Scripps reports second-quarter 2016 results

Scripps reports second-quarter 2016 results

CINCINNATI, Aug. 5, 2016 /PRNewswire/ -- The E.W. Scripps Company (NYSE: SSP) today reported operating results for the second quarter of 2016.

For the quarter, net income from continuing operations was $11.5 million or 14 cents per share. In the prior-year period, the net loss from continuing operations was $13 million or 15 cents per share, including costs associated with the Journal transaction in the prior-year period of $15.7 million after-tax.

Second-Quarter Highlights


-- Revenues from continuing operations were $228 million, up 15 percent
from last year.
-- Retransmission revenue was up 46 percent in the quarter to $53.4
million. We completed a new agreement in January 2016 with Time Warner
Cable covering approximately 3 million households.
-- Election-year TV political advertising was $8.4 million in the second
quarter. Candidate and political action committee spending was focused
in the key Scripps states of Ohio, Florida, Colorado, Nevada and
Wisconsin.
-- In April, we acquired digital-media humor brand Cracked, which informs
and entertains millennial audiences through its high-traffic website,
mobile apps, podcast, social media and digital video. In June, we
acquired popular podcast listening service Stitcher, which facilitates
discovery and streaming for more than 65,000 podcasts to 8 million
registered users.
Commenting on the results, Scripps Chairman, President and CEO Rich Boehne said:

"We are now halfway through a political election year that is different and historic in many ways. It's in defining moments like these when our local television platforms demonstrate their greatest value, both through skilled storytelling and through the delivery of the candidates' own messaging.

"More than 80 percent of our potential political revenue is still ahead of us over the next 13 weeks - with about half of our total political ad revenue projected in the fourth quarter. The second quarter started more slowly than we had anticipated, with the Democrats' Clinton-Sanders race running out longer than most people expected and delaying the start to general-election spending. Republican Donald Trump held back spending while the Democrats duked it out. We expect a more normal pace of spending to set in now that we are through the party conventions, the traditional start of the heavy spending season.

"Of course, the presidential race is typically about 30 percent of our presidential election-year political revenue, and meanwhile, many of our U.S. Senate races continue to be highly competitive, particularly in Arizona, Florida, Indiana, Missouri, Nevada, Ohio and Wisconsin. We also have two competitive governor's races, in Indiana and Missouri.

"The addition of Cracked in April gives us three strong national digital content brands. Cracked, a longtime humor and satire brand, has tremendous appeal with young audiences and is already well-positioned on desktop and social media outlets. Our plan is to leverage the strong over-the-top television relationships we have built with Newsy to create a second OTT channel for Cracked. Cracked and Newsy are joined by over-the-top audio leader Midroll, to round out a strategy to capture younger, organically growing audiences and others drawn by Internet-delivered content."

Second-Quarter Operating Results
Revenues increased $29.7 million, or 15 percent, to $228 million, compared to the second quarter of 2015. The increase was primarily a result of increases in retransmission revenue, political advertising revenue and our growing digital businesses.

Retransmission revenue increased 46 percent to $53.4 million. Television division political advertising revenue was $8.4 million in 2016 compared to $2.2 million in 2015.

Costs and expenses for segments, shared services and corporate were $186 million, up from $166 million, primarily driven by expenses from higher programming fees and costs to support our digital businesses.

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

Television
In the second quarter of 2016, revenue from our television group was $192 million, up $24.4 million or 15 percent. Retransmission revenue increased $16.9 million, and political advertising revenue was $8.4 million in the presidential election year compared to $2.2 million in 2015.

Advertising revenue broken down by category was:


-- Local, up 2.6 percent to $88.8 million (on a same-station basis,
excluding the 2015 results of our divested Boise station, KNIN)
-- National, down 2.4 percent to $37.9 million (on a same-station basis)
-- Political, $8.4 million in 2016 compared to $2.2 million in 2015
Retransmission revenue was up 46 percent to $53.4 million. Core advertising was up 1.1 percent on a same-station basis.

