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 September 30, 1996
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
October 31, 1996 the registrant had outstanding 61,067,262 shares of
Class A Common Stock and 19,470,382 shares of Common Voting Stock.
INDEX TO THE E.W. SCRIPPS COMPANY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
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
Scripps is involved in litigation arising in the ordinary course of
business, such as defamation actions. In addition Scripps is involved
from time to time in various governmental and administrative
proceedings relating to, among other things, renewal of broadcast
licenses. The costs to defend or settle such litigation and other
proceedings are not expected to have a material adverse effect on
Scripps' financial condition or results of operations.
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
No matters were submitted to a vote of security holders during the
quarter for which this report is filed.
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. On August 14, 1996, financial statements for Scripps
Cable for the quarter and six months ended June 30, 1996 were filed as
Amendment Number 6 to Scripps' Current Report on Form 8-K dated
December 28, 1995.
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: November 1, 1996 BY:/s/ D. 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-11
CONSOLIDATED BALANCE SHEETS
( in thousands ) As of
September 30, December 31, September 30,
1996 1995 1995
( Unaudited ) ( Unaudited )
ASSETS
Current Assets:
Cash and cash equivalents $ 16,334 $ 30,021 $ 14,579
Short-term investments 25,013 38,000
Accounts and notes receivable (less
allowances -$3,642, $3,447, $4,022) 150,578 166,867 142,555
Program rights and production costs 70,805 52,402 46,199
Refundable income taxes 17,019 7,828 23,255
Inventories 9,932 11,459 16,476
Deferred income taxes 21,545 21,694 18,350
Miscellaneous 20,856 18,961 20,796
Total current assets 307,069 334,245 320,210
Net Assets of Discontinued Operations 354,951 305,838 305,760
Investments 54,494 53,186 52,108
Property, Plant, and Equipment 433,076 425,959 424,493
Goodwill and Other Intangible Assets 591,746 495,773 500,704
Other Assets:
Program rights and production costs (less current portion) 27,622 26,829 55,577
Miscellaneous 21,386 13,722 9,551
Total other assets 49,008 40,551 65,128
TOTAL ASSETS $ 1,790,344 $ 1,655,552 $ 1,668,403
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
( in thousands, except share data ) As of
September 30, December 31, September 30,
1996 1995 1995
( Unaudited ) ( Unaudited )
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 112,540 $ 78,698 $ 47,043
Accounts payable 76,132 78,538 80,868
Customer deposits and unearned revenue 33,298 21,307 20,847
Accrued liabilities:
Employee compensation and benefits 32,855 32,901 29,924
Artist and author royalties 10,209 6,843 9,277
Interest 3,510 2,169 2,297
Income taxes 1,220 634 2,345
Lawsuits and related settlements 4,387 8,803 11,042
Miscellaneous 24,748 36,226 28,575
Total current liabilities 298,899 266,119 232,218
Deferred Income Taxes 71,868 82,229 78,806
Long-Term Debt (less current portion) 31,804 2,177 63,461
Other Long-Term Obligations and Minority Interests 106,153 113,601 132,871
Commitments and Contingencies (Note 5)
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: 61,036,512; 60,085,408; and 59,671,242 shares 610 601 600
Voting - authorized: 30,000,000 shares; issued and
outstanding: 19,470,382; 19,978,373; and 19,990,833 shares 195 200 200
Total 805 801 800
Additional paid-in capital 268,865 254,063 252,655
Retained earnings 992,373 916,602 886,515
Unrealized gains on securities available for sale 22,733 20,720 21,997
Unvested restricted stock awards (3,841) (1,573) (1,823)
Foreign currency translation adjustment 685 813 903
Total stockholders' equity 1,281,620 1,191,426 1,161,047
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,790,344 $ 1,655,552 $ 1,668,403
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME ( UNAUDITED )
( in thousands, except per share data ) Three month ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Operating Revenues:
Advertising $ 119,117 $ 112,668 $ 353,865 $ 337,234
Circulation 31,793 30,757 97,459 93,242
Other newspaper revenue 12,793 12,488 38,204 38,156
Total newspapers 163,703 155,913 489,528 468,632
Broadcast television 74,325 67,663 230,250 211,711
Entertainment 27,455 21,155 77,274 68,964
Total operating revenues 265,483 244,731 797,052 749,307
Operating Expenses:
Employee compensation and benefits 90,078 84,699 266,294 252,564
Newsprint and ink 29,402 32,008 96,732 88,260
Program, production and copyright costs 17,756 15,448 50,824 47,980
Other operating expenses 65,746 62,094 194,332 185,742
Depreciation 12,518 12,090 36,697 34,477
Amortization of intangible assets 4,738 5,050 15,029 15,155
Total operating expenses 220,238 211,389 659,908 624,178
