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 Scripps reports third quarter results(NYSE: SSP)
For immediate release
Thu, October 25, 2007CINCINNATI - The E. W. Scripps Company today reported third-quarter operating results, including strong revenue and segment profit growth at Scripps Networks, the company's operating division that includes HGTV, Food Network and its other national lifestyle television networks. On a consolidated basis, The E. W. Scripps Company's third-quarter revenue was $596 million compared with $583 million during the same period a year ago. The company's third-quarter income from continuing operations was $87.9 million, or 54 cents per share, compared with $78.4 million, or 48 cents per share, during the same period a year earlier. Income from continuing operations during the third quarter 2007 included a gain of $9.2 million, or 4 cents a share, from the sale of the company's minority stake in CityFeet.com, an online commercial real estate search service. The company's net income for the third quarter, including discontinued operations, was $88.4 million, or 54 cents a share, compared with $73.1 million, or 44 cents a share, for the same period in 2006. (See notes to the financial tables for a description of discontinued operations.) At Scripps Networks, third-quarter revenue grew 16 percent year-over-year to $289 million. Segment profit for the division increased 18 percent to $137 million. (See notes to the financial tables for a definition of segment profit.) In addition to HGTV and Food Network, Scripps Networks includes DIY Network, Fine Living TV Network, Great American Country and a growing portfolio of related lifestyle brands that deliver content and interactive services on the Internet. Online advertising revenue at Scripps Networks grew 31 percent to $17.3 million during the third quarter. Financial performance at Scripps Networks was favorably affected during the third quarter by increased advertising sales that resulted from improved ratings and viewership, particularly at HGTV, and strong pricing in the scatter advertising market. Scripps Networks accounted for nearly half of the company's consolidated revenue during the third quarter. Improved results at Scripps Networks were offset, however, by lower advertising sales at the company's local media businesses and softer performance in the Scripps Interactive Media division. At Scripps newspapers, total revenue during the third quarter was $158 million vs. $168 million for the same period a year ago. Newspaper online revenue increased 19 percent year-over-year to $10.4 million. Newspaper expenses were down 3.7 percent in the quarter, due in part to the voluntary separation plan that was accepted by 137 newspaper division employees during the second quarter of the year. Newspaper segment profit for the period was $36.9 million vs. $39.7 million last year. Lower local and classified advertising sales, including particularly weak real estate and employment advertising in the company's Florida and California markets, contributed to the decline in total newspaper revenue and segment profit. Third-quarter revenue at the Scripps Television Station Group was $73.3 million compared with $81.7 million during the same period a year earlier. Third-quarter segment profit at the TV Station Group was $13.2 million vs. $22.7 million, year-over-year. The decline in revenue and segment profit at the Television Station Group was attributable to the relative absence of political advertising during the quarter when compared with the previous year. Political advertising during the third quarter 2007 was $700,000 compared with $11.7 million during the prior-year period. Local advertising sales at Scripps TV stations were up 1.1 percent during the third quarter and national advertising sales increased 4.2 percent. At Scripps Interactive Media, which includes online comparison shopping services Shopzilla and uSwitch, third-quarter revenue totaled $54.6 million compared with $60.9 million last year. Segment profit for the interactive media division was $8.2 million vs. $9.0 million during the same three-month period a year earlier. The decline in Interactive Media revenue and segment profit is attributable to reduced online energy switching activity at uSwitch and lower referral fee revenue at Shopzilla. On Oct. 16, the company disclosed that its board of directors had unanimously authorized management to pursue a separation of Scripps into two publicly traded companies, one focused on national brands and the other focused on local media. Upon completion of the transaction a new company, Scripps Networks Interactive, will include Scripps Networks and Scripps Interactive Media divisions. The E. W. Scripps Company will include its local newspapers, broadcast television stations and licensing and syndication businesses. The transaction to separate the company is expected to be completed during the second quarter of 2008. "The E. W. Scripps Company's consolidated results during the third quarter reflect strong growth and outstanding operating performance at our national lifestyle television networks and their associated enterprises," said Kenneth W. Lowe, president and chief executive officer for Scripps. "Double-digit revenue and segment profit growth at Scripps Networks, led by HGTV and Food Network, helped the company overcome challenging market conditions that affected its local media and Internet search businesses during the period. "Advertising sales at both HGTV and Food Network surged during the three-month period, the direct result of popular new shows and other programming improvements that resonated with viewers amid a very strong advertising marketplace," Lowe said. "HGTV attracted record numbers of viewers during the summer months and Food Network continued to draw a solid primetime audience. Growing distribution and increased viewership at DIY, Fine Living and Great American Country also contributed to improved consolidated results. "At the company's newspapers, the decline in advertising revenue was in line with our expectations as we continue to work through difficult market conditions that have affected the newspaper publishing industry," Lowe said. "Lower classified advertising sales, particularly as they related to the real estate slump in Florida and California, weighed against newspaper operating results. Newspaper Internet sites, on the other hand, generated double-digit ad revenue growth, demonstrating that we're having success monetizing the online traffic we're building. "Our other local media businesses - the Scripps broadcast TV stations - are cycling against last year's record political advertising revenue. Although local and national advertising sales grew during the third quarter, the increased business wasn't enough to offset nearly $12 million in political advertising sales that were booked during the same period in 2006. We're looking ahead to robust political advertising sales in 2008. "At Shopzilla, we're seeing some encouraging trends," Lowe said. "We're having considerable success expanding the service internationally and in the U.S., we saw a return to double-digit net revenue growth during the final month of the quarter. Lower switching revenue at uSwitch, however, held back third quarter results for the Scripps Interactive Media division." Here are third-quarter results by segment: Scripps Networks Scripps Networks advertising revenue increased 17 percent to $223 million. Affiliate fee revenue was $60.4 million, up 23 percent. Programming, marketing and other expenses increased 15 percent to $120 million. Employee costs were up 12 percent to $36.5 million. Scripps Networks segment profit was $137 million, up 18 percent from $116 million in the prior-year period. Operating revenue at HGTV was up 16 percent to $144 million. HGTV now reaches about 96 million domestic subscribers compared with 91 million at the end of the third quarter 2006. Food Network operating revenue increased 16 percent to $113 million. Food Network reaches about 96 million domestic subscribers, up from 91 million at the end of the third quarter 2006. Revenue at DIY Network was $14.1 million, up 15 percent. DIY can be seen in about 48 million households, up from about 39 million households a year ago. Fine Living revenue increased 25 percent to $11.4 million. Fine Living reaches about 50 million households vs. 40 million households last year. Revenue at Great American Country increased 30 percent to $6.3 million. Great American Country can be seen in about 51 million homes compared with 44 million homes a year ago. Newspapers Total newspaper revenue declined 5.7 percent to $158 million. Advertising revenue at newspapers managed solely by Scripps was $125 million, down 6.4 percent from the prior-year period. Advertising revenue broken down by category was:
Circulation revenue was $28.8 million, down 5.8 percent. Equity in earnings from the company's newspapers in joint operating agreements increased to $12.0 million from $10.1 million as a result of lower depreciation expense compared with the prior year. Newsprint expense declined 20 percent due to lower paper usage and a 13 percent decrease in newsprint prices. Total cash expenses for Scripps newspapers managed solely by the company were down 3.4 percent to the prior year. Total newspaper segment profit was $36.9 million compared with $39.7 million in the prior-year period. Scripps Television Station Group Television Station Group revenue was $73.3 million compared with $81.7 million a year earlier. Revenue broken down by category was:
Cash expenses for the Television Station Group were $60.0 million, up 1.8 percent from the prior year. Television Station Group segment profit was $13.2 million compared with $22.7 million in the prior year period. Scripps Interactive Media Scripps Interactive Media revenue was $54.6 million for the third quarter compared with $60.9 million in the third quarter 2006. Segment profit at Scripps Interactive Media was $8.2 million compared with $9.0 million in the third quarter of 2006. Licensing and Other Media Revenue was $21.0 million compared with $24.6 million in the prior-year period. Segment profit was $1.7 million compared with $4.0 million in the third quarter 2006. Guidance Based on advance advertising sales, the company currently anticipates fourth quarter 2007 total revenue for Scripps Networks will be up 10 to 12 percent year over year. Total Scripps Networks expenses are expected to increase about 5 percent during the fourth quarter. Total newspaper revenue is expected to be down 5 to 7 percent from the prior year in the fourth quarter due primarily to weakness in classified and local advertising. Total newspaper expenses are expected to be down slightly compared with the prior year. At the company's broadcast television stations, the percentage decrease in total revenue is expected to be 15 to 20 percent, reflecting the absence of political advertising relative to the prior-year period. TV Station Group expenses are expected to be down slightly. Scripps Interactive Media, which includes Shopzilla and uSwitch, is expected to generate segment profit of about $18 million in the fourth quarter. Corporate expenses, excluding any expenses that may incurred as a result of the company's proposed separation, are expected to be about $16 million in the fourth quarter. Fourth quarter earnings per share from continuing operations are expected to be between 68 and 72 cents. Earnings per share from continuing operations during the fourth quarter of 2006 were 80 cents. Conference call The senior management team at Scripps will discuss the company's third quarter results during a telephone conference call at 11 a.m. EDT 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. To access the conference call by telephone, dial 1-866-837-9779 (U.S.) or 1-703-639-1417 (International), approximately 10 minutes before the start of the call. Callers will need the name of the call (third 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 2:30 p.m. EDT Oct. 25 until 11:59 p.m. EDT Nov. 1. 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 890440. 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, including the proposed separation plan, 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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