Business News

Scripps Reports First Quarter Results

Friday 25. April 2008 - The E. W. Scripps Company (NYSE:SSP) today reported first-quarter operating results, including strong revenue and segment profit growth at Scripps Networks, the company's operating division that includes HGTV and Food Network, and solid performance at its Shopzilla comparison shopping Internet business.

On a consolidated basis, The E. W. Scripps Company’s first-quarter revenue increased 6.8 percent to $642 million compared with the same period a year ago.

The company’s first-quarter net income was $84.1 million, or 51 cents a share, compared with $68.5 million, or 42 cents a share, for the same period in 2007.

At Scripps Networks, first-quarter revenue grew 15 percent year-over-year to $311 million. Segment profit for the division increased 15 percent to $147 million.

(Segment profit, as defined by the company, excludes interest, income taxes, depreciation and amortization, divested operations, restructuring activities, investment results and certain other items that are included in net income.)

In addition to HGTV and Food Network, Scripps Networks includes DIY Network, Fine Living Network, Great American Country (GAC) and a growing portfolio of related lifestyle brands that deliver content and interactive services on the Internet.

Financial performance at Scripps Networks was favorably affected during the first quarter by increased advertising sales that resulted from improved audience viewership at HGTV and Food Network and strong pricing in the scatter advertising market.

Scripps Networks accounted for nearly half of the company’s consolidated revenue during the first quarter.

At the company’s Interactive Media division, which includes online comparison shopping services Shopzilla and uSwitch, first-quarter revenue grew 23 percent to $77.5 million. Segment profit for the Interactive Media division was $21.0 million compared with a slight loss during the same period a year earlier.

The Interactive Media division’s first-quarter growth is attributable to improvements at Shopzilla that have resulted in the business being able to cost effectively increase and monetize user traffic and increasing energy switching activity and significantly lower expenses at uSwitch in the United Kingdom.

During the prior-year period, Interactive Media segment profit was reduced by about $15 million due to a combination of factors including leadership transition costs at Shopzilla and increased marketing expenses at uSwitch.

At the company’s newspapers and television stations, first quarter operating performance was affected by industry-wide weakness in local advertising sales.

First-quarter revenue at Scripps newspapers was down 8.3 percent, year- over-year, to $156 million. Newspaper online revenue was $10 million, which was flat relative to the prior-year period. Newspaper expenses were down 2.5 percent in the quarter. Newspaper segment profit for the period was $27.6 million vs. $29.3 million last year.

Newspaper segment profit was favorably affected during the first quarter by a $4.4 million, one-time gain from the sale of real estate owned by the Denver Newspaper Agency. The year-over-year newspaper segment profit comparison should also take into account $3.0 million in accelerated depreciation costs that were recorded by the Denver Newspaper Agency during the first quarter of 2007. The accelerated depreciation expense in the prior- year period was related to consolidation of production facilities in Denver.

Lower local and classified advertising sales, including particularly weak real estate and employment classified advertising, contributed to the decline in total newspaper revenue and segment profit.

First-quarter revenue at the Scripps Television Station Group was $76.0 million compared with $76.5 million during the same period a year earlier. First-quarter segment profit at the TV Station Group was $14.2 million vs. $16.4 million, year-over-year.

The decline in revenue and segment profit at the Television Station Group was attributable to generally weak local and national advertising sales, particularly in the automotive and retail categories. Political advertising revenue during the quarter was $3.1 million compared with $300,000 during the same period in 2007.

“Strong growth at our Scripps Networks and Interactive Media divisions drove improved consolidated results for the company during the first quarter,” said Kenneth W. Lowe, president and chief executive officer for Scripps.

“Solid audience trends at HGTV and Food Network, combined with healthy pricing in the scatter advertising market, resulted in double digit revenue and segment profit growth for Scripps Networks,” Lowe said. “We also saw strong growth at our Interactive Media segment, thanks primarily to Shopzilla’s improving ability to efficiently monetize its growing levels of user traffic.”

“At our newspapers and TV stations, first-quarter segment results reflect the continued weakness in local advertising that has affected the entire industry,” Lowe said.

“As for the company’s proposed separation, we’re on track to complete the transaction by the end of the second quarter as planned,” Lowe said. “We’ve received a favorable ruling from the IRS on the tax-free nature of the transaction; we’ve received initial comments from the SEC on the filing of the new company’s Form 10 information statement; and the management teams are in place for both companies going forward. We’re right where we anticipated being at this stage in the process.”

