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Previous: DATALINK SYSTEMS CORP /CA/, 10QSB, 1998-08-13 |
Next: UNITED TRUST INC /IL/, 10-Q, 1998-08-13 |
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 June 30, 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 0-16914
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 July 31, 1998
there were 61,141,887 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 JUNE 30, 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
The following table presents information on matters submitted to a vote of
security holders at the 1998 Annual Meeting of Shareholders.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Broker
Description of Matters Submitted In Favor Against Abstain Non-Votes
Class A Common Shares:
Election of Directors:
Daniel J. Meyer 52,627,910 171,380 8,751,140
Nicholas B. Paumgarten 52,626,814 172,476 8,751,140
Ronald W. Tysoe 52,626,656 172,634 8,751,140
Common Voting Shares:
Election of Directors 18,201,113 1,017,800
Adopt 1997 Deferred Compensation and Phantom Stock
Plan for Senior Officers and Selected Executives 18,201,113 1,017,800
Amend 1997 Deferred Compensation and Stock
Plan for Directors 18,201,113 1,017,800
Adopt Employee Stock Purchase Plan 18,201,113 1,017,800
</TABLE>
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
A Current Report on Form 8-K reporting the Company's consolidated operating
revenues for the period ended May 31, 1998, was filed on June 11, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
THE E. W. SCRIPPS COMPANY
Dated: August 13, 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
June 30, December 31, June 30,
1998 1997 1997
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 17,683 $ 14,321 $ 13,794
Short-term investments 3,237 3,105 33,389
Accounts and notes receivable (less
allowances -$7,113, $6,305, $4,834) 202,208 218,310 176,484
Program rights and production costs 50,389 61,698 29,979
Inventories 17,267 13,685 12,705
Deferred income taxes 22,698 21,630 25,134
Miscellaneous 56,850 46,365 43,034
Total current assets 370,332 379,114 334,519
Investments 111,759 84,645 66,067
Property, Plant and Equipment 472,337 480,037 426,267
Goodwill and Other Intangible Assets 1,218,511 1,237,482 581,170
Other Assets:
Program rights and production costs (less current portion) 29,339 32,546 25,330
Prepaid distribution fees (less current portion) 37,132 48,287 49,046
Miscellaneous 22,502 18,722 19,961
Total other assets 88,973 99,555 94,337
TOTAL ASSETS $ 2,261,912 $ 2,280,833 $ 1,502,360
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
( in thousands, except share data ) As of
June 30, December 31, June 30,
1998 1997 1997
(Unaudited) (Unaudited)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 122,763 $ 171,254 $ 90,040
Accounts payable 81,877 90,408 53,860
Customer deposits and unearned revenue 40,528 39,395 33,905
Accrued liabilities:
Employee compensation and benefits 43,777 41,645 32,764
Distribution fees 18,026 33,388 40,357
Miscellaneous 45,519 53,870 45,298
Total current liabilities 352,490 429,960 296,224
Deferred Income Taxes 100,383 88,051 69,998
Long-Term Debt (less current portion) 601,845 601,852 31,819
Other Long-Term Obligations and Minority Interests (less current portion) 114,672 112,008 102,105
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: 61,356,653; 61,296,157; and 61,640,302 shares 614 613 616
Voting - authorized: 30,000,000 shares; issued and
outstanding: 19,218,913; 19,333,711; and 19,333,711 shares 192 193 193
Total 806 806 809
Additional paid-in capital 251,849 259,739 277,634
Retained earnings 822,825 782,329 724,026
Unrealized gains (losses) on securities available for sale 21,600 11,397 4,385
Unvested restricted stock awards (4,617) (5,602) (5,265)
Foreign currency translation adjustment 59 293 625
Total stockholders' equity 1,092,522 1,048,962 1,002,214
