The E. W. Scripps Company (SSP)
Q2 2010 Earnings Call Transcript
August 9, 2010 9:00 am ET
Tim King – VP, Corporate Communications and IR
– SVP and CFO
– President and CEO
– SVP, Newspapers
– SVP, Television
Alexia Quadrani – J.P. Morgan
Craig Huber – Access 342
Edward Atorino – Benchmark
Scott Davis – J.P. Morgan
Previous Statements by SSP
» The E.W. Scripps Company Q1 2010 Earnings Call Transcript
» The E. W. Scripps Company Q3 2009 Earnings Call Transcript
» The E. W. Scripps Company Q2 2009 Earnings Call Transcript
Ladies and gentlemen, thank you for standing by. Welcome to the second quarter earnings report conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mr. Tim King. Please go ahead, sir.
Thank you, Roxanne, and good morning, everybody. We appreciate you joining us for this call. We're going to start this morning with Tim Stautberg, the senior vice president and chief financial officer. He'll discuss the second quarter financial and operational highlights. He'll cover some non-operating data, and then give you a little bit more color on trends for the benefit of your third quarter models. Then you'll hear from Rich Boehne, our president and CEO, who will provide some context as we look over the longer term horizon. Then of course, we'll open up the lines for a Q&A that will include Mark Contreras, who runs the newspaper division; Brian Lawlor, who's in charge of our TV stations; and, Doug Lyons, our controller.
Now, the commentary you'll hear from our executives this morning may contain certain forward-looking statements. And actual results for future periods may differ from those predicted. On page 11 of the 2009 Form 10-K, you can read some of the factors that may cause the results to differ from what you're about to hear.
And as a reminder, you can access a streaming audio replay of this call by going to scripps.com, and clicking on the Investor Relations link at the top of the page. It will be active later on this afternoon. And we'll keep it there for a couple of weeks.
So with that, I'll turn it right over to Tim Stautberg.
Thanks, Tim, and good morning, everyone. It's a hopeful sign of the times that we felt a year-over-year consolidated revenue increase was noteworthy enough to be called out in the narrative of our earnings release. For decades, the only mystery in a media company's earnings report was the magnitude of the year-over-year revenue increase. But that changed with the onset of the current secular and cyclical challenges. We're still a long way from some of our businesses being as vibrant as we'd like them to be, but reason for optimism can be found at some of the numbers we released today.
The positive news on revenue occurred despite the fact that we're not yet feeling the full effects of political advertising on our television stations. As you know, the heaviest political spending tends to fall between Labor Day and Election Day. And in the current environment, where no incumbent feels safe, it's reasonable during the third and fourth quarters to expect TV stations across the country, especially those like the Scripps stations that are positioned in battle-ground states, to have a very satisfying political season. Despite the absence of the full force of political advertising, our consolidated revenues in the June quarter increased more than 5%, compared with the second quarter last year.
Our costs increased, too, but at the slower rate of 2.7%, excluding restructuring costs. Dramatic expense cuts implemented early last year helped our bottom line for the past four quarters. But our comparisons now include the effects of those cuts in the year-ago quarter, some of which were temporary in nature and are being restored this year.
In the second quarter of 2010, for example, consolidated expenses increased due to, among other things, the resumption of normal marketing activities to support the May sweeps period at our TV stations, which we suspended last year; and, an accrual for network programming expenses that I'll talk about in more detail in just a few minutes. As a result, our income from continuing operations before taxes was $3.7 million, compared with $1.6 million in the year-ago quarter.
We reported income from continuing operations after tax of $0.03 per share in the second quarter, compared with $0.04 per share last year, reflecting a tax benefit of $800,000 in the 2009 quarter.
In early June, we closed on the sale of our licensing business to Iconix Group for $175 million in cash; the operating results of that business; and, the $96 million after-tax gain on the sale, now reported as discontinued operations. Including the results of discontinued operations and the gain on the sale of the licensing business, Scripps reported net income of $99.5 million or $1.56 per share, compared with $2.3 million or $0.04 per share in the second quarter of 2009.
Let's turn now to the operations by starting with our TV stations. The momentum that started late last year strengthened in the second quarter, with revenue increasing 22% over the second quarter of last year. We noted in the press release that the gain is not due just to election year seasonality. The sequential revenue improvements of the second quarter over the first quarter in the last two election cycles were less than half of what we reported this morning, importantly, the momentum built throughout the quarter with total revenues of 27% in June.