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Scripps reports fourth-quarter results



                    Scripps reports fourth-quarter results

Revenue increased 32 percent; net income more than quadrupled

PR Newswire

CINCINNATI, Feb. 26, 2013

CINCINNATI, Feb. 26, 2013 /PRNewswire/ -- Led by a record level of political
advertising revenues and the performance of acquired television stations, The
E.W. Scripps Company (NYSE: SSP) reported operating results for the fourth
quarter of 2012 that were significantly stronger than the fourth quarter of
2011, as well as the fourth quarter of the previous election year.

"Our repositioning of Scripps really paid off in the fourth quarter, and in
all of 2012," said Rich Boehne, Scripps president and CEO. "Investing to
expand our television portfolio and to improve our local news programming
resulted in an attractive platform for political advertising and the most
effective voice for election-year journalism ever staged by Scripps. We also
took advantage of the election year to build out our digital product portfolio
across both TV and newspaper markets, expanding audiences and attracting new
revenue sources. Our investments in new digital products and services will
continue in 2013, consistent with our goal to be the leader in our markets.
These efforts, led by a broad deployment of more sales resources to take
advantage of growing digital revenues, are good examples of creating value
through internal investment."

Consolidated revenues rose 32 percent to $260 million from $197 million in the
fourth quarter of 2011. The 2012 quarter included revenue from television
stations in Indianapolis, Denver, San Diego and Bakersfield that were acquired
on Dec. 30, 2011. Excluding the new stations from the 2012 performance,
consolidated revenues increased 14 percent year over year to $225 million.

Political advertising in the fourth quarter alone was higher than the
full-year political total reported in any previous year.

Consolidated expenses for segments, shared services and corporate rose 14.3
percent to $196 million. Excluding costs associated with the new stations,
expenses increased 1.6 percent to $174 million.

The revenue surge and expense discipline produced a substantial improvement in
operating results. Operating income in the 2012 quarter was $45.4 million, up
from $7.3 million in the fourth quarter of 2011. The year-ago quarter included
$2.8 million of investment banking, legal and other fees associated with the
acquisition of the television stations.

At $2.6 million, interest expense in the 2012 quarter was higher than in the
prior-year quarter due to the debt used to finance the acquisition.

The provision for income taxes was $13.6 million in the fourth quarter of
2012, compared with a tax provision of less than a million dollars in the
fourth quarter of 2011. 

Net income in the fourth quarter of 2012 was $27.2 million, or 47 cents per
share, compared with $6.3 million, or 11 cents per share, in the fourth
quarter of 2011.

"In the television division," continued Boehne, "the new stations in Denver,
Indianapolis, San Diego and Bakersfield finished their first year as Scripps
stations with strong revenue growth. And our decision to replace
underperforming syndicated shows with internally produced programming had a
positive impact in the first year. Our two newest shows – Let's Ask America
and The List – are performing well from both ratings and financial
perspectives.

"Despite difficult circumstances, our newspapers performed in line with our
full-year guidance for 2012 as a result of improving trends in some markets,
and disciplined expense control. The papers are preparing for a move in the
first half of 2013 toward a new - bundled - subscription strategy for print
and digital products."

"We expect the momentum to continue in 2013, with sustained progress from our
newspapers and a level of profitability at our television stations – even on a
same-station basis – that will be more than 50 percent higher than in 2011,
the previous non-election year."

Fourth-quarter results by segment are as follows:

Television
Reported revenue from the company's television stations in the fourth quarter
was $152 million, up from $84.7 million in the fourth quarter of 2011. On a
same-station basis, television revenue increased 39 percent in the quarter to
$118 million.

Reported advertising revenue broken down by category was:

  o Local, up 11 percent to $54.9 million (down 12 percent on a same-station
    basis due to displacement caused by the surge in political advertising)
  o National, up 12 percent to $25.9 million (down 17 percent on a
    same-station basis due to displacement)
  o Political was $56.9 million, compared to $3.5 million in the 2011 quarter

Excluding the newly acquired stations, political advertising totaled $44.1
million in the fourth quarter. That compares with $28.1 million on a
same-station basis in the fourth quarter of 2010 (the previous election cycle)
and $26.0 million in 2008 (the previous presidential cycle). 

