UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number 1-16914
THE E.W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 51-0304972
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1105 N. Market Street
Wilmington, Delaware 19801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (302) 478-4141
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
and Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. As of
July 15, 1994 the registrant had outstanding 54,628,504 shares of
Class A Common stock and 20,174,833 shares of Common Voting stock.
INDEX TO THE E. W. SCRIPPS COMPANY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1994
Item No. Page
PART I - FINANCIAL INFORMATION
1 Financial Statements 3
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 3
PART II - OTHER INFORMATION
1 Legal Proceedings 3
2 Changes in Securities 3
3 Defaults Upon Senior Securities 3
4 Submission of Matters to a Vote of Security Holders 4
5 Other Information 4
6 Exhibits and Reports on Form 8-K 4
PART I
ITEM 1. FINANCIAL STATEMENTS
The information required by this item is filed as part of this Form 10-
Q. See Index to Financial Information at page F-1 of this Form 10-Q.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by this item is filed as part of this Form 10-
Q. See Index to Financial Information at page F-1 of this Form 10-Q.
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in litigation arising in the ordinary course
of business, such as defamation actions. In addition, the Company is
involved from time to time in various governmental and administrative
proceedings relating to, among other things, renewal of broadcast
licenses, none of which is expected to result in material loss.
ITEM 2. CHANGES IN SECURITIES
There were no changes in the rights of security holders during the
quarter for which this report is filed.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the quarter for
which this report is filed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following table presents information on matters submitted to a
vote of security holders at the 1994 Annual Meeting of Shareholders.
Broker
Description of Matter In Favor Against Abstain Non-Votes
Submitted
Class A Common stock:
Election of Directors
David R. Huhn 47,982,612 41,739 6,572,292
Daniel J. Meyer 47,951,922 43,739 6,600,982
Nicholas B. Paumgarten 47,951,922 33,126 6,611,595
Common voting stock:
Election of Directors 18,181,513 1,993,320
Amend Long-term Incentive 18,181,513 1,993,320
Plan
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
The information required by this item is filed as part of this Form 10-
Q. See Index to Exhibits at page E-1 of this Form 10-Q.
Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
THE E. W. SCRIPPS COMPANY
Dated: August 3, 1994 BY:/s/ Daniel J. Castellini
D. J. Castellini
Senior Vice President, Finance &
Administration
THE E. W. SCRIPPS COMPANY
Index to Financial Information
Item Page
Consolidated Balance Sheets F-2
Consolidated Statements of Income F-4
Consolidated Statements of Cash Flows F-5
Consolidated Statements of Stockholders' Equity F-6
Notes to Consolidated Financial Statements F-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations F-15
CONSOLIDATED BALANCE SHEETS
( in thousands ) As of
June 30, December 31, June 30,
1994 1993 1993
ASSETS
Current Assets:
Cash and cash equivalents $ 12,483 $ 18,606 $ 16,041
Accounts and notes receivable (less
allowances - $5,819, $6,995, $6,553) 139,833 150,671 142,424
Program rights and production costs 36,812 42,823 39,718
Inventories 24,712 23,748 29,033
Deferred income taxes 18,651 18,097 10,942
Miscellaneous 23,471 19,050 21,966
Total current assets 255,962 272,995 260,124
Investments 52,355 73,287 29,429
Property, Plant, and Equipment 713,686 712,726 724,333
Goodwill and Other Intangible Assets 542,301 552,989 596,899
Other Assets:
Program rights and production costs (less current portion) 36,622 43,257 33,886
Miscellaneous 22,058 21,228 16,320
Total other assets 58,680 64,485 50,206
TOTAL ASSETS $ 1,622,984 $ 1,676,482 $ 1,660,991
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
( in thousands, except share data ) As of
June 30, December 31, June 30,
1994 1993 1993
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 10,985 $ 96,383 $ 57,959
Accounts payable 67,596 79,334 74,713
Customer deposits and unearned revenue 18,179 17,480 18,314
Accrued liabilities:
Employee compensation and benefits 33,143 31,599 31,408
Artist and author royalties 10,338 10,985 11,938
Copyright and programming costs 7,059 6,986 7,259
Interest 2,649 2,834 2,993
Income taxes 19,249 7,763 1,037
Miscellaneous 31,281 35,276 28,564
Total current liabilities 200,479 288,640 234,185
Deferred Income Taxes 171,483 175,308 117,013
Long-Term Debt (less current portion) 151,582 151,535 344,538
Other Long-Term Obligations and Minority Interests 193,978 201,364 193,209
Stockholders' Equity:
Preferred stock, $.01 par - authorized: 25,000,000 shares;
none outstanding
Common stock, $.01 par:
Class A - authorized: 120,000,000 shares; issued and
outstanding: 54,618,754, 54,586,495,
and 54,452,318 shares 546 546 545
Voting - authorized: 30,000,000 shares; issued and
outstanding: 20,174,833 shares 202 202 202
Total 748 748 747
Additional paid-in capital 98,740 97,945 94,564
Retained earnings 790,451 733,978 676,409
Unrealized gains on securities available for sale 15,429 27,381
Unvested restricted stock awards (821) (1,009) (547)
Foreign currency translation adjustment 915 592 873
Total stockholders' equity 905,462 859,635 772,046
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,622,984 $ 1,676,482 $ 1,660,991
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
