Scripps reports fourth-quarter 2019 results
CINCINNATI, Feb. 28, 2020 /PRNewswire/ --
(Note: During 2019, we acquired eight television stations being divested in the Nexstar/Tribune merger on Sept. 19, 15 television stations from Cordillera on May 1, and three stations from Gray/Raycom on Jan. 1. Results for the Local Media division are presented below both as reported and on an adjusted combined basis as though all of those station acquisitions had closed on Jan. 1, 2018.)
The E.W. Scripps Company (NASDAQ: SSP) today reported operating results for the fourth quarter of 2019. Unless otherwise indicated, all operating results comparisons are to the Scripps historical results for the fourth quarter of 2018.
Total revenue was $444 million compared to $368 million in the fourth-quarter 2018.
Income from continuing operations attributable to Scripps was $10.7 million or 13 cents per share. Pre-tax costs for the current quarter included $3.3 million of acquisition and related integration costs that decreased income by $2.5 million, net of taxes, or 3 cents per share. In the prior-year quarter, income from continuing operations was $36 million or 44 cents per share. Pre-tax costs for the prior-year quarter included an $8.9 million non-cash write-down of our former original program "Pickler & Ben" and $3.8 million of acquisition and related integration costs.
Business highlights
-- Scripps has delivered financial results that have met or exceeded
expectations for the last nine consecutive quarters.
-- In 2019, Scripps completed strategic television station acquisitions
that position it as the fourth-largest independent local broadcaster,
with 60 stations in 42 markets reaching 31% of U.S. TV households and
bolstering the company's economic durability.
-- During the first half of 2020, Scripps will renegotiate retransmission
consent contracts covering about 40% of its subscriber households. In
addition, on Dec. 31, 2019, the company's agreement with Comcast reset,
covering 5.5 million households.
-- Local Media division core advertising revenue, on an adjusted combined
basis, rose nearly 5% in the fourth quarter over Q4 2018. Political
advertising of $15 million exceeded our expectations due to strong
spending on Kentucky, Louisiana and Virginia state races as well as
early 2020 Senate and presidential election spending.
-- National Media division revenue neared the $400 million threshold for
2019 as it builds to well over $500 million in revenue in 2021. All four
key national businesses made strong contributions to full-year growth:
the Katz networks, with a 22% year-over-year revenue increase; Stitcher,
with a 42% increase; Newsy; with a 75% increase; and Triton, the digital
audio software-as-a-service business, rose 16% on an apples to apples
basis as if we had owned it for all of fourth-quarter 2018.
Commenting on recent business highlights, Scripps President and CEO Adam Symson said:
"The E.W. Scripps Company has positioned itself exceedingly well to thrive in the media landscape by working a plan dedicated to executing for near-term operating results and long-term value creation. As we turn the page on 2019, we are the fourth-largest independent broadcaster, reaching one in three U.S. television households with a stronger and better-performing portfolio of local television stations. We have the reach and the depth we sought out as a part of our consolidation strategy.
"Last quarter, our national businesses blew past the $100 million milestone in quarterly revenue through strong contributions from Katz, Newsy, Stitcher and Triton. Each of these four businesses is a leader in a fast-growing marketplace and is contributing to expanding division margins and creating new shareholder value by capitalizing on consumers' changing media behaviors.
"As a result of that repositioning, Scripps will take advantage of the opportunity we see in 2020. Our expanded political advertising footprint sets us up now to even better capture political advertising dollars during what has already proven to be a robustly contested presidential election year. The M&A work of the last year grew the company's scale just ahead of the reset our Comcast retransmission fees and the renegotiating of another 40% of our cable and satellite subscriber base this spring. We expect our National Media division to run ahead of our previous revenue targets of $500 million in 2021.
"We remain committed to a balanced approach to allocating capital through acquisitions and dividends, and we now have a new share repurchase authorization in place. Looking ahead, we are focused on high cash flow this year as we benefit from the creation of a more durable and better-performing company."
Fourth-quarter operating results
Revenue was $444 million, an increase of 21% or $76.3 million from the prior-year quarter. That includes incremental revenue from Triton, acquired Nov. 30, 2018, of $7.4 million, and revenues from the television stations acquired from Gray Television/Raycom Media, effective Jan. 1; from Cordillera Communications on May 1; and from the Nexstar transaction with Tribune on Sept. 19, totaling $116 million. Political revenue in the non-election year was $15 million.
