Media giant E.W. Scripps Co. reported flat earnings and
cash flow for the third quarter ended Sept. 30, mainly attributed to extraordinary items
connected with its two cable networks -- Home & Garden Television and The Food
HGTV affected earnings to the tune of about $2.5 million,
an amount set aside in reserve for possible advertiser "make goods" related to
delivering a smaller audience than the network had promised. The company also incurred
about $800,000 in moving costs when the company relocated its Food Network operations
Excluding the extraordinary items -- which also included
$1.2 million in severance packages for television station employees and $1 million in
accrued compensation of managers of the Scripps Ventures fund -- earnings would have risen
to 36 cents per share from 32 cents per share and revenue would have increased 4.2 percent
to $86.6 million in the quarter.
A company spokesman said the funds for the possible
"make goods" are currently in reserve and reflect a change in accounting
methods. If the company does have to eventually pay "make goods " to
advertisers, they probably will not be in cash, he added.
"We would go back and determine how many instances
have occurred and negotiate with the advertisers how we could make good," the
spokesman said. "It's not necessarily cash, it could be [air] time."
HGTV and Food actually performed well, if the reserves are
not factored in. According to company documents, revenue at HGTV rose 58 percent to $36.7
million, while operating cash flow more than tripled from $900,000 in the same quarter
last year to $3.4 million in the current period.
HGTV also added subscribers: 12.8 million in the past 12
months and 2.7 million in the quarter.
At Food, revenue was up 53 percent to $15.3 million in the
period and the network pared down its cash operating loss from $2.3 million in the third
quarter last year to $1.8 million in the current period. Food also added 1.6 million new
domestic subscribers in the third quarter -- 7.9 million over the past 12 months -- to
finish the period with 42.4 million subscribers
For the nine-month period, operating revenue at HGTV was up
60 percent to $108.1 million and cash flow more than doubled, to $15.7 million from $6.1
Food Network's operating revenue rose 57 percent to
$44.9 million. The company reported a positive cash flow of $1.2 million, up from a cash
flow deficit of $6.5 million in the previous year.
"Scripps completed a satisfactory quarter that was
masked somewhat by a number of unusual items that fell within the period," Scripps
chairman, president and CEO William Burleigh said in a prepared statement. "From an
operating perspective, newspaper advertising sales remained strong and our cable
television networks continued to grow. Weak advertising continues to depress cash flow in
the TV station group."