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Press RoomScripps reports first quarter results(NYSE: SSP)
For immediate release
Wed, April 25, 2007CINCINNATI - The E. W. Scripps Company today reported first-quarter operating results, including strong revenue and segment profit growth at Scripps Networks, the company's expanding operating division that includes HGTV and Food Network. First-quarter income from continuing operations was $64.7 million, or 39 cents per share, compared with $81.5 million, or 49 cents per share, during the same period a year earlier. On a consolidated basis, first-quarter revenue at Scripps grew 2.0 percent year over year to $601 million. On a pro forma basis, as if the company had owned uSwitch since Jan. 1, 2006, consolidated revenue for the quarter was even with the prior-year period. The company acquired uSwitch in March 2006. Operating results from the company's former television retailing subsidiary, Shop At Home, have been reclassified as discontinued operations for all periods presented in the company's financial statements. The company sold the Shop At Home television network in June 2006 and announced in September that it had reached an agreement to sell its five Shop At Home-affiliated broadcast television stations. The company closed on the sale of three of the stations in December 2006 and completed the sale of the remaining two stations on April 24. The company's net income for the first quarter, including discontinued operations, was $68.5 million, or 42 cents per share, compared with net income of $75.1 million, or 45 cents per share, during the first quarter of 2006. Total revenue at Scripps Networks was up 13 percent to $269 million and segment profit for the division grew 20 percent to $128 million. (See notes to the financial tables for a definition of segment profit.) First-quarter financial performance at Scripps Networks was favorably affected by strong double-digit growth in advertising sales and affiliate fee revenue. Scripps Networks accounted for 45 percent of the company's consolidated revenue during the first quarter. The strong results at Scripps Networks were offset, however, by lower segment profits at the company's local newspapers, broadcast television stations and interactive media businesses. The declines at local media businesses were attributable to a weak newspaper advertising environment, particularly in Florida, and difficult year-over-year comparisons for the company's television station group, which, during the previous year's first quarter, benefited from political, Olympics and Super Bowl related advertising sales. Revenue at the company's interactive media division, including Internet search businesses Shopzilla and uSwitch, rose during the first quarter of 2007, but segment profit for the division was down because of changing business conditions, strategic investments the company is making to improve the consumer experience and competitive position at both businesses, and costs related to a transition in leadership at Shopzilla. On a pro forma basis, as if the company had owned uSwitch since Jan. 1, 2006, Scripps Interactive Media revenue was down 8.7 percent during the quarter. The changing business conditions at Scripps Interactive Media include increased competition for visitor traffic in the domestic search engine marketing environment and lower energy costs that have resulted in a softer switching market in the United Kingdom. "Strong financial performance at our national lifestyle television networks continued to drive the company's consolidated results during the first quarter, but as good as business was at our networks, it wasn't enough to overcome lower profits at our local media businesses and Scripps Interactive Media," said Kenneth W. Lowe, president and chief executive officer for Scripps. "Scripps Networks, led by our flagship brands, HGTV and Food Network, outpaced the industry and demonstrated once again their ability to deliver solid revenue and segment profit growth," Lowe said. "Based on the success we had during last year's upfront negotiations with advertisers and the continued strength of the scatter advertising market, we're expecting another year of double-digit revenue and segment-profit growth at Scripps Networks." "At our newspapers, we're contending with the most challenging environment the industry has experienced in recent memory," Lowe said. "Our strategy at present is to focus on attracting new advertisers, increasing our share of local advertising dollars and further reining in expenses. As always, we're determined to operate these businesses as efficiently as possible, especially given current conditions." "First-quarter results at our TV stations also were down compared with the same period last year, which benefited from advertising sales tied to the Olympics and Super Bowl broadcasts," Lowe said. "As is the case during election off-years, we expect broadcast TV results to be lower in 2007, especially when compared with the record political advertising revenue that came our way in 2006." "Meanwhile, profits from our Internet search businesses came under pressure from changes in business conditions, both domestically and in the U.K.," Lowe said. "At the same time, we're making some very deliberate investments in both businesses with the intention of securing for the long term their strong competitive positions in their respective marketplaces." Here are first-quarter results by segment: Scripps Networks Scripps Networks advertising revenue increased 10 percent to $206 million. Affiliate fee revenue was $57.9 million, up 20 percent. Programming, marketing and other expenses increased 5.7 percent to $110 million. Employee costs were up 19 percent to $35.9 million. Scripps Networks segment profit was $128 million, up 20 percent from $107 million in the prior-year period. Revenue at HGTV was up 12 percent to $134 million. HGTV now reaches about 92 million domestic subscribers, compared with 90 million at the end of the first quarter 2006. Food Network revenue increased 15 percent to $108 million. Food Network reaches about 92 million domestic subscribers, up from 89 million at the end of the first quarter 2006. Revenue at DIY Network was $11.5 million, up 7.7 percent. DIY can be seen in about 43 million households, up from about 36 million a year ago. Fine Living revenue increased 24 percent to $10.3 million. Fine Living reaches about 45 million households vs. 37 million at this time a year ago. Revenue at Great American Country was $5.6 million, up 18 percent year over year. Great American Country can be seen in about 47 million homes compared with 41 million a year ago. Newspapers Total newspaper revenue, excluding newspapers that were contributed in 2006 to a partnership in Colorado, declined 7.8 percent to $170 million. Advertising revenue at newspapers managed solely by Scripps was $134 million, down 9.2 percent from the prior-year period. Advertising revenue broken down by category was:
Circulation revenue was $30.9 million, down 4.4 percent. Results from the company's newspapers operated under joint operating agreements and other partnerships reduced segment profit during the quarter by $5.0 million compared with a $1.0 million reduction in segment profits during the first quarter of 2006. Newsprint expense declined 14 percent on a 3.9 percent decrease in newsprint prices. Total cash expenses for Scripps newspapers were even with the prior year. Total newspaper segment profit was $31.6 million compared with $49.9 million in the prior-year period. The decline in segment profit was due primarily to lower local and classified advertising sales at newspapers managed solely by the company and at newspapers that are managed under joint operating agreements and partnerships. Scripps Television Station Group Television Station Group revenue was $76.5 million compared with $83.8 million. Revenue broken down by category was:
Cash expenses for the Television Station Group were $60.1 million, down 1.9 percent from the prior year. Television Station Group segment profit was $16.4 million compared with $22.5 million in the prior-year period. The division's financial results for the prior-year first quarter were favorably affected by the broadcast of the Super Bowl on the company's ABC-affiliated stations and coverage of the Winter Olympics on Scripps-owned NBC affiliates. Scripps Interactive Media Interactive Media revenue was $62.9 million for the first quarter compared with $58.6 million in the first quarter 2006. On a pro forma basis, as if the company had owned uSwitch for the full year 2006, Scripps Interactive Media revenue was down 8.7 percent. The segment loss at Interactive Media was $400,000 compared with $13.9 million in segment profit in the first quarter 2006. Costs related to the leadership transition at Shopzilla reduced segment profit by about $5 million. The company also invested $10 million during the quarter to build brand awareness for uSwitch in the U.K. Licensing and Other Media Revenue was $23.2 million compared with $23.6 million in the prior-year period. Segment profit was $3.0 million compared with $2.9 million in the first quarter 2006.
Guidance Based on advance advertising sales, the company currently anticipates second-quarter total revenue for Scripps Networks will be up 8 to 10 percent year over year. The company still expects Scripps Networks total revenue will be up 10 to 13 percent in 2007. Scripps Networks total expenses are expected to increase about 6 percent in the second quarter. Total newspaper revenue is expected to be down 4 to 6 percent from the prior year in the second quarter due primarily to weakness in classified and local advertising. Total newspaper expenses are expected to increase 1 to 2 percent. Last month a majority of Scripps newspapers offered voluntary separation plans to eligible employees. As a result, the company will incur a charge of up to $10 million,or 4 cents per share, in the second quarter, depending on the number of employees accepting the offer. This charge is not included in the second quarter newspaper expense guidance provided above. At the company's broadcast television stations, the percentage increase in total revenue is expected to be in the low single digits in the second quarter, reflecting the absence of political advertising relative to the prior year period. Scripps Interactive Media, which includes Shopzilla and uSwitch, is expected to generate segment profit of about $5 million in the second quarter. The company's outlook for the second quarter and balance of the year assumes no improvement in market conditions experienced by both businesses in the first quarter. For the full year, interactive media segment profit is expected to be between $30 million and $40 million. Corporate expenses are expected to be about $18 million in the second quarter. Excluding the costs of the voluntary separation plan in the newspaper division, second quarter earnings per share from continuing operations are expected to be between 58 cents and 62 cents. Earnings per share from continuing operations during the second quarter of 2006 were 64 cents. Conference call The senior management team at Scripps will discuss the company's first 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 webcast, visit www.scripps.com, choose "Shareholders," then follow the link in the "Upcoming Events" section. To access the conference call by telephone, dial 1-888-781-3339 (U.S.) or 1-703-546-4240 (international), approximately 10 minutes before the start of the call. Callers will need the name of the call ("first 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 April 25 until 11:59 p.m. EDT May 2. 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 869434. 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 2006 SEC Form 10K. We undertake no obligation to publicly update any forward-looking statements to reflect events or circumstances after the date the statement is made. About Scripps The E. W. Scripps Company (www.scripps.com) 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 and Great American Country; daily and community newspapers in 17 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; Scripps Interactive Media, including 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.
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