Scripps reports fourth-quarter 2015 results

CINCINNATI, Feb. 26, 2016 /PRNewswire/ -- The E.W. Scripps Company (NYSE: SSP) today reported operating results for the fourth quarter of 2015. Unless otherwise indicated, all operating results comparisons are to the Scripps historical results for the fourth quarter of 2014, recast to reflect newspapers as discontinued operations.

For the quarter, the net loss from continuing operations was $21.5 million or 25 cents per share. The quarter included a $45.7 million non-cash pension settlement charge and Journal-related transaction and acquisition integration costs of $1 million. Excluding these charges, income from continuing operations would have been $7.8 million or 9 cents per share.

Fourth-Quarter Highlights

• Revenues from continuing operations were $205 million, up $54 million from last year.
• Retransmission revenue more than doubled in the quarter to $35.9 million. We completed a new agreement, in effect from January 2016 to June 2019, with Time Warner Cable covering approximately 3 million households. The agreement will contribute to a more than 50 percent increase in retransmission revenues in 2016 over 2015.
• We signed a network affiliation agreement covering our five NBC-affiliated stations, which are located in West Palm Beach, Florida; Milwaukee and Green Bay, Wisconsin; Kansas City, Missouri; and Tulsa, Oklahoma.
• We signed 10 new agreements that put Newsy in front of growing audiences of over-the-top news consumers, many of them millennials who enjoy Newsy's approach to national and international news coverage.
• We completed an offering of lump-sum pension benefit payments to eligible participants in our largest pension plan. Lump-sum payments totaling $148 million were paid from plan assets. After the offering, we recorded a non-cash pension settlement charge of $45.7 million for actuarial losses.
• On Oct. 1, we sold KNIN, a Boise, Idaho, FOX affiliate we had to divest as part of the Journal merger, for $14.5 million.

Commenting on the results, Scripps Chairman, President and CEO Rich Boehne said:

"Finally, 2016 is upon us, and we anticipate the highest revenue year in our television division's history as we hit the very top of the four-year political advertising cycle. We are positioning our stations to make the most of the anticipated record broadcast television election spending. That includes making strategic investments to maintain and grow strong ratings, especially in the markets where we expect the greatest presidential election spending. We have one of the most attractive presidential election advertising footprints in the industry, and we're well prepared to make the most of it.

"We finished the year by completing the integration of the former Journal Communications stations. We will launch our original programs The List and Right This Minute in six former Journal markets this year as well as launch The List in syndication starting in September 2016.

"In the fourth quarter, our over-the-top video news service Newsy finalized distribution deals with 10 new partners, which puts Newsy's original reporting and fresh take on global news in front of the growing OTT audience. All of these new partners join Apple TV and Comcast's Watchable, both of which went live with Newsy during the fourth quarter, in providing the company with an even stronger foothold in the high-value video advertising marketplace.

"Podcast industry leader Midroll Media, which we acquired in July, hit several milestones as 2015 came to a close. It expanded its core offerings of comedy and entertainment shows and added popular parenting and nonfiction storytelling categories. Midroll also inked a deal to be a launch partner for Google Play Music's first podcast offering, set to launch later this year. And it continued to grow its paid audience through its Howl subscription service. The development of audio and video OTT brands such as Newsy and Midroll are part of our strategy for capturing new audiences and revenue in fast-growing marketplaces."

Fourth-Quarter Operating Results - Continuing Operations
Revenues increased $54 million, or 36 percent, to $205 million, compared to the fourth quarter of 2014. The increase was primarily a result of the acquisition of the television and radio stations from Journal as well as increases in retransmission revenue. Revenue from acquired operations accounted for approximately $71 million of operating revenues in the quarter.

Retransmission revenues more than doubled to $36 million. During 2014, we renegotiated retransmission agreements covering more than one-third of cable and satellite television subscribers in our legacy markets, and our 2015 results reflect the renewal of those agreements.

Costs and expenses for segments, shared services and corporate were $173 million, up from $112 million, primarily driven by expenses from the acquired stations and higher programming fees.

Fourth-Quarter Operating Results - 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 prior-year periods on an adjusted combined basis.

The adjusted combined revenue and expense information illustrates what the combined Scripps/Journal operations would have been, given the assumptions outlined in the supplemental materials and had the transaction been effective at the beginning of 2014. Refer to the "Supplemental Information" section that begins on page E-7 of the attached tables.

Operating revenues decreased 11.5 percent to $205 million. An $11 million or 46 percent increase in retransmission revenue and 50 percent growth in digital revenues were offset by a $42 million decline in television political advertising during this non-election year.

Costs and expenses for segments, shared services and corporate were $173 million, up from $157 million, primarily due to higher programming fees.

