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 Scripps reports second quarter results(NYSE: SSP)
For immediate release
Tue, July 24, 2007CINCINNATI - The E. W. Scripps Company today reported second-quarter operating results, including improved revenue and segment profit at its national lifestyle television networks. On a consolidated basis, the company's second-quarter revenue was $640 million compared with $642 million during the same period a year ago. The company's second-quarter income from continuing operations was $97.7 million, or 59 cents per share, compared with $105 million, or 64 cents per share, during the same period a year earlier. Income from continuing operations was reduced by $5.4 million, after tax, or 3 cents a share, as a result of voluntary separation offers that were accepted by 137 eligible employees at the company's newspapers during the second quarter of 2007. The company offered voluntary separation plans to eligible employees at a majority of its newspapers with the intent of reducing the division's expenses over the long term. 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 2006 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 second quarter, including discontinued operations, was $97.5 million, or 59 cents per share, compared with net income of $71.1 million, or 43 cents per share, during the second quarter of 2006. At Scripps Networks, the company's largest division that includes its popular national lifestyle television networks, second-quarter revenue grew 7.6 percent year over year to $308 million. Segment profit for the division increased 9.2 percent to $164 million for the period. (See notes to the financial tables for a definition of segment profit.) Online revenue at Scripps Networks grew 26 percent to $19.4 million during the second quarter. Second-quarter financial performance at Scripps Networks was favorably affected by growth in advertising sales, both on television and the Internet, and higher affiliate fee revenue. However, softness in total-day ratings among key demographics at HGTV and Food Network held back advertising revenue growth during the quarter. Scripps Networks, which includes television and interactive brands HGTV, Food Network, DIY Network, Fine Living and Great American Country, accounted for 48 percent of the company's consolidated revenue during the second quarter. Improved results at Scripps Networks were offset by lower advertising sales and referral activity at the company's other operating segments. At Scripps newspapers, total revenue during the second quarter was $166 million vs. $182 million for the same period a year ago. Newspaper online revenue increased 25 percent year over year to $10.7 million. Newspaper segment profit for the period was $33.2 million vs. $55.1 million last year. The $8.9 million in costs associated with the voluntary separation plans affected the division's segment profit results in the second quarter of 2007. Excluding the one-time cost of the voluntary separation plans, total cash expenses at newspapers managed solely by the company were down 1.3 percent for the period. In the second quarter of 2006 newspaper segment profit benefited from a $1.8 million hurricane recovery insurance settlement. Lower local and classified advertising sales, including particularly weak real estate advertising in the company's Florida markets, contributed to the decline in total newspaper revenue. Second-quarter revenue at the Scripps Television Station Group was $84.5 million compared with $86.4 million during the same period a year earlier. Second quarter segment profit at the TV station group was $23.5 million vs. $26.4 million last year. The decline in revenue and segment profit at the TV station group is attributable to the relative absence of political advertising during the quarter compared with the previous year. Political advertising during the second quarter of 2007 was $400,000 compared with $2.7 million during the prior-year period. Local advertising sales at Scripps TV stations were up slightly, while national advertising sales were down 4.0 percent. At Scripps Interactive Media, which includes online comparison shopping services Shopzilla and uSwitch, second-quarter revenue totaled $59.0 million compared with $65.0 million last year. Segment profit for the interactive media division was $6.8 million vs. $16.5 million during the same three-month period a year earlier. The decline in interactive media revenue is attributable to reduced online energy switching activity at uSwitch and lower referral fee revenue at Shopzilla. Segment profit for the interactive media division also was affected by expenses associated with improving the consumer experience at both Shopzilla and uSwitch, ongoing initiatives to expand both businesses internationally and diversification of uSwitch into additional service categories. "Scripps benefited during the second quarter from solid financial performance at our lifestyle television networks and network-branded Web sites," said Kenneth W. Lowe, president and chief executive officer for Scripps. "Advertising and affiliate fee revenue grew during the three-month period as our networks continue to capitalize on their dominance in the shelter and food content categories. Online advertising growth at Scripps Networks was particularly strong as we move assertively to build out the interactive side of the business. "Looking ahead at Scripps Networks, we're seeing improvement in total-day ratings at both HGTV and Food Network as the summer season unfolds and are confident that we're on track to achieve yet another year of double-digit revenue growth," Lowe said. "On a consolidated basis, second-quarter results for Scripps were negatively affected by lower advertising sales at the company's local newspapers and broadcast television stations and a decline in referral fee revenue at our interactive media division," Lowe said. "At our newspapers, industry-wide weakness in local and classified advertising is persisting, prompting us to tighten expense controls while at the same time increasing our sales presence in each of our local markets," Lowe said. "With an eye toward reducing costs for the long-term, eligible newspaper employees were offered voluntary separation plans during the second quarter. A total of 137 newspaper employees took advantage of the opportunity, resulting in a one-time expense that affected income