( in thousands, except share data ) Three months ended Six months ended
June 30, June 30,
1994 1993 1994 1993
Operating Revenues:
Advertising $ 108,748 $ 100,979 $ 209,492 $ 194,553
Circulation 29,189 29,385 58,745 59,162
Other newspaper revenue 13,828 13,268 25,565 24,380
Total newspapers 151,765 143,632 293,802 278,095
Broadcasting 73,892 77,401 134,245 139,246
Cable television 63,266 63,715 125,651 126,905
Entertainment 18,676 18,644 39,654 38,269
Other 3,597 8,126
Total operating revenues 307,599 306,989 593,352 590,641
Operating Expenses:
Employee compensation and benefits 90,182 94,493 178,305 186,830
Program rights and production costs 28,957 29,205 56,181 55,879
Newsprint and ink 22,131 23,386 42,788 44,604
Other operating expenses 72,427 77,436 141,049 145,996
Depreciation 23,154 21,629 44,566 42,892
Amortization of intangible assets 7,506 8,418 15,119 16,781
Total operating expenses 244,357 254,567 478,008 492,982
Operating Income 63,242 52,422 115,344 97,659
Other Credits (Charges):
Interest expense (4,613) (7,148) (9,272) (15,059)
Gain on sale of "Garfield" and "US Acres" copyrights 31,621 31,621
Gain on sale of subsidiary companies 1,774 22,436
Miscellaneous, net (374) (1,431) (252) 1,941
Net other credits (charges) 26,634 (6,805) 22,097 9,318
Income Before Income Taxes and Minority Interests 89,876 45,617 137,441 106,977
Provision for Income Taxes 39,174 20,975 59,526 47,657
Income Before Minority Interests 50,702 24,642 77,915 59,320
Minority Interests 2,878 2,555 4,994 4,635
Net Income $ 47,824 $ 22,087 $ 72,921 $ 54,685
Per Share of Common Stock:
Net income $0.64 $0.30 $0.98 $0.73
Dividends declared $0.11 $0.11 $0.22 $0.22
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
( in thousands ) Six months ended
June 30,
1994 1993
Cash Flows from Operating Activities:
Net income $ 72,921 $ 54,685
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation 44,566 42,892
Amortization of intangible assets 15,119 16,781
Deferred income taxes 2,057 6,508
Minority interests in income of subsidiary companies 4,994 4,635
Gain on sale of subsidiary companies and copyrights (31,621) (22,436)
Changes in certain working capital accounts, net of
effects from subsidiary companies purchased and sold 6,687 (13,221)
Miscellaneous, net 7,010 1,327
Net operating activities 121,733 91,171
Cash Flows from Investing Activities:
Additions to property, plant, and equipment (39,096) (53,140)
Purchase of subsidiary companies, net of cash acquired (17,318) (28,987)
Investments in securities and unconsolidated affiliates (1,781) (2,194)
Sale of subsidiary companies and copyrights 33,626 44,259
Miscellaneous, net 827 3,585
Net investing activities (23,742) (36,477)
Cash Flows from Financing Activities:
Increases in long-term debt 58,100
Payments on long-term debt (85,426) (97,532)
Dividends paid (16,448) (16,415)
Dividends paid to minority interests (1,770) (1,777)
Miscellaneous, net (470) (5)
Net financing activities (104,114) (57,629)
Increase (Decrease) in Cash and Cash Equivalents (6,123) (2,935)
Cash and Cash Equivalents:
Beginning of year 18,606 18,976
End of period $ 12,483 $ 16,041
Supplemental Cash Flow Disclosures:
Interest paid, excluding amounts capitalized $ 9,290 $ 20,508
Income taxes paid 44,598 44,466
Increase in program rights and related liabilities 6,164 4,103
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
( in thousands, except share data )
Unrealized
Gains on Unvested Foreign
Additional Securities Restricted Currency
Common Paid-in Retained Available Stock Translation
Stock Capital Earnings for Sale Awards Adjustment
Balances at December 31, 1992 $ 746 $ 94,366 $ 638,139 $ (516) $ 369
Net income 54,685
Dividends: declared
and paid - $.22 per share
(16,415)
Class A shares issued pursuant to
compensation plans, net:
26,025 shares issued,
15,768 shares repurchased 1 198 (215)
Amortization of restricted stock awards 184
Foreign currency translation adjustment 504
Balances at June 30, 1993 $ 747 $ 94,564 $ 676,409 $ (547) $ 873
Balances at December 31, 1993 $ 748 $ 97,945 $ 733,978 $ 27,381 $ (1,009) $ 592
Net income 72,921
Dividends: declared and
paid - $.22 per share
(16,448)
Class A shares issued pursuant to
compensation plans, net:
37,975 shares issued,
5,716 shares repurchased 688
Tax benefits on compensation plans 107
Amortization of restricted stock awards 188
Foreign currency translation adjustment 323
Increase (decrease) in unrealized gains
on securities available for sale, net
of deferred income taxes of $6,436 (11,952)
Balances at June 30, 1994 $ 748 $ 98,740 $ 790,451 $ 15,429 $ (821) $ 915
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_____________________________________________________________________________
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Except as disclosed herein, there has been no material change
in the information disclosed in the notes to consolidated
financial statements included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1993. In
management's opinion all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of the
interim periods have been made.
Results of operations for the three- and six-month periods
ending June 30, 1994 are not necessarily indicative of the
results that may be expected for future interim periods or
for the year ending December 31, 1994.
Program Rights and Production Costs - Program rights are
recorded at the time such programs become available for
broadcast. Amortization is computed using the straight-line
method based on the license period or based on usage,
whichever yields the greater accumulated amortization for
each program. The liability for program rights is not
discounted for imputed interest.
