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Scripps Reports Third Quarter Results

CINCINNATI, Oct. 17 /PRNewswire-FirstCall/ -- The E. W. Scripps Company (NYSE: SSP) today reported third quarter operating results, including strong revenue growth at its national lifestyle television networks, local broadcast TV stations and interactive media businesses, Shopzilla and uSwitch.

Third quarter income from continuing operations was $78.4 million, or 48 cents per share, compared with $63.8 million, or 39 cents per share, during the same period a year earlier. Third quarter earnings also were affected by the expensing of employee stock options, which commenced on Jan. 1. The stock option expense reduced earnings for the period by $2.6 million after tax, or 2 cents per share.

Consolidated revenue from continuing operations rose 13 percent year-over- year during the third quarter to $583 million. On a pro forma basis, as if Scripps had owned Shopzilla and uSwitch since Jan. 1, 2005, third quarter operating revenue from continuing operations increased 12 percent.

Operating income was up 24 percent to $138 million during the three-month period.

Operating results from the company's former television retailing subsidiary, Shop At Home, and former newspaper in Birmingham, Ala., have been reclassified as discontinued operations for all periods presented in the company's financial statements.

The company sold the Shop At Home television network in June and announced in September that it had reached an agreement to sell its five Shop At Home- affiliated broadcast television stations. The sale of the stations for $170 million is expected to be completed during the first half of 2007. The Birmingham newspaper was closed during the third quarter of 2005.

The company's net income for the third quarter was $73.1 million compared with $82.2 million for the year-ago period. Net income was reduced by a $5.4 million loss from discontinued operations, including an after-tax impairment charge of $4.9 million on the intangible assets associated with the five TV stations held for sale at Shop At Home. During the third quarter of 2005, income from discontinued operations was $18.3 million, reflecting the net effect of a cash payment the company received for terminating the newspaper joint operating agreement to which it was a party in Birmingham offset by operating losses at Shop At Home.

Consolidated third quarter results for Scripps benefited from strong financial performance at the company's Scripps Networks division, which includes HGTV, Food Network, DIY Network, Fine Living and Great American Country.

Total revenue at Scripps Networks increased 19 percent to $249 million. Scripps Networks advertising revenue was up 18 percent to $192 million. Segment profit at Scripps Networks was up 32 percent year-over-year to $116 million.

At the company's Scripps Interactive Media division, which includes Shopzilla and uSwitch, third quarter segment profit reached $9.0 million on revenue of $60.9 million. On a pro forma basis, as if Scripps had owned Shopzilla and uSwitch since Jan. 1, 2005, interactive media division revenue was up about 50 percent. Shopzilla is a leading search and price comparison Web site for consumer products in the U.S. In the United Kingdom, uSwitch is a leading Web site for consumers who want to find, compare and switch essential home services.

At the company's local television stations third quarter revenue was up 12 percent to $81.7 million, due primarily to increased political advertising revenue. Political advertising during the period was $11.7 million compared with $1.0 million during the same period a year ago. Broadcast television segment profit for the period was up 54 percent to $22.7 million.

Revenue at newspapers managed solely by Scripps was up 0.8 percent to $168 million, excluding newspapers that were contributed to a partnership in Colorado created during the first quarter. Advertising revenue at newspapers managed solely by Scripps was up 0.7 percent to $134 million. Online newspaper advertising revenue was up 40 percent, year over year.

The newspaper division's contribution to segment profit was $39.7 million compared with $41.6 million during the same period in 2005. Total segment profit for the Scripps newspaper division was negatively affected by soft advertising sales, the continued investment in division-wide online initiatives and new products in the company's Florida markets.

"Scripps had a very solid third quarter thanks primarily to strong advertising sales at our national lifestyle television networks and a flood of political advertising at our local television stations," said Kenneth W. Lowe, the company's president and chief executive officer. "Ratings and viewership at HGTV and Food Network have good momentum, providing a sound foundation for strong double-digit increases in advertising revenue and segment profit at our Scripps Networks division.

"The Scripps Television Station Group also fared well during the three- month period as a result of strong political advertising in our key television markets," Lowe said. "Our stations are benefiting from vigorously contested races, primarily in Ohio, Michigan and Florida.

"Strong financial performance at Shopzilla and uSwitch also contributed to the company's consolidated growth," Lowe said. "Consumers in growing numbers in the U.S. and the U.K. are turning to our Internet search businesses to shop for the best deals on retail products and essential home services.

"At the company's newspapers, a generally soft advertising climate, led by declines in national advertising and automotive and help wanted classified advertising, held back revenue and segment profit growth during the quarter," Lowe said. "Online newspaper advertising revenue, however, continues to be a bright spot, delivering very strong double-digit growth as we effectively monetize the Internet audiences that we're aggregating."

Following are third quarter results by segment:

Scripps Networks

Scripps Networks advertising revenue increased 18 percent to $192 million. Affiliate fee revenue was $49.0 million, up 12 percent.

Programming, marketing and other expenses increased 8.7 percent to $104 million. Employee costs were up 14 percent to $32.5 million.

Scripps Networks segment profit was $116 million, up 32 percent from $87.9 million in the prior-year period.

HGTV contributed $79.3 million to segment profit, up 19 percent from the year-ago period. HGTV revenue grew 16 percent to $123 million. HGTV now reaches about 91 million domestic subscribers compared with 89 million at the end of the third quarter 2005.