Operating Income 45,245 33,342 137,144 125,129
Other Credits (Charges):
Interest expense (2,713) (2,441) (6,350) (8,623)
Miscellaneous, net 291 1,427 614 2,603
Net other credits (charges) (2,422) (1,014) (5,736) (6,020)
Income from Continuing Operations
Before Taxes and Minority Interests 42,823 32,328 131,408 119,109
Provision for Income Taxes 18,331 14,187 56,603 52,285
Income from Continuing Operations
Before Minority Interests 24,492 18,141 74,805 66,824
Minority Interests 841 784 2,326 2,587
Income From Continuing Operations 23,651 17,357 72,479 64,237
Income From Discontinued Operations 12,268 10,277 34,645 28,650
Net Income $ 35,919 $ 27,634 $ 107,124 $ 92,887
Per Share of Common Stock:
Income from continuing operations $.29 $.22 $.90 $.80
Net income $.45 $.35 $1.33 $1.16
Dividends declared $.13 $.13 $.39 $.37
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS ( UNAUDITED )
( in thousands ) Nine months ended
September 30,
1996 1995
Cash Flows from Operating Activities:
Income from continuing operations $ 72,479 $ 64,237
Adjustments to reconcile income from continuing operations
to net cash flows from continuing operating activities:
Depreciation and amortization 51,726 49,632
Deferred income taxes 11,680 4,462
Minority interests in income of subsidiary companies 2,326 2,587
Settlement of 1985 - 1987 federal income tax audits (45,000)
Other changes in certain working capital accounts, net (5,479) (26,099)
Miscellaneous, net (19,210) 7,997
Net cash provided by continuing operating activities 113,522 57,816
Discontinued cable operations:
Income 34,645 28,650
Adjustment to derive cash flows from operating activities 35,129 53,928
Net cash provided 69,774 82,578
Net operating activities 183,296 140,394
Cash Flows from Investing Activities:
Additions to property, plant, and equipment (41,921) (40,792)
Purchase of subsidiary companies and investments (25,923) (6,270)
Change in short-term investments, net 25,013 (38,000)
Sale of subsidiary companies and other investments 12,113 2,729
Miscellaneous, net 4,313 1,621
Net cash provided by (used in) investing activities of continuing operations (26,405) (80,712)
Net cash provided by (used in) investing activities of
discontinued cable operations (108,075) (29,028)
Net investing activities (134,480) (109,740)
Cash Flows from Financing Activities:
Increases in long-term debt 12,500
Payments on long-term debt (49,031) (38)
Dividends paid (31,353) (29,576)
Dividends paid to minority interests (1,255) (1,274)
Miscellaneous, net 7,261 704
Net cash provided by (used in) financing activities of continuing operations (61,878) (30,184)
Net cash provided by (used in) financing activities of
discontinued cable operations (625) (2,500)
Net financing activities (62,503) (32,684)
Increase (Decrease) in Cash and Cash Equivalents (13,687) (2,030)
Cash and Cash Equivalents:
Beginning of year 30,021 16,609
End of period $ 16,334 $ 14,579
Supplemental Cash Flow Disclosures:
Interest paid, excluding amounts capitalized $ 5,009 $ 8,325
Income taxes paid 50,313 51,422
Notes issued in acquisition of Vero Beach daily newspaper 100,000
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'EQUITY ( UNAUDITED )
( 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, 1994 $ 799 $ 248,098 $ 823,204 $ 12,518 $ (2,036) $ 885
Net income 92,887
Dividends: declared and
paid - $.37 per share (29,576)
Conversion of 184,000 Voting common shares
to 184,000 Class A common shares
Class A Common shares issued pursuant to
compensation plans, net:
191,750 shares issued,
1,250 shares forfeited,
and 16,762 shares repurchased 1 3,950 (538)
Tax benefits of compensation plans 607
Amortization of restricted stock awards 751
Foreign currency translation adjustment 18
Increase in unrealized gains on
securities available for sale, net
of deferred income taxes of $5,104 9,479
Balances at September 30, 1995 $ 800 $ 252,655 $ 886,515 $ 21,997 $ (1,823) $ 903
Balances at December 31, 1995 $ 801 $ 254,063 $ 916,602 $ 20,720 $ (1,573) $ 813
Net income 107,124
Dividends: declared and
paid - $.39 per share (31,353)
Conversion of 507,991 Common Voting shares
to 507,991 Class A Common shares
Class A Common shares issued pursuant to
compensation plans, net:
447,600 shares issued,
and 4,487 shares repurchased 4 12,862 (5,598)
Tax benefits of compensation plans 1,940
Amortization of restricted stock awards 3,330
Foreign currency translation adjustment (128)
Increase in unrealized gains on
securities available for sale, net
of deferred income taxes of $1,084 2,013
Balances at September 30, 1996 $ 805 $ 268,865 $ 992,373 $ 22,733 $ (3,841) $ 685
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ( UNAUDITED )
____________________________________________________________________
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. 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, 1995 has
not changed materially unless otherwise disclosed herein.