Costs and expenses for segments, shared services and corporate were $372 million, up from $276 million in the year-ago period, reflecting the impact of the acquisitions, higher network programming fees and continued investment in programming at the Katz networks and Stitcher.
Fourth-quarter 2019 results by segment compared to prior-period amounts were:
Local Media - As Reported Basis
Revenue from Local Media was $330 million, up 17% from the prior-year quarter.
Retransmission revenue increased 42% to $111 million.
Core advertising revenue increased 67% to $199 million, mainly due to the impact of the television stations acquired from Gray/Raycom, Cordillera and Nexstar/Tribune. Fourth-quarter political revenue was $15 million during the non-election year, compared to $82 million in the prior-year quarter.
Total segment expenses increased 37% to $251 million, primarily driven by increases in programming fees tied to network affiliation agreements and the impact of the television stations acquired from Gray/Raycom, Cordillera and Nexstar/Tribune.
Segment profit was $79.7 million, compared to $98.7 million in the year-ago quarter.
Local Media - Adjusted Combined Basis
In order to provide more meaningful year-over-year comparisons, we are providing non-GAAP supplemental information for certain revenues and expenses for the prior-year periods on an adjusted combined basis.
The adjusted combined revenue and expense information illustrates what the historical results of Scripps would have been, given the assumptions outlined in the supplemental materials and had the transactions been effective at the beginning of 2018. Refer to the "Supplemental Information" section that begins on page E-7 of the attached tables.
Adjusted combined revenue from Local Media was $330 million, down $87 million or 21% from the prior-year quarter. Political advertising revenue was $114 million in the fourth quarter of 2018.
Core advertising rose 4.7% and other revenue was up 12%.
Total segment expenses on an adjusted combined basis decreased 5.4%.
Adjusted combined segment profit was $79.7 million, compared to $152 million in the year-ago quarter.
National Media - As Reported Basis
Revenue from National Media was $113 million, up from $85.5 million in the prior-year period.
Expenses for National Media were $106 million, up from $78.5 million in the prior-year period. The increase was driven by the continued investment and growth of Katz, Stitcher and Newsy as well as the acquisition of Triton, which was completed Nov. 30, 2018.
Segment profit was $7.2 million, compared to $7 million in the 2018 quarter.
Financial condition
On Dec. 31, cash and cash equivalents totaled $33 million while total debt was $1.95 billion.
The company made dividend payments totaling $16 million during 2019.
Year-to-date operating results
The following comparisons are for the period ending Dec. 31, 2019:
In 2019, revenue was $1.4 billion, which compares to revenue of $1.2 billion in 2018. The 2019 period includes incremental revenue from Triton, acquired Nov. 30, 2018, of $37.8 million, and revenues from the television stations acquired from Gray Television/Raycom Media, effective Jan. 1; from Cordillera Communications on May 1; and from Nexstar/Tribune on Sept. 19, totaling $208 million.
Costs and expenses for segments, shared services and corporate were $1.2 billion, up from $1 billion in the year-ago period, reflecting the impact of the acquisitions, higher network programming fees and investment in programming at Katz and Stitcher.
Loss from continuing operations was $18.4 million or 23 cents per share. Pre-tax costs for 2019 included $26.3 million of acquisition and related integration costs and $3.4 million of restructuring charges that increased the loss by $22.3 million, net of taxes, or 28 cents per share. In the prior-year period, income from continuing operations attributable to Scripps was $56.7 million or 68 cents per share. Pre-tax activity in the 2018 period included the non-cash write-down of "Pickler & Ben," $8.9 million of restructuring charges and $4.1 million of acquisition and related integration costs.
Looking ahead
Comparisons are to the same periods of 2019.
First-quarter 2020
Local Media revenue (pro forma)
Up low teens
Local Media expense (pro forma)
Up low teens
National Media revenue Between $105-$110
million
National Media expense About $100 million
Shared services and corporate About $19 million
Interest expense About $25 million
Pension expense About $3 million
Capex (excluding repack) Mid-teens millions
Depreciation About $12 million
Amortization About $15 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 (877) 336-4437 (U.S.) or (234) 720-6985 (international) and give the access code 7221941 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. The public is granted access to the conference call on a listen-only basis.
A replay line will be open from 12:30 p.m. Eastern time Feb. 28 until midnight March 13. The domestic number to access the replay is (866) 207-1041 and the international number is (402) 970-0847. The access code for both numbers is 6793374.