Production costs represent costs incurred in the production
of programming for distribution. Amortization of capitalized
costs is based on the percentage of current period revenues
to anticipated total revenues for each program.
Program and production costs are stated at the lower of
unamortized cost or fair value. The portion of the
unamortized balance expected to be amortized within one year
is classified as a current asset.
Net Income Per Share - Net income per share computations are based
upon the weighted average common shares outstanding. The weighted
average common shares outstanding were as follows:
( in thousands ) Three months ended Six months ended
June 30, June 30,
1994 1993 1994 1993
Weighted average shares outstanding 74,776 74,627 74,769 74,620
The sum of the quarterly net income per share amounts may not
equal the reported year-to-date amounts because each is
computed independently based upon the weighted average number
of shares outstanding for that period.
Reclassification - For comparison purposes certain 1993 items
have been reclassified to conform with 1994 classifications.
2.ACQUISITIONS AND DIVESTITURES
A.Acquisitions
1994 - The Company acquired Cinetel Productions (an
independent producer of programs for cable television).
1993 - The Company purchased 589,000 shares of Scripps Howard
Broadcasting Company common stock for $28,900,000. The
Company also purchased a cable television system.
The following table presents additional information about the
acquisitions:
( in thousands ) Six months ended
June 30,
1994 1993
Goodwill and other intangible assets acquired $ 3,445 $ 16,696
Other assets acquired 14,772 30
Reduction in minority interests 12,261
Liabilities assumed (899)
Cash paid $ 17,318 $ 28,987
The acquisitions have been accounted for as purchases, and
accordingly purchase prices were allocated to assets and
liabilities based on the estimated fair value as of the dates
of acquisition. The acquired operations have been included in
the consolidated statements of income from the dates of
acquisition. Pro forma results are not presented because the
combined results of operations would not be significantly
different from the reported amounts.
B. Divestitures
1993 - The Company sold its book publishing operations and a
newspaper in the first six months of 1993. In subsequent quarters
a newspaper, a television station, and radio stations in three
markets were sold.
The following table presents additional information about the
divestitures which occurred in the three- and six-month periods
ending June 30:
Six
months
ended
June 30,
1993
Cash received $ 44,259
Net assets disposed 21,823
Gain recognized, before income taxes $ 22,436
Included in the consolidated financial statements are the
following results of divested operations (excluding gain on sale):
( in thousands ) Three Six
months months
ended ended
June 30, June 30,
1993 1993
Operating revenues $ 16,300 $ 31,800
Operating income 2,300 3,300
3.UNUSUAL ITEMS
1994 - The Company sold its worldwide Garfield and U.S. Acres
copyrights. The sale resulted in after-tax gains of
$17,400,000, $.23 per share, in the three- and six-month
periods ended June 30.
1993 - The Company's operating results include after-tax gains
of $300,000, $.00 per share, for the three-month period ended
June 30, and $12,400,000, $.17 per share for the six-month
period ended June 30 (see Note 2B).
The Company realized a gain of $1,100,000 on the sale of
certain equipment. The gain increased second quarter and year-
to-date net income $700,000, $.01 per share.
Management changed the estimate of the additional amount of
copyright fees the Company would owe when a dispute between
the television industry and the American Society of
Composers, Authors and Publishers ("ASCAP") was resolved.
The adjustment increased first quarter and year-to-date
operating income $4,300,000 and net income $2,300,000, $.03
per share.
The Company's agreement to guarantee up to $53,000,000 of the
Ogden, Utah, Standard Examiner's debt expired with a change
in ownership of the Standard Examiner. The Company received
a $2,500,000 fee in connection with the transaction. The fee
increased first quarter and year-to-date net income
$1,600,000, $.02 per share.
4.INCOME TAXES
The Internal Revenue Service is currently examining the
consolidated income tax returns of EWS for the years 1985 through
1990. Management believes that adequate provision for income taxes
has been made for all open years.
The provision for income taxes consists of the following:
( in thousands ) Three months ended Six months ended
June 30, June 30,
1994 1993 1994 1993
Current:
Federal $ 30,690 $ 14,652 $ 44,641 $ 33,777
State and local 7,145 2,653 10,622 5,453
Foreign 767 1,074 2,099 1,919
Total current 38,602 18,379 57,362 41,149
Deferred:
Federal (2,380) 1,870 (4,864) 4,383
Other 920 726 485 2,125
Total deferred (1,460) 2,596 (4,379) 6,508
Total income taxes 37,142 20,975 52,983 47,657
Income taxes allocated to stockholders' equity 2,032 6,543
Provision for income taxes $ 39,174 $ 20,975 $ 59,526 $ 47,657
5.LONG-TERM DEBT
Long-term debt consisted of the following:
( in thousands ) As of
June 30, December 31, June 30,
1994 1993 1993
Variable Rate Credit Facilities $ 2,600 $ 88,000 $ 213,600
7.375% notes, due in 1998 99,338 99,264 99,190
9.0% notes, due in 1996 50,000 50,000 50,000
8.5% notes, payable through 1994 8,334 8,334 36,667
Other notes 2,295 2,320 3,040
Total long-term debt 162,567 247,918 402,497
Current portion of long-term debt 10,985 96,383 57,959
Long-term debt (less current portion) $ 151,582 $ 151,535 $ 344,538
Weighted average interest rate on Variable Rate
Credit Facilities at balance sheet date 5.0% 3.4% 3.3%
The Company has a Competitive Advance/Revolving Credit Agreement
which expires in September 1994 and permits maximum borrowings up
to $100,000,000, and additional lines of credit totaling
$30,000,000 which expire at various dates through June 1995
(collectively "Variable Rate Credit Facilities"). Maximum
borrowings under the Variable Rate Credit Facilities are changed as
the Company's anticipated needs change and are not indicative of
the Company's short-term borrowing capacity. The Variable Rate
Credit Facilities may be extended upon mutual agreement.