Financial information as of December 31, 1995 included in these
financial statements has been derived from the audited consolidated
financial statements included in that report. 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 are not necessarily indicative of the results
that may be expected for future interim periods or for the full
year.
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 Nine months ended
September 30, September 30,
1996 1995 1996 1995
Weighted average shares outstanding 80,473 80,010 80,328 79,930
2. ACQUISITIONS AND DIVESTITURES
A. Acquisitions
1996 - In May the Company purchased the Vero Beach, Florida, Press-
Journal.
1995 - There were no acquisitions in 1995.
The following table presents additional information about the
acquisitions:
( in thousands ) Nine months ended
September 30,
1996
Goodwill and other intangible assets acquired $ 110,967
Other assets acquired 10,900
Total 121,867
Liabilities assumed (1,794)
6.17% note issued to seller, due in 1997 (100,000)
Cash paid $ 20,073
The acquisition has been accounted for as a purchase and accordingly
the purchase price has been allocated to assets and liabilities
based on fair values at the date of acquisition. The allocation was
based on estimates and is subject to adjustment.
The acquired operation has been included in the Consolidated
Statements of Income from the acquisition date. The following table
summarizes, on an unaudited, pro forma basis, the estimated combined
results of operations of Scripps and the Press-Journal assuming the
acquisition had taken place at the beginning of the respective
periods. The pro forma information includes adjustments for
interest expense that would have been incurred to finance the
acquisition, additional depreciation based on the fair market value
of the property, plant, and equipment, and amortization of
intangible assets resulting from the acquisition. The unaudited pro
forma results of operations are not necessarily indicative of the
results which actually would have occurred had the acquisition been
completed at the beginning of the respective periods.
( in thousands ) Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Operating revenues $ 265,483 $ 247,864 $ 803,007 $ 760,093
Income from continuing operations 23,651 16,100 68,863 61,168
Net income 35,919 26,377 103,508 89,818
Per share of common stock:
Income from continuing operations $.29 $.20 $.86 $.77
Net income $.45 $.33 $1.29 $1.12
B. Divestitures
1996 - Scripps sold its equity interest in The Television Food
Network, a cable programming network. No material gain or loss was
realized as proceeds approximated the net book value of the net
assets sold.
1995 - Scripps sold its Watsonville, California, daily newspaper.
No material gain or loss was realized as proceeds approximated the
net book value of the net assets sold.
3. LONG-TERM DEBT
Long-term debt consisted of the following:
( in thousands ) As of
September 30, December 31, September 30,
1996 1995 1995
6.17% note, due in 1997 $ 100,000
7.375% notes, due in 1998 29,658 $ 31,658 $ 61,272
Variable Rate Credit Facilities 12,500
9.0% notes, due in 1996 47,000 47,000
Other notes 2,186 2,217 2,232
Total long-term debt 144,344 80,875 110,504
Current portion of long-term debt 112,540 78,698 47,043
Long-term debt (less current portion) $ 31,804 $ 2,177 $ 63,461
Scripps has a Competitive Advance/Revolving Credit Agreement and
other variable rate credit facilities ("Variable Rate Credit
Facilities") which expire through September 1997 and permit maximum
borrowings up to $50,000,000. Maximum borrowings under the
facilities are changed as Scripps' anticipated needs change and are
not indicative of Scripps' short-term borrowing capacity. The
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. Scripps is in
compliance with all debt covenants.