Revenue from retransmission consent agreements more than doubled year over
year to $7.9 million.  As a result of new agreements with cable operators that
went into effect during 2012, same-station retransmission revenue in the
quarter increased 41 percent to $5.5 million.

Digital revenues in the fourth quarter increased 59 percent to $4.4 million,
and grew 29 percent on a same-station basis.

Largely as a result of the addition of new stations, expenses for the TV
station group grew 41 percent to $86.6 million. Excluding the new stations,
expenses were up 5.2 percent, driven by staffing increases and promotional
initiatives associated with Let's Ask America and The List.

The television division's segment profit in the fourth quarter was $65.3
million, compared with $23.2 million in the year-ago period. (See Note 2 in
the attached financial information for a definition of segment profit.) 

Newspapers
Total revenue from Scripps newspapers in the fourth quarter was $105 million,
down 4.6 percent from the fourth quarter of 2011.

Circulation revenue in the fourth quarter decreased 3.4 percent to $29.6
million.  

Print advertising revenue, at $63.8 million, was down 5.8 percent compared
with the year-ago quarter.

Advertising revenue broken down by category was:

  o Classified, down 7.6 percent to $17.0 million

       o Real Estate – down 3.1 percent
       o Employment – down 15.8 percent
       o Automotive – down 9.3 percent

  o Local, down 3.7 percent to $22.5 million
  o Preprint and other, down 2.6 percent to $21.5 million
  o National, down 28 percent to $2.8 million

Digital revenue was up slightly to $6.6 million. Pure play digital revenue
increased 12.8 percent over the year-ago quarter.

Total segment expenses decreased 5.6 percent to $93.5 million. Newsprint
expenses decreased 9.0 percent due to lower volume and slightly lower price,
but the savings were partially offset by higher expenses for outside printing
costs associated with the print-and-deliver initiative, which resulted in a
decrease in expenses for newspaper and press supplies in the quarter of 4.7
percent.

Fourth-quarter segment profit in the newspaper division increased 4.6 percent
to $11.6 million from $11.1 million in the fourth quarter of 2011.

Syndication and other
The "syndication and other" category of the company's financial statements
includes syndication of news features and comics and other features for the
newspaper industry, and certain digital initiatives outside our newspaper and
television markets.

In the fourth quarter, revenues were $2.7 million, and the segment loss was
$1.7 million. In the fourth quarter of 2011, the segment reported profit of
$0.4 million.

Financial condition
At December 31, 2012, Scripps had cash and cash equivalents of $243 million,
up from $210 million at the end of the third quarter. Total debt was $196
million at the end of the fourth quarter.

Full-year results
Revenue in 2012 was $903 million, compared with $729 million in 2011.
Excluding the recently acquired television stations, revenue increased 8.7
percent.

Scripps reported net income in 2012 of $40.2 million, or 70 cents per share,
compared with a net loss of $15.5 million, or 27 cents per share, in 2011.

Looking ahead
For year-over-year performance of key metrics in the first quarter of 2013,
management expects:

  o Television revenues to be flat
  o Television expenses to be down low-single digits
  o Newspaper revenues to be down in the low- to mid-single digits
  o Newspaper expenses to be down in the mid-single digits
  o Expenses for shared services and corporate to be approximately $20 million

For the full year 2013, management expects:

  o Television revenues to be down in the high-single digits due to the
    political off-year
  o Television expenses to be up slightly
  o Newspaper revenues and expenses to decline at a low-single-digit rate,
    with the decline in expenses being greater than the decline in revenue  
  o Depreciation and amortization to be approximately $50 million
  o Capital expenditures to be approximately $25 million
  o Expenses for shared services and corporate to be between $60 and $65
    million

In 2011 we signaled our belief in the importance of digital media by combining
all of our digital initiatives into a single organization that will support
our television and newspaper operations.  Under the direction of our chief
digital officer, we believe this focus will deliver long-term financial
benefits to our television and newspaper groups as we find new and efficient
platforms for bringing together advertisers and audiences.  We began
implementing this new structure in 2012 and have launched a number of new
products and offerings in our newspaper and television markets.  Looking to
seize opportunities for long-term value creation, the company expects to
invest in additional content creation and sales force development and training
in its digital operations in 2013. Much of that incremental investment will be
recorded in the "shared services" line, accounting for much of the
year-over-year increase in that line.

