Scripps reports third-quarter 2018 results
CINCINNATI, Nov. 9, 2018 /PRNewswire/ -- The E.W. Scripps Company (NASDAQ: SSP) today reported operating results for the third quarter of 2018.
Total revenue was $303 million compared to $201 million in third-quarter 2017.
Income from continuing operations was $20 million or 24 cents per share. In the prior-year quarter, the loss from continuing operations was $27.6 million or 34 cents per share. The 2017 quarter included a non-cash goodwill and intangible assets impairment charge of $35.7 million, which increased the loss from continuing operations by $22.5 million (net of taxes) or 27 cents per share.
Business highlights
-- On Oct. 29, Scripps announced its plans to acquire 15 television
stations in 10 local media markets from privately owned Cordillera
Communications for $521 million. The acquisition will be immediately
accretive to company and Local Media margins.
-- On Oct. 17, Scripps announced its plans to acquire Triton, the leader in
digital audio infrastructure and audience measurement, for $150 million.
-- From Jan. 1 through the Nov. 6 election, political advertising totaled
$140 million - an 86 percent increase over our same-station results for
2014, the last midterm election year.
-- Following the planned acquisitions of Cordillera, Triton and two Raycom
TV stations as well as the divestiture of its radio assets, Scripps
projects its leverage ratio to be 4.8 times on a trailing eight quarters
basis by the close of the Cordillera transaction in early 2019.
-- The National Media segment increased its segment profit to $2.8 million
in the third quarter.
-- Revenue from the Katz networks was up 23 percent from the third quarter
of 2017 on a pro forma basis, driven by audience delivery growth, rising
advertising rates and continued expansion of distribution.
-- On Nov. 8, the company closed an agreement with Massachusetts Mutual
Life Insurance Company to purchase a group annuity contract and transfer
approximately $50 million of the company's pension plan obligations.
Commenting on the business highlights, Scripps President and CEO Adam Symson said:
"During a quarter when we delivered terrific operating results across the board - buoyed by record-level mid-term election political revenue, we also took significant action to execute our plan to reposition the company for improved operating performance and long-term growth.
"The acquisitions of the Cordillera television portfolio and Triton, the digital audio SaaS infrastructure and measurement leader, are important moves to enhance the company's cash-flow production and long-term value.
"Triton's efficient business model, multiple growing revenue streams, competitive advantages and expanding international footprint make it an attractive fit into our National Media strategy. Triton is the industry standard by which digital audio is measured, while its infrastructure technology is fueling growth for the world's top audio companies.
"The acquisition of the Cordillera portfolio will add high-performing television stations that lead their markets. Consistent with our strategy to improve our portfolio, their addition will give Scripps No. 1 Nielsen-rated stations in a third of our markets, diversify our network affiliations and geographic reach, add market depth and provide new exposure to contested political states.
"These acquisitions, alongside our consistent operating performance and disciplined approach to return of capital through the share repurchase plan and dividend, should give shareholders confidence that we are executing in a way that delivers them the results they seek."
Third-quarter operating results
Revenue was $303 million, an increase of 51 percent from the third quarter of 2017. Revenue from the Katz networks, which were acquired in the fourth quarter of 2017, was $46.5 million.
Costs and expenses for segments, shared services and corporate were $246 million, up from $187 million in the year-ago period, primarily driven by higher network programming fees and the acquisition of Katz.
Third-quarter results by segment compared to prior-period amounts were:
Local Media
In the third quarter of 2018, revenue from the Local Media group was $231 million, up 23 percent from the prior-year quarter.
Retransmission revenue increased 24 percent to $78.8 million. The increase in retransmission revenues was due to rate step-ups for approximately 5 million of our subscribers as well as regular annual contractual rate increases.
Local Media broadcast time sales were up 25 percent, driven by political advertising revenue of $40 million. The political ad revenue caused displacement in core advertising, contributing to its decline of 7.5 percent.
Total segment expenses increased 3.9 percent to $163 million, primarily driven by increases in programming fees tied to network affiliation agreements as well as the cost of producing our original program "Pickler & Ben," which launched season two in late September.
Third-quarter segment profit was $67.4 million, compared to $30.4 million in the year-ago quarter.
National Media
In the third quarter of 2018, revenue from the National Media division was $71.8 million, up from $12.5 million in the prior-year period. Revenue from Katz was $46.5 million. Excluding the impact of Katz, revenue more than doubled compared to the 2017 quarter.
Expenses for National Media were $68.9 million, up from $16.9 million in the prior-year period. The increase was driven by the acquisition of the Katz networks, which was completed in the fourth quarter of 2017, as well as investment in Newsy and Stitcher.
Third-quarter segment profit was $2.8 million, compared to a loss of $4.4 million in the 2017 quarter.
Financial condition
At the end of 2017, radio operations were classified as held for sale. The radio segment results are included in discontinued operations. All periods have been adjusted to reflect this presentation. Three of the four sales transactions have now closed, and we expect the last transaction to be completed by the end of the fourth quarter.
On Sept. 30, cash and cash equivalents totaled $130 million while total debt was $697 million.
