Company is “exploring strategic alternatives for Shop At Home”; TV station group revenue down 9.5%; lifestyle cable nets revenue up 21%.
The E. W. Scripps Company today reported fourth quarter operating results, including strong revenue and segment profit growth at its national lifestyle television networks and at Shopzilla, the online comparison shopping service that Scripps acquired in June 2005.
Consolidated operating revenue for Scripps during the fourth quarter 2005 grew 17% year-over-year to $707 million. On a pro forma basis, as if Scripps had owned Shopzilla in 2004, operating revenue increased 12 percent.
However, the company recorded a $90.6 million non-cash, after-tax charge in the fourth quarter reflecting a write-down of goodwill and other intangible assets related to its Shop At Home electronic commerce subsidiary. The write-down is the result of continuing operating losses at Shop At Home and a longer than previously anticipated path to profitability. Scripps says it “is in the process of exploring strategic alternatives for Shop At Home.”
As a result, Scripps reported a net loss of $603,000 for the fourth quarter 2005 compared with net income of $91.3 million, or 55 cents per share during the same quarter a year ago. Excluding the Shop At Home charge, fourth quarter 2005 earnings per share were 54 cents.
Fourth quarter 2005 net loss also includes the non-cash effect of the decision earlier in the year to consolidate newspaper production operations in Denver. Earnings were reduced 4 cents per share reflecting the shortened useful life and subsequent higher depreciation expense for production equipment that will be replaced in Denver.
The company’s consolidated fourth quarter results benefited from continued strong financial performance at the company’s Scripps Networks division, which includes HGTV, Food Network, DIY Network, Fine Living and Great American Country.
Scripps Networks segment profit in the fourth quarter was up 34 percent year-over-year to $122 million. Segment profit excludes depreciation, amortization of intangible assets, interest, income taxes, investment results and certain other items that are included in net income. Total revenue for the Scripps Networks division increased 21% to $247 million. Advertising revenue at Scripps Networks was up 27% to $202 million.
At the Scripps Television Station Group, total revenue was down 9.5% to $89.4 million during the fourth quarter, primarily because of the decline in political advertising revenue. Political advertising revenue during the fourth quarter was $2.5 million compared with $21.0 million during the closing weeks of the 2004 national election campaigns.
Broadcast television segment profit was down 25% in the fourth quarter 2005 to $29.9 million.
At Shopzilla, the online comparison shopping service acquired by Scripps in June 2005, segment profit for the fourth quarter was $20.3 million on revenue of $63.2 million. In the fourth quarter of 2004 Shopzilla recorded $5.6 million of segment profit on $25.1 million of revenue.
At the company’s newspapers, total revenue increased 3.7% to $192 million. Advertising revenue at newspapers managed solely by Scripps was up 5.1% to $155 million.
Newspaper division segment profit during the fourth quarter was $55.4 million compared with $69.1 million during the same period last year. Much of the decline is attributable to the higher depreciation expense in Denver, which reduced the company’s equity in income from the Denver Newspaper Agency by $11.3 million. Scripps, which owns the Rocky Mountain News, and MediaNews Group, which owns The Denver Post, are partners in a joint operating agreement in Denver. Each shares 50% of the combined profits from the two newspapers.
At Shop At Home, fourth quarter revenue rose 1.7% to $90.9 million. The segment loss at Shop at Home in the fourth quarter was $10.4 million.
“Scripps Networks and Shopzilla delivered outstanding financial performance during the fourth quarter, but the good news at our fastest growing businesses was tempered by our need to write-down goodwill and other intangible assets at Shop At Home,ÃƒÆ’Ã‚Â¯Ãƒâ€šÃ‚Â¿Ãƒâ€šÃ‚Â½? said Kenneth W. Lowe, president and chief executive officer for Scripps.
“Despite our best efforts, we haven’t been able to secure consistently strong channel positions on cable systems across the country, which has hindered retail sales and profitability at Shop At Home,ÃƒÆ’Ã‚Â¯Ãƒâ€šÃ‚Â¿Ãƒâ€šÃ‚Â½? Lowe said. “While Internet sales are growing at a rapid pace, product sales generated by our television broadcasts have lagged because of the challenges we’ve had gaining affordable access to permanent, high-quality cable distribution for the network. Those factors, among others, prompted us to write down our investment during the fourth quarter and undertake a deliberate and careful assessment of strategic alternatives for Shop At Home. Our intention going forward is to maximize the value of Shop At Home for the benefit of our shareholders.ÃƒÆ’Ã‚Â¯Ãƒâ€šÃ‚Â¿Ãƒâ€šÃ‚Â½?
“Local and national advertising at our local television stations also grew during the quarter, but overall revenue was down because of the relative absence of political advertising this year compared to last,ÃƒÆ’Ã‚Â¯Ãƒâ€šÃ‚Â¿Ãƒâ€šÃ‚Â½? Lowe said. “We’re expecting solid 2006 results with the return of political advertising, the Super Bowl on ABC and the Winter Olympics on NBC.ÃƒÆ’Ã‚Â¯Ãƒâ€šÃ‚Â¿Ãƒâ€šÃ‚Â½?
“At Scripps Networks, the popularity of our lifestyle television brands, especially HGTV and Food Network, continue to reap significant benefits for the company and its shareholders,ÃƒÆ’Ã‚Â¯Ãƒâ€šÃ‚Â¿Ãƒâ€šÃ‚Â½? Lowe said. “Revenue and segment profit growth at HGTV and Food reflect the tremendous popularity of both networks and the success we’ve had developing a schedule of entertaining and informative programming that resonates with viewers. We continued to build these powerful brands during the fourth quarter, including the launch in December of a video-rich broadband channel called HGTVKitchenDesign.com. Scripps Networks continues to be our shining star.ÃƒÆ’Ã‚Â¯Ãƒâ€šÃ‚Â¿Ãƒâ€šÃ‚Â½?
“We’re also encouraged by the exceptional financial performance at our newest business, Shopzilla,ÃƒÆ’Ã‚Â¯Ãƒâ€šÃ‚Â¿Ãƒâ€šÃ‚Â½? Lowe said. “Shopzilla directly benefited during the holiday season from the growing number of consumers who are doing their shopping online. Revenue and segment profit at Shopzilla were up sharply during the fourth quarter, exceeding our expectations and reaffirming for us our belief that online consumers are quickly discovering its power as an easy-to-use shopping service.ÃƒÆ’Ã‚Â¯Ãƒâ€šÃ‚Â¿Ãƒâ€šÃ‚Â½?
“At newspapers managed solely by Scripps, revenue from local and classified advertising sales grew at a respectable pace, demonstrating, in part, the success we’re having with new print and online products we’ve launched in many of our markets,ÃƒÆ’Ã‚Â¯Ãƒâ€šÃ‚Â¿Ãƒâ€šÃ‚Â½? Lowe said. “Excluding our JOA newspapers, the segment profit generated by our newspaper division was essentially flat to the previous year, a positive story relative to rest of the industry.ÃƒÆ’Ã‚Â¯Ãƒâ€šÃ‚Â¿Ãƒâ€šÃ‚Â½?