Press release from Scripps, Nov. 7, 2014:
The E.W. Scripps Company (NYSE: SSP) today reported operating results for the third quarter of 2014. Unless otherwise indicated, all operating results comparisons are to the third quarter ended Sept. 30, 2013.
Television operating revenues increased 22 percent in the third quarter of 2014, driven by $17.4 million of political advertising, contributions from the two stations acquired from Granite in the second quarter, and a nearly 50 percent increase in retransmission revenue.
During October and through Election Night on Tuesday, we booked $33 million of political advertising, bringing the total for the year to $58 million.
Newspapers saw a 4.4 percent decline in total operating revenue. Subscription revenue increased 2 percent.
Commenting on the third quarter, Scripps Chairman, President and CEO Rich Boehne said:
“Television demonstrated its power as a platform for engaging local voters once again in the third quarter. Our local TV brands proved to be the venue of choice for candidates and issue backers in several of the most active election states. For us, this is a low-cost revenue stream that at its peak displaces some core local advertisers. Many of them choose to wait instead of competing with the flurry of political messages. Now with the elections behind us, we expect core advertisers to return through the remainder of the fourth quarter.
“Also in the quarter, we debuted our fourth Scripps-owned original show, the next step in our move to moderate syndicated programming costs and boost profits by tapping our own experience to build audiences and revenues. The Now, which launched in eight of our TV markets at 4 p.m., provides a daily in-depth look at the stories trending locally and nationally, offering deeper perspective and social interaction for the early news audience.
“Digital advertising growth in TV markets once again came from our dedicated digital sales force. We continue to refine our internal investments and the strategy that this quarter produced, in five of our markets, in excess of 20 percent year-over-year growth in sustainable organic revenue streams. That performance helped drive the 8.5 percent overall growth.
“In our newspaper division, subscription revenue rose as expected for the fifth consecutive quarter, though the pace has lessened as we reached the anniversary of our subscription bundle rollout and some targeted price increases. Our newspaper team has done an admirable job of managing expenses in the face of advertising challenges and has held segment profit flat year to date.
“In addition to running the current Scripps business and building new audiences and profit streams, we are moving toward the close of our previously announced transaction with Journal Communications, which will result in a separate newspaper company, to be called Journal Media Group, and an expanded Scripps composed of television, radio and digital brands. At close, projected for some time in the first half of 2015, Scripps will become the nation’s fifth-largest independent local television company.”
Consolidated revenues increased 9.5 percent, or $18.1 million, to $208 million during the 2014 quarter.
Costs and expenses for segments, shared services, and corporate were $188 million, an increase of $6.3 million or 3.5 percent, primarily driven by expenses from the two Granite stations and $2.6 million of incremental expenses to grow digital operations.
The company reported income from operations before income taxes of $0.4 million, compared to a loss of $11.9 million in the 2013 quarter. The third-quarter 2014 pre-tax income included $5 million of acquisition and related integration costs and a $3 million gain related to the sale of excess land in the newspaper division.
In the third quarter of 2014, net loss attributable to Scripps was $1.3 million, or 2 cents per share, while in the third quarter of 2013, net loss attributable to Scripps was $8.9 million, or 16 cents per share. The gain on sale of land, combined with acquisition costs, reduced earnings per share by approximately 2 cents in the period.
Third-quarter results by segment are as follows:
Reported revenue from the television division was $121 million in the 2014 quarter, up $21.8 million or 22 percent.
Advertising revenue broken down by category was:
• Local, up 1.8 percent to $55.6 million
• National, down 2.8 percent to $26.6 million
• Political, $17.4 million compared to $1 million
• Digital, up 8.5 percent to $4.6 million
Retransmission fees were up 46 percent to $15.2 million.
Total segment expenses increased 14 percent to $91.3 million, and on a same-station basis, total costs and expenses increased 6.7 percent. The expenses include higher digital costs due to sales staff hiring and other digital support. In addition, the company saw higher employee-related costs because of salary increases and severance associated with a new master control hub.
Higher network fees tied to the increase in retransmission revenue drove $2.3 million of the $10.9 million increase.
Segment profit in the television division was $29.8 million in the 2014 quarter compared with $18.9 million in the prior-year quarter.
Newspaper revenue of $84.5 million in the third quarter of 2014 declined 4.4 percent. The continued decline in advertising and marketing services revenue was partially offset by an increase in subscription revenue.
Advertising and marketing services revenue of $51.1 million was down 7.2 percent.
Advertising and marketing services revenue broken down by category was:
• Classified, down 6.8 percent to $15.1 million
• Real Estate – up 0.6 percent
• Employment – down 3.3 percent
• Automotive – down 9.1 percent
• Local, down 5.6 percent to $15.5 million
• Preprint and other, down 7.1 percent to $13.6 million
• National, down 46 percent to $0.8 million
• Digital, down 3.9 percent to $6.1 million
Subscription revenue increased 2 percent to $28.7 million, a rate that has moderated now that we hit the second year of the subscription bundle. The increase also was driven by single-copy price increases.
Expenses for the newspaper group were $83.7 million, a decrease of 1.9 percent. Employee costs decreased 3.7 percent, primarily due to lower employment levels, and newsprint expense decreased 4.7 percent, primarily due to an 8.4 percent decline in consumption. Partially offsetting these declines was a 2.2 percent increase in other expenses, including costs to support digital initiatives.
Third-quarter segment profit in the newspaper division was $0.8 million compared to $3 million in the 2013 quarter. Despite continued secular changes in the demand for print advertising, year-to-date segment profit is relatively flat when compared to the first nine months of 2013 due to good expense discipline.
Shared services and corporate
The shared services and corporate line of the company’s financial statements includes certain incremental investments in hiring and developing digital-only sales people, streamlining the digital sales process, and creating digital content.
Shared services and corporate expenses of $10.1 million declined $3.8 million.
On Sept. 30, cash and cash equivalents totaled $124 million, while total debt was $199 million.
The company did not repurchase any shares during the third quarter of 2014. The merger agreement with Journal Communications precludes either company from repurchasing shares prior to closing the transaction.
The following comparisons are to the year-to-date period ending Sept. 30, 2013.
In 2014, revenue was $623 million compared to revenue of $596 million in 2013. Political advertising was up $23.2 million year over year.
Costs and expenses for segments, shared services and corporate were $570 million, an increase of $17 million. The 2014 period includes $8.9 million of incremental expenses to grow digital operations and a full quarter of costs to operate the Granite stations.
The company reported a loss from operations before income taxes of $5.8 million in 2014 compared to a loss from operations before income taxes of $15.6 million in the 2013 period. The year-to-date results were impacted by a $4.1 million charge to exit a multi-employer pension plan, $9.4 million of acquisition and related integration costs and a $3 million gain on the sale of land.
Net loss was $5.2 million, or 9 cents per share, for the first three quarters of 2014, compared to a net loss of $8.3 million, or 15 cents per share, in the first three quarters of 2013. Acquisition and integration costs, charges related to the withdrawal from a multi-employer pension plan and a gain on sale of land reduced earnings per share by approximately 11 cents in the first nine months. The tax expense for the 2013 period includes $2.4 million, or 4 cents per share, in favorable adjustments to the company’s tax reserves.
Year-over-year in the fourth quarter of 2014, management expects:
• Television revenues, as a percentage, to increase in the upper 20s, including $33 million in political advertising and $15 million in retransmission revenue.
• Television expenses to increase low teens.
• Newspaper revenues to decline mid-single digits and expenses to decline low single digits.
• Expenses for shared services and corporate to be less than $15 million.