4. DISCONTINUED CABLE TELEVISION OPERATIONS
On October 28, 1995, Scripps and Comcast Corporation ("Comcast")
reached an agreement pursuant to which Scripps will contribute all
of its non-cable television assets to Scripps Howard, Inc. ("SHI" -
a wholly-owned subsidiary of Scripps and the direct or indirect
parent of all of Scripps' operations) and SHI's cable television
system subsidiaries ("Scripps Cable") will be transferred to and
held directly by Scripps. Scripps Cable will be acquired by Comcast
through a tax-free merger (the "Merger") of Scripps into Comcast.
The remaining SHI business will continue as "New Scripps", which
will be distributed in a tax-free "spin-off" to Scripps shareholders
(the "Spin-Off") prior to the Merger and thereafter renamed The E.W.
Scripps Company. The Merger and Spin-off are collectively referred
to as the "Transactions."
In connection with the Transactions, New Scripps has been
recapitalized to include Common Voting Shares and Class A Common
Shares and the Articles of Incorporation of New Scripps have been
further amended to provide for substantially the same shareholder
voting rights and other terms as the Scripps Certificate of
Incorporation currently provides for. Prior to the Spin-Off New
Scripps will issue to Scripps: (i) a number of New Scripps Common
Voting Shares equal to the number of shares of Scripps Common Voting
Stock then outstanding and (ii) a number of New Scripps Class A Common
Shares equal to the number of shares of Scripps Class A Common Stock
then outstanding. These shares will be distributed to Scripps'
shareholders in the Spin-Off.
The closing date of the Transactions is expected to occur prior to the
end of 1996, subject to certain conditions and rights, including
termination and "top-up" rights described fully in the Joint Proxy
Statement - Prospectus included in Comcast's registration statement on
Form S-4 filed with the Securities and Exchange Commission and
declared effective on September 30, 1996.
Because Scripps Cable represents an entire business segment that
will be divested, its results are reported as "discontinued
operations" for all periods presented.
Summarized operating results for the discontinued cable television
operations are as follows:
( in thousands ) Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Operating revenues $ 77,976 $ 71,110 $ 231,408 $ 207,855
Income before income taxes 20,340 16,874 57,438 46,188
Income taxes (8,072) (6,597) (22,793) (17,538)
Income from discontinued cable operations $ 12,268 $ 10,277 $ 34,645 $ 28,650
In the third quarter of 1995 Scripps Cable accrued an additional
$1,400,000 based upon a reassessment of the ultimate costs of
certain lawsuits (see Note 5). The accrual reduced income from
discontinued operations $900,000. Also in the third quarter of
1995 Scripps sold its Barbourville, Ky. cable television system,
realizing a pre-tax gain of $1,500,000, $900,000 after tax.
Summarized balance sheet data for the discontinued cable television
operations are as follows:
( in thousands ) As of
September 30, December 31, September 30,
1996 1995 1995
Property, plant, and equipment $ 318,698 $ 294,557 $ 288,411
Goodwill and other intangible assets 136,464 93,496 95,275
Other assets 29,710 26,014 29,324
Deferred income tax liabilities (98,975) (76,210) (77,166)
Other liabilities (30,946) (32,019) (30,084)
Net assets of discontinued cable television operations $ 354,951 $ 305,838 $ 305,760
The major components of cash flow for discontinued operations are as
follows:
( in thousands ) Nine months ended
September 30,
1996 1995
Income from discontinued operations $ 34,645 $ 28,650
Depreciation and amortization 40,810 41,005
Other, net (5,681) 12,923
Net cash provided by discontinued cable operating activities $ 69,774 $ 82,578
Capital expenditures $ (46,901) $ (30,119)
Acquisition of cable television systems (primarily equipment
and intangible assets) (62,099) (259)
Other, net 925 1,350
Net cash used in investing activities of discontinued cable operations $(108,075) $ (29,028)
In January 1996 Scripps Cable acquired cable television systems
adjacent to its Knoxville and Chattanooga systems (the "Mid-Tenn.
Purchase") for $62,500,000, including assumed liabilities. The
acquired cable television systems are included in the results of
discontinued operations from the acquisition date.
5. COMMITMENTS AND CONTINGENCIES
In 1994 Scripps accrued an estimate of the ultimate costs, including
attorneys' fees and settlements, of lawsuits filed by certain former
employees and independent contractors of a divested operating unit.
The lawsuits allege that the employees were due severance pay and
that certain contractual obligations were unfulfilled, respectively.
In April 1996 Scripps agreed to settle the severance pay lawsuits.
The settlement did not result in an additional charge. Management
believes the possibility of incurring a loss greater than the amount
accrued for the independent contractor lawsuits is remote.