Food Network contributed $61.4 million to segment profit, up 37 percent from the third quarter last year. Food Network revenue grew 23 percent to $98.0 million. Food Network reaches about 91 million domestic subscribers, up from 88 million at the end of the third quarter 2005.

DIY contributed $100,000 to segment profit compared with $2.0 million in the third quarter 2005. DIY's contribution to segment profit was lower due to the company's decision to increase spending on original programming in preparation for the network becoming a Nielsen-rated service. Third quarter revenue at DIY was $12.3 million compared with $11.1 million in 2005. DIY can be seen in about 39 million households, up from about 35 million a year ago.

Fine Living contributed $1.9 million to segment profit compared with a $300,000 segment loss in 2005. Fine Living revenue increased to $9.1 million from $6.4 million the previous year. Fine Living reaches about 40 million households vs. 29 million at this time a year ago.

Revenue at Great American Country was $4.8 million compared with $3.9 million in 2005. An increase in programming and marketing expenses to build viewership caused Great American Country's contribution to segment profit to be about even with the prior-year period. Great American Country can be seen in about 44 million homes compared with 39 million a year ago.

Newspapers

Revenue from newspapers managed solely by Scripps was up 0.8 percent to $168 million. Advertising revenue from newspapers managed solely by Scripps increased 0.7 percent to $134 million.

    Advertising revenue broken down by category was:

     - Local, up 0.6 percent to $35.4 million.
     - Classified, down 0.7 percent to $54.1 million.
     - National, down 22 percent to $8.2 million.
     - Preprint, online and other, up 10 percent to $36.1 million. Online
       advertising was up 40 percent.

    Circulation revenue was $30.5 million, up 1.8 percent.

Newsprint expense increased 3.8 percent on a 7.0 percent increase in newsprint prices.

Total newspaper segment profit was $39.7 million, compared with $41.6 million in the prior-year period.

The decline in total newspaper segment profit is attributable, in part, to continuing investments in division-wide online initiatives and new products in growing Florida markets.

The company reported a contribution to segment profit of $1.6 million vs. a segment loss of $1.8 million a year earlier from its newspapers operated under joint operating agreements and other partnerships. The improvement is due solely to lower depreciation costs related to an ongoing capital improvement project to consolidate production operations in Denver. Weak advertising sales at the Denver JOA continued in the third quarter.

Interactive Media

Revenue from the company's online search and comparison shopping services, Shopzilla and uSwitch, was $60.9 million for the third quarter. Segment profit was $9.0 million. On a pro forma basis, as if the company had owned both businesses since Jan. 1, 2005, combined revenue at Shopzilla and uSwitch increased about 50 percent during the third quarter.

    Broadcast Television
    Broadcast television revenue increased 12 percent to $81.7 million.
    Revenue broken down by advertising category was:

     - Political, $11.7 million vs. $1.0 million for the same period in 2005.
     - Local, down 0.7 percent to $44.7 million.
     - National, down 7.6 percent to $22.0 million.

The declines in the local and national categories were due, in part, to the displacement of regular inventory to accommodate the increased volume of political advertising business that occurred during the last month of the quarter.

Broadcast television cash expenses were $59.0 million, up 1.5 percent from the prior-year period. The increase included the effects of expensing stock options.

Broadcast television segment profit was $22.7 million, up 54 percent from the prior-year period.

Licensing and Other Media

Revenue was $24.6 million compared with $24.2 million in the prior-year period.

Segment profit was $4.0 million compared with $4.4 million in the third quarter 2005.

Discontinued operations

In June the company sold the Shop At Home television retailing network for $17 million in cash. During the third quarter, the company announced that it had reached agreement to sell its five Shop At Home-affiliated broadcast television stations for $170 million. The sale of the stations is expected to be completed during the first half of 2007.

Discontinued operations also include the company's former newspaper in Birmingham, Ala., which was closed during the third quarter of 2005.

Fourth Quarter Guidance

Employee costs will include approximately $4.0 million (pre-tax) or 2 cents per share, related to expensing stock options granted to employees. The additional cost is reflected in the guidance provided below.

Based on advance advertising sales, the company currently anticipates total revenue for Scripps Networks will be up 11 to 13 percent year over year. Total Scripps Networks expenses are expected to increase 8 to 10 percent during the quarter as the company continues to build consumer awareness and expand distribution of its television and online lifestyle brands.

For newspapers managed solely by Scripps, total revenue is expected to be up slightly over the prior year. Total newspaper expenses are expected to increase about 5 percent during the period.

The contribution to segment profit coming from JOA newspapers and other partnerships is expected to be about $4 million in the quarter.

At the company's broadcast television stations, total revenue, including political, is expected to be up 11 to 13 percent.

Interactive media is expected to generate segment profit of about $26 million in the quarter.

Corporate expenses are expected to be about $15 million.

Depreciation and amortization are expected to be $31 million and interest expense is expected to be about $14 million.

Earnings per share from continuing operations are expected to be between 67 cents and 71 cents. Earnings per share from continuing operations during the fourth quarter of 2005 were 60 cents.

Conference call

The senior management team at Scripps will discuss the company's third quarter results during a telephone conference call at 10 a.m. EDT today. Scripps will offer a live audio webcast of the conference call. To access the webcast, visit http://www.scripps.com, choose "Shareholders," then follow the link in the "Upcoming Events" section. Listeners need Windows Media Player to access the call online.