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 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 at the end of June of this year.

Here are first-quarter results by segment:


Scripps Networks


Scripps Networks advertising revenue increased 15 percent to $236 million. Affiliate fee revenue was $67.4 million, up 17 percent.

Programming, marketing and other expenses increased 15 percent to $126 million. Employee costs were up 17 percent to $42.0 million.

Scripps Networks segment profit was $147 million, up 15 percent from $128 million in the prior-year period.

Revenue at HGTV was up 11 percent to $149 million. HGTV now reaches about 96 million domestic subscribers compared with 92 million at the end of the first quarter 2007.

Food Network revenue increased 19 percent to $128 million. Food Network reaches about 96 million domestic subscribers, up from 92 million at the end of the first quarter 2007.

Revenue at DIY Network was $15.3 million, up 33 percent. DIY can be seen in about 47 million households, up from about 43 million households a year ago.

Fine Living revenue increased 24 percent to $12.8 million. Fine Living reaches about 50 million households vs. 45 million households last year.

Revenue at Great American Country increased 5.8 percent to $5.9 million. Great American Country can be seen in about 53 million homes compared with 47 million homes a year ago.

Newspapers

Total newspaper revenue declined 8.3 percent to $156 million. Advertising revenue at newspapers managed solely by Scripps was $120 million, down 10 percent from the prior-year period.

Advertising revenue broken down by category was:

– Local, down 8.4 percent to $33.9 million.
– Classified, down 19 percent to $41.8 million.
– National, down 10 percent to $8.0 million.
– Preprint and other, down 0.2 percent to $36.5 million. Online revenue,
which is included in the preprint and other category, was $9.9 million,
about flat relative to the prior year period.


Circulation revenue was $30.5 million, down 1.2 percent.


The contribution to segment profit from the company’s joint operating agreement newspaper and partnerships was $2.0 million compared with a $7.4 million loss in the prior year period. The improvement is attributable, in part, to the company’s $4.4 million share of a one-time gain on the sale of real estate in Denver. The prior-year period also included $3.0 million in accelerated depreciation costs related to the consolidation of construction of production facilities in Denver.

Newsprint expense declined 11 percent due primarily to lower paper usage. Newsprint pricing was flat to the prior-year period.

Total cash expenses for Scripps newspapers managed solely by the company were down 2.3 percent to the prior year.

Total newspaper segment profit was $27.6 million compared with $29.3 million in the prior-year period.

Scripps Television Station Group

Television Station Group revenue was $76.0 million compared with $76.5 million a year earlier.

Revenue broken down by category was:

– Local, down 5.8 percent to $45.7 million.
– National, down 7.5 percent to $22.1 million.
– Political, $3.1 million compared with $300,000 in 2007.




Cash expenses for the Television Station Group were $61.8 million, up 2.9 percent from the prior year.

Television Station Group segment profit was $14.2 million compared with $16.4 million in the prior year period.

Interactive Media

Interactive Media revenue was $77.5 million for the first quarter compared with $62.9 million in the first quarter 2007.

Segment profit was $21.0 million compared with a segment loss of $381,000 in the first quarter of 2007. During the prior-year period Interactive Media segment profit was reduced by about $15 million due to a combination of factors including leadership transition costs at Shopzilla and increased marketing expenses at uSwitch.

Licensing and Other Media

Revenue was $22.4 million compared with $23.2 million in the prior-year period. Segment profit was $2.2 million compared with $3.0 million in the first quarter 2007.

Guidance

Based on advance advertising sales, the company currently anticipates second 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 15 percent during the second quarter.

Total newspaper revenue is expected to be down 8 to 10 percent from the prior year in the second quarter due to continued weakness in classified and local advertising. Total newspaper expenses are expected to be down about 7 percent compared with the prior year. Year-over-year newspaper expense reductions reflect $8.9 million in employee severance costs the company incurred during the second quarter 2007.

At the company’s broadcast television stations, total revenue is expected to be flat to up slightly compared with the prior-year period. TV Station Group expenses are expected to be up in the mid-single digits.

Interactive Media, which includes Shopzilla and uSwitch, is expected to generate segment profit of $12 million to $14 million in the second quarter.

Corporate expenses, excluding costs that will be incurred as a result of the company’s separation, are expected to be about $17 million in the second quarter.

Second quarter earnings per share from continuing operations, excluding separation costs, are expected to be between 58 and 62 cents. Earnings per share from continuing operations during the second quarter of 2007 were 58 cents.