During the quarter, the company entered into an accelerated share repurchase agreement to repurchase $25 million of common stock. Year to date, the company has repurchased about 1.7 million shares. The company also made dividend payments totaling $4.2 million during the third quarter.
Year-to-date results
The following comparisons are for the period ending Sept. 30, 2018:
In 2018, revenue was $840 million compared to revenue of $615 million in 2017. Retransmission and carriage revenue increased $29.4 million. Political advertising was $57.5 million in 2018 compared to $5.3 million in 2017. Revenue from Katz for the year-to-date period of 2018 was $136 million.
Costs and expenses for segments, shared services and corporate were $724 million, an increase of $169 million, primarily driven by higher network programming fees and the acquisition of Katz.
Income from continuing operations was $20.1 million or 25 cents per share. Pre-tax costs for the current year included $7 million of restructuring charges. In the prior year, loss from continuing operations was $23.5 million or 29 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, $6.3 million of other income associated with the sale of our newspaper syndication business and an adjustment to a purchase-price earnout, and $2.4 million of restructuring charges.
In 2018, the loss from discontinued operations includes 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 2017.
Fourth-quarter 2018
Local Media revenue Up mid to high 30 percent
range
Retransmission revenue Consistent with third-
quarter 2018
Local Media expense Up mid-single digits
National Media revenue Low to mid $70 million range
National Media expense High $60 million range
Shared services and
Corporate
About $14 million
Interest expense Consistent with prior
quarters
Pension expense About $13 million, including
a non-cash settlement
charge of
$10-$12 million
Capex
Mid single digits
Depreciation & amortization Consistent with prior
quarters
Conference call
The senior management of The E.W. Scripps Company will discuss the company's third-quarter results during a telephone conference call at 9 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) 230-1074 (U.S.) or (612) 234-9960 (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 Nov. 9 until 11:59 p.m. Nov. 16. 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 454993.
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 (NASDAQ: SSP) serves audiences and businesses through a growing portfolio of local and national media brands. With 33 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; and fast-growing national broadcast networks Bounce, Grit, Escape and Laff. 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
Nine Months Ended
September 30, September 30,
(in thousands, except per share
data) 2018 2017 2018 2017
---
Operating revenues $
302,726 $
200,509 $
840,312 $
615,226
Segment, shared services and
corporate expenses (246,109) (186,777) (724,264) (555,286)
Acquisition and related
integration costs (332) (332)
Restructuring costs (863) (2,407) (7,000) (2,407)
Depreciation and amortization
of intangible assets (15,598) (13,775) (46,400) (41,417)
Impairment of goodwill and
intangible assets (35,732) (35,732)
Gains (losses), net on disposal
of property and equipment 501 (114) (150) (176)
Operating expenses (262,401) (238,805) (778,146) (635,018)
Operating income (loss) 40,325 (38,296) 62,166 (19,792)
Interest expense (9,003) (5,720) (27,041) (18,163)
Defined benefit pension plan
expense (3,529) (3,551) (6,306) (10,485)
Miscellaneous, net (546) 1,187 (535) 5,411
Income (loss) from continuing
operations before income taxes 27,247 (46,380) 28,284 (43,029)
(Provision) benefit for income
taxes (7,208) 18,776 (8,160) 19,547
Income (loss) from continuing
operations, net of tax 20,039 (27,604) 20,124 (23,482)
Income (loss) from discontinued
operations, net of tax (908) 920 (22,354) 3,404
Net income (loss) 19,131 (26,684) (2,230) (20,078)
Loss attributable to
noncontrolling interest (632)
Net income (loss) attributable
to shareholders of The E.W.
Scripps Company $
19,131 $
(26,684) $
(1,598) $
(20,078)
Net income (loss) per basic
share of common stock
attributable to the
shareholders of
The E.W. Scripps Company:
Income (loss) from continuing
operations $
0.24 $
(0.34) $
0.25 $
(0.29)
Income (loss) from discontinued
operations (0.01) 0.01 (0.27) 0.04
Net income (loss) per basic
share of common stock
attributable to the
shareholders of The E.W.
Scripps Company $
0.23 $
(0.32) $
(0.02) $
(0.24)
Weighted average basic shares
outstanding 81,452 82,039 81,606 82,140
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 structures, as well as the basis that our chief operating decision maker makes resource allocation decisions.
Effective December 31, 2017, we realigned our businesses into a new internal organization and began reporting to reflect this new structure. Under the new structure, we have the following reportable segments: Local Media, National Media and Other. We have recast the operating results for all periods to reflect this change.