To access the conference call by telephone, dial 1-888-428-4480 (U.S.) or 1-612-332-0932 (International), approximately 10 minutes before the start of the call. Callers will need the name of the call (third quarter earnings report) to be granted access. Callers also will be asked to provide their name and company affiliation. The media and general public are provided access to the conference call on a listen-only basis.

A replay line will be open from 1:30 p.m. EDT today until 11:59 p.m. EDT Oct. 24. The domestic number to access the replay is 1-800-475-6701 and the international number is 1-320-365-3844. The access code for both numbers is 843889.

A replay of the conference call will be archived and available online for an extended period of time following the call. To access the audio replay, visit http://www.scripps.com approximately four hours after the call, choose "Shareholders" then follow the "audio archives" link on the left navigation bar.

Forward-looking statements

This 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 2005 SEC Form 10K.

We undertake no obligation to publicly update any forward-looking statements to reflect events for circumstances after the date the statement is made.

About Scripps

The E. W. Scripps Company (NYSE: SSP) is a diverse and growing media enterprise with interests in national cable networks, newspaper publishing, broadcast television stations, interactive media, and licensing and syndication.

The company's portfolio of media properties includes: Scripps Networks, with such brands as HGTV, Food Network, DIY Network, Fine Living and Great American Country; daily and community newspapers in 18 markets and the Washington-based Scripps Media Center, home to the Scripps Howard News Service; 10 broadcast TV stations, including six ABC-affiliated stations, three NBC affiliates and one independent; Scripps Interactive Media, including leading online search and comparison shopping services, Shopzilla and uSwitch; and United Media, a leading worldwide licensing and syndication company that is the home of PEANUTS, DILBERT and approximately 150 other features and comics.



    THE E. W. SCRIPPS COMPANY
    RESULTS OF OPERATIONS
    (in thousands, except per share data)    Three months ended Sept. 30,
                                              2006      2005      Fav(Unf)

    Operating revenues                     $583,449   $515,332      13.2 %
    Costs and expenses                     (418,615)  (378,593)    (10.6)%
    Depreciation and amortization
     of intangibles                         (27,128)   (25,307)     (7.2)%
    Gain on formation of Colorado
     newspaper partnership
    Gains (losses) on disposal of PP&E         (277)      (107)
    Hurricane recoveries, net                   150

    Operating income                        137,579    111,325      23.6 %
    Interest expense                        (15,281)   (12,136)    (25.9)%
    Equity in earnings of JOAs and
     other joint ventures                    13,942     10,096      38.1 %
    Interest and dividend income                713      3,758     (81.0)%
    Miscellaneous, net                        1,421        417

    Income from continuing operations
     before income taxes and minority
     interests                              138,374    113,460      22.0 %
    Provision for income taxes               44,132     37,895     (16.5)%

    Income from continuing operations before
    minority interests                       94,242     75,565      24.7 %
    Minority interests                       15,806     11,729     (34.8)%

    Income from continuing operations        78,436     63,836      22.9 %
    Income (loss) from discontinued
     operations, net of tax                  (5,373)    18,320

    Net income                              $73,063    $82,156     (11.1)%

    Net income (loss) per diluted share
     of common stock:
       Income from continuing operations      $ .48      $ .39      24.6 %
       Income (loss) from discontinued
        operations                             (.03)       .11
    Net income per diluted share of
     common stock                             $ .44      $ .50     (12.0)%

    Weighted average diluted shares
     outstanding                            164,512    165,703


                                             Nine months ended Sept. 30,
                                             2006       2005     Fav(Unf)

    Operating revenues                   $1,815,092  $1,538,706     18.0 %
    Costs and expenses                   (1,261,801) (1,079,783)   (16.9)%
    Depreciation and amortization
     of intangibles                         (85,909)    (56,782)   (51.3)%
    Gain on formation of Colorado
     newspaper partnership                    3,535
    Gains (losses) on disposal of PP&E         (433)        (65)
    Hurricane recoveries, net                 1,900       1,892      0.4 %

    Operating income                        472,384     403,968     16.9 %
    Interest expense                        (42,971)    (27,067)   (58.8)%
    Equity in earnings of JOAs and
     other joint ventures                    39,923      49,456    (19.3)%
    Interest and dividend income              1,864       4,340    (57.1)%
    Miscellaneous, net                        3,400         350

    Income from continuing operations
     before income taxes and minority
     interests                              474,600     431,047     10.1 %
    Provision for income taxes              159,929     150,968     (5.9)%

    Income from continuing operations before
    minority interests                      314,671     280,079     12.4 %
    Minority interests                       49,881      40,354    (23.6)%

    Income from continuing operations       264,790     239,725     10.5 %
    Income (loss) from discontinued
     operations, net of tax                 (45,518)     10,031

    Net income                             $219,272    $249,756    (12.2)%

    Net income (loss) per diluted share
     of common stock:
       Income from continuing operations     $ 1.61       $1.45     10.9 %
       Income (loss) from discontinued
        operations                             (.28)        .06
    Net income per diluted share of
     common stock                            $ 1.33       $1.51    (11.9)%

    Weighted average diluted shares
     outstanding                            164,842     165,502


    Net income per share amounts may not foot since each is calculated
     independently.