Certain long-term debt agreements contain maintenance requirements
on net worth and coverage of interest expense and restrictions on
dividends and incurrence of additional indebtedness.
6.INVESTMENTS
Investments consisted of the following:
( in thousands, except share data ) As of
June 30, December 31, June 30,
1994 1993 1993
Securities available for sale: *
Pittsburgh Post-Gazette preferred stock,
$25 million face value, 8% cumulative dividend $ 14,000 $ 14,000 $ 14,000
Turner Broadcasting:
Class B common stock (589,165 shares) 10,458 15,907 7,985
Class C preferred stock (convertible into
1,309,092 shares of Class B common stock) 23,236 35,345 3,285
Other 3,185 4,043 1,897
Total securities available for sale 50,879 69,295 27,167
Investments accounted for under the equity method 1,476 3,992 2,262
Total investments $ 52,355 $ 73,287 $ 29,429
Unrealized gains on securities available for sale $ 23,737 $ 42,125 $ 29,476
* Effective December 31, 1993 the Company adopted FAS No. 115. Investments classified as available for
sale are carried at market value at June 30, 1994 and December 31, 1993. At June 30, 1993 such securities
were carried at the lower of cost or market. There were no unrealized losses at June 30, 1994,
December 31, 1993, or June 30, 1993.
7.PROPERTY, PLANT, AND EQUIPMENT AND INTANGIBLE ASSETS
Property, plant, and equipment consisted of the following:
( in thousands ) As of
June 30, December 31, June 30,
1994 1993 1993
Land and improvements $ 46,062 $ 45,199 $ 46,880
Buildings and improvements 188,337 184,708 188,592
Equipment 1,005,191 972,674 1,011,533
Total 1,239,590 1,202,581 1,247,005
Accumulated depreciation 525,904 489,855 522,672
Net property, plant, and equipment $ 713,686 $ 712,726 $ 724,333
Goodwill and other intangible assets consisted of the following:
( in thousands ) As of
June 30, December 31, June 30,
1994 1993 1993
Goodwill $ 388,746 $ 387,868 $ 418,905
Cable television franchise costs 167,390 167,378 167,392
Customer lists 135,067 133,427 133,397
Licenses and copyrights 28,221 28,221 28,263
Non-competition agreements 24,489 32,089 32,249
Other 33,745 31,870 32,753
Total 777,658 780,853 812,959
Accumulated amortization 235,357 227,864 216,060
Net goodwill and other intangible assets $ 542,301 $ 552,989 $ 596,899
8.SEGMENT INFORMATION
Previously reported 1993 segment information has been restated to
conform with 1994 segment classifications. The Entertainment
segment includes United Media licensing and syndication (previously
included in the Publishing segment), Scripps Howard Productions (a
producer of television programming), The Home & Garden Television
Network (a 24-hour cable television channel scheduled for launch in
late 1994), and the Company's equity interest in The Food Network
and SportSouth cable television networks (previously reported in
Miscellaneous, net). On March 31, 1994 the Company completed the
acquisition of Cinetel Productions (an independent producer of
programs for cable television). Cinetel operating results from the
date of acquisition are included in the Entertainment segment.
The Other segment includes book publishing operations which were
sold in 1993 (see Note 2B).
Newspaper 1993 second quarter and year-to-date operating
income was increased $1,100,000 as a result of the gain on
sale of equipment (see Note 3). Broadcasting 1993 first
quarter and year-to-date operating income was increased by
$4,300,000 as a result of the change in estimate of the
additional amount of copyright fees owed ASCAP (see Note 3).
