(NYSE: SSP)

For immediate release

CINCINNATI – The E. W. Scripps Company today reported second quarter operating results, including strong revenue and segment profit growth at its national lifestyle television networks and new interactive media businesses, Shopzilla and uSwitch. 

 

Second quarter income from continuing operations was $105 million, or 64 cents per share, compared with $103 million, or 62 cents per share, during the same period a year earlier. Earnings were affected, in part, by the expensing of employee stock options, which commenced on Jan.1. The stock option expense reduced earnings for the period by $2.7 million after tax, or 2 cents per share.

 

Consolidated revenue from continuing operations rose 19 percent year-over-year during the second quarter to $642 million. On a pro forma basis, as if Scripps had owned Shopzilla and uSwitch since Jan. 1, 2005, second quarter operating revenue from continuing operations increased 12 percent.

 

Total segment profit from continuing operations was up 13 percent to $237 million during the three-month period. Segment profit excludes depreciation, amortization of intangible assets, interest, income taxes, investment results and certain other items that are included in net income.

 

Operating results from the company’s television retailing subsidiary, Shop At Home, and former newspaper in Birmingham, Ala., have been reclassified as discontinued operations for all periods presented in the company’s financial statements. The Shop At Home network was sold in June and the Birmingham newspaper was closed during the third quarter of 2005.

 

Consolidated second quarter results for Scripps benefited from strong financial performance at the company’s Scripps Networks division, which includes HGTV, Food Network, DIY Network, Fine Living and Great American Country.

 

Total revenue at Scripps Networks increased 17 percent to $286 million. Scripps Networks advertising revenue was up 15 percent to $233 million. Segment profit at Scripps Networks was up 22 percent year-over-year to $150 million.

 

At the company’s interactive media division, which includes Shopzilla and uSwitch, second quarter segment profit reached $16.5 million on revenue of $65.0 million. On a pro forma basis, as if Scripps had owned Shopzilla and uSwitch since Jan. 1, 2005, interactive media division revenue nearly doubled.

 

Rapid growth at Shopzilla and uSwitch is attributable to growing consumer acceptance of Internet search and price comparison services in the United States and United Kingdom. Shopzilla is a leading search and price comparison Web site for consumer products in the U.S. In the United Kingdom, uSwitch is a leading Web site for consumers who want to find, compare and switch essential home services.

 

Revenue at newspapers managed solely by Scripps was up 4.8 percent to $182 million, excluding newspapers contributed to a partnership in Colorado that was created during the first quarter. Advertising revenue at newspapers managed solely by Scripps was up 6.4 percent to $147 million. The contribution to segment profit from newspapers managed solely by Scripps was up 1.5 percent.

 

Newspaper division segment profit benefited from a $1.8 million hurricane recovery insurance settlement related to property damage and the loss of business at the company’s Florida Treasure Coast newspapers in 2004.

 

Total segment profit for the Scripps newspaper division was negatively affected by a decrease in equity earnings from the company’s newspapers in Denver, Cincinnati and Albuquerque, which are published under joint operating agreements, also known as JOAs.

 

The decline in equity income from the company’s JOA newspapers is attributable to lower advertising sales in all three markets and higher, non-cash depreciation expenses that are related to a capital project to consolidate production facilities in Denver. Including the JOA newspapers and new Colorado partnership, total newspaper segment profit was $55.1 million compared with $62.6 million during the same period a year ago.

 

At the company’s local television stations second quarter revenue was up 3.9 percent to $86.4 million. Broadcast television segment profit for the period was $26.4 million compared with $27.1 million for the same period a year ago. In the second quarter of 2005, broadcast television segment profit benefited from a net $1.8 million hurricane recovery insurance settlement. 

 

“Scripps had an excellent second quarter, fully taking advantage of its diverse portfolio of targeted, consumer-focused media enterprises to achieve double-digit revenue and segment profit growth,” said Kenneth W. Lowe, the company’s president and chief executive officer. “Our solid operating results consistently demonstrate the success we’ve had identifying and investing in innovative media businesses that promise sustained, long-term growth.”

 

“The company’s Scripps Networks division continues to out-perform the industry, thanks primarily to the enduring popularity of HGTV and Food Network and the growing contribution of our newer networks, DIY Network, Fine Living and Great American Country,” Lowe said. “We’re successfully monetizing solid ratings and viewership growth at HGTV and Food and are making great strides building consumer awareness and excitement around our newer brands. Second quarter operating results at Scripps Networks were outstanding by nearly every measure. ”

 

“Scripps consolidated results also got a substantial boost from our new, fast-growing interactive enterprises,” said Lowe. “Shopzilla and uSwitch are benefiting from the rapidly growing number of consumers who are discovering the time-saving value and utility of using these valuable Internet destinations to search and shop for products and services on the Web. Since being acquired by Scripps, financial performance at Shopzilla and uSwitch has been outstanding, which we believe bodes well for the company’s shareholders.”

 

“At our newspapers, advertising revenue grew respectably during the second quarter thanks to improved classified results, particularly in the real estate category, and rapidly growing online advertising,” Lowe said. “Revenue grew in line with expectations at our local television stations, which benefited from primary election campaigns during the period and the resulting increase in political advertising.”

 

Following are second quarter results by segment:

Scripps Networks advertising revenue increased 15 percent to $233 million. Affiliate fee revenue was $49.2 million, up 24 percent.

 

Programming, marketing and other expenses increased 14 percent to $108 million. Employee costs were up 12 percent to $31.3 million.

 

Scripps Networks segment profit was $150 million, up 22 percent from $123 million in the prior year period.

 

HGTV contributed $98.4 million to segment profit, up 14 percent from the year-ago period. HGTV revenue grew 15 percent to $141 million. HGTV now reaches about 90 million domestic subscribers compared with 89 million at the end of the second quarter 2005.

 

Food Network contributed $72.8 million to segment profit, up 23 percent from the second quarter last year. Food Network revenue grew 19 percent to $113 million. Food Network reaches about 90 million domestic subscribers, up from 88 million at the end of the second quarter 2005.

 

DIY contributed $3.3 million to segment profit compared with $2.2 million in the second quarter 2005. Revenue at DIY was $14.5 million compared with $12.6 million in 2005. DIY can be seen in about 38 million households, up from about 34 million a year ago.

 

Fine Living contributed $3.0 million to segment profit compared with $469,000 in 2005. Fine Living revenue increased to $10.3 million from $7.1 million the previous year. Fine Living reaches about 38 million households vs. 28 million at this time a year ago.

 

Great American Country contributed $183,000 to segment profit during the quarter compared with $100,000 in the same period a year ago. Revenue at Great American Country was $5.1 million compared with $3.6 million in 2005. Great American Country can be seen in about 42 million homes compared with 38 million a year ago.

 

 

Revenue from newspapers managed solely by Scripps was up 4.8 percent to $182 million. Advertising revenue from newspapers managed solely by Scripps increased 6.4 percent to $147 million.

 

Advertising revenue broken down by category was:

 

 

Circulation revenue was $30.4 million, down 2.2 percent.

 

Newsprint expense increased 14 percent on a similar increase in newsprint prices.

 

Total newspaper segment profit was $55.1 million, compared with $62.6 million in the prior-year period.

The decline in total newspaper segment profit is attributable to lower equity income from the company’s JOA newspapers in Denver, Cincinnati and Albuquerque. The decline in equity income is attributable to lower advertising sales in all three markets and higher depreciation expenses related to the capital project in Denver.

 

The company reported segment profit of $2.4 million vs. $9.5 million a year earlier from its newspapers that are published under joint operating agreements, or JOAs, and other partnerships.

 

Total newspaper segment profit was affected favorably by a $1.8 million hurricane recovery insurance settlement.

 

The contribution to segment profit from newspapers managed solely by Scripps increased 1.5 percent to $52.7 million.