    See notes to results of operations.



                        Notes to Results of Operations

    1. DISCONTINUED OPERATIONS

On June 21, 2006, we reached agreement to sell the operations of the Shop At Home television network and certain of its assets to Jewelry Television. Under the terms of the agreement, Jewelry Television also assumed a number of Shop At Home's television affiliation agreements. In the third quarter of 2006, we reached agreement to sell the five Shop At Home-affiliated broadcast television stations to Multicultural Television Broadcasting LLC.

In the third quarter of 2005, we reached an agreement with Advance Publications, Inc., the publisher of the Birmingham News ("News"), to terminate the Birmingham joint operating agreement between the News and our Birmingham Post-Herald newspaper. During the third quarter of 2005, we also ceased publication of our Birmingham Post-Herald newspaper and sold certain assets to the News.

In accordance with the provisions of Financial Accounting Standards ("FAS") 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", the results of businesses held for sale or that have ceased operations are presented as discontinued operations within our results of operations. Accordingly, these businesses have also been excluded from segment results for all periods presented.



    Operating results of our discontinued operations were as follows:

    (in thousands)            Three months                  Nine months
                             ended Sept. 30,               ended Sept. 30,
                         2006      2005  Fav(Unf)     2006      2005  Fav(Unf)

    Operating revenues:
      Shop At Home     $1,962   $79,370  (97.5)%  $166,584  $268,382  (37.9)%
      Birmingham-Post
       Herald                         9                           27
    Total operating
     revenues          $1,962   $79,379  (97.5)%  $166,584  $268,409  (37.9)%

    Equity in earnings
     of JOA, including
     termination fee            $41,970                      $45,423

    Income (loss) from
     discontinued
     operations:
    Shop At Home:
      Loss from
       operations     $(8,110)  $(9,836)  17.5 %  $(58,612) $(24,688)
      Loss on
       divestiture                                 (12,054)
    Total Shop At Home (8,110)   (9,836)  17.5 %   (70,666)  (24,688)
    Birmingham-Post
     Herald                      40,658                 (2)   42,799
    Income (loss) from
     discontinued
     operations,
     before tax        (8,110)   30,822            (70,668)   18,111
    Income taxes
     (benefit)         (2,737)   12,502            (25,150)    8,080

    Income (loss) from
     discontinued
     operations       $(5,373)  $18,320           $(45,518)  $10,031

In connection with reaching agreement on the sale of the five Shop At Home-affiliated broadcast television stations, we recognized an impairment charge on our FCC intangible assets totaling $7.5 million in the third quarter of 2006.

Shop At Home's loss from operations in the 2006 year-to-date period also includes $15.6 million in costs associated with the termination of long-term agreements and employee termination benefits, and a $6.4 million non-cash charge to write-down assets on the Shop At Home television network.

The loss on divestiture in 2006 represents losses on the sale of property and other assets to Jewelry Television.

In 2005, we received cash consideration of approximately $40.8 million from the transactions associated with the termination of the Birmingham joint operating agreement and selling certain assets of the Birmingham-Post Herald newspaper. Third quarter 2005 net income was increased by $24.2 million.


    2. STOCK-BASED COMPENSATION COSTS AND OTHER CHARGES AND CREDITS

    Net income was affected by the following:

    Stock-based compensation costs

Beginning on January 1, 2006, we adopted the requirements of FAS 123R, "Share-Based Payments", and began recording compensation expense on stock options granted to employees. Stock option expense, including the costs of immediately expensed options granted to retiree eligible employees, increased our costs and expenses $4.2 million in the third quarter of 2006 and $17.0 million for the year-to-date period of 2006. Net income was reduced by $2.6 million, $.02 per share in the third quarter of 2006. Year-to-date net income was reduced by $10.7 million, $.07 per share. Based upon stock options issued through September 30, 2006, we expect stock option expense to increase our costs and expenses by approximately $4.0 million for the remainder of 2006.

Gain on formation of Colorado newspaper partnership

In February of 2006, we completed the formation of a newspaper partnership with MediaNews Group, Inc. ("MediaNews") that will operate certain of both companies' newspapers in Colorado. We contributed the assets of our Boulder Daily Camera, Colorado Daily and Bloomfield Enterprise newspapers for a 50% interest in the partnership. MediaNews contributed the assets of publications they operate in Colorado. In addition, MediaNews also paid us cash consideration of $20.4 million. We recognized a pre-tax gain of $3.5 million in the first quarter of 2006 upon completion of the transaction. Net income was increased by $2.1 million, $.01 per share.

Denver newspaper production facilities

In the third quarter of 2005, the management committee of the Denver Newspaper Agency ("DNA") approved plans to consolidate DNA's newspaper production facilities. As a result, assets used in certain of the existing facilities will be retired earlier than previously estimated. The reduction in these assets' estimated useful lives increased DNA's depreciation expense in 2006 and 2005. The increased depreciation resulted in a $3.0 million decrease in our equity in earnings from JOAs in the third quarter of 2006 and $9.1 million in the third quarter 2005. Third quarter net income was decreased by $1.9 million, $.01 per share in 2006 and $5.7 million, $.03 per share in 2005.

