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Previous: GULL LABORATORIES INC /UT/, 10-Q, 1997-05-13 |
Next: CONCORDE STRATEGIES GROUP INC, 10QSB, 1997-05-13 |
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, 1997
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 33-43989
THE E. W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)
Ohio 31-1223339
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
312 Walnut Street
Cincinnati, Ohio 45201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (513) 977-3000
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 30, 1997
there were 61,639,561 of the Registrant's Class A Common Shares outstanding
and 19,333,711 of the Registrant's Common Voting Shares outstanding.
<PAGE>
INDEX TO THE E. W. SCRIPPS COMPANY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997
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
<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 and various governmental and
administrative proceedings relating to 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.
<PAGE>
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.
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 13, 1997 BY:/s/ D. J. Castellini
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-9
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
( in thousands ) As of
March 31, December 31, March 31,
1997 1996 1996
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 19,146 $ 10,145 $ 12,871
Short-term investments 20,500 2,700
Accounts and notes receivable (less
allowances -$4,247, $3,974, $3,534) 177,698 182,687 148,468
Program rights and production costs 37,137 44,639 51,911
Inventories 12,647 11,753 12,941
Deferred income taxes 24,392 24,897 22,608
Miscellaneous 24,210 32,203 18,514
Total current assets 315,730 309,024 267,313
Net Assets of Discontinued Operation - Scripps Cable 349,384
Investments 54,450 40,580 55,069
Property, Plant and Equipment 426,174 430,703 428,885
Goodwill and Other Intangible Assets 585,546 590,452 490,692
Other Assets:
Program rights and production costs (less current portion) 30,087 35,281 23,379
Subscriber acquisition costs (less current portion) 46,852 38,337 2,366
Miscellaneous 19,767 19,236 12,110
Total other assets 96,706 92,854 37,855
TOTAL ASSETS $ 1,478,606 $ 1,463,613 $ 1,629,198
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,
1997 1996 1996
(Unaudited) (Unaudited)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 90,040 $ 90,040 $ 34,741
Accounts payable 66,197 88,574 62,537
Customer deposits and unearned revenue 32,256 30,208 23,799
Accrued liabilities:
Employee compensation and benefits 29,540 33,622 27,137
Subscriber acquisition costs 30,523 33,895 845
Miscellaneous 51,297 47,063 60,772
Total current liabilities 299,853 323,402 209,831
Deferred Income Taxes 65,912 63,953 60,657
Long-Term Debt (less current portion) 31,806 31,793 31,824
Other Long-Term Obligations and Minority Interests 110,632 99,874 109,423
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: 61,622,211; 61,293,240; and 60,471,678 shares 616 613 605
Voting - authorized: 30,000,000 shares; issued and
outstanding: 19,333,711; 19,470,382; and 19,807,053 shares 193 195 198
Total 809 808 803
Additional paid-in capital 277,148 272,703 259,824
Retained earnings 695,974 676,471 935,483
Unrealized gains (losses) on securities available for sale 1,696 (713) 21,966
Unvested restricted stock awards (5,647) (5,241) (1,340)
Foreign currency translation adjustment 423 563 727
Total stockholders' equity 970,403 944,591 1,217,463
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,478,606 $ 1,463,613 $ 1,629,198
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME ( UNAUDITED )
<CAPTION>
(in thousands, except per share data) Three months ended
March 31,
1997 1996
<S> <C> <C>
Operating Revenues:
Advertising $ 203,881 $ 186,927
Circulation 33,808 33,564
Licensing 16,356 12,606
Joint operating agency distributions 11,409 8,911
Program production 11,420 2,641
Other 13,836 9,596
Total operating revenues 290,710 254,245
Operating Expenses:
Employee compensation and benefits 94,805 86,883
Newsprint and ink 27,351 34,169
Program, production and copyright costs 25,827 16,550
Other operating expenses 68,608 61,648
Depreciation 13,424 12,438
Amortization of intangible assets 4,844 5,081
Total operating expenses 234,859 216,769
Operating Income 55,851 37,476
Other Credits (Charges):
Interest expense (2,566) (1,413)
Miscellaneous, net 113 (382)
Net other credits (charges) (2,453) (1,795)
Income from Continuing Operations
Before Taxes and Minority Interests 53,398 35,681
Provision for Income Taxes 22,477 15,274
Income from Continuing Operations
Before Minority Interests 30,921 20,407
Minority Interests 898 687
Income From Continuing Operations 30,023 19,720
Income From Discontinued Operation - Scripps Cable 9,595
Net Income $ 30,023 $ 29,315
Per Share of Common Stock:
Income from continuing operations $.37 $.25
Net income $.37 $.37
Dividends declared $.13 $.13
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS ( UNAUDITED )
<CAPTION>
(in thousands) Three months ended
March 31,
1997 1996
<S> <C> <C>
Cash Flows from Operating Activities:
Income from continuing operations $ 30,023 $ 19,720
Adjustments to reconcile income from continuing operations
to net cash flows from continuing operating activities:
Depreciation and amortization 18,268 17,519
Deferred income taxes 827 53
Minority interests in income of subsidiary companies 898 687
Subscriber acquisition costs (2,946) (744)
Other changes in certain working capital accounts, net 2,685 14,931
Miscellaneous, net 5,186 (4,760)
Net cash provided by continuing operating activities 54,941 47,406
Discontinued Operation - Scripps Cable:
Income 9,595
Adjustment to derive cash flows from operating activities 16,156
Net cash provided 25,751
Net operating activities 54,941 73,157
Cash Flows from Investing Activities:
Additions to property, plant and equipment (8,896) (17,396)
Purchase of subsidiary companies and long-term investments (10,950) (1,187)
Change in short-term investments, net (17,800) 25,013
Miscellaneous, net 525 1,622
Net investing activities of continuing operations (37,121) 8,052
Net investing activities of discontinued operation (76,431)
Net investing activities (37,121) (68,379)
Cash Flows from Financing Activities:
Increases in long-term debt 34,700
Payments on long-term debt (11) (49,010)
Dividends paid (10,520) (10,434)
Dividends paid to minority interests (396) (449)
Miscellaneous, net (primarily exercise of stock options) 2,108 3,890
Net financing activities of continuing operations (8,819) (21,303)
Net financing activities of discontinued operation (625)
Net financing activities (8,819) (21,928)
Increase (Decrease) in Cash and Cash Equivalents 9,001 (17,150)
Cash and Cash Equivalents:
Beginning of year 10,145 30,021
End of period $ 19,146 $ 12,871
Supplemental Cash Flow Disclosures:
Interest paid, excluding amounts capitalized $ 664 $ 2,552
Income taxes paid 7,406 5,347
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
<CAPTION>
( in thousands, except share data )
Unrealized
Gains (Losses) Unvested Foreign
Additional on 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, 1995 $ 801 $ 254,063 $ 916,602 $ 20,720 $ (1,573) $ 813
Net income 29,315
Dividends: declared and
paid - $.13 per share (10,434)
Conversion of 171,320 Common Voting Shares
to 171,320 Class A Common Shares
214,950 Class A Common Shares issued
pursuant to compensation plans 2 4,499 (63)
Tax benefits of compensation plans 1,262
Amortization of restricted stock awards 296
Foreign currency translation adjustment (86)
Increase in unrealized gains (losses) on
securities available for sale, net
of deferred income taxes of $671 1,246
Balances at March 31, 1996 $ 803 $ 259,824 $ 935,483 $ 21,966 $ (1,340) $ 727
Balances at December 31, 1996 $ 808 $ 272,703 $ 676,471 $ (713) $ (5,241) $ 563
Net income 30,023
Dividends: declared and
paid - $.13 per share (10,520)
Conversion of 136,671 Common Voting Shares
to 136,671 Class A Common Shares
192,300 Class A Common Shares issued
pursuant to compensation plans 1 3,221 (1,137)
Tax benefits of compensation plans 1,224
Amortization of restricted stock awards 731
Foreign currency translation adjustment (140)
Increase in unrealized gains (losses) on
securities available for sale, net
of deferred income taxes of $1,635 2,409
Balances at March 31, 1997 $ 809 $ 277,148 $ 695,974 $ 1,696 $ (5,647) $ 423
See notes to consolidated financial statements.