In 1994 Scripps Cable accrued an estimate of the ultimate costs,
including attorneys' fees and settlements, of certain lawsuits
against the Sacramento cable television system related primarily to
employment issues and to the timing and amount of late-payment fees
assessed to subscribers. In the third quarter of 1995 Scripps Cable
accrued an additional $1,400,000 based upon a reassessment of the
probable cost of these and additional employment related lawsuits.
In May 1996 Scripps Cable agreed to settle the late-payment fee
lawsuits. The settlement did not result in an additional charge.
Management believes the possibility of incurring a loss greater than
the amount accrued for the employment issues lawsuits is remote.
Pursuant to the terms of the Merger, New Scripps will indemnify
Comcast against losses related to these lawsuits.
Amounts accrued, less payments for settlements and attorneys fees,
are included in accrued lawsuits and related settlements in the
Consolidated Balance Sheets.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Consolidated results of continuing operations were as follows:
( in thousands, except per share data ) Quarterly Period Year-to-Date
1996 Change 1995 1996 Change 1995
Operating revenues:
Newspapers $ 163,703 5.0 % $ 155,913 $ 489,528 4.5 % $ 468,338
Broadcast television 74,325 9.8 % 67,663 230,250 8.8 % 211,711
Entertainment 27,455 29.8 % 21,155 77,274 12.0 % 68,964
Total 265,483 8.5 % 244,731 797,052 6.4 % 749,013
Divested operating units 294
Total operating revenues $ 265,483 8.5 % $ 244,731 $ 797,052 6.4 % $ 749,307
Operating income:
Newspapers $ 31,922 31.8 % $ 24,214 $ 93,427 5.6 % $ 88,491
Broadcast television 20,522 26.1 % 16,269 67,999 18.4 % 57,455
Entertainment (2,618) (2,741) (6,429) (6,093)
Corporate (4,581) (3,888) (13,435) (12,783)
Total 45,245 33.6 % 33,854 141,562 11.4 % 127,070
Unusual items (4,000)
Divested operating units (512) (418) (1,941)
Total operating income 45,245 35.7 % 33,342 137,144 9.6 % 125,129
Interest expense (2,713) (2,441) (6,350) (8,623)
Miscellaneous, net 291 1,427 614 2,603
Income taxes (18,331) (14,187) (56,603) (52,285)
Minority interest (841) (784) (2,326) (2,587)
Income from continuing operations $ 23,651 $ 17,357 $ 72,479 $ 64,237
Per share of common stock:
Income from continuing operations $.29 31.8 % $.22 $.90 12.5 % $.80
Unusual charge .03
Adjusted income from continuing operations $.29 31.8 % $.22 $.93 16.3 % $.80
( in thousands ) Quarterly Period Year-to-Date
1996 Change 1995 1996 Change 1995
Other Financial and Statistical Data - excluding
divested operating units and unusual items:
Total advertising revenues $ 197,245 8.0 % $ 182,695 $ 595,351 7.4 % $ 554,421
Advertising revenues as a
percentage of total revenues 74.3 % 74.7 % 74.7 % 74.0 %
EBITDA:
Newspapers $ 42,140 25.2 % $ 33,662 $ 122,119 5.3 % $ 116,009
Broadcast television 26,374 15.2 % 22,888 87,470 14.0 % 76,710
Entertainment (1,670) (1,822) (3,651) (3,868)
Corporate (4,343) (3,734) (12,650) (12,152)
Total $ 62,501 22.6 % $ 50,994 $ 193,288 9.4 % $ 176,699
Effective income tax rate 42.8 % 43.9 % 43.1 % 43.9 %
Weighted average shares outstanding 80,473 0.6 % 80,010 80,328 0.5 % 79,930
Total capital expenditures $ 5,147 (48.4)% $ 9,976 $ 41,921 2.8 % $ 40,792
Earnings before interest, income taxes, depreciation, and
amortization ("EBITDA") is included in the discussion of segment
results because:
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. However, management's belief that EBITDA is a
more useful measure of year-over-year performance is not shared
by the accounting profession.
Banks and other lenders use EBITDA to determine Scripps'
borrowing capacity.
Financial analysts use EBITDA to value communications media
companies.
Acquisitions of communications media businesses are based on
multiples of EBITDA.
EBITDA should not, however, be construed as an alternative measure
of the amount of Scripps' income or cash flows from operating
activities as EBITDA excludes significant costs of doing business.
