Business News

Scripps Reports Preliminary Fourth Quarter Financial Results

Friday 01. February 2008 - The E. W. Scripps Company (NYSE:SSP) today reported preliminary operating results for the fourth quarter 2007, reflecting strong revenue and segment profit growth at Scripps Networks, the operating division that includes HGTV, Food Network and the company's other national lifestyle television networks.

The preliminary fourth-quarter operating results do not include an anticipated non-cash charge against earnings for impairment of goodwill and other intangible assets related to losses and challenging business conditions at the company’s uSwitch subsidiary in the United Kingdom.

Scripps determined during the course of performing its annual impairment testing of goodwill and other long-lived assets that the uSwitch-related charge is necessary. The company will disclose the amount of the charge when it completes the impairment testing process and files its Form 10-K with the Securities and Exchange Commission on or before Feb. 29.

Preliminary net income for the quarter, excluding the anticipated charge, was $123 million, or 75 cents per share, compared with $134 million, or 81 cents per share, during the same period a year earlier.

A tax adjustment related to the challenging business conditions at uSwitch reduced preliminary net income by $9.5 million, or 6 cents per share. In the fourth quarter 2006, tax adjustments increased net income by 5 cents per share.

Operating income in the fourth quarter was $205 million vs. $214 million in the fourth quarter 2006. Operating income during the fourth quarter 2007 included $3.5 million in transition costs related to the proposed separation of the company that was announced in October.

Consolidated fourth-quarter revenue was $679 million compared with $683 million during the same period a year ago.

At Scripps Networks, fourth-quarter revenue grew 14 percent year-over-year to $318 million. Segment profit for the division increased 21 percent to $175 million. (See Note 3 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, including RecipeZaar.com, that deliver content and interactive services on the Internet.

On a consolidated basis, the improved results at Scripps Networks were offset by lower advertising sales at the company’s newspapers and broadcast television stations, and softer performance in the Scripps Interactive Media division, which includes online comparison shopping services, Shopzilla and uSwitch.

Commenting on the company’s fourth quarter operating results, Kenneth W. Lowe, president and chief executive officer for Scripps, said, “The outstanding financial performance at our national television networks and their related interactive businesses continued uninterrupted during the last three months of the year. Solid ratings and viewership at HGTV and Food Network during the fourth quarter, combined with strong pricing in the scatter advertising market, resulted in impressive double digit revenue and segment profit growth for our Scripps Networks division.”

“The company’s total revenue, however, was down just slightly during the three-month period due to continued advertising weakness at our local newspapers and the relative absence of political advertising at our local broadcast television stations compared with the prior year,” Lowe said.

“At our online comparison shopping subsidiaries, we were encouraged by year-over-year improvement in fourth-quarter results at Shopzilla, but the continued weakness in energy switching activity at uSwitch held back the division’s overall operating results,” Lowe said.

On Oct. 16, 2007, 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 the businesses that currently comprise the 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 in June of this year.

Here are fourth-quarter results by operating segment:

Scripps Networks


Scripps Networks advertising revenue increased 14 percent to $255 million. Affiliate fee revenue was $58.3 million, up 21 percent.

Programming, marketing and other expenses increased 5.9 percent to $111 million. Employee costs were up 12 percent to $37.7 million.

Scripps Networks segment profit was $175 million, up 21 percent from $144 million in the prior-year period.

Online advertising revenue at Scripps Networks grew 22 percent to $21.6 million during the fourth quarter.

Revenue at HGTV and related HGTV-enterprises was up 15 percent to $150 million. HGTV now reaches about 96 million domestic subscribers compared with 91 million at the end of the fourth quarter 2006.

Revenue at Food Network and Food Network-related enterprises increased 10 percent to $135 million. Food Network reaches about 96 million domestic subscribers, up from 91 million at the end of the fourth quarter 2006.

Revenue at DIY Network was $14.8 million, up 28 percent. DIY can be seen in about 47 million households, up from about 42 million households a year ago.

Fine Living revenue increased 25 percent to $11.6 million. Fine Living reaches about 50 million households vs. 42 million households last year.

Revenue at Great American Country increased 14 percent to $6.4 million. Great American Country can be seen in about 53 million homes compared with 46 million homes a year ago.

Newspapers

Total newspaper revenue declined 9.6 percent to $165 million. Advertising revenue at newspapers managed solely by Scripps was $131 million, down 12 percent from the prior-year period.

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.

Advertising revenue broken down by category was:
— Local, down 15 percent to $37.8 million.
— Classified, down 19 percent to $40.3 million.
— National, down 10 percent to $9.1 million.
— Preprint and other, down 1.9 percent to $43.4 million. Online
advertising revenue, which is included in the preprint and other
category, was $9.2 million, up 6.6 percent, year-over-year.


Circulation revenue was $29.5 million, even with the prior year.


