E.W. Scripps reports Q2 earnings: TV revenue up 4%, newspaper revenue down 1.3%
Newspapers will now be the responsibility of Journal Media Group after business deal struck with Journal Communications
CINCINNATI, Ohio – Aug. 8, 2014 – The E.W. Scripps Company (NYSE: SSP) today reported operating results for the second quarter of 2014.
Increases in local and political advertising, along with growth in retransmission revenue, led to a 4 percent increase in television operating revenues over second-quarter 2013 despite weaknesses in national advertising. Political advertising increased $4.5 million from the 2013 quarter.
Retransmission fees from cable and satellite providers increased 21 percent to $12.7 million.
Newspapers saw a 5.7 percent increase in subscription revenue during the 2014 quarter. Total newspaper operating revenues declined 1.3 percent, in line with the first-quarter decline.
On June 16, Scripps acquired the ABC affiliate in Buffalo and the MyNetworkTV affiliate in Detroit from Granite Broadcasting Corp. for $110 million in cash. The inclusion of operating results from these stations did not alter comparisons to the prior year.
Commenting on the second quarter, Scripps Chairman, President and CEO Rich Boehne said:
“In our television markets, good growth in local, political and digital advertising as well as retransmission revenue more than offset weakness in national advertising. Our digital-only sales force contributed significantly to the nearly 10 percent year-over-year increase in the TV division’s digital revenue. More than half of our stations enjoyed digital revenue growth of more than 20 percent year-over-year.
“Also in television, we launched our duopoly strategy in Detroit with the addition of WMYD, purchased from Granite. WMYD, now the sister station of our long-time powerhouse WXYZ-Channel 7, debuted as a Scripps brand and already offers 17 hours per week of local news, leveraging the strength of the existing award-winning news operations at WXYZ. Also, at the Buffalo station, WKBW, we have begun work to rebuild the ABC affiliate’s news brand and audience. Combined, we expect these two newly acquired stations to contribute more than $15 million of revenue and $5 million of segment profit in the second half of this year.
“In our newspaper division, subscription revenue rose again for the fourth consecutive quarter because of our gains in print and digital subscription bundles as well as targeted price increases. As a result, total revenue declined just more than 1 percent. We saw strength in real estate advertising, led by growth in Naples, Florida, and total expenses declined about 1 percent.
“Across all of our markets, we continue to evolve our digital and mobile products toward a goal of being the local leader in audience and revenue. In the second quarter, our local digital products benefitted from the addition of Newsy as a national and international video news source. Audience reaction was immediate and favorable, and Newsy contributed to our more than three-fold growth in valuable video views across our markets.”
Consolidated revenues increased 2 percent, or $4.1 million, to $212 million during the 2014 quarter.
Costs and expenses for segments, shared services, and corporate were $194 million, an increase of $9.8 million or 5.3 percent from second-quarter 2013, primarily driven by increases in employee-related costs and $2.5 million of incremental expenses to grow digital operations.
The company reported a loss from operations before income taxes of $5.5 million in the 2014 quarter compared to income from operations before income taxes of $3.9 million in the 2013 quarter. The second-quarter 2014 pre-tax loss was impacted by a $4.1 million charge to exit a multi-employer pension plan as well as $4.1 million of acquisition and related integration costs.
In the second quarter of 2014, net loss attributable to Scripps was $3.4 million, or 6 cents per share, and in the second quarter of 2013, net income attributable to Scripps was $3.2 million, or 5 cents per share. Acquisition-integration costs and the charges related to the withdrawal from a multi-employer pension plan reduced earnings per share by approximately 8 cents in the current period. The tax expense for the 2013 quarter includes $1.2 million, or 2 cents per share, in favorable adjustments to the company’s tax reserves.
Second-quarter results by segment are as follows:
Revenue from the television division was $116 million in the 2014 quarter, up $4.4 million or 4 percent from the 2013 quarter. The current-year period included $5.3 million of political revenue.
Advertising revenue broken down by category was:
- Local, up 3.4 percent to $63.2 million
- National, down 12.5 percent to $28.5 million
- Political, $5.3 million compared to $0.8 million in the 2013 quarter
- Retransmission fees, up 21 percent to $12.7 million
- Digital revenue increased 9.6 percent to $4.4 million.
The decline in national advertising revenue reflects the soft demand seen across much of the media industry.
Total segment expenses increased 8.8 percent to $88 million, driven by increases in employee-related costs and higher digital expenses due to increases in sales staff and other digital support costs. The expense increase includes severance costs associated with a new master control hub in Indianapolis.
Segment profit in the television division was $27.8 million in the second quarter of 2014, compared with $30.5 million in the prior-year quarter.
In the second quarter of 2014, revenue from newspapers was $92.3 million, down 1.3 percent from the year-ago quarter. The continued decline in advertising and marketing services revenue was partially offset by an increase in subscription revenue.
Advertising and marketing services revenue was $57 million, down 5.8 percent from the 2013 quarter.
Advertising revenue broken down by category was:
- Classified, down 2 percent to $16.8 million
- Real Estate – up 5 percent
- Employment – up 1.1 percent
- Automotive – down 6.9 percent
- Local, down 3.3 percent to $17.9 million
- Preprint and other, down 6.5 percent to $14.9 million
- National, down 45 percent to $1.1 million
- Digital, down 9 percent to $6.3 million
Subscription revenue increased 5.7 percent to $29.7 million in the current-year quarter, driven by single-copy price increases as well as the subscription bundles introduced in 2013.
Expenses for the newspaper group were $86.8 million, a decrease of 0.9 percent from the second quarter of 2013. Employee costs decreased 4.4 percent, primarily due to lower employment levels, and newsprint expense decreased 4.6 percent, primarily due to a 4.1 percent decline in price. Partially offsetting these declines was a 7.2 percent increase in other expenses, including costs to support digital initiatives.
Second-quarter segment profit in the newspaper division was $5.4 million, a decrease of $0.4 million from the 2013 quarter.