Calling the current business practice of issuing guidance for future revenue
and earnings 'dopey,' USA Networks Inc. chairman Barry Diller said that from now
on, his company will release its operating budget for all of its business
segments to the public.
In a conference call with reporters, Diller said the decision to make the
company's budget public first came about three weeks ago.
'At some point about three weeks ago, we said, `Why don't we just get out of
this circus and release our budget?'' Diller said. 'There were some who said,
`We can't do that,' but a few days later, we said we were going to do it. It's
the right thing to do. [Issuing guidance] is a dopey way of doing things.'
For the quarter, USA's revenue rose 13 percent to $1.26 billion and cash flow
was up 15 percent to $197.1 million.
However, the company warned that fourth-quarter revenue would be flat and
cash flow would dip between 12 percent and 16 percent as a result of the Sept.
11 terrorist attacks and the continuing downturn in the advertising market.
Prior to Sept. 11, the company had projected that cash flow would grow about 25
percent in the quarter.
Diller said in the call that the downturn in the travel market as a result of
the attacks would not deter USA's decision to launch a travel channel -- part of
its pending acquisition of online travel service Expedia.com -- although it
could delay the launch a few months.
'We were thinking that at best, it would be up and going by January,' Diller
said. 'It now mans that we'll probably get it up and going by June. It doesn't
deter us in the slightest from the activity itself. We absolutely believe travel
is a great interactive category and will grow over the near, mid and long
USA's Home Shopping Network division was hit hardest by the terrorist
attacks, with sales virtually nonexistent in the 10 to 14 days after the events.
During the call, Diller said HSN has already begun to rebound and should recover
fully in the fourth quarter.
In the cable and studios segment -- which includes USA Studios and cable
networks USA Network and Sci Fi Channel -- revenue rose 19 percent to $398
million and cash flow was up 31 percent to $155.2 million.
Cash flow grew 31 percent at USA Network to $113.7 million on revenue of $214
million, up 7 percent. At Sci Fi, revenue was down 2 percent to $63.1 million
but cash flow rose 6 percent to $23.9 million.
USA vice chairman Victor Kaufman said the rise in Sci Fi's cash flow was due
mainly to a large increase in affiliate fees -- 19 percent -- tied to an
increase in subscribers.
According to the budget information, USA expects revenue to drop 2 percent at
USA Network to $808 million in 2002, rebounding to $909 million in 2003. Cash
flow at the network is also expected to drop 8 percent to $391 million in 2002,
rising to $444 million in 2003.
At Sci Fi, revenue should rise 16 percent to $314 million in 2002, gaining
another 12 percent to $351 million in 2003. Cash flow is expected to be up 17
percent to $124 million in 2002 and another 30 percent to $161 million in
USA stock fell 81 cents per share to $18.65 Wednesday.