Scripps reports third-quarter 2018 results
Total revenue was
Income from continuing operations was
Business highlights
- On
Oct. 29 , Scripps announced its plans to acquire 15 television stations in 10 local media markets from privately ownedCordillera 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 theNov. 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 withMassachusetts 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
"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
Costs and expenses for segments, shared services and corporate were
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
Retransmission revenue increased 24 percent to
Local Media broadcast time sales were up 25 percent, driven by political advertising revenue of
Total segment expenses increased 3.9 percent to
Third-quarter segment profit was
National Media
In the third quarter of 2018, revenue from the National Media division was
Expenses for National Media were
Third-quarter segment profit was
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
During the quarter, the company entered into an accelerated share repurchase agreement to repurchase
Year-to-date results
The following comparisons are for the period ending
In 2018, revenue was
Costs and expenses for segments, shared services and corporate were
Income from continuing operations was
In 2018, the loss from discontinued operations includes non-cash charges of
Looking ahead
Comparisons are to the same periods of 2017.
Fourth-quarter 2018 |
|
Local Media revenue |
Up mid to high 30 percent range |
Retransmission revenue |
Consistent with third-quarter 2018 |
Local Media expense |
Up mid-single digits |
National Media revenue |
Low to mid |
National Media expense |
High |
Shared services and |
|
Corporate |
About |
Interest expense |
Consistent with prior quarters |
Pension expense |
About |
Capex |
Mid single digits |
Depreciation & amortization |
Consistent with prior quarters |
Conference call
The senior management of
To access the conference call by telephone, dial (800) 230-1074 (
A replay line will be open from
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
About Scripps
|
||||||||||||||||
RESULTS OF OPERATIONS |
||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||
(in thousands, except per share data) |
2018 |
2017 |
2018 |
2017 |
||||||||||||
Operating revenues |
$ |
302,726 |
$ |
200,509 |
$ |
840,312 |
$ |
615,226 |
||||||||
Segment, shared services and corporate expenses |
(246,109) |
(186,777) |
(724,264) |
(555,286) |
||||||||||||
Acquisition and related integration costs |
(332) |
— |
(332) |
— |
||||||||||||
Restructuring costs |
(863) |
(2,407) |
(7,000) |
(2,407) |
||||||||||||
Depreciation and amortization of intangible assets |
(15,598) |
(13,775) |
(46,400) |
(41,417) |
||||||||||||
Impairment of goodwill and intangible assets |
— |
(35,732) |
— |
(35,732) |
||||||||||||
Gains (losses), net on disposal of property and equipment |
501 |
(114) |
(150) |
(176) |
||||||||||||
Operating expenses |
(262,401) |
(238,805) |
(778,146) |
(635,018) |
||||||||||||
Operating income (loss) |
40,325 |
(38,296) |
62,166 |
(19,792) |
||||||||||||
Interest expense |
(9,003) |
(5,720) |
(27,041) |
(18,163) |
||||||||||||
Defined benefit pension plan expense |
(3,529) |
(3,551) |
(6,306) |
(10,485) |
||||||||||||
Miscellaneous, net |
(546) |
1,187 |
(535) |
5,411 |
||||||||||||
Income (loss) from continuing operations before income taxes |
27,247 |
(46,380) |
28,284 |
(43,029) |
||||||||||||
(Provision) benefit for income taxes |
(7,208) |
18,776 |
(8,160) |
19,547 |
||||||||||||
Income (loss) from continuing operations, net of tax |
20,039 |
(27,604) |
20,124 |
(23,482) |
||||||||||||
Income (loss) from discontinued operations, net of tax |
(908) |
920 |
(22,354) |
3,404 |
||||||||||||
Net income (loss) |
19,131 |
(26,684) |
(2,230) |
(20,078) |
||||||||||||
Loss attributable to noncontrolling interest |
— |
— |
(632) |
— |
||||||||||||
Net income (loss) attributable to shareholders of |
$ |
19,131 |
$ |
(26,684) |
$ |
(1,598) |
$ |
(20,078) |
||||||||
Net income (loss) per basic share of common stock attributable to the shareholders of |
||||||||||||||||
Income (loss) from continuing operations |
$ |
0.24 |
$ |
(0.34) |
$ |
0.25 |
$ |
(0.29) |
||||||||
Income (loss) from discontinued operations |
(0.01) |
0.01 |
(0.27) |
0.04 |
||||||||||||
Net income (loss) per basic share of common stock attributable to the shareholders of |
$ |
0.23 |
$ |
(0.32) |
$ |
(0.02) |
$ |
(0.24) |
||||||||
Weighted average basic shares outstanding |
81,452 |
82,039 |
81,606 |
82,140 |
||||||||||||
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 structures, as well as the basis that our chief operating decision maker makes resource allocation decisions.