Total segment expenses increased 13 percent to $138 million, driven by increases in programming fees tied to affiliation agreements. The expense increase also was affected by spending to increase ratings, especially in the markets where we expect the greatest presidential-election spending.

Second-quarter segment profit in the television division was $53.3 million, compared to $44.6 million in the year-ago quarter.

Radio
Revenue was $18.2 million, down from $19.4 million in the 2015 quarter. Expenses were $14.3 million compared to $14.5 million in 2015.

Segment profit in the radio division was $3.9 million in the second quarter of 2016, down from $4.9 million in the 2015 quarter.

Digital
We acquired Midroll in the third quarter of 2015 and Cracked and Stitcher in the second quarter of 2016. Digital revenue was $15.2 million, up $6.6 million from the prior period. Excluding the impact of the acquisitions, revenue increased about 20 percent.

Expenses for the digital group were $19.9 million, an increase of $6.4 million from the prior-year period. Excluding the impact of the acquisitions, expenses increased about 5 percent.

Segment loss in the digital division was $4.7 million in the second quarter of 2016, compared to $4.9 million in the 2015 quarter.

Financial condition
On June 30, cash and cash equivalents totaled $66.5 million while total debt was $397 million.

From Jan. 1 through July 29, we repurchased about 1.3 million shares at an average price of $16.88.

Looking ahead

Comparisons are to the third quarter of 2015, during which we owned the former Journal Communications for the entire period.





Third-quarter 2016
------------------

Television revenue Up between
35-45
percent

Television expense Up mid
teens

Radio revenue Down mid-
single
digits

Radio expense Up mid-
single
digits

Digital revenue Up about
50
percent

Digital expense Up about
50
percent

Corporate and shared services About $10
million


Based on the current election map, we believe our prior full-year political guidance of greater than $150 million is at the high end of our range, with about 10 percent of risk in that number.

Conference call
The senior management of The E.W. Scripps Company will discuss the company's second-quarter results during a telephone conference call at 9 a.m. (Eastern) today. Scripps will offer a live webcast of the conference call. To access the webcast, visit http://www.scripps.com and click on "investors" and then "investor information." The webcast link can be found on that page under "upcoming events."

To access the conference call by telephone, dial (800) 230-1074 (U.S.) or (612) 234-9959 (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 a.m. Eastern time Aug. 5 until 11:59 p.m. Aug. 19. 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 397637.

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, click on "investors" then "investor information," and the link can be found on that page under "audio/video links."

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 SEC Form 10-K. 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 (NYSE: SSP) serves audiences and businesses through a growing portfolio of television, radio and digital media brands. Scripps is one of the nation's largest independent TV station owners, with 33 television stations in 24 markets and a reach of nearly one in five U.S. households. It also owns 34 radio stations in eight markets. Scripps also runs an expanding collection of local and national digital journalism and information businesses, including multi-platform satire and humor brand Cracked, podcast industry leader Midroll Media and over-the-top video news service Newsy. Scripps also produces television shows including "THE LIST" and "The Now," runs an award-winning investigative reporting newsroom in Washington, D.C., and serves as the long-time steward of the nation's largest, most successful and longest-running educational program, 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 Six Months Ended
June 30, June 30,
-------- --------

(in thousands, except per share data) 2016 2015 2016 2015
------------------------------------ ---- ---- ---- ----


Operating revenues $227,817 $198,134 $437,315 $321,157
-------- -------- -------- --------

Segment, shared services and corporate expenses (186,250) (166,116) (368,450) (284,870)

Defined benefit pension plan expense (3,449) (4,120) (6,899) (6,806)

Acquisition and related integration costs - (29,973) (578) (32,747)

Depreciation and amortization (14,786) (13,366) (29,197) (21,661)

Losses, net on disposal of property and equipment (22) (215) (18) (379)
--- ---- --- ----