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) advances understanding of the world through journalism. As the nation's fourth-largest independent TV station owner, Scripps operates 60 television stations in 42 markets. Scripps empowers the next generation of news consumers with its multiplatform news network Newsy and reaches growing audiences through broadcast networks including Bounce and Court TV. Shaping the future of storytelling through digital audio, Scripps owns top podcast company Stitcher and Triton, the global leader in technology and measurement services. Scripps 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
Years Ended December 31,
December 31,
(in thousands, except per share data) 2019 2018 2019 2018
---
Operating revenues $
444,401 $
368,113 $
1,423,836 $
1,208,425
Segment, shared services and corporate expenses (372,208) (275,925) (1,243,331) (1,000,189)
Acquisition and related integration costs (3,300) (3,792) (26,304) (4,124)
Restructuring costs (1,448) (1,911) (3,370) (8,911)
Depreciation and amortization of intangible assets (26,716) (17,587) (86,986) (63,987)
Gains (losses), net on disposal of property and equipment 1,998 (1,105) 1,692 (1,255)
Operating expenses (401,674) (300,320) (1,358,299) (1,078,466)
Operating income 42,727 67,793 65,537 129,959
Interest expense (27,120) (9,143) (80,596) (36,184)
Defined benefit pension plan expense (1,746) (13,446) (6,953) (19,752)
Miscellaneous, net (474) 687 1,137 152
Income (loss) from continuing operations before income taxes 13,387 45,891 (20,875) 74,175
(Provision) benefit for income taxes (2,822) (9,938) 2,497 (18,098)
Income (loss) from continuing operations, net of tax 10,565 35,953 (18,378) 56,077
Loss from discontinued operations, net of tax (13,974) (36,328)
Net income (loss) 10,565 21,979 (18,378) 19,749
Loss attributable to noncontrolling interest (166) (632)
Net income (loss) attributable to the shareholders of The E.W. $
10,731 $
21,979 $
(18,378) $
20,381
Scripps Company
Net income (loss) per diluted share of common stock
attributable to the shareholders of The E.W. Scripps Company:
Income (loss) from continuing operations $
0.13 $
0.44 $
(0.23) $
0.68
Loss from discontinued operations (0.17) (0.44)
Net income (loss) per diluted share of common stock $
0.13 $
0.27 $
(0.23) $
0.24
attributable to the shareholders of The E.W. Scripps Company
Diluted weighted-average shares outstanding 81,322 81,348 80,826 81,927
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 60 local broadcast stations and their related digital operations. It is comprised of 18 ABC affiliates, 11 NBC affiliates, nine CBS affiliates and four FOX affiliates. We also have 13 CW affiliates - five on full power stations and eight on multicast; two MyNetwork affiliates; two independent stations and nine additional low power stations. 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 Hulu, YouTubeTV and AT&T Now.
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
Years Ended December 31,
December 31,
(in thousands) 2019 2018 Change 2019 2018 Change
---
Segment operating revenues:
Local Media $
330,311 $
281,439 17.4 $
1,022,805 $
917,480 11.5
% %
National Media 113,083 85,462 32.3 396,111 286,170 38.4
% %
Other 1,007 1,212 (16.9) 4,920 4,775 3.0
% %
Total operating revenues $
444,401 $
368,113 20.7 $
1,423,836 $
1,208,425 17.8
% %
Segment profit (loss):
Local Media $
79,705 $
98,716 (19.3) $
217,885 $
251,119 (13.2)
% %
National Media 7,222 7,010 3.0 23,986 13,920 72.3
% %
Other (769) (519) 48.2 (3,957) (3,680) 7.5
% %
Shared services and corporate (13,965) (13,019) 7.3 (57,409) (53,123) 8.1
% %
Acquisition and related integration costs (3,300) (3,792) (26,304) (4,124)
Restructuring costs (1,448) (1,911) (3,370) (8,911)