</TABLE>
<PAGE>
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, 1996 has
not changed materially unless otherwise disclosed herein. Financial
information as of December 31, 1996 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. Common stock
equivalents in the form of stock options are excluded from the
computations as they have no material effect on the per share
amounts. The weighted-average common shares outstanding were as
follows:
<TABLE>
<CAPTION>
(in thousands) Three months ended
March 31,
1997 1996
<S> <C> <C>
Weighted-average shares outstanding 80,904 80,204
</TABLE>
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 - Earnings per Share in the
first quarter of 1997. The new standard, which the Company must
adopt in the fourth quarter of 1997, will require the presentation
of basic earnings per share and diluted earnings per share. Basic
earnings per share and diluted earnings per shares would not be
materially different than earnings per share presented in these
financial statements.
2. ACQUISITIONS AND DIVESTITURES
A. Acquisitions
1997 - There were no acquisitions in the three months ended March
31, 1997.
1996 - There were no acquisitions in the three months ended March
31, 1996.
In May the Company acquired the Vero Beach, Florida, Press Journal.
The acquisition was accounted for as a purchase and the acquired
operations have been included in the Consolidated Statements of
Income from the date of acquisition.
B. Divestitures
1996 - The Company sold its equity interest in The Television Food
Network, a cable programming network. No material gain or loss was
realized as proceeds approximated the book value of the net assets
sold.
<PAGE>
3. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
( in thousands ) As of
March 31, December 31, March 31,
1997 1996 1996
<S> <C> <C> <C>
6.17% note, due in 1997 $ 90,000 $ 90,000
7.375% notes, due in 1998 29,682 29,658 $ 29,658
Variable Rate Credit Facilities 34,700
Other notes 2,164 2,175 2,207
Total long-term debt 121,846 121,833 66,565
Current portion of long-term debt 90,040 90,040 34,741
Long-term debt (less current portion) $ 31,806 $ 31,793 $ 31,824
</TABLE>
The Company 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 the Company's anticipated needs change and
are not indicative of the Company's 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. The Company is
in compliance with all debt covenants.
4. DISCONTINUED OPERATION - SCRIPPS CABLE
The Company's cable television systems ("Scripps Cable") were
acquired by Comcast Corporation ("Comcast") on November 13, 1996
("Cable Transaction") through a merger whereby the Company's
shareholders received, tax-free, a total of 93 million shares of
Comcast's Class A Special Common Stock. The aggregate market value
of the Comcast shares was $1,593,000,000 ($19.83 per share of the
Company) and the net book value of Scripps Cable was $356,000,000,
yielding an economic gain of $1,237,000,000 to the Company's
shareholders.
Scripps Cable represented an entire business segment, therefore its
results are reported as a "discontinued operation" for all periods
presented. Results of the remaining business segments, including
results for divested operating units within these segments through
their dates of sale, are reported as "continuing operations."
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The E. W. Scripps Company ("Company") publishes daily newspapers in
16 markets, operates television stations in nine markets, and its
entertainment division consists of Home & Garden Television ("HGTV,"
a 24-hour cable television network), comic character licensing and
television program production.
The Company's cable television systems ("Scripps Cable") were
acquired by Comcast Corporation ("Comcast") on November 13, 1996
("Cable Transaction") through a merger whereby the Company's
shareholders received, tax-free, a total of 93 million shares of
Comcast's Class A Special Common Stock. The aggregate market value
of the Comcast shares was $1,593,000,000 ($19.83 per share of the
Company) and the net book value of Scripps Cable was $356,000,000,
yielding an economic gain of $1,237,000,000 to the Company's
shareholders. The operating results of Scripps Cable are excluded
from management's discussion and analysis of financial condition and
results of operation as management believes it is not relevant to an
understanding of the Company's continuing operations.
Consolidated results of continuing operations were as follows:
<TABLE>
<CAPTION>
( in thousands, except per share data ) Year-to-Date
1997 Change 1996
<S> <C> <C> <C>
Operating revenues:
Newspapers $ 174,854 10.1 % $ 158,843
Broadcast television 72,696 2.8 % 70,721
Entertainment 43,160 74.9 % 24,681
Total operating revenues $ 290,710 14.3 % $ 254,245
Operating income:
Newspapers $ 40,266 53.3 % $ 26,271
Broadcast television 18,731 7.1 % 17,483
Entertainment 1,034 (1,650)
Corporate (4,180) (4,210)
Total 55,851 47.4 % 37,894
Television Food Network (418)
Total operating income 55,851 49.0 % 37,476
Interest expense (2,566) (1,413)
Miscellaneous, net 113 (382)
Income taxes (22,477) (15,274)
Minority interest (898) (687)
Income from continuing operations $ 30,023 52.2 % $ 19,720
Per share of common stock:
Income from continuing operations $.37 48.0 % $.25
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
( in thousands ) Year-to-Date
1997 Change 1996
<S> <C> <C> <C>
Other Financial and Statistical Data - excluding divested operating unit:
Total advertising revenues $ 203,881 9.1 % $ 186,927
Advertising revenues as a
percentage of total revenues 70.1 % 73.5 %
EBITDA:
Newspapers $ 50,930 42.3 % $ 35,780
Broadcast television 24,930 2.4 % 24,339
Entertainment 2,129 (725)
Corporate (3,870) (3,981)
Total $ 74,119 33.8 % $ 55,413
Effective income tax rate 42.1 % 42.8 %
Weighted-average shares outstanding 80,904 0.9 % 80,204
Total capital expenditures $ 8,896 $ 17,396
</TABLE>
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.
Banks and other lenders use EBITDA to determine the Company's
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 the Company's income or cash flows from operating
activities as EBITDA excludes significant costs of doing business.
The Company acquired the Vero Beach, Florida, Press Journal in May
1996 and sold its equity interest in The Television Food Network
("TV Food") in April 1996.
Year-to-date operating losses for HGTV totaled $2,600,000,
$1,600,000 after-tax, $.02 per share in 1997 and $3,800,000,
$2,300,000 after-tax, $.03 per share in 1996.
Interest expense increased and total long-term debt was $55,300,000
higher than at the end of the first quarter in 1996 due primarily to
the Vero Beach newspaper acquisition.
Operating results, excluding TV Food, are presented below and on the
following pages. The results of TV Food are excluded from the
segment operating results because management believes it is not
relevant to understanding the Company's ongoing operations.
<PAGE>
NEWSPAPERS - Operating results for the newspaper segment were as
follows:
<TABLE>
<CAPTION>
( in thousands ) Year-to-Date
1997 Change 1996
<S> <C> <C> <C>
Operating revenues:
Local $ 54,703 12.6 % $ 48,585
Classified 49,902 9.4 % 45,621
National 5,626 32.5 % 4,246
Preprint 16,023 3.0 % 15,550
Newspaper advertising 126,254 10.7 % 114,002
Circulation 33,808 0.7 % 33,564
Joint operating agency distributions 11,409 28.0 % 8,911
Other 3,383 43.0 % 2,366
Total operating revenues 174,854 10.1 % 158,843
Operating expenses:
Employee compensation and benefits 59,290 8.4 % 54,716
Newsprint and ink 27,351 (20.0)% 34,169
Other 37,283 9.1 % 34,178
Depreciation and amortization 10,664 12.1 % 9,509
Total operating expenses 134,588 1.5 % 132,572
Operating income $ 40,266 53.3 % $ 26,271
Other Financial and Statistical Data:
EBITDA $ 50,930 42.3 % $ 35,780
Percent of operating revenues:
Operating income 23.0 % 16.5 %
EBITDA 29.1 % 22.5 %
Capital expenditures $ 6,157 $ 5,231
Advertising inches:
Local 1,992 17.7 % 1,693
Classified 1,708 11.3 % 1,534
National 128 54.2 % 83
Total full run ROP 3,828 15.6 % 3,310
</TABLE>
Strong growth in newspaper advertising revenue and a decline in
newsprint prices led to the improvement in EBITDA. The rate of
growth in newspaper advertising was more than double that of the
previous three quarters. The Vero Beach newspaper, acquired in May
1996, accounted for approximately one-third of the increase in
advertising revenues.
Newsprint prices in the first quarter of 1997 were approximately one-
third lower than in the first quarter of 1996. Newsprint
consumption increased 14%. Newsprint suppliers announced an approximate
15% price increase effective March 1, 1997. If there are no further price
changes, the year-over-year cost of newsprint will decrease approximately
10% in the second quarter, be unchanged in the third quarter, and increase
25% in the fourth quarter of 1997.
<PAGE>
BROADCAST TELEVISION - Operating results for the broadcast
television segment were as follows:
<TABLE>
<CAPTION>
( in thousands ) Year-to-Date
1997 Change 1996
<S> <C> <C> <C>
Operating revenues:
Local $ 38,424 8.1 % $ 35,560
National 29,457 0.3 % 29,377
Political 89 1,382
Other 4,726 7.4 % 4,402
Total operating revenues 72,696 2.8 % 70,721
Operating expenses:
Employee compensation and benefits 25,436 7.2 % 23,727
Program and copyright costs 11,042 (1.4)% 11,203
Other 11,288 (1.4)% 11,452
Depreciation and amortization 6,199 (9.6)% 6,856
Total operating expenses 53,965 1.4 % 53,238
Operating income $ 18,731 7.1 % $ 17,483
Other Financial and Statistical Data:
EBITDA $ 24,930 2.4 % $ 24,339
Percent of operating revenues:
Operating income 25.8 % 24.7 %
EBITDA 34.3 % 34.4 %
Capital expenditures $ 2,107 $ 11,505
</TABLE>
The increasing political advertising in even-numbered years when
congressional and presidential elections occur make it increasingly
difficult to achieve year-over-year increases in operating results
in odd-numbered years. Year-over-year comparisons in subsequent
quarters will be more difficult due to greater amounts of political
advertising in the 1996 periods. Political advertising totaled
$1,718,000 in the second quarter, $3,982,000 in the third quarter,
and $12,423,000 in the fourth quarter of 1996.
The increase in employee costs is due primarily to the Company's
expanded schedules of local news programs. Depreciation and
amortization decreased in in the first quarter of 1997 as certain
intangible assets acquired in the 1991 purchase of the Baltimore
station became fully amortized.
<PAGE>
ENTERTAINMENT - Operating results for the entertainment segment,
excluding TV Food, were as follows:
<TABLE>
<CAPTION>
( in thousands ) Year-to-Date
1997 Change 1996
<S> <C> <C> <C>
Operating revenues:
Licensing $ 16,356 29.7 % $ 12,606
Newspaper feature distribution 5,348 11.2 % 4,808
Advertising 5,673 3,188
Subscriber fees 3,737 1,132
Program production 11,420 2,641
Other 626 306
Total operating revenues 43,160 74.9 % 24,681
Operating expenses:
Employee compensation and benefits 7,380 32.6 % 5,566
Artists' royalties 10,655 20.1 % 8,874
Programming and production costs 14,785 5,347
Other 8,211 46.1 % 5,619
Depreciation and amortization 1,095 18.4 % 925
Total operating expenses 42,126 60.0 % 26,331
Operating income (loss) $ 1,034 $ (1,650)
Other Financial and Statistical Data:
EBITDA $ 2,129 $ (725)
Capital expenditures $ 468 $ 536
</TABLE>
Licensing revenues benefited primarily from the growing popularity
of "Dilbert" in the U.S. and the strength of "Peanuts" in Japan.
The Company signed several long-term licensing and book publishing
agreements for "Dilbert" in 1996. Total international licensing
revenues increased 23% in the first quarter, despite the stronger
dollar. Japanese licensing revenues increased 41% in local currency
in 1997.
Program production revenues are subject to substantial fluctuation
due to the timing of completion and delivery of programs. Scripps
Howard Productions ("SHP") delivered four hours of programming in
the first quarter of 1997 and none in the first quarter of 1996.
SHP delivered eight hours of programming for the full year of 1996.
Subscriber fees and advertising revenue increased due to the continued
growth of HGTV.
Year-to-date operating losses for HGTV totaled $2,600,000 in 1997
and $3,800,000 in 1996.
Programming and production costs increased due to the
additional hours of programming produced by SHP and higher
programming costs associated with the growth of HGTV.
In 1996 the Company agreed to pay incentives of approximately
$50,000,000 to certain cable television system operators in exchange
for long-term contracts to carry HGTV. In the first quarter of 1997
the Company agreed to pay approximately $9,000,000 to additional
cable television system operators in exchange for carriage
contracts. The amount of the incentives approximates the subscriber
revenues HGTV expects to receive over the terms of the contracts.
However, advertising revenue is expected to increase as HGTV's
viewership increases. The costs of the incentives are amortized
based upon the percentage of the current period's subscriber
revenues to estimated total subscriber revenue over the terms of the
contracts. Based on contractual commitments as of early May 1997,
HGTV will be telecast to at least 30 million homes by December 31,
1997. Additional incentive payments may be required to obtain
carriage on additional cable television systems.
<PAGE>
From time-to-time the Company uses foreign currency forward and
option contracts to hedge cash flow exposures denominated in Japanese
yen. These contracts reduce the risk of changes in the exchange rate
on the Company's anticipated net licensing receipts (licensing royalties
less amounts due creators of the properties and certain direct
expenses) for the following year. The maturity of the
contracts coincide with the quarterly payments of licensing
royalties. The Company does not hold foreign currency
contracts for trading purposes and does not hold leveraged
contracts. Information about the Company's foreign currency
contracts, which require the Company to sell yen at a specified
rate, at March 31, 1997 was as follows:
Maturity Contract Exchange US Dollar
Date Amount (in yen) Rate Equivalent
5/15/97 150,345,000 100.23 $1,500,000
8/15/97 160,440,000 106.96 1,500,000
11/17/97 173,700,000 115.80 1,500,000
LIQUIDITY AND CAPITAL RESOURCES
The Company 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 the Company's business segments.
Management expects total cash flow from continuing operating activities
in 1997 will be sufficient to meet the Company's expected capital
expenditures, required debt payments and dividend payments.
Cash flow provided by continuing operating activities was
$54,900,000 in 1997 compared to $47,400,000 in 1996.
Net debt (borrowings less cash equivalent and other short-term
investments) totaled $101,000,000 at March 31, 1997 and was 9% of
total capitalization. Management believes the Company's cash and
cash equivalents, short-term investments and substantial borrowing
capacity, taken together, provide adequate resources to fund the
capital expenditures and expansion of existing businesses and the
development or acquisition of new businesses.
<PAGE>
THE E. W. SCRIPPS COMPANY
Index to Exhibits
Exhibit
No. Item Page
12 Ratio of Earnings to Fixed Charges E-2
<TABLE>
RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12
<CAPTION>
(in thousands) Three months ended
March 31,
1997 1996
<S> <C> <C>
EARNINGS AS DEFINED:
Earnings from operations before income taxes after
eliminating undistributed earnings of 20%- to
50%-owned affiliates $ 54,097 $ 36,369
Fixed charges excluding capitalized interest and
preferred stock dividends of majority-owned
subsidiary companies 3,429 2,230
Earnings as defined $ 57,526 $ 38,599
FIXED CHARGES AS DEFINED:
Interest expense, including amortization of
debt issue costs $ 2,566 $ 1,413
Interest capitalized 203 183
Portion of rental expense representative
of the interest factor 863 817
Preferred stock dividends of majority-owned
subsidiary companies 20 20
Fixed charges as defined $ 3,652 $ 2,433
RATIO OF EARNINGS TO FIXED CHARGES 15.75 15.86
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 19,146
<SECURITIES> 20,500
<RECEIVABLES> 181,945
<ALLOWANCES> 4,247
<INVENTORY> 12,647
<CURRENT-ASSETS> 315,730
<PP&E> 790,052
<DEPRECIATION> 363,878
<TOTAL-ASSETS> 1,478,606
<CURRENT-LIABILITIES> 299,853
<BONDS> 31,806
0
0
<COMMON> 809
<OTHER-SE> 969,594
<TOTAL-LIABILITY-AND-EQUITY> 1,478,606
<SALES> 0
<TOTAL-REVENUES> 290,710
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 233,555
<LOSS-PROVISION> 1,304
<INTEREST-EXPENSE> 2,566
<INCOME-PRETAX> 53,398
<INCOME-TAX> 22,477
<INCOME-CONTINUING> 30,023
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,023
<EPS-PRIMARY> $.37
<EPS-DILUTED> $.37
</TABLE>
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