 

Revenue from the company’s online search and comparison shopping services, Shopzilla and uSwitch, was $65.0 million for the second quarter. Segment profit was $16.5 million.  On a pro forma basis, as if the company had owned both businesses since Jan. 1, 2005, combined revenue at Shopzilla and uSwitch nearly doubled during the second quarter.

 

 

Broadcast television revenue increased 3.9 percent to $86.4 million.

 

Revenue broken down by advertising category was:

 

 

Broadcast television cash expenses were $60.0 million, up 3.7 percent from the prior-year period. The increase included the effects of expensing stock options.

 

Broadcast television segment profit was $26.4 million vs. $27.1 million in the prior-year period. In the second quarter 2005, broadcast television segment profit benefited from a net $1.8 million hurricane recovery insurance settlement.

 

 

Revenue was $22.5 million compared with $31.2 million in the prior-year period. In the prior-year period, the company reached a multi-year agreement with the ABC Television Network for the rights to broadcast certain Peanuts animated specials.

Segment profit was $3.1 million compared with $6.3 million in the second quarter 2005.

In June the company sold the Shop At Home television retailing network for $17 million in cash. The company continues to hold for sale five Shop At Home-affiliated broadcast television stations located in San Francisco, Boston, Cleveland, Raleigh-Durham, N.C., and Bridgeport, Conn.  

 

During the second quarter, the company recorded an after-tax loss from discontinued operations of $33.7 million, reflecting operating results at Shop At Home during the period and costs associated with the sale of the business, including severance for employees.

 

Discontinued operations also include the company’s former newspaper in Birmingham, Ala., which was closed during the third quarter of 2005. 

 

Employee costs for the balance of 2006 will include approximately $8 million, or 3 cents per share, related to the commencement of expensing stock options granted to employees. The additional cost is reflected in the guidance provided below.

 

Based on advance advertising sales, the company currently anticipates third quarter advertising revenue for Scripps Networks will be up 13 to 15 percent year over year. Affiliate fee revenue for the period is expected to be about $48 million. Total Scripps Networks expenses are expected to increase about 13 percent during the third quarter as the company continues to build consumer awareness and expand distribution of its television and online lifestyle brands.

 

The company is in the process of negotiating advertising commitments in the upfront marketplace. Based on early indications and the momentum in ratings and viewership at HGTV and Food Network, Scripps Networks advertising revenue is expected to be up 10 to 14 percent in the fourth quarter.

 

For newspapers currently managed solely by Scripps, total revenue is expected to be up 2 to 4 percent over the prior year in the third quarter. Total newspaper expenses are expected to increase about 5 percent during the period.

 

Equity income from the company’s JOA newspapers is expected to improve by $5 million in the third quarter due to lower depreciation expenses related to the capital project in Denver.

 

At the company’s broadcast television stations, total revenue, including political, is expected to be up 10 to 14 percent in the third quarter.

 

Interactive media is expected to generate segment profit of about $8 million in the third quarter. For the full year, the interactive media division is expected to generate segment profit of about $65 million.

 

Corporate expenses are expected to be about $15 million in the third quarter.

 

Depreciation and amortization in the third quarter are expected to be $30 million and interest expense is expected to be about $17 million.

 

Earnings per share from continuing operations are expected to be between 38 cents and 42 cents, including dilution related to the acquisitions of Shopzilla and uSwitch of approximately 7 cents per share. Earnings per share from continuing operations during the third quarter of 2005 were 39 cents.

 

 

The senior management team at Scripps will discuss the company’s second quarter results during a telephone conference call at 10 a.m. EDT today. Scripps will offer a live audio webcast 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 1-612-332-0932 (International), approximately 10 minutes before the start of the call. Callers will need the name of the call (second 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. EDT today until 11:59 p.m. EDT July 31. 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 836113.

 

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.

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 2005 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.

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, 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; leading online search and comparison shopping services, Shopzilla and uSwitch; and United Media, a leading worldwide licensing and syndication company that is the home of PEANUTS, DILBERT and approximately 150 other features and comics.