Depreciation and amortization of intangible (26,716) (17,587) (86,986) (63,987)
assets
Gains (losses), net on disposal of property 1,998 (1,105) 1,692 (1,255)
and equipment
Interest expense (27,120) (9,143) (80,596) (36,184)
Defined benefit pension plan expense (1,746) (13,446) (6,953) (19,752)
Miscellaneous, net (474) 687 1,137 152
Income (loss) from continuing operations $
13,387 $
45,891 $
(20,875) $
74,175
before income taxes
Operating results for our Local Media segment were as follows:
Three Months Ended
Years Ended December 31,
December 31,
(in thousands) 2019 2018 Change 2019 2018 Change
---
Segment operating revenues:
Core advertising $
198,519 $
119,025 66.8 $
599,870 $
465,275 28.9
% %
Political 15,230 82,116 23,263 139,600
Retransmission 110,695 77,855 42.2 382,710 301,411 27.0
% %
Other 5,867 2,443 16,962 11,194 51.5
%
Total operating revenues 330,311 281,439 17.4 1,022,805 917,480 11.5
% %
Segment costs and expenses:
Employee compensation and benefits 114,133 75,647 50.9 363,801 292,079 24.6
% %
Programming 83,960 56,046 49.8 276,784 219,690 26.0
% %
Impairment of programming assets 8,920 8,920
Other expenses 52,513 42,110 24.7 164,335 145,672 12.8
% %
Total costs and expenses 250,606 182,723 37.2 804,920 666,361 20.8
% %
Segment profit $
79,705 $
98,716 (19.3) $
217,885 $
251,119 (13.2)
% %
Operating results for National Media segment were as follows:
Three Months Ended
Years Ended December 31,
December 31,
(in thousands) 2019 2018 Change 2019 2018 Change
---
Segment operating revenues:
Katz $
64,589 $
49,668 30.0 $
227,035 $
185,852 22.2
% %
Stitcher 21,437 16,716 28.2 72,545 51,063 42.1
% %
Newsy 13,307 9,244 44.0 43,025 24,588 75.0
% %
Triton 10,670 3,292 41,065 3,292
Other 3,080 6,542 (52.9) 12,441 21,375 (41.8)
% %
Total operating revenues 113,083 85,462 32.3 396,111 286,170 38.4
% %
Segment costs and expenses:
Employee compensation and benefits 22,096 16,787 31.6 86,315 58,033 48.7
% %
Programming 52,426 36,085 45.3 174,604 131,063 33.2
% %
Other expenses 31,339 25,580 22.5 111,206 83,154 33.7
% %
Total costs and expenses 105,861 78,452 34.9 372,125 272,250 36.7
% %
Segment profit $
7,222 $
7,010 3.0 $
23,986 $
13,920 72.3
% %
2. CONDENSED CONSOLIDATED BALANCE SHEETS
As of December 31,
(in thousands) 2019 2018
---
ASSETS
Current assets:
Cash and cash equivalents $
32,968 $
107,114
Other current assets 544,476 363,903
Total current assets 577,444 471,017
Investments 8,553 7,162
Property and equipment 375,904 237,927
Operating lease right-of-use assets 138,640
Goodwill 1,271,855 834,013
Other intangible assets 1,061,791 478,953
Programming (less current portion) 96,256 75,333
Deferred income taxes 11,802 9,141
Miscellaneous 19,108 16,515
TOTAL ASSETS $
3,561,353 $
2,130,061
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $
29,153 $
26,919
Unearned revenue 11,678 11,459
Current portion of long-term debt 10,612 3,000
Accrued expenses and other current liabilities 248,037 156,681
Total current liabilities 299,480 198,059
Long-term debt (less current portion) 1,904,418 685,764
Other liabilities (less current portion) 459,520 320,073
Total equity 897,935 926,165
TOTAL LIABILITIES AND EQUITY $
3,561,353 $
2,130,061
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
Years Ended December 31,
December 31,
(in thousands) 2019 2018 2019 2018
---
Numerator (for basic and diluted earnings per share)
Income (loss) from continuing operations, net of tax $
10,565 $
35,953 $
(18,378) $
56,077
Loss attributable to noncontrolling interest 166 632
Less income allocated to RSUs (176) (544) (908)
Numerator for basic and diluted earnings per share from $
10,555 $
35,409 $
(18,378) $
55,801
continuing operations attributable to the shareholders of The E.W.
