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 September 30, 2001
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
incorporation or organization) |
(I.R.S. Employer
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 October 31, 2001 there were 60,026,678 of the Registrant's Class A Common Shares outstanding and 19,096,913 of the Registrant's Common Voting Shares outstanding.
| INDEX TO THE E. W. SCRIPPS COMPANY
|
|||
| REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2001
|
|||
| |
|||
| 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 | |
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.
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.
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.
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: | November 13, 2001 | BY: | D. J. Castellini | |
| |
||||
| D. J. Castellini | ||||
| Senior Vice President and Chief Financial Officer | ||||
THE E. W. SCRIPPS COMPANY
Index to Financial Information
| CONSOLIDATED BALANCE SHEETS | |||||||||
| ( in thousands ) | September 30,
2001 |
As of
December 31, 2000 |
September 30,
2000 |
||||||
( Unaudited )
|
( Unaudited )
|
||||||||
| |
|||||||||
| ASSETS | |||||||||
| Current Assets: | |||||||||
| Cash and cash equivalents | $ | 15,332 | $ | 14,112 | $ | 18,599 | |||
| Accounts and notes receivable (less | |||||||||
| allowances -$14,304, $13,891, $14,608) | 228,734 | 289,583 | 255,822 | ||||||
| Program rights and production costs | 145,432 | 115,513 | 117,445 | ||||||
| Network distribution fees | 23,219 | 21,105 | 19,671 | ||||||
| Inventories | 7,521 | 17,802 | 18,905 | ||||||
| Deferred income taxes | 30,747 | 30,421 | 28,404 | ||||||
| Miscellaneous | 36,217 | 35,449 | 32,261 | ||||||
| | |||||||||
| Total current assets | 487,202 | 523,985 | 491,107 | ||||||
| |
|||||||||
| Investments | 355,261 | 177,922 | 230,756 | ||||||
| |
|||||||||
| Property, Plant and Equipment | 387,438 | 502,041 | 484,149 | ||||||
| |
|||||||||
| Goodwill and Other Intangible Assets | 1,191,285 | 1,209,132 | 1,201,281 | ||||||
| |
|||||||||
| Other Assets: | |||||||||
| Program rights and production costs (less current portion) | 91,770 | 96,881 | 86,437 | ||||||
| Network distribution fees (less current portion) | 53,404 | 40,571 | 45,231 | ||||||
| Miscellaneous | 19,414 | 22,334 | 24,860 | ||||||
| |
|||||||||
| Total other assets | 164,588 | 159,786 | 156,528 | ||||||
| |
|||||||||
| TOTAL ASSETS | $ | 2,585,774 | $ | 2,572,866 | $ | 2,563,821 | |||
| |
|||||||||
See notes to consolidated financial statements.
F-2
| CONSOLIDATED BALANCE SHEETS |
| |
| ( in thousands, except share data ) |
| September 30,
2001 (Unaudited) |
As of
December 31, 2000 |
September 30,
|
|||||||
| |
|||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Current Liabilities: | |||||||||
| Current portion of long-term debt | $
|
460,630 | $
|
212,828 | $
|
209,237 | |||
| Accounts payable | 84,762 | 114,275 | 103,604 | ||||||
| Customer deposits and unearned revenue | 32,686 | 37,214 | 32,988 | ||||||
| Accrued liabilities: | |||||||||
| Employee compensation and benefits | 44,762 | 49,089 | 62,910 | ||||||
| Network distribution fees | 67,407 | 48,257 | 47,808 | ||||||
| Miscellaneous | 85,056 | 71,313 | 65,523 | ||||||
| |
|||||||||
| Total current liabilities | 775,303 | 532,976 | 522,070 | ||||||
| |
|||||||||
| Deferred Income Taxes | 138,767 | 129,932 | 148,345 | ||||||
| |
|||||||||
| Long-Term Debt (less current portion) | 209,814 | 501,781 | 501,788 | ||||||
| |
|||||||||
| Other Long-Term Obligations and Minority Interests (less current portion) | 127,953 | 130,367 | 129,182 | ||||||
| |
|||||||||
| 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: 60,020,711; 59,641,828; and 59,399,794 shares | 600 | 596 | 594 | ||||||
| Voting - authorized: 30,000,000 shares; issued and | |||||||||
| outstanding: 19,096,913; 19,096,913; and 19,216,913 shares | 191 | 191 | 192 | ||||||
| |
|||||||||
| Total | 791 | 787 | 786 | ||||||
| Additional paid-in capital | 170,844 | 157,394 | 156,140 | ||||||
| Retained earnings | 1,185,918 | 1,093,138 | 1,055,849 | ||||||
| Unrealized gains on securities available for sale | (12,546 | ) | 31,877 | 57,891 | |||||
| Foreign currency translation adjustment | (203 | ) | 361 | 602 | |||||
| Unvested restricted stock awards | (10,867 | ) | (5,747 | ) | (8,832 | ) | |||
| |
|||||||||
| Total stockholders' equity | 1,333,937 | 1,277,810 | 1,262,436 | ||||||
| |
|||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $
|
2,585,774 | $
|
2,572,866 | $
|
2,563,821 | |||
| |
|||||||||
See notes to consolidated financial statements.
F-3
CONSOLIDATED STATEMENTS OF INCOME ( UNAUDITED )| ( in thousands, except per share data ) | Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| 2001 | 2000 | 2001 | 2000 | ||||||||||||||
| |
|||||||||||||||||
| Operating Revenues: | |||||||||||||||||
| Advertising | $ | 247,617 | $ | 319,231 | $ | 804,841 | $ | 982,856 | |||||||||
| Circulation | 34,850 | 35,162 | 105,090 | 110,059 | |||||||||||||
| Affiliate fees | 20,556 | 14,464 | 60,248 | 43,629 | |||||||||||||
| Licensing | 14,269 | 16,731 | 49,520 | 50,391 | |||||||||||||
| Joint operating agency distributions | 14,280 | 11,924 | 31,064 | 35,073 | |||||||||||||
| Other | 10,527 | 12,346 | 32,768 | 38,167 | |||||||||||||
| |
|||||||||||||||||
| Total operating revenues | 342,099 | 409,858 | 1,083,531 | 1,260,175 | |||||||||||||
| |
|||||||||||||||||
| Operating Expenses: | |||||||||||||||||
| Employee compensation and benefits | 114,588 | 129,672 | 351,430 | 386,278 | |||||||||||||
| Newsprint and ink | 20,035 | 38,228 | 68,659 | 114,066 | |||||||||||||
| Amortization of purchased programming | 33,971 | 30,176 | 99,760 | 87,546 | |||||||||||||
| Other operating expenses | 88,768 | 110,143 | 291,883 | 347,423 | |||||||||||||
| Depreciation | 13,189 | 17,209 | 41,141 | 51,468 | |||||||||||||
| Amortization of intangible assets | 10,793 | 10,079 | 32,323 | 29,884 | |||||||||||||
| |
|||||||||||||||||
| Total operating expenses | 281,344 | 335,507 | 885,196 | 1,016,665 | |||||||||||||
| |
|||||||||||||||||
| Operating Income | 60,755 | 74,351 | 198,335 | 243,510 | |||||||||||||
| |
|||||||||||||||||
| Other Credits (Charges): | |||||||||||||||||
| Interest expense | (8,417 | ) | (13,393 | ) | (31,737 | ) | (39,510 | ) | |||||||||
| Investment results, net of expenses | (10,917 | ) | 900 | 50,825 | (9,611 | ) | |||||||||||
| Net gains on divested operations | (73 | ) | 6,196 | ||||||||||||||
| Miscellaneous, net | 240 | 1,002 | 1,073 | 1,993 | |||||||||||||
| |
|||||||||||||||||
| Net other credits (charges) | (19,094 | ) | (11,564 | ) | 20,161 | (40,932 | ) | ||||||||||
| |
|||||||||||||||||
| Income Before Taxes and Minority Interests | 41,661 | 62,787 | 218,496 | 202,578 | |||||||||||||
| Provision for Income Taxes | 18,023 | 26,319 | 87,249 | 84,266 | |||||||||||||
| |
|||||||||||||||||
| Income Before Minority Interests | 23,638 | 36,468 | 131,247 | 118,312 | |||||||||||||
| Minority Interests | 1,005 | 1,040 | 2,826 | 3,159 | |||||||||||||
| |
|||||||||||||||||
| Net Income | $ | 22,633 | $ | 35,428 | $ | 128,421 | $ | 115,153 | |||||||||
| |
|||||||||||||||||
| Net Income per Share of Common Stock: | |||||||||||||||||
| Basic | $.29 | $.45 | $1.63 | $1.47 | |||||||||||||
| Diluted | .28 | .45 | 1.61 | 1.46 | |||||||||||||
| |
|||||||||||||||||
See notes to consolidated financial statements.