Operating expenses (204,507) (213,790) (405,142) (346,463)
-------- -------- -------- --------

Operating income (loss) 23,310 (15,656) 32,173 (25,306)

Interest expense (4,432) (4,225) (9,011) (6,277)

Miscellaneous, net (458) 387 (649) (1,049)
---- --- ---- ------

Income (loss) from continuing operations before income taxes 18,420 (19,494) 22,513 (32,632)

(Provision) benefit for income taxes (6,932) 6,539 (6,137) 11,562
------ ----- ------ ------

Income (loss) from continuing operations 11,488 (12,955) 16,376 (21,070)

Loss from discontinued operations, net of tax - (18,448) - (15,432)
--- ------- --- -------

Net income (loss) $11,488 $(31,403) $16,376 $(36,502)
======= ======== ======= ========

Net income (loss) per basic share of common stock:

Income (loss) from continuing operations $0.14 $(0.15) $0.19 $(0.30)

Loss from discontinued operations - (0.22) - (0.22)
--- ----- --- -----

Net income (loss) per basic share of common stock $0.14 $(0.37) $0.19 $(0.52)
===== ====== ===== ======


Weighted average basic shares outstanding 83,773 83,903 83,869 70,692
====== ====== ====== ======


See notes to results of operations.


Notes to Results of Operations

1. SEGMENT INFORMATION

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

Our television segment includes 15 ABC affiliates, five NBC affiliates, two FOX affiliates, two CBS affiliates and four non big-four affiliated stations. We also own five Azteca America Spanish-language affiliates. Our television stations reach approximately 18% of the nation's television households. Television stations earn revenue primarily from the sale of advertising time to local, national and political advertisers and retransmission fees received from cable operators and satellite carriers.

Our radio segment consists of 34 radio stations in eight markets. We operate 28 FM stations and six AM stations. Radio stations earn revenue primarily from the sale of advertising to local advertisers.

Our digital segment includes the digital operations of our local television and radio businesses. It also includes the operations of national digital businesses such as Newsy, an over-the-top ("OTT") video news service, Cracked, the multi-platform humor and satire brand, and Midroll, a podcast industry leader. Our digital operations earn revenue primarily through the sale of advertising and marketing services.

Syndication and other primarily includes the syndication of news features and comics and other features for the newspaper industry.

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. Corporate assets are primarily cash and cash equivalents, restricted cash, 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 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 the operating results of our business segments is as follows:





Three Months Ended Six Months Ended
June 30, June 30,
-------- --------

(in thousands) 2016 2015 Change 2016 2015 Change
------------- ---- ---- ------ ---- ---- ------


Segment operating revenues:

Television $191,745 $167,394 14.5 % $371,649 $281,612 32.0 %

Radio 18,183 19,413 (6.3)% 32,786 19,413 68.9 %

Digital 15,207 8,602 76.8 % 27,533 14,837 85.6 %

Syndication and other 2,682 2,725 (1.6)% 5,347 5,295 1.0 %
----- ----- ----- -----

Total operating revenues $227,817 $198,134 15.0 % $437,315 $321,157 36.2 %
======== ======== ======== ========


Segment profit (loss):

Television $53,298 $44,596 19.5 % $94,985 $66,650 42.5 %

Radio 3,903 4,908 (20.5)% 6,046 4,908 23.2 %

Digital (4,715) (4,917) (4.1)% (7,848) (9,571) (18.0)%

Syndication and other (1,045) (1,062) (1.6)% (152) (657) (76.9)%

Shared services and corporate (9,874) (11,507) (14.2)% (24,166) (25,043) (3.5)%

Defined benefit pension plan expense (3,449) (4,120) (6,899) (6,806)

Acquisition and related integration costs - (29,973) (578) (32,747)

Depreciation and amortization (14,786) (13,366) (29,197) (21,661)

Losses, net on disposal of property and equipment (22) (215) (18) (379)

Interest expense (4,432) (4,225) (9,011) (6,277)