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,261,912 $ 2,280,833 $ 1,502,360
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME ( UNAUDITED )
<CAPTION>
( in thousands, except per share data ) Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Operating Revenues:
Advertising $ 277,284 $ 226,993 $ 534,631 $ 431,287
Circulation 37,740 32,153 78,281 65,961
Licensing 16,022 14,403 30,606 30,627
Joint operating agency distributions 13,227 13,121 24,043 24,530
Affiliate fees 9,397 5,164 18,074 8,901
Program production 1,765 2,299 3,494 13,719
Other 11,483 11,379 24,598 21,197
Total operating revenues 366,918 305,512 713,727 596,222
Operating Expenses:
Employee compensation and benefits 114,433 96,381 229,705 191,186
Newsprint and ink 36,958 30,416 73,306 57,767
Program, production and copyright costs 25,136 16,988 47,982 42,815
Other operating expenses 89,757 74,072 178,890 142,680
Depreciation 15,504 12,470 31,335 25,894
Amortization of intangible assets 9,923 4,824 19,847 9,668
Total operating expenses 291,711 235,151 581,065 470,010
Operating Income 75,207 70,361 132,662 126,212
Other Credits (Charges):
Interest expense (11,747) (2,484) (23,759) (5,050)
Miscellaneous, net 915 368 (523) 481
Net other credits (charges) (10,832) (2,116) (24,282) (4,569)
Income Before Taxes and Minority Interests 64,375 68,245 108,380 121,643
Provision for Income Taxes 26,380 28,728 44,339 51,205
Income Before Minority Interests 37,995 39,517 64,041 70,438
Minority Interests 1,571 938 2,539 1,836
Net Income $ 36,424 $ 38,579 $ 61,502 $ 68,602
Net Income per Share of Common Stock:
Basic $.45 $.48 $.77 $.85
Diluted .45 .47 .75 .84
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS ( UNAUDITED )
<CAPTION>
( in thousands ) Six months ended
June 30,
1998 1997
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 61,502 $ 68,602
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation and amortization 51,182 35,562
Deferred income taxes 5,765 3,066
Minority interests in income of subsidiary companies 2,539 1,836
Prepaid distribution fee amortization greater (less)than payments (7,531) (7,384)
Other changes in certain working capital accounts, net 12,945 (14,738)
Miscellaneous, net (2,237) 8,250
Net operating activities 124,165 95,194
Cash Flows from Investing Activities:
Additions to property, plant and equipment (25,807) (22,154)
Purchase of investments (13,127) (20,503)
Change in certain short-term investments, net (30,689)
Miscellaneous, net 2 988
Net investing activities (38,932) (72,358)
Cash Flows from Financing Activities:
Payments on long-term debt (48,564) (23)
Dividends paid (21,006) (21,047)
Repurchase Class A Common shares (14,911) (287)
Dividends paid to minority interests (794) (793)
Miscellaneous, net (primarily exercise of stock options) 3,404 2,963
Net financing activities (81,871) (19,187)
Increase in Cash and Cash Equivalents 3,362 3,649
Cash and Cash Equivalents:
Beginning of year 14,321 10,145
End of period $ 17,683 $ 13,794
Supplemental Cash Flow Disclosures:
Interest paid, excluding amounts capitalized $ 23,685 $ 2,341
Income taxes paid 40,853 48,858
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 Comprehensive
Additional Other Restricted Total Income for the
Common Paid-in Retained Comprehensive Stock Stockholders' Three Months
Stock Capital Earnings Income Awards Equity Ended June 30
<S> <C> <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 68,602 68,602 $ 38,579
Unrealized holding gains
arising in period, net
of deferred income taxes
of $2,745 and $1,110 5,098 5,098 2,689
Foreign currency translation
adjustments 62 62 202
Total 68,602 5,160 73,762 $ 41,470
Dividends: declared and paid -
$.26 per share (21,047) (21,047)
Conversion of 136,671 Common
Voting Shares to 136,671
Class A Common Shares
Class A Common Shares issued
pursuant to compensation
plans, net: 217,950 issued;
7,559 shares repurchased 1 3,462 (1,383) 2,080
Tax benefits of compensation plans 1,469 1,469
Amortization of restricted stock awards 1,359 1,359
Balances at June 30, 1997 $ 809 $ 277,634 $ 724,026 $ 5,010 $ (5,265) $ 1,002,214
Balances at December 31, 1997 $ 806 $ 259,739 $ 782,329 $ 11,690 $ (5,602) $ 1,048,962
Comprehensive income:
Net income 61,502 61,502 $ 36,424
Unrealized holding gains
arising in period, net
of deferred income taxes
of $5,811 and $3,520 10,837 6,536
Less: reclassification adjustment
for gains included in net
income, net of deferred
income taxes of $317 in the
year-to-date period (634)
Increase in unrealized gains
on securities 10,203 10,203 6,536
Foreign currency translation
adjustments (234) (234) (140)
Total 61,502 9,969 71,471 $ 42,820
Dividends: declared and paid -
$.26 per share (21,006) (21,006)
Conversion of 114,798 Common Voting
Shares to 114,798 Class A Common Shares
Repurchase and retire 270,000 Class A
Common Shares (2) (13,887) (13,889)
Class A Common Shares issued pursuant to
compensation plans, net: 235,924
shares issued, 1,500 shares forfeited
and 18,726 shares repuchased 2 3,023 (442) 2,583
Tax benefits of compensation plans 2,974 2,974
Amortization of restricted stock awards 1,427 1,427
Balances at June 30, 1998 $ 806 $ 251,849 $ 822,825 $ 21,659 $ (4,617) $ 1,092,522
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 Six months ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Basic weighted-average shares outstanding 80,404 80,562 80,381 80,529
Effect of dilutive securities:
Unvested restricted stock held by employees 197 218 198 213
Stock options held by employees 1,087 921 1,073 902
Diluted weighted-average shares outstanding 81,688 81,701 81,652 81,644
</TABLE>
Comprehensive Income - The Company adopted Financial Accounting
Standard ("FAS") No. 130 - Reporting Comprehensive Income in the first
quarter of 1998.
Recently Issued Accounting Standards - The Financial Accounting
Standards Board issued FAS No. 133 - Accounting for Derivative
Instruments and Hedging Activities. The Company uses foreign currency
forward and option contracts to reduce the risk of changes in the
exchange rate for the Japanese yen on the Company's anticipated net
licensing receipts and forward contracts to reduce the risk of changes
in the price of newsprint on anticipated purchases. The new standard,
which must be adopted by January 1, 2000, will not have a material
effect on the Company's financial position or its results of
operations. Foreign currency forward and option contracts are
currently recognized at fair value, however changes in the fair value
of such contracts, which under current accounting rules are recognized
immediately, will be initially reported as a separate component of
comprehensive income and reclassified into earnings when the related
licensing revenue is earned. Newsprint forward contracts are not
currently recorded in the Company's balance sheet and gains and losses
are deferred and recognized in income as the newsprint is consumed.
Under the new standard newsprint forward contracts will be recorded at
fair value and changes in the value of the contracts will be initially
reported as a separate component of comprehensive income and
reclassified into earnings when the newsprint is consumed.
<PAGE>
2. ACQUISITIONS AND DIVESTITURES
A. Acquisitions
1998 - There were no acquisitions in the six months ended June 30, 1998.
1997 - There were no acquisitions in the six months ended June 30,
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.
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 share data ) Three months ended Six months ended
June 30, June 30,
1997 1997
<S> <C> <C>
Operating revenues $ 339,958 $ 661,921
Net Income 31,457 52,691
Net income per share of common stock:
Basic $.39 $.65
Diluted .39 .65
</TABLE>
B. Divestitures
1998 - The Company sold Scripps Howard Productions, its Los Angeles-
based fiction television production operation, in May.
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 Six months
ended ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Operating revenues $ 11,200 $ 31,200
Operating income (loss) $ 0 400 $ (900) 700
</TABLE>
<PAGE>
3. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
( in thousands ) As of
June 30, December 31, June 30,
1998 1997 1997
<S> <C> <C> <C>
Variable rate credit facilities $ 492,921 $ 541,459
6.625% note, due in 2007 99,865 99,858
6.375% note, due in 2002 99,916 99,906
7.375% notes, due in 1998 29,802 29,754 $ 29,706
6.17% note, due in 1997 90,000
Other notes 2,104 2,129 2,153
Total long-term debt 724,608 773,106 121,859
Current portion of long-term debt 122,763 171,254 90,040
Long-term debt (less current portion) $ 601,845 $ 601,852 $ 31,819
</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 5.65% at June 30, 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.
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 primarily evaluates performance based on results of
operations before depreciation, amortization, income taxes, interest,
unusual items, and foreign exchange gains and losses ("EBITDA").
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.
<PAGE>
Financial information for the Company's business segments is as
follows:
<TABLE>
<CAPTION>
( in thousands ) Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
OPERATING REVENUES
Newspapers $ 220,077 $ 181,891 $ 435,203 $ 356,745
Broadcast television 88,733 87,129 163,548 159,825
Category television 34,027 13,046 63,133 22,595
Licensing and other media 26,139 24,224 55,281 58,503
Total 368,976 306,290 717,165 597,668
Eliminate intersegment revenue (2,058) (778) (3,438) (1,446)
Total $ 366,918 $ 305,512 $ 713,727 $ 596,222
EBITDA
Newspapers $ 65,621 $ 53,537 $ 128,347 $ 105,329
Broadcast television 35,414 38,087 57,967 63,017
Category television 2,166 (685) 1,341 (3,053)
Licensing and other media 2,038 905 5,064 4,540
Corporate (4,605) (4,189) (8,875) (8,059)
Total $ 100,634 $ 87,655 $ 183,844 $ 161,774
DEPRECIATION
Newspapers $ 9,987 $ 7,816 $ 20,198 $ 16,177
Broadcast television 3,828 3,531 7,754 7,290
Category television 931 444 1,890 960
Licensing and other media 518 456 1,006 934
Corporate 240 223 487 533
Total $ 15,504 $ 12,470 $ 31,335 $ 25,894
AMORTIZATION OF INTANGIBLE ASSETS
Newspapers $ 5,743 $ 2,284 $ 11,486 $ 4,587
Broadcast television 2,405 2,440 4,810 4,880
Category television 1,672 3,346
Licensing and other media 103 100 205 201
Total $ 9,923 $ 4,824 $ 19,847 $ 9,668
OPERATING INCOME
Newspapers $ 49,891 $ 43,437 $ 96,663 $ 84,565
Broadcast television 29,181 32,116 45,403 50,847
Category television (437) (1,129) (3,895) (4,013)
Licensing and other media 1,417 349 3,853 3,405
Corporate (4,845) (4,412) (9,362) (8,592)
Total $ 75,207 $ 70,361 $ 132,662 $ 126,212
OTHER NONCASH ITEMS
Broadcast television $ (629) $ (1,569) $ (1,324) $ (2,584)
Category television (8,387) (4,047) (13,688) (8,376)
Licensing and other media (816) (555) (2,418) 4,106
Total $ (9,832) $ (6,171) $ (17,430) $ (6,854)
</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 Six months ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Newspapers $ 5,687 $ 7,846 $ 11,999 $ 14,003
Broadcast television 6,903 4,211 11,996 6,318
Category television 831 855 1,134 1,135
Licensing and other media 53 82 120 270
Corporate 243 264 558 428
Total $ 13,717 $ 13,258 $ 25,807 $ 22,154
BUSINESS ACQUISITIONS AND OTHER ADDITIONS TO LONG-LIVED ASSETS
Newspapers $ 449 $ 300 $ 780 $ 341
Broadcast television 155 1,150 225 1,750
Category television 845 18,101 3,590 26,897
Licensing and other media 5,649 6,553 9,474 15,512
Corporate 2,468 2,468 1,350
Total $ 9,566 $ 26,104 $ 16,537 $ 45,850
ASSETS
Newspapers $ 1,283,076 $ 691,997
Broadcast television 479,331 492,279
Category television 288,136 117,656
Licensing and other media 147,612 99,693
Corporate 63,757 100,735
Total $ 2,261,912 $ 1,502,360
</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 operations are on a
diluted basis.
Consolidated results of continuing operations were as follows:
<TABLE>
<CAPTION>
( in thousands, except per share data ) Quarterly Period Year-to-Date
1998 Change 1997 1998 Change 1997
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Newspapers $ 220,077 28.4 % $ 171,363 $ 435,203 29.4 % $ 336,422
Broadcast television 88,733 1.8 % 87,129 163,548 2.3 % 159,825
Category television 34,027 160.8 % 13,046 63,133 179.4 % 22,595
Licensing and other media 26,139 10.8 % 23,595 55,281 16.1 % 47,603
Total 368,976 25.0 % 295,133 717,165 26.6 % 566,445
Eliminate intersegment revenue (2,058) (778) (3,438) (1,446)
Divested operating units 11,157 31,223
Total operating revenues $ 366,918 20.1 % $ 305,512 $ 713,727 19.7 % $ 596,222
Operating income:
Newspapers $ 49,891 18.0 % $ 42,267 $ 96,663 16.9 % $ 82,688
Broadcast television 29,181 (9.1)% 32,116 45,403 (10.7)% 50,847
Category television (437) (1,129) (3,895) 2.9 % (4,013)
Licensing and other media 1,417 1,142 4,772 3.9 % 4,595
Corporate (4,845) (4,412) (9,362) (8,592)
Total 75,207 7.5 % 69,984 133,581 6.4 % 125,525
Divested operating units 377 (919) 687
Total operating income 75,207 6.9 % 70,361 132,662 5.1 % 126,212
Interest expense (11,747) (2,484) (23,759) (5,050)
Miscellaneous, net 915 368 (523) 481
Income taxes (26,380) (28,728) (44,339) (51,205)
Minority interest (1,571) (938) (2,539) (1,836)
Net income $ 36,424 (5.6)% $ 38,579 $ 61,502 (10.3)% $ 68,602
Net income per share of common stock $.45 (4.3)% $.47 $.75 (10.7)% $.84
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
( in thousands ) Quarterly Period Year-to-Date
1998 Change 1997 1998 Change 1997
<S> <C> <C> <C> <C> <C> <C>
Other Financial and Statistical Data - excluding divested operations:
Total advertising revenues $ 277,284 25.9 % $ 220,293 $ 534,631 27.8 % $ 418,349
Advertising revenues as a
percentage of total revenues 75.1 % 74.6 % 74.5 % 73.9 %
EBITDA:
Newspapers $ 65,621 26.6 % $ 51,837 $ 128,347 25.4 % $ 102,386
Broadcast television 35,414 (7.0)% 38,087 57,967 (8.0)% 63,017
Category television 2,166 (685) 1,341 (3,053)
Licensing and other media 2,038 1,664 5,951 5.1 % 5,664
Corporate (4,605) (4,189) (8,875) (8,059)
Total $ 100,634 16.1 % $ 86,714 $ 184,731 15.5 % $ 159,955
Effective income tax rate 41.0 % 42.1 % 40.9 % 42.1 %
Weighted-average shares outstanding 81,688 (0.0)% 81,701 81,652 0.0 % 81,644
Cash provided by operating activities $ 34,262 $ 40,253 $ 124,165 $ 95,194
Capital expenditures (13,717) (12,972) (25,807) (21,298)
Business acquisitions and other
additions to long-lived assets (9,566) (26,104) (16,537) (45,850)
Increase (decrease) in long-term debt 14,427 (12) (48,564) (23)
Repurchase Class A Common shares (14,911) (287) (14,911) (287)
Dividends paid, including minority interests (10,906) (10,924) (21,800) (21,840)
</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 $615,000,000, to $735,000,000,
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 $.06 per share in the second quarter
of 1998 and $.14 per share year-to-date.
<PAGE>
The Company sold Scripps Howard Productions ("SHP"), its Los Angeles-
based fiction television production operation, in May 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".
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 ) Quarterly Period Year-to-Date
1998 Change 1997 1998 Change 1997
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Local $ 64,924 27.6 % $ 50,874 $ 129,948 27.0 % $ 102,336
Classified 70,344 33.1 % 52,867 135,448 34.5 % 100,695
National 6,135 4.6 % 5,865 12,504 10.5 % 11,313
Preprint and other 23,467 45.9 % 16,080 45,202 44.0 % 31,392
Newspaper advertising 164,870 31.2 % 125,686 323,102 31.5 % 245,736
Circulation 37,740 26.4 % 29,856 78,281 27.5 % 61,374
Joint operating agency distributions 13,227 5.9 % 12,493 24,043 2.8 % 23,393
Other 4,240 27.4 % 3,328 9,777 65.2 % 5,919
Total operating revenues 220,077 28.4 % 171,363 435,203 29.4 % 336,422
Operating expenses:
Employee compensation and benefits 72,551 31.3 % 55,243 143,902 31.4 % 109,535
Newsprint and ink 36,958 26.9 % 29,122 73,306 32.4 % 55,366
Other 44,947 27.8 % 35,161 89,648 29.7 % 69,135
Depreciation and amortization 15,730 64.4 % 9,570 31,684 60.8 % 19,698
Total operating expenses 170,186 31.8 % 129,096 338,540 33.4 % 253,734
Operating income $ 49,891 18.0 % $ 42,267 $ 96,663 16.9 % $ 82,688
Other Financial and Statistical Data:
EBITDA $ 65,621 26.6 % $ 51,837 $ 128,347 25.4 % $ 102,386
Percent of operating revenues:
Operating income 22.7 % 24.7 % 22.2 % 24.6 %
EBITDA 29.8 % 30.2 % 29.5 % 30.4 %
Capital expenditures $ 5,687 $ 7,562 $ 11,999 $ 13,267
Business acquistions and other
additions to long-lived assets 449 300 780 341
</TABLE>
The acquired newspapers provided 85% of the increase in total
operating revenues in the quarter and 80% year-to-date. On a pro
forma basis, assuming all newspapers were owned for the full period in
both years, total operating revenues increased 4.6% in the quarter and
5.8% year-to-date. Advertising revenues increased 6.2% in the quarter
and 7.0% year-to-date, on the same pro forma basis.
Excluding the acquired newspapers, employee compensation increased
4.7%,other operating expenses increased 4.5%, and EBITDA increased
1.1% in the second quarter.
Newsprint prices in the second quarter of 1998 were approximately 7%
higher than in the second quarter of 1997. Excluding the acquired
newspapers, consumption increased 1.2%. At the current price, the
cost of newsprint would increase approximately 25% in the third
quarter and 10% in the fourth quarter, including the effects of the
acquired newspapers.
<PAGE>
BROADCAST TELEVISION - Operating results were as follows:
<TABLE>
<CAPTION>
( in thousands ) Quarterly Period Year-to-Date
1998 Change 1997 1998 Change 1997
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Local $ 45,098 2.9 % $ 43,806 $ 84,754 3.1 % $ 82,230
National 35,923 (6.4)% 38,399 66,005 (2.7)% 67,856
Political 3,152 164 3,482 253
Other 4,560 (4.2)% 4,760 9,307 (1.9)% 9,486
Total operating revenues 88,733 1.8 % 87,129 163,548 2.3 % 159,825
Operating expenses:
Employee compensation and benefits 26,710 3.6 % 25,784 53,209 3.9 % 51,220
Program and copyright costs 13,311 19.6 % 11,132 26,684 20.3 % 22,174
Other 13,298 9.7 % 12,126 25,688 9.7 % 23,414
Depreciation and amortization 6,233 4.4 % 5,971 12,564 3.2 % 12,170
Total operating expenses 59,552 8.3 % 55,013 118,145 8.4 % 108,978
Operating income $ 29,181 (9.1)% $ 32,116 $ 45,403 (10.7)% $ 50,847
Other Financial and Statistical Data:
EBITDA $ 35,414 (7.0)% $ 38,087 $ 57,967 (8.0)% $ 63,017
Percent of operating revenues:
Operating income 32.9 % 36.9 % 27.8 % 31.8 %
EBITDA 39.9 % 43.7 % 35.4 % 39.4 %
Capital expenditures $ 6,903 $ 4,211 $ 11,996 $ 6,318
Business acquisitions and other
additions to long-lived assets 155 1,150 225 1,750
</TABLE>
Revenues in the third quarter are expected to be flat with the prior
year. Additional political advertising should offset the effects of
general softness in demand for television advertising, the strike at
General Motors, and the continued weak ratings for ABC network
programming on stations in the Company's six largest markets.
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 ) Quarterly Period Year-to-Date
1998 Change 1997 1998 Change 1997
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Advertising $ 23,468 206.7 % $ 7,653 $ 42,872 222.1 % $ 13,311
Affiliate fees 9,397 82.0 % 5,164 18,074 103.1 % 8,901
Other 1,162 229 2,187 383
Total operating revenues 34,027 160.8 % 13,046 63,133 179.4 % 22,595
Operating expenses:
Employee compensation and benefits 8,223 218.7 % 2,580 16,602 205.6 % 5,432
Programming and production costs 9,052 85.9 % 4,869 17,538 86.4 % 9,407
Other 14,586 132.2 % 6,282 27,652 155.8 % 10,809
Depreciation and amortization 2,603 444 5,236 960
Total operating expenses 34,464 143.1 % 14,175 67,028 151.9 % 26,608
Operating income (loss) $ (437) $ (1,129) $ (3,895) $ (4,013)
Other Financial and Statistical Data:
EBITDA $ 2,166 $ (685) $ 1,341 $ (3,053)
Capital expenditures $ 831 $ 855 $ 1,134 $ 1,135
Business acquisitions and other
additions to long-lived assets 845 18,101 3,590 26,897
</TABLE>
The October 1997 acquisition of Food Network provided approximately 45%
of the increase in operating revenues for the quarter and year-to-date
periods. 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 42.2
million homes in June 1998, up 12.5 million from June 1997 and 2.0
million in the quarter. Food Network was telecast to 33.1 million homes
in June 1998, up 7.5 million from June 1997 and 1.4 million in the
quarter.
Other operating revenues includes the sale of merchandise and the sale
of programming in international markets.
Second quarter 1998 operating expenses include development costs of
$1,200,000 for extensions of the HGTV brand. The other increases in
operating expenses are consistent with the increases in revenue.
Second quarter EBITDA for HGTV was $3,400,000 in 1998 and ($1,400,000)
in 1997. Year-to-date EBITDA was $5,200,000 in 1998 and ($3,500,000)
in 1997. Operating income (losses) for the quarterly periods were
$2,800,000, $1,800,000 after-tax, $.02 per share, in 1998 and
($1,800,000), ($1,300,000) after-tax, ($.02) per share, in 1997. Year-
to-date operating income (losses) totaled $4,000,000, $2,400,000 after-
tax, $.03 per share, in 1998 and ($4,400,000), ($2,900,000) after-tax,
($.04) per share, in 1997.
EBITDA for Food Network was ($1,800,000) in the second quarter of 1998
and ($4,200,000) year-to-date. Operating income (losses) for Food
Network totaled ($3,700,000), ($2,300,000) after-tax, ($.03) per
share, for the quarter and ($8,200,000), $(5,100,000) after-tax,
($.06) per share, year-to-date.
<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 from operating activities was $124,000,000 in 1998 compared
to $95,200,000 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 repurchased 270,000 shares at a
cost of $13,900,000 in 1998 and 621,000 shares at a cost of
$25,700,000 in the second half of 1997.
Net debt (borrowings less cash equivalent and other short-term
investments) totaled $721,000,000 at June 30, 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.
YEAR 2000 ISSUES
The Year 2000 Issue results from computer programs using two digits
rather than four to define the year. Computer programs that use date-
sensitive information may recognize a date of "00" as the year 1900
instead of the year 2000. This could result in the inability to
insert advertising into programming or newspapers, to process
newspaper subscriptions and/or deliver newspapers to subscribers, or
to broadcast programming.
The Company has substantially completed a review of its systems to
determine which the Year 2000 Issue affects and what corrective
actions are needed to remedy the Year 2000 Issue. Based on the
assessment of its systems, the Company currently believes that the
Year 2000 Issue will not pose significant operational problems. Most
of the Company's systems and applications have been found to be Year
2000 compliant. The Company expects to modify or replace those
systems that are not Year 2000 compliant by mid-1999. To date costs
of achieving Year 2000 compliance, including capital spending, have
not been material to the Company's results of operations, its cash
flow or its financial position. Expenses to be incurred in the
remainder of 1998 and in 1999 are expected to be less than $3,000,000.
The Company could experience a disruption of operations if significant
suppliers and customers fail to remedy their own Year 2000 Issues.
Failure of various third party systems could delay the delivery of
newsprint, prohibit the Company's category television networks from
being viewed or prevent the Company's broadcast television systems
from receiving programming from networks or other suppliers. The
Company's plans to attain Year 2000 compliance include communications
with such third parties to determine the extent to which the Company's
systems and business operations are vulnerable if these third parties
fail to remediate their own Year 2000 issues and to assure that those
third parties are implementing Year 2000 compliance plans. There can
be no assurance that these third-party systems will be remedied on a
timely basis and that they will not adversely affect the Company's
systems and operations.
<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
</TEXT
<TABLE>
RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12
<CAPTION>
( in thousands ) Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
EARNINGS AS DEFINED:
Earnings from operations before income taxes after
eliminating undistributed earnings of 20%- to
50%-owned affiliates $ 64,738 $ 67,896 $ 109,163 $ 121,993
Fixed charges excluding capitalized interest and
preferred stock dividends of majority-owned
subsidiary companies 12,958 3,430 26,192 6,859
Earnings as defined $ 77,696 $ 71,326 $ 135,355 $ 128,852
FIXED CHARGES AS DEFINED:
Interest expense, including amortization of
debt issue costs $ 11,747 $ 2,484 $ 23,759 $ 5,050
Interest capitalized 69 218 100 421
Portion of rental expense representative
of the interest factor 1,211 946 2,433 1,809
Preferred stock dividends of majority-owned
subsidiary companies 20 20 40 40
Fixed charges as defined $ 13,047 $ 3,668 $ 26,332 $ 7,320
RATIO OF EARNINGS TO FIXED CHARGES 5.96 19.45 5.14 17.60
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 17,683
<SECURITIES> 3,237
<RECEIVABLES> 209,321
<ALLOWANCES> 7,113
<INVENTORY> 17,267
<CURRENT-ASSETS> 370,332
<PP&E> 879,675
<DEPRECIATION> 407,338
<TOTAL-ASSETS> 2,261,912
<CURRENT-LIABILITIES> 352,490
<BONDS> 601,845
0
0
<COMMON> 806
<OTHER-SE> 1,091,716
<TOTAL-LIABILITY-AND-EQUITY> 2,261,912
<SALES> 0
<TOTAL-REVENUES> 366,918
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 287,998
<LOSS-PROVISION> 3,713
<INTEREST-EXPENSE> 11,747
<INCOME-PRETAX> 64,375
<INCOME-TAX> 26,380
<INCOME-CONTINUING> 36,424
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,424
<EPS-PRIMARY> $.45
<EPS-DILUTED> $.45
</TABLE>
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