Financial information relating to the Company's business segments
is as follows:
( in thousands ) Three months ended Six months ended
June 30, June 30,
1994 1993 1994 1993
OPERATING REVENUES
Newspapers $ 151,765 $ 143,632 $ 293,802 $ 278,095
Broadcasting 73,892 77,401 134,245 139,246
Cable television 63,266 63,715 125,651 126,905
Entertainment 18,676 18,644 39,654 38,269
Other 3,597 8,126
Total operating revenues $ 307,599 $ 306,989 $ 593,352 $ 590,641
OPERATING INCOME
Newspapers $ 34,106 $ 20,309 $ 62,125 $ 36,328
Broadcasting 26,161 22,563 41,951 39,571
Cable television 7,379 11,632 16,904 25,634
Entertainment (1,045) 912 1,000 2,753
Other 82 (201)
Corporate (3,359) (3,076) (6,636) (6,426)
Total operating income $ 63,242 $ 52,422 $ 115,344 $ 97,659
DEPRECIATION
Newspapers $ 7,177 $ 6,427 $ 14,303 $ 14,167
Broadcasting 2,292 2,487 4,459 4,926
Cable television 12,883 12,297 24,657 22,993
Entertainment 658 233 855 450
Other 8 25
Corporate 144 177 292 331
Total depreciation $ 23,154 $ 21,629 $ 44,566 $ 42,892
AMORTIZATION OF INTANGIBLE ASSETS
Newspapers $ 1,747 $ 1,732 $ 3,529 $ 3,479
Broadcasting 2,861 3,114 5,724 6,085
Cable television 2,874 3,254 5,842 6,582
Entertainment 24 3 24 5
Other 315 630
Total amortization of intangible assets $ 7,506 $ 8,418 $ 15,119 $ 16,781
CAPITAL EXPENDITURES
Newspapers $ 4,187 $ 7,630 $ 10,259 $ 14,062
Broadcasting 3,185 2,124 5,877 5,486
Cable television 10,650 17,978 22,171 31,998
Entertainment 471 54 502 382
Corporate 171 287 1,212
Total capital expenditures $ 18,664 $ 27,786 $ 39,096 $ 53,140
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Consolidated results of operations were as follows:
( in thousands, except per share data ) Quarterly Period Year-to-Date
1994 Change 1993 1994 Change 1993
Operating Revenues:
Newspapers $ 151,765 5.7 % $ 143,632 $ 293,802 5.6 % $ 278,095
Broadcasting 73,892 (4.5)% 77,401 134,245 (3.6)% 139,246
Cable television 63,266 (0.7)% 63,715 125,651 (1.0)% 126,905
Entertainment 18,676 0.2 % 18,644 39,654 3.6 % 38,269
Other 3,597 8,126
Total operating revenues $ 307,599 0.2 % $ 306,989 $ 593,352 0.5 % $ 590,641
Operating income:
Newspapers $ 34,106 67.9 % $ 20,309 $ 62,125 71.0 % $ 36,328
Broadcasting 26,161 15.9 % 22,563 41,951 6.0 % 39,571
Cable television 7,379 (36.6)% 11,632 16,904 (34.1)% 25,634
Entertainment (1,045) 912 1,000 (63.7)% 2,753
Other 82 (201)
Corporate (3,359) (9.2)% (3,076) (6,636) (3.3)% (6,426)
Total operating income 63,242 20.6 % 52,422 115,344 18.1 % 97,659
Interest expense (4,613) (7,148) (9,272) (15,059)
Gain on sale of subsidiary companies and copyrights 31,621 1,774 31,621 22,436
Miscellaneous, net (374) (1,431) (252) 1,941
Income taxes (39,174) (20,975) (59,526) (47,657)
Minority interest (2,878) (2,555) (4,994) (4,635)
Net income $ 47,824 116.5 % $ 22,087 $ 72,921 33.3 % $ 54,685
Net income per share of common stock $.64 113.3 % $.30 $.98 34.2 % $.73
Weighted average shares outstanding 74,776 0.2 % 74,627 74,769 0.2 % 74,620
Effective income tax rate 43.6 % 46.0 % 43.3 % 44.5 %
For comparison purposes certain 1993 operating revenues, operating
expenses, and equity in income of certain joint ventures (see below)
have been reclassified to conform with 1994 classifications.
Previously reported 1993 segment information has been restated to
conform with 1994 segment classifications. The Entertainment segment
includes United Media licensing and syndication (previously included
in the Publishing segment), Scripps Howard Productions (a producer of
television programming), The Home & Garden Television Network (a 24-
hour cable television channel scheduled for launch in late 1994), and
the Company's equity interest in The Food Network and SportSouth cable
television networks (previously reported in Miscellaneous, net). On
March 31, 1994 the Company completed the acquisition of Cinetel
Productions (an independent producer of programs for cable
television). Cinetel operating results from the date of acquisition
are included in the Entertainment segment.
The Other segment includes book publishing operations which were sold
in 1993 (see (ii) below).
The following items affected the comparability of the Company's
reported results of operations:
(i) The Company sold its worldwide Garfield and U.S. Acres
copyrights in the second quarter of 1994. The sale resulted
in a gain of $31,600,000, $17,400,000 after-tax, $.23 per
share, in the three- and six-month periods ended June 30,
1994. See Note 3 to the Consolidated Financial Statements.
(ii) The Company sold its book publishing operations and a
newspaper in the first six months of 1993. In subsequent quarters
a newspaper, a television station, and radio stations in three
markets were sold. The aforementioned businesses, and any related
gains on the sales of the businesses, are hereinafter referred to
as the "Divested Operations." See Note 2B to the Consolidated
Financial Statements.
The following items related to Divested Operations affected the
comparability of the Company's reported results of operations:
( in thousands, except per share data ) Quarterly Period Year-to-Date
1993 1993
Operating revenues $ 16,300 $ 31,800
Operating income 2,300 3,300
Gain recognized (before income
taxes and minortiy interests) 1,774 22,436
Gain recognized (after income
taxes and minority interests) 300 12,400
Gain recognized per share
(after income taxes and
minority interests) .00 .17
(iii) The Company realized a gain of $1,100,000 on the sale of
certain equipment ("Gain on Equipment") in the second quarter
of 1993. The gain increased second quarter and year-to-date
net income $700,000, $.01 per share. See Note 3 to the
Consolidated Financial Statements.
(iv) In the first quarter of 1993 management changed the estimate
of the additional amount of copyright fees the Company would owe
when a dispute between the television industry and the American
Society of Composers, Authors and Publishers was resolved ("ASCAP
Adjustment"). The adjustment increased broadcasting operating
income $4,300,000 and net income $2,300,000, $.03 per share. See
Note 3 to the Consolidated Financial Statements.
(v) In the first quarter of 1993 the Company's agreement to guarantee
up to $53,000,000 of the Ogden, Utah, Standard Examiner's debt
expired with a change in ownership of the Standard Examiner. The
Company received a $2,500,000 fee in connection with the
transaction ("Ogden Fee"). The fee increased net income
$1,600,000, $.02 per share. See Note 3 to the Consolidated
Financial Statements.