F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS ( UNAUDITED )| ( in thousands ) | Nine months ended | ||||||||
| September 30, | |||||||||
| 2001 | 2000 | ||||||||
| |
|||||||||
| Cash Flows from Operating Activities: | |||||||||
| Net income | $ | 128,421 | $ | 115,153 | |||||
| Adjustments to reconcile net income | |||||||||
| to net cash flows from operating activities: | |||||||||
| Depreciation and amortization | 73,464 | 81,352 | |||||||
| Net investment results and loss (gain) on divestitures | (54,270 | ) | 4,315 | ||||||
| Deferred income taxes | 32,657 | 3,298 | |||||||
| Dividends greater than share of earnings of equity method investments | 21,382 | 515 | |||||||
| Minority interests in income of subsidiary companies | 2,826 | 3,159 | |||||||
| Network distribution fee amortization greater (less) than payments | 3,323 | 8,172 | |||||||
| Program cost amortization greater (less) than payments | (23,516 | ) | (24,841 | ) | |||||
| Other changes in certain working capital accounts, net | 15,445 | (7,556 | ) | ||||||
| Miscellaneous, net | 15,777 | 8,371 | |||||||
| |
|||||||||
| Net operating activities | 215,509 | 191,938 | |||||||
| |
|||||||||
| Cash Flows from Investing Activities: | |||||||||
| Additions to property, plant and equipment | (46,054 | ) | (44,535 | ) | |||||
| Purchase of subsidiary companies and long-term investments | (33,595 | ) | (112,156 | ) | |||||
| Payment for interest in Denver JOA | (62,117 | ) | |||||||
| Sale of subsidiary companies and long-term investments | 14,694 | 50,963 | |||||||
| Miscellaneous, net | 1,508 | 10,695 | |||||||
| |
|||||||||
| Net investing activities | (125,564 | ) | (95,033 | ) | |||||
| |
|||||||||
| Cash Flows from Financing Activities: | |||||||||
| Increase in long-term debt | 8,059 | 737 | |||||||
| Payments on long-term debt | (52,249 | ) | (58,270 | ) | |||||
| Repurchase Class A Common shares | (20,671 | ) | |||||||
| Dividends paid | (35,641 | ) | (32,913 | ) | |||||
| Dividends paid to minority interests | (1,176 | ) | (1,175 | ) | |||||
| Miscellaneous, net (primarily employee stock compensation) | 12,953 | 2,859 | |||||||
| |
|||||||||
| Net financing activities | (88,725 | ) | (88,762 | ) | |||||
| |
|||||||||
| Increase in Cash and Cash Equivalents | 1,220 | 8,143 | |||||||
| Cash and Cash Equivalents: | |||||||||
| Beginning of year | 14,112 | 10,456 | |||||||
| |
|||||||||
| End of period | $ | 15,332 | $ | 18,599 | |||||
| |
|||||||||
| |
|||||||||
| Supplemental Cash Flow Disclosures: | |||||||||
| Interest paid, excluding amounts capitalized | $ | 27,946 | $ | 35,691 | |||||
| Income taxes paid | 26,964 | 81,094 | |||||||
| Denver newspaper assets contributed to JOA | 160,064 | ||||||||
| Destin newspaper traded for Fort Pierce newspaper (see Note 2) | 3,857 | ||||||||
| |
|||||||||
See notes to consolidated financial statements.
F-5
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND STOCKHOLDERS’ EQUITY ( UNAUDITED )
| |
|
||||||||||||||||||||||||||||
| ( in thousands, except share data ) | |||||||||||||||||||||||||||||
| Accumulated | Unvested | Comprehensive | |||||||||||||||||||||||||||
| Additional | Other | Restricted | Total | Income for the | |||||||||||||||||||||||||
| Common | Paid-in | Retained | Comprehensive | Stock | Stockholders’ | Three Months | |||||||||||||||||||||||
| Stock | Capital | Earnings | Income | Awards | Equity | Ended Sept. 30 | |||||||||||||||||||||||
| |
|
||||||||||||||||||||||||||||
| Balances at December 31, 1999 | $ | 781 | $ | 136,731 | $ | 973,609 | $ | 58,271 | $ | (4,940 | ) | $ | 1,164,452 | ||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||||||||
| Net income | 115,153 | 115,153 | $ | 35,428 | |||||||||||||||||||||||||
| |
|
||||||||||||||||||||||||||||
| Unrealized gains, net of tax of $710 and ($816) | 1,406 | 1,406 | (1,418 | ) | |||||||||||||||||||||||||
| Less: reclassification adjustment for gains in income, net of tax of ($438) and ($4) | (813 | ) | (813 | ) | (8 | ) | |||||||||||||||||||||||
| |
|
||||||||||||||||||||||||||||
| Increase (decrease) in unrealized gains on securities | 593 | 593 | (1,426 | ) | |||||||||||||||||||||||||
| Foreign currency translation adjustments | (371 | ) | (371 | ) | (98 | ) | |||||||||||||||||||||||
| |
|
||||||||||||||||||||||||||||
| Total | 115,153 | 222 | 115,375 | $ | 33,904 | ||||||||||||||||||||||||
| |
|||||||||||||||||||||||||||||
| Dividends: declared and paid - $.42 per share | (32,913 | ) | (32,913 | ) | |||||||||||||||||||||||||
| Compensation plans, net: 502,895 shares issued; 1,500 shares forfeited; 27,050 shares repurchased | 5 | 17,549 | (3,892 | ) | 13,662 | ||||||||||||||||||||||||
| Tax benefits of compensation plans | 1,860 | 1,860 | |||||||||||||||||||||||||||
| |
|||||||||||||||||||||||||||||
| Balances at September 30, 2000 | $ | 786 | $ | 156,140 | $ | 1,055,849 | $ | 58,493 | $ | (8,832 | ) | $ | 1,262,436 | ||||||||||||||||
| |
|||||||||||||||||||||||||||||
| Balances at December 31, 2000 | $ | 787 | $ | 157,394 | $ | 1,093,138 | $ | 32,238 | $ | (5,747 | ) | $ | 1,277,810 | ||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||||||||
| Net income | 128,421 | 128,421 | $ | 22,633 | |||||||||||||||||||||||||
| |
|
||||||||||||||||||||||||||||
| Unrealized gains, net of tax of $3,065 and ($16,590) | 6,116 | 6,116 | (30,407 | ) | |||||||||||||||||||||||||
| Less: reclassification adjustment for gains in income, net of tax of ($27,213) and ($48) | (50,539 | ) | (50,539 | ) | (89 | ) | |||||||||||||||||||||||
| |
|
||||||||||||||||||||||||||||
| Increase (decrease) in unrealized gains on securities | (44,423 | ) | (44,423 | ) | (30,496 | ) | |||||||||||||||||||||||
| Foreign currency translation adjustments | (564 | ) | (564 | ) | (145 | ) | |||||||||||||||||||||||
| |
|
||||||||||||||||||||||||||||
| Total | 128,421 | (44,987 | ) | 83,434 | $ | (8,008 | ) | ||||||||||||||||||||||
| |
|||||||||||||||||||||||||||||
| Dividends: declared and paid - $.45 per share | (35,641 | ) | (35,641 | ) | |||||||||||||||||||||||||
| Repurchase 352,200 Class A Common Shares | (4 | ) | (20,667 | ) | (20,671 | ) | |||||||||||||||||||||||
| Compensation plans, net: 843,008 shares issued; 109,425 shares repurchased; 2,500 shares forfeited | 8 | 25,214 | (5,120 | ) | 20,102 | ||||||||||||||||||||||||
| Tax benefits of compensation plans | 8,903 | 8,903 | |||||||||||||||||||||||||||
| |
|||||||||||||||||||||||||||||
| Balances at September 30, 2001 | $ | 791 | $ | 170,844 | $ | 1,185,918 | $ | (12,749 | ) | $ | (10,867 | ) | $ | 1,333,937 | |||||||||||||||
| |
|||||||||||||||||||||||||||||
See notes to consolidated financial statements.