In the second quarter of 1996 Scripps incurred an unusual charge of
approximately $4,000,000, $2,600,000 after-tax, $.03 per share, for
Scripps' share of certain costs associated with restructuring
portions of the distribution system of the Cincinnati joint
operating agency.
Scripps acquired the Vero Beach daily newspaper on May 9, 1996, sold
its equity interest in The Television Food Network ("TV Food") in
the second quarter of 1996, and sold its Watsonville, California,
daily newspaper in the first quarter of 1995.
Year-to-date operating losses for the Home & Garden Television
network ("HGTV") totaled $12,200,000, $7,500,000 after-tax, $.09 per
share in 1996 and $10,500,000, $6,400,000 after-tax, $.08 per share
in 1995. Operating losses for the quarterly periods were
$5,300,000, $3,300,000 after-tax, $.04 per share in 1996 and
$3,900,000, $2,300,000 after-tax, $.03 per share in 1995.
Interest expense decreased in the year-to-date period as a result of
reduced average borrowings. However, primarily because of the
acquisition of the Vero Beach newspaper, total long-term debt
increased $63,500,000 in 1996 to $144,000,000, which is $34,000,000
more than at the end of the third quarter in 1995.
Operating results, excluding TV Food and the Watsonville newspaper,
are presented below and on the following pages. The results of the
divested operating units are excluded from the segment operating
results because management believes they are not relevant to
understanding Scripps' ongoing operations.
NEWSPAPERS - Operating results for the newspaper segment, excluding
the Watsonville newspaper, were as follows:
( in thousands ) Quarterly Period Year-to-Date
1996 Change 1995 1996 Change 1995
Operating revenues:
Local $ 48,062 5.0 % $ 45,772 $ 146,264 3.5 % $ 141,270
Classified 51,027 7.5 % 47,458 146,852 7.9 % 136,146
National 4,646 25.6 % 3,700 13,643 13.6 % 12,014
Preprint 15,382 (2.3)% 15,738 47,106 (1.0)% 47,576
Newspaper advertising 119,117 5.7 % 112,668 353,865 5.0 % 337,006
Circulation 31,793 3.4 % 30,757 97,459 4.6 % 93,192
Joint operating agency distributions 9,966 (0.8)% 10,051 30,581 (3.6)% 31,732
Other 2,827 16.0 % 2,437 7,623 19.0 % 6,408
Total operating revenues 163,703 5.0 % 155,913 489,528 4.5 % 468,338
Operating expenses:
Employee compensation and benefits 56,676 3.4 % 54,830 167,320 1.9 % 164,177
Newsprint and ink 29,402 (8.1)% 32,008 96,732 9.6 % 88,235
Other 35,485 0.2 % 35,413 103,357 3.4 % 99,917
Depreciation and amortization 10,218 8.1 % 9,448 28,692 4.3 % 27,518
Total operating expenses 131,781 0.1 % 131,699 396,101 4.3 % 379,847
Operating income $ 31,922 31.8 % $ 24,214 $ 93,427 5.6 % $ 88,491
Other Financial and Statistical Data:
Earnings before interest,
income taxes, depreciation,
and amortization ("EBITDA") $ 42,140 25.2 % $ 33,662 $ 122,119 5.3 % $ 116,009
Percent of operating revenues:
Operating income 19.5 % 15.5 % 19.1 % 18.9 %
EBITDA 25.7 % 21.6 % 24.9 % 24.8 %
Capital expenditures $ 1,668 (64.4)% $ 4,686 $ 19,573 33.2 % $ 14,696
Advertising inches:
Local 1,627 7.0 % 1,521 5,008 0.8 % 4,966
Classified 1,804 7.8 % 1,674 5,099 4.5 % 4,881
National 96 17.1 % 82 276 10.8 % 249
Total full run ROP 3,527 7.6 % 3,277 10,383 2.8 % 10,096
Declining newsprint prices led to the 25% increase in EBITDA in the
third quarter. The average price of newsprint in the third quarter
of 1996 was approximately 11% less than in the third quarter of
1995.
Higher advertising rates were the primary cause of the increase in
advertising revenues as volume decreased in many of Scripps'
newspaper markets in the third quarter. Approximately half of the
year-over-year increase in advertising revenues and 80% of the
increase in advertising inches is due to the May 9, 1996 acquisition
of The Vero Beach newspaper.
