Business News
Scripps Reports Third-Quarter Results
Friday 06. November 2009 - The E.W. Scripps Company (NYSE:SSP) reported a net loss from continuing operations of $3.5 million, or 7 cents per share, in the third quarter of 2009, compared with a net loss from continuing operations of $3.1 million, or 6 cents per share, in the 2008 quarter. In an environment of declining revenues, disciplined expense management enabled the company to generate positive segment profit in all three of its operating divisions during the quarter.
Also during the quarter, the company strengthened its financial condition by reducing long-term debt to a level that is below the value of its cash and short-term investments.
Consolidated revenues were $186 million, a 19 percent decrease from $230 million in the third quarter of 2008.
“We’re determined to position Scripps for continued success in the rapidly evolving news industry. In the third quarter we made significant progress,” said Rich Boehne, president and chief executive officer of The E.W. Scripps Company.
“During the third quarter, we significantly reduced our bank debt, giving us the flexibility we need to pursue strategies for expanding audiences and revenue streams across multiple platforms despite the difficult economic environment.
“In the TV station markets, we’re seeing some modest improvement in the flow of advertising dollars but we intend to continue funding much of our investment in content and new business categories through the shifting of internal resources. At the newspapers, where ad revenues continue to be very weak, we’re deep into a restructuring of operations that will both reduce expenses and bring a sharper focus to content and advertising sales.
“As we head into the last quarter of this very difficult year, we believe the advertising and expense trends we experienced in the third quarter will continue. Newspaper ad revenue declines are moderating slightly, and local and national TV revenues have shown gradual sequential improvement. Comparisons for the TV station group are difficult given the $26 million in political ad revenues we generated during the fourth quarter of 2008.”
The operations that formerly comprised the company’s Scripps Networks and interactive media divisions, which were spun off into Scripps Networks Interactive on July 1, 2008, are reported in previous periods as discontinued operations, as is the joint operating agreement (JOA) that included the Rocky Mountain News, the company’s newspaper in Denver that was closed in February 2009.
As part of the wind-down of the JOA in Denver, Scripps also transferred to its partner the company’s 50-percent partnership interest in Prairie Mountain Publishing (PMP). The results for PMP are reflected in the attached financial tables under “Equity in earnings of JOAs and other joint ventures.”
Third-quarter results by segment are as follows:
Television
Revenue from the company’s television stations was $59.8 million in the third quarter, a decrease of 22 percent from the third quarter of 2008, which benefitted from Olympic advertising and heavy political spending.
Advertising revenue broken down by category was:
— Local, down 15 percent to $36.0 million
— National, down 18 percent to $16.1 million
— Political was $1.7 million, compared with $10.3 million in the 2008
quarter
— Other revenue, which includes retransmission fees for carriage of the
stations on cable and satellite systems, up 44 percent to $4.2 million
The decrease in revenue from local and national advertisers was largely attributable to reduced spending by automotive, financial services and retail advertisers, but the year-over-year declines in local and national advertising showed sequential improvement compared with the second quarter, when local was down 26 percent and national was down 29 percent.
As is common for this stage of the election cycle, political spending in the third quarter of 2009 was down significantly compared with the year-ago period that included political advertising in advance of the November elections at the local, state and national levels.
Segment expenses for the station group decreased 5.4 percent to $56.7 million, compared with $60.0 million a year ago. Programming costs were 11 percent higher due to contractual increases for syndicated programming in several key markets, but they were more than offset by reduced employee costs and expense savings in production and distribution.
The television division reported segment profit of $3.1 million in the third quarter, compared with $17.0 million in segment profit in the year-ago quarter.
Newspapers
Year-over-year revenue from Scripps newspapers fell 20 percent to $104 million. Advertising revenue was down 27 percent to $73.3 million. Both figures reflect improvement of approximately 2 percentage points compared with the declines from the second quarter of 2008 to the second quarter of 2009.
Advertising revenue broken down by category was:
— Local, down 27 percent to $21.5 million
— Classified, down 36 percent to $22.3 million
— National, down 17 percent to $4.9 million
— Preprint and other, down 21 percent to $17.3 million
— Online, down 20 percent to $7.3 million
The decline in online advertising revenue is attributable to the weakness in print classified advertising, to which roughly half of the online advertising is tied. Revenue from online-only ad sales rose 38 percent to $3.9 million.
Circulation revenue rose 2.8 percent to $27.3 million.
Year-over-year employee costs declined 15 percent in the quarter due to this year’s decision to adjust compensation programs. Excluding the favorable impact of a $3.0 million adjustment for self-insured health care and disability claims in the third quarter of 2008 that did not repeat this year, the year-over-year decrease in employee costs for the newspaper division in the third quarter of 2009 would have been 19 percent. Newsprint and ink expense in the third quarter declined 51 percent due to a 30 percent decrease in volume and a 33 percent decrease in the average price per ton.
Segment expenses for Scripps newspapers were down 20 percent from the prior-year period to $93.5 million.
Segment profit in the newspaper division was $10.9 million, compared with $14.0 million in the third quarter of 2008.
Licensing and other media
Third-quarter revenues from our licensing and syndication businesses were flat at $22.2 million. Costs and expenses, including royalty payments, declined 7.6 percent to $19.1 million, resulting in segment profit of $3.2 million, compared with $1.5 million in the prior-year period.
Financial flexibility
During the quarter, the company used Federal tax refunds totaling $28.4 million and cash on hand to reduce borrowings under its recently amended revolving credit facility. Long-term debt at the end of the third quarter was $29.5 million, while cash, cash equivalents and short-term investments totaled $31.7 million. At the end of the second quarter, long-term debt was $73.1 million, and cash, cash equivalents and short-term investments totaled $41.9 million.
Year-to-date results
Revenues from continuing operations through the first nine months of the year were $585 million, compared with $737 million in the year-ago period.
The company reported a net loss from continuing operations in the first three quarters of 2009 of $206 million, or $3.83 per share, including a charge for the impairment of goodwill in the company’s television segment, restructuring charges and charges related to the separation of the company’s cable networks and comparison shopping services into a separate, publicly traded company. The net loss from continuing operations in the first three quarters of 2008 was $548 million, or $10.10 per share, including separation charges and a charge for the impairment of goodwill and equity investments.
The year-to-date 2009 results reflect two non-recurring items from the first quarter, net of taxes: 1) an impairment charge of $192 million to write down the carrying value of goodwill and other intangible assets at the Scripps television stations, and 2) a non-cash curtailment charge of $1.9 million related to the company’s decision to freeze its pension plan on June 30, 2009.