Scripps Company
Denominator
Basic weighted-average shares outstanding 80,927 80,669 80,826 81,369
Effective of dilutive securities:
Stock options and restricted stock units 395 679 558
Diluted weighted-average shares outstanding 81,322 81,348 80,826 81,927
ADJUSTED COMBINED SUPPLEMENTAL INFORMATION
Due to the effect that the 2019 television station acquisitions have on our Local Media segment, and to provide meaningful period over period comparisons, we are providing this supplemental non-GAAP (Generally Accepted Accounting Principles) information to present certain financial results on an adjusted combined basis. The adjusted combined financial results have been compiled by adding, as of the earliest period presented, the acquired Waco, Texas; Tallahassee, Florida; Cordillera; and Nexstar-Tribune television stations' historical revenue, employee compensation and benefits, programming and other expenses to Scripps' historical revenue, employee compensation and benefits, programming and other expenses captions historically reported within our Local Media segment. These historical results are adjusted for certain intercompany adjustments and other impacts that would result from the companies operating under the ownership of Scripps.
Management uses the adjusted combined non-GAAP supplemental information for purposes of evaluating the performance of the Local Media segment. The company therefore believes that the non-GAAP measure presented provides useful information to investors by allowing them to view the company's businesses through the eyes of management, facilitating comparison of Local Media results across historical periods and providing a focus on the underlying ongoing operating performance of the segment.
The company uses the adjusted combined non-GAAP supplemental information to supplement the financial information presented on a GAAP historical basis. This non-GAAP supplemental information is not to be considered in isolation from, or as a substitute for, the related GAAP measures, and should be read only in conjunction with financial information presented on a GAAP basis.
The adjusted combined financial results contained in the following supplemental information is for informational purposes only. These results do not necessarily reflect what the historical results of Scripps would have been if the acquisitions of the Waco, Tallahassee, Cordillera and Nexstar-Tribune broadcast operations had occurred on January 1, 2018. Nor is this information necessarily indicative of the future results of operations of the combined entities.
The adjusted combined financial information is not pro forma information prepared in accordance with Article 11 of SEC regulation S-X, and the preparation of information in accordance with Article 11 would result in a significantly different presentation.
Local Media adjusted combined segment profit
Three Months Ended
Years Ended December 31,
December 31,
(in thousands) 2019 2018 Change 2019 2018 Change
---
Segment operating revenues:
Core advertising $
198,519 $
189,602 4.7 $
750,708 $
740,500 1.4
% %
Political 15,230 114,323 24,367 196,435
Retransmission 110,695 107,808 2.7 446,150 419,645 6.3
% %
Other 5,867 5,222 12.4 22,307 21,281 4.8
% %
Total operating revenues 330,311 416,955 (20.8) 1,243,532 1,377,861 (9.7)
%
%
Segment costs and expenses:
Employee compensation and benefits 114,133 111,893 2.0 440,454 435,174 1.2
% %
Programming 83,960 80,565 4.2 357,842 338,970 5.6
% %
Impairment of programming assets 8,920 8,920
Other expenses 52,513 63,551 (17.4) 206,844 225,587 (8.3)
%
%
Total costs and expenses 250,606 264,929 (5.4) 1,005,140 1,008,651 (0.3)
% %
Segment profit $
79,705 $
152,026 (47.6) $
238,392 $
369,210 (35.4)
% %
Non-GAAP reconciliation
Below is a reconciliation of Scripps historical reported revenue and segment profit for its Local Media segment to the adjusted combined revenue and adjusted combined segment profit for the Local Media segment with the 2019 television station acquisitions.
Three Months Ended
Years Ended December 31,
December 31,
(in thousands) 2019 2018 2019 2018
---
Local Media operating revenues, as reported $
330,311 $
281,439 $
1,022,805 $
917,480
Waco/Tallahassee TV stations acquisition 6,805 25,237
Cordillera TV stations acquisition 59,416 47,952 184,079
Nexstar-Tribune stations acquisition 73,607 195,478 268,279
Other revenue adjustments (1) (4,312) (22,703) (17,214)
Local Media adjusted combined operating revenues $
330,311 $
416,955 $
1,243,532 $
1,377,861
Three Months Ended
Years Ended December 31,
December 31,
(in thousands) 2019 2018 2019 2018
---
Local Media segment profit, as reported $
79,705 $
98,716 $
217,885 $
251,119
Waco/Tallahassee TV stations acquisition 2,265 7,833
Cordillera TV stations acquisition 30,338 10,753 72,469
Nexstar-Tribune stations acquisition 25,019 32,457 55,003
Other revenue adjustments (1) (4,312) (22,703) (17,214)
Local Media adjusted combined segment profit $
79,705 $
152,026 $
238,392 $
369,210
(1) Primarily reflects reduced retransmission revenue from CW affiliates under Scripps retransmission agreements in effect during each period.
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SOURCE The E.W. Scripps Company
