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Scripps reports fourth-quarter 2018 results

CINCINNATI, March 1, 2019 /PRNewswire/ -- The E.W. Scripps Company (SSP) today reported operating results for the fourth quarter of 2018.

New Scripps Logo (PRNewsfoto/The E.W. Scripps Company)

Total revenue was $368 million compared to $262 million in fourth-quarter 2017.

Income from continuing operations was $36 million or 44 cents per share. Pre-tax costs for the current quarter included an $8.9 million non-cash write-off of our original program "Pickler & Ben" and $3.8 million of costs attributed to the Triton and Raycom acquisitions and the pending Cordillera TV station acquisition. In the prior-year quarter, income from continuing operations was $11.5 million or 16 cents per share. The 2017 quarter included a pre-tax gain on the investment in Katz of $5.4 million.

Business highlights

  • In the fourth quarter:
  • On Jan. 1, Scripps completed the acquisition of three television stations in Tallahassee, Florida, and Waco/Temple/Bryan, Texas, from Raycom Media.
  • Scripps' acquisition of 15 television stations in 10 local media markets from Cordillera Communications has been cleared by the U.S. Department of Justice and is expected to close early in the second quarter, pending Federal Communications Commission consent.
  • In January, Scripps completed a new multi-year affiliation agreement with NBC.
  • The company announced the Katz networks will relaunch the iconic trial coverage network Court TV in May.
  • The next-generation national news network Newsy garnered a 196 percent increase in revenue in the fourth quarter and 144 percent for the year, driven mostly by higher revenue on its over-the-top distribution platforms.
  • Looking ahead to 2019, Scripps expects about a 15 percent increase in the retransmission revenue we receive from cable, satellite and over-the-top television providers for the full year on an as-reported basis, excluding Cordillera. In addition, the number of total paid subscriber households remained flat in the most recent period for which there is full data.

Commenting on the business highlights, Scripps President and CEO Adam Symson said:

"Last year, the company made tremendous strides in its plan to improve short-term operating performance while positioning itself strategically for long-term growth. In terms of our five-point growth plan, we completed the reorganization of our company into consumer-focused Local and National Media divisions, reduced our corporate and division costs by more than $30 million, sold our 34 radio stations, and beat our financial results guidance across the board each quarter.

"We announced plans to acquire 18 television stations from Cordillera and Raycom, enhancing our durability and depth in key states and growing our reach to 21 percent of the United States. Upon the closing of the Cordillera transaction, we will own No.1 stations in a third of our local media markets.

"We maintained a balanced approach to allocating capital through the television station acquisitions and the addition of digital audio leader Triton to our portfolio of fast-growing National Media businesses combined with the initiation of a dividend and our accelerated share repurchase program.

"Looking ahead, we are focused on continuing to seek opportunities to bolster the durability and reach of our portfolio. Scripps also continues to grow its retransmission revenue and will benefit in less than a year from the reset of its Comcast contract on Dec. 31, 2019. 

"We will continue to scale our national businesses by focusing on audience and revenue growth to drive greater future cash-flow contributions.

"Our management prioritizes near-term operating performance while maintaining our approach to long-term value creation. These were the goals of our plan, and we are pleased with our progress in executing it."

Fourth-quarter operating results
Revenue was $368 million, an increase of 41 percent from the fourth quarter of 2017. Revenue from Triton, which was acquired on Nov. 30, 2018, was $3.3 million.

Costs and expenses for segments, shared services and corporate were $276 million, up from $227 million in the year-ago period, primarily driven by higher network programming fees.

Fourth-quarter 2018 results by segment compared to prior-period amounts were:

Local Media
Revenue from Local Media was $281 million, up 39 percent from the prior-year quarter.

Local Media broadcast time sales were up 51 percent, driven by political advertising revenue of $82 million. The political ad revenue caused some displacement of core advertising, contributing to its decline of 8.4 percent.

Retransmission revenue increased 23 percent to $77.9 million. The increase in retransmission revenues was due to contract renewals covering approximately 5 million subscribers as well as regular annual contractual rate increases.

Total segment expenses increased 16.4 percent to $183 million, primarily driven by increases in programming fees tied to network affiliation agreements and an $8.9 million non-cash write-off of our "Pickler & Ben" programming asset.

Segment profit was $98.7 million, compared to $45.4 million in the year-ago quarter.

National Media
Revenue from National Media was $85.5 million, up from $57.9 million in the prior-year period. Revenue from Triton, which was acquired on Nov. 30, was $3.3 million.

Expenses for National Media were $78.5 million, up from $55.3 million in the prior-year period. The increase is primarily driven by continued investment in Newsy and Stitcher.

