beat fourth-quarter targets, citing strong results at its lifestyle networks and online comparison shopping outlet.
The Cincinnati-based media outfit posted a 12% pro forma revenue gain, assuming it had owned its recently acquired Shopzilla property in the earlier quarter. But the company swung to a latest-quarter loss after taking a $91 million charge to write down the value of its Shop At Home subsidiary, which Scripps is shopping around.
For the quarter ended Dec. 31, Scripps lost $603,000, or less than a penny a share, reversing the year-ago profit of $91.3 million, or 55 cents per share. Revenue rose to $707 million from $606 million a year earlier. Excluding the Shop At Home charge, the latest-quarter profit was 54 cents a share.
Analysts were looking for 49 cents a share on $698.4 million in revenue.
"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," said CEO Ken Lowe.
The company has had difficulty securing strong channel positions on cable systems for Shop At Home, which it claims has hindered retail sales and profitability.
"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," said Lowe. "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."
Despite the write-down, the networks division continued to perform well, with revenue up 21% to $247 million and profit in the segment up 34% to $122 million. That division includes the company's popular HGTV, Food Network, DIY Network and others.
At Shopzilla, the online comparison shopping service Scripps acquired last spring, profit for the fourth quarter was $20.3 million on revenue of $63.2 million.
The company's newspapers division saw slower revenue growth, with revenue up 3.7% to $192 million. Meanwhile, revenue at the company's Television Station Group revenue was down 9.5% to $89.4 million during the fourth quarter, primarily because of the decline in political advertising revenue compared to fourth quarter 2004.
"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," 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."
Based on advance advertising sales, the company expects first-quarter revenue for the networks will be up 18% to 20% year over year. The company says expenses are expected to increase about 15% in the first quarter as the company continues to invest in building viewership across its networks.
It expects newspaper revenue to be up 3% to 5% over the prior year in the first quarter. Total newspaper expenses are expected to increase 10% to 13%. At the company's broadcast television stations, total revenue is expected to be up 12% to 15% in the first quarter. Advertising revenue tied to the Super Bowl and Olympics could reach $8 million. Shopzilla is expected to generate segment profit of about $10 million in the first quarter. Losses at Shop At Home are expected to reduce first-quarter segment profit by $7 million to $10 million.
First-quarter earnings per share are expected to be between 38 cents and 42 cents, including the effect of expensing stock options granted to employees. Earnings per share during the first quarter of 2005 were 42 cents. Analysts were looking for 44 cents.
Scripps shares rose 97 cents early Thursday to $49.22.