F-6
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, 2000, has not changed materially unless otherwise disclosed herein. Financial information as of December 31, 2000, 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.
Joint Operating Agencies - The application for a joint operating agency (“JOA”) between the Company’s Denver Rocky Mountain News (“RMN”) and MediaNews Group Inc.’s Denver Post was approved in January 2001 by the U.S. Department of Justice. The JOA commenced operations on January 22, 2001. The Denver Publishing Company, a wholly owned subsidiary of the Company, holds a 50% interest in the JOA.
Included in JOA distributions in the Consolidated Statements of Income is the Company’s share of the operating profit (loss) of the Denver JOA from January 22, 2001. The Company also includes in its operating expenses its editorial costs associated with the RMN. The Company’s financial statements no longer include the advertising and other revenue of the RMN, the costs to produce, distribute and market the newspaper, nor related depreciation. The Company’s residual interest in the net assets of the JOA is included in Investments in the Consolidated Balance Sheets.
Derivative Instruments and Hedging Activities - The Company adopted Financial Accounting Standard (“FAS”) No. 133 – Accounting for Derivative Instruments and Hedging Activities effective January 1, 2001. Adoption of the new standard had no effect on the Company’s financial statements.
Net Income Per Share - The following table presents additional information about basic and diluted weighted-average shares outstanding:
| |
|||||||||
| ( in thousands ) | Three months ended | Nine months ended | |||||||
| September 30, | September 30, | ||||||||
| 2001 | 2000 | 2001 | 2000 | ||||||
| |
|||||||||
| Basic weighted-average shares outstanding | 78,977 | 78,186 | 78,847 | 78,114 | |||||
| Effect of dilutive securities: | |||||||||
| Unvested restricted stock held by employees | 180 | 185 | 162 | 145 | |||||
| Stock options held by employees | 1,010 | 802 | 1,002 | 760 | |||||
| |
|||||||||
| Diluted weighted-average shares outstanding | 80,167 | 79,173 | 80,011 | 79,019 | |||||
| |
|||||||||
Recently Issued Accounting Standards - The Emerging Issues Task Force reached a consensus on Issue 00-25 - Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor’s Products in April 2001. The consensus, which must be adopted no later than January 1, 2002, requires consideration paid to customers to be deducted from revenue. The Company currently classifies amortization of distribution fees paid to cable television and satellite broadcast systems as an operating expense in its financial statements.
The Company plans to adopt this policy effective with its Annual Report on Form 10-K for the year ended December 31, 2001. Financial statements for prior periods will be restated. The change in classification will have no impact on the Company’s reported operating income or financial position. However, operating revenues will be reduced by the amounts of amortization of distribution fees, which in the nine months ended September 30 totaled $17,000,000 in 2001 and $13,900,000 in 2000.
F-7
In July 2001 the Financial Accounting Standards Board issued FAS No. 141 - Business Combinations and FAS No. 142 - Goodwill and Other Intangible Assets. FAS No. 141 requires business combinations initiated after June 30, 2001, to be accounted for using the purchase method of accounting. FAS 141 also specifies the types of acquired intangible assets that are required to be recognized and reported separately from goodwill. Intangible assets acquired that are obtained through contractual or legal right, or are capable of being separately sold, transferred, licensed, rented or exchanged are recognized as an asset apart from goodwill. Intangible assets that do not meet the requirements for recognition apart from goodwill are subsumed into goodwill.
The Company will adopt FAS 142 effective January 1, 2002. Upon adoption management will assess the estimated useful lives of intangible assets. Recorded goodwill and intangible assets with indefinite lives will no longer be amortized, but instead will be tested for impairment at least annually. Goodwill and intangible assets with indefinite lives acquired in business combinations completed before July 1, 2001, will continue to be amortized until December 31, 2001. Other intangible assets will be amortized over their respective estimated useful lives and reviewed for impairment in accordance with FAS 121 - Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
Upon adoption of FAS 142, the Company will make a transitional evaluation of whether goodwill is impaired. To accomplish this, the Company must (i) identify its reporting units, (ii) determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets to those reporting units, and (iii) determine whether the carrying value of each reporting unit exceeds fair value. This first step of the transitional assessment must be completed by June 30, 2002. If the carrying value of any reporting unit exceeds its fair value, then detailed fair values for each of the assigned assets (excluding goodwill) and liabilities will be determined to calculate the amount of goodwill impairment, if any. This second step is required to be completed as soon as possible, but no later than December 31, 2002. Any transitional impairment loss resulting from the adoption will be recognized as the effect of a change in accounting principle.
| Recorded goodwill and other intangible assets as of September 30, 2001 were as follows: | |||
| |
|||
| ( in thousands ) | |||
| |
|||
| Goodwill | $ | 1,203,260 | |
| Customer base | 180,694 | ||
| Work force | 17,020 | ||
| Network affiliation contracts | 58,520 | ||
| FCC licenses | 30,644 | ||
| Customer lists | 4,219 | ||
| Other | 8,821 | ||
| |
|
|
|
| Total | 1,503,178 | ||
| Accumulated amortization | 311,893 | ||
| |
|
|
|
| Net goodwill and other intangible assets | $ | 1,191,285 | |
| |
|
|
|
The Company cannot at this time estimate the impact, if any, of the transitional impairment evaluation. The Company is currently assessing the estimated useful lives of its intangible assets and cannot estimate the impact of adoption of the new standards on amortization of goodwill and other intangible assets. However, it is expected that amortization of goodwill and other intangible assets will decrease substantially.
Reclassifications - For comparative purposes, certain 2000 amounts have been reclassified to conform to 2001 classifications.
F-8
2. ACQUISITIONS AND DIVESTITURES
Acquisitions
| 2001 - | In the first quarter the Company acquired an additional 3.5% interest in The Television Food Network. | |
| 2000 - | In the first quarter the Company acquired the daily newspaper in Fort Pierce, Florida, in exchange for its newspaper in Destin, Florida, and cash; and television station KMCI in Lawrence, Kansas. In the third quarter the Company acquired the weekly newspaper in Marco Island, Florida. |
The following table presents additional information about the acquisitions:
| |
|||||||
| ( in thousands ) | |||||||
| September 30, | |||||||
| 2001 | 2000 | ||||||
| |
|||||||
| Goodwill and other intangible assets acquired | $ | 14,435 | $ | 55,589 | |||
| Other assets acquired | 7,532 | ||||||
| |
|||||||
| Total | 14,435 | 63,121 | |||||
| Fair value of Destin newspaper | (3,857 | ) | |||||
| Liabilities assumed | (197 | ) | |||||
| |
|||||||
| Cash paid | $ | 14,435 | $ | 59,067 | |||
| |
|||||||
In the fourth quarter of 2000 the Company acquired the daily newspaper in Henderson, Kentucky.
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. Operating results are included in the Consolidated Statements of Income from the dates of acquisitions, with the exception of KMCI whose results were included while the Company operated the station under a contract with the former owner. Pro forma results are not presented because the combined results of operations would not be significantly different than the reported amounts.
Divestitures
| 2000 - | In the first quarter 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. In the third quarter the Company sold its remaining independent telephone directories in Louisiana. The sales and trade resulted in net gains of $6,196,000, $3,700,000 after-tax ($.05 per share). |
Included in the consolidated financial statements are the following results of divested operations (excluding gains on sales):
| |
|||||||
| ( in thousands ) | Three months | Nine months | |||||
| ended | ended | ||||||
| September 30, | September 30, | ||||||
| 2000 | 2000 | ||||||
| |
|||||||
| Operating revenues | $ | 2,436 | $ | 10,500 | |||
| Operating income (loss) | 97 | (275 | ) | ||||
| |
|||||||
F-9
| 3. UNUSUAL CREDITS AND CHARGES | |
| 2001 - | Included in net investment results are i) recognized net investment gains and ii) adjustments to accrued incentive compensation related to changes in the net gains (realized and estimated unrealized) on the Scripps Ventures I portfolio. Included in year-to-date recognized net investment gains are i) a gain of $65,900,000 on the exchange of the Company’s investment in Time Warner for America Online, which acquired Time Warner, and an $11,700,000 gain on the sale of a portion of the Company’s investment in Centra Software, ii) $35,000,000 in write-downs for several investments, and iii) an $11,500,000 reduction in accrued incentive compensation, to zero at September 30, 2001. |
| Net investment results increased net income $33,500,000 ($.42 per share) year-to-date and decreased net income $6,900,000 ($.09 per share) for the quarter. | |
| Costs associated with workforce reductions, including the Company’s share of such costs at the Denver JOA, reduced operating income $1,500,000 in the third quarter and $12,700,000 year-to-date. Net income was reduced $900,000 ($.01 per share) in the third quarter and $8,000,000 ($.10 per share) year-to-date. | |
| The combined effect of the above items was to increase 2001 year-to-date net income $25,500,000 ($.32 per share) and to reduce 2001 third quarter net income $7,900,000 ($.10 per share). | |
| 2000 - | Included in net investment results are i) realized gains of $12,400,000 on the sale of certain investments, ii) $15,400,000 in write-downs of certain investments, and iii) a $6,200,000 increase in accrued incentive compensation, to $13,200,000 at September 30, 2000. |
| Net investment results reduced net income $6,100,000 ($.08 per share) year-to-date and increased net income $800,000 ($.01 per share) for the quarter. | |
| $3,200,000 of expenses associated with preparations for the joint newspaper operations in Denver, of which $2,400,000 was recognized in the third quarter, reduced net income $1,600,000 ($.02 per share) in the third quarter and $2,100,000 ($.03 per share) year-to-date. | |
| The combined effect of the above items and the gains on divestitures (see Note 2) was to reduce 2000 year-to-date net income $4,500,000 ($.05 per share) and to reduce third quarter net income $800,000 ($.01 per share). | |
| F-10 | |
4. LONG-TERM DEBT
Long-term debt consisted of the following:
| |
|||||||||
| ( in thousands ) | September 30,
2001 |
As of
December 31, 2000 |
September 30,
2000 |
||||||
| |
|||||||||
| Variable rate credit facilities, including commercial paper | $ | 460,590 | $ | 512,788 | $ | 509,196 | |||
| $100 million, 6.625% note, due in 2007 | 99,912 | 99,901 | 99,898 | ||||||
| $100 million, 6.375% note, due in 2002 | 99,978 | 99,964 | 99,959 | ||||||
| Other notes | 9,964 | 1,956 | 1,972 | ||||||
| |
|||||||||
| Total long-term debt | 670,444 | 714,609 | 711,025 | ||||||
| Current portion of long-term debt | 460,630 | 212,828 | 209,237 | ||||||
| |
|||||||||
| Long-term debt (less current portion) | $ | 209,814 | $ | 501,781 | $ | 501,788 | |||
| |
|||||||||
The Company has a Competitive Advance and Revolving Credit Facility Agreement, which permits aggregate borrowings up to $675,000,000 (the "Variable Rate Credit Facilities") maturing in 2002. Borrowings 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 3.2% at September 30, 2001, 6.6% at December 31, 2000, and 6.7% at September 30, 2000.
F-11
| 5. INVESTMENTS |
| Investments consisted of the following: |
| |
| ( in thousands, except share data ) | September 30,
2001 |
As of
|
September 30,
2000 |
||||||
| Securities available for sale (at market value): | |||||||||
| AOL Time Warner common stock (2,017,000 shares) | $
|
66,757 | |||||||
| Time Warner common stock (1,344,000 shares) | $
|
70,239 | $
|
105,318 | |||||
| Centra Software (700,500; 1,792,500; 1,792,500 common shares) | 5,996 | 6,946 | 11,653 | ||||||
| garden.com Inc. (2,414,000 common shares and 276,000 warrants) | 2,112 | ||||||||
| Other | 3,483 | 3,969 | 4,442 | ||||||
| |
|||||||||
| Total available-for-sale securities | 76,236 | 81,154 | 123,525 | ||||||
| Denver newspaper JOA | 202,944 | ||||||||
| FOX SportSouth and other joint ventures | 8,706 | 9,502 | 8,948 | ||||||
| Other equity investments | 67,375 | 87,266 | 98,283 | ||||||
| |
|||||||||
| Total investments | $
|
355,261 | $
|
177,922 | $
|
230,756 | |||
| |
|||||||||
| Unrealized gains (losses) on securities available for sale | $
|
(19,529 | )
|
$
|
49,047 | $
|
89,076 | ||
| |
|||||||||
Investments available for sale represent securities in publicly traded companies. Investments available for sale are recorded at fair value. Fair value is based upon the closing price of the security on the reporting date.
The Company exchanged its investment in Time Warner for America Online, which acquired Time Warner, in the first quarter of 2001. The Company sold 1,092,000 shares of Centra Software in the second quarter of 2001. See Note 3.
Other equity investments include securities that do not trade in public markets, so they do not have readily determinable fair values. Many of the investees have had no rounds of equity financing in the past 18 months. There can be no assurance as to the amounts the Company would receive if these securities were sold.
The Company's Scripps Ventures Funds I and II invest in new businesses focusing primarily on new media technology. Scripps Ventures I invested $54,000,000. The managers' compensation includes a share of the portfolio's cumulative net gain through December 2002 if a specified minimum return is achieved. The incentive compensation accrual was zero at September 30, 2001, and will be subject to change as the net gain changes through December 2002. Scripps Ventures II is authorized to invest up to $100,000,000, of which $42,000,000 was invested as of September 30, 2001. The managers have a minority equity interest in the return on Scripps Ventures II's investments if a specified minimum return is achieved.
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 divested operating units (see Note 2), unusual items (see Note 3) 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. International revenues are primarily derived from licensing comic characters and HGTV and Food Network programming in international markets. Licensing of comic characters in Japan provides more than 50% of the Company's international revenues, which are less than $50,000,000 annually.
F-12
Financial information for the Company’s business segments is as follows:
| ( in thousands ) | Three months ended | Nine months ended | ||||||||||
| September 30, | September 30, | |||||||||||