Year-to-date equity in earnings from JOAs was decreased $9.3 million in 2006 reducing net income by $5.7 million, $.04 per share. The increased depreciation is expected to decrease equity in earnings from JOAs approximately $3.0 million in each remaining quarter until the second quarter of 2007.

Hurricanes

Certain of our Florida operations sustained hurricane damages in 2004 and 2005. Throughout the course of 2005 and 2006, we reached agreements with insurance providers and other responsible third parties on certain of our property and business interruption claims and recorded year-to-date insurance recoveries of $1.9 million in 2006 and $2.2 million in 2005. The insurance recoveries recorded in 2005 were partially offset by additional estimated losses of $0.3 million. Year-to-date net income was increased by $1.2 million, $.01 per share in 2006 and 2005.

3. SEGMENT INFORMATION

Our reportable segments are strategic businesses that offer different products and services. Scripps Networks includes national television networks, Newspapers includes daily and community newspapers, Broadcast television includes nine network affiliated stations and one independent station, Interactive media includes our online search and comparison shopping services, and Licensing and other media primarily includes syndication and licensing of news features and comics.

Our chief operating decision maker (as defined by FAS 131 - Segment Reporting) evaluates the operating performance of our business segments using a measure we call segment profits. Segment profits excludes interest, income taxes, depreciation and amortization, divested operating units, restructuring activities, investment results and certain other items that are included in net income determined in accordance with accounting principles generally accepted in the United States of America.

Items excluded from segment profits generally result from decisions made in prior periods or from decisions made by corporate executives rather than the managers of the business segments. Depreciation and amortization charges are the result of decisions made in prior periods regarding the allocation of resources and are therefore excluded from the measure. Financing, tax structure and divestiture decisions are generally made by corporate executives. Excluding these items from our business segment performance measure enables us to evaluate business segment operating performance for the current period based upon current economic conditions and decisions made by the managers of those business segments in the current period.

We account for our share of the earnings of joint operating agreements ("JOAs") and newspaper partnerships using the equity method of accounting. Our equity in earnings of JOAs and newspaper partnerships is included in "Equity in earnings of JOAs and other joint ventures" in our Results of Operations. Newspaper segment profits include equity in earnings of JOAs and newspaper partnerships. Scripps Networks segment profits include equity in earnings of FOX Sports Net South and joint ventures with foreign entities.


    Information regarding the operating performance of our business segments
determined in accordance with FAS 131 and reconciliation to our Results of
Operations is as follows:



    (in thousands)                            Three months ended Sept. 30,
                                              2006       2005     Fav(Unf)

    Segment operating revenues:
      Scripps Networks                      $248,795    $209,115    19.0 %

      Newspapers:
        Newspapers managed solely by us      167,892     166,543     0.8 %
        JOAs and newspaper partnerships           43         181   (76.2)%
      Total                                  167,935     166,724     0.7 %
      Boulder prior to formation of Colorado
       newspaper partnership                               7,314
      Total newspapers                       167,935     174,038    (3.5)%
      Broadcast television                    81,667      72,808    12.2 %
      Interactive media                       60,864      35,210    72.9 %
      Licensing and other media               24,647      24,214     1.8 %
      Corporate/intercompany                   (459)        (53)

    Total operating revenues                $583,449    $515,332    13.2 %

    Segment profit (loss):
      Scripps Networks                      $116,247     $87,943    32.2 %

      Newspapers:
        Newspapers managed solely by us       38,110      42,187    (9.7)%
        JOAs and newspaper partnerships        1,568     (1,829)
      Total                                   39,678      40,358    (1.7)%
      Boulder prior to formation of Colorado
       newspaper partnership                               1,241
      Total newspapers                        39,678      41,599    (4.6)%
      Broadcast television                    22,694      14,714    54.2 %
      Interactive media                        8,957       7,309    22.5 %
      Licensing and other media                4,007       4,425    (9.4)%
      Corporate/intercompany                (12,657)     (9,155)   (38.3)%
    Depreciation and amortization of
     intangibles                            (27,128)    (25,307)    (7.2)%
    Gain on formation of Colorado
     newspaper partnership
    Gains (losses) on disposal of PP&E         (277)       (107)
    Interest expense                        (15,281)    (12,136)   (25.9)%
    Interest and dividend income                 713       3,758   (81.0)%
    Miscellaneous, net                         1,421         417

    Income from continuing operations
     before income taxes and minority
     interests                              $138,374    $113,460    22.0 %



    (in thousands)                            Nine months ended Sept. 30,
                                              2006        2005    Fav(Unf)

    Segment operating revenues:
      Scripps Networks                      $772,700    $656,092    17.8 %

      Newspapers:
        Newspapers managed solely by us      533,988     516,009     3.5 %
        JOAs and newspaper partnerships          147         331   (55.5)%
      Total                                  534,135     516,340     3.4 %
      Boulder prior to formation of Colorado
       newspaper partnership                   2,189      20,716   (89.4)%
      Total newspapers                       536,324     537,056    (0.1)%
      Broadcast television                   251,875     228,251    10.4 %
      Interactive media                      184,472      36,257
      Licensing and other media               70,778      81,227   (12.9)%
      Corporate/intercompany                 (1,057)       (177)

    Total operating revenues              $1,815,092  $1,538,706    18.0 %

    Segment profit (loss):
      Scripps Networks                      $373,062    $292,345    27.6 %

