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 Scripps reports fourth-quarter 2017 results
   Wednesday, February 28, 2018 7:30:00 AM ET

The E.W. Scripps Company (SSP ) today reported operating results for the fourth quarter of 2017. At the end of the quarter, Radio operations were classified as held for sale, and its results are included in discontinued operations. All periods have been adjusted to reflect this presentation.

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Scripps also is reporting results through its new segments, Local Media and National Media, which are reflected in all periods.

For the quarter, the net income from continuing operations was $11.5 million or 16 cents per share. In the prior-year quarter, net income from continuing operations was $36.3 million or 44 cents per share. The current-year quarter included a gain on the investment in Katz of $5.4 million, offset by $2 million of restructuring charges, which increased income from continuing operations by $2 million (net of taxes) or 2 cents per share.

In spite of a $52.8 million decline in political revenue due to the non-election year, total fourth-quarter 2017 revenue of $257 million stayed relatively equal to the fourth quarter of 2016.

Business highlights

-- On Feb. 15, the Scripps board initiated the company’s first quarterly dividend in 10 years. The first-quarter dividend of 5 cents per share will be payable to shareholders of record on March 1 for payout on March 26.

-- On Jan. 25, the company said it expects its comprehensive restructuring work to yield more than $30 million in annual savings. The company also announced plans to sell its radio station group, with Kalil & Co. retained to handle the process.

-- In the Local Media division, core advertising was up 7 percent in the fourth quarter.

-- The company green-lit a second season of the daytime show Pickler & Ben, with 100 markets already committed to airing it compared to 38 in the first season. The show is growing audience in its time periods on Scripps stations.

-- In the National Media division, Newsy ended the year with contracts covering carriage into 26 million cable households, broadening its distribution into that lucrative marketplace after already being deployed on all the major over-the-top television platforms.

-- Further pursuing a more effective and efficient operating structure, the company reorganized its businesses to better focus on the marketplaces they serve: A Local Media division comprised of local media brands on all platforms and a National Media division made up of the businesses with national scale and reach focused on the national advertising market.

Commenting on the business highlights, Scripps President and CEO Adam Symson said:

"Six months into our systematic work to optimize the company’s performance - and with full confidence in our path ahead - the Scripps board decided the time was right to initiate our first quarterly dividend since 2008. Their decision is a tangible show of confidence in the state of our business and our strategies for the future.

"We’ve begun to see the positive impact of our comprehensive reorganization and restructuring with cost reductions that will drive meaningful margin and cash flow improvement.

"We also continue to move forward with our television station acquisition strategy - an aggressive plan to get deeper and even stronger in the markets where we operate and emerge with a higher-performing portfolio that has more revenue and profit-generating capacity.

"And we’ve made significant progress unlocking strong growth opportunities around the future of television while improving our financial foundation. Our fast-growing Katz networks are capitalizing on the resurgence of over-the-air viewership and their 90 percent national household reach, and Newsy is quickly marching toward 40 million pay TV homes by the end of 2018. Both are creating compelling platforms to attract national advertising revenue.

"This work in recent months demonstrates the company’s commitment to two equally important opportunities: building near-term value through improved operating performance in our strong, stable local business and setting up our company for significant long-term value creation."

Fourth-quarter operating results Revenue was $257 million, an increase of 1.6 percent compared to the fourth quarter of 2016.

Costs and expenses for segments, shared services and corporate were $222 million, up from $172 million in the year-ago period, primarily driven by higher network programming fees and a quarter of expense from Katz.

Fourth-quarter results by segment compared to prior-year amounts were:

Local Media In the fourth quarter of 2017, revenue from the Local Media group was $203 million, down about 17 percent from the prior-year quarter. Political advertising revenue was $3.4 million in the fourth quarter of 2017, compared to $56.2 million in the fourth quarter of last year.

Retransmission revenue increased 4.9 percent to $63.5 million.

Core advertising was up 6.6 percent in the fourth quarter.

Total segment expenses increased 6.5 percent to $157 million, driven by increases in programming fees tied to network affiliation agreements as well as the cost of producing Pickler & Ben.

