Scripps provides 2005 financial outlook at CSFB investor conference in New York
Mon, December 06, 2004 by Tim Stautberg
NEW YORK – Senior managers of The E. W. Scripps Company will provide a general financial outlook for 2005 today during the Credit Suisse First Boston Media and Telecom Week Conference which is being held in New York City. Scripps management also will discuss the company’s long-term growth strategy, which includes continued expansion of its growing portfolio of national television networks – Home & Garden Television, Food Network, DIY Network, Fine Living and Great American Country (GAC).Participating in the Scripps presentation will be Kenneth W. Lowe, president and chief executive officer; Joseph G. NeCastro, senior vice president and chief financial officer; and Richard A. Boehne, executive vice president.The company will provide a general financial outlook for revenues and expenses in 2005 for each of the company’s business segments. The financial outlook, by segment, will include: Scripps Networks On a combined basis, advertising revenues at the company’s more developed networks, HGTV and Food Network, are expected to be up 20 to 25 percent and affiliate fee revenues are expected to increase about 15 percent. The company said it anticipates continued ad revenue growth based on the strength of advanced advertising sales through the first three quarters of 2005. The level of growth for the full year, however, will depend on the strength or weakness of the quarter-to-quarter sale of unreserved advertising time in the scatter market. The company is expecting next year’s quarterly scatter markets to be relatively stronger than the fourth quarter 2004.The company said it expects programming expenses for HGTV and Food Network to be up 10 to 15 percent and all other expenses will be up 20 to 25 percent as the company continues to invest in research, sales and marketing to support and grow these important brands.Segment losses related to the development of Fine Living, DIY, GAC and other emerging programming services will be $27 million to $34 million in the coming year. DIY is expected to report its first profitable quarter in the fourth quarter 2005.Looking at the entire Scripps Networks division on a combined basis, including the revenue and expenses of the company’s latest acquisition, GAC, Scripps Networks is expecting:Ad revenue up 25-30 percentAffiliate fees up 15 percentProgramming expenses up 15-20 percentAll other up 25-30 percentNewspapersExcluding Denver, the company expects the slow improvement in advertising to continue into 2005. Advertising revenues are expected to be up 3 to 5 percent.Non-newsprint cash expenses are expected to rise 3 to 5 percent.The company also is factoring in a 10 to 12 percent increase in newsprint costs, depending on the timing and magnitude of any price adjustments. The company is projecting a slight profit improvement in 2005 segment profits from its newspaper in Denver, the Rocky Mountain News. The company shares 50 percent of the profits generated by a joint operating agreement between the News and The Denver Post, which is owned by MediaNews Group.Broadcast television The absence of political advertising revenue in 2005 will make comparisons with 2004 difficult. The company recorded $42 million in political advertising revenue in 2004. Total television station ad revenues in 2005 are projected to be down 5 to 8 percent.Total cash expenses are expected to be about even with 2004. Shop At Home The company reported that it continues the process of implementing a long-term transition plan at Shop at Home Network that includes changing the mix of retail products sold on the network to more closely match the consumer and lifestyle categories targeted by its national television networks.The segment loss related to the transition at Shop at Home is expected to be $15 million to $20 million in 2005.Other itemsDepreciation and amortization will likely increase to $80 million to $90 million next year because of the $140 million acquisition of GAC in November. The company has not completed the purchase accounting for the transaction but anticipates amortizing a sizeable portion of the purchase price over a relatively short period of time. The company will provide a more precise number when it reports fourth quarter earnings in January. The tax rate will be about 36 percent. Minority interest will rise again in 2005 because of the increasing profitability of the Food Network. Projected minority interest of $50 million to $54 million largely reflects Tribune’s 31 percent interest in Food. The company will spend about $90 million to $110 million on capital projects next year, including another expansion of Scripps Networks headquarters in Knoxville, Tenn. Fourth quarter 2004 updateThe company made a slight adjustment to two components of its current quarter guidance. Continuing softness in the national television advertising scatter market will cause Scripps Networks ad revenue growth to be about 22 percent in the fourth quarter vs. the company’s previous guidance of about 25 percent. On the other hand, Scripps Networks affiliate fee revenue is now expected to increase about 50 percent in the quarter. The company’s original guidance was for 45 percent growth in affiliate fee revenue.Forward-looking statementsThis press release 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. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. The company’s written policy on forward-looking statements can be found on page F-5 of its 2004 SEC Form 10K and F-27 of its most recent Form 10Q.We undertake no obligation to publicly update any forward-looking statements to reflect events for circumstances after the date the statement is made.About ScrippsThe E.W. Scripps Company is a diverse media concern with interests in national lifestyle television networks, newspaper publishing, broadcast television, television retailing, interactive media and licensing and syndication. All of the company’s media businesses provide content and advertising services via the Internet.Scripps is organized into the following operating divisions. Scripps Networks, which includes the company’s growing portfolio of popular lifestyle television networks. Scripps Networks brands include Home & Garden Television, Food Network, DIY Network, Fine Living and Great American Country. Scripps Networks Web sites include FoodNetwork.com, HGTV.com, DIYnetwork.com, fineliving.com and gactv.com. Scripps Networks programming can be seen in 86 countries.Scripps Newspapers, including daily and community newspapers in 19 markets and the Washington-based Scripps Media Center, home to the Scripps Howard News Service. Scripps newspapers include the Rocky Mountain News in Denver, the Commercial Appeal in Memphis, the Knoxville (Tenn.) News Sentinel and the Ventura County (Calif.) Star. Scripps Television Station Group, including six ABC-affiliated stations, three NBC affiliates and one independent. Scripps operates broadcast television stations in Detroit, Cleveland, Cincinnati, Phoenix, Tampa, Baltimore, Kansas City, Mo., West Palm Beach, Fla., Tulsa, Okla., and Lawrence, Kan.Shop At Home Network, the company’s television retailing subsidiary, which markets a growing range of consumer goods directly to television viewers and visitors to the Shop At Home Web site, shopathometv.com. Shop At Home reaches about 51 million full-time equivalent U.S. households, including 5 million households via five Scripps-owned Shop At Home affiliated television stations.United Media, a leading licensing and syndication company. United Media is the worldwide licensing and syndication home of Peanuts, Dilbert and about 150 other features and characters.