CINCINNATI - The E. W. Scripps Company, which on July 1 spun off its national lifestyle television networks and global interactive services businesses into a separate publicly traded company, today reported consolidated operating results for the second quarter of 2008.
The earnings report for the three-month and year-to-date periods ending June 30 includes results from the company's Scripps Networks and Interactive Media operating divisions, the two business segments that now comprise the Lifestyle Media and Interactive Services business segments of the newly created Scripps Networks Interactive Inc. (NYSE: SNI).
Scripps Networks Interactive will report operating results separately beginning with the third quarter of 2008. Its businesses will be classified by The E. W. Scripps Company as discontinued operations, also beginning with the third quarter.
Consolidated second-quarter results for The E. W. Scripps Company reflect strong growth at Scripps Networks, which includes HGTV and Food Network, and solid operating performance at Shopzilla, the company's online comparison shopping business. Consolidated growth, however, was held back by weak advertising sales at the company's newspapers and broadcast television stations.
On a consolidated basis, The E. W. Scripps Company's second-quarter revenue increased 3.8 percent to $664 million compared with the same period a year ago.
The company's second-quarter net income was $51.2 million, or 94 cents a share, compared with $97.5 million, or $1.78 a share, for the same period in 2007. Reported earnings per share reflect the one-for-three reverse stock split that became effective on July 16 for The E. W. Scripps Company. Shares of Scripps Networks Interactive were not affected by the reverse stock split.
For The E. W. Scripps Company, on a pre-spin-off basis, consolidated second-quarter net income was affected by about $18.0 million in costs related to the spin-off.
Net income also was affected by a $26.4 million loss that resulted from the repurchase of previously issued long-term debt from bondholders ahead of scheduled maturity dates. The company restructured its debt prior to the spin-off.
Consolidated net income was favorably affected during the second quarter by solid operating performance at Scripps Networks, which in addition to HGTV and Food Network, also includes DIY Network, Fine Living Network, the Great American Country television network and SN Digital, a growing portfolio of food- and shelter-related interactive businesses.
Second-quarter revenue at Scripps Networks grew 13 percent year over year to $349 million. Segment profit for the division increased 9.8 percent to $180 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.)
Financial performance at Scripps Networks was favorably affected during the second quarter by increased advertising sales that resulted from improved viewership at HGTV and Food Network and strong pricing in the scatter advertising market.
At the company's online comparison shopping services, Shopzilla and uSwitch, combined second-quarter revenue grew 13 percent to $66.9 million. Segment profit for the Interactive Media division was $15.1 million compared with $6.8 million during the same period a year earlier.
The Interactive Media division's second-quarter growth is attributable to Shopzilla's effectiveness in increasing and monetizing domestic user traffic to its Web sites and strong growth in its emerging European markets. Increased energy switching activity combined with significantly lower expenses at uSwitch in the United Kingdom also contributed to the positive results.
At the company's newspapers and television stations, second-quarter operating performance was affected by industry-wide weakness in local advertising sales.
Total second-quarter revenue at Scripps newspapers was down 13 percent, year over year, to $144 million. The company has been adjusting fixed costs at its newspapers to align with changing business conditions. Newspaper expenses were down 9.7 percent in the quarter, and employee costs were down 12 percent. The company incurred employee severance costs of $8.9 million during the second quarter 2007. Newspaper segment profit for the period was $16.3 million vs. $30.1 million last year.
Lower local and classified advertising sales, including particularly weak real estate, employment and automotive classified advertising, contributed to the decline in total newspaper revenue and segment profit.
Second-quarter revenue at the Scripps television station group was $80.5 million compared with $84.5 million during the same period a year earlier. Second-quarter segment profit at the TV station group was $18.3 million vs. $23.5 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 $1.6 million compared with $400,000 during the same period in 2007. Political advertising revenue was weaker than expected due to the lack of primary campaign spending in Florida and Michigan. Year-to-date, political advertising revenue at the company's TV stations is about $4.7 million vs. $700,000 in the prior-year period.
Here are second-quarter results by segment:
Scripps Networks advertising revenue increased 11 percent to $271 million. Affiliate fee revenue was $69.7 million, up 19 percent.
Programming, marketing and other expenses increased 18 percent to $133 million. Employee costs were up 14 percent to $41.5 million.
Scripps Networks segment profit was $180 million, up 9.8 percent from $164 million in the prior-year period.
Revenue at HGTV was up 13 percent to $172 million. HGTV now reaches about 95 million domestic subscribers compared with 93 million at the end of the second quarter 2007.
Food Network revenue also increased 13 percent to $136 million. Food Network reaches about 96 million domestic subscribers, up from 93 million at the end of the second quarter 2007.
Revenue at DIY Network was $19.3 million, up 28 percent. DIY can be seen in about 48 million households, up from about 45 million households a year ago.
Fine Living revenue increased 17 percent to $14.7 million. Fine Living reaches about 50 million households vs. 47 million households last year.
Revenue at Great American Country was $6.8 million vs. $7.1 million, year-over-year. Great American Country can be seen in about 54 million homes compared with 48 million homes a year ago.
Total newspaper revenue declined 13 percent to $144 million. Advertising revenue at newspapers managed solely by Scripps was $112 million, down 15 percent from the prior-year period.