BROADCAST TELEVISION - Operating results for the broadcast
television segment were as follows:
( in thousands ) Quarterly Period Year-to-Date
1996 Change 1995 1996 Change 1995
Operating revenues:
Local $ 37,690 11.3 % $ 33,871 $ 116,013 7.2 % $ 108,199
National 28,338 (3.9)% 29,485 94,194 3.4 % 91,090
Political 3,982 387 7,082 758
Other 4,315 10.1 % 3,920 12,961 11.1 % 11,664
Total operating revenues 74,325 9.8 % 67,663 230,250 8.8 % 211,711
Operating expenses:
Employee compensation and benefits 24,512 8.2 % 22,663 72,685 9.0 % 66,666
Program and copyright costs 11,952 3.2 % 11,578 34,520 (0.7)% 34,760
Other 11,487 9.0 % 10,534 35,575 6.0 % 33,575
Depreciation and amortization 5,852 (11.6)% 6,619 19,471 1.1 % 19,255
Total operating expenses 53,803 4.7 % 51,394 162,251 5.2 % 154,256
Operating income $ 20,522 26.1 % $ 16,269 $ 67,999 18.4 % $ 57,455
Other Financial and Statistical Data:
Earnings before interest,
income taxes, depreciation,
and amortization ("EBITDA") $ 26,374 15.2 % $ 22,888 $ 87,470 14.0 % $ 76,710
Percent of operating revenues:
Operating income 27.6 % 24.0 % 29.5 % 27.1 %
EBITDA 35.5 % 33.8 % 38.0 % 36.2 %
Capital expenditures $ 2,079 (55.9)% $ 4,717 $ 19,661 30.7 % $ 15,042
The increase in employee costs is due primarily to Scripps' expanded
schedules of local news programs. Construction of new facilities at
the Phoenix and Tampa stations resulted in the increase in 1996 year-
to-date capital spending. Depreciation and amortization decreased
in the third quarter of 1996 as certain intangible assets acquired
in the 1991 purchase of the Baltimore station became fully
amortized.
ENTERTAINMENT - Operating results for the entertainment segment,
excluding TV Food, were as follows:
( in thousands ) Quarterly Period Year-to-Date
1996 Change 1995 1996 Change 1995
Operating revenues:
Licensing $ 13,156 19.0 % $ 11,051 $ 37,938 (1.7)% $ 38,609
Newspaper feature distribution 5,152 7.1 % 4,811 15,035 10.4 % 13,614
Program production 3,222 54.2 % 2,089 7,597 (13.3)% 8,767
Subscriber fees 1,769 572 4,467 1,406
Advertising 3,803 2,364 11,236 5,704
Other 353 31.7 % 268 1,001 15.9 % 864
Total operating revenues 27,455 29.8 % 21,155 77,274 12.0 % 68,964
Operating expenses:
Employee compensation and benefits 5,594 15.6 % 4,838 16,826 18.0 % 14,254
Artists' royalties 9,220 16.4 % 7,922 26,875 0.8 % 26,663
Programming and production costs 5,862 51.5 % 3,870 16,304 23.3 % 13,220
Other 8,449 33.1 % 6,347 20,920 11.9 % 18,695
Depreciation and amortization 948 3.2 % 919 2,778 24.9 % 2,225
Total operating expenses 30,073 25.8 % 23,896 83,703 11.5 % 75,057
Operating income (loss) $ (2,618) $ (2,741) $ (6,429) $ (6,093)
Other Financial and Statistical Data:
Earnings before interest,
income taxes, depreciation,
and amortization ("EBITDA") $ (1,670) $ (1,822) $ (3,651) $ (3,868)
Capital expenditures $ 1,056 $ 436 $ 2,096 $ 9,549
Licensing revenues in the third quarter benefited from the strength
of "Peanuts" in Japan, offset somewhat by the reduced value of the
yen, and from the growing popularity of "Dilbert" in the U.S.
Program production revenues are subject to substantial fluctuation
due to the timing of completion and delivery of programs. Program
production revenues decreased in the year-to-date period as fewer
programs were completed and delivered by Scripps Howard Productions
("SHP") and Cinetel. Program production revenues for the full year
of 1996 are expected to increase however, as SHP has commitments for
four network prime-time programs to be delivered in 1996 compared to
two in 1995.
Subscriber fees and advertising revenue increased due to the
continued growth of HGTV.
Year-to-date operating losses for HGTV totaled $12,200,000 in 1996
and $10,500,000 in 1995. Operating losses for the quarterly periods
were $5,300,000 in 1996 and $3,900,000 in 1995.
Programming and production costs increased due to higher programming
costs associated with the growth of HGTV.