"We see an immediate opportunity to capture a larger share of the digital
audiences and revenues in our markets through an aggressive build-out of our
operations. In 2013 that will result in approximately $22 million in
investment," said Boehne. "Scripps has a long history of creating value
through internal investment, reducing short-term segment profit to produce
attractive long-term returns. We see that opportunity again as audiences and
revenues grow quickly on smartphones, tablets, laptops and desktops. While
those costs will affect bottom-line expectations in 2013, our company is
enjoying genuine momentum right now with solid prospects of improved
profitability."

Conference call
The senior management of The E.W. Scripps Company will discuss the company's
fourth-quarter results during a telephone conference call at 9 a.m. (Eastern)
today. Scripps will offer a live audio webcast of the conference call. To
access the webcast, visit www.scripps.com, and click on the "Investor
Relations" link.

To access the conference call by telephone, dial 1-800-230-1096 (U.S.) or
1-612-332-0819 (international) approximately 10 minutes before the start of
the call. Investors and analysts will need the name of the call ("fourth
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
granted access to the conference call on a listen-only basis.

A replay line will be open from 11 a.m. (Eastern) February 26 until 11:59 p.m.
March 4. 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
278001.

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
www.scripps.com approximately four hours after the call, choose "investor
relations," then follow the "audio archives" link on the left side of the
page.

Forward-looking statements
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 in its 2011 SEC Form 10K. The company undertakes no obligation to
publicly update any forward-looking statements to reflect events or
circumstances after the date the statement is made.

About Scripps
Scripps (www.scripps.com) is a leading media enterprise that embraces its rich
history in delivering high-quality journalism through television stations,
newspapers and the Scripps Howard News Service, while developing and expanding
its digital strategies for multiple platforms. The company provides
community-changing breaking news, story-telling, investigations and
interactive outreach at 19 television stations in major markets such as
Denver, San Diego, Detroit, Phoenix, Cleveland, Cincinnati and Tampa, and 13
newspaper markets, including Memphis, Knoxville, Naples, Fla., and Corpus
Christi, Texas. Since 1941, Scripps has operated the National Spelling Bee,
one of America's most-enduring celebrations of academic excellence. For a full
listing of Scripps media companies and their associated Web sites, visit
http://www.scripps.com/.

 

THE E. W. SCRIPPS COMPANY
RESULTS OF OPERATIONS
                             Three months ended
                                                     Years ended December 31,
                             December 31,
(in thousands, except per    2012        2011        2012          2011
share data)
Operating revenues           $ 259,753   $ 197,397   $  903,458    $ 728,660
Segment, shared and          (195,894)   (171,404)   (755,971)     (682,231)
corporate expenses
Pension expense              (2,865)     (2,834)     (8,620)       (8,135)
Acquisition and related      —           (2,787)     (5,826)       (2,787)
integration costs
Restructuring costs          (2,915)     (3,406)     (9,335)       (9,935)
Depreciation and             (12,287)    (9,568)     (49,332)      (40,069)
amortization
Impairment of long-lived     —           —           —             (9,000)
assets
Gains (losses), net on
disposal of property, plant  (424)       (110)       (474)         124
and equipment
Operating expenses           (214,385)   (190,109)   (829,558)     (752,033)
Operating income (loss)      45,368      7,288       73,900        (23,373)
Interest expense             (2,593)     (473)       (12,246)      (1,640)
Miscellaneous, net           (2,295)     (53)        (4,747)       (675)
Income (loss) from
operations before income     40,480      6,762       56,907        (25,688)
taxes
(Provision) benefit for      (13,561)    (620)       (16,985)      10,001
income taxes
Net income (loss)            26,919      6,142       39,922        (15,687)
Net income (loss)
attributable to              (266)       (150)       (266)         (150)
noncontrolling interests
Net income (loss)
attributable to the          $ 27,185    $ 6,292     $  40,188     $ (15,537)
shareholders of  The E.W.
Scripps Company
Net income (loss) per basic
share of common stock
attributable to the          $ 0.47      $ 0.11      $  0.70       $ (0.27)
shareholders of The E.W.
Scripps Company:
Weighted average basic       55,073      54,683      54,907        57,217
shares outstanding
See notes to results of operations.