The items above are excluded from the consolidated and segment
operating results presented in the following pages of this
Management's Discussion and Analysis. Management believes they are
not relevant to understanding the Company's ongoing operations.
Net income per share was as follows:
Quarterly Period Year-to-Date
1994 Change 1993 1994 Change 1993
Adjusted net income per share
(excluding gains and unusual items) $ .41 46.4 % $ .28 $ .74 48.0 % $ .50
Year-to-date interest expense decreased $5,800,000 as average long-
term debt in 1994 was $212,000,000 less than in 1993.
Miscellaneous includes the Ogden Fee described in (v) above.
RESULTS OF OPERATIONS
CONSOLIDATED - Operating results, excluding the Divested Operations,
Gain on Equipment and ASCAP Adjustment, were as follows:
( in thousands ) Quarterly Period Year-to-Date
1994 Change 1993 1994 Change 1993
Operating revenues:
Newspapers $ 151,765 8.9 % $ 139,329 $ 293,802 8.9 % $ 269,722
Broadcast television 73,892 7.0 % 69,033 134,245 8.3 % 123,959
Cable television 63,266 (0.7)% 63,715 125,651 (1.0)% 126,905
Entertainment 18,676 0.2 % 18,644 39,654 3.6 % 38,269
Total operating revenues $ 307,599 5.8 % $ 290,721 $ 593,352 6.2 % $ 558,855
Operating income:
Newspapers $ 34,106 73.4 % $ 19,669 $ 62,125 72.5 % $ 36,017
Broadcast television 26,161 31.9 % 19,836 41,951 35.2 % 31,030
Cable television 7,379 (36.6)% 11,632 16,904 (34.1)% 25,634
Entertainment (1,045) 912 1,000 (63.7)% 2,753
Corporate (3,359) (9.2)% (3,076) (6,636) (3.3)% (6,426)
Total operating income $ 63,242 29.1 % $ 48,973 $ 115,344 29.6 % $ 89,008
Other Financial and Statistical Data:
Total advertising revenues $ 185,339 9.4 % $ 169,488 $ 348,596 9.8 % $ 317,411
Advertising revenues as a
percentage of total revenues 60.3 % 58.3 % 58.8 % 56.8 %
Total capital expenditures $ 18,664 (32.0)% $ 27,461 $ 39,096 (25.8)% $ 52,695
SEGMENTS - Operating results, excluding the Divested Operations, Gain
on Equipment, and the ASCAP Adjustment, for each of the Company's
business segments are presented on the following pages.
Earnings before interest, income taxes, depreciation, and amortization
("EBITDA") is included in the discussion of segment results because:
Acquisitions of communications media businesses are based on
multiples of EBITDA.
Financial analysts use EBITDA to value communications media
companies.
Changes in depreciation and amortization are often unrelated to
current performance. Management believes the year-over-year
change in EBITDA is a more useful measure of year-over-year
performance than the change in operating income because, combined
with information on capital spending plans, it is a more reliable
indicator of results that may be expected in future periods.
Banks and other lenders use EBITDA to determine the Company's
borrowing capacity.
EBITDA should not, however, be construed as an alternative measure of
the amount of the Company's income or cash flows from operating
activities.
NEWSPAPERS - Operating results for the newspaper segment, excluding
the Divested Operations and Gain on Equipment, were as follows:
( in thousands, except newsprint information ) Quarterly Period Year-to-Date
1994 Change 1993 1994 Change 1993
Operating revenues:
Local $ 46,611 5.7 % $ 44,090 $ 91,880 6.9 % $ 85,934
Classified 42,652 15.7 % 36,878 80,040 13.7 % 70,396
National 4,098 20.6 % 3,397 8,094 30.5 % 6,200
Preprint 15,387 11.3 % 13,821 29,478 10.1 % 26,782
Newspaper advertising 108,748 10.8 % 98,186 209,492 10.7 % 189,312
Circulation 29,189 2.3 % 28,536 58,745 2.5 % 57,322
Joint operating agency distributions 11,680 13.2 % 10,320 21,446 14.8 % 18,681
Other 2,148 (6.1)% 2,287 4,119 (6.5)% 4,407
Total operating revenues 151,765 8.9 % 139,329 293,802 8.9 % 269,722
Operating expenses:
Employee compensation and benefits 55,537 (1.0)% 56,082 110,108 (0.3)% 110,450
Newsprint and ink 22,131 (2.1)% 22,611 42,788 (0.7)% 43,091
Other 31,067 (2.5)% 31,848 60,949 (1.2)% 61,703
Depreciation and amortization 8,924 (2.1)% 9,119 17,832 (3.4)% 18,461
Total operating expenses 117,659 (1.7)% 119,660 231,677 (0.9)% 233,705
Operating income $ 34,106 73.4 % $ 19,669 $ 62,125 72.5 % $ 36,017
Other Financial and Statistical Data:
Earnings before interest,
income taxes, depreciation,
and amortization ("EBITDA") $ 43,030 49.5 % $ 28,788 $ 79,957 46.8 % $ 54,478
Percent of operating revenues:
Operating income 22.5 % 14.1 % 21.1 % 13.4 %
EBITDA 28.4 % 20.7 % 27.2 % 20.2 %
Capital expenditures $ 4,187 (43.8)% $ 7,450 $ 10,259 (25.9)% $ 13,849
Advertising inches:
Local 1,960 0.6 % 1,949 3,931 1.7 % 3,864
Classified 3,055 6.9 % 2,859 5,743 6.4 % 5,399
National 104 4.0 % 100 205 12.6 % 182
Total full run ROP 5,119 4.3 % 4,908 9,879 4.6 % 9,445
Newsprint information:
Consumption (in tonnes) 49,770 3.9 % 47,891 96,993 4.2 % 93,049
Weighted average price per tonne $ 425 (6.1)% $ 453 $ 422 (5.2)% $ 445
Demand for local advertising continued to improve in the first half of
1994 and strong growth in classified continues with the economic
recovery. Advertising revenues increased for all of the Company's
daily newspapers. Newsprint suppliers have announced price increases
which would result in a fourth quarter 1994 weighted average price
per tonne approximately 15% higher than the weighted average price in
the fourth quarter of 1993.