The contribution to segment profit from the company’s newspapers in joint operating agreements and other partnerships increased to $7.4 million from $3.5 million as a result of lower depreciation expense compared with the prior year.

Newsprint expense declined 21 percent due to lower consumption and a 13 percent decrease in newsprint prices.

Total cash expenses for Scripps newspapers managed solely by the company were down 5.5 percent compared with the prior year.

Total newspaper segment profit was $44.7 million compared with $50.9 million in the prior-year period.

Scripps Television Station Group

Television Station Group revenue was $91.5 million compared with $112 million a year earlier.

Revenue broken down by category was:
— Local, up 14 percent to $56.8 million.
— National, down 1.6 percent to $28.4 million.
— Political, $1.3 million compared with $28.9 million in 2006.




Cash expenses for the Television Station Group were $60.8 million, down 2.8 percent from the prior year.

Television Station Group segment profit was $30.7 million compared with $49.1 million in the prior-year period.

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.

Scripps Interactive Media

Scripps Interactive Media revenue was $79.8 million for the fourth quarter compared with $86.6 million in the fourth quarter 2006.

Segment profit at Scripps Interactive Media was $25.1 million compared with $28.3 million in the fourth quarter of 2006.

The decline in Interactive Media revenue and segment profit during the fourth quarter was attributable solely to reduced online energy switching activity at uSwitch. Revenue and profitability improved year-over-year during the fourth quarter at Shopzilla.

Licensing and Other Media

Revenue was $25.3 million compared with $23.9 million in the prior-year period. Segment profit was $3.4 million compared with $2.7 million in the fourth quarter 2006.

Full-year results

Preliminary income from continuing operations was $374 million, or $2.27 per share, compared with $397 million, or $2.41 per share, in 2006. Preliminary income from continuing operations does not include an anticipated non-cash charge against earnings for impairment of goodwill and other intangible assets related to losses and challenging business conditions at uSwitch. Preliminary net income, excluding the anticipated charge and including discontinued operations, was $378 million, or $2.30 per share, compared with $353 million, or $2.14 per share.

Following are full-year results by operating segment:
— Scripps Networks: Total revenue increased 13 percent to $1.2 billion
from $1.1 billion the prior year. Segment profit increased 17 percent
to $603 million. Advertising revenue grew 11 percent to $928 million.
Affiliate fee revenue was up 21 percent to $235 million. Segment costs
and expenses increased 9.2 percent to $599 million.
— Newspapers: Revenue at newspapers managed solely by Scripps was $658
million compared with $716 million in 2006. Advertising revenue at
newspapers managed solely by Scripps declined 9.6 percent to $522
million. Total newspaper segment profit, including newspapers in joint
operating agreements, was $146 million compared with $196 million in
2006. Segment costs and expenses decreased 1.1 percent to $558 million.
— TV Station Group: Revenue was $326 million compared with $364 million
in the prior year. Segment profit was $83.9 million compared with $121
million in 2006. Political advertising revenue for the year was $2.7
million compared with $44.3 million in 2006. Segment costs and expenses
were $242 million, down 0.3 percent from the prior year.
— Scripps Interactive Media: Revenue was $256 million compared with $271
million in 2006. Segment profit was $39.7 million compared with $67.7
million in the previous year.
— Licensing and Other Media: Revenue was $91.8 million compared with
$94.6 million in 2006. Segment profit was $10.7 million compared with
$12.7 million in the previous year.
— Capital expenditures were $129 million vs. $105 million in 2006.


Guidance


Based on advance advertising sales, the company currently anticipates first quarter 2008 total revenue for Scripps Networks will be up 10 to 12 percent year-over-year. Total Scripps Networks expenses are expected to increase about 12 percent during the first quarter.

Total revenue at newspapers managed solely by Scripps is expected to be down 5 to 7 percent from the prior year in the first quarter due primarily to weakness in classified and local advertising. Total newspaper expenses are expected to be down 3 to 5 percent compared with the prior year.

The company anticipates that its newspapers in joint operating agreements and other partnerships will reduce the total segment profit of the newspaper division by $4 million in the first quarter.

At the company’s broadcast television stations, total revenue is expected to be flat to up 4 percent compared with the prior year, depending on the level of political advertising during the period. Television Station Group expenses are expected to be up between 4 and 6 percent.

Scripps Interactive Media, which includes Shopzilla and uSwitch, is expected to generate segment profit of about $13 million in the first quarter, compared with a small loss in the first quarter 2007. Both Shopzilla and uSwitch are expected to contribute to segment profit during the quarter.

Corporate expenses are expected to be about $20 million in the first quarter, excluding costs related to the proposed separation of the company. Corporate expenses in the first quarter 2007 were $19 million.

Minority interest will be about $20 million in the first quarter due to the increasing profitability of Food Network. Minority interest for the same period in 2007 was $18 million.

First quarter earnings per share from continuing operations are expected to be between 38 and 42 cents. Earnings per share from continuing operations during the first quarter of 2007 were 39 cents.