      Newspapers:
        Newspapers managed solely by us      141,835     149,798    (5.3)%
        JOAs and newspaper partnerships        2,984      14,674   (79.7)%
      Total                                  144,819     164,472   (11.9)%
      Boulder prior to formation of Colorado
       newspaper partnership                   (125)       2,799
      Total newspapers                       144,694     167,271   (13.5)%
      Broadcast television                    71,598      58,067    23.3 %
      Interactive media                       39,341       7,667
      Licensing and other media               10,027      15,609   (35.8)%
      Corporate/intercompany                (43,608)    (30,688)   (42.1)%
    Depreciation and amortization of
     intangibles                            (85,909)    (56,782)   (51.3)%
    Gain on formation of Colorado
     newspaper partnership                     3,535
    Gains (losses) on disposal of PP&E         (433)        (65)
    Interest expense                        (42,971)    (27,067)   (58.8)%
    Interest and dividend income               1,864       4,340   (57.1)%
    Miscellaneous, net                         3,400         350

    Income from continuing operations
     before income taxes and minority
     interests                              $474,600    $431,047    10.1 %


Certain items required to reconcile segment profitability to consolidated results of operations determined in accordance with accounting principles generally accepted in the United States of America are attributed to particular business segments. Significant reconciling items attributable to each business segment are as follows:



    (in thousands)             Three months ended      Nine months ended
                                   Sept. 30,               Sept. 30,
                              2006   2005  Fav(Unf)  2006    2005  Fav(Unf)

    Depreciation:
    Scripps Networks        $4,550  $3,569 (27.5)% $12,467 $10,569 (18.0)%

    Newspapers:
      Newspapers managed
       solely by us          5,576   5,039 (10.7)%  16,156  14,968  (7.9)%
      JOAs and newspaper
       partnerships            311     310  (0.3)%     921     919  (0.2)%
    Total                    5,887   5,349 (10.1)%  17,077  15,887  (7.5)%
    Boulder prior to
     formation of Colorado
     newspaper partnership             316             111     931  88.1 %
    Total newspapers         5,887   5,665  (3.9)%  17,188  16,818  (2.2)%
    Broadcast television     4,281   4,688   8.7 %  13,413  13,845   3.1 %
    Interactive media        1,143   1,994  42.7 %   7,924   2,046
    Licensing and other
     media                     120     221  45.7 %     442     664  33.4 %
    Corporate                  378     559  32.4 %   1,030   1,651  37.6 %

    Total depreciation     $16,359 $16,696   2.0 % $52,464 $45,593 (15.1)%

    Amortization of
     intangibles:
    Scripps Networks          $801  $1,112  28.0 %  $2,481  $2,482   0.0 %

    Newspapers:
      Newspapers managed
       solely by us            562      77           1,003     238
      JOAs and newspaper
       partnerships                     67                     200
    Total                      562     144           1,003     438
    Boulder prior to
     formation of Colorado
     newspaper partnership              20              21      60  65.0 %
    Total newspapers           562     164           1,024     498
    Broadcast television       284     296   4.1 %     844     880   4.1 %

    Interactive media        9,122   7,039 (29.6)%  29,096   7,329

    Total amortization of
     intangibles           $10,769  $8,611 (25.1)% $33,445 $11,189


    Gains (losses) on disposal of PP&E:

    Scripps Networks         $(10)                   $(104)   $(25)

    Newspapers:
      Newspapers managed
       solely by us          (161)   $(84) (91.7)%    (196)   (222)  11.7 %
      JOAs and newspaper
       partnerships             1                        9
    Total newspapers         (160)    (84) (90.5)%    (187)   (222)  15.8 %
    Broadcast television     (107)    (23)            (142)    200
    Corporate                                                  (18)

    Gains (losses) on
     disposal of PP&E       $(277)  $(107)           $(433)   $(65)

    Gain on formation of
     Colorado newspaper
     partnership                                    $3,535



    4. JOINT OPERATING AGREEMENTS AND NEWSPAPER PARTNERSHIPS

Three of our newspapers are operated pursuant to the terms of JOAs. The Newspaper Preservation Act of 1970 provides a limited exemption from anti- trust laws, permitting competing newspapers in a market to combine their sales, production and business operations in order to reduce aggregate expenses and take advantage of economies of scale, thereby allowing the continuing operation of both newspapers in that market. Each newspaper in a JOA maintains a separate and independent editorial operation.

In February of 2006, we formed a newspaper partnership with MediaNews Group, Inc. ("MediaNews") that will operate certain of both companies' newspapers in Colorado, including their editorial operations. We have a 50% interest in the partnership.

Our share of the operating profit (loss) of JOAs and newspaper partnership are reported as "Equity in earnings of JOAs and other joint ventures" in our financial statements.