BROADCAST TELEVISION - Operating results for the broadcast television
segment, excluding the Divested Operations and ASCAP Adjustment, were
as follows:
( in thousands ) Quarterly Period Year-to-Date
1994 Change 1993 1994 Change 1993
Operating revenues:
Local $ 38,030 8.6 % $ 35,029 $ 70,517 9.4 % $ 64,446
National 32,507 2.5 % 31,712 57,832 5.4 % 54,894
Political 1,239 33 1,601 209
Other 2,116 (6.3)% 2,259 4,295 (2.6)% 4,410
Total operating revenues 73,892 7.0 % 69,033 134,245 8.3 % 123,959
Operating expenses:
Employee compensation and benefits 18,545 5.3 % 17,613 36,483 5.1 % 34,712
Program costs 13,059 (11.5)% 14,761 25,085 (6.3)% 26,777
Other 10,974 (5.0)% 11,556 20,543 (2.6)% 21,087
Depreciation and amortization 5,153 (2.2)% 5,267 10,183 (1.6)% 10,353
Total operating expenses 47,731 (3.0)% 49,197 92,294 (0.7)% 92,929
Operating income $ 26,161 31.9 % $ 19,836 $ 41,951 35.2 % $ 31,030
Other Financial and Statistical Data:
Earnings before interest,
income taxes, depreciation,
and amortization ("EBITDA") $ 31,314 24.7 % $ 25,103 $ 52,134 26.0 % $ 41,383
Percent of operating revenues:
Operating income 35.4 % 28.7 % 31.2 % 25.0 %
EBITDA 42.4 % 36.4 % 38.8 % 33.4 %
Capital expenditures $ 3,185 60.9 % $ 1,979 $ 5,877 11.9 % $ 5,254
Improved demand for advertising time led to the increase in revenues
and EBITDA. EBITDA improved sharply at the Company's Baltimore
television station following termination of an agreement to broadcast
Oriole baseball games. The loss of baseball advertising revenue was
more than offset by the switch to lower-cost programming. Excluding
the Baltimore station, revenues increased 12 percent.
The Company has entered into 10-year affiliation agreements with the
ABC television network in five of the Company's television markets.
The agreements with ABC extend existing affiliation agreements in the
Detroit and Cleveland markets, and will replace the current NBC
affiliation in Baltimore and Fox affiliations in Phoenix and Tampa.
The Company has reached agreements to affiliate its Kansas City
television station with NBC and to extend its existing NBC
affiliations in Tulsa and West Palm Beach. The Company had previously
been notified of Fox's plans to move its programming to other stations
in the Kansas City, Phoenix, and Tampa markets.
CABLE TELEVISION - Operating results for the cable television segment
were as follows:
( in thousands, except per subscriber information ) Quarterly Period Year-to-Date
1994 Change 1993 1994 Change 1993
Operating revenues:
Basic services $ 41,315 (6.3)% $ 44,094 $ 82,352 (6.2)% $ 87,791
Premium programming services 12,189 6.6 % 11,437 24,186 6.2 % 22,769
Other monthly service 4,257 24.1 % 3,429 8,471 23.8 % 6,845
Advertising 2,699 19.0 % 2,269 4,859 17.4 % 4,140
Installation and miscellaneous 2,806 12.9 % 2,486 5,783 7.9 % 5,360
Total operating revenues 63,266 (0.7)% 63,715 125,651 (1.0)% 126,905
Operating expenses:
Employee compensation and benefits 10,272 4.2 % 9,856 20,821 7.1 % 19,433
Program costs 15,253 11.7 % 13,652 30,192 10.9 % 27,216
Other 14,605 12.1 % 13,024 27,235 8.7 % 25,047
Depreciation and amortization 15,757 1.3 % 15,551 30,499 3.1 % 29,575
Total operating expenses 55,887 7.3 % 52,083 108,747 7.4 % 101,271
Operating income $ 7,379 (36.6)% $ 11,632 $ 16,904 (34.1)% $ 25,634
Other Financial and Statistical Data:
Earnings before interest,
income taxes, depreciation,
and amortization ("EBITDA") $ 23,136 (14.9)% $ 27,183 $ 47,403 (14.1)% $ 55,209
Percent of operating revenues:
Operating income 11.7 % 18.3 % 13.5 % 20.2 %
EBITDA 36.6 % 42.7 % 37.7 % 43.5 %
Capital expenditures $ 10,650 (40.8)% $ 17,978 $ 22,171 (30.7)% $ 31,998
Average number of basic subscribers 712.9 4.8 % 680.4 709.1 4.6 % 678.0
Average monthly revenue
per basic subscriber $ 29.58 (5.2)% $ 31.21 $ 29.53 (5.4)% $ 31.20
Homes passed at end of period 1,156.3 1.8 % 1,136.3
Basic subscribers at end of period 715.7 5.1 % 681.0
Penetration rate 61.9 % 59.9 %
Re-regulation of the cable television industry significantly affected
the Company's cable television operations. New rules which became
effective in July 1994 are expected to reduce rates slightly in the
third quarter.
