Scripps operating cash flow up 12 percent
Tue, April 16, 2002 by Tim Stautberg
CINCINNATI – The E. W. Scripps Company’s first quarter operating cash flow from core operations increased 12 percent to $96.3 million compared to $86.0 million during the first quarter of 2001.Earnings per share from core operations were 56 cents compared to an adjusted 44 cents during the same quarter a year earlier, up 27 percent. The previously reported first quarter 2001 earnings per share from core operations of 35 cents included a charge of 9 cents for amortization of goodwill and other intangible assets that are no longer amortized under accounting rules adopted Jan.1, 2002.Net income for the quarter was $39.9 million, down from $66.4 million in the same period a year ago. Net income reported in the first quarter of 2001 included, among other things, the amortization of goodwill and other intangible assets and an after-tax gain that resulted from the exchange of the company’s investment in Time Warner for America Online, which acquired Time Warner in January 2001. The company excludes investment results and unusual items when calculating earnings from core operations.The company’s first quarter consolidated revenues were $360 million, off slightly from $362 million during the first quarter of 2001.The first quarter results reflect continued growth of the company’s cable television networks, emerging profitability of its newspaper in Denver, lower interest rates and a general stabilization during the period in newspaper and television advertising. “We’re seeing some signs that the economic recovery we’ve planned for may be under way,” said Kenneth W. Lowe, president and chief executive officer. “Our cable television networks continue to grow nicely, we’re seeing a return to profitability at our Denver newspaper and, for all of our media businesses, it appears that the advertising markets are stabilizing, all of which gives us cause for guarded optimism.”“At Scripps Networks, the decision to continue building our growing portfolio of national television brands through the recession is showing positive results. Increased distribution and viewership of Home & Garden Television and Food Network, combined with a firming up of the scatter advertising market, translated into solid revenue and cash flow growth for Scripps Networks during the quarter. The improved Scripps Networks results are despite our continued investment in the DIY – Do It Yourself Network and our newest brand, Fine Living, which we successfully launched in March.”“At our newspaper in Denver, first quarter results were substantially improved over last year,” Lowe said. “The improvement is the direct result of significant cost reductions that have been achieved by merging the business operations of our newspaper, the Rocky Mountain News, with the business operations of The Denver Post. The successful implementation of the Denver JOA continues to be one of the company's top priorities.”“First quarter results at the other 20 Scripps newspapers and the company’s 10 broadcast television stations offer evidence that local ad markets are stabilizing. Excluding Denver, and aided by an additional Sunday, first quarter newspaper operating cash flow moved up and revenues were even with the same period a year ago. Despite continued weakness at the company’s six ABC affiliates, the Scripps television station group reported revenue and cash flow even with last year, thanks in part to increased revenues that resulted from the broadcast of the Olympics by our three NBC stations.”“Based on advanced advertising sales at all of our businesses, it would appear that the improvement is continuing into the second quarter,” Lowe said. “We’re encouraged by what we’re seeing and are optimistic that all of the Scripps media businesses are in excellent position to take advantage of economic recovery.”Guidance Second quarter advertising revenue for Scripps Networks is expected to be up between 3 and 6 percent year-over-year. Affiliate fee revenue for Scripps Networks is expected to increase 25 percent during the second quarter, net of distribution fee amortization. The company currently anticipates that second quarter newspaper and broadcast television advertising revenues will be even year-over-year. Second quarter core earnings per share are expected to be between 65- and 75-cents per share compared to 64 cents per share in the second quarter of 2001, adjusted for the new accounting rule for amortization of goodwill and intangible assets. Here are first quarter operating results by business segment:NewspapersNewspaper operating cash flow increased 18 percent to $63.7 million.Pro forma newspaper advertising revenue during the first quarter was $130 million, even with the same period a year ago. Broken down by category: Local retail increased 1.3 percent to $45.2 million. Classified decreased 5.4 percent to $54.2 million. National increased 4.3 percent to $7.9 million. Preprint and other increased 9.7 percent to $23.1 million. Pro forma circulation revenues were $35.4 million, even with the first quarter of 2001.Newsprint costs decreased 23 percent over the prior year on a 22 percent decrease in newsprint prices.Excluding Denver, total newspaper revenues were $179 million, even with the same year ago period. (See note (b) to financial statements.)First quarter newspaper results include the effects of an additional Sunday in the period. Excluding the additional Sunday, total newspaper advertising revenue was down about 2 percent.Scripps NetworksScripps Networks operating cash flow was up 26 percent to $19.9 million.Scripps Networks advertising revenue increased 4.2 percent to $69.4 million and affiliate fee revenue was up 26 percent to $18.2 million. Home & Garden Television produced operating cash flow of $22.8 million, up27 percent from the year-ago period. HGTV revenues grew 3.6 percent to $53.6 million. Home & Garden Television now reaches 77.7 million domestic subscribers, an increase of 7.8 million in the past 12 months and up about 1.3 million in the first quarter. The Food Network had revenues of $33.5 million, up 12 percent. Food Network operating cash flow was $9.8 million compared to $3.5 million in the first quarter last year. Food Network reaches 73.8 million domestic subscribers, up 16 million in the past 12 months and up 2.3 million in the first quarter.Cash operating losses for DIY and Fine Living totaled $12.1 million during the first quarter vs. $5.4 million in the year-ago period. Broadcast Television Broadcast television operating cash flow decreased 0.7 percent to $16.0 million.Broadcast television revenues decreased 0.6 percent to $65.5 million. The company’s three NBC affiliates reported a $2.3 million year-over-year increase in advertising revenue for the quarter, most of which was attributable to the Olympics.Licensing and Other Media Revenues decreased 11 percent to $21.5 million. Operating cash flow was $4.1 million vs. $4.7 million in the first quarter of last year. Conference callThe senior management team at Scripps will discuss the company’s first quarter results during a telephone conference call at 10:30 a.m. EDT today. Scripps will offer a live audio Web cast of the conference call. To access the Web cast, visit www.scripps.com, choose “investor relations,” then follow the “live Web cast” link at the top of the page. Listeners will need Real Player G2 or higher (download free at www.real.com) to access the call online. Also, a limited number of dial-in lines for the conference call will be available on a listen-only basis. To access the conference call, dial 888-423-3268 approximately 10 minutes prior to the start of the call. Callers will need the name of the call (first quarter earnings report) to be granted access. Callers also will be asked to provide their name and company affiliation. An instant replay line will be open from 2 p.m. EDT Wednesday, April 10, until 11:59 p.m. EDT on Saturday, April 13. The domestic number to access the replay is 800-475-6701 and the international number is 320-365-3844. The access code for both numbers is 632876. 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 www.scripps.com approximately four hours after the call, choose “investor relations” then follow the “audio archives” link at the top of the page. Forward looking statementsThis 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 2001 SEC Form 10K and page F-15 of its most recent Form 10Q.About ScrippsThe E.W. Scripps Company is a diverse media concern with interests in newspaper publishing, broadcast television, cable television networks and interactive media. Scripps operates 21 daily newspapers, 10 broadcast TV stations and four cable television networks.Scripps Networks cable television brands include Home & Garden Television, Food Network, DIY -- Do It Yourself Network and Fine Living. Scripps Networks programming can be seen internationally in 15 countries.The company also operates Scripps Howard News Service, United Media, the worldwide licensing and syndication home of PEANUTS and DILBERT, and 31 Web sites, including hgtv.com, foodtv.com, diynet.com, fineliving.com and comics.com.