Segment profit was $7 million, compared to $2.7 million in the 2017 quarter.

Financial condition
During the fourth quarter of 2018, we completed the sale of our radio business through four transactions totaling $83.5 million.

On Dec. 31, cash and cash equivalents totaled $107 million while total debt was $696 million.

The company repurchased about 123,000 shares for $2.1 million and also made dividend payments totaling $4 million during the fourth quarter.

Year-to-date results
The following comparisons are for the period ending Dec. 31, 2018:

In 2018, company revenue was $1.2 billion, which compares to revenue of $877 million in 2017. Retransmission and carriage revenue increased $44.7 million. Political advertising was $140 million in 2018 compared to $8.7 million in 2017. Revenue from Katz for the year-to-date period of 2018 was $186 million compared to $41 million for the one quarter we owned Katz in 2017. Katz was acquired on Oct. 2, 2017.

Costs and expenses for segments, shared services and corporate were $1 billion, an increase of $218 million, primarily driven by higher network programming fees and the acquisition of Katz.

Income from continuing operations was $56.1 million or 68 cents per share. Pre-tax costs for the current year included the non-cash write-off of "Pickler & Ben," $8.9 million of restructuring charges and $4.1 million of acquisition and related integration costs. In the prior year, the loss from continuing operations was $12 million or 13 cents per share. Pre-tax activity in the 2017 period included a $35.7 million non-cash charge to write down goodwill and intangible assets at Cracked, a $2.4 million non-cash charge to interest expense to write off deferred costs associated with debt refinancing, $4.4 million of restructuring charges, and $11.6 million of other income associated with the gain on Scripps' 5 percent interest in Katz, the sale of our newspaper syndication business and an adjustment to the purchase price earnout for Midroll Media.

In 2018, the loss from discontinued operations included non-cash charges of $25.9 million to write down the assets of our radio business to fair value.

Looking ahead
Comparisons are to the same periods of 2018.

 


First-quarter 2019

Local Media revenue   

Up mid-single digits

     Retransmission revenue   

Up high teens

Local Media expense    

Up mid-single digits    

National Media revenue   

In the low-to-mid $80 million range

National Media expense   

About $80 million

Shared services and              


Corporate     

About $14 million

Interest expense     

About $9 million

Pension expense    

About $2 million

Capex    

In the high-single-digit millions

Depreciation & amortization  

About $18 million

 

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 9:30 a.m. Eastern today. To access the live webcast, visit http://ir.scripps.com and find the link under "upcoming events."

To access the conference call by telephone, dial (800) 230-1059 (U.S.) or (612) 288-0337 (international) approximately five minutes before the start of the call. Investors and analysts will need the name of the call ("Scripps earnings call") to be granted access. Callers also will be asked to provide their name and company affiliation. The public is granted access to the conference call on a listen-only basis.

A replay line will be open from 11:30 a.m. Eastern time March 1 until 11:59 p.m. March 8. The domestic number to access the replay is (800) 475-6701 and the international number is (320) 365-3844. The access code for both numbers is 462637.

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://ir.scripps.com approximately four hours after the call, and the link can be found on that page under "audio/video links."

Forward-looking statements
This document 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. Such forward-looking statements are made as of the date of this document and should be evaluated with the understanding of their inherent uncertainty. A detailed discussion of principal risks and uncertainties that may cause actual results and events to differ materially from such forward-looking statements is included in the company's Form 10-K on file with the SEC in the section titled "Risk Factors." 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  
The E.W. Scripps Company (SSP) serves audiences and businesses through a growing portfolio of local and national media brands. With 36 television stations, Scripps is one of the nation's largest independent TV station owners. Scripps runs a collection of national journalism and content businesses, including Newsy, the next-generation national news network; podcast industry leader Stitcher; the fast-growing national broadcast networks Bounce, Grit, Escape and Laff; and Triton, the global leader in digital audio technology and measurement services. Scripps produces original programming including "Pickler & Ben," runs an award-winning investigative reporting newsroom in Washington, D.C., and is the longtime steward of the Scripps National Spelling Bee. Founded in 1878, Scripps has held for decades to the motto, "Give light and the people will find their own way."

