UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number 0-16914
THE E. W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)
Ohio 31-1223339
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
312 Walnut Street
Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (513) 977-3000
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. As of April 30, 2000
there were 59,052,521 of the Registrant's Class A Common Shares outstanding
and 19,216,913 of the Registrant's Common Voting Shares outstanding.
<PAGE>
INDEX TO THE E. W. SCRIPPS COMPANY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000
Item No. Page
PART I - FINANCIAL INFORMATION
1 Financial Statements 3
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 3
3 Quantitative and Qualitative Disclosures About
Market Risk 3
PART II - OTHER INFORMATION
1 Legal Proceedings 3
2 Changes in Securities 3
3 Defaults Upon Senior Securities 3
4 Submission of Matters to a Vote of Security Holders 4
5 Other Information 4
6 Exhibits and Reports on Form 8-K 4
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
The information required by this item is filed as part of this Form 10-Q.
See Index to Financial Information at page F-1 of this Form 10-Q.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is filed as part of this Form 10-Q.
See Index to Financial Information at page F-1 of this Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is filed as part of this Form 10-Q.
See Index to Financial Information at page F-1 of this Form 10-Q.
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in litigation arising in the ordinary course of
business, such as defamation actions and various governmental and
administrative proceedings relating to renewal of broadcast licenses, none
of which is expected to result in material loss.
ITEM 2. CHANGES IN SECURITIES
There were no changes in the rights of security holders during the quarter
for which this report is filed.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the quarter for which
this report is filed.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
quarter for which this report is filed.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
The information required by this item is filed as part of this Form 10-Q.
See Index to Exhibits at page E-1 of this Form 10-Q.
Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this report
is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
THE E. W. SCRIPPS COMPANY
Dated: May 10, 2000 BY: D. J. Castellini
D. J. Castellini
Senior Vice President and
Chief Financial Officer
<PAGE>
THE E. W. SCRIPPS COMPANY
Index to Financial Information
Item Page
Consolidated Balance Sheets F-2
Consolidated Statements of Income F-4
Consolidated Statements of Cash Flows F-5
Consolidated Statements of Comprehensive Income and
Stockholders' Equity F-6
Notes to Consolidated Financial Statements F-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Forward Looking Statements F-13
Results of Operations F-13
Newspapers F-15
Broadcast Television F-16
Category Television F-17
Liquidity and Capital Resources F-18
Market Risk F-19
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
( in thousands ) As of
March 31, December 31, March 31,
2000 1999 1999
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 19,670 $ 10,456 $ 13,574
Accounts and notes receivable (less
allowances -$10,850, $11,266, $9,897) 274,812 280,829 217,844
Program rights and production costs 87,699 93,001 57,755
Network distribution fees 22,220 17,899 12,900
Inventories 17,442 16,235 16,566
Deferred income taxes 27,709 27,769 24,310
Miscellaneous 27,738 31,095 31,489
Total current assets 477,290 477,284 374,438
Investments 275,530 205,864 146,625
Property, Plant and Equipment 484,509 485,596 470,420
Goodwill and Other Intangible Assets 1,222,746 1,191,718 1,199,615
Other Assets:
Program rights and production costs (less current portion) 78,679 75,702 62,550
Network distribution fees (less current portion) 41,353 50,066 57,031
Miscellaneous 33,348 33,974 34,304
Total other assets 153,380 159,742 153,885
TOTAL ASSETS $ 2,613,455 $ 2,520,204 $ 2,344,983
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
( in thousands, except share data ) As of
March 31, December 31, March 31,
2000 1999 1999
(Unaudited) (Unaudited)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 274,126 $ 267,600 $ 230,785
Accounts payable 91,206 116,201 96,312
Customer deposits and unearned revenue 35,964 40,583 38,084
Accrued liabilities:
Employee compensation and benefits 40,681 46,464 39,555
Network distribution fees 40,877 41,712 38,793
Miscellaneous 87,506 64,908 67,503
Total current liabilities 570,360 577,468 511,032
Deferred Income Taxes 167,084 143,912 123,732
Long-Term Debt (less current portion) 501,842 501,847 503,813
Other Long-Term Obligations and Minority Interests (less current portion) 140,141 132,702 123,248
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: 59,033,621; 58,925,449; and 59,102,871 shares 590 589 591
Voting - authorized: 30,000,000 shares; issued and
outstanding: 19,216,913; 19,216,913; and 19,218,913 shares 192 192 192
Total 782 781 783
Additional paid-in capital 139,713 136,731 147,703
Retained earnings 996,085 973,432 891,346
Unrealized gains on securities available for sale 101,573 57,298 46,744
Foreign currency translation adjustment 946 973 320
Unvested restricted stock awards (5,071) (4,940) (3,738)
Total stockholders' equity 1,234,028 1,164,275 1,083,158
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,613,455 $ 2,520,204 $ 2,344,983
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME ( UNAUDITED )
<CAPTION>
( in thousands, except per share data )
Three months ended
March 31,
2000 1999
<S> <C> <C>
Operating Revenues:
Advertising $ 317,699 $ 282,977
Circulation 38,349 40,424
Licensing 16,251 15,766
Joint operating agency distributions 10,883 10,917
Affiliate fees 14,630 11,937
Other 13,047 14,239
Total operating revenues 410,859 376,260
Operating Expenses:
Employee compensation and benefits 127,292 117,980
Newsprint and ink 37,192 37,303
Amortization of purchased programming 28,038 23,587
Other operating expenses 117,272 105,664
Depreciation 17,074 16,353
Amortization of intangible assets 9,734 9,636
Total operating expenses 336,602 310,523
Operating Income 74,257 65,737
Other Credits (Charges):
Interest expense (12,636) (11,073)
Investment results, net of expenses (9,062) (66)
Net gains on divested operations 6,269
Miscellaneous, net 946 1,368
Net other credits (charges) (14,483) (9,771)
Income Before Taxes and Minority Interests 59,774 55,966
Provision for Income Taxes 25,114 22,932
Income Before Minority Interests 34,660 33,034
Minority Interests 1,056 1,033
Net Income $ 33,604 $ 32,001
Net Income per Share of Common Stock:
Basic $.43 $.41
Diluted .43 .40
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS ( UNAUDITED )
<CAPTION>
( in thousands )
Three months ended
March 31,
2000 1999
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 33,604 $ 32,001
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation and amortization 26,808 25,989
Deferred income taxes (613) 3,824
Minority interests in income of subsidiary companies 1,056 1,033
Network distribution fee amortization greater (less) than payments 3,182 (6,598)
Program cost amortization greater (less) than payments (8,950) (13,060)
Other changes in certain working capital accounts, net (4,340) 13,148
Miscellaneous, net 6,570 3,760
Net operating activities 57,317 60,097
Cash Flows from Investing Activities:
Additions to property, plant and equipment (15,014) (14,198)
Purchase of subsidiary company and long-term investments (52,093) (8,835)
Sale of subsidiary companies and long-term investments 24,660
Change in short-term investments, net 20,525
Miscellaneous, net (630) 4,260
Net investing activities (43,077) 1,752
Cash Flows from Financing Activities:
Increase in long-term debt 7,900 759
Payments on long-term debt (1,394) (36,827)
Repurchase Class A Common shares (16,709)
Dividends paid (10,951) (10,970)
Dividends paid to minority interests (392) (392)
Miscellaneous, net (primarily employee stock compensation) (189) 445
Net financing activities (5,026) (63,694)
Increase (Decrease) in Cash and Cash Equivalents 9,214 (1,845)
Cash and Cash Equivalents:
Beginning of year 10,456 15,419
End of period $ 19,670 $ 13,574
Supplemental Cash Flow Disclosures:
Interest paid, excluding amounts capitalized $ 9,236 $ 7,709
Income taxes paid 8,948 11,457
Destin newspaper traded for Fort Pierce newspaper (see Note 2) 3,857
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
AND STOCKHOLDERS' EQUITY ( UNAUDITED )
<CAPTION>
( in thousands, except share data )
Accumulated Unvested
Additional Other Restricted Total
Common Paid-in Retained Comprehensive Stock Stockholders'
Stock Capital Earnings Income Awards Equity
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1998 $ 785 $ 161,878 $ 870,315 $ 39,485 $ (3,731) $ 1,068,732
Comprehensive income:
Net income 32,001 32,001
Unrealized gains, net of deferred tax
of $4,253 7,898 7,898
Less: reclassification adjustment for gains
in income, net of deferred tax of $31 (58) (58)
Increase in unrealized gains on securities 7,840 7,840
Foreign currency translation adjustments (261) (261)
Total 32,001 7,579 39,580
Dividends: declared and paid - $.14 per share (10,970) (10,970)
Repurchase 391,100 Class A Common Shares (4) (16,705) (16,709)
Compensation plans, net: 169,825 shares issued;
821 shares repurchased 2 1,199 (7) 1,194
Tax benefits of compensation plans 1,331 1,331
Balances at March 31, 1999 $ 783 $ 147,703 $ 891,346 $ 47,064 $ (3,738) $ 1,083,158
Balances at December 31, 1999 $ 781 $ 136,731 $ 973,432 $ 58,271 $ (4,940) $ 1,164,275
Comprehensive income:
Net income 33,604 33,604
Unrealized gains, net of deferred tax
of $24,278 45,080 45,080
Less: reclassification adjustment for gains
in income, net of deferred tax of ($433) (805) (805)
Increase in unrealized gains on securities 44,275 44,275
Foreign currency translation adjustments (27) (27)
Total 33,604 44,248 77,852
Dividends: declared and paid - $.14 per share (10,951) (10,951)
Compensation plans, net: 133,251 shares issued;
25,079 shares repurchased 1 1,982 (131) 1,852
Tax benefits of compensation plans 1,000 1,000
Balances at March 31, 2000 $ 782 $ 139,713 $ 996,085 $ 102,519 $ (5,071) $ 1,234,028
See notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
______________________________________________________________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States of America for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The
information disclosed in the notes to consolidated financial
statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999, has not changed materially unless
otherwise disclosed herein. Financial information as of December 31,
1999, included in these financial statements has been derived from the
audited consolidated financial statements included in that report. In
management's opinion all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the interim periods
have been made.
Results of operations are not necessarily indicative of the results
that may be expected for future interim periods or for the full year.
Net Income Per Share - The following table presents additional
information about basic and diluted weighted-average shares
outstanding:
<TABLE>
<CAPTION>
( in thousands )
Three months ended
March 31,
2000 1999
<S> <C> <C>
Basic weighted-average shares outstanding 77,977 78,096
Effect of dilutive securities:
Unvested restricted stock held by employees 116 192
Stock options held by employees 731 838
Diluted weighted-average shares outstanding 78,824 79,126
</TABLE>
Recently Issued Accounting Standards - The Financial Accounting
Standards Board issued FAS No. 133 - Accounting for Derivative
Instruments and Hedging Activities. The standard, which must be
adopted by January 1, 2001, will not have a material effect on the
Company's financial position or its results of operations. Under the
new standard changes in the fair value of foreign currency forward and
option contracts 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 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. The
Company's accounting for put options and zero-cost collars will not
change under the new standard.
The Emerging Issues Task Force reached a consensus on Issue 00-2 -
Accounting for Web Site Development Costs at its March 2000 meeting.
The consensus requires capitalization of certain costs incurred in the
development of Internet sites. The Company currently capitalizes the
cost of computer hardware and software used in the operation of its
Internet sites, however all other development costs are expensed as
incurred. Issue 00-2, which must be adopted by September 2000, will
require the Company to capitalize such development costs, including
graphics and other design costs. The Company has not yet quantified
the impact of this change in accounting policy.
Reclassifications - For comparative purposes, certain 1999 amounts have
been reclassified to conform to 2000 classifications.
<PAGE>
2. ACQUISITIONS AND DIVESTITURES
Acquisitions
2000 - The Company acquired the daily newspaper in Fort Pierce,
Florida, in exchange for its newspaper in Destin, Florida, and
cash, and acquired television station KMCI in Lawrence, Kansas,
which the Company had previously operated under a Local Management
Agreement.
1999 - The Company acquired the 70% of Colorado Real Estate On-Line,
a provider of real estate listings on the Internet, that it did
not already own and acquired an additional 1.86% interest in The
Television Food Network.
The following table presents additional information about the
acquisitions:
<TABLE>
<CAPTION>
( in thousands )
Three months ended March 31,
2000 1999
<S> <C> <C>
Goodwill and other intangible assets acquired $ 44,381 $ 4,250
Other assets acquired 2,646 58
Total 47,027 4,308
Fair value of Destin newspaper (3,857)
Liabilities assumed (38) (806)
Cash paid $ 43,132 $ 3,502
</TABLE>
The acquisitions have been accounted for as purchases. The
allocations of the purchase prices are based on preliminary appraised
values of the assets acquired and liabilities assumed, and are
therefore subject to change. The operating results of the Fort Pierce
newspaper are included in the Consolidated Statements of Income from
the date of acquisition. Pro forma results are not presented because
the combined results of operations would not be significantly
different than the reported amounts. The operating results for KMCI
were included in the Consolidated Statements of Income while the
Company operated the station under the LMA.
Divestitures
2000 - The Company sold its independent telephone directories in
Memphis, Tennessee, Kansas City, Missouri, and North Palm Beach,
Florida, and traded its Destin, Florida, newspaper and cash for
the daily newspaper in Fort Pierce, Florida. The sales and trade
resulted in net gains of $6,300,000, $3,800,000 after-tax ($.05
per share).
Included in the consolidated financial statements are the following
results of divested operations (excluding gains on sales):
<TABLE>
<CAPTION>
( in thousands )
Three months ended March 31,
2000 1999
<S> <C> <C>
Operating revenues $ 5,505 $ 5,197
Operating income 293 285
</TABLE>
<PAGE>
3. UNUSUAL CREDITS AND CHARGES
In addition to the gains on divested operations described in Note 2,
the Company's 2000 net investment income includes i) recognized net
investment losses totaling $2,000,000 and ii) a $7,100,000 increase in
accrued incentive compensation for Scripps Ventures I's portfolio
managers (see Note 5). Net investment results reduced net income
$5,900,000 ($.07 per share). The combined effect of unusual credits
and charges was to reduce net income $2,100,000, ($.02 per share).
4. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
( in thousands ) As of
March 31, December 31, March 31,
2000 1999 1999
<S> <C> <C> <C>
Variable rate credit facilities, including commercial paper $ 573,590 $ 565,689 $ 530,745
$100 million, 6.625% note, due in 2007 99,890 99,887 99,876
$100 million, 6.375% note, due in 2002 99,949 99,944 99,930
Other notes 2,539 3,927 4,047
Total long-term debt 775,968 769,447 734,598
Current portion of long-term debt 274,126 267,600 230,785
Long-term debt (less current portion) $ 501,842 $ 501,847 $ 503,813
</TABLE>
The Company has a Competitive Advance and Revolving Credit Facility
Agreement, which 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 2000, and the other limited
to $300,000,000 principal amount maturing in 2002. Borrowings under
the Variable Rate Credit Facilities are available on a committed
revolving credit basis at the Company's choice of three short-term
rates or through an auction procedure at the time of each borrowing.
The Variable Rate Credit Facilities are also used by the Company in
whole or in part, in lieu of direct borrowings, as credit support for
its commercial paper. The weighted-average interest rates on the
Variable Rate Credit Facilities were 6.1% at March 31, 2000, 6.0% at
December 31, 1999, and 5.0% at March 31, 1999.
<PAGE>
5. INVESTMENTS
Investments consisted of the following:
<TABLE>
<CAPTION>
( in thousands ) As of
March 31, December 31, March 31,
2000 1999 1999
<S> <C> <C> <C>
Securities available for sale (at market value):
Time Warner common stock (1,344,000 shares) $ 134,455 $ 97,227 $ 95,211
Centra Software (1,792,500 common shares) 37,532
garden.com (2,414,000 common shares and 276,000 warrants) 21,098 22,636
iVillage (270,000 common shares) 5,699 5,897
Other 7,686 9,177 5,360
Total available-for-sale securities 206,470 134,937 100,571
Investments accounted for using the equity method 7,210 7,578 7,443
Other (primarily investments in private companies, at adjusted cost) 61,850 63,349 38,611
Total investments $ 275,530 $ 205,864 $ 146,625
Unrealized gains on securities available for sale $ 156,332 $ 88,214 $ 71,928
</TABLE>
Investments available for sale represent securities in publicly traded
companies, and are recorded at fair value. Fair value is based upon the
closing price of the security on the reporting date. In the first
quarter of 2000 Centra Software completed an initial public offering of
its common stock. In the third quarter of 1999 garden.com completed an
initial public offering of its common stock and the Company sold its
interest in Family Point, Inc. to iVillage for cash and stock. These
investments had previously been included in the other category.
The Company intends to sell its iVillage investment in 2000, at the end
of the mandatory lock-up period. The Company has executed a zero-cost
collar on 229,000 iVillage shares, giving the company the right to sell
those shares at prices between $21.02 and $22.65 and giving the counter
party the right to purchase the shares at prices between $24.35 and
$26.24. The closing price of iVillage common stock was $15.50 on
March 31, 2000.
Several of the Company's investments in available-for-sale securities
declined in value after March 31. As of May 9, 2000, the fair value of
the Company's investments in available-for-sale securities was
$151,000,000.
Securities of private companies do not trade in public markets, so they
do not have readily determinable fair values. However, using prices
paid by other investors in the most recent round of financing as the
fair value, the total estimated value of investments in private companies
was $106,000,000 on March 31, 2000.
The Company's Scripps Ventures Funds I and II invest in new businesses
focusing on new media technology and educational media enterprises.
Scripps Ventures I invested $50,000,000. The managers' compensation
includes a share of the portfolio's cumulative net gain (realized and
unrealized) through June 2001 if a specified minimum return is achieved.
This incentive compensation will be paid in 2001. The total accrued
incentive compensation was increased to $14,100,000 at March 31, 2000,
based on the portfolio's net gain of $94,000,000. Scripps Ventures II
is authorized to invest up to $100,000,000, and $15,600,000 was invested
as of March 31, 2000. The managers have a minority equity interest in
the return on Scripps Ventures II's investments if a specified
minimum return is achieved.
<PAGE>
6. SEGMENT INFORMATION
The Company's reportable segments are strategic businesses that offer
different products and services. The Company primarily evaluates the
operating performance of its segments based on earnings before
interest, income taxes, depreciation and amortization ("EBITDA"),
excluding unusual items and all credits and charges classified as non-
operating in the Consolidated Statements of Income. No single
customer provides more than 10% of the Company's revenue. The Company
derives less than 10% of its revenues from markets outside of the U.S.
Financial information for the Company's business segments is as
follows:
<TABLE>
<CAPTION>
( in thousands ) Three months ended
March 31,
2000 1999
<S> <C> <C>
OPERATING REVENUES
Newspapers $ 230,910 $ 222,577
Broadcast television 76,687 75,367
Category television 73,323 48,200
Licensing and other media 29,939 30,116
Total $ 410,859 $ 376,260
EBITDA
Newspapers $ 62,593 $ 65,408
Broadcast television 23,554 21,448
Category television 15,338 4,994
Licensing and other media 4,406 4,251
Corporate (4,826) (4,375)
Total $ 101,065 $ 91,726
DEPRECIATION
Newspapers $ 10,045 $ 9,377
Broadcast television 4,684 4,695
Category television 1,857 1,815
Licensing and other media 251 226
Corporate 237 240
Total $ 17,074 $ 16,353
AMORTIZATION OF INTANGIBLE ASSETS
Newspapers $ 5,591 $ 5,646
Broadcast television 2,352 2,366
Category television 1,727 1,574
Licensing and other media 64 50
Total $ 9,734 $ 9,636
OPERATING INCOME
Newspapers $ 46,957 $ 50,385
Broadcast television 16,518 14,387
Category television 11,754 1,605
Licensing and other media 4,091 3,975
Corporate (5,063) (4,615)
Total $ 74,257 $ 65,737
OTHER NONCASH ITEMS
Broadcast television $ (344) $ 290
Category television (5,424) (19,948)
Total $ (5,768) $ (19,658)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
( in thousands )
Three months ended
March 31,
2000 1999
<S> <C> <C>
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Newspapers $ 3,414 $ 8,700
Broadcast television 8,675 3,073
Category television 906 1,228
Licensing and other media 1,798 487
Corporate 221 710
Total $ 15,014 $ 14,198
BUSINESS ACQUISITIONS AND OTHER ADDITIONS TO LONG-LIVED ASSETS
Newspapers $ 32,001 $ 1,129
Broadcast television 14,605 55
Category television 577 14,739
Licensing and other media 8,956 6,051
Total $ 56,139 $ 21,974
ASSETS
Newspapers $1,238,158 $1,231,383
Broadcast television 498,845 483,494
Category television 475,426 370,465
Licensing and other media 344,974 209,408
Corporate 56,052 50,233
Total $2,613,455 $2,344,983
</TABLE>
Other noncash items include programming and program production
expenses in excess of (less than) the amounts paid, and, for category
television, amortization of network distribution fees in excess of
(less than) distribution fee payments. Other additions to long-lived
assets include investments and network distribution fees. Corporate
assets are primarily cash, investments, and refundable and deferred
income taxes.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company operates in three reportable segments: newspapers,
broadcast television and category television.
FORWARD-LOOKING STATEMENTS
This discussion and the information contained in the notes to the
consolidated financial statements contain certain forward-looking
statements that are based on management's current expectations.
Forward-looking statements are subject to certain risks, trends and
uncertainties that could cause actual results to differ materially
from the expectations expressed in the forward-looking statements.
Such risks, trends and uncertainties, which in most instances are
beyond the Company's control, include changes in advertising demand
and other economic conditions; consumers' taste; newsprint prices;
program costs; labor relations; technological developments;
competitive pressures; interest rates; regulatory rulings; and
reliance on third-party vendors for various products and services.
The words "believe," "expect," "anticipate," "estimate," "intend" and
similar expressions identify forward-looking statements. All forward-
looking statements, which are as of the date of this filing, should be
evaluated with the understanding of their inherent uncertainty.
RESULTS OF OPERATIONS
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 operations were as follows:
<TABLE>
<CAPTION>
( in thousands, except per share data ) Year-to-Date
2000 Change 1999
<S> <C> <C> <C>
Operating revenues:
Newspapers $ 230,024 3.7 % $ 221,752
Broadcast television 76,687 1.8 % 75,367
Category television 73,323 52.1 % 48,200
Licensing and other media 25,320 (1.6)% 25,744
Total 405,354 9.2 % 371,063
Divested operating units 5,505 5,197
Total operating revenues $ 410,859 9.2 % $ 376,260
Operating income:
Newspapers $ 46,874 (6.8)% $ 50,282
Broadcast television 16,518 14.8 % 14,387
Category television 11,754 1,605
Licensing and other media 3,881 2.3 % 3,793
Corporate (5,063) (4,615)
Total 73,964 13.0 % 65,452
Divested operating units 293 285
Total operating income 74,257 13.0 % 65,737
Interest expense (12,636) (11,073)
Investment results, net of expenses (9,062) (66)
Net gains on divested operations 6,269
Miscellaneous, net 946 1,368
Income taxes (25,114) (22,932)
Minority interest (1,056) (1,033)
Net income $ 33,604 5.0 % $ 32,001
Per share of common stock:
Net income $.43 7.5 % $.40
Adjusted net income (excluding investment results
and net gains on divested operations) $.45 $.40
</TABLE>
<PAGE)
Other financial and statistical data, excluding divested operations, is
as follows:
<TABLE>
<CAPTION>
( in thousands ) Year-to-Date
2000 Change 1999
<S> <C> <C> <C>
Total advertising revenues $ 312,442 12.4 % $ 278,016
Advertising revenues as a
percentage of total revenues 77.1 % 74.9 %
EBITDA:
Newspapers $ 62,461 (4.3)% $ 65,259
Broadcast television 23,554 9.8 % 21,448
Category television 15,338 4,994
Licensing and other media 4,174 3.4 % 4,037
Corporate (4,826) (4,375)
Total $ 100,701 10.2 % $ 91,363
Effective income tax rate 42.0 % 41.0 %
Weighted-average shares outstanding 78,824 (0.4)% 79,126
Net cash provided by operating activities $ 57,317 $ 60,097
Capital expenditures (14,991) (14,184)
Business acquisitions and other
additions to long-lived assets (56,139) (21,974)
Increase (decrease) in long-term debt 6,506 (36,068)
Dividends paid, including minority interests (11,343) (11,362)
Purchase and retirement of common stock (16,709)
</TABLE>
Earnings before interest, income taxes, depreciation and amortization
("EBITDA") is included in the discussion of results of operations
because:
Management believes the year-over-year change in EBITDA, combined
with information on past and future capital spending, is a more
useful and reliable measure of year-over-year performance than the
change in operating income.
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.
In the first quarter of 2000 the Company acquired the daily newspaper in
Fort Pierce, Florida, in exchange for its newspaper in Destin, Florida,
and cash, and acquired television station KMCI in Lawrence, Kansas,
which the Company had previously operated under a Local Management
Agreement. In the first quarter of 1999 the Company acquired the 70% of
Colorado Real Estate On-line, a provider of real estate listings on the
Internet, that it did not already own and acquired an additional
1.86% interest in The Television Food Network.
In the first quarter of 2000 the Company also sold its independent
telephone directories in Memphis, Tennessee, Kansas City, Missouri, and
North Palm Beach, Florida. The sales and trade resulted in net gains of
$6.3 million, $3.8 million after-tax ($.05 per share). In addition, net
investment income includes i) net recognized investment losses of $2.0
million and ii) a $7.1 million increase in accrued incentive
compensation for Scripps Ventures I's portfolio managers (see Note 5 to
the Consolidated Financial Statements). Net investment results reduced
net income $5.9 million ($.07 per share).
Excluding the items described above, first quarter earnings per share
were $.45 in 2000 versus $.40 in 1999.
Operating results for each of the Company's reportable segments,
excluding divested operating units, are presented on the following
pages. Interest expense increased primarily due to higher rates on the
Company's variable rate borrowings.
<PAGE>
NEWSPAPERS - Operating results, excluding divested operations, were as
follows:
<TABLE>
<CAPTION>
( in thousands ) Year-to-Date
2000 Change 1999
<S> <C> <C> <C>
Operating revenues:
Local $ 67,539 0.6 % $ 67,106
Classified 73,787 9.2 % 67,599
National 8,779 5.9 % 8,292
Preprint and other 27,229 13.4 % 24,021
Newspaper advertising 177,334 6.2 % 167,018
Circulation 38,289 (5.2)% 40,370
Joint operating agency distributions 10,883 (0.3)% 10,917
Other 3,518 2.1 % 3,447
Total operating revenues 230,024 3.7 % 221,752
Operating expenses, excluding depreciation and amortizataion:
Editorial and newspaper content 26,818 5.3 % 25,479
Newsprint and ink 36,230 (0.3)% 36,325
Other press and production 23,778 8.2 % 21,979
Circulation and distribution 28,131 16.7 % 24,107
Commercial printing and other 8,241 44.0 % 5,723
Advertising sales and marketing 22,078 11.1 % 19,878
General and administrative 22,287 (3.1)% 23,002
Total 167,563 7.1 % 156,493
EBITDA 62,461 (4.3)% 65,259
Depreciation and amortization 15,587 4.1 % 14,977
Operating income $ 46,874 (6.8)% $ 50,282
Other Financial and Statistical Data:
Percent of operating revenues:
EBITDA 27.2 % 29.4 %
Operating income 20.4 % 22.7 %
Capital expenditures $ 3,414 $ 8,686
Business acquisitions and other
additions to long-lived assets 32,001 1,129
</TABLE>
Circulation revenue decreased primarily due to promotions and
discounts offered in the Denver market. Circulation and distribution
costs increased due to the effort to gain market share in Denver.
Excluding Denver, EBITDA increased 1%.
Newsprint prices decreased 9%, which was offset by a 9% increase in
newsprint consumed. The increase in consumption is primarily due to
an 18% year-over-year increase in circulation in the Denver market.
The newspapers' Internet businesses had EBITDA of $(1.0) million,
compared to $(0.2) million in the first quarter of 1999.
<PAGE>
BROADCAST TELEVISION - Operating results were as follows:
<TABLE>
<CAPTION>
( in thousands ) Year-to-Date
2000 Change 1999
<S> <C> <C> <C>
Operating revenues:
Local $ 41,079 (0.5)% $ 41,303
National 30,052 3.8 % 28,939
Political 1,741 364
Other 3,815 (19.9)% 4,761
Total operating revenues 76,687 1.8 % 75,367
Operating expenses, excluding depreciation and amortization:
Programming and station operations 37,287 (1.2)% 37,726
Sales and marketing 9,891 5.7 % 9,355
General and administrative 5,955 (12.9)% 6,838
Total 53,133 (1.5)% 53,919
EBITDA 23,554 9.8 % 21,448
Depreciation and amortization 7,036 (0.4)% 7,061
Operating income $ 16,518 14.8 % $ 14,387
Other Financial and Statistical Data:
Percent of operating revenues:
EBITDA 30.7 % 28.5 %
Operating income 21.5 % 19.1 %
Capital expenditures $ 8,675 $ 3,073
Business acquisitions and other
additions to long-lived assets 14,605 55
</TABLE>
EBITDA improved primarily due to increased political advertising and
cost reduction initiatives.
Other revenue is primarily network compensation. The Company's network
compensation revenues decreased $1.2 million in the first quarter of
2000, and are expected to be down approximately $3.0 million, to $10.0
million, for the full year.
<PAGE>
CATEGORY TELEVISION - Operating results were as follows:
<TABLE>
<CAPTION>
( in thousands ) Year-to-Date
2000 Change 1999
<S> <C> <C> <C>
Operating revenues:
Advertising $ 57,475 71.5 % $ 33,505
Affiliate fees 14,630 22.6 % 11,937
Other 1,218 (55.8)% 2,758
Total operating revenues 73,323 52.1 % 48,200
Operating expenses, excluding depreciation and amortization:
Programming and production 19,958 29.9 % 15,370
Operations and distribution 8,516 49.0 % 5,716
Amortization of distribution fees 4,396 1.7 % 4,322
Sales and marketing 14,586 29.8 % 11,237
General and administrative 11,488 64.1 % 6,999
Total 58,944 35.1 % 43,644
EBITDA - consolidated networks 14,379 4,556
Share of pre-tax earnings of equity-method investments 959 438
Total EBITDA 15,338 4,994
Depreciation and amortization 3,584 5.8 % 3,389
Operating income (loss) $ 11,754 $ 1,605
Other Financial and Statistical Data:
Percent of operating revenues:
EBITDA 20.9 % 10.4 %
Operating income 16.0 % 3.3 %
Payments for programming and network
distribution fees less than (greater than)
amounts recognized as expense $ (5,424) $ (19,948)
Capital expenditures 906 1,228
Business acquisitions and other
additions to long-lived assets 577 14,739
</TABLE>
According to the Nielsen Homevideo Index ("Nielsen"), HGTV was
distributed to 60.5 million homes in March 2000, up 8.6 million from
March 1999 and up 1.5 million in the quarter. Food Network was
distributed to 46.4 million homes in March 2000, up 7.3 million from
March 1999 and up 2.2 million in the quarter.
The Company launched DIY, its third network, in the fourth quarter of
1999. DIY had EBITDA of $(2.0) million in the first quarter of 2000.
HGTV's and Food Network's Internet businesses had EBITDA of $(1.7)
million in the first quarter of 2000, versus breakeven last year,
primarily due to promotional spending for foodtv.com.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company generates significant cash flow from operating activities.
There are no significant legal or other restrictions on the transfer
of funds among the Company's business segments. Cash flow provided by
operating activities in excess of capital expenditures is used
primarily to fund corporate expenditures or to invest in new
businesses. Management expects total cash flow from operating
activities in 2000 will be sufficient to meet the Company's expected
total capital expenditures, required interest payments and dividend
payments.
Management is authorized to repurchase an additional 2.2 million
shares of the Company's Class A Common shares under a 1998
authorization from the Board of Directors.
The Company's Scripps Ventures Funds invest in new businesses focusing
on new media technology and educational media enterprises. See Note 5
to the Consolidated Financial Statements. The Board of Directors has
authorized up to $150 million of such investments. At March 31, 2000,
an additional $84 million remains to be invested under the
authorization.
Net debt (borrowings less cash equivalent and other short-term
investments) increased $6.3 million, to $776 million at March 31,
2000. The Company currently intends to repay debt only when there are
not more productive uses for excess cash. The Company expects to
extend the $400 million one-year portion of its variable credit
facility, or to refinance borrowings under that line.
Management believes the Company's cash flow from operations and
substantial borrowing capacity, taken together, provide adequate
resources to fund expansion of existing businesses and the development
or acquisition of new businesses.
<PAGE>
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. The information disclosed in Market Risk in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999, has
not changed materially unless otherwise disclosed here-in.
The Company may use foreign currency forward and option contracts to
hedge its cash flow exposures denominated in Japanese yen and forward
contracts to reduce the risk of changes in the price of newsprint
on anticipated newsprint purchases. The Company held no foreign
currency or newsprint forward contracts at March 31, 2000,
or December 31, 1999.
