|
|
|
|
|
|
|
|
|
|
Previous: SIXX HOLDINGS INC, 10QSB, 1998-05-15 |
Next: CONCORDE STRATEGIES GROUP INC, 10QSB, 1998-05-15 |
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, 1998
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 45202
(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, 1998
there were 61,581,488 of the Registrant's Class A Common Shares outstanding
and 19,218,913 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, 1998
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 15, 1998 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 Comprehensive Income and
Stockholders' Equity F-6
Notes to Consolidated Financial Statements F-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations F-12
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
( in thousands ) As of
March 31, December 31, March 31,
1998 1997 1997
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 17,501 $ 14,321 $ 19,146
Short-term investments 3,135 3,105 20,500
Accounts and notes receivable (less
allowances -$6,707, $6,305, $4,247) 187,548 218,310 177,298
Program rights and production costs 58,733 61,698 37,137
Inventories 19,295 13,685 12,647
Deferred income taxes 22,356 21,630 24,392
Miscellaneous 47,932 46,365 24,210
Total current assets 356,500 379,114 315,330
Investments 92,865 84,645 54,850
Property, Plant and Equipment 474,320 480,037 426,174
Goodwill and Other Intangible Assets 1,227,957 1,237,482 585,546
Other Assets:
Program rights and production costs (less current portion) 33,181 32,546 30,087
Prepaid distribution fees (less current portion) 45,587 48,287 46,852
Miscellaneous 21,780 18,722 19,767
Total other assets 100,548 99,555 96,706
TOTAL ASSETS $ 2,252,190 $ 2,280,833 $ 1,478,606
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,
1998 1997 1997
(Unaudited) (Unaudited)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 108,298 $ 171,254 $ 90,040
Accounts payable 87,887 90,408 66,197
Customer deposits and unearned revenue 40,219 39,395 32,256
Accrued liabilities:
Employee compensation and benefits 39,758 41,645 29,540
Distribution fees 31,478 33,388 30,523
Miscellaneous 62,609 53,870 51,297
Total current liabilities 370,249 429,960 299,853
Deferred Income Taxes 92,949 88,051 65,912
Long-Term Debt (less current portion) 601,849 601,852 31,806
Other Long-Term Obligations and Minority Interests (less current portion) 115,282 112,008 110,632
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: 61,553,530; 61,296,157; and 61,622,211 shares 616 613 616
Voting - authorized: 30,000,000 shares; issued and
outstanding: 19,218,913; 19,333,711; and 19,333,711 shares 192 193 193
Total 808 806 809
Additional paid-in capital 263,889 259,739 277,148
Retained earnings 796,909 782,329 695,974
Unrealized gains (losses) on securities available for sale 15,064 11,397 1,696
Unvested restricted stock awards (5,008) (5,602) (5,647)
Foreign currency translation adjustment 199 293 423
Total stockholders' equity 1,071,861 1,048,962 970,403
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,252,190 $ 2,280,833 $ 1,478,606
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,
1998 1997
<S> <C> <C>
Operating Revenues:
Advertising $ 257,347 $ 204,294
Circulation 40,541 33,808
Licensing 14,584 16,224
Joint operating agency distributions 10,816 11,409
Affiliate fees 8,677 3,737
Program production 1,729 11,420
Other 13,115 9,818
Total operating revenues 346,809 290,710
Operating Expenses:
Employee compensation and benefits 115,272 94,805
Newsprint and ink 36,348 27,351
Program, production and copyright costs 22,846 25,827
Other operating expenses 89,133 68,608
Depreciation 15,831 13,424
Amortization of intangible assets 9,924 4,844
Total operating expenses 289,354 234,859
Operating Income 57,455 55,851
Other Credits (Charges):
Interest expense (12,012) (2,566)
Miscellaneous, net (1,438) 113
Net other credits (charges) (13,450) (2,453)
Income Before Taxes and Minority Interests 44,005 53,398
Provision for Income Taxes 17,959 22,477
Income Before Minority Interests 26,046 30,921
Minority Interests 968 898
Net Income $ 25,078 $ 30,023
Net Income per Share of Common Stock:
Basic $.31 $.37
Diluted .31 .37
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS ( UNAUDITED )
<CAPTION>
( in thousands )
Three months ended
March 31,
1998 1997
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 25,078 $ 30,023
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation and amortization 25,755 18,268
Deferred income taxes 2,198 827
Minority interests in income of subsidiary companies 968 898
Prepaid distribution fee amortization greater (less) than payments 784 (2,946)
Other changes in certain working capital accounts, net 37,780 2,685
Miscellaneous, net (2,660) 5,186
Net operating activities 89,903 54,941
Cash Flows from Investing Activities:
Additions to property, plant and equipment (12,090) (8,896)
Purchase of investments (4,285) (10,950)
Change in certain short-term investments, net (17,800)
Miscellaneous, net 1,254 525
Net investing activities (15,121) (37,121)
Cash Flows from Financing Activities:
Payments on long-term debt (62,991) (11)
Dividends paid (10,498) (10,520)
Dividends paid to minority interests (396) (396)
Miscellaneous, net (primarily exercise of stock options) 2,283 2,108
Net financing activities (71,602) (8,819)
Increase in Cash and Cash Equivalents 3,180 9,001
Cash and Cash Equivalents:
Beginning of year 14,321 10,145
End of period $ 17,501 $ 19,146
Supplemental Cash Flow Disclosures:
Interest paid, excluding amounts capitalized $ 8,164 $ 664
Income taxes paid 5,740 7,406
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
AND STOCKHOLDERS' EQUITY ( UNAUDITED )
<CAPTION>
( in thousands, except share data )
Accumulated Unvested
Additional Other Restricted Total
Common Paid-in Retained Comprehensive Stock Stockholders'
Stock Capital Earnings Income Awards Equity
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996 $ 808 $ 272,703 $ 676,471 $ (150) $ (5,241) $ 944,591
Comprehensive income
Net income 30,023 30,023
Increase in unrealized gains (losses) on
securities available for sale, net
of deferred income taxes of $1,635 2,409 2,409
Foreign currency translation adjustments (140) (140)
Total 30,023 2,269 32,292
Dividends: declared and paid - $.13 per share (10,520) (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) 2,085
Tax benefits of compensation plans 1,224 1,224
Amortization of restricted stock awards 731 731
Balances at March 31, 1997 $ 809 $ 277,148 $ 695,974 $ 2,119 $ (5,647) $ 970,403
Balances at December 31, 1997 $ 806 $ 259,739 $ 782,329 $ 11,690 $ (5,602) $ 1,048,962
Comprehensive income:
Net income 25,078 25,078
Unrealized holding gains arising in period 4,301
Less: reclassification adjustment for gains
included in net income, net of deferred
income taxes of $317 (634)
Net increase in unrealized gains (losses) on
securities available for sale, net
of deferred income taxes of $1,974 3,667 3,667
Foreign currency translation adjustments (94) (94)
Total 25,078 3,573 28,651
Dividends: declared and paid - $.13 per share (10,498) (10,498)
Conversion of 114,798 Common Voting Shares
to 114,798 Class A Common Shares issued
142,575 Class A Common Shares issued
pursuant to compensation plans 2 2,538 (143) 2,397
Tax benefits of compensation plans 1,612 1,612
Amortization of restricted stock awards 737 737
Balances at March 31, 1998 $ 808 $ 263,889 $ 796,909 $ 15,263 $ (5,008) $ 1,071,861
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, 1997 has not
changed materially unless otherwise disclosed herein. Financial
information as of December 31, 1997 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 - The following table presents additional
information about basic and diluted weighted-average shares
outstanding:
<TABLE>
<CAPTION>
( in thousands )
Three months ended
March 31,
1998 1997
<S> <C> <C>
Basic weighted-average shares outstanding 80,358 80,496
Effect of dilutive securities:
Unvested restricted stock held by employees 198 207
Stock options held by employees 1,060 885
Diluted weighted-average shares outstanding 81,616 81,588
</TABLE>
Comprehensive Income - The Company adopted Financial Accounting
Standard No. 130 - Reporting Comprehensive Income in the first quarter
of 1998.
2. ACQUISITIONS AND DIVESTITURES
A. Acquisitions
1998 - There were no acquisitions in the three months ended March 31, 1998.
1997 - There were no acquisitions in the three months ended March 31, 1997.
In October the Company acquired the newspaper and broadcast operations
of Harte-Hanks Communications ("Harte-Hanks") for approximately
$790,000,000 in cash. The Harte-Hanks newspaper operations include
daily newspapers in Abilene, Corpus Christi, Plano, San Angelo and
Wichita Falls, Texas, and a daily newspaper in Anderson, South
Carolina. The Company immediately traded the Harte-Hanks broadcast
operations for an approximate 56% controlling interest in The
Television Food Network and $75,000,000 in cash. In August the
Company traded its daily newspapers in Monterey and San Luis Obispo,
California, for the daily newspaper in Boulder, Colorado.
<PAGE>
The acquisitions have been accounted for as purchases. The acquired
operations have been included in the Consolidated Statements of Income
from the dates of acquisition. The following table summarizes, on an
unaudited pro forma basis, the estimated combined results of
operations of the Company and the acquired operations assuming the
transactions had taken place at the beginning of the period. 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 the intangible assets acquired. The pro forma
information excludes the results of operations of the Monterey and San
Luis Obispo newspapers, and excludes the gain recognized on the
transaction. The unaudited pro forma results of operations are not
necessarily indicative of the results that actually would have
occurred had the acquisition been completed at the beginning of the
period.
<TABLE>
<CAPTION>
( in thousands, except per share data ) Three months
ended
March 31,
1997
<S> <C>
Operating revenues $ 321,963
Net Income 21,234
Net income per share of common stock:
Basic $.26
Diluted .26
</TABLE>
B. Divestitures
1998 - The Company expects to sell Scripps Howard Productions,
its Los Angeles-based fiction television production operation,
in 1998.
1997 - In August the Company traded its Monterey and San Luis Obispo,
California, daily newspapers for the daily newspaper in Boulder,
Colorado, and in October terminated the joint operating agency and ceased
operations of its newspaper in El Paso, Texas.
Included in the consolidated financial statements are the following
results of divested operations (excluding gains on sale):
<TABLE>
<CAPTION>
( in thousands ) Three months
ended
March 31,
1998 1997
<S> <C> <C>
Operating revenues $ 20,100
Operating income (loss) $ (900) 300
</TABLE>
<PAGE>
3. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
( in thousands ) As of
March 31, December 31, March 31,
1998 1997 1997
<S> <C> <C> <C>
Variable rate credit facilities $ 478,480 $ 541,459
6.625% note, due in 2007 99,862 99,858
6.375% note, due in 2002 99,911 99,906
7.375% notes, due in 1998 29,778 29,754 $ 29,682
6.17% note, due in 1997 90,000
Other notes 2,116 2,129 2,164
Total long-term debt 710,147 773,106 121,846
Current portion of long-term debt 108,298 171,254 90,040
Long-term debt (less current portion) $ 601,849 $ 601,852 $ 31,806
</TABLE>
The Company has a Competitive Advance and Revolving Credit Facility
Agreement which permits aggregate borrowings up to $800,000,000 (the
"Variable Rate Credit Facilities"). The Variable Rate Credit
Facilities are comprised of two unsecured lines, one limited to
$400,000,000 principal amount maturing in 1998, and the other limited
to $400,000,000 principal amount maturing in 2002. Borrowings under
the Variable Rate Credit Facilities are available on a committed
revolving credit basis at the Company's choice of three short-term
rates or through an auction procedure at the time of each borrowing.
The Variable Rate Credit Facilities are also used by the Company in
whole or in part, in lieu of direct borrowings, as credit support for
its commercial paper. The weighted-average interest rate on the Variable
Rate Credit Facilities was 5.60% at March 31, 1998, and 5.85% at
December 31, 1997.
Certain long-term debt agreements contain maintenance requirements on
net worth and coverage of interest expense and restrictions on
incurrence of additional indebtedness. The Company is in compliance
with all debt covenants.
Current maturities of long-term debt are classified as long-term to
the extent they can be refinanced under existing long-term credit
commitments.
<PAGE>
4. SEGMENT INFORMATION
The Company's reportable segments are strategic businesses that offer
different products and services. They are managed separately because
each business requires different technology and marketing strategies.
The Company evaluates performance based on results of operations
before income taxes, interest, unusual items, and foreign exchange
gains and losses. Intersegment sales, which primarily consist of
programming produced for Home & Garden Television and Food Network,
are generally recorded at cost.
No single customer provides more than 10% of the Company's revenue.
The Company derives less than 10% of its revenues from markets outside
of the U.S.
Financial information for the Company's business segments is as
follows:
<TABLE>
<CAPTION>
( in thousands )
Three months ended
March 31,
1998 1997
<S> <C> <C>
OPERATING REVENUES
Newspapers $ 215,126 $ 174,854
Broadcast television 74,815 72,696
Category television 29,106 9,549
Licensing and other media 29,142 34,279
Total 348,189 291,378
Eliminate intersegment revenue (1,380) (668)
Total $ 346,809 $ 290,710
OPERATING INCOME
Newspapers $ 46,772 $ 41,128
Broadcast television 16,222 18,731
Category television (3,458) (2,884)
Licensing and other media 2,436 3,056
Corporate (4,517) (4,180)
Total $ 57,455 $ 55,851
DEPRECIATION
Newspapers $ 10,211 $ 8,361
Broadcast television 3,926 3,759
Category television 959 516
Licensing and other media 488 478
Corporate 247 310
Total $ 15,831 $ 13,424
AMORTIZATION OF INTANGIBLE ASSETS
Newspapers $ 5,743 $ 2,303
Broadcast television 2,405 2,440
Category television 1,674
Licensing and other media 102 101
Total $ 9,924 $ 4,844
OTHER NONCASH ITEMS
Broadcast television $ (695) $ (1,015)
Category television (5,301) (4,329)
Licensing and other media (1,602) 4,661
Total $ (7,598) $ (683)
</TABLE>
Other noncash items include programming and program production
expenses in excess of (less than) the amounts paid, and, for category
television, amortization of prepaid distribution fees in excess of
(less than) distribution fee payments.
<PAGE>
<TABLE>
<CAPTION>
( in thousands )
Three months ended
March 31,
1998 1997
<S> <C> <C>
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Newspapers $ 6,312 $ 6,157
Broadcast television 5,093 2,107
Category television 303 280
Licensing and other media 67 188
Corporate 315 164
Total $ 12,090 $ 8,896
BUSINESS ACQUISITIONS AND OTHER ADDITIONS TO LONG-LIVED ASSETS
Newspapers $ 331 $ 41
Broadcast television 70 600
Category television 2,745 8,796
Licensing and other media 3,825 8,959
Corporate 1,350
Total $ 6,971 $ 19,746
ASSETS
Newspapers $ 1,297,009 $ 692,802
Broadcast television 478,658 493,435
Category television 284,821 108,312
Licensing and other media 133,410 98,259
Corporate 58,292 85,798
Total $ 2,252,190 $ 1,478,606
</TABLE>
Other additions to long-lived assets include investments and prepaid
distribution fees. Corporate assets are primarily cash, investments,
and refundable and deferred income taxes.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The E. W. Scripps Company ("Company") operates in three reportable
segments: newspapers, broadcast television and category television.
The newspaper segment includes 20 daily newspapers in the U.S. The
broadcast television segment includes nine network-affiliated
stations. Category television includes Home & Garden Television
("HGTV"), The Television Food Network ("Food Network"), and the
Company's 12% equity interest in SportSouth, a regional cable
television network. Licensing and other media aggregates the
Company's operating segments that are too small to report separately,
including syndication and licensing of news features and comics,
television program production, and publication of independent
telephone directories.
All per share disclosures included in management's discussion and
analysis of financial condition and results of operation are on a
diluted basis.
Consolidated results of continuing operations were as follows:
<TABLE>
<CAPTION>
( in thousands, except per share data ) Year-to-Date
1998 Change 1997
<S> <C> <C> <C>
Operating revenues:
Newspapers $ 215,126 30.3 % $ 165,059
Broadcast television 74,815 2.9 % 72,696
Category television 29,106 9,549
Licensing and other media 29,142 21.4 % 24,008
Total 348,189 28.3 % 271,312
Eliminate intersegment revenue (1,380) (668)
Divested operating units 20,066
Total operating revenues $ 346,809 19.3 % $ 290,710
Operating income:
Newspapers $ 46,772 15.7 % $ 40,421
Broadcast television 16,222 (13.4)% 18,731
Category television (3,458) (19.9)% (2,884)
Licensing and other media 3,354 (2.9)% 3,453
Corporate (4,517) (4,180)
Total 58,373 5.1 % 55,541
Divested operating units (918) 310
Total operating income 57,455 2.9 % 55,851
Interest expense (12,012) (2,566)
Miscellaneous, net (1,438) 113
Income taxes (17,959) (22,477)
Minority interest (968) (898)
Net income $ 25,078 (16.5)% $ 30,023
Net income per share of common stock $.31 (16.2)% $.37
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
( in thousands ) Year-to-Date
1998 Change 1997
<S> <C> <C> <C>
Other Financial and Statistical Data - excluding divested operations:
Total advertising revenues $ 257,347 29.9 % $ 198,055
Advertising revenues as a
percentage of total revenues 73.9 % 73.0 %
EBITDA:
Newspapers $ 62,726 24.1 % $ 50,549
Broadcast television 22,553 (9.5)% 24,930
Category television (825) 65.2 % (2,368)
Licensing and other media 3,912 (2.2)% 4,000
Corporate (4,270) (3,870)
Total $ 84,096 14.8 % $ 73,241
Effective income tax rate 40.8 % 42.1 %
Weighted-average shares outstanding 81,616 0.0 % 81,588
Cash provided by operating activities $ 89,903 $ 54,941
Capital expenditures 12,090 8,326
Business acquisitions and other
additions to long-lived assets 6,971 19,746
Increase (decrease) in long-term debt (62,991) (11)
Dividends paid, including minority interests 10,894 10,916
</TABLE>
Earnings before interest, income taxes, depreciation and amortization
("EBITDA") is included in the discussion of segment results because:
Management believes the year-over-year change in EBITDA is a more
useful measure of year-over-year economic performance than the
change in operating income because, combined with information on
capital spending plans, it is more reliable. Changes in
amortization and depreciation have no impact on economic
performance. Depreciation is a function of capital spending,
which is important and is separately disclosed.
Banks and other lenders use EBITDA to determine the Company's
borrowing capacity.
Financial analysts and acquirors use EBITDA, combined with capital
spending requirements, to value communications media companies.
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.
In October 1997 the Company acquired the newspaper and broadcast
operations of Harte-Hanks Communications ("Harte-Hanks"). The Company
immediately traded the Harte-Hanks broadcast operations for an
approximate 56% controlling interest in Food Network. The average
balance of outstanding debt increased $620,000,000 to $742,000,000 as
long-term debt was used to finance the acquisitions. The estimated
reduction in earnings per share due to the HHC Newspaper Operations
and Food Network acquisitions was $.08 per share in the first quarter
of 1998.
The Company expects to sell Scripps Howard Productions ("SHP"), its
Los Angeles-based fiction television production operation, in 1998.
In August 1997 the Company traded its Monterey and San Luis Obispo,
California, daily newspapers for the daily newspaper in Boulder, Colorado.
In October 1997 the Company terminated the joint operating agency
and ceased operations of its newspaper in El Paso, Texas.
Operating results for SHP and the Monterey, San Luis Obispo, and El Paso
newspapers are included in "Divested Operations".
Licensing and other media revenues increased as the Company published
its first independent yellow pages directory.
Operating results for the Company's reportable segments, excluding
Divested Operations, are presented on the following pages. The
results of Divested Operations are excluded from the segment
operating results because management believes they are not relevant to
understanding the Company's ongoing operations.
<PAGE>
NEWSPAPERS - Operating results, excluding Divested Operations, were as
follows:
<TABLE>
<CAPTION>
( in thousands ) Year-to-Date
1998 Change 1997
<S> <C> <C> <C>
Operating revenues:
Local $ 65,024 26.4 % $ 51,462
Classified 65,104 36.1 % 47,828
National 6,369 16.9 % 5,447
Preprint and other 21,735 42.0 % 15,311
Newspaper advertising 158,232 31.8 % 120,048
Circulation 40,541 28.6 % 31,518
Joint operating agency distributions 10,816 (0.8)% 10,901
Other 5,537 113.6 % 2,592
Total operating revenues 215,126 30.3 % 165,059
Operating expenses:
Employee compensation and benefits 71,351 31.4 % 54,293
Newsprint and ink 36,348 38.5 % 26,244
Other 44,701 31.6 % 33,973
Depreciation and amortization 15,954 57.5 % 10,128
Total operating expenses 168,354 35.1 % 124,638
Operating income $ 46,772 15.7 % $ 40,421
Other Financial and Statistical Data:
EBITDA $ 62,726 24.1 % $ 50,549
Percent of operating revenues:
Operating income 21.7 % 24.5 %
EBITDA 29.2 % 30.6 %
Capital expenditures $ 6,312 $ 5,705
Business acquistions and other
additions to long-lived assets 331 41
</TABLE>
The acquired newspapers provided 76% of the increase in total
operating revenues. Total operating revenues increased 7.1% and
advertising revenues increased 7.9% on a pro forma basis, assuming all
newspapers were owned for the full period in both years. Advertising
volume increased 5.1% on the same pro forma basis.
Excluding the acquired newspapers, employee compensation increased
4.8% and other operating expenses increased 7.7% in the first quarter.
Newsprint prices in the first quarter of 1998 were approximately 13%
higher than in the first quarter of 1997. On a pro forma basis,
consumption increased approximately 5%. At the current price,
the cost of newsprint will increase approximately 30% in the second
quarter and 20% in the second half of the year, including the effects of
the acquired newspapers.
<PAGE>
BROADCAST TELEVISION - Operating results were as follows:
<TABLE>
<CAPTION>
( in thousands ) Year-to-Date
1998 Change 1997
<S> <C> <C> <C>
Operating revenues:
Local $ 39,656 3.2 % $ 38,424
National 30,082 2.1 % 29,457
Political 330 89
Other 4,747 0.4 % 4,726
Total operating revenues 74,815 2.9 % 72,696
Operating expenses:
Employee compensation and benefits 26,499 4.2 % 25,436
Program and copyright costs 13,373 21.1 % 11,042
Other 12,390 9.8 % 11,288
Depreciation and amortization 6,331 2.1 % 6,199
Total operating expenses 58,593 8.6 % 53,965
Operating income $ 16,222 (13.4)% $ 18,731
Other Financial and Statistical Data:
EBITDA $ 22,553 (9.5)% $ 24,930
Percent of operating revenues:
Operating income 21.7 % 25.8 %
EBITDA 30.1 % 34.3 %
Capital expenditures $ 5,093 $ 2,107
Business acquisitions and other
additions to long-lived assets 70 600
</TABLE>
The demand for advertising time was soft in most of the Company's
television markets in the first quarter and is expected to remain soft
in the second quarter. Weak ratings for ABC network programming in
the Company's six largest markets contributed to the dampened revenue
growth.
The increase in program costs is primarily due to the higher cost of
the popular talk show "The Rosie O'Donnell Show," which is carried by
five stations. The costs of developing locally-produced shows
contributed to the increase in other operating expenses. The increase
in capital expenditures is due to the construction of a new building
for the Phoenix station.
<PAGE>
CATEGORY TELEVISION - Operating results were as follows:
<TABLE>
<CAPTION>
( in thousands ) Year-to-Date
1998 Change 1997
<S> <C> <C> <C>
Operating revenues:
Advertising $ 19,404 242.9 % $ 5,658
Affiliate fees 8,677 132.2 % 3,737
Other 1,025 154
Total operating revenues 29,106 9,549
Operating expenses:
Employee compensation and benefits 8,379 193.8 % 2,852
Programming and production costs 8,486 87.0 % 4,538
Other 13,066 188.6 % 4,527
Depreciation and amortization 2,633 516
Total operating expenses 32,564 161.9 % 12,433
Operating income (loss) $ (3,458) $ (2,884)
Other Financial and Statistical Data:
EBITDA $ (825) $ (2,368)
Capital expenditures $ 303 $ 280
Business acquisitions and other
additions to long-lived assets 2,745 8,796
</TABLE>
The October 1997 acquisition of Food Network provided approximately 45%
of the increase in operating revenues. The remaining increase in
advertising and affiliate fee revenues is primarily due to the increase
in cable television systems that carry HGTV, and, therefore, the
increase in potential audience. According to the Nielsen Homevideo Index,
HGTV was telecast to 40.2 million homes in March 1998, up 15.1 million
from March 1997. Food Network was telecast to 31.7 million homes in
March 1998, up 9.7 million from March 1997.
Other operating revenues includes the sale of merchandise and the sale
of programming in international markets.
The increases in operating expenses are consistent with the increases
in revenue.
EBITDA for HGTV was $1,800,000 in 1998 and ($2,100,000) in 1997.
Operating income (losses) for HGTV totaled $1,200,000, $600,000 after-tax,
$.01 per share, in 1998 and ($2,600,000), ($1,600,000) after-tax, ($.02) per
share, in 1997. EBITDA for Food Network was ($2,400,000) in 1998.
Operating income (losses) for Food Network totaled ($4,400,000),
($2,900,000) after-tax, ($.04) per share, in 1998.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company generates significant cash flow from operating activities,
primarily from its newspaper and broadcast television operating
segments. There are no significant legal or other restrictions on the
transfer of funds among the Company's business segments.
Cash flow provided by the operating activities of the newspaper and
broadcast television segments in excess of the capital expenditures of
those segments are used primarily to invest in the category television
segment, to fund corporate expenditures, or to invest in new
businesses. Management expects total cash flow from operating
activities in 1998 will be sufficient to meet the Company's expected
total capital expenditures, required interest payments and dividend
payments. The Company expects to extend the $400,000,000 one-year
portion of its variable rate credit facility, or to refinance the
borrowings under that line.
Cash flow provided by continuing operating activities was $89,900,000
in 1998 compared to $54,900,000 in 1997. The improvement was due to
the increase in EBITDA and a decrease in accounts receivable from
customers.
In 1997 the Board of Directors authorized, subject to business and
market conditions, the purchase of up to 4,000,000 of the Company's
Class A Common Shares. The Company did not purchase any shares in the
first quarter of 1998.
Net debt (borrowings less cash equivalent and other short-term
investments) totaled $707,000,000 at March 31, 1998 and was 40%
of total capitalization. Management believes the Company's
cash flow from operations and substantial borrowing capacity, taken
together, provide adequate resources to fund 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
27 Financial Data Schedule E-3
<TABLE>
RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12
<CAPTION>
( in thousands ) Three months ended
March 31,
1998 1997
<S> <C> <C>
EARNINGS AS DEFINED:
Earnings from operations before income taxes after
eliminating undistributed earnings of 20%- to
50%-owned affiliates $ 44,425 $ 54,097
Fixed charges excluding capitalized interest and
preferred stock dividends of majority-owned
subsidiary companies 13,234 3,429
Earnings as defined $ 57,659 $ 57,526
FIXED CHARGES AS DEFINED:
Interest expense, including amortization of
debt issue costs $ 12,012 $ 2,566
Interest capitalized 31 203
Portion of rental expense representative
of the interest factor 1,222 863
Preferred stock dividends of majority-owned
subsidiary companies 20 20
Fixed charges as defined $ 13,285 $ 3,652
RATIO OF EARNINGS TO FIXED CHARGES 4.34 15.75
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 17,501
<SECURITIES> 3,135
<RECEIVABLES> 194,255
<ALLOWANCES> 6,707
<INVENTORY> 19,295
<CURRENT-ASSETS> 356,500
<PP&E> 870,232
<DEPRECIATION> 395,912
<TOTAL-ASSETS> 2,252,190
<CURRENT-LIABILITIES> 370,249
<BONDS> 601,849
0
0
<COMMON> 808
<OTHER-SE> 1,071,053
<TOTAL-LIABILITY-AND-EQUITY> 2,252,190
<SALES> 0
<TOTAL-REVENUES> 346,809
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 287,438
<LOSS-PROVISION> 1,916
<INTEREST-EXPENSE> 12,012
<INCOME-PRETAX> 44,005
<INCOME-TAX> 17,959
<INCOME-CONTINUING> 25,078
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,078
<EPS-PRIMARY> $.31
<EPS-DILUTED> $.31
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1996 DEC-31-1996
<PERIOD-END> SEP-30-1997 JUN-30-1997 DEC-31-1996 MAR-31-1996
<CASH> 14,597 13,794 10,145 12,871
<SECURITIES> 0 33,389 2,700 0
<RECEIVABLES> 174,226 181,318 186,661 152,002
<ALLOWANCES> 4,915 4,834 3,974 3,534
<INVENTORY> 12,683 12,705 11,753 12,941
<CURRENT-ASSETS> 317,953 334,519 309,024 226,429
<PP&E> 806,709 801,755 781,903 755,150
<DEPRECIATION> 376,378 375,488 351,200 326,265
<TOTAL-ASSETS> 1,522,910 1,502,360 1,463,613 1,652,598
<CURRENT-LIABILITIES> 234,966 296,224 323,402 208,986
<BONDS> 52,671 31,819 31,793 31,824
0 0 0 0
0 0 0 0
<COMMON> 811 809 808 803
<OTHER-SE> 1,032,072 1,001,405 943,783 1,216,660
<TOTAL-LIABILITY-AND-EQUITY> 1,522,910 1,502,360 1,463,613 1,652,598
<SALES> 0 0 0 0
<TOTAL-REVENUES> 882,403 596,222 1,121,858 254,245
<CGS> 0 0 0 0
<TOTAL-COSTS> 0 0 0 0
<OTHER-EXPENSES> 700,747 467,025 910,115 215,312
<LOSS-PROVISION> 5,869 2,985 5,892 1,457
<INTEREST-EXPENSE> 7,350 5,050 9,629 1,413
<INCOME-PRETAX> 190,813 121,643 219,587 35,681
<INCOME-TAX> 80,873 51,205 86,011 15,274
<INCOME-CONTINUING> 107,180 68,602 130,140 19,720
<DISCONTINUED> 0 0 27,263 9,595
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 107,180 68,602 157,403 29,315
<EPS-PRIMARY> $1.33 $.85 $1.62 $.25
<EPS-DILUTED> $1.31 $.84 $1.61 $.24
</TABLE>
|
|