| 2001 | 2000 | 2001 | 2000 | |||||||||
| |
||||||||||||
| OPERATING REVENUES | ||||||||||||
| Newspapers | $ | 177,975 | $ | 231,519 | $ | 549,425 | $ | 701,050 | ||||
| Scripps Networks | 83,103 | 72,540 | 269,902 | 232,329 | ||||||||
| Broadcast Television | 61,121 | 79,793 | 201,241 | 243,951 | ||||||||
| Licensing and other media | 19,900 | 23,570 | 67,012 | 72,345 | ||||||||
| |
||||||||||||
| Total | 342,099 | 407,422 | 1,087,580 | 1,249,675 | ||||||||
| Unusual item | (4,049 | ) | ||||||||||
| Divested operating units | 2,436 | 10,500 | ||||||||||
| |
||||||||||||
| Per consolidated financial statements | $ | 342,099
|
$ | 409,858
|
$ | 1,083,531
|
$ | 1,260,175
|
||||
| |
||||||||||||
| EBITDA | ||||||||||||
| Newspapers | $ | 58,200 | $ | 63,272 | $ | 172,482 | $ | 191,368 | ||||
| Scripps Networks | 17,647 | 13,806 | 60,061 | 54,323 | ||||||||
| Broadcast Television | 12,478 | 28,191 | 53,820 | 84,655 | ||||||||
| Licensing and other media | 2,513 | 3,947 | 11,154 | 12,577 | ||||||||
| Corporate | (4,561 | ) | (5,518 | ) | (13,465 | ) | (15,079 | ) | ||||
| |
||||||||||||
| Total | 86,277 | 103,698 | 284,052 | 327,844 | ||||||||
| Unusual items | (1,540 | )
|
(2,407 | )
|
(12,253 | )
|
(3,243 | )
|
||||
| Divested operating units | 348 | 261 | ||||||||||
| |
||||||||||||
| Per consolidated financial statements | $ | 84,737
|
$ | 101,639
|
$ | 271,799
|
$ | 324,862
|
||||
| |
||||||||||||
| DEPRECIATION | ||||||||||||
| Newspapers | $ | 6,316 | $ | 10,293 | $ | 19,546 | $ | 30,653 | ||||
| Scripps Networks | 1,582 | 1,896 | 5,425 | 5,337 | ||||||||
| Broadcast Television | 4,794 | 4,787 | 14,786 | 14,196 | ||||||||
| Licensing and other media | 232 | (218 | )
|
616 | 166 | |||||||
| Corporate | 265 | 255 | 705 | 759 | ||||||||
| |
||||||||||||
| Total | 13,189 | 17,013 | 41,078 | 51,111 | ||||||||
| Unusual items | 63 | |||||||||||
| Divested operating units | 196 | 357 | ||||||||||
| |
||||||||||||
| Per consolidated financial statements | $ | 13,189
|
$ | 17,209
|
$ | 41,141
|
$ | 51,468
|
||||
| |
||||||||||||
| AMORTIZATION OF INTANGIBLE ASSETS | ||||||||||||
| Newspapers | $ | 6,516 | $ | 5,841 | $ | 19,248 | $ | 17,214 | ||||
| Scripps Networks | 1,902 | 1,802 | 5,608 | 5,402 | ||||||||
| Broadcast Television | 2,375 | 2,381 | 7,056 | 7,089 | ||||||||
| |
||||||||||||
| Total | 10,793 | 10,024 | 31,912 | 29,705 | ||||||||
| Unusual items | 411 | |||||||||||
| Divested operating units | 55 | 179 | ||||||||||
| |
||||||||||||
| Per consolidated financial statements | $ | 10,793
|
$ | 10,079
|
$ | 32,323
|
$ | 29,884
|
||||
| |
||||||||||||
| OPERATING INCOME | ||||||||||||
| Newspapers | $ | 45,368 | $ | 47,138 | $ | 133,688 | $ | 143,501 | ||||
| Scripps Networks | 14,163 | 10,108 | 49,028 | 43,584 | ||||||||
| Broadcast Television | 5,309 | 21,023 | 31,978 | 63,370 | ||||||||
| Licensing and other media | 2,281 | 4,165 | 10,538 | 12,411 | ||||||||
| Corporate | (4,826 | )
|
(5,773 | )
|
(14,170 | )
|
(15,838 | )
|
||||
| |
||||||||||||
| Total | 62,295 | 76,661 | 211,062 | 247,028 | ||||||||
| Unusual items | (1,540 | )
|
(2,407 | )
|
(12,727 | )
|
(3,243 | )
|
||||
| Divested operating units | 97 | (275 | )
|
|||||||||
| |
||||||||||||
| Per consolidated financial statements | $ | 60,755
|
$ | 74,351
|
$ | 198,335
|
$ | 243,510
|
||||
| |
||||||||||||
F-13
| ( in thousands ) | Three months ended | Nine months ended | ||||||||||
| September 30, | September 30, | |||||||||||
| 2001 | 2000 | 2001 | 2000 | |||||||||
| |
||||||||||||
| PAYMENTS (GREATER) LESS THAN PROGRAM AMORTIZATION | ||||||||||||
| AND NETW ORK DISTRIBUTION COSTS | ||||||||||||
| Scripps Networks | $ | (7,162 | ) | $ | (7,029 | ) | $ | (22,380 | ) | $ | (17,118 | ) |
| Broadcast Television | 823 | 595 | 2,187 | 449 | ||||||||
| Total | $ | (6,339 | ) | $ | (6,434 | ) | $ | (20,193 | ) | $ | (16,669 | ) |
| ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT | ||||||||||||
| Newspapers | $ | 8,334 | $ | 12,182 | $ | 24,097 | $ | 21,536 | ||||
| Scripps Networks | 5,523 | 3,132 | 10,812 | 6,382 | ||||||||
| Broadcast Television | 2,951 | 2,952 | 10,295 | 15,774 | ||||||||
| Licensing and other media | 21 | 13 | 301 | 329 | ||||||||
| Corporate | 130 | 111 | 549 | 404 | ||||||||
| Total | 16,959 | 18,390 | 46,054 | 44,425 | ||||||||
| Divested operating units | 110 | |||||||||||
| |
||||||||||||
| Per consolidated financial statements | $ | 16,959 | $ | 18,390
|
$ | 46,054
|
$ | 44,535
|
||||
| |
||||||||||||
| BUSINESS ACQUISITIONS AND | ||||||||||||
| OTHER ADDITIONS TO LONG-LIVED ASSETS | ||||||||||||
| Newspapers | $ | 80 | $ | 17,334 | $ | 63,796 | $ | 50,140 | ||||
| Scripps Networks | 19,570 | 3,833 | 47,420 | 12,825 | ||||||||
| Broadcast Television | 50 | 27 | 14,710 | |||||||||
| Licensing and other media | 10 | |||||||||||
| Venture capital and other investments | 8,623 | 4,874 | 15,995 | 50,926 | ||||||||
| Total | $ | 28,273
|
$ | 26,091
|
$ | 127,238
|
$ | 128,611
|
||||
| |
||||||||||||
| ASSETS | ||||||||||||
| Newspapers | $ | 1,279,953 | $ | 1,245,711 | ||||||||
| Scripps Networks | 576,627 | 499,300 | ||||||||||
| Broadcast Television | 484,308 | 501,383 | ||||||||||
| Licensing and other media | 21,736 | 30,789 | ||||||||||
| Venture capital and other investments | 143,687 | 221,425 | ||||||||||
| Corporate | 71,604 | 56,980 | ||||||||||
| Total | 2,577,915 | 2,555,588 | ||||||||||
| Divested operating units | 7,859 | 8,233 | ||||||||||
| Total | $ | 2,585,774
|
$ | 2,563,821
|
||||||||
| |
||||||||||||
Other additions to long-lived assets include investments and network distribution fees. Corporate assets are primarily cash, cash equivalent and other short-term investments, and refundable and deferred income taxes.
F-14
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company operates in three reportable segments: Newspapers, Scripps Networks, and Broadcast 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
Acquisitions and divestitures can affect the comparability of year-over-year reported results. Amounts included in the accompanying tables include the results of acquired operations from the dates of acquisition. The results of divested operating units are removed from the segment operating results and reported separately because management believes they impede analysis of the Company’s ongoing operations.
See Note 2 to the Consolidated Financial Statements on page F-9 regarding acquisitions and divestitures.
The application for a JOA between the Company’s Denver Rocky Mountain News (“RMN”) and MediaNews Group Inc.’s Denver Post was approved in January 2001 by the U.S. Department of Justice. The JOA commenced operations on January 22, 2001. The Denver Publishing Company, a wholly owned subsidiary of the Company holds a 50% interest in the JOA.
Included in RMN revenue is the Company’s share of the operating profit (loss) of the Denver JOA from January 22, 2001. The Company also includes in its operating expenses its editorial costs associated with the RMN. The Company’s financial statements no longer include the advertising and other revenue of the RMN, the costs to produce, distribute and market the newspaper, nor related depreciation. To enhance comparability of year-over-year operating results, the Company is reporting the RMN separately.
All per share disclosures included in management’s discussion and analysis of financial condition and results of operations are on a diluted basis.
F-15
Consolidated results of operations were as follows:
| |
||||||||||||||||||||||
| ( in thousands, except per share data ) | Quarterly Period
|
Year-to-Date
|
||||||||||||||||||||
| 2001
|
Change
|
2000
|
2001
|
Change
|
2000
|
|||||||||||||||||
| |
||||||||||||||||||||||
| Operating revenues: | ||||||||||||||||||||||
| Newspapers | $
|
174,315 | (0.3 | )% | $
|
174,838 | $
|
534,189 | (0.4 | )% | $
|
536,175 | ||||||||||
| Scripps Networks | 83,103 | 14.6 | % | 72,540 | 269,902 | 16.2 | % | 232,329 | ||||||||||||||
| Broadcast Television | 61,121 | (23.4 | )% | 79,793 | 201,241 | (17.5 | )% | 243,951 | ||||||||||||||
| Licensing and other media | 19,900 | (15.6 | )% | 23,570 | 67,012 | (7.4 | )% | 72,345 | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
| Total | 338,439 | (3.5 | )% | 350,741 | 1,072,344 | (1.1 | )% | 1,084,800 | ||||||||||||||
| Rocky Mountain News | 3,660 | 56,681 | 15,236 | 164,875 | ||||||||||||||||||
| Unusual item | (4,049 | ) | ||||||||||||||||||||
| Divested operating units | 2,436 | 10,500 | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
| Total operating revenues | $
|
342,099 | $
|
409,858 | $
|
1,083,531 | $
|
1,260,175 | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
| Operating income: | ||||||||||||||||||||||
| Newspapers | $
|
47,152 | (8.7 | )% | $
|
51,650 | $
|
147,918 | (10.1 | )% | $
|
164,471 | ||||||||||
| Scripps Networks | 14,163 | 40.1 | % | 10,108 | 49,028 | 12.5 | % | 43,584 | ||||||||||||||
| Broadcast Television | 5,309 | (74.7 | )% | 21,023 | 31,978 | (49.5 | )% | 63,370 | ||||||||||||||
| Licensing and other media | 2,281 | (45.2 | )% | 4,165 | 10,538 | (15.1 | )% | 12,411 | ||||||||||||||
| Corporate | (4,826 | ) | 16.4 | % | (5,773 | ) | (14,170 | ) | 10.5 | % | (15,838 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
| Total | 64,079 | (21.1 | )% | 81,173 | 225,292 | (15.9 | )% | 267,998 | ||||||||||||||
| Rocky Mountain News | (1,784 | ) | 60.5 | % | (4,512 | ) | (14,230 | ) | 32.1 | % | (20,970 | ) | ||||||||||
| Unusual items | (1,540 | ) | (2,407 | ) | (12,727 | ) | (3,243 | ) | ||||||||||||||
| Divested operating units | 97 | (275 | ) | |||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total operating income | 60,755 | 74,351 | 198,335 | 243,510 | ||||||||||||||||||
| Interest expense | (8,417 | ) | (13,393 | ) | (31,737 | ) | (39,510 | ) | ||||||||||||||
| Investment results, net of expenses | (10,917 | ) | 900 | 50,825 | (9,611 | ) | ||||||||||||||||
| Net gains (loss) on divested operations | (73 | ) | 6,196 | |||||||||||||||||||
| Miscellaneous, net | 240 | 1,002 | 1,073 | 1,993 | ||||||||||||||||||
| Income taxes | (18,023 | ) | (26,319 | ) | (87,249 | ) | (84,266 | ) | ||||||||||||||
| Minority interest | (1,005 | ) | (1,040 | ) | (2,826 | ) | (3,159 | ) | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
| Net income | $
|
22,633 | $
|
35,428 | $
|
128,421 | $
|
115,153 | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
| Net income per share of common stock | $
|
.28 | $
|
.45 | $
|
1.61 | $
|
1.46 | ||||||||||||||
| Weighted-average shares outstanding | 80,167 | 79,173 | 80,011 | 79,019 | ||||||||||||||||||
| |
||||||||||||||||||||||
| Reconciliations to net income from core operations: | ||||||||||||||||||||||
| Reported net income | $
|
22,633 | $
|
35,428 | $
|
128,421 | $
|
115,153 | ||||||||||||||
| Add back/(deduct): | ||||||||||||||||||||||
| Net investment results | 6,948 | (772 | )
|
(33,506
|
) | 6,072 | ||||||||||||||||
| Workforce reductions | 904 | 7,982 | ||||||||||||||||||||
| Net (gains) loss on divested operations | 47 | (3,716 | ) | |||||||||||||||||||
| Denver JOA expenses | 1,565 | 2,108 | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
| Net income from core operations | $
|
30,485 | (15.9 | )% | $
|
36,268 | $
|
102,897 | (14.0 | )% | $
|
119,617 | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
| Reported net income per share of common stock | $
|
.28 | $
|
.45 | $
|
1.61 | $
|
1.46 | ||||||||||||||
| Add back/(deduct): | ||||||||||||||||||||||
| Net investment results | .09 | (.01
|
)
|
(.42
|
)
|
.08 | ||||||||||||||||
| Workforce reductions | .01 | .10 | ||||||||||||||||||||
| Net (gains) loss on divested operations | .00 | (.05 | ) | |||||||||||||||||||
| Denver JOA expenses | .02 | .03 | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income from core operations per | ||||||||||||||||||||||
| share of common stock | $
|
.38 | (17.4 | )% | $
|
.46 | $
|
1.29 | (14.6 | )% | $
|
1.51 | ||||||||||
See Note 3 to the Consolidated Financial Statements on page F-10 regarding items excluded from core operations.
F-16
Other financial and statistical data, excluding divested operations and unusual items, are as follows:
| |
||||||||||||||||||
| (in thousands) | Quarterly Period
|
Year-to-date | ||||||||||||||||
| 2001
|
Change | 2000
|
2001
|
Change | 2000
|
|||||||||||||
| |
||||||||||||||||||
| Total advertising revenues | $
|
247,617 | (6.5
|
)% | $
|
264,768 | $
|
794,062 | (3.4
|
)% | $
|
821,852 | ||||||
| |
||||||||||||||||||
| Advertising revenues as a | ||||||||||||||||||
| percentage of total revenues | 73.2 | % | 75.5 | % | 74.0 | % | 75.8 | % | ||||||||||
| |
||||||||||||||||||
| EBITDA: | ||||||||||||||||||
| Newspapers | $
|
59,470 | (7.2 | )% | $ | 64,116 | $
|
184,424 | (8.4 | )% | $
|
201,387 | ||||||
| Scripps Networks | 17,647 | 27.8 | % | 13,806 | 60,061 | 10.6 | % | 54,323 | ||||||||||
| Broadcast Television | 12,478 | (55.7 | )% | 28,191 | 53,820 | (36.4 | )% | 84,655 | ||||||||||
| Licensing and other media | 2,513 | (36.3 | )% | 3,947 | 11,154 | (11.3 | )% | 12,577 | ||||||||||
| Corporate | (4,561 | ) | 17.3 | % | (5,518 | ) | (13,465 | ) | 10.7 | % | (15,079 | ) | ||||||
| |
||||||||||||||||||
| Total | 87,547 | (16.3 | )% | 104,542 | 295,994 | (12.4 | )% | 337,863 | ||||||||||
| Denver Rocky Mountain News | (1,270 | ) | (844 | ) | (11,942 | ) | (10,019
|
) | ||||||||||
| Total EBITDA | $
|
86,277 | $ | 103,698
|
$
|
284,052 | $ | 327,844
|
||||||||||
| |
||||||||||||||||||
| Effective income tax rate for core
operations |
41.8 | % | 42.0
|
% | 41.4. | % | 41.3
|
% | ||||||||||
| |
||||||||||||||||||
| Net cash provided by operating activities | $
|
92,102 | $ | 76,298
|
$
|
215,509 | $ | 191,938
|
||||||||||
| Capital expenditures | (16,959 | ) | (18,390
|
) | (46,054 | ) | (44,425
|
) | ||||||||||
| Business acquisitions and other | ||||||||||||||||||
| additions to long-lived assets | (28,273 | ) | (26,091
|
) | (127,238 | ) | (128,611
|
)
|
||||||||||
| Increase (decrease) in long-term debt | (40,877 | ) | (50,098
|
) | (44,190 | ) | (57,533
|
) | ||||||||||
| Dividends paid, including minority
interests |
(12,298 | ) | (11,382
|
) | (36,817 | ) | (34,088
|
) | ||||||||||
| Purchase and retirement of common stock | (18,683 | ) | (20,671 | ) | ||||||||||||||
| |
||||||||||||||||||
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 historical and anticipated 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.
Average daily borrowings under short-term credit facilities in the third quarter were $457 million in 2001 and $512 million in 2000. The weighted-average interest rate on such borrowings was 3.6% in 2001 and 6.7% in 2000. For the year-to-date period the weighted-average interest rate on the short-term credit facilities was 4.8% in 2001 and 6.3% in 2000. The Company is currently rolling over short-term debt at an effective 90-day yield of 2.0%. The average balance of all interest bearing obligations for the first nine months of the year was $747 million in 2001 and $783 million in 2000.
Interest capitalized was $600,000 in 2001 and $50,000 in 2000.
Third quarter operating results were affected by a downturn in business immediately following the September 11, 2001, terrorist attacks, which exacerbated an already weak advertising market. The Company's nine network-affiliated television stations broadcast 36 hours of continuous, commercial free network and local news coverage following the attacks, and for the next several days there was little demand for television advertising.
Operating results for each of the Company's reportable segments, excluding divested operating units and unusual items, are presented on the following pages.
F-17
NEWSPAPERS - RMN operating results are presented separately as a single line item to enhance comparability of year-over-year Newspaper operating results. Excluding divested operations and unusual items, operating results were as follows:
| |
||||||||||||||||||
| (in thousands) | Quarterly Period
|
Year-to-date
|
||||||||||||||||
| 2001
|
Change
|
2000
|
2001
|
Change
|
2000
|
|||||||||||||
| |
||||||||||||||||||
| Operating revenues: | ||||||||||||||||||
| Local | $
|
45,697 | (2.2 | )% | $
|
46,705 | $
|
148,474 | (1.7 | )% | $ | 151,053
|
||||||
| Classified | 50,720 | (5.7 | )% | 53,763 | 152,345 | (4.3 | )% | 159,248
|
||||||||||
| National | 7,965 | 8.1 | % | 7,367 | 24,026 | 12.1 | % | 21,428
|
||||||||||
| Preprint and other | 21,911 | 4.0 | % | 21,074 | 65,021 | 3.6 | % | 62,751
|
||||||||||
| |
||||||||||||||||||
| Newspaper advertising | 126,293 | (2.0 | )% | 128,909 | 389,866 | (1.2 | )% | 394,480
|
||||||||||
| Circulation | 34,850 | 8.7 | % | 32,058 | 104,310 | 4.7 | % | 99,662
|
||||||||||
| Joint operating agency distributions | 10,620 | (10.9 | )% | 11,924 | 31,547 | (10.1 | )% | 35,073
|
||||||||||
| Other | 2,552 | 31.1 | % | 1,947 | 8,466 | 21.6 | % | 6,960
|
||||||||||
| |
||||||||||||||||||
| Total operating revenues | 174,315 | (0.3 | )% | 174,838 | 534,189 | (0.4 | )% | 536,175
|
||||||||||
| |
||||||||||||||||||
| Expenses, excluding depreciation and amortization: | ||||||||||||||||||
| Editorial and newspaper content | 21,910 | 4.0 | % | 21,073 | 65,682 | 2.7 | % | 63,962 | ||||||||||
| Newsprint and ink | 19,424 | 2.2 | % | 18,998 | 63,396 | 9.6 | % | 57,823 | ||||||||||
| Other press and production | 16,708 | 4.3 | % | 16,026 | 51,096 | 4.4 | % | 48,946 | ||||||||||
| Circulation and distribution | 16,257 | 9.3 | % | 14,878 | 48,041 | 6.9 | % | 44,936 | ||||||||||
| Other advertising, internet and printing | 7,253 | 14.6 | % | 6,329 | 21,849 | 14.6 | % | 19,062 | ||||||||||
| Advertising sales and marketing | 15,104 | 0.1 | % | 15,088 | 47,376 | 2.9 | % | 46,045 | ||||||||||
| General and administrative | 17,717 | 0.5 | % | 17,633 | 50,422 | (2.3 | )% | 51,624 | ||||||||||
| |
||||||||||||||||||
| Total | 114,373 | 4.0 | % | 110,025 | 347,862 | 4.7 | % | 332,398 | ||||||||||
| |
||||||||||||||||||
| EBITDA | 59,942 | (7.5 | )% | 64,813 | 186,327 | (8.6 | )% | 203,777 | ||||||||||
| Share of pre-tax earnings of equity-method
investments |
(472 | ) | (697 | ) | (1,903 | ) | (2,390 | ) | ||||||||||
| |
||||||||||||||||||
| Total EBITDA | 59,470 | (7.2 | )% | 64,116 | 184,424 | (8.4 | )% | 201,387 | ||||||||||
| Depreciation and amortization | 12,318 | (1.2 | )% | 12,466 | 36,506 | (1.1 | )% | 36,916 | ||||||||||
| |
||||||||||||||||||
| Operating income, excluding the RMN | 47,152 | (8.7 | )% | 51,650 | 147,918 | (10.1 | )% | 164,471 | ||||||||||
| RMN operating income (loss) | (1,784 | ) | 60.5 | % | (4,512 | ) | (14,230 | ) | 32.1 | % | (20,970 | ) | ||||||
| |
||||||||||||||||||
| Total operating income | $
|
45,368 | (3.8 | )% | $
|
47,138 | $
|
133,688 | (6.8 | )% | $
|
143,501 | ||||||
| |
||||||||||||||||||
| Other Financial and Statistical Data: | ||||||||||||||||||
| Percent of operating revenues: | ||||||||||||||||||
| EBITDA | 34.1 | % | 36.7 | % | 34.5 | % | 37.6 | % | ||||||||||
| Operating income | 27.0 | % | 29.5 | % | 27.7 | % | 30.7 | % | ||||||||||
| |
||||||||||||||||||
| Capital expenditures | $ | 8,334 | $
|
12,182 | $ | 24,097 | $
|
21,536 | ||||||||||
| Business acquisitions and other | ||||||||||||||||||
| additions to long-lived assets | 80 | 17,334 | 63,796 | 50,140 | ||||||||||||||
| |
||||||||||||||||||
The demand for advertising was soft in most of the Company's markets for the first nine months of 2001, particularly local retail and help wanted classified advertising. On a pro forma basis, assuming all acquisitions had been completed as of January 1, 2000, local advertising decreased 3.8% in the quarter and 4.2% year-to-date. Classified advertising decreased 6.4% in the quarter and 5.7% year-to-date.
Expenses other than newsprint increased approximately 2.3% for the quarter and 1% year-to-date on the same pro forma basis. Newsprint and ink increased primarily due to a 7% increase in year-over-year newsprint prices.
The Company's operating results in Denver have improved due to advertising and circulation rate increases and cost cutting measures implemented by the JOA, including the publication of combined weekend editions and a single classified advertising section distributed daily in both newspapers. However, in addition to the soft demand for advertising in general, major metropolitan markets in the U.S., including Denver, have experienced sharp decreases in help wanted advertising. This has slowed the improvement in operating results expected at the outset of the JOA.
F-18
SCRIPPS NETWORKS - Operating results, excluding unusual items, were as follows:
| |
||||||||||||||||||||
| (in thousands) | Quarterly Period
|
Year-to-date
|
||||||||||||||||||
| 2001
|
Change
|
2000
|
2001
|
Change
|
2000
|
|||||||||||||||
| |
||||||||||||||||||||
| Operating revenues: | ||||||||||||||||||||
| Advertising | $ | 61,234 | 8.3 | % | $
|
56,559 | $ | 205,753 | 11.4 | % | $ | 184,736 | ||||||||
| Affiliate fees | 20,556 | 42.1 | % | 14,464 | 60,248 | 38.1 | % | 43,629 | ||||||||||||
| Other | 1,313 | (13.4 | )% | 1,517 | 3,901 | (1.6 | )% | 3,964 | ||||||||||||
| |
||||||||||||||||||||
| Total operating revenues | 83,103 | 14.6 | % | 72,540 | 269,902 | 16.2 | % | 232,329 | ||||||||||||
| |
||||||||||||||||||||
| Operating expenses, excluding depreciation and amortization: | ||||||||||||||||||||
| Programming and production | 25,747 | 16.8 | % | 22,040 | 74,833 | 17.8 | % | 63,514 | ||||||||||||
| Operations and distribution | 7,877 | 4.1 | % | 7,568 | 26,791 | 11.9 | % | 23,936 | ||||||||||||
| Amortization of distribution fees | 6,047 | 24.2 | % | 4,869 | 16,991 | 22.3 | % | 13,893 | ||||||||||||
| Sales and marketing | 15,701 | (4.9 | )% | 16,517 | 55,307 | 12.7 | % | 49,066 | ||||||||||||
| General and administrative | 12,028 | 27.3 | % | 9,452 | 39,895 | 28.8 | % | 30,979 | ||||||||||||
| |
||||||||||||||||||||
| Total | 67,400 | 11.5 | % | 60,446 | 213,817 | 17.9 | % | 181,388 | ||||||||||||
| |
||||||||||||||||||||
| EBITDA - consolidated networks | 15,703 | 29.8 | % | 12,094 | 56,085 | 10.1 | % | 50,941 | ||||||||||||
| Share of pre-tax earnings of equity-method
investments |
1,944 | 1,712 | 3,976 | 3,382 | ||||||||||||||||
| |
||||||||||||||||||||
| Total EBITDA | 17,647 | 27.8 | % | 13,806 | 60,061 | 10.6 | % | 54,323 | ||||||||||||
| Depreciation and amortization | 3,484 | (5.8 | )% | 3,698 | 11,033 | 2.7 | % | 10,739 | ||||||||||||
| Operating income | $
|
14,163 | 40.1 | % | $
|
10,108 | $ | 49,028 | 12.5 | % | $
|
43,584 | ||||||||
| |
||||||||||||||||||||
| Other Financial and Statistical Data: | ||||||||||||||||||||
| Percent of operating revenues: | ||||||||||||||||||||
| EBITDA | 21.2 | % | 19.0 | % | 22.3 | % | 23.4 | % | ||||||||||||
| Operating income | 17.0 | % | 13.9 | % | 18.2 | % | 18.8 | % | ||||||||||||
| |
||||||||||||||||||||
| Payments for programming and network | ||||||||||||||||||||
| distribution fees less than (greater than) | ||||||||||||||||||||
| amounts recognized as expense | $
|
(7,162 | ) | $
|
(7,029 | ) | $
|
(22,380
|
) | $
|
(17,118 | ) | ||||||||
| Capital expenditures | 5,523 | 3,132 | 10,812 | 6,382 | ||||||||||||||||
| Business acquisitions and other | ||||||||||||||||||||
| additions to long-lived assets | 19,570 | 3,833 | 47,420 | 12,825 | ||||||||||||||||
| |
||||||||||||||||||||
According to the Nielsen Homevideo Index, HGTV was distributed to 74.3 million homes in September 2001, up 8.4 million from September 2000 and 3.8 million in the third quarter. Food Network was distributed to 67.7 million homes in September 2001, up 15.4 million from September 2000 and 7.3 million in the third quarter.
