Scripps operating cash flow up 10 percent

Tue, April 11, 2000 by Tim Stautberg

CINCINNATI - The E.W. Scripps Company's operating cash flow increased 10 percent to $101 million in the first quarter. Earnings per share from core operations were 45 cents vs. 40 cents during the same quarter a year earlier, excluding a net 2-cent charge associated with divestitures and the company's venture capital funds. (See footnote.)"Strong growth in our category television division propelled the company's consolidated first quarter results," said William R. Burleigh, chairman and chief executive officer. "Excellent performance at Home & Garden Television and the Food Network continues to confirm the wisdom of the company's strategy of expanding these businesses.""Also, the new Do It Yourself cable television network and its companion Internet site - diynet.com - are gaining momentum," Burleigh added. "DIRECTV, the nation's largest satellite television service provider, and EchoStar's DISH Network have both announced plans to add DIY to their systems this year.""At our television stations, the first quarter improved over the previous year, the result of cost savings measures we have initiated, some strengthening in the TV advertising environment and increased political ad spending during the primary elections.""Our newspaper division achieved modest top line growth, but operating cash flow continued to be held back, primarily by our ongoing efforts to gain share in the competitive Denver market," Burleigh said. "Also, Internet investment at our newspapers was $800,000 greater than in the first quarter of 1999.""On the Internet, our online products and services are rapidly gaining scale, posting strong, across-the-board page view growth," Burleigh said. "We've made it a priority to exploit online opportunities by developing local destination portals around our newspapers and TV stations and universally branded sites around our cable television networks and licensing and syndication businesses.""Our spending on the Internet and DIY was a little less than we expected. The net cost was 3 cents per share vs. the 5 cents estimated in January. We will continue to invest online throughout the year."Following are results by operating group:NEWSPAPERS(excluding divested operations)Operating cash flow decreased 4.3 percent to $62.5 million. Newspaper advertising revenue during the first quarter increased 6.2 percent to $177 million. Broken down by category: -- Local retail increased 0.6 percent to $67.5 million. -- Classified increased 9.2 percent to $73.8 million. -- National increased 5.9 percent to $8.8 million. -- Preprint and other increased 13 percent to $27.2 million. Circulation revenues decreased 5.2 percent to $38.3 million, due primarily to the continuing initiatives to increase share in the Denver market. Total newspaper revenues were $230 million, up 3.7 percent. BROADCAST TELEVISION Broadcast television operating cash flow increased 9.8 percent to $23.6 million. Revenues increased 1.8 percent to $76.7 million. Broadcast television cash operating costs during the first quarter decreased 1.5 percent. CATEGORY TELEVISION Home & Garden Television produced operating cash flow of $14.4 million vs. $4.6 million in the year-ago period. Revenues grew 54 percent to $51 million. Home & Garden Television now reaches 60.5 million domestic subscribers, an increase of 8.6 million in the past 12 months and up 1.5 million in the first quarter. The Food Network had revenues of $22.2 million, up 60 percent. Operating cash flow was $3 million compared to $500,000 in the first quarter of last year. The network reaches 46.4 million domestic subscribers, up 7.3 million in the past 12 months and up 2.2 million in the first quarter. Start-up costs for the Do it Yourself (DIY) network were $2 million vs. $300,000 in the year-ago period. DIY, launched Sept. 30, is a simultaneous on-air, on-line network that provides immediate access to step-by-step instructions, in-depth demonstrations and tips for the do-it-yourself home enthusiast. LICENSING AND OTHER MEDIA(excluding divested operations) Revenues decreased 1.6 percent to $25.3 million. Operating cash flow was $4.2 million vs. $4.0 million in the first quarter of last year. INTERNET The 31 Scripps Internet sites recorded 356 million page views during the first quarter compared to 232 million in the same period last year, an increase of 53 percent. Broken down by category, first quarter page views were: -- Local portals (newspapers and television stations), 71.5 million, up 46 percent.-- Category television (hgtv.com, foodtv.com, diynet.com), 148 million, up 64 percent.-- United Media (comics.com), 136 million, up 46 percent.The companyЎ¦s Internet sites generated $4.9 million in revenue during the first quarter. Related costs were $8.1 million. The E.W. Scripps Company operates 20 daily newspapers; 10 broadcast television stations; three TV networks, Home & Garden Television, the Food Network and Do It Yourself; and a TV programmer, Scripps Productions. The company also operates United Media, a worldwide syndicator and licensor of news features and comics, and the Scripps Howard News Service. Scripps operates 31 revenue-producing Web sites, including hgtv.com, foodtv.com, diynet.com and comics.com.(a) In the first quarter of 2000 the Company i) acquired the daily newspaper in Fort Pierce, Florida, in exchange for its newspaper in Destin, Florida, and cash and ii) sold its independent telephone directories in Memphis, Tennessee, Kansas City, Missouri, and North Palm Beach, Florida. The sales and trade resulted in net gains of $6.3 million, $3.8 million after-tax ($.05 per share).(b) Included in venture capital results in the first quarter of 2000 are i) recognized investment gains and losses and ii) an adjustment to accrued incentive compensation related to changes in the net gains (realized and estimated unrealized) on the Scripps Ventures I portfolio. Net income was reduced $5.9 million ($.07 per share). Accrued incentive compensation was increased $7.1 million, to $14.1 million, in conjunction with the increase in the net gain on Scripps Ventures I’s portfolio of $47 million, to $94 million. The incentive compensation for Scripps Ventures I will be paid in 2001 based on the portfolio’s return through June 2001. The estimated value of Scripps Ventures I and II’s portfolios at March 31, 2000, was $147 million. (c) Operating income by segment is as follows:(d) Operating results for the Company’s Category Television networks are as follows: