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Previous: SEAFIELD CAPITAL CORP, 8-K, 1994-05-11 |
Next: RYMAC MORTGAGE INVESTMENT CORP, 10-Q, 1994-05-11 |
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 March 31, 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
(A$dress 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
April 15, 1994 the registrant had outstanding 54,596,643 shares of
Class A Common stock and 20,174,833 shares of Common Voting stock.
<PAGE>
INDEX TO THE E. W. SCRIPPS COMPANY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 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 3
5 Other Information 3
6 Exhibits and Reports on Form 8-K 4
<PAGE>
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
There were no matters submitted to a vote of security holders during
the quarter for which this report is filed.
ITEM 5.OTHER INFORMATION
None.
<PAGE>
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: May 11, 1994 BY: /s/ D. J. Castellini
Senior Vice President, Finance
& Administration
<PAGE>
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
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
( in thousands ) As of
March 31, December 31, March 31,
1994 1993 1993
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 14,165 $ 18,606 $ 11,392
Accounts and notes receivable (less
allowances - $5,543, $6,995, $6,133) 127,313 150,671 128,433
Program rights and production costs 42,586 42,823 45,555
Inventories 24,868 23,748 34,108
Deferred income taxes 18,424 18,097 10,290
Miscellaneous 21,367 19,050 22,230
Total current assets 248,723 272,995 252,008
Investments 58,995 73,287 28,861
Property, Plant, and Equipment 719,216 712,726 721,442
Goodwill and Other Intangible Assets 548,625 552,989 610,814
Other Assets:
Program rights and production costs (less current portion) 45,886 43,257 40,364
Miscellaneous 17,795 21,228 17,403
Total other assets 63,681 64,485 57,767
TOTAL ASSETS $ 1,639,240 $ 1,676,482 $ 1,670,892
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
( in thousands, except share data ) As of
March 31, December 31, March 31,
1994 1993 1993
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 62,582 $ 96,383 $ 70,346
Accounts payable 71,959 79,334 86,241
Customer deposits and unearned revenue 20,180 17,480 15,204
Accrued liabilities:
Employee compensation and benefits 31,058 31,599 30,184
Artist and author royalties 11,141 10,985 11,190
Copyright and programming costs 6,718 6,986 6,849
Interest 3,186 2,834 6,883
Income taxes 13,515 7,763 12,892
Miscellaneous 30,178 35,276 23,564
Total current liabilities 250,517 288,640 263,353
Deferred Income Taxes 172,716 175,308 113,765
Long-Term Debt (less current portion) 151,560 151,535 344,531
Other Long-Term Obligations and Minority Interests 195,570 201,364 191,508
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: 54,596,643, 54,586,495,
and 54,443,401 shares 546 546 544
Voting - authorized: 30,000,000 shares; issued and
outstanding: 20,174,833 shares 202 202 202
Total 748 748 746
Additional paid-in capital 98,272 97,945 94,324
Retained earnings 750,852 733,978 662,531
Unrealized gains on securities available for sale 19,110 27,381
Unvested restricted stock awards (899) (1,009) (386)
Foreign currency translation adjustment 794 592 520
Total stockholders' equity 868,877 859,635 757,735
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,639,240 $ 1,676,482 $ 1,670,892
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
( in thousands, except share data ) Three months
ending
March 31,
1994 1993
<S> <C> <C>
Operating Revenues:
Advertising $ 100,744 $ 93,574
Circulation 29,556 29,777
Other newspaper revenue 11,737 11,112
Total newspapers 142,037 134,463
Broadcasting 60,353 61,845
Cable television 62,385 63,190
Entertainment 20,978 19,625
Other 4,529
Total operating revenues 285,753 283,652
Operating Expenses:
Employee compensation and benefits 88,123 92,337
Program rights and production costs 27,224 26,674
Newsprint and ink 20,657 21,218
Other operating expenses 68,622 68,560
Depreciation 21,412 21,263
Amortization of intangible assets 7,613 8,363
Total operating expenses 233,651 238,415
Operating Income 52,102 45,237
Other Credits (Charges):
Interest expense (4,659) (7,911)
Gain on sale of subsidiary companies 20,662
Miscellaneous, net 122 3,372
Net other credits (charges) (4,537) 16,123
Income Before Income Taxes and Minority Interests 47,565 61,360
Provision for Income Taxes 20,352 26,682
Income Before Minority Interests 27,213 34,678
Minority Interests 2,116 2,080
Net Income $ 25,097 $ 32,598
Per Share of Common Stock:
Net income $0.34 $0.44
Dividends declared $0.11 $0.11
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
( in thousands ) Three months
ending
March 31,
1994 1993
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 25,097 $ 32,598
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation 21,412 21,263
Amortization of intangible assets 7,613 8,363
Deferred income taxes 1,535 3,912
Minority interests in income of subsidiary companies 2,116 2,080
Gain on sale of subsidiary companies (20,662)
Changes in certain working capital accounts, net of effects
from subsidiary companies purchased and sold 13,772 10,901
Miscellaneous, net 3,037 (5,875)
Net operating activities 74,582 52,580
Cash Flows from Investing Activities:
Additions to property, plant, and equipment (20,433) (25,354)
Purchase of subsidiary companies, net of cash acquired (17,970) (28,945)
Investments in securities and unconsolidated affiliates (161) (963)
Sale of subsidiary companies 30,360
Miscellaneous, net 2,762 1,112
Net investing activities (35,802) (23,790)
Cash Flows from Financing Activities:
Increases in long-term debt 35,500
Payments on long-term debt (33,814) (62,516)
Dividends paid (8,223) (8,206)
Dividends paid to minority interests (885) (989)
Miscellaneous, net (299) (163)
Net financing activities (43,221) (36,374)
Increase (Decrease) in Cash and Cash Equivalents (4,441) (7,584)
Cash and Cash Equivalents:
Beginning of year 18,606 18,976
End of period $ 14,165 $ 11,392
Supplemental Cash Flow Disclosures:
Interest paid, excluding amounts capitalized $ 4,307 $ 9,474
Income taxes paid 12,208 16,324
Increase in program rights and related liabilities 6,713 3,575
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
( 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
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1992 $ 746 $ 94,366 $ 638,139 $ (516) $ 369
Net income 32,598
Dividends: declared
and paid - $.11 per share (8,206)
Class A shares issued pursuant to
compensation plans, net:
16,525 shares issued,
15,185 shares repurchased (42)
Amortization of restricted stock awards 130
Foreign currency translation adjustment 151
Balances at March 31, 1993 $ 746 $ 94,324 $ 662,531 $ (386) $ 520
Balances at December 31, 1993 $ 748 $ 97,945 $ 733,978 $ 27,381 $ (1,009) $ 592
Net income 25,097
Dividends: declared and
paid - $.11 per share (8,223)
Class A shares issued pursuant to
compensation plans, net:
12,550 shares issued,
2,402 shares repurchased 270
Tax benefits on compensation plans 57
Amortization of restricted stock awards 110
Foreign currency translation adjustment 202
Increase (decrease) in unrealized gains
on securities available for sale, net
of deferred income taxes of $4,454 (8,271)
Balances at March 31, 1994 $ 748 $ 98,272 $ 750,852 $ 19,110 $ (899) $ 794
See notes to consolidated financial statements.
</TABLE>
<PAGE>
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-month period ending March
31, 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:
<TABLE>
<CAPTION>
( in thousands ) Three months ending
March 31,
1994 1993
<S> <C> <C>
Weighted average shares outstanding 74,762 74,613
</TABLE>
Reclassification - For comparison purposes certain 1993 items
have been reclassified to conform with 1994 classifications.
<PAGE>
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:
<TABLE>
<CAPTION>
( in thousands ) Three months
ending
March 31,
1994 1993
<S> <C> <C>
Goodwill and other intangible assets acquired $ 3,245 $ 16,669
Other assets acquired 14,725 15
Reduction in minority interests 12,261
Cash paid $ 17,970 $ 28,945
</TABLE>
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.
<PAGE>
B.Divestitures
The Company sold Pharos Books and World Almanac Education in the
first quarter of 1993. In subsequent quarters two newspapers, a
television station, radio stations in three markets, and the
remaining book publishing operations were sold.
The following table presents additional information about the
divestitures which occurred in the first quarter:
<TABLE>
<CAPTION>
( in thousands ) Three
months ending
March 31,
1993
<S> <C>
Cash received $ 30,360
Net assets disposed 9,698
Gain recognized, before income taxes $ 20,662
</TABLE>
Included in the consolidated financial statements are the
following results of divested operations (excluding gain on sale):
<TABLE>
<CAPTION>
( in thousands ) Three
months ending
March 31,
1993
<S> <C>
Operating revenues $ 15,500
Operating income 900
</TABLE>
3.UNUSUAL ITEMS
1993 - The Company's operating results include an after-tax
gain of $12,100,000, $.16 per share (see Note 2B).
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
("ASCAP") was resolved. The adjustment increased 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 net income $1,600,000, $.02 per share.
<PAGE>
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:
<TABLE>
<CAPTION>
( in thousands ) Three months
ending
March 31,
1994 1993
<S> <C> <C>
Current:
Federal $ 13,951 $ 19,125
State and local 3,477 2,800
Foreign 1,332 845
Total current 18,760 22,770
Deferred:
Federal (2,484) 2,513
Other (435) 1,399
Total deferred (2,919) 3,912
Total income taxes 15,841 26,682
Income taxes allocated to stockholders' equity 4,511
Provision for income taxes $ 20,352 $ 26,682
</TABLE>
<PAGE>
5.LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
( in thousands ) As of
March 31, December 31, March 31,
1994 1993 1993
<S> <C> <C> <C>
Variable Rate Credit Facilities $ 54,200 $ 88,000 $ 226,000
7.375% notes, due in 1998 99,301 99,264 99,154
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 2,307 2,320 3,056
Total long-term debt 214,142 247,918 414,877
Current portion of long-term debt 62,582 96,383 70,346
Long-term debt (less current portion) $ 151,560 $ 151,535 $ 344,531
Weighted average interest rate on Variable Rate
Credit Facilities at balance sheet date 3.5% 3.4% 3.3%
</TABLE>
The Company has a Competitive Advance/Revolving Credit Agreement
which permits maximum borrowings up to $100,000,000 and additional
lines of credit totaling $30,000,000 (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 expire at various
dates through September 1994 and 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.
<PAGE>
6.INVESTMENTS
Investments consisted of the following:
<TABLE>
<CAPTION>
( in thousands, except share data ) As of
March 31, December 31, March 31,
1994 1993 1993
<S> <C> <C> <C>
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) 12,078 15,907 7,985
Class C preferred stock (convertible into
1,309,092 shares of Class B common stock) 26,836 35,345 3,285
Other 3,627 4,043 578
Total securities available for sale 56,541 69,295 25,848
Investments accounted for under the equity method 2,454 3,992 3,013
Total investments $ 58,995 $ 73,287 $ 28,861
Unrealized gains on securities available for sale $ 29,400 $ 42,125 $ 30,421
* Effective December 31, 1993 the Company adopted FAS No. 115. Investments classified as available for sale are
carried at market value at March 31, 1994 and December 31, 1993. At March 31, 1993 such securities were
carried at the lower of cost or market. There were no unrealized losses in either year.
</TABLE>
<PAGE>
7.PROPERTY, PLANT, AND EQUIPMENT AND INTANGIBLE ASSETS
Property, plant, and equipment consisted of the following:
<TABLE>
<CAPTION>
( in thousands ) As of
March 31, December 31, March 31,
1994 1993 1993
<S> <C> <C> <C>
Land and improvements $ 47,334 $ 45,199 $ 48,552
Buildings and improvements 187,587 184,708 188,397
Equipment 986,693 972,674 989,548
Total 1,221,614 1,202,581 1,226,497
Accumulated depreciation 502,398 489,855 505,055
Net property, plant, and equipment $ 719,216 $ 712,726 $ 721,442
</TABLE>
Goodwill and other intangible assets consisted of the following:
<TABLE>
<CAPTION>
( in thousands ) As of
March 31, December 31, March 31,
1994 1993 1993
<S> <C> <C> <C>
Goodwill $ 387,905 $ 387,868 $ 421,419
Cable television franchise costs 167,383 167,378 167,389
Customer lists 134,927 133,427 133,397
Licenses and copyrights 28,221 28,221 28,263
Non-competition agreements 24,489 32,089 34,249
Other 33,570 31,870 38,787
Total 776,495 780,853 823,504
Accumulated amortization 227,870 227,864 212,690
Net goodwill and other intangible assets $ 548,625 $ 552,989 $ 610,814
</TABLE>
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 will be included in the Entertainment segment.
The Other segment includes book publishing operations which were
sold in 1993 (see Note 2B).
Broadcasting operating income was increased in the first
quarter of 1993 by $4,300,000 as a result of the change in
estimate of the additional amount of copyright fees owed
ASCAP (see Note 3).
<PAGE>
Financial information relating to the Company's business segments
is as follows:
<TABLE>
<CAPTION>
( in thousands ) Three months
ending
March 31,
1994 1993
<S> <C> <C>
OPERATING REVENUES
Newspapers $ 142,037 $ 134,463
Broadcasting 60,353 61,845
Cable television 62,385 63,190
Entertainment 20,978 19,625
Other 4,529
Total operating revenues $ 285,753 $ 283,652
OPERATING INCOME
Newspapers $ 28,019 $ 16,019
Broadcasting 15,790 17,008
Cable television 9,525 14,002
Entertainment 2,045 1,841
Other (283)
Corporate (3,277) (3,350)
Total operating income $ 52,102 $ 45,237
DEPRECIATION
Newspapers $ 7,126 $ 7,740
Broadcasting 2,167 2,439
Cable television 11,774 10,696
Entertainment 197 217
Other 17
Corporate 148 154
Total depreciation $ 21,412 $ 21,263
AMORTIZATION OF INTANGIBLE ASSETS
Newspapers $ 1,782 $ 1,747
Broadcasting 2,863 2,971
Cable television 2,968 3,328
Entertainment 2
Other 315
Total amortization of intangible assets $ 7,613 $ 8,363
CAPITAL EXPENDITURES
Newspapers $ 6,073 $ 6,432
Broadcasting 2,692 3,362
Cable television 11,521 14,020
Entertainment 31 328
Corporate 116 1,212
Total capital expenditures $ 20,433 $ 25,354
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Consolidated results of operations were as follows:
<TABLE>
<CAPTION>
( in thousands, except per share data ) Year-to-Date
1994 Change 1993
<S> <C> <C> <C>
Operating revenues:
Newspapers $ 142,037 5.6 % $ 134,463
Broadcasting 60,353 (2.4)% 61,845
Cable television 62,385 (1.3)% 63,190
Entertainment 20,978 6.9 % 19,625
Other 4,529
Total operating revenues $ 285,753 0.7 % $ 283,652
Operating income:
Newspapers $ 28,019 74.9 % $ 16,019
Broadcasting 15,790 (7.2)% 17,008
Cable television 9,525 (32.0)% 14,002
Entertainment 2,045 11.1 % 1,841
Other (283)
Corporate (3,277) 2.2 % (3,350)
Total operating income 52,102 15.2 % 45,237
Interest expense (4,659) (7,911)
Gain on sale of subsidiary companies 20,662
Miscellaneous, net 122 3,372
Income taxes (20,352) (26,682)
Minority interest (2,116) (2,080)
Net income $ 25,097 (23.0)% $ 32,598
Net income per share of common stock $.34 (22.7)% $.44
Weighted average shares outstanding 74,762 0.2% 74,613
Effective income tax rate 42.8 % 43.5 %
</TABLE>
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
will be included in the Entertainment segment.
The Other segment includes book publishing operations which were sold
in 1993 (see (i) below).
<PAGE>
The following items affected the comparability of the Company's
reported results of operations:
(i) The Company sold Pharos Books and World Almanac Education in
the first quarter of 1993. In subsequent quarters two newspapers,
a television station, radio stations in three markets, and the
remaining book publishing operations 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:
<TABLE>
<CAPTION>
( in thousands, except per share data )
1993
<S> <C>
Operating revenues $ 15,500
Operating income 900
Gain recognized (before income
taxes and minortiy interests) 20,662
Gain recognized (after income
taxes and minority interests) 12,100
Gain recognized per share
(after income taxes and
minority interests) .16
</TABLE>
(ii) 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.
(iii) 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:
<TABLE>
<CAPTION>
Year-to-Date
1994 Change 1993
<S> <C> <C> <C>
Reported net income per share $ .34 (22.7)% $ .44
Note Ref.
(i) Gain on sale of Divested Operations ( .16)
(ii) - (iii) 1993 unusual items ( .05)
Rounding ( .01)
Adjusted net income per share $ .34 54.5 % $ .22
</TABLE>
Interest expense decreased $3,300,000 as average long-term debt in
1994 was $197,000,000 less than in 1993.
Miscellaneous includes the Ogden Fee described in (iii) above.
<PAGE>
RESULTS OF OPERATIONS
CONSOLIDATED - Operating results, excluding the Divested Operations
and ASCAP Adjustment, were as follows:
<TABLE>
<CAPTION>
( in thousands ) Year-to-Date
1994 Change 1993
<S> <C> <C> <C>
Operating revenues:
Newspapers $ 142,037 8.9 % $ 130,393
Broadcast television 60,353 9.9 % 54,926
Cable television 62,385 (1.3)% 63,190
Entertainment 20,978 6.9 % 19,625
Total operating revenues $ 285,753 6.6 % $ 268,134
Operating income:
Newspapers $ 28,019 71.4 % $ 16,348
Broadcast television 15,790 41.1 % 11,194
Cable television 9,525 (32.0)% 14,002
Entertainment 2,045 11.1 % 1,841
Corporate (3,277) 2.2 % (3,350)
Total operating income $ 52,102 30.1 % $ 40,035
Other Financial and Statistical Data:
Total advertising revenues $ 163,257 10.4 % $ 147,923
Advertising revenues as a
percentage of total revenues 57.1 % 55.2 %
Total capital expenditures $ 20,433 (19.0)% $ 25,234
</TABLE>
SEGMENTS - Operating results, excluding the Divested Operations 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.
<PAGE>
NEWSPAPERS - Operating results for the newspaper segment, excluding
the Divested Operations, were as follows:
<TABLE>
<CAPTION>
( in thousands, except newsprint information ) Year-to-Date
1994 Change 1993
<S> <C> <C> <C>
Operating revenues:
Local $ 45,269 8.2 % $ 41,844
Classified 37,388 11.5 % 33,518
National 3,996 42.6 % 2,803
Preprint 14,091 8.7 % 12,961
Newspaper advertising 100,744 10.6 % 91,126
Circulation 29,556 2.7 % 28,786
Joint operating agency distributions 9,766 16.8 % 8,361
Other 1,971 (7.0)% 2,120
Total operating revenues 142,037 8.9 % 130,393
Operating expenses:
Employee compensation and benefits 54,571 0.4 % 54,368
Newsprint and ink 20,657 0.9 % 20,480
Other 29,882 0.1 % 29,855
Depreciation and amortization 8,908 (4.6)% 9,342
Total operating expenses 114,018 114,045
Operating income $ 28,019 71.4 % $ 16,348
Other Financial and Statistical Data:
Earnings before interest,
income taxes, depreciation,
and amortization ("EBITDA") $ 36,927 43.7 % $ 25,690
Percent of operating revenues:
Operating income 19.7 % 12.5 %
EBITDA 26.0 % 19.7 %
Capital expenditures $ 6,073 (5.1)% $ 6,399
Advertising inches:
Local 1,971 2.9 % 1,915
Classified 2,688 5.8 % 2,540
National 101 23.2 % 82
Total full run ROP 4,760 4.9 % 4,537
Newsprint information:
Consumption (in tonnes) 47,223 4.6 % 45,158
Weighted average price per tonne $ 419 (4.3)% $ 438
</TABLE>
Demand for local advertising continued to improve in the first
quarter. Advertising revenues increased for nearly all of the
Company's newspapers.
<PAGE>
BROADCAST TELEVISION - Operating results for the broadcast television
segment, excluding the Divested Operations and ASCAP Adjustment, were
as follows:
<TABLE>
<CAPTION>
( in thousands ) Year-to-Date
1994 Change 1993
<S> <C> <C> <C>
Operating revenues:
Local $ 32,487 10.4 % $ 29,417
National 25,325 9.2 % 23,182
Political 362 176
Other 2,179 1.3 % 2,151
Total operating revenues 60,353 9.9 % 54,926
Operating expenses:
Employee compensation and benefits 17,938 4.9 % 17,099
Program costs 12,026 0.1 % 12,016
Other 9,569 0.4 % 9,531
Depreciation and amortization 5,030 (1.1)% 5,086
Total operating expenses 44,563 1.9 % 43,732
Operating income $ 15,790 41.1 % $ 11,194
Other Financial and Statistical Data:
Earnings before interest,
income taxes, depreciation,
and amortization ("EBITDA") $ 20,820 27.9 % $ 16,280
Percent of operating revenues:
Operating income 26.2 % 20.4 %
EBITDA 34.5 % 29.6 %
Capital expenditures $ 2,692 (17.8)% $ 3,275
</TABLE>
Revenues increased at all of the Company's television stations.
<PAGE>
CABLE TELEVISION - Operating results for the cable television segment
were as follows:
<TABLE>
<CAPTION>
( in thousands, except per subscriber information ) Year-to-Date
1994 Change 1993
<S> <C> <C> <C>
Operating revenues:
Basic services $ 41,037 (6.1)% $ 43,697
Premium programming services 11,997 5.9 % 11,332
Other monthly service 4,214 23.4 % 3,416
Advertising 2,160 15.4 % 1,871
Installation and miscellaneous 2,977 3.6 % 2,874
Total operating revenues 62,385 (1.3)% 63,190
Operating expenses:
Employee compensation and benefits 10,549 10.1 % 9,577
Program costs 14,939 10.1 % 13,564
Other 12,630 5.0 % 12,023
Depreciation and amortization 14,742 5.1 % 14,024
Total operating expenses 52,860 7.5 % 49,188
Operating income $ 9,525 (32.0)% $ 14,002
Other Financial and Statistical Data:
Earnings before interest,
income taxes, depreciation,
and amortization ("EBITDA") $ 24,267 (13.4)% $ 28,026
Percent of operating revenues:
Operating income 15.3 % 22.2 %
EBITDA 38.9 % 44.4 %
Capital expenditures $ 11,521 (17.8)% $ 14,020
Average number of basic subscribers 705.8 4.4 % 676.3
Average monthly revenue
per basic subscriber $ 29.46 (5.4)% $ 31.14
Homes passed at end of period 1,147.8 1.5 % 1,130.4
Basic subscribers at end of period 711.3 4.6 % 680.2
Penetration rate 62.0 % 60.2 %
</TABLE>
Re-regulation of the cable television industry significantly affected
the Company's cable television operations. New rules which are
expected to further reduce regulated rates are scheduled to become
effective in July. Based upon the revised rules, year-over-year
declines in revenues and EBITDA are expected to increase in magnitude
in the third quarter of 1994.
<PAGE>
ENTERTAINMENT - Operating results for the entertainment segment were
as follows:
<TABLE>
<CAPTION>
( in thousands ) Year-to-Date
1994 Change 1993
<S> <C> <C> <C>
Operating revenues:
Licensing $ 15,808 12.8 % $ 14,019
Syndication 4,714 (1.6)% 4,791
Film and television production 456 (44.0)% 815
Total operating revenues 20,978 6.9 % 19,625
Operating expenses:
Employee compensation and benefits 3,205 (8.7)% 3,512
Artists' royalties 10,641 13.7 % 9,358
Film and television production costs 259 (51.9)% 538
Other 4,631 11.4 % 4,157
Depreciation and amortization 197 (10.0)% 219
Total operating expenses 18,933 6.5 % 17,784
Operating income $ 2,045 11.1 % $ 1,841
Other Financial and Statistical Data:
Earnings before interest,
income taxes, depreciation,
and amortization ("EBITDA") $ 2,242 8.8 % $ 2,060
Percent of operating revenues:
Operating income 9.7 % 9.4 %
EBITDA 10.7 % 10.5 %
Capital expenditures $ 31 $ 328
</TABLE>
Increases in domestic and Japanese licensing revenues more than offset
a decrease in European revenues. The change in the exchange rate for
the Japanese yen increased licensing revenues $700,000.
On April 6, 1994 the Company announced it had reached agreement to
sell the copyright and syndication and licensing rights for the
character "Garfield" to Paws, Inc. The sale is expected to be
completed in the second quarter of 1994.
Start-up costs for The Home & Garden Television Network ("Home &
Garden"), a 24-hour cable channel scheduled for launch in late 1994,
totaled $250,000 in the first quarter of 1994.
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
will be included in the Entertainment segment from the date of
acquisition.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities was $74,600,000 in 1994 compared
to $52,600,000 in 1993.
Cash flow from operating activities in 1994 was used primarily for capital
expenditures of $20,400,000, acquisitions and investments of
$18,100,000, debt reduction of $33,800,000, and dividend payments of
$9,100,000. The debt to total capitalization ratio at March 31 was
.20 in 1994 and .35 in 1993.
Consolidated capital expenditures for the remainder of 1994 are
expected to total approximately $80,000,000, including Home & Garden.
Current maturities of long-term debt at March 31, 1994 total
$62,600,000. The Company expects to finance its capital requirements
and start-up costs for Home & Garden 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.
<PAGE>
THE E. W. SCRIPPS COMPANY
Index to Exhibits
Exhibit
No. Item Page
12 Ratio of Earnings to Fixed Charges E-1
<PAGE>
<TABLE>
RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12
<CAPTION>
( in thousands ) Three months
ending
March 31,
1994 1993
<S> <C> <C>
EARNINGS AS DEFINED:
Earnings from operations before income taxes after eliminating
undistributed earnings of 20%- to 50%-owned affiliates $ 48,674 $ 61,519
Fixed charges excluding capitalized interest and preferred stock
dividends of majority-owned subsidiary companies 6,000 9,184
Earnings as defined $ 54,674 $ 70,703
FIXED CHARGES AS DEFINED:
Interest expense, including amortization of debt issue costs $ 4,659 $ 7,911
Interest capitalized 44
Portion of rental expense representative of the interest factor 1,147 1,136
Preferred stock dividends of majority-owned subsidiary companies 20 22
Share of interest expense related to guaranteed debt
50%-owned affiliated company 194 137
Fixed charges as defined $ 6,020 $ 9,250
RATIO OF EARNINGS TO FIXED CHARGES 9.08 7.64
</TABLE>
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