Fourth-quarter segment profit was $45.4 million, compared to $95.1 million in the year-ago quarter.

National Media In the fourth quarter of 2017, revenue from the National Media group was $53 million, up from $9 million in the prior-year period. Revenue from Katz, which we acquired on Oct. 2, 2017, was $41 million.

Expenses for the National Media group were $50.3 million, up from $11.2 million from the prior-year period. Excluding the impact of Katz, expenses increased 30 percent.

Fourth-quarter segment profit was $2.7 million, compared to a loss of $2.2 million in the 2016 quarter.

Financial condition As of Dec. 31, cash and cash equivalents totaled $149 million while total debt was $693 million.

From Jan. 1, 2017, through Feb. 23, 2018, the company repurchased 1.3 million shares at an average price of $17.31. In November 2016, the board of directors authorized a $100 million share repurchase program that expires at the end of 2018.

Year-to-date results The following comparisons are for the year ending Dec. 31, 2017:

In 2017, revenue was $865 million compared to $868 million in 2016. Retransmission revenue increased $39 million. In the non-election year, political advertising was $8.7 million in 2017 compared to $101 million in 2016.

Costs and expenses for segments, shared services and corporate were $770 million, an increase of $86 million, primarily driven by higher network programming fees as well as costs in the National Media businesses.

Net loss from continuing operations was $12 million or 13 cents per share. In the prior year, net income from continuing operations was $59.9 million or 71 cents per share. The 2017 period includes a $2.4 million charge to write off deferred loan fees associated with refinanced debt, $11.6 million of other income associated with the gain on Scripps’ 5 percent interest in Katz, the sale of a small business and an adjustment to a purchase-price earnout, $4.4 million of restructuring charges and a $35.7 million non-cash charge to write down goodwill and intangible assets.

Looking ahead Comparisons are to the same period of 2017 as reported in today’s press release tables.

                            First-quarter 2018
Local Media revenue         Up mid-single digits
Retransmission revenue      Up about 10 percent
Local Media expense         Up mid-single digits
National Media revenue      In the mid-to-high $50 million range
National Media expense      In the mid-to-high $50 million range
Shared services and
Corporate                   In the mid-teen millions
Interest expense            About $8 million
Pension expense             About $2 million
Capex                       In the high-single-digit millions
Depreciation & amortization About $15 million

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 8:30 a.m. (Eastern) today. To access the live webcast, visit http://www.scripps.com and click on "investors" and then "investor information."

To access the conference call by telephone, dial (800) 230-1085 (U.S.) or (612) 234-9959 (international) approximately five minutes before the start of the call and ask for "Scripps earnings call". Callers 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 10:30 a.m. Eastern time Feb. 28 until 11:59 p.m. on March 14. 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 444385.

A replay of the conference call will be archived and available online approximately four hours after the call and then for an extended period of time. To access the audio replay, visit http://www.scripps.com , click on "investors" then "investor information," and scroll down to "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 (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 an expanding collection of national journalism and content businesses, including Newsy, the next-generation national news network; podcast industry leader Midroll Media; 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."

