Ad revenues for both television and newspapers were down again in Q3 for E.W. Scripps Company, although CEO Rich Boehne noted sequential improvement, particularly for TV. Focusing the company on maximum financial flexibility, Scripps is now essentially debt free.
During Q3, Scripps used a federal tax refund of $28.4 million to pay down its credit revolver. That left the company with $29.5 million in long-term debt at the end of the quarter, which is less than the $31.7 million in cash, cash-equivalents and short-term investments held by Scripps.
With that strong balance sheet, Boehne said the company has been able to actually increase spending in some areas while making prudent cuts where possible. “First, and most important, we decided that local news and information provided by TV stations and newspapers should be approached as a consumer product. And consumers, faced with many choices, will flee unless we deliver compelling quality and value. That decision in the third quarter resulted in the protection of journalism positions in our newsrooms – and in some cases direct investment in the quality of our content. The television stations, for example, are deep into a large scale training program aimed at increasing the quantity and quality of local content we offer on-air and on the web. This program would be an easy expense to cut, given the current weakness in revenues, but with so many of our competitors pulling back on product, we’ve decided to push ahead and invest in audience gains while the opportunity is available,” Boehne told investors and analysts in his quarterly conference call. He also insisted that the company’s heavy exposure to the ailing markets of Florida will pay off, since the state now offers a value proposition to potential homebuyers after suffering steep drops in real estate values.
Total Q3 revenues were down 19% to $186 million. The company posted a net loss from continuing operations of $3.5 million, or seven cents per share.
Television revenues declined 22% to $59.8 million and TV segment profits were $3.1 million. That was down significantly from $17 million in profits from a year ago, but CFO Tim Stoutberg was happy to report that the TV division remained in the black for the second consecutive quarter, following red ink in Q1 of this year.
Local advertising revenues for the TV group declined 15% to $36 million, national was down 18% to $16.1 million, and political was only $1.7 million, down from $10.3 million a year earlier. Other revenue, including retransmission consent fees, rose 44% to $4.2 million. Boehne noted that most of the retrans payments under existing contracts remained with Scripps Networks Interactive when the two companies separated, so retrans will be a future growth area for E.W. Scripps as those contracts come up for renewal.
Newspaper revenues fell 20% in Q3 to $104 million. Within that, ad revenues were dwon 27% to $73.3 million. Local dropped 27%, national 17% and classified plunged 36%. Circulation revenues rose 2.8% to $27.3 million.
For the current quarter, Stoutberg noted that the TV group is up against tough comps from $26 million of political ad revenues in Q4 2008. That number is expected to be only $2.4 million this year. “Looking ahead to the fourth quarter, we believe the advertising expense trend observed in the third quarter will continue. Newspaper ad revenue declines are moderating slightly and local and national TV revenues have shown gradual sequential improvement,” the CFO said.