Wednesday, October 15, 2003

Profits increase at media giants


Earnings

By John Eckberg, Jeff McKinney and James Pilcher
The Cincinnati Enquirer

Media giant E.W. Scripps Co., owner of the Cincinnati Post and the surging Scripps Networks, posted solid earnings gains Tuesday, as did Gannett Co. Inc., owner of The Cincinnati Enquirer.

The advertising results suggest that the U.S. economy could be on the road to recovery, some executives said.

Scripps, buoyed by advertising and fees for its Home & Garden Television and Food Network, posted a profit of $51.9 million, or 64 cents a share, compared with $45.7 million, or 57 cents a share, a year earlier. Scripps stock hit a 52-week high Tuesday, closing at $92.88, up $4.89.

"It was a solid third quarter, thanks primarily to continued success at Scripps Networks," Kenneth W. Lowe, president and chief executive at Scripps, said during a third-quarter conference call Tuesday with Wall Street media analysts.

"Robust advertising sales at both HGTV and Food Network propelled the company's total growth. We continue to have great success with quality original programming that resonates with our viewers."

Revenue at the company, which owns 21 daily newspapers, 10 television stations, four cable and satellite television networks, rose 24 percent, to $440.5 million, up from $345.3 million from a year earlier.

At the cable and satellite arm, Scripps Networks, third-quarter profits increased 35 percent, to $40.3 million, while revenues increased 25 percent, to $122 million. Scripps Networks also includes Do It Yourself Network and Fine Living.

Scripps newspaper revenues were flat at $164 million - a decline of 0.1 percent from the same period last year - though a joint newspaper operation in Denver yielded profits of $2.4 million, compared with about $1 million from last year.

All newspapers, cable networks and broadcast television stations will promote the Home Shopping Network, Lowe said.

"It will be an uncommon mix of information and commerce as we learn to build a commerce business adjacent to our mix of media businesses," he said.

For Gannett, which publishes 100 newspapers in the U.S., including USA Today, the third quarter brought record earnings of $279 million, or $1.03 a diluted share, compared with $265.6 million, or 99 cents, posted for the same period last year.

Softer local advertising and lagging help-wanted advertising limited revenues, Douglas H. McCorkindale, chairman, president and chief executive of Gannett, said. The company also owns 100 Web sites and 22 television stations and publishes 500 non-weekly newspapers in the U.S. and 17 daily newspapers in the United Kingdom.

"We saw signs of unevenness in the third quarter," McCorkindale said. "The good news is that September came in stronger. In the U.S., pre-print, financial, health and telecommunication categories gained. That helped offset lagging results from department stores, particularly Dillards and Federated."

In other reports:

Fifth Third Bancorp

Loan growth and higher fee income helped the parent of Fifth Third Bank post a 4.9 percent gain in third-quarter profits.

Cincinnati's largest banking company earned $437.2 million, or 76 cents a share, up from $416.6 million, or 70 cents a share, in the same year-ago period. The bank's third-quarter results this year included a $10.8 million after-tax charge tied to a change in an accounting rule. Excluding that expense, Fifth Third had third-quarter earnings of $448.1 million, or 77 cents a share.

Fifth Third's higher profits came as both mortgage and consumer loans rose more than 15 percent, helped by lower interest rates that cut borrowing costs in the quarter. The bank's quarterly earnings were in line with analysts' expectations of 77 cents a share.

But the bank's stock was down $1.74 Tuesday, closing at $58.26 a share.

Concerns about revenue growth, where Fifth Third typically is an industry leader, could have hurt its stock, said Fred Cummings of McDonald Investments in Cleveland. For instance, Fifth Third's data processing unit had only a 6 percent gain in quarterly revenue growth. Normally, that business grows at double-digit levels.

"That particular business only accounts for about 10 percent of total revenues, but those on the Street are used to seeing it grow at a much higher level," Cummings said.

Cummings also lowered his fourth-quarter estimate on Fifth Third to 78 cents a share from 80 cents a share, reflecting expectation of a lower net interest margin and lower data-processing revenues. But he reiterated his buy rating on Fifth Third's stock and 12-month price target of $70 a share.

Delta Air Lines

The nation's No. 3 carrier posted a net loss of $164 million for the third quarter, which was significantly better than the same period last year. But that continued a string of nine-figure losses for the Atlanta-based carrier.

Delta, the dominant local airline, did report a profit in the second quarter this year, but that was a result of government reimbursements for security-related costs. Aside from that, the company has not had a profitable quarter since the fourth quarter of 2000 and has continued to lose hundreds of millions every quarter since the Sept. 11, 2001, terror attacks.

The loss amounted to $1.36 a share, which bettered analysts polled by Nelson Equity Research, who had predicted a loss of $1.44 a share.

The net figures included unusual items regarding debt reduction. Without those items, Delta's loss was $172 million, or $1.43 a share.

In the third quarter last year, Delta lost $212 million, or $1.75 a share.

The company, which operates its second-largest hub at the Cincinnati/Northern Kentucky International Airport, also announced that it was changing its new aircraft delivery schedule, saying it would sell 11 aircraft scheduled for delivery in 2005 to an unnamed third party.

Delta now has $2.9 billion in cash, including $2.7 billion in unrestricted cash. It also recorded $201 million in positive cash flow on $3.44 billion in revenues, which was up from $3.43 billion in last year's third quarter.

E-mail jeckberg@enquirer.com; jmckinney@enquirer.com; and jpilcher@enquirer.com.



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