Advertising revenue broken down by category was:
- Local, down 13 percent to $30.8 million.
- Classified, down 21 percent to $38.5 million.
- National, down 20 percent to $6.7 million.
- Preprint and other, down 7.9 percent to $35.9 million. Online revenue, which is included in the preprint and other category, was $9.9 million, down 8.0 percent relative to the prior-year period due mostly to the weakness in classified advertising categories. Revenue from Internet-only advertising sales was up 26 percent.
Circulation revenue was $28.0 million, down 5.4 percent.
Segment profit at newspapers managed solely by the company was $19.1 million compared with $29.3 million in the year-ago quarter. The segment loss from the company's joint operating agreement newspaper and partnerships was $2.7 million vs. a $900,000 contribution to segment profit in the second quarter 2007.
Newsprint expense declined 3.9 percent due primarily to lower paper usage. Newsprint pricing was up about 15 percent over the prior-year period.
Total cash expenses for Scripps newspapers managed solely by the company were down 8.1 percent from the prior year. Year-over-year newspaper expense reductions reflect $8.9 million in employee severance costs the company incurred during the second quarter of 2007.
Total newspaper segment profit was $16.3 million vs. $30.1 million in the same prior-year period.
Scripps Television Station Group
Television station group revenue was $80.5 million compared with $84.5 million a year earlier.
Revenue broken down by category was:
- Local, down 7.0 percent to $50.4 million.
- National, down 7.6 percent to $23.8 million.
- Political, $1.6 million compared with $400,000 in 2007.
Cash expenses for the television station group were $62.2 million, up 1.9 percent from the prior year.
Television Station Group segment profit was $18.3 million compared with $23.5 million in the prior year period.
Interactive Media revenue was $66.9 million for the second quarter compared with $59.0 million in the second quarter 2007.
Segment profit was $15.1 million compared with $6.8 million in the second quarter of 2007.
Licensing and Other Media
Revenue was $23.4 million compared with $22.4 million in the prior-year period.
Segment profit was $1.8 million compared with $2.6 million in the second quarter 2007.
(The following guidance is for The E. W. Scripps Company. Guidance for Scripps Networks Interactive Inc. was provided today in a separate press release.)
Total newspaper revenue is expected to be down 13 to 15 percent from the prior year in the third quarter due to continued weakness in classified and local advertising. Total newspaper expenses are expected to be flat compared with the prior year. The company anticipates a segment loss of $3 million during the quarter from its joint operating agreement newspapers and partnerships.
At the company's broadcast television stations, total revenue, including political advertising, is expected to be up 15 to 17 percent compared with the prior-year period. TV station group expenses are expected to be up in the mid-single digits. Political advertising revenue at the company's TV stations is expected to be between $40 million and $44 million for the full-year.
Corporate expenses, excluding costs incurred as a result of the Scripps Networks Interactive spin-off, are expected to be about $11 million in the third quarter.
Third-quarter earnings per share from continuing operations, excluding separation costs, are expected to be between 10 and 15 cents.
Based on the stock price of the company subsequent to the July 1, 2008, spin-off of Scripps Networks Interactive and the continued effects of a weakening economy on our newspaper advertising revenue, the company will test goodwill, long-lived assets and equity investments for impairment as of July 1, 2008. If it is determined that the fair values of those assets are less than their carrying values, a non-cash charge for impairment will be recorded in the third quarter. Such a charge is not included in the earnings per share forecast provided above.
The senior management teams at The E. W. Scripps Company and Scripps Networks Interactive Inc. will discuss the company's second quarter results during a telephone conference call at 10 a.m. EDT today. Scripps will offer a live audio webcast of the conference call. To access the webcast, visit www.scripps.com, choose "Shareholders" then follow the link in the "Upcoming Events" section.
To access the conference call by telephone, dial 1-800-230-1766 (U.S.) or 1-612-332-0418 (International), approximately 10 minutes before the start of the call. Callers will need the name of the call (second 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 12:00 p.m. EDT July 24 until 11:59 p.m. EDT July 31. 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 953825.
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.
This press release contains certain forward-looking statements related to the company's businesses 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 2007 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 The E. W. Scripps Company
The E. W. Scripps Company (http://www.scripps.com/) is a diverse, 130-year-old media enterprise with interests in broadcast television stations, newspaper publishing and licensing and syndication. The company's portfolio of locally focused media properties includes: 10 broadcast TV stations, with six ABC-affiliated stations, three NBC affiliates and one independent; daily and community newspapers in 15 markets and the Washington D.C.-based Scripps Media Center, home of the Scripps Howard News Service; and United Media, the licensor and syndicator of Peanuts, Dilbert and approximately 150 other features and comics.
About Scripps Networks Interactive Inc.
Scripps Networks Interactive Inc. is the leading developer of lifestyle-oriented content for television and the Internet, where on-air programming is complemented with online video, social media areas and e-commerce components on companion Web sites and broadband vertical channels. The company's media portfolio includes: Lifestyle Media, with popular lifestyle television and Internet brands HGTV, Food Network, DIY Network, Fine Living Network and country music network Great American Country; and Interactive Services, with leading online comparison shopping services, Shopzilla and uSwitch.
location: Scripps Networks Interactive