The following table presents additional information about the Company's
market-risk-sensitive financial instruments:
<TABLE>
<CAPTION>
( in thousands ) As of March 31, 2000 As of December 31, 1999
Cost Fair Cost Fair
Basis Value Basis Value
<S> <C> <C> <C> <C>
Financial instruments subject to interest rate risk:
Variable rate credit facilities, including
commercial paper $ 573,590 $ 573,590 $ 565,689 $ 565,689
$100 million, 6.625% note, due in 2007 99,890 95,000 99,887 94,668
$100 million, 6.375% note, due in 2002 99,949 98,000 99,944 98,107
Other notes 2,539 1,510 3,927 2,836
Total long-term debt $ 775,968 $ 768,100 $ 769,447 $ 761,300
Financial instruments subject to market value risk:
Time Warner common stock (1,344,000 shares) $ 27,814 $ 134,455 $ 27,816 $ 97,227
Centra Software (1,792,500 common shares) 3,652 37,532
garden.com Inc. (2,414,000 common shares
and 276,000 warrants) 9,628 21,098 9,625 22,636
iVillage Inc. (270,000 common shares) 5,892 5,699 5,897 5,897
Other available-for-sale securities 3,152 7,686 3,385 9,177
Total investments in publicly-traded companies 50,138 206,470 46,723 134,937
Investments in private companies 61,850 (a) 63,349 (a)
(a) Investments in private companies do not trade in public markets,
so they do not have readily determinable fair values. However,
based upon amounts paid for such securities by other investors
in subsequent rounds of financing, if any, the estimated value
of these investments exceeded their cost by approximately
$44,200,000 on March 31, 2000.
</TABLE>
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
to manage its interest rate risk. See Note 4 to the Consolidated
Financial Statements. The weighted-average interest rate on borrowings
under the Variable Rate Credit Facilities was 6.1% at March 31, 2000
and 6.0% at December 31, 1999.
The Company holds 1,792,500 shares of Centra Software, which became
publicly traded in January 2000. The Company's investment in Centra
Software had previously been included in private companies in the
above table. The estimated fair value of the Centra Software investment
on December 31, 1999, was $6 million.
Several of the Company's investments in publicly-traded companies declined
in value after March 31. As of May 9, 2000, the fair value of the
Company's investments in publicly-traded companies was $151 million.
<PAGE>
THE E. W. SCRIPPS COMPANY
Index to Exhibits
Exhibit
No. Item Page
12 Ratio of Earnings to Fixed Charges E-2
<TABLE>
RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12
<CAPTION>
( in thousands )
Three months ended
March 31,
2000 1999
<S> <C> <C>
EARNINGS AS DEFINED:
Earnings from operations before income taxes after
eliminating undistributed earnings of 20%- to
50%-owned affiliates $ 60,335 $ 56,346
Fixed charges excluding capitalized interest and
preferred stock dividends of majority-owned
subsidiary companies 14,447 12,408
Earnings as defined $ 74,782 $ 68,754
FIXED CHARGES AS DEFINED:
Interest expense, including amortization of
debt issue costs $ 12,636 $ 11,073
Interest capitalized 14 11
Portion of rental expense representative
of the interest factor 1,811 1,335
Preferred stock dividends of majority-owned
subsidiary companies 20 20
Fixed charges as defined $ 14,481 $ 12,439
RATIO OF EARNINGS TO FIXED CHARGES 5.16 5.53
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 19,670
<SECURITIES> 0
<RECEIVABLES> 285,662
<ALLOWANCES> 10,850
<INVENTORY> 17,442
<CURRENT-ASSETS> 477,290
<PP&E> 950,556
<DEPRECIATION> 466,047
<TOTAL-ASSETS> 2,613,455
<CURRENT-LIABILITIES> 570,360
<BONDS> 501,842
0
0
<COMMON> 782
<OTHER-SE> 1,233,246
<TOTAL-LIABILITY-AND-EQUITY> 2,613,455
<SALES> 0
<TOTAL-REVENUES> 410,859
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 333,612
<LOSS-PROVISION> 2,990
<INTEREST-EXPENSE> 12,636
<INCOME-PRETAX> 59,774
<INCOME-TAX> 25,114
<INCOME-CONTINUING> 33,604
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,604
<EPS-BASIC> $.43
<EPS-DILUTED> $.43
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 13,574
<SECURITIES> 0
<RECEIVABLES> 227,741
<ALLOWANCES> 9,897
<INVENTORY> 16,566
<CURRENT-ASSETS> 374,438
<PP&E> 904,432
<DEPRECIATION> 434,012
<TOTAL-ASSETS> 2,344,983
<CURRENT-LIABILITIES> 511,032
<BONDS> 503,813
0
0
<COMMON> 783
<OTHER-SE> 1,082,375
<TOTAL-LIABILITY-AND-EQUITY> 2,344,983
<SALES> 0
<TOTAL-REVENUES> 376,260
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 307,718
<LOSS-PROVISION> 2,805
<INTEREST-EXPENSE> 11,073
<INCOME-PRETAX> 55,966
<INCOME-TAX> 22,932
<INCOME-CONTINUING> 32,001
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,001
<EPS-BASIC> $.41
<EPS-DILUTED> $.40
</TABLE>