Notes to Results of Operations

1. ACQUISITION AND INTEGRATION COSTS

Included in acquisition and related integration costs for 2012, is a $5.7
million non-cash charge to terminate the McGraw-Hill stations' national
representation agreement. We decided to use our existing national
representative in all Scripps markets. As an inducement, our existing national
representative firm agreed to pay the $5.7 million termination fee on our
behalf.

2. SEGMENT INFORMATION

We determine our business segments based upon our management and internal
reporting structure. Our reportable segments are strategic businesses that
offer different products and services.

Out television segment includes ten ABC affiliates, three NBC affiliates, one
independent station and five Azteca affiliates. Our television stations reach
approximately 13% of the nation's television households. Television stations
earn revenue primarily from the sale of advertising time to local and national
advertisers.

Our newspaper  segment includes daily and community newspapers in 13 markets
in the U.S. Newspapers earn revenue primarily from the sale of advertising
space to local and national advertisers and from the sale of newspapers to
readers.

Syndication and other primarily include certain digital operations outside our
newspaper and television markets and syndication of news features and comics
and other features for the newspaper industry.

We allocate a portion of certain digital and corporate costs and expenses,
including information technology, certain employee benefits, and other shared
services, to our business segments. The allocations are generally amounts
agreed upon by management, which may differ from an arms-length amount.
Corporate assets are primarily cash and cash equivalents, and other short-term
investments, property and equipment primarily used for corporate purposes, and
deferred income taxes.

Our chief operating decision maker evaluates the operating performance of our
business segments and makes decisions about the allocation of resources to our
business segments using a measure called segment profit. Segment profit
excludes interest, defined benefit plan pension expense (other than current
service costs), income taxes, depreciation and amortization, divested
operating units, restructuring activities, investment results and certain
other items that are included in net income (loss) determined in accordance
with accounting principles generally accepted in the United States of America.

Effective January 1, 2012, we changed our defined benefit plan pension expense
allocation policy to charge business segments only for the current service
costs of defined benefit plans. We have recast the prior period for this
change.

Information regarding our business segments is as follows:

 

               Three months ended               Years ended
                                                December 31,
               December 31,
(in thousands) 2012        2011        Change   2012        2011         Change
Segment
operating
revenues:
Television     $ 151,913   $ 84,665    79.4  %  $ 493,896   $ 300,598    64.3   %
Newspapers     105,142     110,209     (4.6) %  399,091     414,289      (3.7)  %
Syndication    2,698       2,523       6.9   %  10,471      13,773       (24.0) %
and other
Total
operating      $ 259,753   $ 197,397   31.6  %  $ 903,458   $ 728,660    24.0   %
revenues
Segment profit
(loss):
Television     $ 65,290    $ 23,206             $ 159,917   $ 51,989
Newspapers     11,615      11,099               27,595      26,417
Syndication    (1,688)     370                  (3,395)     (1,343)
and other
Shared
services and   (11,358)    (8,682)              (36,630)    (30,634)
corporate
Depreciation
and            (12,287)    (9,568)              (49,332)    (40,069)
amortization
Impairment of
long-lived     —           —                    —           (9,000)
assets
Gains
(losses), net
on disposal of (424)       (110)                (474)       124
property,
plant and
equipment
Pension        (2,865)     (2,834)              (8,620)     (8,135)
expense
Interest       (2,593)     (473)                (12,246)    (1,640)
expense
Acquisition
and related    —           (2,787)              (5,826)     (2,787)
integration
costs
Restructuring  (2,915)     (3,406)              (9,335)     (9,935)
costs
Miscellaneous, (2,295)     (53)                 (4,747)     (675)
net
Income (loss)
from
operations     $ 40,480    $ 6,762              $ 56,907    $ (25,688)
before income
taxes

 

The following is segment operating revenue for television:

