Business News

Scripps Reports Fourth-Quarter Results

Monday 23. February 2009 - Additional initiatives being pursued to reduce expenses in 2009

The E.W. Scripps Company (NYSE:SSP) today reported fourth-quarter operating results for its television, newspaper, and licensing and syndication businesses. The operations that formerly comprised the company’s Scripps Networks and interactive media divisions, which were spun off into a separate publicly traded company on July 1, 2008, are reported in previous periods as discontinued operations.

The quarterly results reflect continued weakness in advertising sales at the company’s newspapers and television stations. The company’s revenue decreased 6.2 percent to $265 million, compared with $282 million in the fourth quarter of 2007.

The company reported a loss from continuing operations before income taxes and minority interests of $19.4 million, compared with income before income taxes and minority interests of $44.7 million in the fourth quarter of 2007.

The company still is in the process of finalizing the allocation of its provision for income taxes for 2008 and 2007 between its continuing and discontinued operations. The final allocated amounts will be included in the company’s 2008 Form 10K, which is expected to be filed by March 2.

During the fourth quarter, pre-tax income from continuing operations was reduced by the following items:

— severance costs in the newspaper division totaling $5.0 million,

— costs related to the separation of the Scripps Networks and interactive media divisions totaling $1.9 million,

— the write-down of certain long-lived assets in the television division totaling $31.0 million, and

— the write-down of the company’s investment in its Colorado newspaper partnership totaling $10.9 million.

“It became apparent toward the end of the year there’s nowhere to hide from the national economic crisis. Despite our geographic diversity and multiple sources of advertising revenue, we’re feeling the pain as the recession rolls its way through our local markets and media businesses,” said Rich Boehne, president and CEO of Scripps. “Our primary short-term goal is to protect the company’s financial health and flexibility, but at the same time we continue to reposition our local brands to take advantage of the long-term opportunities presented by this season of rapid evolution for media.”

Fourth-quarter results by segment are as follows:

Television


Revenue from the company’s television stations was $93.4 million in the fourth quarter, an increase of 2.1 percent over the fourth quarter of 2007.

Revenue broken down by category was:
— Local, down 26.9 percent to $41.5 million
— National, down 26.9 percent to $20.8 million
— Political, $26.0 million compared with $1.3 million in the 2007 quarter




After a slow start for political advertising due to national party rules that prohibited Democratic candidates from advertising in Michigan and Florida, the full-year total for political advertising was $41 million, in line with the $42 million reported in the previous presidential election year of 2004.

Cash expenses for the station group were $62.3 million, an increase of 2.5 percent from $60.8 million in the 2007 quarter, despite a 15 percent increase in programming costs.

Segment profit for the television division was $31.1 million in the fourth quarter, a 1.3 percent increase over the fourth quarter of 2007.

Newspapers

Year-over-year revenue from newspapers managed solely by Scripps fell 16.5 percent to $137.5 million. Advertising revenue was down 19.8 percent to $104.8 million.

Advertising revenue broken down by category was:
— Local, down 15.1 percent to $32.1 million
— Classified, down 31.2 percent to $27.7 million
— National, down 18.0 percent to $7.5 million
— Preprint and other, down 13.8 percent to $29.5 million
— Online, down 13.1 percent to $8.0 million




The decline in online ad revenue is attributable to the weakness in print classified advertising, to which most of the online advertising is tied. Revenue from pure-play advertisers who only purchase ads on the company’s newspaper Web sites more than doubled to $3.7 million.

Circulation revenue was $28.3 million, down 3.9 percent.

Due to significantly lower usage, newsprint and ink expense declined slightly to $16.7 million, despite an increase in newsprint pricing of about 41 percent over the prior-year period.

Cash expenses for Scripps newspapers, including severance costs of $5.0 million, were down 2.1 percent from the prior year.

Segment profit at newspapers managed solely by the company was $12.9 million, compared with $37.3 million in the fourth quarter of 2007.

