Business News

Scripps Reports First-Quarter Results

Tuesday 05. May 2009 - The E.W. Scripps Company (NYSE:SSP) today reported first-quarter operating results for its television, newspaper, and licensing and syndication businesses.

The operations that formerly comprised the company’s Scripps Networks and interactive media divisions, which were spun off into a separate publicly traded company (now Scripps Networks Interactive Inc.) on July 1, 2008, are reported in previous periods as discontinued operations.

In February, the company closed the Rocky Mountain News after an unsuccessful search for a buyer. As part of the process of exiting the Denver market, Scripps expects to transfer its 50 percent interest in the Denver Newspaper Agency (DNA), which published the Rocky Mountain News and The Denver Post under a joint operating agreement and Prairie Mountain Publishing (PMP), a Colorado newspaper partnership, to MediaNews Group, which was the company’s partner in PMP as well as DNA. In 2008 the company closed its Albuquerque newspaper, which had been operated under a joint operating agreement, after an unsuccessful search for a buyer.

The quarterly results reflect continued weakness in advertising sales at the company’s newspapers and television stations. Consolidated revenue decreased 20 percent to $205 million, compared with $256 million in the first quarter of 2008. The loss from continuing operations, net of tax, was $221 million, or $4.12 per share, compared with income from continuing operations, net of tax, of $8.6 million, or 16 cents per share, in the 2008 quarter.

Income (loss) from continuing operations, net of tax, included the following items in the first quarter:

— a preliminary non-cash impairment charge of $192 million to write down
the carrying value of the goodwill and other intangible assets at the
Scripps television stations,
— operating losses and wind-down costs at the company’s newspapers
operated under joint operating agreements and newspaper partnerships
of $13.3 million in 2009 (compared with operating income at such
newspapers of $1.2 million in 2008), and

— a non-cash curtailment charge of $2.6 million related to the company’s
decision to freeze its pension plan later this year.



Excluding those items, the net loss from continuing operations attributable to Scripps shareholders would have been $13.0 million, or 24 cents per share, in the first quarter of 2009, compared with net income from continuing operations of $7.4 million, or 14 cents per share, in the year-ago period.

At the end of the quarter, the company’s long-term debt stood at $73.1 million, an increase of $12.0 million from the end of 2008. During the quarter, the value of cash and short-term investments on the company’s balance sheet increased $18.3 million to $44.9 million. The increase in cash and marketable securities was due primarily to the reimbursement of taxes paid in the third quarter of 2008 on income attributable to Scripps Networks Interactive prior to the spin-off.

“In the first quarter we made a series of tough decisions intended to improve our financial position through the current economic downturn and beyond into what we believe will be a restructured environment for local media,” said Rich Boehne, president and chief executive officer of Scripps. “The most difficult decision, but also the one that eliminated significant financial risk, was the shutdown of the Rocky Mountain News in Denver. Operating losses and expenses related to the shutdown were confined to the first quarter, so now we move ahead sadly but in a much better position to weather the economic storm and focus on the television and newspapers markets where we have long-term opportunity. Unfortunately, the operating environment in the second quarter has shown no signs of improvement over our experience in the first quarter.

“We also suspended the company’s match of employee contributions to their 401(k) accounts, reduced salaries, eliminated bonuses, and decided to freeze our pension plan, plus we reduced or cut out a long list of other expenses. These savings will become more significant as we move through the remainder of the year.

“Despite all we’ve done to reduce expenses during these difficult days, we have not done so indiscriminately. Today our low debt is a competitive advantage, allowing us to leverage our investments in local news and information content. In this period of dramatic economic pressure, we’re determined to stay focused on the needs of viewers, readers and advertisers.”

First-quarter results by segment are as follows:

Television



Revenue from the company’s television stations was $60.4 million in the first quarter, a decrease of 20.5 percent from the first quarter of 2008.

Revenue broken down by category was:

— Local, down 22.1 percent to $35.6 million
— National, down 16.9 percent to $18.4 million
— Other, which includes retransmission, rose 41.5 percent to $4.2
million

— Political was $177,000, compared to $3.1 million in the 2008 quarter



The decrease in the local and national revenue was largely attributable to reduced spending by advertisers in the automotive, financial services and retail categories. As is common for this stage of the election cycle, there was virtually no political spending in the first quarter of 2009, compared with the year-ago period that included local, state and national primaries.

Cash expenses for the station group increased slightly to $62.8 million, compared with $61.8 million a year ago. Increased pension benefits costs and a curtailment charge related to the company’s plans to freeze the pension plan later this year more than offset a 5 percent decrease in other employee costs. Programming costs were 12 percent higher due to contractual increases for syndicated programming in several key markets.

The segment loss for the television division was $2.4 million in the first quarter, compared with $14.2 million in segment profit in the first quarter of 2008.

Newspapers

Year-over-year revenue from newspapers managed solely by Scripps fell 21.7 percent to $122 million. Advertising revenue was down 28.6 percent to $85.8 million.

Advertising revenue broken down by category was:

— Local, down 24.9 percent to $26.6 million
— Classified, down 37.7 percent to $26.6 million
— National, down 25.7 percent to $6.0 million
— Preprint and other, down 19.7 percent to $19.3 million

— Online, down 26.5 percent to $7.3 million



The decline in online ad revenue is attributable to the weakness in print classified advertising, to which 55 percent of the online advertising is tied. Revenue from pure-play advertisers who only purchase ads on the company’s newspaper Web sites rose 30 percent to $3.4 million.

Circulation revenue rose slightly to $30.6 million.

Cash expenses for Scripps newspapers were down 8.6 percent from the prior year to $119 million. Employee costs, including higher pension benefits costs and a curtailment charge related to the company’s plans to freeze the pension plan later this year, declined 7 percent during the quarter compared with the year-ago period. Newsprint expense declined 16 percent despite a 27 percent increase in the average price per ton during the quarter.

Segment profit at newspapers managed solely by the company was $2.9 million, compared with $25.6 million in the first quarter of 2008.

Licensing and Other Media

Revenue was $23.1 million, a 2.1 percent decrease from the prior-year period. Costs and expenses declined 7.2 percent to $20 million, resulting in a 50 percent increase in segment profit to $3.2 million.