                Three months ended              Year ended

                December 31,                    December 31,
(in thousands)  2012        2011       Change   2012        2011        Change
Segment
operating
revenues:
Local           $ 54,874    $ 49,378   11.1  %  $ 223,534   $ 177,931   25.6 %
National        25,919      23,168     11.9  %  109,084     84,425      29.2 %
Political       56,916      3,487               106,732     6,922
Digital         4,366       2,746      59.0  %  15,024      9,400       59.8 %
Retransmission  7,858       3,880      102.5 %  30,867      15,687      96.8 %
Other           1,980       2,006      (1.3) %  8,655       6,233       38.9 %
Total operating $ 151,913   $ 84,665   79.4  %  $ 493,896   $ 300,598   64.3 %
revenues

 

The following is segment operating revenue for newspapers:

            Three months ended                Year ended

            December 31,                      December 31,
(in         2012        2011        Change    2012        2011        Change
thousands)
Segment
operating
revenues:
Local       $ 22,526    $ 23,391    (3.7)  %  $ 79,700    $ 83,992    (5.1)  %
Classified  17,009      18,417      (7.6)  %  74,530      78,077      (4.5)  %
National    2,807       3,915       (28.3) %  9,421       13,723      (31.3) %
Preprint    21,485      22,054      (2.6)  %  70,701      72,824      (2.9)  %
and other
Print       63,827      67,777      (5.8)  %  234,352     248,616     (5.7)  %
advertising
Circulation 29,632      30,673      (3.4)  %  117,700     120,569     (2.4)  %
Digital     6,636       6,579       0.9    %  26,085      26,160      (0.3)  %
Other       5,047       5,180       (2.6)  %  20,954      18,944      10.6   %
Total
operating   $ 105,142   $ 110,209   (4.6)  %  $ 399,091   $ 414,289   (3.7)  %
revenues

 

3. CONDENSED CONSOLIDATED BALANCE SHEETS

 

                                               As of

                                               December 31,
(in thousands)                                 2012          2011
ASSETS
Current assets:
Cash and cash equivalents                      $ 242,642     $ 127,889
Other current assets                           160,058       197,521
Total current assets                           402,700       325,410
Investments                                    21,115        23,214
Property, plant and equipment                  374,931       387,972
Goodwill                                       27,966        28,591
Other intangible assets                        144,783       151,858
Deferred income taxes                          36,095        32,705
Other long-term assets                         23,178        20,778
TOTAL ASSETS                                   $ 1,030,768   $ 970,528
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable                               $ 23,329      $ 17,697
Customer deposits and unearned revenue         26,240        26,373
Current portion of long-term debt              15,900        15,900
Accrued expenses and other current liabilities 80,564        65,078
Total current liabilities                      146,033       125,048
Long-term debt (less current portion)          180,200       196,100
Other liabilities (less current portion)       164,625       132,379
Total equity                                   539,910       517,001
TOTAL LIABILITIES AND EQUITY                   $ 1,030,768   $ 970,528

 

4. EARNINGS PER SHARE ("EPS")

Unvested awards of share-based payments with rights to receive dividends or
dividend equivalents, such as our restricted stock and restricted stock units
(RSUs), are considered participating securities for purposes of calculating
EPS. Under the two-class method, we allocate a portion of net income to these
participating securities and therefore exclude that income from the
calculation of EPS allocated to common stock. We do not allocate losses to the
participating securities.

 

                                   Three months ended   Year ended

                                   December 31,         December 31,
(in thousands)                     2012       2011      2012       2011
Numerator (for basic earnings per
share)
Net income (loss) attributable to
the shareholders of The E.W.       $ 27,185   $ 6,292   $ 40,188   $ (15,537)

  Scripps Company
Less income allocated to unvested  (1,108)    (427)     (1,845)    —
restricted stock and RSUs
Numerator for basic earnings per   $ 26,077   $ 5,865   $ 38,343   $ (15,537)
share
Denominator
Basic weighted-average shares      55,073     54,683    54,907     57,217
outstanding
Effective of dilutive securities:
Stock options held by employees    883        —         474        —
and directors
Diluted weighted-average shares    55,956     54,683    55,381     57,217
outstanding

 

SOURCE The E.W. Scripps Company

Website: http://www.scripps.com
Contact: Tim King, The E.W. Scripps Company, +1-513-977-3732,
tim.king@scripps.com
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