By: Press Release | PR Newswire
Record third-quarter political spending last year resulted in an expected decline in year-over-year television revenue for The E.W. Scripps Company (NYSE: SSP) in the third quarter of 2013. However, excluding the cyclical political revenue from both years, television revenues rose 7.5 percent, boosted by a 40 percent increase in retransmission fees from cable and satellite operators.
Scripps also completed the rollout of digital and print subscription bundles in all 13 of its newspaper markets, which, combined with targeted price increases, led to an upswing in newspaper subscription revenue in the third quarter. Consolidated revenues were $190 million, a decrease of 14 percent, or $30.1 million, from the prior-year quarter. In this off-cycle period, political advertising revenues decreased $32.9 million.
The Company reported a loss from operations before income taxes of $11.9 million in the third quarter of 2013 compared to income from operations before income taxes of $14.2 million in the prior-year period. The net loss for the third quarter of 2013 was $8.9 million, or 16 cents per share, compared to net income of $12 million, or 21 cents per share, in the third quarter of 2012. The tax expense for the 2012 quarter includes $3.7 million, or 7 cents per share, in favorable adjustments to the reserve for prior-year income taxes.
Costs and expenses for segments, shared services and corporate decreased 1.7 percent to $182 million compared to the year-ago quarter. “In television we saw, in addition to the rise in retransmission fees, an increase in local, national and digital advertising, despite an uncertain economic environment,” said Rich Boehne, Scripps chairman, president and CEO. “The television group also has closely managed expenses, helped by the success of our programming strategy. Our game show Let’s Ask America is now airing in all 13 Scripps TV markets, and this week we announced a deal for MGM to begin syndicating the show nationwide. Our second original and wholly owned show, The List, is seeing strong ratings growth, and the success of both shows, along with that of our partially owned show, RightThisMinute, have decreased programming expenses and lessened our reliance on syndicated shows.
“Our push to win in the local digital marketplace continues unabated. By year end we expect to have hired more than 100 people whose jobs are solely focused on selling and managing advertising campaigns for clients in our local markets. Our next generation of apps and site improvements continue to roll out across the company, and we’re seeing audience growth and engagement as well as increases in unique visitors, video views and product downloads.
“In the newspaper group, subscription revenue increased for the first time in many years due to our new digital and print bundled subscriptions and an increase in single-copy prices in some markets. We expect to see further lift in subscription revenue in the coming quarters from our bundled subscriptions. All 13 Scripps markets have now launched the bundles, and early adoption rates are promising – nearly 25 percent of our total subscribers had already established their digital accounts by the end of the quarter, and some markets have seen 40 percent activation rates. Also strong in the early months have been digital-only subscriptions, which establish our relationship with an all-new group of consumers.”
Third-quarter results by segment are as follows: Television Revenue from television stations was $99.3 million in the third quarter of 2013, down $26 million from the year-ago quarter. The prior-year period included $36 million of political revenue as well as incremental 2012 Summer Olympics advertising on our three NBC-affiliated stations. Advertising revenue broken down by category was:
— Local, up 5 percent to $54.6 million
— National, up 5.4 percent to $27.4 million
— Political, $1 million compared to $33.9 million in the 2012 quarter
— Retransmission fees, up 40 percent to $10.4 million Digital revenue increased 6.1 percent to $4.3 million.
Total segment expenses decreased 3.7 percent, primarily related to reductions in incentive compensation, lower syndicated programming costs, and lower marketing and promotion costs. The prior-year period included marketing and promotion costs to support the debut of Let’s Ask America and The List. Segment profit in the third quarter was $18.9 million, compared with $41.8 million in the year-ago quarter.
Newspapers In the third quarter of 2013, revenue from newspapers was $88.3 million, down 4.4 percent from the prior-year period but offset slightly by the first subscription revenue increase since the fourth quarter of 2010. Advertising and marketing services revenue was $55.1 million, which represents an 8.1 percent decline from the prior-year period. Advertising and marketing services revenue broken down by category was:
— Classified, down 11 percent to $16.2 million
— Real Estate – down 5.1 percent
— Employment – down 16.4 percent
— Automotive – down 11 percent
— Local, down 5.6 percent to $16.5 million
— Preprint and other, down 8.3 percent to $14.6 million
— National, down 24.5 percent to $1.4 million
— Digital, down 1.8 percent, to $6.3 million.
Pure-play digital revenue increased 6.5 percent over the year-ago quarter. Subscription revenue increased 1.4 percent to $28.2 million. In the third quarter, Scripps completed the launch of its bundled subscription packages which, combined with single-copy price increases, led to the increase in subscription revenue. Nearly 25 percent of current subscribers activated their digital accounts and now have full access to all content on their desktop computers, tablets and smartphones. Activations are a key measure of adoption of Scripps digital news products.
Expenses for the newspaper group were $85.3 million, a decrease of 3.2 percent from the third quarter of 2012. Employee costs decreased 4.8 percent due to lower employment levels. Newsprint expenses decreased 15 percent, due to an 11 percent decline in price and also due to lower volume.
Third-quarter segment profit in the newspaper division was $3 million, a decrease of $1.2 million from the third quarter of 2012. Shared services and corporate The “shared services and corporate” line of the Company’s financial statements includes certain incremental investments in hiring and developing digital-only sales people, streamlining the digital sales process, and creating digital content. Shared services and corporate expenses increased $3.3 million to $13.9 million. Nearly all of this increase was due to costs to grow digital offerings and revenue.
Through October, we hired 81 digital-only salespeople and are on track to hire a total of 100 by year end. Financial condition At Sept. 30, 2013, cash and cash equivalents totaled $202 million, while total debt was $184 million. We repurchased 2.1 million shares for $34.4 million in the third quarter and 4.8 million shares for $69.3 million year to date.
Year-to-date, revenue was $596 million, compared to 2012 year-to-date revenue of $644 million. Political advertising declined $47.7 million year over year. In the first three quarters of 2013, the Company reported a $15.6 million loss from operations before income taxes, compared to income from operations before income taxes of $16.4 million in 2012. The prior-year period included acquisition-integration costs of $5.8 million, primarily a non-cash charge to terminate an agreement with the previous national sales representation firm of the acquired stations.
For the first nine months of the year, costs and expenses for segments, shared services and corporate were $553 million, a decrease of $6.9 million compared to the same period in 2012. The 2013 period includes $12.2 million of incremental expenses to grow digital operations. Net loss was $8.3 million, or 15 cents per share, in the first nine months of 2013, compared to net income of $13 million, or 23 cents per share, in the first nine months of 2012.
The current-year tax benefit includes $2.4 million, or 4 cents per share, in favorable adjustments to the reserve for prior-year income taxes, while the prior-year tax expense includes $3.7 million, or 7 cents per share, in favorable adjustments to the reserve for 2011 income taxes. Acquisition-integration costs reduced the prior-year earnings per share by approximately 6 cents. Looking ahead For year-over-year performance of key metrics in the fourth quarter, management expects:
— Television revenues to be down mid-twenties (prior-year period includes $56.9 million of political advertising). For the full year, television revenue to be down mid-teens.
— Television expenses to be down mid-single digits.
— Newspaper revenues and expenses to decline at a low-to-mid-single-digit rate, with the decline in expenses being greater than the decline in revenues. Subscription revenues to increase low single digits. For the full year, newspaper revenue to be down mid-single-digits.
— Expenses for shared services and corporate to be approximately $15 million.