SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
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 (IRS 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
Title of each class Name of each exchange on
which registered
Securities registered pursuant
to Section 12(b) of the Act:
Class A Common Shares,
$.01 par value New York Stock Exchange
Securities registered pursuant
to Section 12(g) of the Act:
Not applicable
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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of the
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
___
The aggregate market value of Class A Common Shares of the
Registrant held by nonaffiliates of the Registrant, based on
the $41.00 per share closing price for such stock on
February 26, 1999, was approximately $1,083,000,000. As of
February 26, 1999, nonaffiliates held approximately
1,562,800 Common Voting Shares. There is no active
market for such stock.
As of February 26, 1999, there were 59,092,246 of the
Registrant's Class A Common Shares, $.01 par value per
share, outstanding and 19,218,913 of the
Registrant's Common Voting Shares, $.01 par value per share,
outstanding.
<PAGE>
INDEX TO THE E. W. SCRIPPS COMPANY
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998
Item No. Page
PART I
1. Business
Newspapers 3
Broadcast Television 7
Category Television 10
Licensing and Other Media 11
Employees 12
2. Properties 12
3. Legal Proceedings 12
4. Submission of Matters to a Vote of Security Holders 12
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters 13
6. Selected Financial Data 13
7. Management's Discussion and Analysis of Financial
Condition and Results of Operation 13
8. Financial Statements and Supplementary Data 13
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 13
PART III
10. Directors and Executive Officers of the Registrant 14
11. Executive Compensation 15
12. Security Ownership of Certain Beneficial Owners
and Management 15
13. Certain Relationships and Related Transactions 15
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 15
<PAGE>
PART I
ITEM 1. BUSINESS
The E. W. Scripps Company ("Company") is a diversified media
company operating in three reportable segments: newspapers,
broadcast television and category television. The newspaper
segment includes 19 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% interest in FOX
Sports South, 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 and
publication of independent telephone directories. A summary
of segment information for the three years ended December
31, 1998, is set forth on page F-38 of this Form 10-K.
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. Despite the economic gain, accounting rules
required the Company to record the Cable Transaction as a
spin-off, at net book value, of Scripps Cable to the
Company's shareholders. Therefore no gain was reflected in
the Company's financial statements.
Scripps Cable represented an entire business segment,
and therefore its results are reported as a "discontinued
operation" for all periods presented (see Note 15 to the
Consolidated Financial Statements). 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."
Newspapers
General - The Company publishes daily newspapers in 19
markets. From its Washington bureau the Company operates
the Scripps Howard News Service, a supplemental wire service
covering stories in the capital, other parts of the United
States and abroad. The Company acquired or divested the
following newspaper operations in the five years ended
December 31, 1998:
1998 - Divested the Dallas Community newspapers,
including the Plano daily.
1997 - Acquired daily newspapers in Abilene, Corpus
Christi, Plano, San Angelo and Wichita Falls, Texas, a
group of community newspapers in the Dallas, Texas,
market and a daily newspaper in Anderson, South
Carolina. Traded its Monterey and San Luis Obispo,
California, daily newspapers for the daily newspaper in
Boulder, Colorado, and terminated the joint operating
agency and ceased operations of its newspaper in El
Paso, Texas.
1996 - Acquired the Vero Beach, Florida, daily newspaper.
1995 - Divested the Watsonville, California, daily
newspaper.
<PAGE>
Revenues - The Company's newspaper operating revenues for
the five years ended December 31, 1998, were as follows:
<TABLE>
<CAPTION>
( in thousands )
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Newspaper advertising:
Local ROP $ 265,503 $ 220,324 $ 192,563 $ 185,821 $ 179,599
Classified ROP 258,531 213,473 184,629 170,058 153,156
National ROP 26,877 23,027 19,384 16,480 14,963
Preprint and other 96,581 73,109 64,538 65,585 60,045
Total newspaper advertising 647,492 529,933 461,114 437,944 407,763
Circulation 152,829 129,383 121,365 117,288 109,057
Joint operating agency distributions 48,278 47,052 39,341 39,476 39,375
Other 16,193 14,562 8,669 7,399 7,745
Total 864,792 720,930 630,489 602,107 563,940
Divested newspapers 14,206 30,084 40,372 38,291 38,998
Total newspaper operating revenues $ 878,998 $ 751,014 $ 670,861 $ 640,398 $ 602,938
</TABLE>
The Company's newspaper operating revenues are derived
primarily from advertising and circulation. Joint operating
agency distributions represent the Company's share of
profits of newspapers managed by the other party to a joint
operating agency (see "Joint Operating Agencies"). Other
newspaper operating revenues include commercial printing.
Advertising rates and revenues vary among the Company's
newspapers depending on circulation, type of advertising,
local market conditions and competition. Advertising
revenues are derived from run-of-paper ("ROP")
advertisements included with news stories in the body of the
newspaper and from preprinted advertisements that are
generally produced by advertisers and inserted into the
newspaper.
ROP is further broken down among "local," "classified" and
"national" advertising. Local refers to advertising that is
not in the classified advertising section and is purchased
by in-market advertisers. Classified refers to advertising
in the section of the newspaper that is grouped by type of
advertising, e.g., automotive and help wanted. National
refers to advertising purchased by businesses that operate
beyond the local market and purchase advertising from many
newspapers, primarily through advertising agencies. A given
volume of ROP advertisements is generally more profitable to
the Company than the same volume of preprinted
advertisements.
Advertising revenues vary through the year, with the first
and third quarters generally having lower revenues than the
second and fourth quarters. Advertising rates and volume
are highest on Sundays, primarily because circulation and
readership is greatest on Sundays.
<PAGE>
Circulation revenues are derived from home delivery sales of
newspapers to subscribers and from single-copy sales made
through retail outlets and vending machines. Circulation
information for the Company's newspapers is as follows:
<TABLE>
<CAPTION>
( in thousands ) (1) Morning (M)
Newspaper Evening (E) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Daily Paid Circulation
Abilene (TX) Reporter-News M (5) 39.8 40.3 41.3 42.7 42.7
Albuquerque (NM) Tribune (2) E 23.0 25.1 27.2 30.0 32.4
Anderson (SC) Independent-Mail M (5) 40.2 41.4 42.0 42.4 42.9
Birmingham (AL) Post-Herald (2) E (3) 21.3 25.6 49.7 58.2 59.6
Boulder (CO) Camera M (5) 34.4 34.2 33.9 34.7 34.6
Bremerton (WA) Sun M (4) 36.5 38.4 36.2 35.9 38.2
Cincinnati (OH) Post (2) E 70.9 77.2 81.3 87.4 90.9
Corpus Christi (TX) Caller-Times M (5) 66.2 68.1 64.8 66.4 66.3
Denver (CO) Rocky Mountain News M (6) 332.0 302.9 316.9 331.0 344.9
Evansville (IN) Courier M 60.6 61.8 60.5 61.8 62.8
Knoxville (TN) News-Sentinel M 121.9 122.3 122.7 124.9 127.9
Memphis (TN) Commercial Appeal M 174.4 185.7 182.6 190.2 198.0
Naples (FL) Daily News M 50.2 49.2 48.4 47.8 45.2
Redding (CA) Record-Searchlight M (4) 34.8 35.7 35.2 37.7 37.1
San Angelo (TX) Standard-Times M (5) 31.2 31.5 32.2 32.7 32.2
Stuart (FL) News M 36.1 35.4 35.1 36.3 34.7
Ventura County (CA) Star M (4) 92.4 95.9 94.7 96.3 102.9
Vero Beach (FL) Press Journal M (5) 32.0 32.4 33.3 32.9 32.2
Wichita Falls (TX) Times Record News M (5) 37.0 37.9 38.0 38.4 39.3
Total Daily Circulation 1,334.9 1,341.0 1,376.0 1,427.7 1,464.8
Sunday Paid Circulation
Abilene (TX) Reporter-News (5) 49.7 50.4 51.5 52.8 53.7
Anderson (SC) Independent-Mail (5) 46.3 47.8 48.1 48.5 49.0
Boulder (CO) Camera (5) 41.6 41.4 41.7 42.7 43.1
Bremerton (WA) Sun 39.7 41.7 39.8 39.6 40.5
Corpus Christi (TX) Caller-Times (5) 86.9 89.4 88.1 96.1 95.3
Denver (CO) Rocky Mountain News (6) 432.9 415.7 406.5 436.1 447.2
Evansville (IN) Courier 105.6 109.2 109.6 114.0 116.4
Knoxville (TN) News-Sentinel 162.8 166.2 167.6 174.8 177.9
Memphis (TN) Commercial Appeal 242.9 256.6 259.4 269.4 279.9
Naples (FL) Daily News 64.3 63.1 61.5 61.4 58.4
Redding (CA) Record-Searchlight 38.0 38.1 38.2 39.9 40.3
San Angelo (TX) Standard-Times (5) 37.2 37.7 38.7 39.4 38.9
Stuart (FL) News 45.7 45.4 44.1 44.4 43.1
Ventura County (CA) Star 104.6 103.4 102.8 104.0 108.8
Vero Beach (FL) Press Journal (5) 35.7 35.9 35.7 35.3 34.5
Wichita Falls (TX) Times Record News (5) 42.8 44.4 45.2 46.8 48.1
Total Sunday Circulation 1,576.7 1,586.4 1,578.5 1,645.2 1,675.1
</TABLE>
(1) Based on Audit Bureau of Circulation Publisher's
Statements ("Statements") for the six-month periods
ending September 30, except figures for the Naples Daily
News, the Stuart News and the Vero Beach Press Journal
which are from the Statements for the twelve-month
periods ending September 30.
(2) The other party to a JOA manages this newspaper's
non-editorial operations. See "Joint Operating
Agencies."
(3) Moved to evening distribution in 1996.
(4) Redding moved from evening to morning distribution
in 1994. Bremerton and the Thousand Oaks and Simi Valley
editions of the Ventura County newspaper moved to morning
distribution in 1995.
(5) Abilene, Anderson, Boulder, Corpus Christi, San
Angelo and Wichita Falls acquired in 1997. Vero Beach
acquired in 1996.
(6) In 1996 the Company eliminated distribution outside
the newspaper's primary market area ("PMA").
<PAGE>
Joint Operating Agencies - The Company is currently a party
to newspaper joint operating agencies ("JOAs") in three
markets. A JOA combines all but the editorial operations of
two competing newspapers in a market in order to reduce
aggregate expenses and take advantage of economies of scale,
thereby allowing the continuing operation of both newspapers
in that market. The Newspaper Preservation Act of 1970
("NPA") provides a limited exemption from anti-trust laws,
generally permitting the continuance of JOAs in existence
prior to the enactment of the NPA and the formation, under
certain circumstances, of new JOAs between newspapers.
Except for the Company's JOA in Cincinnati, all of the
Company's JOAs were entered into prior to the enactment of
the NPA. From time to time the legality of pre-NPA JOAs has
been challenged on anti-trust grounds but no such challenge
has yet succeeded in the courts.
JOA revenues less JOA expenses, as defined in each JOA,
equals JOA profits, which are split between the parties to
the JOA. In each case JOA expenses exclude editorial
expenses. The other party to the JOA manages each of the
three JOAs. The Company receives approximately 20% to 40%
of JOA profits for those JOAs.
The table below provides certain information about the
Company's JOAs.
<TABLE>
<CAPTION>
Year JOA Year of JOA
Newspaper Publisher of Other Newspaper Entered Into Expiration
<S> <C> <C> <C>
The Albuquerque Tribune Journal Publishing Company 1933 2022
Birmingham Post-Herald Newhouse Newspapers 1950 2015
The Cincinnati Post Gannett Newspapers 1977 2007
</TABLE>
The JOAs generally provide for automatic renewal terms of
ten years, unless advance notice of termination ranging from
two to five years, is given by either party.
A JOA in Evansville, Indiana, which was managed by the
Company, expired in 1998 and was not renewed. The Company
had received approximately 80% of JOA profits. The Company
continues to operate its Evansville newspaper.
Competition - The Company's newspapers compete for
advertising revenues primarily with other local media,
including other local newspapers, television and radio
stations, cable television, telephone directories, Internet
sites and direct mail. Competition for advertising revenues
is based upon audience size and demographics, price and
effectiveness. Changes in technology and new media, such as
electronic publications, have created additional competitors
for classified advertising. Most of the Company's
newspapers publish electronic versions of the newspaper on
the Internet and offer advertising space, including
classified advertising, on their web sites. Newspapers
compete with all other information and entertainment media
for consumers' discretionary time.
All of the Company's newspaper markets are highly
competitive, particularly Denver, which has a competing
morning and Sunday newspaper.
Newspaper Production - The Company's daily newspapers are
printed using offset or flexographic presses and use
computer systems for writing, editing and composing and
producing the advertising and news material printed in each
edition.
Raw Materials and Labor Costs - The Company consumed
approximately 240,000 metric tons of newsprint in 1998 and
210,000 metric tons in 1997. The Company purchases
newsprint from various suppliers, many of which are
Canadian. Management believes that the Company's sources of
supply of newsprint are adequate for its anticipated needs.
Newsprint is a basic commodity and its price is very
sensitive to the worldwide balance of supply and demand.
Because of the capital commitment to construct and operate
a newsprint mill, the supply of newsprint is relatively
stable except for temporary disruptions caused by labor
stoppages. However the demand for newsprint can change
quickly with economic changes, resulting in wide swings in
the price of newsprint. Newsprint prices increased from
approximately $420 per metric tonne in the first quarter
of 1994 to $745 by the first quarter of 1996, then
declined to approximately $500 by March 1997. The
newsprint price was approximately $565 per metric tonne in
December 1998. The Company uses newsprint forward
contracts to hedge its exposure to changes in the price of
newsprint. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Market
Risk."
Labor costs accounted for approximately 42% of the Company's
newspaper operating expenses in 1998 and 43% in 1997. A
substantial number of the Company's newspaper employees are
represented by labor unions. See "Employees."
<PAGE>
Broadcast Television
General - The Company's broadcast television segment
consists of nine network-affiliated television stations.
The Company did not acquire or divest any broadcast
television operations in the five years ended December 31,
1998.
Revenues - The Company's broadcast television operating
revenues for the five years ended December 31, 1998, were as
follows:
<TABLE>
<CAPTION>
( in thousands )
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Local advertising $ 166,115 $ 171,211 $ 159,412 $ 150,489 $ 142,491
National advertising 125,432 139,322 127,172 125,476 122,668
Political advertising 20,084 2,106 19,505 3,207 14,291
Other 19,083 18,577 17,378 16,056 8,734
Total broadcast television operating revenues $ 330,714 $ 331,216 $ 323,467 $ 295,228 $ 288,184
</TABLE>
The Company's broadcast television operating revenues are
derived primarily from the sale of time to businesses for
commercial messages that appear during entertainment and
news programming. Local and national advertising refer to
time purchased by local, regional and national businesses;
political refers to campaigns for elective office and
campaigns for political issues. Automobile advertising
accounts for approximately one-fourth of the Company's local
and national advertising revenues.
The first and third quarters of each year generally have
lower advertising revenues than the second and fourth
quarters. The increasing political advertising in even-
numbered years when congressional and presidential elections
occur make it difficult to achieve year-over-year increases
in operating results in odd-numbered years.
Other revenues primarily consist of network compensation
(see "Network Affiliation and Programming"). The new and
extended network affiliation agreements signed in 1994 and
1995 with ABC require increased network compensation
payments.
<PAGE>
Information concerning the Company's stations and the
markets in which they operate is as follows:
<TABLE>
<CAPTION>
Current
Expiration Affiliation Stations
Network of FCC Rank of Agreement in
Station and Market Affiliation License Market(1) Expires Market(3) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WXYZ, Detroit, Ch. 7 ABC 2005 9 2004 7
Average Audience Share (2) 17 18 21 21 21
Station Rank in Market (4) 2 2 1 1 1
WEWS, Cleveland, Ch. 5 ABC 2005 13 2004 12
Average Audience Share (2) 14 17 19 19 20
Station Rank in Market (4) 1 2 1 1 1
WFTS, Tampa, Ch. 28 ABC (6) 2005 14 2004 10
Average Audience Share (2) 9 9 9 11 8
Station Rank in Market (4) 4 4 4 4 4
KNXV, Phoenix, Ch. 15 ABC (6) 2006 17 2004 12
Average Audience Share (2) 9 10 10 11 10
Station Rank in Market (4) 5 4 4 3 4
WMAR, Baltimore, Ch. 2 ABC (6) 2001 24 2005 6
Average Audience Share (2) 10 11 12 14 17
Station Rank in Market (4) 3 3 3 3 3
WCPO, Cincinnati, Ch. 9 ABC (5) 2005 32 2006 6
Average Audience Share (2) 15 17 18 17 19
Station Rank in Market (4) 2 1 1 1 1
KSHB, Kansas City, Ch. 41 NBC (7) 2006 33 2004 8
Average Audience Share (2) 7 10 10 11 11
Station Rank in Market (4) 4 4 4 4 4
WPTV, W. Palm Beach, Ch. 5 NBC 2005 44 2004 9
Average Audience Share (2) 16 19 20 21 20
Station Rank in Market (4) 1 1 1 1 1
KJRH, Tulsa, Ch. 2 NBC 2006 59 2004 9
Average Audience Share (2) 12 14 14 16 16
Station Rank in Market (4) 3 3 3 3 4
</TABLE>
All market and audience data is based on the November A.C. Nielsen
Company survey.
(1) Rank of Market represents the relative size of the television
market in the United States.
(2) Represents the number of television households tuned to a
specific station from 6 a.m. to 2 a.m. each day, as a
percentage of total viewing households in Area of
Dominant Influence.
(3) Stations in Market does not include public broadcasting
stations, satellite stations, or translators which rebroadcast
signals from distant stations.
(4) Station Rank in Market is based on Average Audience Share as
described in (2).
(5) Prior to June 1996, WCPO was a CBS affiliate.
(6) Prior to January 1995, WFTS and KNXV were FOX affiliates and WMAR
was a NBC affiliate.
(7) Prior to September 1994, KSHB was a FOX affiliate.
<PAGE>
Competition - The Company's television stations compete for
advertising revenues primarily with other local media,
including other television stations, radio stations, cable
television, newspapers, Internet sites and direct mail.