THE E.W. SCRIPPS COMPANY
RESULTS OF OPERATIONS
                                                                Three Months Ended            Years Ended December 31,
                                                                December 31,
(in thousands, except per share data)                           2017           2016           2017            2016
Operating revenues                                              $    256,975   $    252,953   $    864,834    $    868,820
Segment, shared services and corporate expenses                 (222,152)      (172,111)      (770,071)       (684,353)
Acquisition and related integration costs                       --             --             --              (578)
Restructuring costs                                             (2,015)        --             (4,422)         --
Depreciation and amortization of intangible assets              (14,926)       (13,643)       (56,343)        (55,204)
Impairment of goodwill and intangibles                          --             --             (35,732)        --
Gains (losses), net on disposal of property and equipment       7              (436)          (169)           (480)
Operating expenses                                              (239,086)      (186,190)      (866,737)       (740,615)
Operating income (loss)                                         17,889         66,763         (1,903)         128,205
Interest expense                                                (8,534)        (4,436)        (26,697)        (18,039)
Defined benefit pension plan expense                            (3,627)        (3,828)        (14,112)        (14,332)
Miscellaneous, net                                              5,225          (1,401)        10,636          (2,646)
Income (loss) from continuing operations before income taxes    10,953         57,098         (32,076)        93,188
(Provision) benefit for income taxes                            507            (20,799)       20,054          (33,266)
Income (loss) from continuing operations, net of tax            11,460         36,299         (12,022)        59,922
Income (loss) from discontinued operations, net of tax          (6,009)        2,038          (2,595)         7,313
Net income (loss)                                               5,451          38,337         (14,617)        67,235
Net income (loss) attributable to noncontrolling interest       (1,511)        --             (1,511)         --
Net income (loss) attributable to the shareholders of The E.W.  $    6,962     $    38,337    $    (13,106)   $    67,235
Scripps Company
Net income (loss) per basic share of common stock attributable
to the shareholders of The E.W. Scripps Company:
Income (loss) from continuing operations                        $    0.16      $    0.44      $    (0.13)     $    0.71
Income (loss) from discontinued operations                      (0.07)         0.02           (0.03)          0.09
Net income (loss) per basic share of common stock attributable  $    0.09      $    0.46      $    (0.16)     $    0.80
to the shareholders of The E.W. Scripps Company
Weighted average basic shares outstanding                       81,792         82,401         82,052          83,339
See notes to results of operations.

Notes to Results of Operations

1. SEGMENT INFORMATION

We determine our business segments based upon our management and internal reporting structure, as well as the basis that our chief operating decision maker makes resource allocation decisions.

Effective December 31, 2017, we realigned our businesses into a new internal organization and began reporting to reflect this new structure. Under the new structure we have the following reportable segments: Local Media, National Media and Other. We have recast the operating results for all periods to reflect this change.

Our Local Media segment includes our local broadcast stations and their related digital operations. It is comprised of fifteen ABC affiliates, five NBC affiliates, two FOX affiliates and two CBS affiliates. We also have two MyTV affiliates, one CW affiliate, one independent station and three Azteca America Spanish-language affiliates. Our Local Media segment earns revenue primarily from the sale of advertising to local, national and political advertisers and retransmission fees received from cable operators, telecommunications companies and satellite carriers.

Our National Media segment includes our collection of national brands. Our national media brands include Katz, Midroll Media (Midroll), 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 the United States of America.

