Scripps reports third-quarter 2018 results

Fri, November 09, 2018 by Carolyn Micheli

CINCINNATI – 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.

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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.”

Investor contact:
Carolyn Micheli, The E.W. Scripps Company, 513-977-3732, Carolyn.micheli@scripps.com
Media contact:
Kari Wethington, The E.W. Scripps Company, 513-977-3763, Kari.wethington@scripps.com

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