from continuing operations. On a more positive note, online advertising sales at our newspapers continued to grow strongly during the period. "Second-quarter revenue at the Scripps Television Station Group was down modestly compared with the same period in 2006 when we were experiencing the early stages of a record year for political advertising," Lowe said. "Our TV stations have done a great job mining their markets for new sources of revenue while at the same time keeping a tight lid on expenses. "At Scripps Interactive Media, referral fee revenue at Shopzilla and uSwitch was lower during the quarter in the face of changing market conditions," Lowe said. "The competition for bidding on keywords in the search engine marketplace continued to be vigorous, having a direct impact on Shopzilla's results. And in the U.K., the softer energy switching activity that uSwitch began experiencing during the first three months of the year continued into the second quarter. "Our response has been to invest in both Shopzilla and uSwitch to build on the competitive advantage each has created in their respective marketplaces," Lowe said. "We're also investing to expand internationally and, in the case of uSwitch, diversify its product offerings." Here are second-quarter results by segment: Scripps Networks Scripps Networks advertising revenue increased 4.8 percent to $245 million. Affiliate fee revenue was $58.7 million, up 19 percent. Programming, marketing and other expenses increased 3.5 percent to $112 million. Employee costs were up 17 percent to $36.5 million. Scripps Networks segment profit was $164 million, up 9.2 percent from $150 million in the prior-year period. Operating revenue at HGTV was up 7.1 percent to $152 million. HGTV now reaches about 93 million domestic subscribers, compared with 90 million at the end of the second quarter of 2006. Food Network operating revenue increased 6.8 percent to $121 million. Food Network reaches about 93 million domestic subscribers, up from 90 million at the end of the second quarter 2006. Revenue at DIY Network was $15.1 million, up 4.3 percent. DIY can be seen in about 45 million households, up from about 38 million a year ago. Fine Living revenue increased 22 percent to $12.6 million. Fine Living reaches about 47 million households vs. 38 million at this time a year ago. Revenue at Great American Country increased 40 percent to $7.1 million. Great American Country can be seen in about 48 million homes compared with 42 million a year ago. Newspapers Total newspaper revenue declined 8.9 percent to $166 million. Advertising revenue at newspapers managed solely by Scripps was $131 million, down 11 percent from the prior-year period. Advertising revenue broken down by category was:
Circulation revenue was $29.6 million, down 2.8 percent. Newsprint expense declined 19 percent due to lower consumption and a 9.4 percent decrease in newsprint prices. Equity in earnings from the company's newspapers in joint operating agreements and other partnerships during the second quarter was $13.6 million vs. $11.1 million last year. Depreciation expenses related to the capital project in Denver decreased equity in earnings by $1.0 million during the quarter compared with $3.1 million in the second quarter of 2006. Total newspaper segment profit was $33.2 million compared with $55.1 million in the prior-year period. During the second quarter 2006, newspaper segment profit was favorably affected by a $1.8 million hurricane recovery insurance settlement. During the second quarter of 2007, voluntary separation plans accepted by eligible employees reduced segment profit by about $8.9 million. Excluding the cost of voluntary separation plans, total cash expenses for newspapers managed solely by the company were down 1.3 percent compared with the prior year. Scripps Television Station Group Television Station Group revenue was $84.5 million compared with $86.4 million in the year-ago period. Revenue broken down by category was:
Cash expenses for the Television Station Group were $61.0 million, up 1.7 percent from the prior year. TV station group segment profit was $23.5 million compared with $26.4 million in the prior-year period. Scripps Interactive Media Interactive Media revenue was $59.0 million for the second quarter compared with $65.0 million in the second quarter of 2006. Segment profit at Interactive Media was $6.8 million compared with $16.5 million in the second quarter of 2006. Licensing and Other Media Revenue was $22.4 million compared with $22.5 million in the prior-year period. Segment profit was $2.6 million compared with $3.1 million in the second quarter 2006. Guidance Based on advance advertising sales, the company currently anticipates third quarter 2007 total revenue for Scripps Networks will be up 8 to 10 percent, year over year. The company also expects Scripps Networks total revenue will be up about 10 percent for the full year. Scripps Networks total expenses are expected to increase about 8 percent in the third quarter as the company continues to invest in building viewership across all five networks and its portfolio of Web-based businesses. Total newspaper revenue is expected to be down 5 to 8 percent over the prior year in the third quarter due primarily to weakness in classified and local advertising. Total newspaper expenses are expected to be down in the low single digits. At the company's broadcast television stations, the percentage decrease in total revenue is expected to be 13 to 16 percent, 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 $6 million in the third 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 $15 million in the third quarter. Third quarter earnings per share from continuing operations are expected to be between 38 and 42 cents. Earnings per share from continuing operations during the third quarter of 2006 were 48 cents. Conference call 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 webcast, visit www.scripps.com, choose "Shareholders," then follow the link in the "Upcoming Events" section. To access the conference call by telephone, dial 1-800-553-5260 (U.S.) or 1-612-32-0923 (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 July 24 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 877900. 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 http://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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