Information regarding our business segments is as follows:
                                           Three Months Ended                        Years Ended December 31,
                                           December 31,
(in thousands)                             2017           2016           Change      2017            2016           Change
Segment operating revenues:
Local Media                                $    202,566   $    242,634   (16.5) %    $    779,205    $    836,154   (6.8) %
National Media                             52,973         9,033          486.4  %    80,174          27,929         187.1 %
Other                                      1,436          1,286          11.7   %    5,455           4,737          15.2  %
Total operating revenues                   $    256,975   $    252,953   1.6    %    $    864,834    $    868,820   (0.5) %
Segment profit (loss):
Local Media                                $    45,431    $    95,089                $    156,890    $    243,298
National Media                             2,667          (2,181)                    (9,260)         (10,156)
Other                                      (123)          (35)                       (2,361)         (2,513)
Shared services and corporate              (13,152)       (12,031)                   (50,506)        (46,162)
Acquisition and related integration costs  --             --                         --              (578)
Restructuring costs                        (2,015)        --                         (4,422)         --
Depreciation and amortization of           (14,926)       (13,643)                   (56,343)        (55,204)
intangible assets
Impairment of goodwill and intangibles     --             --                         (35,732)        --
Gains (losses), net on disposal of         7              (436)                      (169)           (480)
property and equipment
Interest expense                           (8,534)        (4,436)                    (26,697)        (18,039)
Defined benefit pension plan expense       (3,627)        (3,828)                    (14,112)        (14,332)
Miscellaneous, net                         5,225          (1,401)                    10,636          (2,646)
Income (loss) from continuing              $    10,953    $    57,098                $    (32,076)   $    93,188
operations before income taxes
Operating results for our Local Media segment were as follows:
                                    Three Months Ended                      Years Ended December 31,
                                    December 31,
(in thousands)                      2017          2016          Change      2017          2016          Change
Segment operating revenues:
Core advertising                    $   130,180   $   122,099   6.6    %    $   493,462   $   500,091   (1.3)  %
Political                           3,396         56,160        (94.0) %    8,651         100,761       (91.4) %
Retransmission                      63,496        60,542        4.9    %    259,499       220,723       17.6   %
Other revenue                       5,494         3,833         43.3   %    17,593        14,579        20.7   %
Total operating revenues            202,566       242,634       (16.5) %    779,205       836,154       (6.8)  %
Segment costs and expenses:
Employee compensation and benefits  71,770        69,902        2.7    %    287,758       281,956       2.1    %
Programming                         49,148        41,477        18.5   %    186,945       162,821       14.8   %
Other expenses                      36,217        36,166        0.1    %    147,612       148,079       (0.3)  %
Total costs and expenses            157,135       147,545       6.5    %    622,315       592,856       5.0    %
Segment profit                      $   45,431    $   95,089    (52.2) %    $   156,890   $   243,298   (35.5) %
Operating results for National Media segment were as follows:
                                    Three Months Ended                    Years Ended December 31,
                                    December 31,
(in thousands)                      2017         2016          Change     2017          2016           Change
Segment operating revenues:
Katz                                $   40,975   $   --                   $   40,975    $   --
Midroll                             5,221        4,283         21.9  %    18,232        14,093         29.4  %
Newsy                               3,128        1,712         82.7  %    10,089        4,806          109.9 %
Other revenue                       3,649        3,038         20.1  %    10,878        9,030          20.5  %
Total operating revenues            52,973       9,033         486.4 %    80,174        27,929         187.1 %
Segment costs and expenses:
Employee compensation and benefits  11,784       6,080         93.8  %    31,121        20,767         49.9  %
Programming                         24,632       1,742                    29,522        4,165
Other expenses                      13,890       3,392         309.5 %    28,791        13,153         118.9 %
Total costs and expenses            50,306       11,214        348.6 %    89,434        38,085         134.8 %
Segment profit                      $   2,667    $   (2,181)              $   (9,260)   $   (10,156)

2. CONDENSED CONSOLIDATED BALANCE SHEETS

                                                As of December 31,
(in thousands)                                  2017            2016
ASSETS
Current assets:
Cash and cash equivalents                       $   148,699     $   134,352
Other current assets                            320,831         197,322
Assets held for sale -- current                 136,004         14,221
Total current assets                            605,534         345,895
Investments                                     7,699           14,221
Property and equipment                          209,995         225,437
Goodwill                                        755,949         575,780
Other intangible assets                         425,975         412,551
Licensed programming (less current portion)     85,269          1,796
Deferred income taxes                           20,076          16,608
Miscellaneous                                   19,051          11,798
Assets held for sale -- noncurrent              --              131,820
TOTAL ASSETS                                    $   2,129,548   $   1,735,906
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable                                $   23,647      $   15,976
Customer deposits and unearned revenue          7,353           6,410
Current portion of long-term debt               5,656           6,571
Accrued expenses and other current liabilities  154,596         72,294
Liabilities held for sale -- current            19,536          2,880
Total current liabilities                       210,788         104,131
Long-term debt (less current portion)           687,619         386,614
Other liabilities (less current portion)        293,656         273,929
Liabilities held for sale -- noncurrent         --              25,297
Total equity                                    937,485         945,935
TOTAL LIABILITIES AND EQUITY                    $   2,129,548   $   1,735,906

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            Years Ended December 31,
                                                                    December 31,
(in thousands)                                                      2017           2016           2017             2016
Numerator (for basic and diluted earnings per share)
Net income (loss) from continuing operations                        $     11,460   $     36,299   $     (12,022)   $     59,922
Loss attributable to noncontrolling interest                        1,511          --             1,511            --
Income allocated to RSUs                                            (194)          (604)          --               (817)
Numerator for basic and diluted earnings per share from             $     12,777   $     35,695   $     (10,511)   $     59,105
continuing operations attributable to the shareholders of The E.W.
Scripps Company
Denominator
Basic weighted-average shares outstanding                           81,792         82,401         82,052           83,339
Effective of dilutive securities:
Stock options held by employees and directors                       --             283            --               300
Diluted weighted-average shares outstanding                         81,792         82,684         82,052           83,639
Anti-dilutive securities (1)                                        1,220          --             1,220            --
(1) Amount outstanding at Balance Sheet date, before application of the treasury stock method and not weighted for period outstanding.