 

THE E.W. SCRIPPS COMPANY
RESULTS OF OPERATIONS




Three Months Ended
December 31,


Years Ended December 31,

(in thousands, except per share data)


2018


2017


2018


2017










Operating revenues


$

368,113



$

261,746



$

1,208,425



$

876,972


Segment, shared services and corporate expenses


(275,925)



(226,923)



(1,000,189)



(782,209)


Acquisition and related integration costs


(3,792)





(4,124)




Restructuring costs


(1,911)



(2,015)



(8,911)



(4,422)


Depreciation and amortization of intangible assets


(17,587)



(14,926)



(63,987)



(56,343)


Impairment of goodwill and intangible assets








(35,732)


Gains (losses), net on disposal of property and equipment


(1,105)



7



(1,255)



(169)


Operating expenses


(300,320)



(243,857)



(1,078,466)



(878,875)


Operating income (loss)


67,793



17,889



129,959



(1,903)


Interest expense


(9,143)



(8,534)



(36,184)



(26,697)


Defined benefit pension plan expense


(13,446)



(3,627)



(19,752)



(14,112)


Miscellaneous, net


687



5,225



152



10,636


Income (loss) from continuing operations before income taxes


45,891



10,953



74,175



(32,076)


(Provision) benefit for income taxes


(9,938)



507



(18,098)



20,054


Income (loss) from continuing operations, net of tax


35,953



11,460



56,077



(12,022)


Income (loss) from discontinued operations, net of tax


(13,974)



(5,999)



(36,328)



(2,595)


Net income (loss)


21,979



5,461



19,749



(14,617)


Loss attributable to noncontrolling interest




(1,511)



(632)



(1,511)


Net income (loss) attributable to the shareholders of The E.W.
Scripps Company


$

21,979



$

6,972



$

20,381



$

(13,106)


Net income (loss) per diluted share of common stock
attributable to the shareholders of The E.W. Scripps Company:









  Income (loss) from continuing operations


$

0.44



$

0.16



$

0.68



$

(0.13)


  Income (loss) from discontinued operations


(0.17)



(0.07)



(0.44)



(0.03)


Net income (loss) per diluted share of common stock
attributable to the shareholders of The E.W. Scripps Company


$

0.27



$

0.09



$

0.24



$

(0.16)











Diluted weighted-average shares outstanding


81,348



81,792



81,927



82,052



See notes to results of operations.
Net income per share amounts may not foot since each is calculated independently.

Notes to Results of Operations

1. SEGMENT INFORMATION

We determine our business segments based upon our management and internal reporting structure, as well as the basis that our chief operating decision maker makes resource allocation decisions. We report our financial performance based on the following segments: Local Media, National Media, Other.

Our Local Media segment includes our local broadcast stations and their related digital operations. It is comprised of fifteen ABC affiliates, five NBC affiliates, two FOX affiliates and two CBS affiliates. We also have two MyTV affiliates, one CW affiliate, two independent stations and four Azteca America Spanish-language affiliates. Our Local Media segment earns revenue primarily from the sale of advertising to local, national and political advertisers and retransmission fees received from cable operators, telecommunication companies and satellite carriers. We also receive retransmission fees from over-the-top virtual MVPDs such as YouTubeTV, DirectTV Now and Sony Vue.

Our National Media segment includes our collection of national brands. Our national media brands include Katz, Stitcher and its advertising network Midroll Media (Midroll), Newsy, Triton and other national brands. These operations earn revenue primarily through the sale of advertising.

We allocate a portion of certain corporate costs and expenses, including information technology, certain employee benefits and shared services, to our business segments. The allocations are generally amounts agreed upon by management, which may differ from an arms-length amount.

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 pension plan expense, income taxes, depreciation and amortization, impairment charges, 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.

Information regarding our business segments is as follows:



Three Months Ended
December 31,




Years Ended December 31,



(in thousands)


2018


2017


Change


2018


2017


Change














Segment operating revenues:













Local Media


$

281,439



$

202,377



39.1

%


$

917,480



$

778,376



17.9

%

National Media


85,462



57,934



47.5

%


286,170



93,141




Other


1,212



1,435



(15.5)

%


4,775



5,455



(12.5)

%

Total operating revenues


$

368,113



$

261,746



40.6

%


$

1,208,425



$

876,972



37.8

%














Segment profit (loss):













Local Media


$

98,716



$

45,431





$

251,119



$

156,890



60.1

%

National Media


7,010



2,667





13,920



(9,260)




Other


(519)



(123)





(3,680)



(2,361)



55.9

%

Shared services and corporate


(13,019)



(13,152)





(53,123)



(50,506)



5.2

%

Acquisition and related integration costs


(3,792)







(4,124)






Restructuring costs


(1,911)



(2,015)





(8,911)



(4,422)




Depreciation and amortization of intangible assets


(17,587)



(14,926)





(63,987)



(56,343)




Impairment of goodwill and intangible assets










(35,732)




Gains (losses), net on disposal of property and equipment


(1,105)



7





(1,255)



(169)




Interest expense


(9,143)



(8,534)





(36,184)



(26,697)




Defined benefit pension plan expense


(13,446)



(3,627)





(19,752)



(14,112)




