Scripps operating cash flow up 22 percent

Thu, November 05, 1998 by Rich Boehne

CINCINNATI, Ohio – The E. W. Scripps Company’s operating cash flow moved up 22 percent to $82.8 million in the third quarter of 1998. Excluding acquired and divested operations, operating cash flow increased 6.4 percent.In October 1997 the company acquired six newspapers and controlling interest in the Food Network. The effects of those transactions reduced third quarter net income by 7 cents per share. Earnings per share were 32 cents in the third quarter vs. 34 cents, excluding a gain, in the year-ago quarter.“The third quarter went pretty much as expected,” said William R. Burleigh, president and chief executive officer. “Our newspapers continued to perform admirably, posting solid revenue gains and prudently holding the line on costs.” “At our television stations, the convergence of a number of factors had a negative effect on results, ” Burleigh said. “Poor ratings for ABC programming in six of our major markets, the strike at General Motors earlier this year and mergers and reorganizations in the telecommunications, financial and package goods industries took their toll.”“Healthy growth continued at our two Category Television networks – Home & Garden Television and the Food Network. HGTV added another 3 million households to its reach and is producing positive cash flow as planned. Food added more than a million households and operating losses weren’t as deep as we had projected.”Scripps repurchased 1 million shares of its stock during the third quarter, and has repurchased an additional 1.1 million shares in the first eight days of October. “We have great confidence in the value of Scripps. With that in mind, we view the current market environment as an opportunity to benefit shareholders by purchasing our own shares at prices that will generate strong, long-term returns on investment,” Burleigh said.Following are results by operating group:Newspapers Operating cash flow increased 41 percent to $63.6 million. Excluding the acquired and divested newspapers, operating cash flow increased 13 percent. Excluding the acquired and divested newspapers, employee costs were up 2.4 percent. Newsprint costs moved up 5.7 percent, reflecting a 7 percent year-over-year increase in the price paid for paper. Other expenses decreased 5.1 percent. The year-over-year cost of newsprint in the fourth quarter is expected to increase about 10 percent.Advertising revenue on a pro forma basis increased 6.2 percent to $161 million for newspapers owned at the end of 1997. Broken down by category:  Local retail increased 4.7 percent to $61.6 million.  Classified increased 4.4 percent to $69.2 million.  National increased 25 percent to $7.1 million.  Preprint increased 11 percent to $22.9 million. On a pro forma basis, circulation revenues were down 1 percent to $37.8 million and total revenues increased 4.4 percent to $214 million. Broadcast Television Operating cash flow decreased 21 percent to $20.2 million. Revenues decreased 5.6 percent to $72.6 million. The decline is due to a combination of factors, including:  The company’s exposure to poorly rated ABC network programming in six of its major markets.  Continued softness in automotive advertising.  The negative effect mergers and reorganizations in the telecommunications, financial and package good industries are having on advertising.Political advertising revenues for the quarter were $3.8 million, compared to $400,000 for the same period in 1997.While political advertising is expected to increase as election day draws near, advance sales in other categories indicate that the softness in television advertising will continue into the fourth quarter.Expenses increased 2.2 percent. As anticipated, costs for syndicated programming rose 18 percent to $13.9 million. Most of the increase is attributable to the popular “Rosie O’Donnell Show,” which was renewed in September 1997 at dramatically higher prices. Employee costs were unchanged at $26 million and other expenses were down 7.1 percent to $12.5 million.Category TelevisionThe category television group had a cash operating loss of $600,000. Revenues for the period were $33.2 million.Home & Garden Television produced positive operating cash flow of $1.9 million in the third quarter (excluding development costs of $1.0 million for brand extensions) compared to losses of $900,000 in the year-ago period. Revenues grew 72 percent to $23.2 million. Home & Garden Television now reaches 45.1 million domestic subscribers, up 11.8 million in the past 12 months and up 2.9 million in the third quarter. The Food Network had revenues of $10 million and cash operating losses of $2.3 million. The network reaches 34.5 million domestic subscribers, up 6.8 million in the past 12 months and up 1.3 million in the third quarter.Category television also includes Scripps’ 12 percent ownership of SportSouth, a regional sports network.Licensing and Other MediaExcluding divested operations, revenues increased 23 percent to $25.4 million. Operating cash flow was $4.2 million vs. $1.4 million in the year-ago period.Year-to-date resultsConsolidated operating cash flow rose 16 percent to $267 million. Excluding acquired and divested operations, operating cash flow increased 4.3 percent.Net income was down 8.8 percent to $87.6 million, $1.08 per share. The effects of the October 1997 acquisitions reduced net income by 21 cents per share.The E.W. Scripps Company operates 20 daily newspapers; nine network-affiliated television stations; two TV networks, Home & Garden Television and the Food Network; a TV programmer, Cinetel Productions; United Media, a worldwide syndicator and licensor of news features and comics; and independent Yellow Pages directories. (a) Includes the Company’s newspapers in Monterey, San Luis Obispo and El Paso, and Scripps Howard Productions (“SHP”). In the third quarter of 1997 the Company traded its newspapers in Monterey and San Luis Obispo, California, for the newspaper in Boulder, Colorado. The trade resulted in an after-tax gain of $11.1 million ($.14 per share). The Company terminated the Joint Operating Agency and ceased operations of its El Paso newspaper on October 11, 1997. The Company sold SHP in the second quarter of 1998.(b) Operating income by segment is as follows:(c) Operating results for HGTV and Food Network, included in the Category Television segment, are as follows: