and Other Media
Revenue was $24.5 million compared with $29.0 million in the prior-year period.
Segment profit was $3.4 million compared with $5.1 million in the fourth quarter 2004.
Full-year results
Net income from continuing operations was $223 million, or $1.35 per share in 2005 vs. $301 million, or $1.82 per share last year.
Full-year 2005 and 2004 results included the following:
- A $90.6 million, or 55 cents per share charge in 2005 to write down the value of goodwill and other intangible assets at Shop At Home.
- A gain of $16.5 million, or 10 cents per share in 2004 from the sale of real estate and certain investments.
Following are full-year results by operating group:
Guidance
Employee costs in 2006 will include approximately $22 million related to the commencement of expensing stock options granted to employees. In the first quarter approximately $10 million, or 4 cents per share, will be recorded. The additional cost is reflected in the expense growth guidance provided below.
Based on advance advertising sales, the company currently anticipates first quarter 2006 total revenue for Scripps Networks will be up 18 to 20 percent year over year. Total Scripps Networks expenses are expected to increase about 15 percent in the first quarter as the company continues to invest in building viewership across all five networks.
Total newspaper revenue is expected to be up 3 to 5 percent over the prior year in the first quarter. Total newspaper expenses are expected to increase 10 to 13 percent.
At the company’s broadcast television stations, total revenue is expected to be up 12 to 15 percent in the first quarter. Advertising revenue tied to the Super Bowl and Olympics could reach $8 million.
Shopzilla is expected to generate segment profit of about $10 million in the first quarter.
Losses at Shop at Home are expected to reduce first quarter segment profit by $7 million to $10 million.
Corporate expenses are expected to be about $17 million in the first quarter.
First quarter earnings per share are expected to be between 38 cents and 42 cents, including the effect of expensing stock options granted to employees. Earnings per share during the first quarter of 2005 were 42 cents.
Other financial estimates for the full year follow:
Conference call
The senior management team at Scripps will discuss the company’s fourth quarter results during a telephone conference call at 10 a.m. EST today. Scripps will offer a live audio Web cast of the conference call. To access the Web cast, visit www.scripps.com, choose “Shareholders,” then follow the link in the “Upcoming Events” section. Listeners need Windows Media Player to access the call online.
To access the conference call by telephone, dial 1-800-553-0358 (U.S.) or 1-612-332-1213 (International), approximately 10 minutes before the start of the call. Callers will need the name of the call (fourth quarter earnings report) to be granted access. Callers also will be asked to provide their name and company affiliation. The media and general public are provided access to the conference call on a listen-only basis.
A replay line will be open from 1:30 p.m. EST Feb. 2 until 11:59 p.m. EST Feb. 9. The domestic number to access the replay is 1-800-475-6701 and the international number is 1-320-365-3844. The access code for both numbers is 814749.
A replay of the conference call will be archived and available online for an extended period of time following the call. To access the audio replay, visit www.scripps.com approximately four hours after the call, choose “Shareholders” then follow the “audio archives” link on the left navigation bar.
Forward-looking statements
This press release contains certain forward-looking statements related to the company’s businesses that are based on management’s 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 company’s written policy on forward-looking statements can be found on page F-5 of its 2004 SEC Form 10K.
We undertake no obligation to publicly update any forward-looking statements to reflect events for circumstances after the date the statement is made.
About Scripps
The E.W. Scripps Company (NYSE: SSP) is a diverse and growing media enterprise with interests in national cable networks, newspaper publishing, broadcast television stations, electronic commerce, interactive media, and licensing and syndication.
The company’s portfolio of media properties includes: Scripps Networks, with such brands as HGTV, Food Network, DIY Network, Fine Living, Great American Country and HGTVPro; daily and community newspapers in 18 markets and the Washington-based Scripps Media Center, home to the Scripps Howard News Service; 10 broadcast TV stations, including six ABC-affiliated stations, three NBC affiliates and one independent; United Media, a leading worldwide licensing and syndication company that is the home of PEANUTS, DILBERT and approximately 150 other features and comics; Shop At Home, which markets a growing range of consumer goods directly to television viewers in roughly 57 million U.S. households; and Shopzilla, the online comparison shopping service that carries an index of more than 30 million products from approximately 60,000 merchants.
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