4. SUPPLEMENTAL INFORMATION

The following quarterly information presents our 2017 quarters recast to reflect the new segments.

                                                 2017
(in thousands)                                   1st Quarter    2nd Quarter    3rd Quarter     4th Quarter    Total
Segment operating revenues:
Local Media                                      $    187,279   $    201,644   $    187,716    $    202,566   $    779,205
National Media                                   7,327          10,309         9,565           52,973         80,174
Other                                            1,723          1,796          500             1,436          5,455
Total operating revenues                         $    196,329   $    213,749   $    197,781    $    256,975   $    864,834
Segment profit (loss):
Local Media                                      $    32,351    $    48,736    $    30,372     $    45,431    156,890
National Media                                   (3,957)        (3,596)        (4,374)         2,667          (9,260)
Other                                            249            (1,658)        (829)           (123)          (2,361)
Shared services and corporate                    (14,582)       (11,335)       (11,437)        (13,152)       (50,506)
Acquisition and related integration costs        --             --             --              --             --
Restructuring costs                              --             --             (2,407)         (2,015)        (4,422)
Depreciation and amortization of intangible      (13,861)       (13,781)       (13,775)        (14,926)       (56,343)
assets
Impairment of goodwill and intangibles           --             --             (35,732)        --             (35,732)
Gains (losses), net on disposal of property and  (47)           (15)           (114)           7              (169)
equipment
Interest expense                                 (4,195)        (8,248)        (5,720)         (8,534)        (26,697)
Defined benefit pension plan expense             (3,467)        (3,467)        (3,551)         (3,627)        (14,112)
Miscellaneous, net                               (879)          5,103          1,187           5,225          10,636
Income (loss) from continuing operations before  $    (8,388)   $    11,739    $    (46,380)   $    10,953    $    (32,076)
income taxes
Operating results for our Local Media segment were as follows:
                                    2017
(in thousands)                      1st Quarter   2nd Quarter   3rd Quarter   4th Quarter   Total
Segment operating revenues:
Core advertising                    $   115,948   $   129,378   $   117,956   $   130,180   $   493,462
Political                           1,041         2,525         1,689         3,396         8,651
Retransmission                      66,211        66,059        63,733        63,496        259,499
Other revenue                       4,079         3,682         4,338         5,494         17,593
Total operating revenues            187,279       201,644       187,716       202,566       779,205
Segment costs and expenses:
Employee compensation and benefits  73,453        70,891        71,644        71,770        287,758
Programming                         45,150        44,838        47,809        49,148        186,945
Other expenses                      36,325        37,179        37,891        36,217        147,612
Total costs and expenses            154,928       152,908       157,344       157,135       622,315
Segment profit                      $   32,351    $   48,736    $   30,372    $   45,431    $   156,890
Operating results for National Media segment were as follows:
                                    2017
(in thousands)                      1st Quarter   2nd Quarter   3rd Quarter   4th Quarter  Total
Segment operating revenues:
Katz                                $   --        $   --        $   --        $   40,975   $   40,975
Midroll                             4,152         4,696         4,163         5,221        18,232
Newsy                               1,202         3,136         2,623         3,128        10,089
Other revenue                       1,973         2,477         2,779         3,649        10,878
Total operating revenues            7,327         10,309        9,565         52,973       80,174
Segment costs and expenses:
Employee compensation and benefits  6,505         6,643         6,189         11,784       31,121
Programming                         1,427         1,848         1,615         24,632       29,522
Other expenses                      3,352         5,414         6,135         13,890       28,791
Total costs and expenses            11,284        13,905        13,939        50,306       89,434
Segment profit                      $   (3,957)   $   (3,596)   $   (4,374)   $   2,667    $   (9,260)

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SOURCE The E.W. Scripps Company

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