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, one independent station and three 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, telecommunications 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 brands include Katz, Stitcher and its advertising network Midroll Media, Newsy 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. 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
Nine Months Ended
September 30, September 30,
(in thousands) 2018 2017 Change 2018 2017 Change
---
Segment operating
revenues:
Local Media $
230,734 $
187,505 23.1 $
636,041 $
575,999 10.4
% %
National Media 71,761 12,504 200,708 35,207
Other 231 500 (53.8) 3,563 4,020 (11.4)
% %
Total operating $
302,726 $
200,509 51.0 $
840,312 $
615,226 36.6
revenues % %
Segment profit (loss):
Local Media $
67,416 $
30,372 122.0
%
% $
152,403 $
111,459 36.7
National Media 2,838 (4,374) 6,910 (11,927)
Other (1,267) (829) 52.8 (3,161) (2,238) 41.2
% %
Shared services and (12,370) (11,437) 8.2 (40,104) (37,354) 7.4
corporate % %
Acquisition and
related integration
costs (332) (332)
Restructuring costs (863) (2,407) (7,000) (2,407)
Depreciation and
amortization of
intangible assets (15,598) (13,775) (46,400) (41,417)
Impairment of goodwill
and intangible assets (35,732) (35,732)
Gains (losses), net on
disposal of property
and equipment 501 (114) (150) (176)
Interest expense (9,003) (5,720) (27,041) (18,163)
Defined benefit
pension plan expense (3,529) (3,551) (6,306) (10,485)
Miscellaneous, net (546) 1,187 (535) 5,411
Income (loss) from
continuing operations
before income taxes $
27,247 $
(46,380) $
28,284 $
(43,029)
Operating results for our Local Media segment were as follows:
Three Months Ended
Nine Months Ended
September 30, September 30,
(in thousands) 2018 2017 Change 2018 2017 Change
---
Segment operating revenues:
Core advertising $
108,925 $
117,745 (7.5) $
346,250 $
362,642 (4.5)
% %
Political 40,018 1,689 57,484 5,255
Retransmission 78,759 63,733 23.6 223,556 196,003 14.1
% %
Other 3,032 4,338 (30.1) 8,751 12,099 (27.7)
% %
Total operating revenues 230,734 187,505 23.1 636,041 575,999 10.4
% %
Segment costs and expenses:
Employee compensation and 70,862 71,644 (1.1)
benefits %
% 216,432 215,988 0.2
Programming 57,156 47,598 20.1 163,644 137,157 19.3
% %
Other expenses 35,300 37,891 (6.8) 103,562 111,395 (7.0)
% %
Total costs and expenses 163,318 157,133 3.9 483,638 464,540 4.1
% %
Segment profit $
67,416 $
30,372 122.0
%
% $
152,403 $
111,459 36.7
Operating results for our National Media segment were as follows:
Three Months Ended
Nine Months Ended
September 30, September 30,
(in thousands) 2018 2017
Change 2018 2017
Change
---
Segment operating
revenues:
Katz $
46,537
$ $
136,184
$
Stitcher 13,392 7,102 34,347 21,017
Newsy 5,681 2,623 15,344 6,961
Other 6,151 2,779 14,833 7,229
Total operating revenues 71,761 12,504 200,708 35,207
Segment costs and
expenses:
Employee compensation and
benefits 14,852 6,189 41,246 19,337
Programming 33,676 4,554 94,978 12,896
Other expenses 20,395 6,135 57,574 14,901
Total costs and expenses 68,923 16,878 193,798 47,134
Segment profit (loss) $
2,838 $
(4,374) $
6,910 $
(11,927)
2. CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
As of
As of
September 30, December 31,
2018 2017
---
ASSETS
Current assets:
Cash and cash equivalents $
129,743 $
148,699
Other current assets 322,553 320,831
Assets held for sale 108,636 136,004
Total current assets 560,932 605,534
Investments 7,299 7,699
Property and equipment 223,629 209,995
Goodwill 760,098 755,949
Other intangible assets 411,419 425,975
Programming (less current portion) 69,381 85,269
Deferred income taxes 15,730 20,076
Miscellaneous 19,542 19,051
TOTAL ASSETS $
2,068,030 $
2,129,548
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $
38,213 $
23,647
Unearned revenue 17,692 7,353
Current portion of long-term debt 3,000 5,656
Accrued expenses and other current liabilities 129,115 154,596
Liabilities held for sale 22,173 19,536
Total current liabilities 210,193 210,788
Long-term debt (less current portion) 686,212 687,619
Other liabilities (less current portion) 265,973 293,656
Total equity 905,652 937,485
TOTAL LIABILITIES AND EQUITY $
2,068,030 $
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
Nine Months Ended
September 30, September 30,
(in thousands) 2018 2017 2018 2017
---
Numerator (for basic and diluted
earnings per share)
Income (loss) from continuing
operations, net of tax $
20,039 $
(27,604) $
20,124 $
(23,482)
Loss attributable to
noncontrolling interest 632
Less income allocated to RSUs (316) (338)
Numerator for basic and diluted
earnings per share from
continuing operations
attributable to the shareholders
of The E.W. Scripps Company $
19,723 $
(27,604) $
20,418 $
(23,482)
Denominator
Basic weighted-average shares
outstanding 81,452 82,039 81,606 82,140
Effective of dilutive securities:
Stock options and restricted stock
units 632 491
Diluted weighted-average shares
outstanding 82,084 82,039 82,097 82,140
Anti-dilutive securities (1) 1,373 1,373
(1) Amount outstanding at balance sheet date, before application of the treasury stock method and not weighted for period outstanding.
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SOURCE The E.W. Scripps Company