Information related to the operating results of our JOAs and newspaper partnerships is as follows:



    (in thousands)           Three months ended          Nine months ended
                                 Sept. 30,                   Sept. 30,
                            2006    2005  Fav(Unf)     2006    2005  Fav(Unf)
    Equity in earnings of
     JOAs and newspaper
     partnerships included
     in segment profit:
      Denver              $1,736  $(1,614)           $5,939  $16,055 (63.0)%
      Cincinnati           5,341    6,100 (12.4)%    14,386   17,138 (16.1)%
      Albuquerque          2,622    2,783  (5.8)%     7,958    8,476  (6.1)%
      Colorado               402                        957
      Other newspaper
       partnerships and
       joint ventures        (15)     (18) 16.7 %       131      209 (37.3)%

    Total equity in
     earnings of JOAs
     included in
     segment profit       10,086    7,251  39.1 %    29,371   41,878 (29.9)%
    Operating revenues
     of JOAs and
     newspaper
     partnerships             43      181 (76.2)%       147      331 (55.6)%
    Total                $10,129   $7,432  36.3 %   $29,518  $42,209 (30.1)%

    JOAs and newspaper
     partnerships
     contribution to
     segment profit:
      Denver             $(4,213) $(7,454)  43.5 % $(12,236) $(1,857)
      Cincinnati           3,812    3,922   (2.8)%    9,256   10,974 (15.7)%
      Albuquerque          1,582    1,721   (8.1)%    4,876    5,348  (8.8)%
      Colorado               402                        957
      Other newspaper
       partnerships and
       joint ventures        (15)     (18)  16.4 %      131      209 (37.4)%

    Total contribution
     to segment profit    $1,568  $(1,829)           $2,984  $14,674 (79.7)%

Additional depreciation incurred by the Denver News Agency reduced equity in earnings of JOAs by $3.0 million in the third quarter of 2006 and $9.1 million in the third quarter of 2005. Year-to-date equity in earnings of JOAs was reduced by $9.3 million in 2006. (See Note 2).

Gannett Newspapers has notified us of its intent to terminate the Cincinnati JOA upon its expiration in December 2007.

5. SCRIPPS NETWORKS

Scripps Networks includes five national television networks and their affiliated Websites, Home & Garden Television ("HGTV"), Food Network, DIY Network ("DIY"), Fine Living and Great American Country ("GAC"); and our 12% interest in FOX Sports Net South, a regional television network. Our networks also operate internationally through licensing agreements and joint ventures with foreign entities.

The networks utilize common facilities and certain sales, operational and support services are shared by the networks. Expenses directly attributable to the operations of a network are charged directly to that network. The costs of shared facilities and services are not allocated to individual networks for segment reporting purposes.

    Financial information for Scripps Networks is as follows:



    (in thousands)                               Three months ended Sept. 30,
                                                2006        2005     Fav(Unf)

    HGTV:
    Operating revenues                        $122,867   $106,201      15.7 %
    Direct segment operating expenses          (44,081)   (39,619)    (11.3)%
    Equity in earnings of joint ventures           557         30
    Contribution to segment profit             $79,343    $66,612      19.1 %

    Food Network:
    Operating revenues                         $97,995    $80,013      22.5 %
    Direct segment operating expenses          (36,725)   (35,347)     (3.9)%
    Equity in earnings of joint ventures            90        287     (68.6)%
    Contribution to segment profit             $61,360    $44,953      36.5 %

    DIY:
    Operating revenues                         $12,321    $11,055      11.5 %
    Direct segment operating expenses          (12,219)    (9,078)    (34.6)%
    Contribution to segment profit                $102     $1,977     (94.8)%

    Fine Living:
    Operating revenues                          $9,082     $6,382      42.3 %
    Direct segment operating expenses           (7,166)    (6,628)     (8.1)%
    Equity in earnings (losses) of
     joint ventures                                 31        (97)
    Contribution to segment profit              $1,947      $(343)

    Great American Country:
    Operating revenues                          $4,817     $3,857      24.9 %
    Direct segment operating expenses           (4,817)    (3,985)    (20.9)%
    Contribution to segment profit                  $-      $(128)    100.0 %

    Unallocated costs and other               $(26,505)  $(25,128)     (5.5)%




    (in thousands)                               Nine months ended Sept. 30,
                                                2006       2005      Fav(Unf)

    HGTV:
    Operating revenues                        $382,555   $333,815      14.6 %
    Direct segment operating expenses         (128,309)  (118,022)     (8.7)%
    Equity in earnings of joint ventures         1,667      1,038      60.6 %
    Contribution to segment profit            $255,913   $216,831      18.0 %

    Food Network:
    Operating revenues                        $305,011   $254,559      19.8 %
    Direct segment operating expenses         (115,893)  (107,830)     (7.5)%
    Equity in earnings of joint ventures           817        771       6.0 %
    Contribution to segment profit            $189,935   $147,500      28.8 %

    DIY:
    Operating revenues                         $37,538    $33,067      13.5 %
    Direct segment operating expenses          (33,272)   (27,506)    (21.0)%
    Contribution to segment profit              $4,266     $5,561     (23.3)%

    Fine Living:
    Operating revenues                         $27,715    $19,479      42.3 %
    Direct segment operating expenses          (21,758)   (19,655)    (10.7)%
    Equity in earnings (losses) of
     joint ventures                                 64       (382)
    Contribution to segment profit              $6,021      $(558)

    Great American Country:
    Operating revenues                         $14,623    $10,808      35.3 %
    Direct segment operating expenses          (14,216)   (11,751)    (21.0)%
    Contribution to segment profit                $407      $(943)

    Unallocated costs and other               $(83,480)  $(76,046)     (9.8)%



    REVENUE AND STATISTICAL SUMMARY FOR SELECTED OPERATING SEGMENTS

    (amounts in millions,              September            Year-to-date
    unless otherwise noted)        2006   2005   %       2006   2005    %