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

Television
In the fourth quarter of 2015, revenue from our television group was $171 million, down $29 million. Retransmission revenue increased $11 million while political advertising revenue decreased $42 million in the off-cycle year.

Advertising revenue broken down by category was:

• Local, up 0.2 percent to $90.2 million
• National, down 0.8 percent to $38.3 million
• Political, $2.1 million in 2015 compared to $43.9 million in 2014

Core (local and national) advertising increased 1 percent on a same-station, adjusted combined basis, excluding the results of KNIN for 2014.

Retransmission revenue was up 46.5 percent to $35.9 million.

Total segment expenses increased 12 percent to $129 million, driven by increases in programming fees tied to affiliation agreements we signed with ABC covering 10 of our stations in December 2014 and with CBS for Nashville in July.

Fourth-quarter segment profit in the television division was $41.4 million, compared to $83.8 million in the year-ago quarter.

Radio
Revenue was $19 million, down from $21.3 million in the 2014 quarter as advertising slowed in the later part of the quarter. Political revenue decreased $700,000. Expenses were $15.2 million compared to $16.1 million in 2014.

Segment profit in the radio division was $3.9 million in the fourth quarter of 2015, compared to $5.2 million in the 2014 quarter.

Digital
Digital revenue was $13.2 million, up $4.4 million from the prior period. Excluding Midroll, revenue increased 18 percent.

Expenses for the digital group were $17.1 million, an increase of $3.9 million from the prior-year period.

Segment loss in the digital division was $3.9 million in the fourth quarter of 2015, compared to $4.4 million in the 2014 quarter.

Financial condition
On Dec. 31, cash and cash equivalents totaled $108 million while total debt was $399 million.

From mid-May through Feb. 24, we repurchased 1.2 million shares at an average price of $18.88.  

Looking ahead
The guidance below is in comparison to the adjusted combined results explained above and outlined beginning on page E-7.

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 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) 230-1059 (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 Feb. 26 until 11:59 p.m. March 11. 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 385050.

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 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."

Notes to Results of Operations

1. SEGMENT INFORMATION

We determine our business segments based upon our management and internal reporting structure. 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 and national 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, 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.

Effective April 1, 2015, we began reporting our digital operations as a segment. We have recast the operating results for television, syndication and other, and shared services and corporate in prior periods to reflect this change.

Information regarding our business segments is as follows:

The following table presents operating revenue for our television segment:

The following table presents operating revenue for radio segment:

2. CONDENSED CONSOLIDATED BALANCE SHEETS

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:

ADJUSTED COMBINED SUPPLEMENTAL INFORMATION

We are providing this supplemental non-GAAP (Generally Accepted Accounting Principles) information to illustrate what the combined Scripps/Journal broadcast operations would have been had the transactions been effective at the beginning of 2013 with the new segment reporting structure, given the assumptions contained therein.

Management uses the adjusted combined non-GAAP supplemental information for purposes of evaluating business unit and consolidated company performance. The company therefore believes that the non-GAAP measures presented provide useful information to investors by allowing them to view the company's businesses through the eyes of management, facilitating comparison of results across historical periods and providing a focus on the underlying ongoing operating performance of its businesses.

The company uses the adjusted combined non-GAAP supplemental information to supplement the financial information presented on Scripps 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 historical adjusted combined financial information 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 acquisition of Journal's broadcast operations had occurred on January 1, 2013. Nor is this information necessarily indicative of the future results of operations of the combined companies. The preparation of the adjusted combined financial information includes the use of estimates that may not have been accurate and assumptions that may not have been valid had the transactions occurred on January 1, 2013. However management believes them to be reasonable.

The historical 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.

The historical adjusted combined financial information constitutes forward-looking information and is subject to certain risks and uncertainties that could cause actual amounts to differ materially from those anticipated. See "Risk Factors" and "Cautionary Statements Regarding Forward Looking Information" included in our 2014 Annual Report on Form 10-K or as amended in subsequent filings.

The 2015 and 2014 historical adjusted combined amounts reflect the historical combined results of Scripps and Journal's broadcast operations, and the television stations acquired from Granite. The newspaper operations of Scripps and Journal that were spun-off have been excluded from the historical adjusted combined amounts.

Actual and adjusted combined income from operations before income taxes

Television segment actual and adjusted combined segment profit

Radio segment actual and adjusted combined segment profit

Digital segment actual and adjusted combined segment loss

Non-GAAP reconciliation

Below is a reconciliation of Scripps historical reported revenue and income (loss) from operations before income taxes to the adjusted combined revenue and adjusted combined income (loss) from operations before income taxes.

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SOURCE The E.W. Scripps Company