Miscellaneous, net


687



5,225





152



10,636




Income (loss) from continuing operations before income taxes


$

45,891



$

10,953





$

74,175



$

(32,076)




Operating results for our Local Media segment were as follows:



Three Months Ended
December 31,




Years Ended December 31,



(in thousands)


2018


2017


Change


2018


2017


Change














Segment operating revenues:













Core advertising


$

119,025



$

129,991



(8.4)

%


$

465,275



$

492,633



(5.6)

%

Political


82,116



3,396





139,600



8,651




Retransmission


77,855



63,496



22.6

%


301,411



259,499



16.2

%

Other


2,443



5,494



(55.5)

%


11,194



17,593



(36.4)

%

Total operating revenues


281,439



202,377



39.1

%


917,480



778,376



17.9

%

Segment costs and expenses:













Employee compensation and benefits


75,647



71,770



5.4

%


292,079



287,758



1.5

%

Programming


56,046



48,959



14.5

%


219,690



186,116



18.0

%

Impairment of programming assets


8,920







8,920






Other expenses


42,110



36,217



16.3

%


145,672



147,612



(1.3)

%

Total costs and expenses


182,723



156,946



16.4

%


666,361



621,486



7.2

%

Segment profit


$

98,716



$

45,431





$

251,119



$

156,890



60.1

%

Operating results for National Media segment were as follows:



Three Months Ended
December 31,




Years Ended December 31,



(in thousands)


2018


2017


Change


2018


2017


Change














Segment operating revenues:













Katz


$

49,668



$

40,975



21.2

%


$

185,852



$

40,975




Stitcher


16,716



10,182



64.2

%


51,063



31,199



63.7

%

Newsy


9,244



3,128





24,588



10,089




Triton


3,292







3,292






Other


6,542



3,649



79.3

%


21,375



10,878



96.5

%

Total operating revenues


85,462



57,934



47.5

%


286,170



93,141




Segment costs and expenses:













Employee compensation and benefits


16,787



11,784



42.5

%


58,033



31,121



86.5

%

Programming


36,085



29,593



21.9

%


131,063



42,489




Other expenses


25,580



13,890



84.2

%


83,154



28,791




Total costs and expenses


78,452



55,267



42.0

%


272,250



102,401




Segment profit (loss)


$

7,010



$

2,667





$

13,920



$

(9,260)




2. CONDENSED CONSOLIDATED BALANCE SHEETS



As of December 31,

(in thousands)


2018


2017






ASSETS





Current assets:





Cash and cash equivalents


$

107,114



$

148,699


Other current assets


363,903



320,831


Assets held for sale




136,004


Total current assets


471,017



605,534


Investments


7,162



7,699


Property and equipment


237,927



209,995


Goodwill


834,013



755,949


Other intangible assets


478,953



425,975


Programming (less current portion)


75,333



85,269


Miscellaneous


25,656



39,127


TOTAL ASSETS


$

2,130,061



$

2,129,548







LIABILITIES AND EQUITY





Current liabilities:





Accounts payable


$

26,919



$

23,647


Unearned revenue


11,459



7,353


Current portion of long-term debt


3,000



5,656


Accrued expenses and other current liabilities


156,681



154,596


Liabilities held for sale




19,536


Total current liabilities


198,059



210,788


Long-term debt (less current portion)


685,764



687,619


Other liabilities (less current portion)


320,073



293,656


Total equity


926,165



937,485


TOTAL LIABILITIES AND EQUITY


$

2,130,061



$

2,129,548


3. EARNINGS PER SHARE ("EPS")

Unvested awards of share-based payments with rights to receive dividends or dividend equivalents, such as our 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 for common stock. We do not allocate losses to the participating securities.

The following table presents information about basic and diluted weighted-average shares outstanding:



Three Months Ended
December 31,


Years Ended December 31,

(in thousands)


2018


2017


2018


2017










Numerator (for basic and diluted earnings per share)









Income (loss) from continuing operations, net of tax


$

35,953



$

11,460



$

56,077



$

(12,022)


Loss attributable to noncontrolling interest




1,511



632



1,511


Less income allocated to RSUs


(544)



(194)



(908)




Numerator for basic and diluted earnings per share from
continuing operations attributable to the shareholders of The E.W.
Scripps Company


$

35,409



$

12,777



$

55,801



$

(10,511)


Denominator









Basic weighted-average shares outstanding


80,669



81,792



81,369



82,052


Effective of dilutive securities:









Stock options and restricted stock units


679





558




Diluted weighted-average shares outstanding


81,348



81,792



81,927



82,052


Anti-dilutive securities (1)




1,220





1,220




(1)

Amount outstanding at Balance Sheet date, before application of the treasury stock method and not weighted for period outstanding.

 

 

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