    SCRIPPS NETWORKS
     Operating Revenues
     Advertising                 $67.4  $57.4  17.5%   $611.8  $524.6  16.6%
     Affiliate fees, net          16.2   15.2   7.1%    146.6   125.2  17.0%
     Other                         2.6    1.3            14.3     6.3

     Scripps Networks            $86.2  $73.8  16.8%   $772.7  $656.1  17.8%

     Subscribers (1)
     HGTV                                                91.0    89.2   2.0%
     Food Network                                        90.8    88.1   3.1%
     Great American Country                              44.3    39.0  13.6%

    NEWSPAPERS (2)
     Operating Revenues
     Local                       $12.6  $12.3   2.2%   $116.8  $115.4   1.3%
     Classified                   17.2   17.7  (2.9)%   175.5   166.2   5.6%
     National                      2.7    3.8 (27.2)%    27.6    30.7 (10.3)%
     Preprints, online and other  12.1   11.0  10.3%    109.0    97.9  11.4%
     Newspaper advertising        44.7   44.8  (0.3)%   428.9   410.2   4.6%
     Circulation                  10.8    9.6  12.3%     93.3    94.2  (1.0)%
     Other                         1.5    1.4   6.6%     11.8    11.6   2.0%

     Newspapers managed solely
      by us                      $57.0  $55.8   2.0%   $534.0  $516.0   3.5%

     Ad inches (excluding JOAs)
      (in thousands)
     Local                         414    439  (5.7)%   3,908   3,993  (2.1)%
     Classified                    772    719   7.4%    7,234   6,635   9.0%
     National                       73     90 (18.5)%     718     830 (13.5)%
     Full run ROP                1,260  1,248   0.9%   11,860  11,458   3.5%

    BROADCAST TELEVISION
     Operating Revenues
     Local                       $15.9  $16.8  (5.1)%  $152.2  $142.7   6.7%
     National                      7.8    9.5 (18.1)%    75.5    73.8   2.3%
     Political                     6.6    0.2            15.3     1.5
     Other                         1.5    1.4  11.6%      8.8    10.3 (14.7)%

     Broadcast Television        $31.9  $27.9  14.5%   $251.9  $228.3  10.3%


    (1) Subscriber counts are according to the Nielsen Homevideo Index of
          homes that receive cable networks.

    (2) On February 1, 2006, we contributed the Boulder Daily Camera, the
          Colorado Daily and the twice-weekly Broomfield Enterprise in
          exchange for a 50% interest in a partnership we jointly operate with
          MediaNews Group Inc. To enhance comparability the reported revenues
          do not include operating revenues of these newspapers prior to the
          formation of the partnership. Our 50% share of the operating profit
          (loss) of the partnership is reported as "Equity in earnings of JOAs
          and other joint ventures" in our financial statements.



    REVENUE AND STATISTICAL SUMMARY FOR SELECTED OPERATING SEGMENTS

    (amounts in millions, unless
     otherwise noted)                                 Third Quarter
                                                2006       2005        %
    SCRIPPS NETWORKS
     Operating Revenues
     Advertising                            $191.8      $163.0       17.6%
     Affiliate fees, net                      49.0        43.6       12.4%
     Other                                     8.0         2.5

     Scripps Networks                       $248.8      $209.1       19.0%

     Subscribers (1)
     HGTV                                     91.0        89.2        2.0%
     Food Network                             90.8        88.1        3.1%
     Great American Country                   44.3        39.0       13.6%

    NEWSPAPERS (2)
     Operating Revenues
     Local                                   $35.4       $35.2        0.6%
     Classified                               54.1        54.5       (0.7)%
     National                                  8.2        10.5      (21.5)%
     Preprints, online and other              36.1        32.8       10.1%
     Newspaper advertising                   133.9       133.0        0.7%
     Circulation                              30.5        30.0        1.8%
     Other                                     3.4         3.5       (1.8)%

     Newspapers managed solely by us        $167.9      $166.5        0.8%

     Ad inches (excluding JOAs) (in
      thousands)
     Local                                   1,208       1,243       (2.8)%
     Classified                              2,329       2,192        6.3%
     National                                  209         267      (21.7)%
     Full run ROP                            3,746       3,703        1.2%

    BROADCAST TELEVISION
     Operating Revenues
     Local                                   $44.7       $45.0       (0.7)%
     National                                 22.0        23.8       (7.6)%
     Political                                11.7         1.0
     Other                                     3.3         3.0       10.8%

     Broadcast Television                    $81.7       $72.8       12.2%


    (1) Subscriber counts are according to the Nielsen Homevideo Index of
          homes that receive cable networks.

    (2) On February 1, 2006, we contributed the Boulder Daily Camera, the
          Colorado Daily and the twice-weekly Broomfield Enterprise in
          exchange for a 50% interest in a partnership we jointly operate with
          MediaNews Group Inc. To enhance comparability the reported revenues
          do not include operating revenues of these newspapers prior to the
          formation of the partnership. Our 50% share of the operating profit
          (loss) of the partnership is reported as "Equity in earnings of JOAs
          and other joint ventures" in our financial statements.

SOURCE The E. W. Scripps Company
10/17/2006

/CONTACT: Tim Stautberg of The E. W. Scripps Company, +1-513-977-3826, or Stautberg@scripps.com /