Effective
Our Local Media segment includes our local broadcast stations and their related digital operations. It is comprised of fifteen
Our National Media segment includes our collection of national brands. Our national brands include Katz, Stitcher and its advertising network Midroll Media, Newsy 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. 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
Information regarding the operating results of our business segments is as follows:
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||
(in thousands) |
2018 |
2017 |
Change |
2018 |
2017 |
Change |
||||||||||||||||
Segment operating revenues: |
||||||||||||||||||||||
Local Media |
$ |
230,734 |
$ |
187,505 |
23.1 |
% |
$ |
636,041 |
$ |
575,999 |
10.4 |
% |
||||||||||
National Media |
71,761 |
12,504 |
200,708 |
35,207 |
||||||||||||||||||
Other |
231 |
500 |
(53.8) |
% |
3,563 |
4,020 |
(11.4) |
% |
||||||||||||||
Total operating revenues |
$ |
302,726 |
$ |
200,509 |
51.0 |
% |
$ |
840,312 |
$ |
615,226 |
36.6 |
% |
||||||||||
Segment profit (loss): |
||||||||||||||||||||||
Local Media |
$ |
67,416 |
$ |
30,372 |
122.0 |
% |
$ |
152,403 |
$ |
111,459 |
36.7 |
% |
||||||||||
National Media |
2,838 |
(4,374) |
6,910 |
(11,927) |
||||||||||||||||||
Other |
(1,267) |
(829) |
52.8 |
% |
(3,161) |
(2,238) |
41.2 |
% |
||||||||||||||
Shared services and corporate |
(12,370) |
(11,437) |
8.2 |
% |
(40,104) |
(37,354) |
7.4 |
% |
||||||||||||||
Acquisition and related integration costs |
(332) |
— |
(332) |
— |
||||||||||||||||||
Restructuring costs |
(863) |
(2,407) |
(7,000) |
(2,407) |
||||||||||||||||||
Depreciation and amortization of intangible assets |
(15,598) |
(13,775) |
(46,400) |
(41,417) |
||||||||||||||||||
Impairment of goodwill and intangible assets |
— |
(35,732) |
— |
(35,732) |
||||||||||||||||||
Gains (losses), net on disposal of property and equipment |
501 |
(114) |
(150) |
(176) |
||||||||||||||||||
Interest expense |
(9,003) |
(5,720) |
(27,041) |
(18,163) |
||||||||||||||||||
Defined benefit pension plan expense |
(3,529) |
(3,551) |
(6,306) |
(10,485) |
||||||||||||||||||
Miscellaneous, net |
(546) |
1,187 |
(535) |
5,411 |
||||||||||||||||||
Income (loss) from continuing operations before income taxes |
$ |
27,247 |
$ |
(46,380) |
$ |
28,284 |
$ |
(43,029) |
Operating results for our Local Media segment were as follows:
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||
(in thousands) |
2018 |
2017 |
Change |
2018 |
2017 |
Change |
||||||||||||||||
Segment operating revenues: |
||||||||||||||||||||||
Core advertising |
$ |
108,925 |
$ |
117,745 |
(7.5) |
% |
$ |
346,250 |
$ |
362,642 |
(4.5) |
% |
||||||||||
Political |
40,018 |
1,689 |
57,484 |
5,255 |
||||||||||||||||||
Retransmission |
78,759 |
63,733 |
23.6 |
% |
223,556 |
196,003 |
14.1 |
% |
||||||||||||||
Other |
3,032 |
4,338 |
(30.1) |
% |
8,751 |
12,099 |
(27.7) |
% |
||||||||||||||
Total operating revenues |
230,734 |
187,505 |
23.1 |
% |
636,041 |
575,999 |
10.4 |
% |
||||||||||||||
Segment costs and expenses: |
||||||||||||||||||||||
Employee compensation and benefits |
70,862 |
71,644 |
(1.1) |
% |
216,432 |
215,988 |
0.2 |
% |
||||||||||||||
Programming |
57,156 |
47,598 |
20.1 |
% |
163,644 |
137,157 |
19.3 |
% |
||||||||||||||
Other expenses |
35,300 |
37,891 |
(6.8) |
% |
103,562 |
111,395 |
(7.0) |
% |
||||||||||||||
Total costs and expenses |
163,318 |
157,133 |
3.9 |
% |
483,638 |
464,540 |
4.1 |
% |
||||||||||||||
Segment profit |
$ |
67,416 |
$ |
30,372 |
122.0 |
% |
$ |
152,403 |
$ |
111,459 |
36.7 |
% |