Competition for advertising revenues is based upon audience
size and demographics, price and effectiveness. Television
stations compete for consumers' discretionary time with all
other information and entertainment media. The Company's
television stations have experienced declines in their
average audience share in recent years due to the creation
of new networks and increased audience share of alternative
services providers such as traditional cable, "wireless"
cable and direct broadcast satellite television. Continuing
technological advances will improve the capability of
alternative service providers to offer video services in
competition with terrestrial broadcasting. The degree of
competition from such service providers, and from local
telephone companies that are pursuing efforts to enter this
market, is expected to increase. The Company intends to
undertake upgrades in its services, including initiation of
digital television broadcasting to maintain its competitive
posture. Technological advances in interactive media services
will further increase these competitive pressures.
Network Affiliation and Programming - The Company's
television stations are affiliated with national television
networks. The networks offer a variety of programs to
affiliated stations, which have the right of first refusal
before such programming may be offered to other television
stations in the same market. Networks compensate affiliated
stations for carrying network programming. The national
television networks have expressed their intention to reduce
the amount of such compensation or to have their affiliated
stations share in the cost of popular shows such as "ER".
The Company received $16,000,000 in network compensation in
1998 and expects network compensation to total approximately
$15,000,000 in 1999.
In addition to network programs, the Company's television
stations broadcast locally produced programs, syndicated
programs, sports events, movies and public service programs.
News is the focus of the Company's locally produced
programming. Advertising during local news programs on the
Company's stations account for approximately 30% of
revenues. The Company's stations also produce "niche"
programs focusing on topics such as home improvement,
cooking and items of interest in the stations' local markets.
The Company plans to increase the amount of locally produced
programming aired by its stations.
Federal Regulation of Broadcasting - Television broadcasting
is subject to the jurisdiction of the FCC pursuant to the
Communications Act of 1934, as amended ("Communications
Act"). The Communications Act prohibits the operation of
television broadcasting stations except in accordance with a
license issued by the FCC and empowers the FCC to revoke,
modify and renew broadcasting licenses, approve the transfer
of control of any corporation holding such licenses,
determine the location of stations, regulate the equipment
used by stations and adopt and enforce necessary
regulations. The Telecommunications Act of 1996 (the "1996
Act") significantly relaxed the regulatory environment
applicable to broadcasters.
Under the 1996 Act, television broadcast licenses may be
granted for a term of eight years, rather than five, and
they remain renewable upon request. While there can be no
assurance regarding the renewal of the Company's television
broadcast licenses, the Company has never had a license
revoked, has never been denied a renewal and all previous
renewals have been for the maximum term.
FCC regulations govern the multiple ownership of television
stations and other media. Under the multiple ownership
rule, a license for a television station will generally not
be granted or renewed if (i) the applicant already owns,
operates, or controls a television station serving
substantially the same area, or (ii) the grant of the
license would result in the applicant's owning, operating,
controlling, or having an interest in television stations
whose total national audience reach exceeds 35% of all
television households. The FCC rules also generally
prohibit "cross-ownership" of a television station and daily
newspaper or cable television system in the same service
area. The Company's television station and daily newspaper
in Cincinnati were owned by the Company at the time the
cross-ownership rules were enacted and enjoy "grandfathered"
status. These properties would become subject to the cross-
ownership rules upon their sale. The 1996 Act directed the
FCC to review all its ownership rules, and such a review is
ongoing.
Under the Cable Television Consumer Protection and
Competition Act of 1992 ("1992 Act"), each television
broadcast station gained "must-carry" rights on any cable
system defined as "local" with respect to that station.
Stations may waive their must-carry rights and instead
negotiate retransmission consent agreements with local cable
companies. The Company's stations have generally elected to
negotiate retransmission consent agreements with cable
companies. The United States Supreme Court recently held
that the must-carry rules are valid. The FCC is considering
how the must-carry rules will apply to television stations'
new digital transmissions.
Management believes the Company is in substantial compliance
with all applicable regulatory requirements.
<PAGE>
Category Television
General - The Company's category television segment includes
HGTV and Food Network (24-hour national cable television
networks) and a 12% interest FOX Sports South (a regional
cable television network). The Company owned 57% of Food
Network at the end of 1998 and 59% on February 28, 1999.
Food Network began telecasting in December 1993 and HGTV in
December 1994.
According to the Nielson Homevideo Index, HGTV was telecast
to 48.4 million homes in December 1998, 36.1 million homes
in December 1997 and 25.2 million homes in December 1996.
Food Network was telecast to 37.1 million homes in December
1998, 29.1 million homes in December 1997 and 19.1 million
homes in December 1996.
Revenues - The Company's category television revenues for
the five years ended December 31, 1998, were as follows:
<TABLE>
<CAPTION>
( in thousands )
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Advertising $ 96,271 $ 37,473 $ 15,717 $ 8,734
Affiliate fees 38,063 19,711 6,943 3,021
Program production 10,872 7,878 7,658 6,176 $ 4,885
Other 3,435 1,739 1,261 998 524
Total category television operating revenues $ 148,641 $ 66,801 $ 31,579 $ 18,929 $ 5,409
</TABLE>
Category television revenues are derived from the sale of
advertising time and, if so provided in the affiliation
agreements, from affiliate fees paid by cable television and
other distribution systems that carry the networks. Such
fees are generally based on the number of subscribers who
receive the networks. Most of Food Network's affiliation
agreements do not provide for affiliate fee revenues.
Programming - HGTV features 24 hours of daily programming
focusing on home repair and remodeling, gardening,
decorating and other activities associated with the home.
Food Network also features 24 hours of daily programming
focusing on food and nutrition. Topics include gourmet
meals, healthful diets, weeknight meals and wine.
The Company both internally produces and purchases
programming for HGTV and Food Network. Purchases are made
from a variety of independent producers.
Distribution - HGTV and Food Network are transmitted via
satellite to cable television and direct broadcast satellite
systems. Popularity of the programming with subscribers is a
primary factor in obtaining and retaining distribution by
system operators. Because of limited channel capacity,
cable television system operators have been able to demand
payments or equity interests in cable television programming
networks in exchange for long-term agreements to distribute
the networks. Food Network provided equity interests to
cable television systems that launched it in 1993, and since
their launch, HGTV and Food Network have committed to pay
distribution fees totaling $110,000,000 to other cable
television and direct broadcast satellite systems in
exchange for long-term distribution contracts. The amounts
of distribution fees received by systems depended upon
several factors, including the numbers of subscribers, the
terms of the agreements and the amounts of affiliate fees
the systems agreed to pay to HGTV and Food Network.
Distribution fee payments were generally due when the
systems launched the network or over the terms of the
distribution agreements. Unpaid distribution fees totaled
$52,400,000 at December 31, 1998.
Management believes the popularity of HGTV and Food Network,
which consistently rank among the favorite channels of cable
television subscribers, will enable the Company to renew its
existing distribution agreements and to obtain additional
distribution. Additional distribution fees may be required
to expand distribution of the networks.
Competition - In addition to competing with other networks
for distribution on cable television systems, HGTV and Food
Network compete for advertising revenues primarily with
other local and national media, including other cable
television networks, television stations, radio stations,
newspapers, Internet sites and direct mail. Competition for
advertising revenues is based upon audience size and
demographics, price and effectiveness. The Company's cable
television networks compete for consumers' discretionary
time with all other information and entertainment media.
<PAGE>
Licensing and Other Media
General - 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 and publication of independent telephone directories.
Scripps Howard Productions ("SHP"), the Company's television
program production operation based in Los Angeles, was sold
in 1998. SHP began operations in 1993 and sold its first
programs in 1995.
Revenues - The Company's licensing and other media revenues
for the five years ended December 31, 1998, were as follows:
<TABLE>
<CAPTION>
( in thousands )
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Licensing $ 62,260 $ 56,813 $ 53,672 $ 49,366 $ 49,236
Newspaper feature distribution 22,650 20,920 20,695 18,915 17,998
Other 11,292 4,123 161 830
Total licensing and other media revenues 96,202 81,856 74,528 68,281 68,064
Divested other media 11,070 21,423 7,542
Total Licensing and other media operating revenues $ 96,202 $ 92,926 $ 95,951 $ 75,823 $ 68,064
</TABLE>
The Company, under the trade name United Media, is a leading
distributor of news columns, comics and other features for
the newspaper industry. Included among these features is
"Peanuts", one of the most successful strips in the history
of comic art. United Media sold its worldwide "Garfield"
and "U.S. Acres" copyrights in 1994.
United Media owns and licenses worldwide copyrights
relating to "Peanuts", "Dilbert" and other character
properties for use on numerous products, including plush
toys, greeting cards and apparel, for promotional purposes
and for exhibit on television, video cassettes and other
media. "Peanuts" provides more than 80% of the Company's
licensing revenues. Approximately 70% of "Peanuts"
licensing revenues are earned in international markets,
with the Japanese market providing approximately two-
thirds of international revenue. The Company uses foreign
currency forward and option contracts to hedge its
exposure to changes in the exchange rate for the Japanese
yen. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Market
Risk."
Merchandise, literary and exhibition licensing revenues are
generally a negotiated percentage of the licensee's sales.
The Company generally negotiates a fixed fee for the use of
its copyrighted characters for promotional and advertising
purposes. The Company generally pays a percentage of gross
syndication and licensing royalties to the creators of these
properties.
Competition - The Company's newspaper feature distribution
operations compete for a limited amount of newspaper space
with other distributors of news columns, comics and other
features. Competition is primarily based on price and
popularity of the features. Popularity of licensed
characters is a primary factor in obtaining and renewing
merchandise and promotional licenses.
<PAGE>
Employees
As of December 31, 1998, the Company had approximately 7,900
full-time employees, of whom approximately 6,000 were
engaged in newspapers, 1,500 in broadcast television, 400 in
category television and 100 in licensing and other media.
Various labor unions represent approximately 1,700
employees, primarily in newspapers. The present operations
of the Company have not experienced any work stoppages since
1985. The Company considers its relationship with employees
to be generally satisfactory.
ITEM 2. PROPERTIES
The properties used in the Company's newspaper operations
generally include business and editorial offices and
printing plants.
The Company's television operations require offices and
studios and other real property for towers upon which
broadcasting transmitters and antenna equipment are located.
The Company completed construction of a new building for the
Phoenix station in 1998 and plans to construct a new
building for the West Palm Beach Station. Ongoing advances
in the technology for delivering video signals to the home,
such as "high definition television," may, in the future,
require a high level of capital expenditures in order to
maintain competitive position. The Company's Detroit
station began high definition broadcasting in 1998. The
Baltimore, Cincinnati, Cleveland, Phoenix and Tampa stations
are expected to begin high definition broadcasting in 1999.
Capital spending for the broadcast television segment was
$15,600,000 in 1997, $33,500,000 in 1998, and is expected to
be approximately $35,000,000 in 1999.
The Company's category television operations require offices
and studios and other real and personal property to produce
programs and to transmit the network programming via leased
satellite. HGTV operates from an 80,000 square-foot
production facility in Knoxville. An expansion of that
facility is planned for 1999. Food Network operates from
leased facilities in New York.
Management believes the Company's present facilities are
generally well maintained and are sufficient to serve its
present needs.
ITEM 3. 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
primarily relating to renewal of broadcast licenses, none of
which is expected to result in material loss.
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.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Class A Common Shares are traded on the New
York Stock Exchange ("NYSE") under the symbol "SSP." There
are approximately 5,000 owners of the Company's Class A
Common Shares, based on security position listings, and 18
owners of Company's Common Voting Shares (which does not
have a public market). The Company has declared cash
dividends in every year since its incorporation in 1922.
Future dividends are, however, subject to the Company's
earnings, financial condition and capital requirements.
The range of market prices of the Company's Class A Common
Shares, which represents the high and low sales prices for
each full quarterly period, and quarterly cash dividends,
are as follows:
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
<S> <C> <C> <C> <C> <C>
1998
Market price of common stock:
High $55.313 $58.500 $56.000 $51.875
Low 45.063 50.125 42.875 38.500
Cash dividends per share of common stock $ .13 $ .13 $ .14 $ .14 $ .54
1997
Market price of common stock:
High $37.500 $41.750 $43.938 $48.938
Low 32.625 32.250 36.563 40.250
Cash dividends per share of common stock $ .13 $ .13 $ .13 $ .13 $ .52
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data required by this item is filed
as part of this Form 10-K. See Index to Consolidated
Financial Statement Information at page F-1 of this Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Management's Discussion and Analysis of Financial Condition
and Results of Operation required by this item is filed as
part of this Form 10-K. See Index to Consolidated Financial
Statement Information at page F-1 of this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Supplementary Data required by
this item is filed as part of this Form 10-K. See Index to
Consolidated Financial Statement Information at page F-1 of
this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers
Executive officers serve at the pleasure of the Board of
Directors. Certain information about such officers appears
in the table below.
Name Age Position
Lawrence A. Leser 63 Chairman of the Board of
Directors (since August 1994);
Director (since 1977); Chief
Executive Officer (1985 to 1996);
President (1985 to August 1994)
William R. Burleigh 63 Chief Executive Officer (since
May 1996); President (since August
1994); Director (since 1990); Chief
Operating Officer (1994 to 1996);
Executive Vice President (1990 to
1994)
Richard A. Boehne 42 Executive Vice President (since
February 1999); Vice President/
Corporate Communications and
Investor Relations (1995 to 1999);
Director of Corporate Communications
and Investor Relations (1989 to 1994)
Daniel J. Castellini 59 Senior Vice President/Finance
and Administration (since 1986)
Paul F. (Frank) Gardner 56 Senior Vice President/Television
(since April 1993)
Alan M. Horton 55 Senior Vice President/Newspapers
(since May 1994); Vice President/
Operations, Newspapers (1991 to
1994)
Craig C. Standen 56 Senior Vice President/Corporate
Development (since August 1994);
Vice President/Marketing-
Advertising, Newspapers (1990
to 1994)
Gregory L. Ebel 43 Vice President/Human Resources
(since 1994); Senior Vice
President, PNC Bank Ohio
(1990 to 1994)
Neal F. Fondren 40 Vice President/New Media (since
November 1996; Director
Administration and Business
Development, Cable Division
(1994 to 1996); General Manager
Northwest Georgia cable systems
(1990 to 1994)
James M. Hart 57 Vice President/Television (since
May 1995); President, Multimedia,
Inc.'s broadcasting division
(1994 to 1995); Vice President
and General Manager WBIR, a
Multimedia television station
(1981 to 1994)
Jeffrey J. Hively 45 Vice President/Newspaper Operations
(since May 1994); Director of
Circulation (1992 to 1994)
J. Robert Routt 44 Vice President and Controller
(since 1985)
Stephen W. Sullivan 52 Vice President/Newspapers (since
November 1997); President,
Harte-Hanks Newspapers and
Senior Vice President,
Harte-Hanks Communications
(1991 to 1997)
Daniel K. Thomasson 65 Vice President/News - Newspapers,
retired (1986 to January 1999)
M. Denise Kuprionis 42 Corporate Secretary (since 1987)
E. John Wolfzorn 53 Treasurer (since 1979)
<PAGE>
Directors
The information required by Item 10 of Form 10-K relating to
directors of the Company is incorporated by reference to the
material captioned "Election of Directors" in the Company's
definitive proxy statement for the Annual Meeting of
Shareholders ("Proxy Statement"). The Proxy Statement will
be filed with the Securities and Exchange Commission on or
before April 30, 1999.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 of Form 10-K is
incorporated by reference to the material captioned
"Executive Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 of Form 10-K is
incorporated by reference to the material captioned
"Security Ownership of Certain Beneficial Owners and
Management" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 of Form 10-K is
incorporated by reference to the material captioned "Certain
Transactions" in the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Financial Statements and Supplemental Schedules
(a) The consolidated financial statements of the Company
are filed as part of this Form 10-K. See Index to
Consolidated Financial Statement Information at page
F-1.
The report of Deloitte & Touche LLP, Independent
Auditors, dated January 22, 1999, is filed as part of
this Form 10-K. See Index to Consolidated Financial
Statement Information at page F-1.
(b) The consolidated supplemental schedules of the
Company are filed as part of this Form 10-K. See
Index to Consolidated Financial Statement Schedules
at page S-1.
Exhibits
The information required by this item appears at page E-1
of this Form 10-K.
Reports on Form 8-K
No Current Reports on Form 8-K were filed in the fourth
quarter of 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 9, 1999.
THE E. W. SCRIPPS COMPANY
By/s/ William R. Burleigh
William R. Burleigh
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant in the capacities
indicated, on March 9, 1999.
Signature Title
/s/ Lawrence A. Leser Chairman of the Board
Lawrence A. Leser
/s/ William R. Burleigh President, Chief Executive Officer
William R. Burleigh and Director
(Principal Executive Officer)
/s/ Daniel J. Castellini Senior Vice President/Finance
Daniel J. Castellini and Administration
(Principal Financial and Accounting
Officer)
/s/ Charles E. Scripps Chairman of the Executive Committee
Charles E. Scripps of the Board of Directors
/s/ John H. Burlingame Director
John H. Burlingame
/s/ Daniel J. Meyer Director
Daniel J. Meyer
/s/ Nicholas B. Paumgarten Director
Nicholas B. Paumgarten
/s/ Paul K. Scripps Director
Paul K. Scripps
Director
Edward W. Scripps, Jr.
/s/ Ronald W. Tysoe Director
Ronald W. Tysoe
Director
Julie A. Wrigley
<PAGE>
THE E. W. SCRIPPS COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENT INFORMATION
Item No. Page
1. Selected Financial Data F-2
2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
Consolidated Results of Continuing Operations F-6
Newspapers F-9
Broadcast Television F-10
Category TV F-11
Liquidity and Capital Resources F-13
Market Risk F-13
Year 2000 Readiness F-14
3. Independent Auditors' Report F-18
4. Consolidated Balance Sheets F-19
5. Consolidated Statements of Income F-21
6. Consolidated Statements of Cash Flows F-22
7. Consolidated Statements of Comprehensive Income and
Stockholders' Equity F-23
8. Notes to Consolidated Financial Statements F-24
<PAGE>
<TABLE>
ELEVEN-YEAR FINANCIAL HIGHLIGHTS
<CAPTION>
( in millions, except share data )
1998(1) 1997(1) 1996(1) 1995(1) 1994(1) 1993(1) 1992(1) 1991(1) 1990(1) 1989(1) 1988(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations
Operating Revenues:
Newspapers $ 865 $ 721 $ 630 $ 602 $ 564 $ 515 $ 490 $ 470 $ 482 $ 484 $ 472
Broadcast television 331 331 323 295 288 255 247 216 205 191 180
Category television 149 67 32 19 5
Licensing and other media 96 82 75 68 68 85 87 92 92 100 94
Total 1,440 1,201 1,060 985 926 855 825 778 779 775 747
Divested operating units (2) 14 41 62 46 39 90 193 296 318 315 318
Total operating revenues $1,455 $1,242 $1,122 $1,030 $965 $945 $1,017 $1,074 $1,097 $1,089 $1,065
Operating Income (Loss):
Newspapers $ 197 $ 172 $ 134 $ 121 $ 116 $ 74 $ 85 $ 67 $ 76 $ 98 $ 96
Broadcast television 93 104 100 87 95 69 62 50 61 49 45
Category television (7) (14) (17) (19) (9) (1)
Licensing and other media 11 7 8 7 5 5 8 10 10 18 19
Corporate (17) (17) (18) (17) (15) (14) (15) (13) (15) (16) (14)
Total 277 252 207 179 191 133 140 114 132 149 146
Divested operating units (2) (1) 3 2 9 (11) 37 37 40 40
Unusual items (3) (4) (8) (1) (36)
Total operating income 276 251 206 181 184 142 129 150 133 189 186
Interest expense (47) (19) (10) (11) (16) (26) (34) (38) (43) (42) (54)
Gains (losses) on divested
operations (1) 48 92 78 4 1
Gain on sale of Garfield
copyrights (4) 32
Other unusual credits (charges) (5) (3) 22 (17) 3 (4)
Miscellaneous, net 3 2 2 (1) (2) (4) (2) (1) 1
Income taxes (6) (93) (118) (86) (75) (80) (86) (65) (48) (44) (66) (53)
Minority interests (5) (5) (3) (3) (8) (16) (9) (7) (8) (8) (8)
Income from continuing operations $ 131 $ 158 $ 130 $ 94 $ 93 $ 105 $ 91 $ 56 $ 35 $ 76 $ 73
Share Data
Income from continuing operations $1.62 $ 1.93 $ 1.61 $1.17 $1.21 $1.40 $1.22 $.75 $.46 $ .97 $.96
Adjusted income from continuing
operations (excluding unusual
items and net gains) 1.62 1.63 1.41 1.17 1.25 .72 .80 .75 .77 .94 .95
Cash dividends .54 .52 .52 .50 .44 .44 .40 .40 .40 .345 .30
Market value of proceeds from
Cable Transaction (8) 19.83
Market Value of Common Shares at
December 31
Per share $49.75 $48.44 $35.00 $39.38 $30.25 $27.50 $24.75 $24.13 $17.00 $24.00 $17.13
Total 3,908 3,906 2,827 3,153 2,415 2,056 1,847 1,798 1,267 1,834 1,348
EBITDA (excluding divested operating
units and unusual items):
Newspapers $ 260 $ 217 $ 171 $ 156 $ 150 $ 110 $ 119 $ 96 $ 102 $ 120 $ 116
Broadcast television 118 128 126 113 116 89 82 66 75 65 61
Category television 6 (9) (14) (17) (8) (1)
Licensing and other media 12 8 9 8 6 6 9 11 11 19 20
Corporate (16) (16) (17) (16) (15) (13) (13) (12) (14) (15) (13)
Total $ 380 $ 328 $ 274 $ 244 $ 249 $ 191 $ 196 $ 162 $ 173 $ 189 $ 184
Scripps Cable Financial Data (8)
Operating revenues $ 270 $ 280 $ 255 $ 252 $ 238 $ 218 $ 193 $ 171 $ 144
Operating income excluding
unusual items 61 65 43 46 44 36 27 23 12
Net income 40 40 30 24 15 11 14 12 4
Net income per share of common stock .49 .50 .39 .32 .20 .14 .18 .15 .05
EBITDA - excluding unusual items 109 119 101 106 102 92 85 77 63
Capital expenditures (58) (48) (42) (67) (58) (37) (36) (28) (42)
Note: Certain amounts may not foot as each is rounded independently.
</TABLE>
<PAGE>
<TABLE>
ELEVEN-YEAR FINANCIAL HIGHLIGHTS
<CAPTION>
( in millions, except share data )
1998(1) 1997(1) 1996(1) 1995(1) 1994(1) 1993(1) 1992(1) 1991(1) 1990(1) 1989(1) 1988(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Flow Statement Data
Net cash provided by continuing
operations 237 196 176 114 170 142 127 136 155 164 128
Depreciation and amortization of
intangible assets 104 78 69 67 59 61 64 56 49 47 45
Investing activity:
Capital expenditures (67) (57) (53) (57) (54) (37) (87) (114) (49) (59) (47)
Business acquisitions and investments (26) (748) (128) (12) (32) (42) (17) (131) (9) (1)
Other (investing)/divesting
activity, net 10 30 35 (19) 51 147 38 3 23 2 (2)
Financing activity:
Increase (decrease) in long-term debt (4) 651 41 (30) (138) (194) (50) 124 (96) (50) (94)
Divendends paid (47) (46) (45) (43) (37) (37) (34) (35) (36) (32) (40)
Common stock issued (retired) (108) (26) (40) 93
Other financing activity 5 4 9 6 1 2 (1) (1)
Balance Sheet Data
Total assets 2,345 2,286 1,469 1,350 1,287 1,255 1,287 1,296 1,095 1,126 1,097
Long-term debt (including current
portion) (7) 769 773 122 81 110 248 442 492 368 421 471
Stockholders' equity (7) 1,069 1,049 945 1,191 1,084 860 733 677 639 643 629
Note: Certain amounts may not foot as each is rounded independently.
</TABLE>
<PAGE>
Notes to Selected Financial Data
The income statement and cash flow data for the eleven years
ended December 31, 1998, and the balance sheet data as of
the same dates have been derived from the audited
consolidated financial statements of the Company. The data
should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of
Operation" and the consolidated financial statements and
notes thereto included elsewhere herein. All per share
amounts are presented on a diluted basis. EBITDA is defined
as earnings before interest, income taxes, depreciation and
amortization. See page F-7.
(1) In the periods presented the Company acquired and divested the following:
Acquisitions
1997 - Daily newspapers in Abilene, Corpus Christi,
Plano, San Angelo, and Wichita Falls, Texas;
community newspapers in the Dallas, Texas, market,
daily newspapers in Anderson, South Carolina, and
Boulder, Colorado (in exchange for the Company's
daily newspapers in Monterey and San Luis Obispo,
California). Approximate 56% interest in The
Television Food Network.
1996 - Vero Beach, Florida, daily newspaper.
1994 - The remaining 13.9% minority interest in Scripps
Howard Broadcasting Company ("SHB") in exchange for
4,952,659 Class A Common Shares. Cinetel Productions
(an independent producer of programs for cable
television).
1993 - The remaining 2.7% minority interest in the
Knoxville News-Sentinel and 5.7% of the outstanding
shares of SHB.
1992 - Three daily newspapers in California (including
The Monterey County Herald in connection with the
sale of The Pittsburgh Press).
1991 - Baltimore television station WMAR.
1989 - Sundance Publishers and Distributors.
Divestitures
1998 - Dallas community newspapers, including the Plano
daily, and Scripps Howard Productions, the Company's
television program production operation based in Los
Angeles, California.
1997 - Monterey and San Luis Obispo, California, daily
newspapers (in exchange for Boulder, Colorado, daily
newspaper). Terminated joint operating agreement
("JOA") and ceased operations of El Paso, Texas,
daily newspaper. The JOA termination and trade
resulted in pre-tax gains totaling $47.6 million,
increasing income from continuing operations by $26.2
million, $.32 per share.
1995 - Watsonville, California, daily newspaper. No
material gain or loss was realized as proceeds
approximated the book value of net assets sold.
1993 - Book publishing operations; newspapers in Tulare,
California, and San Juan; Memphis television station;
radio stations. The divestitures resulted in net pre-
tax gains of $91.9 million, increasing income from
continuing operations by $46.8 million, $.63 per
share.
1992 - The Pittsburgh Press; TV Data; certain other
investments. The divestitures resulted in net pre-
tax gains of $78.0 million, increasing income from
continuing operations $45.6 million, $.61 per share.
1991 - George R. Hall Company (contracting firm
specializing in the installation, relocation, and
rebuilding of newspaper presses). No gain or loss
was realized as proceeds equaled the book value of
net assets sold.
1989 - Investment in American City Business Journals ("ACBJ").
The sale resulted in a pre-tax gain of $3.9 million,
increasing income from continuing operations $2.3 million,
$.03 per share.
1988 - ACBJ sold several business journals and the
Company recorded a loss on the anticipated sale of
its Hollywood, Florida, daily newspaper. The
divestitures resulted in a pre-tax gain of $0.8
million, increasing income from continuing operations
$0.8 million, $.01 per share.
(2) Noncable television operating units sold prior to December 31, 1998.
(3) The following unusual items affected operating income:
1996 - A $4.0 million charge for the Company's share of
certain costs associated with restructuring portions
of the distribution system of the Cincinnati JOA.
The charge reduced income from continuing operations
by $2.6 million, $.03 per share.
1994 - A $7.9 million loss on program rights expected
to be sold as a result of changes in television
network affiliations. The loss reduced income from
continuing operations by $4.9 million, $.07 per
share.
1993 - A change in estimate of disputed music license
fees increased operating income by $4.3 million; a
gain on the sale of certain publishing equipment
increased operating income by $1.1 million; a charge
for workforce reductions at 1) the Company's Denver
newspaper and 2) the newspaper feature and the
licensing operations of United Media decreased
operating income by $6.3 million. The planned
workforce reductions were fully implemented in 1994.
These items totaled $0.9 million and reduced income
from continuing operations by $0.6 million, $.01 per
share.
1992 - Operating losses of $32.7 million during the
Pittsburgh Press strike (reported in divested
operating units) reduced income from continuing
operations $20.2 million, $.27 per share.
1990 - A $36.4 million charge associated with an
agreement to terminate the Knoxville joint operating
agency. The charge reduced income from continuing
operations by $23.7 million, $.31 per share.
(4) In 1994 the Company sold its worldwide GARFIELD and
U.S. ACRES copyrights. The sale resulted in a pre-tax
gain of $31.6 million, $17.4 million after-tax, $.23 per
share.
<PAGE>
(5) Other unusual credits (charges) included the following:
1997 - Write-down of investments totaling $2.7 million.
Income from continuing operations was reduced $1.7
million, $.02 per share.
1996 - A $40.0 million gain on the Company's investment
in Turner Broadcasting Systems when Turner was merged
into Time Warner; $3.0 million write-off of an
investment in Patient Education Media, Inc.; and
$15.5 million contribution to a charitable
foundation. These items totaled $21.5 million and
increased income from continuing operations by $19.1
million, $.23 per share.
1994 - An estimated $2.8 million loss on real estate
expected to be sold as a result of changes in
television network affiliations; an $8.0 million
contribution to a charitable foundation; and a $6.1
million accrual for lawsuits associated with a
divested operating unit. These items totaled $16.9
million and reduced income from continuing operations
by $9.8 million, $.13 per share.
1993 - A $2.5 million fee received in connection with
the change in ownership of the Ogden, Utah,
newspaper. Income from continuing operations was
increased $1.6 million, $.02 per share.
1992 - Write-downs of real estate and investments
totaling $3.5 million. Income from continuing
operations was reduced $2.3 million, $.03 per share.
(6) The provision for income taxes was affected by the
following unusual items:
1994 - A change in estimated tax liability for prior
years increased the tax provision, reducing income
from continuing operations by $5.3 million, $.07 per
share.
1993 - A change in estimated tax liability for prior
years decreased the tax provision, increasing income
from continuing operations by $5.4 million, $.07 per
share; the effect of the increase in the federal
income tax rate to 35% from 34% on the beginning of
the year deferred tax liabilities increased the tax
provision, reducing income from continuing operations
by $2.3 million, $.03 per share.
1992 - A change in estimated tax liability for prior
years decreased the tax provision, increasing income
from continuing operations $8.4 million, $.11 per
share.
(7) Includes effect of discontinued cable television operations prior to
completion of the Cable Transaction.
(8) 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 billion and
the net book value of Scripps Cable was $356 million,
yielding an economic gain of $1.237 billion to the
Company's shareholders. This gain is not reflected
in the Company's financial statements as accounting
rules required the Company to record the transaction
at book value. Unless otherwise noted, the data
excludes the cable television segment, which is
reported as a discontinued business operation.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
The E. W. Scripps Company ("Company") operates in three
reportable segments: newspapers, broadcast television and
category television. The newspaper segment includes 19
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"), Scripps
Productions and the Company's 12% interest in FOX Sports
South, 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 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 )
For the years ended December 31,
1998 Change 1997 Change 1996
<S> <C> <C> <C> <C> <C>
Operating revenues:
Newspapers $ 864,792 20.0 % $ 720,930 14.3 % $ 630,489
Broadcast television 330,714 (0.2)% 331,216 2.4 % 323,467
Category television 148,641 122.5 % 66,801 111.5 % 31,579
Licensing and other media 96,202 17.5 % 81,856 9.8 % 74,528
Total 1,440,349 19.9 % 1,200,803 13.3 % 1,060,063
Divested operating units 14,206 41,154 61,795
Total operating revenues $ 1,454,555 17.1 % $ 1,241,957 10.7 % $ 1,121,858
Operating income (loss):
Newspapers $ 196,737 14.1 % $ 172,440 28.7 % $ 133,952
Broadcast television 92,966 (10.3)% 103,690 3.2 % 100,437
Category television (6,635) 52.0 % (13,811) 21.1 % (17,495)
Licensing and other media 10,688 54.3 % 6,929 (17.8)% 8,434
Corporate (17,231) (0.1)% (17,207) 6.8 % (18,471)
Total 276,525 9.7 % 252,041 21.8 % 206,857
Divested operating units (481) (1,217) 2,994
Unusual items (4,000)
Total operating income 276,044 10.1 % 250,824 21.8 % 205,851
Interest expense (47,108) (18,543) (9,629)
Net gains and unusual items 44,894 21,531
Miscellaneous, net 226 3,126 1,834
Income taxes (93,075) (117,510) (86,011)
Minority interest (4,873) (5,089) (3,436)
Income from continuing operations $ 131,214 (16.8)% $ 157,702 21.2 % $ 130,140
Per share of common stock:
Income from continuing operations $ 1.62 (16.1)% $ 1.93 19.9 % $ 1.61
Adjusted income from continuing operations
(excluding unusual items and net gains) $ 1.62 (0.6)% $ 1.63 15.6 % $ 1.41
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
( in thousands )
For the years ended December 31,
1998 Change 1997 Change 1996
<S> <C> <C> <C> <C> <C>
Other Financial and Statistical Data - excluding
divested operating units and unusual items:
Total advertising revenues $ 1,081,765 20.6 % $ 897,055 12.5 % $ 797,267
Advertising revenues as a percentage of total revenues 75.1 % 74.7 % 75.2 %
EBITDA:
Newspapers $ 260,439 20.2 % $ 216,750 27.1 % $ 170,557
Broadcast television 118,012 (7.8)% 128,048 1.4 % 126,225
Category television 5,642 165.8 % (8,580) 40.7 % (14,458)
Licensing and other media 11,636 51.8 % 7,665 (16.1)% 9,136
Corporate (16,207) (1.2)% (16,011) 7.8 % (17,372)
Total $ 379,522 15.8 % $ 327,872 19.6 % $ 274,088
Effective income tax rate 40.6 % 41.9 % 39.2 %
Weighted-average shares outstanding 80,921 (0.9)% 81,645 1.0 % 80,841
Net cash provided by continuing operating activities $ 236,616 20.6 % $ 196,229 11.4 % $ 176,224
Capital expenditures 66,759 20.0 % 55,644 7.3 % 51,871
Business acquisitions and other
additions to long-lived assets 43,465 828,478 173,543
Increase (decrease) in long-term debt (3,800) 651,170 40,958
Dividends paid, including minority interests 46,571 1.2 % 46,014 3.3 % 44,537
Purchase and retirement of common stock 108,421 25,694
</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 the three years ending December 31, 1998, the Company
acquired the following operations:
1997 - In October the Company acquired the newspaper and
broadcast operations of Harte-Hanks Communications
("Harte-Hanks") for $775,000,000, plus working capital,
in cash. The Harte-Hanks newspaper operations ("HHC
Newspaper Operations") included daily newspapers in
Abilene, Corpus Christi, Plano, San Angelo and Wichita
Falls, Texas, a group of community newspapers in the
Dallas, Texas, market and a daily newspaper in
Anderson, South Carolina. The Company immediately
traded the Harte-Hanks broadcast operations for an
approximate 56% controlling interest in Food Network
and approximately $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.
1996 - In May the Company acquired the Vero Beach, Florida, Press Journal for
$20,073,000 in cash and $100,000,000 in notes issued to the seller.
<PAGE>
In the three years ended December 31, 1998, the Company
divested the following operations (the "Divested Operating
Units"):
1998 - Sold Scripps Howard Productions, the Company's
television program production operation based in Los
Angeles, and the Dallas Community newspapers, including
the Plano daily. No material gain or loss was
recognized as the proceeds approximated the net book
value of the assets sold.
1997 - Traded its Monterey and San Luis Obispo,
California, daily newspapers for the daily newspaper in
Boulder, Colorado, and terminated the joint operating
agreement ("JOA") and ceased operations of its
newspaper in El Paso, Texas, on October 11. The JOA
termination and the trade resulted in gains totaling
$47,600,000, $26,200,000 after-tax, $.32 per share.
In addition to the gains on divested operations in 1997,
unusual items affecting the comparability of the Company's
results of operations included the following:
1997 - Write-down of certain investments to
estimated realizable value, resulting in a loss of
$2,700,000, $1,700,000 after tax, $.02 per share
1996 - A $4,000,000 operating charge for the Company's share
of certain costs associated with restructuring portions
of the distribution system of the Cincinnati JOA.
The charge reduced income from continuing operations by
$2,600,000, $.03 per share on a diluted basis.
Net gains that increased income from continuing operations
by $24,300,000, $.30 per share. A pre-tax gain of $40,000,000
was recognized on the Company's investment in Turner Broadcasting
Systems when Turner was merged into Time Warner, and a
$3,000,000 investment in Patient Education Media, Inc.
was written off.
Contribution of 375,000 shares of Time Warner
stock to Scripps Howard Foundation, a private
charitable foundation. The contribution reduced pre-
tax income by $15,500,000 and income from continuing
operations by $5,200,000, $.07 per share.
Excluding the divested operations, unusual items and the
acquired operations from all periods, consolidated EBITDA
increased 5.7% in 1998 and 14% in 1997. Operating income
increased 5.6% in 1998 and 17% in 1997 on that same basis.
EBITDA for licensing and other media in 1997 was reduced by
start-up costs associated with the independent yellow page
directories. Operating results for each of the Company's
reportable segments, excluding the Divested Operating Units
and unusual items described above, are presented on the
following pages.
The average balance of outstanding debt increased
$504,000,000 in 1998 and $123,000,000 in 1997 as long-term
debt was used to finance the purchase of acquired
operations.
The effective income tax rate in 1996 was affected by
contributions to a charitable foundation described above.
The effective income tax rate in 1999 is expected to be
approximately 41%.
The estimated effect of amortization of intangible assets on
earnings per share was $.36 in 1998 and $.23 in 1997.
The HHC Newspaper Operations and Food Network acquisitions
reduced earnings per share approximately $.23 in 1998 and
$.04 in 1997.
<PAGE>
NEWSPAPERS - Operating results, excluding Divested Operating
Units and the Cincinnati JOA Charge, were as follows:
<TABLE>
<CAPTION>
( in thousands )
For the years ended December 31,
1998 Change 1997 Change 1996
<S> <C> <C> <C> <C> <C>
Operating revenues:
Local $ 265,503 20.5 % $ 220,324 14.4 % $ 192,563
Classified 258,531 21.1 % 213,473 15.6 % 184,629
National 26,877 16.7 % 23,027 18.8 % 19,384
Preprint and other 96,581 32.1 % 73,109 13.3 % 64,538
Newspaper advertising 647,492 22.2 % 529,933 14.9 % 461,114
Circulation 152,829 18.1 % 129,383 6.6 % 121,365
Joint operating agency distributions 48,278 2.6 % 47,052 19.6 % 39,341
Other 16,193 11.2 % 14,562 68.0 % 8,669
Total operating revenues 864,792 20.0 % 720,930 14.3 % 630,489
Operating expenses:
Employee compensation and benefits 280,289 19.7 % 234,194 12.1 % 208,969
Newsprint and ink 146,146 21.8 % 119,973 1.0 % 118,729
Other 177,918 18.6 % 150,013 13.4 % 132,234
Depreciation and amortization 63,702 43.8 % 44,310 21.0 % 36,605
Total operating expenses 668,055 21.8 % 548,490 10.5 % 496,537
Operating income $ 196,737 14.1 % $ 172,440 28.7 % $ 133,952
Other Financial and Statistical Data:
EBITDA $ 260,439 20.2 % $ 216,750 27.1 % $ 170,557
Percent of operating revenues:
Operating income 22.7 % 23.9 % 21.2 %
EBITDA 30.1 % 30.1 % 27.1 %
Capital expenditures $ 23,522 (28.5)% $ 32,911 35.2 % $ 24,340
Business acquisitions and other
additions to long-lived assets $ 3,570 $ 622,233 $ 122,593
</TABLE>
The newspaper acquisitions accounted for 75% of the increase
in advertising revenue in 1998 and 50% in 1997. On a pro
forma basis, assuming all newspapers owned at the end of
1998 were owned for the full three-year period, advertising
revenues increased 6.5% in 1998 and 7.6% in 1997.
Excluding the acquired newspapers, EBITDA increased 2.5% in
1998 and 17% in 1997.
Excluding the acquired newspapers, employee compensation
and benefits increased 3.8% in 1998 and 5.4% in 1997,
newsprint and ink increased 9.8% in 1998 and decreased
3.5% in 1997, and other operating expenses increased 2.8%
in 1998 and 7.3% in 1997. Changes in newsprint and ink
are primarily due to changes in the price of newsprint.
The average price of newsprint increased from
approximately $420 per metric tonne in the first quarter
of 1994 to $745 in the first quarter of 1996, declined to
approximately $500 by March 1997, then increased to
approximately $565 by December 1998. The Company expects
the price of newsprint in the first quarter of 1999 to be
approximately 3% less than the fourth quarter of 1998.
Depreciation and amortization increased due to the
newspaper acquisitions.
Capital expenditures in 1999 are expected to be
approximately $25,000,000 and depreciation and
amortization is expected to increase approximately 2%.
<PAGE>
BROADCAST TELEVISION - Operating results were as follows:
<TABLE>
<CAPTION>
( in thousands )
For the years ended December 31,
1998 Change 1997 Change 1996
<S> <C> <C> <C> <C> <C>
Operating revenues:
Local $ 166,115 (3.0)% $ 171,211 7.4 % $ 159,412
National 125,432 (10.0)% 139,322 9.6 % 127,172
Political 20,084 2,106 19,505
Other 19,083 2.7 % 18,577 6.9 % 17,378
Total operating revenues 330,714 (0.2)% 331,216 2.4 % 323,467
Operating expenses:
Employee compensation and benefits 103,630 0.3 % 103,350 5.4 % 98,099
Program and copyright costs 56,263 17.5 % 47,890 (0.3)% 48,049
Other 52,809 1.7 % 51,928 1.6 % 51,094
Depreciation and amortization 25,046 2.8 % 24,358 (5.5)% 25,788
Total operating expenses 237,748 4.5 % 227,526 2.0 % 223,030
Operating income $ 92,966 (10.3)% $ 103,690 3.2 % $ 100,437
Other Financial and Statistical Data:
EBITDA $ 118,012 (7.8)% $ 128,048 1.4 % $ 126,225
Percent of operating revenues:
Operating income 28.1 % 31.3 % 31.1 %
EBITDA 35.7 % 38.7 % 39.0 %
Capital expenditures $ 33,454 114.0 % $ 15,632 (33.5)% $ 23,491
Business acquisitions and other
additions to long-lived assets $ 218 $ 3,000 $ 1,700
</TABLE>
The Company's average audience share has declined in recent
years due to the creation of new networks and increases in
the audience share of alternative service providers such as
cable television and direct broadcast satellite systems.
Technological advancement in interactive media services will
further increase these competitive pressures.
The demand for local and national advertising declined
sharply for most of the Company's television stations in the
second half of 1998. The decline was due to a number of
factors, including:
Softness in automobile advertising that has continued
since the General Motors strike.
The negative effects that mergers and reorganizations
in the telecommunications, grocery, financial and packaged
goods industries are having on advertising.
Reduced audiences for ABC network programs that precede
the late news in the Company's six largest television
markets.
Increased political advertising softened the effect the
decline in demand had on year-over-year revenue
comparisons. Advertising revenues in the first quarter of
1999 are expected to be flat compared to the first quarter
of 1998.
National television networks have expressed their
intention to reduce the amount of compensation paid to
affiliated stations, or to have affiliated stations share
in the cost of popular programs such as "ER". The Company
received network compensation of $16,000,000 in 1998,
$15,600,000 in 1997 and $14,300,000 in 1996. Network
compensation is expected to be approximately $15,000,000
in 1999.
<PAGE>
Staffing levels were reduced in 1998 in response to the
advertising weakness. Employee compensation and benefits
are expected to increase approximately 5% in 1999 as the
Company expects to hire additional employees to improve
the stations' Internet sites and to attract additional
advertising on those sites. The 1998 increase in program
costs is primarily due to the higher cost of "The Rosie
O'Donnell Show," which is carried by five stations.
Program costs are expected to increase approximately 2% in
1999.
The increase in capital expenditures is primarily due to
the construction of a new building for the Phoenix
station. Capital expenditures in 1999 are expected to be
approximately $35,000,000, including a new building for
the West Palm Beach station. Depreciation and
amortization in 1999 is expected to increase approximately
15%.
CATEGORY TELEVISION - Operating results were as follows:
<TABLE>
<CAPTION>
( in thousands )
For the years ended December 31,
1998 Change 1997 Change 1996
<S> <C> <C> <C> <C> <C>
Operating revenues:
Advertising $ 96,271 156.9 % $ 37,473 138.4 % $ 15,717
Affiliate fees 38,063 93.1 % 19,711 183.9 % 6,943
Program production 10,872 38.0 % 7,878 2.9 % 7,658
Other 3,435 97.5 % 1,739 37.9 % 1,261
Total operating revenues 148,641 122.5 % 66,801 111.5 % 31,579
Operating expenses:
Employee compensation and benefits 33,550 80.9 % 18,545 81.9 % 10,195
Programming and production costs 51,211 84.2 % 27,802 33.0 % 20,911
Other 58,238 100.6 % 29,034 94.5 % 14,931
Depreciation and amortization 12,277 134.7 % 5,231 72.2 % 3,037
Total operating expenses 155,276 92.6 % 80,612 64.3 % 49,074
Operating income (loss) $ (6,635) $ (13,811) $ (17,495)
Other Financial and Statistical Data:
EBITDA $ 5,642 $ (8,580) $ (14,458)
Capital expenditures $ 7,936 38.2 % $ 5,742 105.1 % $ 2,800
Business acquisitions and other
additions to long-lived assets $ 17,431 $ 179,354 $ 44,000
</TABLE>
The October 1997 acquisition of Food Network provided
approximately 40% of the increase in operating revenues in
1998 and 20% of the increase in 1997. On a pro forma basis,
assuming Food Network was owned for the full three-year
period, operating revenues increased 77% in 1998 and 86% in
1997. The increase in advertising and affiliate fee
revenues is primarily due to the increase in cable
television systems that carry HGTV and Food Network and,
therefore, the increase in potential audience. According to
the Nielsen Homevideo Index, HGTV was telecast to 48.4
million homes in December 1998, 36.1 million homes in
December 1997, and 25.2 million homes in December 1996.
Food Network was telecast to 37.1 million homes in December
1998, 29.1 million homes in December 1997, and 19.1 million
homes in December 1996.
<PAGE>
HGTV and Food Network are transmitted via satellite to cable
television and direct broadcast satellite systems. Because
of limited channel capacity, cable television system
operators have been able to demand payments or equity
interests in cable television programming networks in
exchange for long-term agreements to distribute the
networks. Food Network provided equity interests to cable
television systems that launched it in 1993, and since their
launch, HGTV and Food Network have committed to pay
distribution fees totaling $110,000,000 to other cable
television and direct broadcast satellite systems in
exchange for long-term distribution contracts. The amounts
of distribution fees received by systems depended upon
several factors, including the numbers of subscribers, the
terms of the agreements and the amounts of affiliate fees
the systems agreed to pay to HGTV and Food Network.
Distribution fee payments were generally due when the
systems launched the network or over the terms of the
distribution agreements. Unpaid distribution fees totaled
$52,400,000 at December 31, 1998.
Management believes the popularity of HGTV and Food Network,
which consistently rank among the favorite channels of cable
television subscribers, will enable the Company to renew its
existing distribution agreements and to obtain additional
distribution. Additional distribution fees may be required
to expand distribution of the networks.
Distribution fees are amortized based upon the percentage of
the current period's affiliate fee revenue to the estimated
total of such revenue over the lives of the contracts, or,
for contracts that do not provide for affiliate fee revenue,
on a straight-line basis. Amortization of prepaid
distribution fees (included in other operating expenses) was
approximately $15,700,000 in 1998, $9,400,000 in 1997, and
$1,600,000 in 1996. Unamortized distribution fees total
$62,000,000 at December 31, 1998. Amortization in 1999 is
expected to be approximately $22,000,000.
Capital expenditures in 1999 are expected to be
approximately $20,000,000. Depreciation and amortization is
expected to increase approximately 18%.
<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 flows 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 continuing operating activities in 1999 will be
sufficient to meet the Company's expected total capital
expenditures, required interest payments and dividend
payments. Total capital expenditures in 1999 are expected
to be approximately $80,000,000. The Company expects to
extend the $400,000,000 one-year-term portion of its
variable rate credit facility, or to refinance the
borrowings under that line.
Cash flow provided by continuing operating activities was
$237,000,000 in 1998, $196,000,000 in 1997 and $176,000,000
in 1996. The increases in cash flow provided by continuing
operating activities were primarily due to improvements in
EBITDA. Cash flow provided by operating activities in 1998
was used for capital expenditures of $67,000,000, dividend
payments of $46,600,000 and to repurchase 2,402,100 Class A
Common Shares for $108,000,000. The Board of Directors has
authorized the purchase of an additional 2,976,900 Class A
Common Shares.
Net debt (borrowings less cash equivalent and other short-
term investments) decreased $21,100,000 during 1998 to
$749,000,000. At December 31, 1998, net debt was 41% 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.
MARKET RISK
The Company's earnings and cash flow can be affected by,
among other things, interest rate changes, foreign currency
fluctuations (primarily in the exchange rate for the
Japanese yen) and changes in the price of newsprint. See
"NEWSPAPERS". The Company is also exposed to changes in the
market value of its investments.
In the normal course of business, the Company employs
foreign currency forward and option contracts to hedge its
cash flow exposures denominated in Japanese yen. The
contracts reduce the risk of changes in the exchange rate
for Japanese yen 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 Company employs off-balance-sheet
financial instruments, such as forward contracts, to reduce
the risk of changes in the price of newsprint on anticipated
newsprint purchases. As market conditions warrant, the
Company enters into foreign currency and newsprint forward
contracts only to hedge its anticipated transactions for, at
most, the ensuing year. The impact of any reasonably possible
change in the values of these derivative financial instruments on the
Company's financial position, its results of operations, and
its cash flows is immaterial. The Company held no foreign currency
or newsprint forward contracts at December 31, 1998.
<PAGE>
The Company manages interest-rate risk primarily by
maintaining a mix of fixed-rate and variable-rate debt. The
Company currently does not use interest rate swaps, forwards
or other derivative financial instruments. The following
table presents additional information about the Company's
market-risk-sensitive financial instruments:
<TABLE>
<CAPTION>
( in thousands )
As of December 31, 1998 As of December 31, 1997
Cost or Estimated Cost or Estimated
Carrying Fair Carrying Fair
Value Value Value Value
<S> <C> <C> <C> <C>
Financial instruments subject to interest rate risk:
Variable rate credit facilities $ 567,561 $ 567,561 $ 541,459 $ 541,459
$100 million, 6.625% note, due in 2007 99,872 104,556 99,858 101,297
$100 million, 6.375% note, due in 2002 99,925 102,397 99,906 100,440
$30 million, 7.375% notes, due in 1998 29,754 30,289
Other notes 2,077 1,586 2,129 1,615
Total long-term debt 769,435 776,100 773,106 775,100
Program rights payable 52,125 48,800 45,856 42,800
Short-term investments 20,551 20,551 3,105 3,105
Financial instruments subject to market value risk:
Time Warner common stock (1,344,000 shares) $ 27,816 $ 83,446 $ 27,816 $ 41,681
Other available-for-sale securities 1,050 5,286 1,738 5,420
Venture capital and other investments 36,899 (a) 30,060 (a)
(a) Investments classified as venture capital and other investments do not trade in public markets, so they
do not have readily determinable fair values.
</TABLE>
The Variable Rate Credit Facilities are comprised of two
unsecured lines, one limited to $400,000,000 principal
amount maturing in one year, and the other limited to
$300,000,000 principal amount maturing in five years. The
Variable Rate Credit Facilities are 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 borrowings under the Variable Rate Credit
Facilities at December 31 was 5.25% in 1998 and 5.85% in
1997.
The Company does not hold financial instruments for trading
or speculative purposes, and does not hold leveraged
contracts.
YEAR 2000 READINESS
Items disclosed herein constitute "Y2000 Readiness
Disclosures" under the Year 2000 Information and Readiness
Disclosure Act.
Description and Company Plans
The Year 2000 ("Y2K") issue results from computer
programs, computer equipment and certain embedded chips
using two digits rather than four to define the year.
Computer applications and equipment that use date-
sensitive software or date-sensitive embedded chips may
recognize a date of "00" as the year 1900 instead of the
year 2000. As a result, those computer applications may
fail or improperly process financial transactions.
The Company's Y2K remediation project includes the
following phases: identification and assessment of the Y2K
issue, determination of required revisions to or
replacements of affected computer applications and
equipment, testing of those revisions and replacements,
and developing contingency plans in the event that
revisions and replacements are not completed timely or do
not fully remediate the Y2K issues.
<PAGE>
Identification and Assessment of Y2K Issues
The identification and assessment phase, which is
substantially complete, included a comprehensive inventory
of internally developed computer applications, computer
applications and computer hardware purchased or licensed
from third parties (which includes the majority of the
Company's computer software applications), and other
equipment with embedded chips. The inventoried
applications and equipment were evaluated to identify Y2K
issues. Y2K issues were identified based upon review of
applications and equipment by the Company and/or
communication with the vendor. This phase also included
an assessment of the impact of failing to remediate
identified Y2K issues on the Company's business
operations, results of operations, and financial
condition. Based upon the identification of Y2K issues
and assessment of the effect of those issues, each of the
computer applications and items of equipment with embedded
chips were assigned to one of the following categories:
1) applications and equipment with Y2K issues that, if
they were to fail, would seriously impair the Company's
ability to operate its business, 2) applications and
equipment with Y2K issues for which the Company has
feasible alternatives, 3) applications and equipment found
to be Y2K compliant or certified Y2K compliant by the vendor, and
4) noncompliant applications and equipment that will have
little or no effect on business operations. The term "Y2K compliant"
as used throughout this document means that the relevant
hardware, software, embedded chips or interfaces specifically
referenced herein will correctly process, provide and receive
date data within and between the 20th and 21st centuries.
The Company has created a central data base identifying all
inventoried applications and equipment, Y2K issues
identified, the priority of remediation based upon the
perceived business risk, the probable method of
remediation (upgrade or replace), and targeted remediation
completion date. As of February 1, 1999, approximately
20% of the Company's applications were classified in the
highest priority, 15% in the second priority, and
approximately 55% of applications have been found to be
Y2K-compliant.
The identification and assessment phase also included
communications with significant vendors, suppliers and
customers to determine the extent to which the Company's
systems and business operations are vulnerable if those
third parties fail to remediate their own Y2K issues.
Y2K Remediation Efforts
The Company's plan of remediation includes a mix of
installing new applications and equipment, upgrading
existing applications and equipment, retiring obsolete
systems and equipment, and confirming significant third
party compliance. A discussion of the identified Y2K
issues that could materially affect each of the Company's
business segments and the Company's plan of remediation
follows.
Newspapers
The Company uses a variety of newspaper circulation,
advertising and editorial computer systems in the
production of its newspapers. The Company began
replacing most of its internally developed software with
applications developed by third-party software vendors and
upgrading other applications several years ago. Many of
these systems have been installed and implemented.
Vendors have either certified their applications to
be Y2K compliant or have Y2K-compliant upgrades
currently available. Remediation of noncompliant
systems is expected to be completed through early third
quarter of 1999, with most upgrades and replacements being
completed in the first quarter of 1999.
Equipment and applications used in producing, printing,
sorting and distributing newspapers use software or
embedded chips that are not Y2K compliant. Management has
determined that in many instances this equipment is not
date dependent and the internal calendars can be set back
to an earlier year without affecting the operation of the
equipment. Other equipment and software will have to be
upgraded or replaced.
Management anticipates increasing its newspaper
inventories in the latter part of 1999 to mitigate the
effect of any temporary disruption in the delivery of
newsprint or any disruption in the operation of newsprint
mills.
The Company's Cincinnati, Birmingham and Albuquerque
newspapers operate under joint operating agreements
("JOAs") whereby the Company receives a portion of the JOA
profits from the managing party. The Company has
discussed Y2K issues with the managing parties to ensure
the managing parties are addressing their Y2K issues.
The Company's share of JOA profits could be adversely
affected if those managing parties experience a
significant disruption in business operations; however
management believes the possibility of a significant
disruption is unlikely.
<PAGE>
Broadcast Television
The Company receives network and syndicated programming
via satellite. The Company's receipt of that programming
is dependent upon the broadcast networks and program
syndicators resolving their Y2K issues. NBC has scheduled
Y2K testing of its affiliate network. The Company expects
to perform similar testing with ABC. Management does not
anticipate any disruption in receiving programming from
the broadcast networks or syndicators, but in the event of
such a disruption the Company has alternative programming
available.
The Company uses advertising inventory management software
to manage, schedule and bill advertising in each of the
Company's broadcast television markets. This software is
licensed from two different vendors. One of the systems,
used in three of the Company's markets, has been certified
by the vendor to be Y2K compliant. The other system must
be upgraded. The vendor has informed the Company that a
Y2K compliant version of its software will be available in
the early part of the second quarter of 1999. Management
expects to complete installation of the upgrades by the
end of the second quarter of 1999.
The insertion of advertising into program breaks is
automated by computer-controlled equipment. This
equipment has been found to be noncompliant and must be
upgraded or replaced. Failure of this software or
equipment would not materially disrupt the Company's
business operations as this process can be performed
manually.
The Company uses various broadcast and studio equipment to
produce and transmit its broadcast signals. Although much
of this equipment includes embedded chips, the Company
believes the equipment will continue to function after
1999. The Company is currently testing this equipment.
If such testing indicates that Y2K issues affect the
operation of the equipment, the necessary upgrades or
replacements would be installed by the second quarter of
1999.
Category Television
The Company uses advertising inventory management software
to manage, schedule and bill advertising. Some of these
systems are currently Y2K compliant. Y2K compliant
versions of remaining software applications will be
installed by the end of the first quarter of 1999.
The insertion of advertising into program breaks is
automated by computer-controlled equipment. Failure of this
software or equipment would not materially disrupt the
Company's business operations as this process can be
performed manually.
The Company transmits its network programming to cable
television and direct broadcast satellite systems via
satellite. Management has determined that certain
equipment, while noncompliant, will continue
to function after 1999, therefore it does not need to be
upgraded or replaced. Noncompliant equipment that could
affect the production and transmission of a signal is
scheduled to be upgraded or replaced by the end of the
second quarter of 1999.
Management believes the satellites used in transmitting the
Company's networks are Y2K compliant and expects to receive
written assurances to that effect. However, the Company
understands that headend equipment controlling set-top boxes
for virtually all cable television subscribers is presently
not Y2K compliant. Management believes that failure of this
equipment could potentially prevent cable television systems
from delivering the Company's programming to viewers.
Management understands that equipment and set-top box
manufacturers have recently developed solutions that cable
television systems have begun to install in their headend
equipment. Management anticipates that this issue will be
remediated, but that process is not within the Company's
control.
Testing of Upgrades and Replacements
The Company's Y2K remediation program includes testing of
applications and equipment identified by the Company as
compliant or certified as compliant by the vendor. The
Company's program also includes testing of upgrades and
replacements during installation and upon completion.
Testing includes the use of dates that simulate
transactions and environments, both before and after the
year 2000, including leap year. While that testing
provides assurance that the upgrades and replacements
installed by the Company perform as designed, it is not
possible for the Company to completely simulate the effect
of the year 2000 when testing the Company's systems, and
certain embedded chips cannot be tested.
<PAGE>
Costs of Y2K Remediation Program
Costs of the Company's Y2K remediation program, including
those incurred to date, are expected to total less than
$10,000,000. The majority of these costs would have been
incurred regardless of the Y2K issue, although the Y2K
issue has slightly accelerated the Company's plans to
replace certain equipment and computer software.
Management believes the acceleration of these projects has
not resulted in the deferral of other information
technology projects that would have a material effect on
the Company's results of operations or financial
condition.
Risks of Y2K Issues and Contingency Plans
Like all large companies, the Company is dependent on the
continued functioning of basic, heavily computerized
services such as banking, telephony and electric power.
Management has attempted to ensure that the third parties
upon which the Company relies are addressing their Y2K
issues, but management has no direct knowledge of those
issues and cannot estimate the costs to the Company if
such issues are not remedied. Management believes the
possibility of failure of these critical third party
systems is unlikely.
The Company's Y2K remediation program includes contingency
planning to ensure business continuity in each of the
Company's markets. Such plans will address a variety of
internal and external scenarios that might occur as a
result of the Y2K issue, and will specify alternatives if
any Y2K-related business disruption occurs. The Company
expects to complete such contingency plans in early 1999,
and will update those plans throughout the remainder of
1999 based upon the progress of the Y2K remediation
program.
Management believes it has an effective program to resolve
the Y2K issue in a timely manner and that its Y2K issues
will be remediated. Based upon assessment of its internal
systems and the status of its Y2K remediation efforts,
management does not expect the Y2K issue to pose
significant problems for the Company's operations or to
have a material effect on the Company's results of
operations or financial condition. However, if the
Company is unable to complete its Y2K remediation program,
or if its Y2K remediation program does not fully remediate
the effects of the Y2K issue, or if third parties fail to
remediate their own Y2K issues, the Company could experience
a material disruption in its business operations. In
addition, disruptions in the general economy as a result
of the Y2K issue could lead to a reduction of advertising
spending which could adversely affect the Company.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders,
The E. W. Scripps Company:
We have audited the accompanying consolidated balance sheets
of The E. W. Scripps Company and subsidiary companies
("Company") as of December 31, 1998 and 1997, and the
related consolidated statements of income, cash flows and
comprehensive income and stockholders' equity for each of
the three years in the period ended December 31, 1998. Our
audits also included the financial statement schedule listed
in the Index at Item S-1. These financial statements and
financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial
position of the Company at December 31, 1998 and 1997, and
the results of its operations and cash flows for each of the
three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule,
when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
January 22, 1999
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
( in thousands )
As of December 31,
1998 1997
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 14,400 $ 14,316
Short-term investments 20,551 3,105
Accounts and notes receivable (less allowances - 1998, $7,322; 1997, $6,305) 217,810 218,990
Program rights and production costs 68,870 62,065
Prepaid distribution fees 18,729 15,240
Inventories 15,009 13,685
Deferred income taxes 24,140 21,630
Miscellaneous 27,824 24,707
Total current assets 407,333 373,738
Investments 140,788 84,645
Property, Plant and Equipment 478,703 480,000
Goodwill and Other Intangible Assets 1,193,257 1,244,442
Other Assets:
Program rights and production costs (less current portion) 50,763 38,659
Prepaid distribution fees (less current portion) 43,204 46,479
Miscellaneous 31,064 18,520
Total other assets 125,031 103,658
TOTAL ASSETS $ 2,345,112 $ 2,286,483
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
( in thousands, except share data )
As of December 31,
1998 1997
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 267,601 $ 171,254
Accounts payable 101,433 88,789
Customer deposits and unearned revenue 36,234 38,830
Accrued liabilities:
Employee compensation and benefits 40,807 43,025
Distribution fees 35,520 38,827
Miscellaneous 50,896 54,600
Total current liabilities 532,491 435,325
Deferred Income Taxes 115,634 88,051
Long-Term Debt (less current portion) 501,834 601,852
Other Long-Term Obligations and Minority Interests (less current portion) 126,421 112,293
Commitments and Contingencies (Note 13)
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: 1998 - 59,324,967 shares; 1997 - 61,296,157 shares 593 613
Voting - authorized: 30,000,000 shares; issued and
outstanding: 1998 - 19,218,913 shares; 1997 - 19,333,711 shares 192 193
Total 785 806
Additional paid-in capital 161,878 259,739
Retained earnings 870,315 782,329
Unrealized gains on securities available for sale 38,904 11,397
Foreign currency translation adjustment 581 293
Unvested restricted stock awards (3,731) (5,602)
Total stockholders' equity 1,068,732 1,048,962
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,345,112 $ 2,286,483
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
( in thousands, except per share data )
For the years ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Operating Revenues:
Advertising $ 1,093,890 $ 916,661 $ 822,758
Circulation 153,788 135,582 130,092
Licensing 62,260 56,813 53,672
Joint operating agency distributions 48,278 48,977 43,279
Affiliate fees 38,063 19,711 6,943
Program production 10,872 18,950 29,080
Other 47,404 45,263 36,034
Total operating revenues 1,454,555 1,241,957 1,121,858
Operating Expenses:
Employee compensation and benefits 454,486 398,746 360,697
Newsprint and ink 148,069 123,508 123,390
Program, production and copyright costs 107,646 86,468 88,990
Other operating expenses 364,465 304,805 273,553
Depreciation 63,722 54,085 49,528
Amortization of intangible assets 40,123 23,521 19,849
Total operating expenses 1,178,511 991,133 916,007
Operating Income 276,044 250,824 205,851
Other Credits (Charges):
Interest expense (47,108) (18,543) (9,629)
Net gains and unusual items 44,894 21,531
Miscellaneous, net 226 3,126 1,834
Net other credits (charges) (46,882) 29,477 13,736
Income from Continuing Operations
Before Taxes and Minority Interests 229,162 280,301 219,587
Provision for Income Taxes 93,075 117,510 86,011
Income from Continuing Operations
Before Minority Interests 136,087 162,791 133,576
Minority Interests 4,873 5,089 3,436
Income From Continuing Operations 131,214 157,702 130,140
Discontinued Operation - Scripps Cable:
Income from operations 39,514
Costs of Cable Transaction (12,251)
Net Income $ 131,214 $ 157,702 $ 157,403
Per Share of Common Stock - Basic:
Income from continuing operations $1.65 $1.96 $1.62
Net income $1.65 $1.96 $1.96
Per Share of Common Stock - Diluted:
Income from continuing operations $1.62 $1.93 $1.61
Net income $1.62 $1.93 $1.95
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
( in thousands, except share data )
For the years ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Income from continuing operations $ 131,214 $ 157,702 $ 130,140
Adjustments to reconcile income from continuing operations
to net cash flows from continuing operating activities:
Depreciation and amortization 103,845 77,606 69,377
Deferred income taxes 10,268 28,865 13,650
Minority interests in income of subsidiary companies 4,873 5,089 3,436
Net gains and unusual items (44,894) (21,367)
Prepaid distribution fee amortization greater (less) than
payments (6,610) (12,411) (8,345)
Program cost amortization greater (less) than payments (17,431) (7,591) (12,188)
Other changes in certain working capital accounts, net 2,682 (17,630) (6,890)
Miscellaneous, net 7,775 9,493 8,411
Net cash provided by continuing operating activities 236,616 196,229 176,224
Discontinued Operation - Scripps Cable:
Income 27,263
Adjustment to derive cash flows from operating activities 37,830
Net cash provided by Scripps Cable operating activities 65,093
Net operating activities 236,616 196,229 241,317
Cash Flows from Investing Activities:
Additions to property, plant and equipment (66,969) (56,620) (53,300)
Purchase of subsidiary companies and long-term investments (26,034) (748,485) (127,749)
Change in short-term investments, net (17,446) 2,700 22,313
Sale of subsidiary companies and long-term investments 32,389 29,339 11,650
Miscellaneous, net (4,755) (1,492) 1,057
Net cash used in continuing operations investing activities (82,815) (774,558) (146,029)
Net cash used in Scripps Cable investing activities (119,575)
Net investing activities (82,815) (774,558) (265,604)
Cash Flows from Financing Activities:
New debt 741,216 100,000
Payments on long-term debt (3,800) (90,046) (59,042)
Dividends paid (43,228) (42,064) (41,840)
Dividends paid to minority interests (3,343) (3,950) (2,697)
Repurchase and retirement of Class A Common Shares (108,421) (25,694)
Miscellaneous, net (primarily exercise of stock options) 5,075 3,038 8,615
Net cash provided by (used in) continuing operations
financing activities (153,717) 582,500 5,036
Net cash used in Scripps Cable financing activities (625)
Net financing activities (153,717) 582,500 4,411
Increase (Decrease) in Cash and Cash Equivalents 84 4,171 (19,876)
Cash and Cash Equivalents:
Beginning of year 14,316 10,145 30,021
End of year $ 14,400 $ 14,316 $ 10,145
Supplemental Cash Flow Disclosures:
Interest paid, excluding amounts capitalized $ 46,300 $ 19,343 $ 10,006
Income taxes paid 76,237 86,599 66,320
Monterey and San Luis Obispo newspapers traded for
Boulder newspaper 50,000
Cable Transaction (at book value; fair market
value was $1,590,000) 355,694
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND STOCKHOLDERS' EQUITY
<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, 1995 $ 801 $ 254,063 $ 916,602 $ 21,533 $ (1,573) $ 1,191,426
Comprehensive income
Net income 157,403 157,403
Unrealized gains, net of deferred tax of $2,327 4,320 4,320
Less: reclassification adjustment for gains
in income, net of deferred tax of ($13,867) (25,753) (25,753)
Increase in unrealized gains on securities (21,433) (21,433)
Foreign currency translation adjustments (250) (250)
Total 157,403 (21,683) 135,720
Dividends: declared and paid - $.52 per share (41,840) (41,840)
Cable Transaction (at book value) (355,694) (355,694)
Convert 507,991 Voting Shares to Class A Shares
Compensation plans, net: 707,200 shares
issued; 7,359 shares repurchased 7 16,068 (3,668) 12,407
Tax benefits of compensation plans 2,572 2,572
As of December 31, 1996 808 272,703 676,471 (150) (5,241) 944,591
Comprehensive income
Net income 157,702 157,702
Unrealized gains, net of deferred tax of $6,521 12,110 12,110
Foreign currency translation adjustments (270) (270)
Total 157,702 11,840 169,542
Dividends: declared and paid - $.52 per share (42,064) (42,064)
Adjustment to Cable Transaction (9,780) (9,780)
Convert 136,671 Voting Shares to Class A Shares
Repurchase 621,000 Class A Common Shares (7) (25,687) (25,694)
Compensation plans, net: 529,475 shares
issued; 42,229 shares repurchased 5 8,038 (361) 7,682
Tax benefits of compensation plans 4,685 4,685
As of December 31, 1997 806 259,739 782,329 11,690 (5,602) 1,048,962
Comprehensive income:
Net income 131,214 131,214
Unrealized gains, net of deferred tax of $15,080 28,006 28,006
Less: reclassification adjustment for gains
in income, net of deferred tax of ($268) (499) (499)
Increase in unrealized gains on securities 27,507 27,507
Foreign currency translation adjustments 288 288
Total 131,214 27,795 159,009
Dividends: declared and paid - $.54 per share (43,228) (43,228)
Convert 114,798 Voting Shares to Class A Shares
Repurchase 2,402,100 Class A Common Shares (24) (108,397) (108,421)
Compensation plans, net: 345,053 shares issued;
1,500 shares forfeited; 27,441 shares repurchased 3 6,536 1,871 8,410
Tax benefits of compensation plans 4,000 4,000
As of December 31, 1998 $ 785 $ 161,878 $ 870,315 $ 39,485 $ (3,731) $ 1,068,732
See notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations - The E. W. Scripps Company ("Company")
operates in three reportable segments: newspapers, broadcast
television and category television. The newspaper segment
includes 19 daily newspapers in the U.S. The newspaper
segment primarily derives revenue from the sale of
advertising space to local and national advertisers and from
the sale of the newspaper to readers. The broadcast
television segment includes nine network-affiliated
stations. Television stations derive revenue from the sale
of advertising time to local and national advertisers and
receive compensation for broadcasting network programming.
Category television includes Home & Garden Television
("HGTV"), The Television Food Network ("Food Network"),
Scripps Productions, and the Company's 12% interest in FOX
Sports South, a regional cable television network. Revenues
are primarily derived from the sale of advertising time and
from affiliate fees paid by cable television and direct
broadcast satellite systems which distribute the networks.
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 and
publication of independent telephone directories. The
relative importance of each line of business to continuing
operations is indicated in the segment information presented
in Note 12.
The Company's operations are geographically dispersed and
its customer base is diverse. However, more than 70% of the
Company's operating revenues are derived from advertising.
Operating results can be affected by changes in the demand
for advertising both nationally and in individual markets.
The Company grants credit to substantially all of its
customers. Management believes bad debt losses resulting
from default by a single customer, or defaults by customers
in any depressed region or business sector, would not have a
material effect on the Company's financial position.
Cable Transaction - 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. Despite the
economic gain, accounting rules required the Company to
record the Cable Transaction as a spin-off, at net book
value, of Scripps Cable to the Company's shareholders.
Therefore no gain was reflected in the Company's financial
statements. Pursuant to the terms of its agreement with
Comcast, the Company remained liable for any losses
resulting from certain lawsuits, certain other expenses and
tax liabilities of Scripps Cable attributable to periods
prior to the Cable Transaction (see Notes 4 and 13). In
1997 the Company adjusted its estimate of these liabilities,
reducing stockholders' equity by $9,780,000.
Scripps Cable represented an entire business segment,
therefore its results are reported as a "discontinued
operation" for all periods presented (see Note 15). 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."
Use of Estimates - Preparation of the financial statements
requires the use of estimates. The Company's financial
statements include estimates for such items as income taxes
payable and self-insured risks. The Company self insures
for employees' medical and disability income benefits,
workers' compensation and general liability. The recorded
liability for self-insured risks is calculated using
actuarial methods and is not discounted. The recorded
liability for self-insured risks totaled $19,900,000 at
December 31, 1998. Management does not believe it is likely
that its estimates for such items will change materially in
the near term.
Consolidation - The consolidated financial statements
include the accounts of the Company and its majority-owned
subsidiary companies.
Revenue Recognition - Significant revenue recognition
policies are as follows:
Advertising revenues are recognized based on dates of
publication or broadcast.
Circulation revenue is recognized based on date of
publication.
Affiliate fees are recognized as programming is
provided to cable television and direct broadcast satellite
services.
Royalties from merchandise licensing are recognized as
the licensee sells products. Royalties from promotional
licensing are recognized over the lives of the licensing
agreements.
<PAGE>
Prepaid Distribution Fees - Prepaid distribution fees are
incentives paid to cable television and direct broadcast
satellite system operators in exchange for long-term
contracts to carry HGTV and Food Network. These fees are
amortized based upon the percentage of the current period's
affiliate fee revenues to the estimated total of such
revenue over the lives of the contracts, or, for contracts
that do not provide for the Company to receive affiliate
fees, on a straight-line basis. The portion of the
unamortized balance expected to be amortized within one year
is classified as a current asset.
Program Rights and Production Costs - Program rights are
recorded when programs become available for broadcast.
Amortization is computed using the straight-line method
based on the license period or based on usage, whichever
yields the greater accumulated amortization for each
program. The liability for program rights is not discounted
for imputed interest.
Production costs primarily represent costs incurred in the
production of programming for internal use. Programs
produced for internal use are amortized over the estimated
useful life of the program. The portion of the unamortized
balance expected to be amortized within one year is
classified as a current asset. Program and production costs
are stated at the lower of unamortized cost or fair value.
Program rights liabilities payable within the next twelve
months are included in accounts payable. Noncurrent program
rights liabilities are included in other long-term
obligations. The following table presents additional
information about these liabilities:
<TABLE>
<CAPTION>
( in thousands )
As of December 31,
1998 1997
<S> <C> <C>
Liabilities for programs available for broadcast:
Carrying amount $ 52,125 $ 45,856
Fair value 48,800 42,800
</TABLE>
Long-Lived Assets - Long-lived assets to be held and used
are recorded at unamortized cost. Management reviews long-
lived assets, including related goodwill and other
intangible assets, for impairment whenever events or changes
in circumstances indicate the carrying amounts of the assets
may not be recoverable. Recoverability is determined by
comparing the forecasted undiscounted cash flows of the
operation to which the assets relate to the carrying amount
of the assets. If the operation is determined to be unable
to recover the carrying amount of its assets, then goodwill
and other intangible assets are written down first, followed
by other long-lived assets of the operation, to fair value.
Fair value is determined based on discounted cash flows.
Long-lived assets to be disposed of are reported at the
lower of carrying amount or fair value less costs to sell.
Goodwill and Other Intangible Assets - Goodwill represents
the cost of acquisitions in excess of tangible assets and
identifiable intangible assets received. Noncompetition
agreements and cable and direct broadcast satellite network
affiliation contracts are amortized on a straight-line basis
over the terms of the agreements. Goodwill, customer lists
and other intangible assets are amortized on a straight-line
basis over periods of up to 40 years.
Property, Plant and Equipment - Depreciation is computed
using the straight-line method over estimated useful lives
as follows:
Buildings and improvements 35 years
Printing presses 20 years
Other newspaper production equipment 5 to 10 years
Television transmission towers and related equipment 15 years
Other television and program production equipment 5 to 15 years
Office and other equipment 3 to 10 years
Interest costs related to major capital projects are
capitalized and classified as property, plant and equipment.
Income Taxes - Deferred income taxes are provided for
temporary differences between the tax basis and reported
amounts of assets and liabilities that will result in
taxable or deductible amounts in future years. The
Company's temporary differences primarily result from
accelerated depreciation and amortization for tax purposes,
investment gains and losses not yet recognized for tax
purposes and accrued expenses not deductible for tax
purposes until paid.
<PAGE>
Investments - Investments in 20%- to 50%-controlled
companies and in all joint ventures are accounted for using
the equity method. Venture capital investments that do not
have a determinable fair value are carried at cost.
Investments in other debt and equity securities are
classified as available for sale and are carried at fair
value. Fair value is determined by reference to quoted
market prices. Unrealized gains or losses on those
securities are recognized as a separate component of
stockholders' equity. The cost of securities sold is
determined by specific identification.
Newspaper Joint Operating Agencies - The Company is
currently a party to newspaper joint operating agencies
("JOAs") in three markets. A JOA combines all but the
editorial operations of two competing newspapers in a
market. The managing party distributes a portion of JOA
profits to the other party. Each of these three JOAs is
managed by the other party.
The Company includes its portion of these JOA operating
profits in operating revenues but does not include any
assets or liabilities because the Company has no residual
interest in the net assets.
A JOA in Evansville, Indiana, which was managed by the
Company, expired in 1998 and was not renewed. The Company
included the full amount of this JOAs assets and
liabilities, and revenues earned and expenses incurred in
the operation of the JOA, in the consolidated financial
statements. Distributions of JOA operating profits to the
other party were included in other operating expenses. The
Company continues to operate its newspaper in Evansville. A
JOA in El Paso, Texas, which was managed by the other party,
was terminated in 1997 (see Note 2).
Inventories - Inventories are stated at the lower of cost or
market. The cost of newsprint included in inventory is
computed using the last in, first out ("LIFO") method. At
December 31 newsprint inventories were approximately 67% of
total inventories in 1998 and 64% in 1997. The cost of
other inventories is computed using the first in, first out
("FIFO") method. Inventories would have been $1,500,000 and
$1,400,000 higher at December 31, 1998 and 1997 if FIFO
(which approximates current cost) had been used to compute
the cost of newsprint.
Postemployment Benefits - Retiree health benefits are
recognized during the years that employees render service.
Other postemployment benefits, such as disability-related
benefits and severance, are recognized when the costs of
such benefits are incurred.
Stock-Based Compensation - The Company's incentive plans
provide for the awarding of options to purchase Class A
Common Shares and awards of Class A Common Shares to certain
employees of the Company. Stock options are awarded to
purchase Class A Common Shares at not less than 100% of the
fair market value on the date of the award. Stock options
and awards of Class A Common Shares vest over an incentive
period conditioned upon the individual's employment through
that period. The Company measures compensation expense
using the intrinsic-value-based method (see Note 14).
Cash and Cash Equivalents - Cash and cash equivalents
represent cash on hand, bank deposits and debt instruments
with an original maturity of less than three months. Cash
equivalents are stated at cost plus accrued interest, which
approximates fair value.
Short-term Investments - Short-term investments represent
excess cash invested in securities not meeting the criteria
to be classified as cash equivalents. Short-term
investments are carried at cost plus accrued income, which
approximates fair value.
Risk Management Contracts - In the normal course of business
the Company employs foreign currency forward and option
contracts to hedge cash flow exposures denominated in
Japanese yen. The contracts reduce the risk of changes in
the exchange rate for Japanese yen 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. Such contracts are
recorded at fair value in the Consolidated Balance Sheets
and gains or losses are recognized in income as changes
occur in the exchange rate for the Japanese yen. The
Company also employs off-balance-sheet financial
instruments, such as forward contracts, to reduce the risk
of changes in the price of newsprint on anticipated
newsprint purchases. Gains or losses on the contracts are
deferred and charged to newsprint and ink expense as the
newsprint is consumed.
As market conditions warrant, the Company enters into
foreign currency and newsprint forward contracts only to
hedge its anticipated transactions for, at most, the ensuing
year. The Company held no derivative financial instruments
at December 31, 1998. The Company does not hold derivative
financial instruments for trading or speculative purposes,
and does not hold leveraged contracts. The impact of risk
management activities on the Company's financial position,
its results of operations, and its cash flows is immaterial.
<PAGE>
Net Income Per Share - The following table presents
additional information about basic and diluted weighted-
average shares outstanding:
<TABLE>
<CAPTION>
( in thousands )
For the years ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Basic weighted-average shares outstanding 79,715 80,500 80,230
Effect of dilutive securities:
Unvested restricted stock held by employees 197 214 99
Stock options held by employees 1,009 931 512
Diluted weighted-average shares outstanding 80,921 81,645 80,841
</TABLE>
Recently Issued Accounting Standards - The Financial
Accounting Standards Board issued FAS No. 133 - Accounting
for Derivative Instruments and Hedging Activities. As
market conditions warrant, 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 reported financial position or results of
operations. Foreign currency forward and option contracts,
when used, 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,
when used, are not 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.
Reclassifications - For comparative purposes, certain 1997
and 1996 amounts have been reclassified to conform to 1998
classifications.
<PAGE>
2. ACQUISITIONS AND DIVESTITURES
Acquisitions
1997 - In October the Company acquired the newspaper and
broadcast operations of Harte-Hanks Communications
("Harte-Hanks") for $775,000,000, plus working capital,
in cash. The Harte-Hanks newspaper operations ("HHC
Newspaper Operations") included daily newspapers in
Abilene, Corpus Christi, Plano, San Angelo and Wichita
Falls, Texas, a group of community newspapers in the
Dallas, Texas, market and a daily newspaper in
Anderson, South Carolina. The Company immediately
traded the Harte-Hanks broadcast operations for an
approximate 56% controlling interest in Food Network
and approximately $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.
1996 - In May the Company acquired the Vero Beach,
Florida, daily newspaper.
The following table presents additional information about
the acquisitions:
<TABLE>
<CAPTION>
( in thousands )
For the years ended
December 31,
1997 1996
<S> <C> <C>
Goodwill and other intangible assets acquired $ 688,102 $ 110,967
Other assets acquired (primarily property, equipment and program costs) 108,278 10,900
Total 796,380 121,867
Fair value of Monterey and San Luis Obispo daily newspapers (50,000)
Liabilities assumed (26,700) (1,794)
Cash paid $ 719,680 $ 120,073
</TABLE>
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 respective periods. The
pro forma information includes adjustments for interest
expense that would have been incurred to finance the
acquisition, additional depreciation based on the fair
market value of the property, plant and equipment, and
amortization of 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
respective periods.
<TABLE>
<CAPTION>
( in thousands, except per share data )
For the years ended
December 31,
1997 1996
<S> <C> <C>
Operating revenues $ 1,350,096 $ 1,253,798
Income from continuing operations 124,965 100,704
Net income 124,965 127,967
Per share of common stock - basic:
Income from continuing operations $1.55 $1.26
Net income 1.55 1.60
Per share of common stock - diluted:
Income from continuing operations $1.53 $1.25
Net income 1.53 1.58
</TABLE>
<PAGE>
Divestitures
1998 - The Company sold Scripps Howard Productions, its
program television production operation based in Los
Angeles, and the Dallas Community newspapers, including
the Plano daily newspaper. No material gain or loss
was realized on either divestiture as proceeds
approximated the book value of the net assets sold.
1997 - The Company traded its Monterey and San Luis
Obispo, California, daily newspapers for the daily
newspaper in Boulder, Colorado, and terminated the JOA
and ceased operations of its newspaper in El Paso,
Texas, on October 11. The JOA termination and the
trade resulted in gains totaling $47,600,000,
$26,200,000 after-tax ($.32 per share on a diluted
basis).
Included in the consolidated financial statements were the
following results of divested operating units (excluding
gains on sales):
<TABLE>
<CAPTION>
( in thousands, except per share data )
For the years ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Operating revenues $ 14,206 $ 41,154 $ 61,795
Operating income (loss) (481) (1,217) 2,994
</TABLE>
3. UNUSUAL CREDITS AND CHARGES
In addition to the gains on divested operations, unusual
items that affected the comparability of the Company's
results of operations included the following:
1997 - Write-down of certain investments to estimated
realizable value, resulting in a loss of
$2,700,000, $1,700,000 after tax, $.02 per share on a
diluted basis.
1996 - A $4,000,000 operating charge for the Company's share of
certain costs associated with restructuring portions of
the distribution system of the Cincinnati JOA. The
charge reduced income from continuing operations by
$2,600,000, $.03 per share on a diluted basis.
Net gains that increased income from continuing operations
by $24,300,000, $.30 per share on a diluted basis.
A pre-tax gain of $40,000,000 was recognized on the
Company's investment in Turner Broadcasting Systems
when Turner was merged into Time Warner, and a $3,000,000
investment in Patient Education Media, Inc., was written off.
Contribution of 375,000 shares of Time Warner
stock to Scripps Howard Foundation, a private
charitable foundation. The contribution reduced pre-
tax income by $15,500,000 and income from continuing
operations by $5,200,000, $.07 per share on a diluted
basis.
<PAGE>
4. INCOME TAXES
In 1997 the Company reached an agreement with the Internal
Revenue Service ("IRS") to settle the audit of its 1988
through 1991 consolidated federal income tax returns. The
settlement did not result in an adjustment to the Company's
tax liability for prior years. Pursuant to the terms of its
agreement with Comcast, the Company remains liable for all
tax liabilities of Scripps Cable attributable to periods
prior to completion of the Cable Transaction. The Company's
1992 through 1995 consolidated federal income tax returns
are currently under examination by the IRS. Management
believes that adequate provision for income taxes has been
made for all open years.
The approximate effects of the temporary differences giving
rise to the Company's deferred income tax liabilities
(assets) were as follows:
<TABLE>
<CAPTION>
( in thousands )
As of December 31,
1998 1997
<S> <C> <C>
Accelerated depreciation and amortization $ 106,725 $ 91,573
Investments, primarily gains and losses not yet recognized for tax 26,052 13,258
Accrued expenses not deductible until paid (12,110) (13,323)
Deferred compensation and retiree benefits not deductible until paid (19,969) (17,028)
Other temporary differences, net (6,417) (4,997)
Total 94,281 69,483
State net operating loss carryforwards (9,790) (9,576)
Valuation allowance for state deferred tax assets 7,003 6,514
Net deferred tax liability $ 91,494 $ 66,421
</TABLE>
The Company's state net operating loss carryforwards expire
from 1999 through 2018. At each balance sheet date
management estimates the amount of state net operating loss
carryforwards that are not expected to be used prior to
expiration of the carryforward period. The tax effect of
these unused state net operating loss carryforwards is
included in the valuation allowance.
<PAGE>
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
( in thousands )
For the years ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Current:
Federal $ 62,730 $ 68,600 $ 55,897
State and local 12,028 14,275 9,814
Foreign 3,878 4,314 4,078
Total current 78,636 87,189 69,789
Deferred:
Federal 23,538 31,100 1,937
Other 1,542 3,432 173
Total deferred 25,080 34,532 2,110
Total income taxes 103,716 121,721 71,899
Income taxes allocated to stockholders' equity (10,641) (4,211) 14,112
Provision for income taxes $ 93,075 $ 117,510 $ 86,011
</TABLE>
The difference between the statutory rate for federal income
tax and the effective income tax rate was as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Statutory rate 35.0 % 35.0 % 35.0 %
Effect of:
State and local income taxes 3.8 4.1 2.9
Amortization of nondeductible goodwill 1.6 1.8 1.8
Charitable contributions of appreciated investments (2.2)
Miscellaneous 0.2 1.0 1.7
Effective income tax rate 40.6 % 41.9 % 39.2 %
</TABLE>
5. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
( in thousands )
As of December 31,
1998 1997
<S> <C> <C>
Variable rate credit facilities $ 567,561 $ 541,459
$100 million, 6.625% note, due in 2007 99,872 99,858
$100 million, 6.375% note, due in 2002 99,925 99,906
$30 million, 7.375% notes, due in 1998 29,754
Other notes 2,077 2,129
Total long-term debt 769,435 773,106
Current portion of long-term debt 267,601 171,254
Long-term debt (less current portion) $ 501,834 $ 601,852
Fair value of long-term debt * $ 776,100 $ 775,100
* Fair value was estimated based on current rates available to the Company
for debt of the same remaining maturity.
</TABLE>
The Company has a Competitive Advance and Revolving Credit
Facility Agreement that permits aggregate borrowings up to
$700,000,000 (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 one year, and the other limited to
$300,000,000 principal amount maturing in five years.
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 at
December 31 was 5.25% in 1998 and 5.85% in 1997.
Certain long-term debt agreements contain maintenance
requirements for 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.
Interest costs capitalized were $300,000 in 1998, $1,200,000
in 1997 and $700,000 in 1996.
<PAGE>
6. INVESTMENTS
Investments, excluding short-term investments, consisted of
the following:
<TABLE>
<CAPTION>
( in thousands, except share data )
As of December 31,
1998 1997
<S> <C> <C>
Securities available for sale:
Time Warner common stock (1,344,000 shares) $ 83,446 $ 41,681
Other 5,286 5,420
Total available-for-sale securities 88,732 47,101
Investments accounted for using the equity method 15,157 7,484
Other (primarily venture capital) 36,899 30,060
Total investments $ 140,788 $ 84,645
Unrealized gains on securities available for sale $ 59,866 $ 17,547
</TABLE>
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
( in thousands )
As of December 31,
1998 1997
<S> <C> <C>
Land and improvements $ 48,267 $ 48,235
Buildings and improvements 230,985 214,337
Equipment 628,004 598,204
Total 907,256 860,776
Accumulated depreciation 428,553 380,776
Net property, plant and equipment $ 478,703 $ 480,000
</TABLE>
<PAGE>
8. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consisted of the
following:
<TABLE>
<CAPTION>
( in thousands )
As of December 31,
1998 1997
<S> <C> <C>
Goodwill $ 1,182,634 $ 1,194,447
Customer lists 145,358 145,454
Cable and direct broadcast satellite network affiliation contracts 18,554 18,554
Licenses and copyrights 28,221 28,221
Other 27,796 29,726
Total 1,402,563 1,416,402
Accumulated amortization 209,306 171,960
Net goodwill and other intangible assets $ 1,193,257 $ 1,244,442
</TABLE>
9. OTHER LONG-TERM OBLIGATIONS AND MINORITY INTERESTS
Other long-term obligations and minority interests consisted
of the following:
<TABLE>
<CAPTION>
( in thousands )
As of December 31,
1998 1997
<S> <C> <C>
Program rights payable $ 52,125 $ 45,856
Employee compensation and benefits 68,945 59,677
Distribution fees 52,409 54,347
Minority interests 10,956 10,537
Other 28,787 24,947
Total other long-term obligations and minority interests 213,222 195,364
Current portion of other long-term obligations 86,801 83,071
Other long-term obligations and minority interests (less current portion) $ 126,421 $ 112,293
</TABLE>
<PAGE>
10. SUPPLEMENTAL CASH FLOW INFORMATION
The following table presents additional information about
the change in certain working capital accounts:
<TABLE>
<CAPTION>
( in thousands )
For the years ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Other changes in certain working capital accounts, net:
Accounts receivable $ 63 $ (22,882) $ (10,630)
Accounts payable 4,377 (6,019) 7,467
Accrued income taxes (1,950) (2,290) 669
Other accrued liabilities (2,724) 10,265 (2,988)
Other, net 2,916 3,296 (1,408)
Total $ 2,682 $ (17,630) $ (6,890)
</TABLE>
<PAGE>
11. EMPLOYEE BENEFIT PLANS
Retirement plans expense consisted of the following:
<TABLE>
<CAPTION>
( in thousands )
For the years ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Service cost $ 11,718 $ 9,047 $ 8,921
Interest cost 14,757 14,729 13,605
Actual (return) loss on plan assets, net of expenses (35,773) (41,665) (29,737)
Net amortization and deferral 17,098 22,866 14,921
Total for defined benefit plans 7,800 4,977 7,710
Multi-employer plans 1,051 923 1,054
Defined contribution plans 5,370 4,585 4,124
Total $ 14,221 $ 10,485 $ 12,888
</TABLE>
<PAGE>
The following table presents information about the Company's
employee benefit plan assets and obligations:
<TABLE>
<CAPTION>
( in thousands )
For the years ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 236,260 $ 203,919 $ 206,331
Service cost 11,718 9,047 8,921
Interest cost 14,757 14,729 13,605
Plan amendments 280
Actuarial losses (gains) 21,708 26,218 (12,756)
Acquisitions and divestitures 2,300
Benefits paid (14,950) (17,933) (14,482)
Benefit obligation at end of year 269,493 236,260 203,919
Change in plan assets
Fair value at beginning of year 246,811 220,603 195,667
Actual return on plan assets 35,773 41,665 29,737
Company contributions 752 1,868 7,203
Acquisitions and divestitures 608 2,478
Benefits paid (14,950) (17,933) (14,482)
Fair value at end of year 268,386 246,811 220,603
Plan assets greater than (less than) projected benefits (1,107) 10,551 16,684
Unrecognized net loss (gain) (14,732) (18,979) (21,338)
Unrecognized prior service cost 4,620 5,704 6,486
Unrecognized net asset at the date FAS No. 87 was
adopted, net of amortization (4,881) (6,328) (7,775)
Net pension asset (liability) recognized in the balance sheet $ (16,100) $ (9,052) $ (5,943)
</TABLE>
Assumptions used in the accounting for the defined benefit
plans were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Discount rate as of December 31 6.5% 6.5% 7.5%
Expected long-term rate of return on plan assets 8.5% 7.5% 8.5%
Rate of increase in compensation levels 4.0% 3.0% 4.0%
</TABLE>
The plans' long-term rate of return on assets, net of
expenses, has been approximately two percentage points
greater than the discount rate. Management believes the
discount rate plus two percentage points is the best
estimate of the long-term return on plan assets at any point
in time. Therefore, when the discount rate changes,
management's expectation for the future long-term rate of
return on plan assets changes in tandem.
Plan assets consist of marketable equity and fixed-income
securities.
The Company has unfunded health and life insurance benefit
plans that are provided to certain retired employees. The
combined number of 1) active employees eligible for such
benefits and 2) retired employees receiving such benefits is
less than 5% of the Company's current workforce. The
actuarial present value of the projected benefit obligation
at December 31 was $8,600,000 in 1998 and $8,200,000 in
1997. The cost of the plan was less than $1,000,000 in each
year.
<PAGE>
12. 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. See Note 1 for
descriptive information about the Company's business
segments. The accounting policies of the segments are the
same as those described in the summary of significant
accounting policies. The Company primarily evaluates the
operating performance of its segments based on earnings
before interest, income taxes, depreciation and amortization
("EBITDA"), excluding unusual items. EBITDA also excludes
all credits and charges classified as non-operating in the
Consolidated Statements of Income.
In 1998 the Company changed its reportable segments to
include Scripps Productions in the Category Television
operating segment because HGTV and Food Network telecast the
majority of the programs it produces. Scripps Productions
was previously reported with Licensing and Other Media.
Prior period information has been restated. The Company
sold Scripps Howard Productions, its television program
production operation based in Los Angeles, in 1998 (see Note
2). Amounts for Scripps Howard Productions are included
with Licensing and Other Media.
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>
The following table presents financial information about the
Company's business segments:
<TABLE>
<CAPTION>
( in thousands )
For the years ended December 31,
1998 1997 1996
<S> <C> <C> <C>
OPERATING REVENUES
Newspapers $ 878,998 $ 751,014 $ 670,861
Broadcast television 330,714 331,216 323,467
Category television 148,641 66,801 31,579
Licensing and other media 96,202 92,926 95,951
Total continuing operations $ 1,454,555 $ 1,241,957 $ 1,121,858
EBITDA
Newspapers $ 261,692 $ 220,425 $ 177,962
Broadcast television 118,012 128,048 126,225
Category television 5,642 (8,580) (14,458)
Licensing and other media 10,750 4,548 6,871
Corporate (16,207) (16,011) (17,372)
Total 379,889 328,430 279,228
Unusual credits (charges) - see Note 3 (4,000)
Total continuing operations $ 379,889 $ 328,430 $ 275,228
DEPRECIATION
Newspapers $ 41,453 $ 33,840 $ 30,452
Broadcast television 15,529 14,738 14,547
Category television 4,738 3,438 2,636
Licensing and other media 978 873 794
Corporate 1,024 1,196 1,099
Total continuing operations $ 63,722 $ 54,085 $ 49,528
AMORTIZATION OF INTANGIBLE ASSETS
Newspapers $ 23,065 $ 12,105 $ 8,207
Broadcast television 9,517 9,620 11,241
Category television 7,539 1,793 401
Licensing and other media 2 3
Total continuing operations $ 40,123 $ 23,521 $ 19,849
OPERATING INCOME
Newspapers $ 197,174 $ 174,480 $ 139,303
Broadcast television 92,966 103,690 100,437
Category television (6,635) (13,811) (17,495)
Licensing and other media 9,770 3,672 6,077
Corporate (17,231) (17,207) (18,471)
Total 276,044 250,824 209,851
Unusual credits (charges) - see Note 3 (4,000)
Total continuing operations $ 276,044 $ 250,824 $ 205,851
OTHER NONCASH ITEMS
Broadcast television $ (76) $ (3,790) $ (1,448)
Category television (26,793) (16,683) (13,922)
Licensing and other media 2,828 471 (5,163)
Total continuing operations $ (24,041) $ (20,002) $ (20,533)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
( in thousands )
For the years ended December 31,
1998 1997 1996
<S> <C> <C> <C>
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Newspapers $ 23,732 $ 33,762 $ 25,653
Broadcast television 33,454 15,632 23,491
Category television 7,936 5,742 2,800
Licensing and other media 1,041 670 630
Corporate 806 814 726
Total continuing operations $ 66,969 $ 56,620 $ 53,300
BUSINESS ACQUISITIONS AND OTHER ADDITIONS TO LONG-LIVED ASSETS
Newspapers $ 3,570 $ 644,527 $ 122,593
Broadcast television 218 3,000 1,700
Category television 17,431 179,354 44,000
Licensing and other media 22,246 23,891 5,195
Corporate 55
Total continuing operations $ 43,465 $ 850,772 $ 173,543
ASSETS
Newspapers $ 1,246,156 $ 1,331,676 $ 700,932
Broadcast television 509,285 495,049 515,866
Category television 340,852 300,006 109,966
Licensing and other media 172,397 110,053 75,835
Corporate 76,422 49,699 66,070
Total continuing operations $ 2,345,112 $ 2,286,483 $ 1,468,669
</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. 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>
13. COMMITMENTS AND CONTINGENCIES
The Company is involved in litigation arising in the
ordinary course of business, none of which is expected to
result in material loss.
The Company purchased program rights totaling $100,000,000
in 1998, $70,100,000 in 1997 and $53,700,000 in 1996, the
payments for which are generally made over the lives of the
contracts. At December 31, 1998, the Company was committed
to purchase approximately $140,000,000 of program rights
that are not currently available for broadcast, including
$130,000,000 for programs not yet produced. If such
programs are not produced the Company's commitments would
expire without obligation.
Minimum payments on noncancelable leases at December 31,
1998, were: 1999, $9,800,000; 2000, $7,200,000; 2001,
$5,100,000; 2002, $4,400,000; 2003, $4,400,000 and later
years, $12,800,000. Rental expense for cancelable and
noncancelable leases was $15,000,000 in 1998, $12,200,000 in
1997 and $10,300,000 in 1996.
14. CAPITAL STOCK AND INCENTIVE PLANS
The capital structure of the Company includes Common Voting
Shares and Class A Common Shares. The articles provide that
the holders of Class A Common Shares, who are not entitled
to vote on any other matters except as required by Ohio law,
are entitled to elect the greater of three or one-third of
the directors.
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. In 1998
the Board increased the authorization to 6,000,000 shares.
The Company repurchased 2,402,100 shares in 1998 at a cost
of $108,421,000 and 621,000 shares in 1997 at a cost of
$25,694,000.
The 1987 Long-Term Incentive Plan (the "1987 Plan"), which
expired on December 9, 1997, provided for the awarding of
incentive and nonqualified stock options with 10-year terms,
stock appreciation rights, performance units and restricted
and nonrestricted Class A Common Shares to key employees and
the 1994 Non-Employee Directors' Stock Option Plan provides
for the awarding of stock options to nonemployee directors.
The 1987 Plan was replaced by the 1997 Long-Term Incentive
Plan (the "1997 Plan"). The terms of the 1997 Plan are
substantially the same as the 1987 Plan. The 1997 Plan
expires in 2007, except for options then outstanding. The
number of shares authorized for issuance under the plans at
December 31, 1998, were 7,913,000, of which 2,345,000 were
available.
Stock options may be awarded to purchase Class A Common
Shares at not less than 100% of the fair market value on the
date the option is granted. Stock options will vest over an
incentive period, conditioned upon the individual's
employment through that period.
<PAGE>
The following table presents information about stock
options:
<TABLE>
<CAPTION>
Weighted- Range of
Number Average Exercise
of Shares Exercise Price Prices
<S> <C> <C> <C>
Outstanding at December 31, 1995 1,919,625 $25.52 $16 - 34
Granted in 1996 prior to the Cable Transaction 96,500 43.51 39 - 48
Exercised in 1996 prior to the Cable Transaction (353,350) 23.51 16 - 34
Adjustment of options upon completion of the Cable Transaction 1,036,225
Granted in 1996 subsequent to the Cable Transaction 25,000 34.25 34
Exercised in 1996 subsequent to the Cable Transaction (43,200) 14.39 10 - 19
Outstanding at December 31, 1996 2,680,800 16.74 10 - 34
Granted in 1997 605,500 35.33 35 - 43
Exercised in 1997 (448,975) 17.27 10 - 26
Forfeited in 1997 (11,800) 34.50 35
Outstanding at December 31, 1997 2,825,525 21.00 11 - 43
Granted in 1998 634,450 47.32 39 - 56
Exercised in 1998 (274,239) 16.02 11 - 39
Forfeited in 1998 (31,316) 35.04 35 - 39
Outstanding at December 31, 1998 (by year granted):
1990 64,520 14.20 11 - 15
1991 372,950 11.99 11 - 13
1992 174,000 15.18 15 - 17
1993 630,000 17.73 15 - 21
1994 561,600 18.83 17 - 21
1995 12,000 19.63 18 - 20
1996 156,400 28.31 24 - 34
1997 548,500 35.37 35 - 43
1998 634,450 47.32 39 - 56
Total options outstanding 3,154,420 $26.58 $11 - 56
Exercisable at December 31:
1996 2,417,900 $16.02 $10 - 27
1997 2,190,625 16.90 11 - 27
1998 2,204,089 19.41 11 - 43
</TABLE>
The number of options and the option prices were adjusted
based on the market price of Class A Common Shares before
and after completion of the Cable Transaction, in order to
preserve the economic value of the options. Substantially
all options granted prior to 1997 are exercisable.
<PAGE>
The Company has adopted the "disclosure-only" provisions of
FAS No. 123; therefore no compensation expense has been
recognized for stock option grants. Had compensation
expense been determined based upon the fair value
(determined using the Black-Scholes option pricing model) at
the grant date consistent with the provisions of FAS No.
123, the Company's income from continuing operations would
have been reduced to the pro forma amounts as follows:
<TABLE>
<CAPTION>
( in thousands, except per share data )
For the years ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Pro forma income from continuing operations $ 127,900 $ 155,800 $ 126,500
Pro forma income from continuing operations per share of common stock:
Basic $1.60 $1.94 $1.58
Diluted 1.58 1.91 1.56
</TABLE>
The 1996 amounts above include the $2,900,000, $.04 per
share on a diluted basis, effect of the option adjustment
related to the Cable Transaction. That amount is the after-
tax difference between the fair value of the adjusted
options and the intrinsic value of the original options
outstanding on the date of the Cable Transaction. FAS No.
123 requires that, for options issued prior to the adoption
of FAS No. 123, such difference must be included in the pro
forma disclosures. There was no difference between the fair
values of the original and the adjusted options on the date
of the Cable Transaction. Information related to the fair
value of stock option grants is presented below:
<TABLE>
<CAPTION>
For the years ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Weighted-average fair value of options granted $14.33 $12.03 $14.84
Assumptions used to determine fair value:
Dividend yield 1.5% 1.5% 1.5%
Expected volatility 24% 28% 27%
Risk-free rate of return 5.7% 6.0% 6.4%
Expected life of options 7 years 7 years 7 years
</TABLE>
Awards of Class A Common Shares vest over an incentive
period conditioned upon the individual's employment
throughout that period. During the vesting period shares
issued are nontransferable, but the shares are entitled to
all the rights of an outstanding share. Compensation
expense is determined based upon the fair value of the
shares at the grant date. Information related to awards of
Class A Common Shares is presented below:
<TABLE>
<CAPTION>
( in thousands, except share data )
For the years ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Class A Common Shares:
Shares awarded prior to completion of the Cable Transaction 130,500
Weighted-average price of shares awarded $43.45
Adjustment of unvested shares upon completion
of the Cable Transaction 127,650
Awarded subsequent to completion of the Cable Transaction 20,500 80,500 52,500
Weighted-average price of shares awarded $51.22 $38.97 34.25
Shares forfeited 1,500
Compensation expense recognized:
Continuing operations $ 2,863 $ 2,776 $ 1,482
Scripps Cable 2,300
</TABLE>
The number of unvested shares was adjusted based on the
market price of Class A Common Shares before and after
completion of the Cable Transaction, to preserve the
economic value of the awards.
<PAGE>
15. DISCONTINUED OPERATION - SCRIPPS CABLE
The following tables present summarized financial
information for Scripps Cable:
Operating Results
<TABLE>
<CAPTION>
( in thousands, except share data )
Year Ended
December 31,
1996
<S> <C>
Operating revenues $ 270,172
Income before income taxes 60,541
Income taxes (21,027)
Income from operations 39,514
Costs of Cable Transaction (12,251)
Net income $ 27,263
Net income per share of common stock:
Basic $.34
Diluted .34
</TABLE>
Cash Flows
<TABLE>
<CAPTION>
( in thousands )
Year Ended
December 31,
1996
<S> <C>
Net income $ 27,263
Depreciation and amortization 48,008
Other, net (10,178)
Net cash provided by operating activities $ 65,093
Capital expenditures $ (57,898)
Acquisition of cable television systems (primarily equipment and intangible assets) (62,099)
Other, net 422
Net cash used in investing activities $ (119,575)
</TABLE>
<PAGE>
16. SUMMARIZED QUARTERLY FINANCIAL INFORMATION (Unaudited)
Summarized financial information is as follows:
<TABLE>
<CAPTION>
( in thousands, except per share data )
1st 2nd 3rd 4th
1998 Quarter Quarter Quarter Quarter Total
<S> <C> <C> <C> <C> <C>
Operating revenues $ 346,809 $ 366,918 $ 343,423 $ 397,405 $ 1,454,555
Operating expenses:
Employee compensation and benefits 114,194 113,372 112,388 114,532 454,486
Newsprint and ink 36,348 36,958 36,100 38,663 148,069
Program, production and copyright costs 23,429 25,100 26,095 33,022 107,646
Other operating expenses 89,628 90,854 86,073 97,910 364,465
Depreciation and amortization 25,755 25,427 25,311 27,352 103,845
Total operating expenses 289,354 291,711 285,967 311,479 1,178,511
Operating income 57,455 75,207 57,456 85,926 276,044
Interest expense (12,012) (11,747) (11,712) (11,637) (47,108)
Miscellaneous, net (1,438) 915 285 464 226
Income taxes (17,959) (26,380) (18,852) (29,884) (93,075)
Minority interests (968) (1,571) (1,099) (1,235) (4,873)
Income from continuing operations $ 25,078 $ 36,424 $ 26,078 $ 43,634 $ 131,214
Income from continuing operations per
share of common stock:
Basic $ .31 $ .45 $ .33 $ .56 $ 1.65
Diluted $ .31 $ .45 $ .32 $ .55 $ 1.62
Basic weighted-average shares outstanding 80,358 80,404 79,874 78,226 79,715
Diluted weighted-average shares outstanding 81,616 81,688 81,041 79,339 80,921
Cash dividends per share of common stock $ .13 $ .13 $ .14 $ .14 $ .54
</TABLE>
The sum of the quarterly net income per share amounts
may not equal the reported annual amount because each is
computed independently based upon the weighted-average
number of shares outstanding for the period.
<PAGE>
<TABLE>
<CAPTION>
( in thousands, except per share data )
1st 2nd 3rd 4th
1997 Quarter Quarter Quarter Quarter Total
<S> <C> <C> <C> <C> <C>
Operating revenues $ 290,710 $ 305,512 $ 286,181 $ 359,554 $ 1,241,957
Operating expenses:
Employee compensation and benefits 94,805 96,381 97,491 110,069 398,746
Newsprint and ink 27,351 30,416 30,204 35,537 123,508
Program, production and copyright costs 25,827 16,988 18,356 25,297 86,468
Other operating expenses 68,608 74,072 72,532 89,593 304,805
Depreciation and amortization 18,268 17,294 18,023 24,021 77,606
Total operating expenses 234,859 235,151 236,606 284,517 991,133
Operating income 55,851 70,361 49,575 75,037 250,824
Interest expense (2,566) (2,484) (2,300) (11,193) (18,543)
Net gains and unusual items 20,981 23,913 44,894
Miscellaneous, net 113 368 914 1,731 3,126
Income taxes (22,477) (28,728) (29,668) (36,637) (117,510)
Minority interests (898) (938) (924) (2,329) (5,089)
Net income $ 30,023 $ 38,579 $ 38,578 $ 50,522 $ 157,702
Income from continuing operations per
share of common stock:
Basic $ .37 $ .48 $ .48 $ .63 $ 1.96
Diluted $ .37 $ .47 $ .47 $ .62 $ 1.93
Basic weighted-average shares outstanding 80,496 80,562 80,644 80,297 80,500
Diluted weighted-average shares outstanding 81,588 81,701 81,814 81,476 81,645
Cash dividends per share of common stock $ .13 $ .13 $ .13 $ .13 $ .52
</TABLE>
The sum of the quarterly net income per share amounts
may not equal the reported annual amount because each is
computed independently based upon the weighted-average
number of shares outstanding for the period.
<PAGE>
THE E. W. SCRIPPS COMPANY
Index to Consolidated Financial Statement Schedules
Valuation and Qualifying Accounts S-2
<PAGE>
<TABLE>
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 SCHEDULE II
<CAPTION>
( in thousands )
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
INCREASE
ADDITIONS DEDUCTIONS (DECREASE)
BALANCE CHARGED TO AMOUNTS RECORDED BALANCE
BEGINNING COSTS AND CHARGED ACQUISITIONS END OF
CLASSIFICATION OF PERIOD EXPENSES OFF-NET (DIVESTITURES) PERIOD
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998:
Allowance for doubtful
accounts receivable $ 6,305 $ 6,926 $ 5,826 $ (83) $ 7,322
YEAR ENDED DECEMBER 31, 1997:
Allowance for doubtful
accounts receivable $ 3,974 $ 7,387 $ 6,152 $ 1,096 $ 6,305
YEAR ENDED DECEMBER 31, 1996:
Allowance for doubtful
accounts receivable $ 3,447 $ 5,422 $ 4,895 $ 3,974
</TABLE>
<PAGE>
THE E. W. SCRIPPS COMPANY
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit Exhibit No.
Number Description of Item Page Incorporated
<S> <C> <C> <C>
3.01 Articles of Incorporation (5) 3.01
3.02 Code of Regulations (5) 3.02
4.01 Class A Common Share Certificate (2) 4
4.02A Form of Indenture: 6.375% notes due in 2002 (3) 4.1
4.02B Form of Indenture: 6.625% notes due in 2007 (3) 4.1
4.03A Form of Debt Securities: 6.375% notes due in 2002 (3) 4.2
4.03B Form of Debt Securities: 6.625% notes due in 2007 (3) 4.2
10.01 Amended and Restated Joint Operating Agreement, dated January 1, 1979, among
Journal Publishing Company, New Mexico State Tribune Company and
Albuquerque Publishing Company, as amended (1) 10.0
10.02 Amended and Restated Joint Operating Agreement, dated February 29, 1988, among
Birmingham News Company and Birmingham Post Company (1) 10.02
10.03 Joint Operating Agreement, dated September 23, 1977, between the
Cincinnati Enquirer, Inc. and the Company, as amended (1) 10.03
10.05 Amended and Restated Joint Operating Agreement, dated October 23, 1986, among
Evansville Press Company, Inc., Hartmann Publications, Inc. and Evansville
Printing Corporation (1) 10.05
10.06 Building Lease, dated April 25, 1984, among Albuquerque Publishing Company,
Number Seven and Jefferson Building Partnership (1) 10.08A
10.06A Ground Lease, dated April 25, 1984, among Albuquerque Publishing Company,
New Mexico State Tribune Company, Number Seven and Jefferson Building
Partnership (1) 10.08B
10.07 Agreement, dated August 17, 1989, between United Feature Syndicate, Inc. and
Charles M. Schulz and the Trustees of the Schulz Family Renewal Copyright
Trust, as amended (1) 10.11
10.40 5-Year Competitive Advance and Revolving Credit Agreement, dated as of
September 26, 1997, among The E. W. Scripps Company, the Banks named
therein, The Chase Manhattan Bank, as Agent, and J. P. Morgan & Co., as
Documentation Agent (3) 10.1
10.41 364-Day Competitive Advance and Revolving Credit Agreement, dated as of
September 26, 1997, among The E. W. Scripps Company, the Banks named
therein, The Chase Manhattan Bank, as Agent, and J. P. Morgan & Co., as
Documentation Agent (3) 10.2
10.53 1987 Long-Term Incentive Plan (1) 10.36
10.54 Agreement, dated December 24, 1959, between the Company and Charles E. Scripps,
as amended (1) 10.39A
10.54A Assignment, Assumption, and Release Agreement, dated December 31, 1987,
between the Company, Scripps Howard, Inc. and Charles E. Scripps (1) 10.39B
10.54B Amendment, dated June 21, 1988 to December 24, 1959 Agreement between
the Company and Charles E. Scripps (1) 10.39C
10.55 Board Representation Agreement, dated March 14, 1986, between
The Edward W. Scripps Trust and John P. Scripps (1) 10.44
10.56 Shareholder Agreement, dated March 14, 1986, between the Company and the
Shareholders of John P. Scripps Newspapers (1) 10.45
10.57 Scripps Family Agreement dated October 15, 1992 (4) 1
10.58 1997 Long-Term Incentive Plan (6) 4B
10.59 Non-Employee Directors' Stock Option Plan (6) 4A
10.60 1997 Deferred Compensation and Phantom Stock Plan for Senior Officers
and Selected Executives (7) 4A
10.61 1997 Deferred Compensation and Stock Plan for Directors E-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Exhibit No.
Number Description of Item Page Incorporated
<S> <C> <C>
12 Computation of Ratio of Earnings to Fixed Charges for the Three Years Ended
December 31, 1997 E-4
21 Subsidiaries of the Company E-5
23 Independent Auditors' Consent E-6
27 Financial Data Schedule E-7
27 Restated 1997 Financial Data Schedule E-8
</TABLE>
(1) Incorporated by reference to Registration Statement of
The E. W. Scripps Company on Form S-1 (File No. 33-
21714).
(2) Incorporated by reference to The E. W. Scripps
Company Annual Report on Form 10-K for the year ended
December 31, 1990.
(3) Incorporated by reference to Registration
Statement on Form S-3 (File No. 33-36641).
(4) Incorporated by reference to The E. W. Scripps
Company Current Report on Form 8-K dated October 15,
1992.
(5) Incorporated by reference to Scripps Howard, Inc.
Registration Statement on Form 10 (File No. 1-11969).
(6) Incorporated by reference to Registration Statement of
The E. W. Scripps Company on Form S-8 (File No. 333-27623).
(7) Incorporated by reference to Registration Statement of
The E. W. Scripps Company on Form S-8 (File No. 333-27621).
THE E. W. SCRIPPS COMPANY
1997 DEFERRED COMPENSATION AND STOCK PLAN FOR DIRECTORS
1. Introduction
Effective January 1, 1997, The E. W. Scripps Company (the "Company")
hereby adopts a non-qualified deferred compensation and stock
plan (the "Plan") for its directors ("Participants"). For
purposes of this Plan, a director shall be defined as any director
who is eligible to receive cash compensation for his or her
service as a director of the Company.
The purpose of the Plan is to provide an opportunity for Participants
to enhance their personal financial planning by having access to a
vehicle for deferring income to a time considered to be of
personal advantage. Additionally, the Plan is designed to more
closely align the Participants' financial interests with those
of the Company's shareholders.
2. Plan Administration
The Plan shall be governed by the Board of Directors of the
Company and administered by the Corporate Secretary.
A Participant's interest in the Plan may not be sold, assigned,
pledged, transferred or otherwise encumbered.
3. Compensation Eligible for Deferral
Participating directors can elect to defer annual fees,
meeting fees, and/or fees for serving as chairman of a committee
which become payable under the director fee schedule
approved from time to time by The E. W. Scripps Company.
4. Timing of Election
The election to defer potential director fee payments under
the Plan must be made within 30 days after the first of each
calendar year. (However, for the year 1997, since the Plan
was approved by the Board of Directors on March 10, 1997,
the deadline to defer fees is extended to March 31, 1997
for those directors who have been continuously deferring
fees.)
Once an election is made, it cannot be revoked.
5. Deferral Period
Participants can elect to defer payment from the date such
payment otherwise would be made until an actual date specified
by the Participant, but no earlier than three years from
the date it would otherwise have been paid, or until the
date that he/she resigns as a director or is not re-elected
a director.
6. Deferral Election
Directors may defer a minimum of 50% of annual fees, meeting fees,
and/or fees for serving as chairman of a committee which
become payable under the director fee schedule approved by the
Board of Directors of the Company.
At the time of the election to defer, a Participant must select
the deferral period. See Section 5 above.
<PAGE>
A Participant must elect to defer either into the Fixed Income Fund
or into Phantom Stock, or some combination of these two funds.
Once an election to defer is made, it is irrevocable.
Deferred amounts will be earned on a quarterly basis.
(A) Fixed Income Fund
Deferred amounts will be recorded on the Company's books
and credited with an interest factor during the deferral
period. Interest on unpaid deferred amounts will be
compounded and credited annually. Interest is calculated
based on the twelve month average of the 10-year
treasury rate (at November of each year), plus 1%.
(B) Phantom Stock Fund
Quarterly, the earned amount will be converted to phantom
shares of the Company's Class A Common Stock. The conversion
calculation is:
Quarterly deferred retainer, committee chair retainer, and
meeting fee amounts divided by the Fair Market Value of the
Company's Class A Common Shares on the date earned equals
the number of phantom shares credited. (The Fair
Market Value shall be the average of the high and
low sale prices of the Company's stock on the New York
Stock Exchange. The date earned is the last day of each
quarter that the director served in his or her position.)
Dividends on shares accumulated during the year and for
prior years shall be converted on December 31 of each year
and added to the balance of the deferred amount. Dividends
shall be converted to phantom shares using the above
calculation, except that it will be computed on an annual
basis. The Fair Market Value shall be calculated on the
last trading day for that calendar year.
7. Payment of the Balance in the Deferred Account
Participants may not make intra-Plan transfers, i.e., once
an election is made to defer into a specific fund, the
Participant cannot elect to move an account balance into
another fund.
(A) Fixed Income Fund
At the time the Participant executes the Election Form,
the Participant may elect that deferred amounts, including
interest, be paid in a lump sum, or over a specified number
of years (not to exceed 15 years). If the Participant fails
to make an election as to the period of time over which
payments are to be made, payments shall be made over a
10 year period, commencing on the date elected by the
Participant on the Election Form.
Balances in the fixed income fund will continue to earn
interest credit as described above.
Notwithstanding the foregoing provision, the Company
shall have the discretion to accelerate pay-out in the event
of a Participant's disability, death or servere hardship.
<PAGE>
(B) Phantom Stock Fund
At the election of the Participant, made at the time the
Participant executes the Election Form, the Participant
may elect that (i) the balance in his or her phantom
stock account shall be paid in shares, in cash equal
to the value of the shares, or a combination of shares
and cash and (ii) such payment shall be in a lump sum
at the end of the deferral period or over a specified
number of years (not to exceed 15 years) beginning at the
end of the deferral period.
Participant may change the form of payment of the balance
in his or her Phantom Stock Account subject to applicable
law.
If payment is to be in cash and over time as aforesaid, the
unpaid balance will be held in the phantom stock fund and
will continue to earn dividend credit as described above.
If the Participant fails to make an election as to the period
of time over which cash payments are to be made, such payment
shall be made over a ten-year period, beginning at the end
of the deferral period.
8. Previous Deferral Elections
Adoption of the Plan automatically transfers all deferred balances,
for active directors, under the 1995 Deferred Compensation Plan
for Directors, to the Plan. A written election must be made
as to whether the transferred funds are to be held in the fixed
income fund or the phantom stock fund. Transferred funds from
the 95 plan to the phantom stock fund within the Plan will be
converted using the actual Fair Market Value for the quarter
in which the conversion occurs.
9. Funding of the Plan
The deferred dollar amount will be recorded on the Company's
books. During the deferral period, and the payout period,
the director will be a general, unsecured creditor of the
Company.
10. Change of Control
At the time the Participant executes the Election Form, the
Participant may elect to accelerate the payment of all deferred
amounts and receive payment in a lump sum (in cash or shares
or a combination of both, as the case may be) as soon as
practicable after (and in the event that) a Change in Control
occurs. For purposes hereof, "Change in Control" shall mean
an event that would be required to be reported in response
to Item 1 of Form 8-K or any successor form thereto promulgated
under the Securities Exchange Act of 1934.
<TABLE>
<CAPTION>
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12
( in thousands )
Years ended December
31,
1998 1997 1996
<S> <C> <C> <C>
EARNINGS AS DEFINED:
Earnings from operations before income taxes after eliminating
undistributed earnings of 20%- to 50%-owned affiliates $ 229,743 $ 286,135 $ 221,565
Fixed charges excluding capitalized interest and preferred stock
dividends of majority-owned subsidiary companies 52,113 22,618 13,050
Earnings as defined $ 281,856 $ 308,753 $ 234,615
FIXED CHARGES AS DEFINED:
Interest expense, including amortization of debt issue costs $ 47,108 $ 18,543 $ 9,629
Interest capitalized 341 1,193 749
Portion of rental expense representative of the interest factor 5,005 4,075 3,421
Preferred stock dividends of majority-owned subsidiary companies 80 80 80
Fixed charges as defined $ 52,534 $ 23,891 $ 13,879
RATIO OF EARNINGS TO FIXED CHARGES 5.37 12.92 16.90
</TABLE>
<TABLE>
SUBSIDIARIES OF THE COMPANY EXHIBIT 21
<CAPTION>
Jurisidiction of
Name of Subsidiary Incorporation
<S> <C>
BRV, Inc. (Boulder Daily Camera, Bremerton Sun, Redding Record Searchlight,
Ventura County Newspapers) California
Birmingham Post Company (Birmingham Post Herald) Alabama
Channel 7 of Detroit, Inc., (WXYZ) Michigan
Collier County Publishing Company (The Naples Daily News) Florida
Denver Publishing Company (Rocky Mountain News) Colorado
Evansville Courier Company, Inc., 91.5%-owned Indiana
Force V Corporation (Destin Log) Florida
Independent Publishing Company (Anderson Independent Mail) South Carolina
Knoxville News-Sentinel Company Delaware
Memphis Publishing Company, 91.3%-owned (The Commercial Appeal) Delaware
New Mexico State Tribune Company (The Albuquerque Tribune) New Mexico
Scripps Acquisition L.P. (Corpus Christi Caller-Times, Abilene Reporter-News,
Wichita Falls Times Record News, San Angelo Standard-Times) Delaware
Scripps Howard Broadcasting Company, (WMAR, Baltimore;
WCPO, Cincinnati; WEWS, Cleveland; KSHB, Kansas City;
KNXV, Phoenix; KJRH, Tulsa; WPTV, West Palm Beach,
Home & Garden Television, The Television Food Network, G.P. 59% owned,
Scripps Productions) Ohio
Scripps Howard Publishing Co. (Scripps Howard News Service, YP-USA, Ltd, 60% owned) Delaware
Stuart News Company (Stuart News, Jupiter Courier, Vero Beach Press Journal) Florida
Tampa Bay Television, Inc., (WFTS) Delaware
United Feature Syndicate, Inc. (United Media, Newspaper Enterprise Association) New York
</TABLE>
INDEPENDENT AUDITORS' CONSENT EXHIBIT 23
We consent to the incorporation by reference in Registration
Statements Nos. 33-53953, 33-32740, 33-35525, 33-47828, 33-
63398, 33-59701, 333-27621, 333-27623 and 333-40767 of The
E. W. Scripps Company and subsidiary companies on Form S-8
and Registration Statement No. 33-36641 of The E. W. Scripps
Company and subsidiary companies on Form S-3 of our report
dated January 22, 1999 appearing in this Annual Report on
Form 10-K of The E. W. Scripps Company and subsidiary
companies for the year ended December 31, 1998
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
March 8, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 14,400
<SECURITIES> 20,551
<RECEIVABLES> 225,132
<ALLOWANCES> 7,322
<INVENTORY> 15,009
<CURRENT-ASSETS> 407,333
<PP&E> 907,256
<DEPRECIATION> 428,553
<TOTAL-ASSETS> 2,345,112
<CURRENT-LIABILITIES> 532,491
<BONDS> 501,834
0
0
<COMMON> 785
<OTHER-SE> 1,067,947
<TOTAL-LIABILITY-AND-EQUITY> 2,345,112
<SALES> 0
<TOTAL-REVENUES> 1,454,555
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,170,247
<LOSS-PROVISION> 8,264
<INTEREST-EXPENSE> 47,108
<INCOME-PRETAX> 229,162
<INCOME-TAX> 93,075
<INCOME-CONTINUING> 131,214
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 131,214
<EPS-PRIMARY> $1.65
<EPS-DILUTED> $1.62
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 14,316
<SECURITIES> 3,105
<RECEIVABLES> 225,295
<ALLOWANCES> 6,305
<INVENTORY> 13,685
<CURRENT-ASSETS> 373,738
<PP&E> 860,776
<DEPRECIATION> 380,776
<TOTAL-ASSETS> 2,286,483
<CURRENT-LIABILITIES> 435,325
<BONDS> 601,852
0
0
<COMMON> 806
<OTHER-SE> 1,048,156
<TOTAL-LIABILITY-AND-EQUITY> 2,286,483
<SALES> 0
<TOTAL-REVENUES> 1,241,957
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 983,003
<LOSS-PROVISION> 8,130
<INTEREST-EXPENSE> 18,543
<INCOME-PRETAX> 280,301
<INCOME-TAX> 117,510
<INCOME-CONTINUING> 157,702
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 157,702
<EPS-PRIMARY> $1.96
<EPS-DILUTED> $1.93
</TABLE>