JOA and Newspaper Partnerships

Scripps reported $51,000 in equity in earnings of JOAs, compared to $11.0 million in the fourth quarter of 2007. The dramatic decrease is attributable to the cessation of cash distributions from the Denver Newspaper Agency in the second half of 2008, as well as the change in the reporting of earnings from the Albuquerque partnership. As a result of the closure of The Albuquerque Tribune and termination of the Albuquerque JOA in early 2008, the company’s residual interest in the Albuquerque partnership is now treated as a passive investment. For reporting purposes, earnings from the partnership have been removed from the “JOA and newspaper partnerships” segment in 2008 and now are reflected in the “investment in newspaper partnership” line in the attached financial tables.

Consequently, the results of the JOAs and newspaper partnerships decreased segment profit by $8.4 million in the quarter, compared with a contribution to segment profit of $3.5 million in the fourth quarter of 2007.

Licensing and Other Media

Revenue was $30.9 million, a 20 percent increase compared with $25.7 million in the prior-year period, and segment profit increased more than 36 percent to $4.3 million from $3.2 million in the 2007 quarter. The increase was largely attributable to the ABC television network airing 13 Peanuts specials in the fourth quarter of 2008 vs. eight airings in the 2007 quarter.

Full Year

For the full year, consolidated revenues from continuing operations decreased 7.2 percent to $1.00 billion from $1.08 billion in 2007.

Revenues at newspapers managed solely by Scripps decreased 13.6 percent to $568.7 million, and segment profit was $71.5 million, compared with prior-year segment profit of $135.9 million.

Television revenue was essentially flat at $326.9 million, and segment profit decreased 3.9 percent to $80.6 million.

Revenue from licensing and other media rose 9.5 percent to $102.5 million, and segment profit increased 16.2 percent to $10.4 million.

Non-operating items

Due to sharp declines in the equities markets in the fourth quarter, the value of the company’s pension plan assets was approximately $145 million less than the value of the company’s accumulated benefit obligations at the end of the year. The company’s pension expense in 2008 was $15 million, but it is expected to climb to $41 million in 2009. The company is only required to fund approximately $5 million into its pension plans in 2009 due to excess contributions in prior years, but in 2010 the company’s pension contribution is expected to be approximately $46 million.

Bank debt as of Dec. 31 was approximately $61 million.

Capital expenditures for 2009 are expected to total approximately $52 million.

Denver

For the full year, newsroom expenses for the Rocky Mountain News incurred by Scripps were approximately $16 million higher than equity in earnings from the Denver Newspaper Agency, excluding a one-time gain from the sale of real estate in the first quarter.

The company announced in December its intention to sell the Rocky Mountain News and expects to announce its plans for the future of the newspaper before the end of the first quarter.

Expense-control initiatives

To reduce expenses and protect the health of the company during this period of unprecedented pressure on the company’s ad revenue sources, Scripps yesterday announced to employees a list of cost-saving measures. The initiatives include pay reductions of 3 to 5 percent for most employees at newspapers and the corporate office. These cuts are in addition to salary cuts of between 5 and 15 percent that affected corporate executives, TV station general managers and newspaper publishers effective January 1, 2009. The company also will suspend its match of most employees’ contributions to 401(k) retirement savings plans, and drastically reduce bonuses across the company for 2009. Other changes were implemented as well, differing by location, division and, where applicable, collective bargaining agreements. It is expected that these measures will reduce the company’s expenses in 2009 by approximately $20 million.

Employees also were told that the company will freeze its pension plan later this year, but specific details of the change – and what the company will do to help transition employees who are close to retirement – are not yet available.

Outlook

Fast-changing economic conditions, which weigh heavily on the decisions of advertisers, complicate the forecasting of first-quarter performance. Revenue and expense trends of the fourth quarter of 2008 have continued into the first quarter of 2009.