With no debt and nearly $160 million in cash at the end of the quarter, Scripps is well situated should it decide to boost its 10-station portfolio, but executives say any future acquisitions would have to generate a “strong cash return.”
While not rejecting potential interest in the McGraw-Hill station group, E.W. Scripps executives kept their cards close to the vest in comments during today’ second-quarter financial results conference call.
“It’s best not to talk about specific groups or stations we’ve looked at,” said Rich Boehne, Scripps president-CEO, adding that if the company were to acquire stations, a key criteria would be the ability to generate a “strong cash return.”
With no debt and nearly $160 million in cash at the end of the quarter, Scripps is well situated should it decide to boost its 10-station portfolio.
Superficially, the McGraw-Hill stations, all ABC affiliates, appear to be a good fit for Scripps, which has six ABC affiliates of its own. Moreover, the McGraw-Hill stations’ newscasts rank no better than third in their markets, signaling opportunities for significant improvement.
While acknowledging that, “When you look at underperformers, you have to focus on something you can bring something to, to increase cash flow and performance,” Boehne cited another criteria for Scripps.
“We’re ABC-heavy today and would like to spread out our exposure,” he said. “If there was a geographical or affiliate diversification that could happen, we would be interested in looking at those opportunities.”
Timothy Stautberg, recently named to take over Scripps’ struggling newspaper division after serving as CFO, noted that the company broke out retrans revenues for the first time. Those revenues rose 31% to $3.9 million for the quarter and the company anticipates continued growth in that category as new waves of deals come on line.
While Scripps expects to sign deals encompassing about three million subscribers over the next two years, its two big contracts — just under 3 million Time Warner Cable subscribers and a little less than 5 million with Comcast — are considerably further out, 2016 and 2020, respectively.
Auto advertising that came in below expectations prevented Scripps from hitting the projected 3.2% revenue growth in broadcasting. However, like most broadcasters reporting results so far, the company sees improvement in the third quarter. It projects auto revenues will rise mid- to high-single digits in that period.