Miscellaneous, net (458) 387 (649) (1,049)
---- --- ---- ------

Income (loss) from continuing operations before income taxes $18,420 $(19,494) $22,513 $(32,632)
======= ======== ======= ========


Operating revenues for our television segment were as follows:





Three Months Ended Six Months Ended
June 30, June 30,
-------- --------

(in thousands) 2016 2015 Change 2016 2015 Change
------------- ---- ---- ------ ---- ---- ------


Segment operating revenues:

Local $88,812 $87,277 1.8% $169,069 $146,032 15.8%

National 37,904 39,027 (2.9)% 71,349 64,629 10.4%

Political 8,449 2,221 17,709 2,721

Retransmission 53,433 36,495 46.4% 107,047 64,413 66.2%

Other 3,147 2,374 32.6% 6,475 3,817 69.6%
----- ----- ----- -----

Total operating revenues $191,745 $167,394 14.5% $371,649 $281,612 32.0%
======== ======== ======== ========


Operating revenues for our radio segment were as follows:





Three Months Ended Six Months Ended
June 30, June 30,
-------- --------

(in thousands) 2016 2015 Change 2016 2015 Change
------------- ---- ---- ------ ---- ---- ------


Segment operating revenues:

Advertising $17,568 $18,641 (5.8)% $31,690 $18,641 70.0%

Other 615 772 (20.3)% 1,096 772 42.0%
--- --- ----- ---

Total operating revenues $18,183 $19,413 $32,786 $19,413
======= ======= ======= =======







2. CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands) As of As of
June 30, December 31,
2016 2015
--- ---- ----


ASSETS

Current assets:

Cash and cash
equivalents $66,479 $108,061

Other current
assets 211,104 194,569
------- -------

Total current
assets 277,583 302,630

Investments 14,840 13,856

Property and
equipment 263,696 271,047

Goodwill 617,080 585,787

Other intangible
assets 479,773 479,187

Deferred income
taxes 20,698 13,640

Miscellaneous 13,619 14,713
------ ------

TOTAL ASSETS $1,687,289 $1,680,860
========== ==========


LIABILITIES AND
EQUITY

Current
liabilities:

Accounts payable $29,024 $31,606

Customer deposits
and unearned
revenue 7,297 8,508

Current portion
of long-term
debt 6,656 6,656

Accrued expenses
and other
current
liabilities 61,882 73,053
------ ------

Total current
liabilities 104,859 119,823
------- -------

Long-term debt
(less current
portion) 390,825 392,487

Other liabilities
(less current
portion) 267,204 267,567
------- -------

Total equity 924,401 900,983
------- -------

TOTAL LIABILITIES
AND EQUITY $1,687,289 $1,680,860
========== ==========


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 Six Months Ended
June 30, June 30,
-------- --------

(in thousands) 2016 2015 2016 2015
------------- ---- ---- ---- ----


Numerator (for basic and diluted earnings per share)

Income (loss) from continuing operations $11,488 $(12,955) $16,376 $(21,070)

Less income allocated to RSUs (159) - (203) -
---- --- ---- ---

Numerator for basic and diluted earnings per share $11,329 $(12,955) $16,173 $(21,070)
======= ======== ======= ========

Denominator

Basic weighted-average shares outstanding 83,773 83,903 83,869 70,692

Effective of dilutive securities:

Stock options held by employees and directors 278 - 315 -
--- --- --- ---

Diluted weighted-average shares outstanding 84,051 83,903 84,184 70,692
====== ====== ====== ======


SOURCE The E.W. Scripps Company

The E.W. Scripps Company

CONTACT: Investor contact: Carolyn Micheli, The E.W. Scripps Company, 513-977-3732, Carolyn.micheli@scripps.com; Media contact: Valerie Miller, The E.W. Scripps Company, 513-977-3023, Valerie.miller@scripps.com

Web Site: http://www.scripps.com


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