United Media distributes news columns, comics, and features,
and licenses copyrights for "Peanuts", "Dilbert", and other
character properties on a worldwide basis. Revenues from
outside the U.S. represent less than 5% of Scripps' total
revenues. The Japanese market provides more than two-thirds of
international revenues and approximately 45% of total licensing
revenue. The impact of changes in the value of the U.S. dollar
in foreign exchange markets does not have a significant effect
on the recorded value of Scripps' foreign-currency-denominated
assets, which are primarily related to uncollected licensing
royalties and represent less than 1% of total assets. Scripps'
foreign-currency-denominated liabilities are primarily related
to payments due to creators of the properties. However,
comparison of year-over-year licensing revenues can be
significantly affected by changes in the exchange rate for the
Japanese yen. Japanese licensing revenues in local currency
increased 24% in the 1996 year-to-date period, however the change
in the exchange rate caused such revenues to increase only 4%
in dollar terms. The effect on licensing revenues of changes
in the exchange rate for other foreign currencies is not
significant.
From time-to-time Scripps uses foreign currency forward and
option contracts to hedge cash flow exposures denominated in
Japanese yen. The purpose of the contracts is to reduce the
risk of changes in the exchange rate on Scripps' anticipated
net licensing receipts (licensing royalties less amounts due
creators of the properties and certain direct expenses) for the
following year. The maturities of the contracts coincide with
the quarterly payments of licensing royalties. Scripps does
not hold foreign currency contracts for trading purposes and
does not hold leveraged contracts.
Information about Scripps' foreign currency contracts, which
require Scripps to sell yen at a specified rate, at September
30, 1996 was as follows:
Maturity Contract Exchange US Dollar
Date Amount (in yen) Rate Equivalent
11/15/96 143,835,000 95.89 1,500,000
2/18/97 151,635,000 101.09 1,500,000
5/15/97 150,345,000 100.23 1,500,000
8/15/97 160,440,000 106.96 1,500,000
Capital expenditures in 1995 primarily relate to the launch of HGTV.
The increase in depreciation and amortization is primarily due to
the start-up of HGTV.
LIQUIDITY AND CAPITAL RESOURCES
Scripps generates significant cash flow from operating activities,
primarily from its newspaper and broadcast television operations.
There are no significant legal or other restrictions on the transfer
of funds among Scripps' business segments. Cash flows provided by
the operating activities of the newspaper and broadcast television
segments in excess of the capital expenditures of those segments are
used to invest in the entertainment segment and to fund corporate
expenses. Management expects total cash flow from continuing
operating activities in 1996 will exceed Scripps' expected
capital expenditures, debt repayments, and dividend payments.
Cash flow provided by continuing operating activities was
$113,500,000 in 1996 compared to $57,800,000 in 1995. Cash flow
provided by continuing operating activities in 1995 was reduced by a
$45,000,000 payment to settle the audit of Scripps' 1985 through
1987 federal income tax returns.
Net debt (borrowings less cash equivalent and other short-term
investments) totaled $144,300,000 at September 30, 1996 and was 10%
of total capitalization. Management believes Scripps' cash and cash
equivalents and substantial borrowing capacity, taken together,
provide adequate resources to fund the capital expenditures and
future expansion of existing businesses and the development or
acquisition of new businesses.
THE E.W. SCRIPPS COMPANY
Index to Exhibits
Exhibit
No. Item Page
12 Ratio of Earnings to Fixed Charges E-2
27 Financial Data Schedule E-3
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 Nine months ended
September 30, September 30,
1996 1995 1996 1995
EARNINGS AS DEFINED:
Earnings from operations before income taxes after
eliminating undistributed earnings of 20%- to
50%-owned affiliates $ 43,362 $ 32,871 $ 132,404 $ 125,356
Fixed charges excluding capitalized interest and
preferred stock dividends of majority-owned
subsidiary companies 3,548 3,267 8,873 11,293
Earnings as defined $ 46,910 $ 36,138 $ 141,277 $ 136,649
FIXED CHARGES AS DEFINED:
Interest expense, including amortization of
debt issue costs $ 2,713 $ 2,441 $ 6,350 $ 8,623
Interest capitalized 158 183 567 270
Portion of rental expense representative
of the interest factor 835 826 2,523 2,670
Preferred stock dividends of majority-owned
subsidiary companies 20 20 60 60
Fixed charges as defined $ 3,726 $ 3,470 $ 9,500 $ 11,623
RATIO OF EARNINGS TO FIXED CHARGES 12.59 10.41 14.87 11.76