Operating results for our National Media segment were as follows:
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||
(in thousands) |
2018 |
2017 |
Change |
2018 |
2017 |
Change |
||||||||||||||
Segment operating revenues: |
||||||||||||||||||||
Katz |
$ |
46,537 |
$ |
— |
$ |
136,184 |
$ |
— |
||||||||||||
Stitcher |
13,392 |
7,102 |
34,347 |
21,017 |
||||||||||||||||
Newsy |
5,681 |
2,623 |
15,344 |
6,961 |
||||||||||||||||
Other |
6,151 |
2,779 |
14,833 |
7,229 |
||||||||||||||||
Total operating revenues |
71,761 |
12,504 |
200,708 |
35,207 |
||||||||||||||||
Segment costs and expenses: |
||||||||||||||||||||
Employee compensation and benefits |
14,852 |
6,189 |
41,246 |
19,337 |
||||||||||||||||
Programming |
33,676 |
4,554 |
94,978 |
12,896 |
||||||||||||||||
Other expenses |
20,395 |
6,135 |
57,574 |
14,901 |
||||||||||||||||
Total costs and expenses |
68,923 |
16,878 |
193,798 |
47,134 |
||||||||||||||||
Segment profit (loss) |
$ |
2,838 |
$ |
(4,374) |
$ |
6,910 |
$ |
(11,927) |
2. CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) |
As of |
As of |
||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ |
129,743 |
$ |
148,699 |
||||
Other current assets |
322,553 |
320,831 |
||||||
Assets held for sale |
108,636 |
136,004 |
||||||
Total current assets |
560,932 |
605,534 |
||||||
Investments |
7,299 |
7,699 |
||||||
Property and equipment |
223,629 |
209,995 |
||||||
|
760,098 |
755,949 |
||||||
Other intangible assets |
411,419 |
425,975 |
||||||
Programming (less current portion) |
69,381 |
85,269 |
||||||
Deferred income taxes |
15,730 |
20,076 |
||||||
Miscellaneous |
19,542 |
19,051 |
||||||
TOTAL ASSETS |
$ |
2,068,030 |
$ |
2,129,548 |
||||
LIABILITIES AND EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ |
38,213 |
$ |
23,647 |
||||
Unearned revenue |
17,692 |
7,353 |
||||||
Current portion of long-term debt |
3,000 |
5,656 |
||||||
Accrued expenses and other current liabilities |
129,115 |
154,596 |
||||||
Liabilities held for sale |
22,173 |
19,536 |
||||||
Total current liabilities |
210,193 |
210,788 |
||||||
Long-term debt (less current portion) |
686,212 |
687,619 |
||||||
Other liabilities (less current portion) |
265,973 |
293,656 |
||||||
Total equity |
905,652 |
937,485 |
||||||
TOTAL LIABILITIES AND EQUITY |
$ |
2,068,030 |
$ |
2,129,548 |
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 |
Nine Months Ended |
|||||||||||||||
(in thousands) |
2018 |
2017 |
2018 |
2017 |
||||||||||||
Numerator (for basic and diluted earnings per share) |
||||||||||||||||
Income (loss) from continuing operations, net of tax |
$ |
20,039 |
$ |
(27,604) |
$ |
20,124 |
$ |
(23,482) |
||||||||
Loss attributable to noncontrolling interest |
— |
— |
632 |
— |
||||||||||||
Less income allocated to RSUs |
(316) |
— |
(338) |
— |
||||||||||||
Numerator for basic and diluted earnings per share from continuing operations attributable to the shareholders of |
$ |
19,723 |
$ |
(27,604) |
$ |
20,418 |
$ |
(23,482) |
||||||||
Denominator |
||||||||||||||||
Basic weighted-average shares outstanding |
81,452 |
82,039 |
81,606 |
82,140 |
||||||||||||
Effective of dilutive securities: |
||||||||||||||||
Stock options and restricted stock units |
632 |
— |
491 |
— |
||||||||||||
Diluted weighted-average shares outstanding |
82,084 |
82,039 |
82,097 |
82,140 |
||||||||||||
Anti-dilutive securities (1) |
— |
1,373 |
— |
1,373 |
||||||||||||
(1) Amount outstanding at balance sheet date, before application of the treasury stock method and not weighted for period outstanding. |
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