Other operating expenses includes a $1,500,000 charge for special
rebates to the Company's Sacramento system customers and related legal
costs. The rebate was awarded by a federal court in connection with
litigation concerning the system's pricing policies in the late 1980s.
ENTERTAINMENT - Operating results for the entertainment segment were
as follows:
( in thousands ) Quarterly Period Year-to-Date
1994 Change 1993 1994 Change 1993
Operating revenues:
Licensing $ 11,596 (13.6)% $ 13,422 $ 27,404 (0.1)% $ 27,441
Syndication 4,591 (2.8)% 4,725 9,305 (2.2)% 9,516
Film and television production 2,489 497 2,945 124.5 % 1,312
Other
Total operating revenues 18,676 0.2 % 18,644 39,654 3.6 % 38,269
Operating expenses:
Employee compensation and benefits 3,944 12.9 % 3,493 7,149 2.1 % 7,005
Artists' royalties 8,080 (11.7)% 9,154 18,721 1.1 % 18,512
Film and television production costs 645 190.5 % 222 904 18.9 % 760
Other 6,370 37.7 % 4,627 11,001 25.2 % 8,784
Depreciation and amortization 682 189.0 % 236 879 93.2 % 455
Total operating expenses 19,721 11.2 % 17,732 38,654 8.8 % 35,516
Operating income $ (1,045) $ 912 $ 1,000 (63.7)% $ 2,753
Other Financial and Statistical Data:
Earnings before interest,
income taxes, depreciation,
and amortization ("EBITDA") $ (363) (131.6)% $ 1,148 $ 1,879 (41.4)% $ 3,208
Percent of operating revenues:
Operating income (5.6)% 4.9 % 2.5 % 7.2 %
EBITDA (1.9)% 6.2 % 4.7 % 8.4 %
Capital expenditures $ 471 $ 54 $ 502 $ 382
The Company acquired Cinetel Productions in Knoxville, Tennessee, on
March 31, 1994. Cinetel is one of the largest independent producers
of programs for cable television. Cinetel's results of operations are
included in the Entertainment segment from the date of acquisition.
The Company completed the sale of its Garfield and U.S. Acres
copyrights in the second quarter, contributing to the decrease in
licensing and syndication revenues and EBITDA. The change in the
exchange rate for the Japanese yen increased licensing revenues
$900,000 in the year-to-date period.
Start-up costs for The Home & Garden Television Network ("HGTV"), a 24-
hour cable channel scheduled for launch in late 1994, totaled
$1,500,000 in the first six months of 1994.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities was $121,700,000 in 1994 compared
to $91,200,000 in 1993.
Cash flow from operating activities and from the sale of copyrights
totaled $155,000,000 in 1994 and was used primarily for capital
expenditures of $39,100,000, acquisitions and investments of
$19,100,000, debt reduction of $85,400,000, and dividend payments of
$18,200,000. The debt to total capitalization ratio at June 30 was
.15 in 1994 and .34 in 1993.
Consolidated capital expenditures for the remainder of 1994 are
expected to total approximately $45,000,000, including HGTV. Current
maturities of long-term debt at June 30, 1994 total $11,000,000. The
Company expects to finance its capital requirements and start-up costs
for HGTV primarily through cash flow from operations.
PROPOSED MERGER
On April 7, 1994 the board of directors of Scripps Howard Broadcasting
Company ("SHB") approved a merger proposal from the Company, under
which the Company would exchange 3.45 shares of its Class A Common
stock for each SHB share. The Company and SHB executed a definitive
agreement on May 4, 1994. The merger is subject to regulatory
approvals and a vote of SHB shareholders. If the merger is effected
under the terms proposed by the Company, approximately 5,000,000
additional shares of Class A Common stock would be issued. There can
be no assurance that the merger will be entered into or that any
transaction will be consummated.
THE E. W. SCRIPPS COMPANY
Index to Exhibits
Exhibit
No. Item Page
12 Ratio of Earnings to Fixed Charges E-2
RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12
( in thousands ) Three months ended Six months ended
June 30, June 30,
1994 1993 1994 1993
EARNINGS AS DEFINED:
Earnings from operations before income taxes after
eliminating undistributed earnings of 20%- to
50%-owned affiliates $ 91,190 $ 45,523 $ 139,864 $ 107,042
Fixed charges excluding capitalized interest and
preferred stock dividends of majority-owned
subsidiary companies 5,985 8,483 11,985 17,667
Earnings as defined $ 97,175 $ 54,006 $ 151,849 $ 124,709
FIXED CHARGES AS DEFINED:
Interest expense, including amortization of
debt issue costs $ 4,613 $ 7,148 $ 9,272 $ 15,059
Interest capitalized 9 53
Portion of rental expense representative
of the interest factor 1,156 1,182 2,303 2,318
Preferred stock dividends of majority-owned
subsidiary companies 20 23 40 45
Share of interest expense related to guaranteed debt
50%-owned affiliated company 216 153 410 290
Fixed charges as defined $ 6,005 $ 8,515 $ 12,025 $ 17,765
RATIO OF EARNINGS TO FIXED CHARGES 16.18 6.34 12.63 7.02