During the third quarter Food Network renewed its distribution agreement with AT&T, expanding distribution of Food Network and providing for payment of affiliate fees to Food Network. In October the Company announced an agreement with AOL Time Warner, Inc. ("AOL") that will add Food Network to additional AOL cable television systems by the end of the year, and providing for the payment of affiliate fees to Food Network. Previously Food Network had been distributed without payment of affiliate fees by AT&T and AOL.
The Company launched DIY in the fourth quarter of 1999 and expects to launch Fine Living, its fourth network, in early 2002. Start-up losses associated with DIY and Fine Living reduced EBITDA in the third quarter by $5.7 million in 2001 compared to $3.0 million in the third quarter of 2000. DIY and Fine Living reduced year-to-date EBITDA $16 million in 2001 and $7.6 million in 2000. Full year start-up losses are expected to reduce EBITDA by approximately $22 million.
The distribution agreement with AOL provides for expanded distribution of DIY on AOL cable television systems, adding approximately 5 million new households by 2003. In addition, the agreement provides for distribution of Fine Living to 5 million households.
Excluding the start-up expenses of the new networks, EBITDA increased 39% in the quarter and 23% year-to-date.
F-19
BROADCAST TELEVISION - Operating results, excluding unusual items, were as follows:
| |
|||||||||||||||||||
| (in thousands) | Quarterly Period
|
Year-to-date
|
|||||||||||||||||
| 2001
|
Change
|
2000
|
2001
|
Change
|
2000
|
||||||||||||||
| |
|||||||||||||||||||
| Operating revenues: | |||||||||||||||||||
| Local | $
|
35,389 | (10.3 | )% | $
|
39,451 | $
|
117,927 | (8.3 | )% | $
|
128,602 | |||||||
| National | 21,151 | (20.4 | )% | 26,588 | 70,220 | (22.0 | )% | 90,002 | |||||||||||
| Political | 735 | 10,202 | 1,039 | 14,108 | |||||||||||||||
| Other | 3,846 | 8.3 | % | 3,552 | 12,055 | 7.3 | % | 11,239 | |||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total operating revenues | 61,121 | (23.4 | )% | 79,793 | 201,241 | (17.5 | )% | 243,951 | |||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses, excluding depreciation and
amortization: |
|||||||||||||||||||
| Programming and station operations | 34,970 | (3.5 | )% | 36,241 | 103,733 | (6.0 | )% | 110,354 | |||||||||||
| Sales and marketing | 7,772 | (13.5 | )% | 8,989 | 25,767 | (14.5 | )% | 30,138 | |||||||||||
| General and administrative | 5,901 | (7.4 | )% | 6,372 | 17,921 | (4.7 | )% | 18,804 | |||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total | 48,643 | (5.7 | )% | 51,602 | 147,421 | (7.5 | )% | 159,296 | |||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| EBITDA | 12,478 | (55.7 | )% | 28,191 | 53,820 | (36.4 | )% | 84,655 | |||||||||||
| Depreciation and amortization | 7,169 | 0.0 | % | 7,168 | 21,842 | 2.6 | % | 21,285 | |||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating income | $
|
5,309 | (74.7 | )% | $
|
21,023 | $
|
31,978 | (49.5 | )% | $
|
63,370 | |||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other Financial and Statistical Data: | |||||||||||||||||||
| Percent of operating revenues: | |||||||||||||||||||
| EBITDA | 20.4 | % | 35.3 | % | 26.7 | % | 34.7 | % | |||||||||||
| Operating income | 8.7 | % | 26.3 | % | 15.9 | % | 26.0 | % | |||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Capital expenditures | $
|
2,951 | $
|
2,952 | $
|
10,295 | $
|
15,774 | |||||||||||
| Business acquisitions and other | |||||||||||||||||||
| additions to long-lived assets | 50 | 27 | 14,710 | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company's nine network-affiliated television stations broadcast 36 hours of continuous, commercial free network and local news coverage following the September 11, 2001, terrorist attacks, and for the next several days there was little demand for television advertising.
The Company continues to be adversely affected by its relatively high exposure to weakly rated ABC television network programming. Six of the Company's 10 television stations are ABC affiliates. Year-over-year automobile advertising declined sharply in the quarter.
Operating expenses, excluding depreciation and amortization, are expected to decrease approximately 7% for the full year.
F-20
LIQUIDITY AND CAPITAL RESOURCES
The Company’s cash flow from operating activities is expected to substantially exceed the total of its capital expenditure requirements and cash dividends in 2001, as it has each year since 1992. The excess cash flow from existing businesses and the Company’s substantial borrowing capacity have been used primarily to fund acquisitions, investments, and to develop new businesses. There are essentially no legal or other restrictions on the transfer of funds among the Company’s business segments.
Repurchase of a total of six million Class A Common shares was authorized by the Board of Directors in 1998. The balance remaining on this authorization is 1.8 million shares.
The Company’s Scripps Ventures Funds invest in new businesses focusing primarily on new media technology. See Note 5 to the Consolidated Financial Statements. At September 30, 2001, an additional $58 million remains to be invested under the Board of Directors authorization.
Net debt (borrowings less cash equivalent and other short-term investments) decreased $44 million in the first nine months of 2001, to $670 million at September 30, 2001.
F-21
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, 2000, has not changed materially unless otherwise disclosed herein.
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 in 2001 or 2000.
The following table presents additional information about the Company’s market-risk-sensitive financial instruments:
| ( in thousands, except share data ) | As of September 30, 2001 | As of December 31, 2000 | ||||||||||
| Cost | Fair | Cost | Fair | |||||||||
| Basis | Value | Basis | Value | |||||||||
| Financial instruments subject to interest rate risk: | ||||||||||||
| Variable rate credit facilities, including commercial paper | $ | 460,590 | $ | 460,590 | $ | 512,788 | $ | 512,788 | ||||
| $100 million, 6.625% note, due in 2007 | 99,912 | 103,125 | 99,901 | 97,900 | ||||||||
| $100 million, 6.375% note, due in 2002 | 99,978 | 101,885 | 99,964 | 99,800 | ||||||||
| Other notes | 9,964 | 8,900 | 1,956 | 812 | ||||||||
| Total long-term debt | $ | 670,444 | $ | 674,500 | $ | 714,609 | $ | 711,300 | ||||
| Financial instruments subject to market value risk: | ||||||||||||
| AOL Time Warner common stock (2,017,000 shares) | $ | 93,722 | $ | 66,757 | ||||||||
| Time Warner common stock (1,344,000 shares) | $ | 27,816 | $ | 70,239 | ||||||||
| Centra Software (700,500 and 1,792,500 common shares) | 1,427 | 5,996 | 3,652 | 6,946 | ||||||||
| Other available-for-sale securities | 616 | 3,483 | 639 | 3,969 | ||||||||
| Total investments in publicly-traded companies | 95,765 | 76,236 | 32,107 | 81,154 | ||||||||
| Other equity investments | 67,375 | (a) | 87,266 | (a) | ||||||||
| (a) | Included in other equity investments are securities that do not trade in public markets, so they do not have readily determinable fair values. Many of the investees have had no rounds of equity financing in the past 18 months. There can be no assurance as to the amounts the Company would receive if these securities were sold. |
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 3.2% at September 30, 2001, and 6.6% at December 31, 2000.
F-22
THE E. W. SCRIPPS COMPANY
Index to Exhibits
| Exhibit | ||||
| No. | Item | Page
|
||
| 12 Ratio of Earnings to Fixed Charges | E-2
|
|||
E-1
| RATIO OF EARNINGS TO FIXED CHARGES | EXHIBIT 12
|
|||||||||||
| ( in thousands ) | Three months ended | Nine months ended | ||||||||||
| September 30, | September 30, | |||||||||||
| 2001 | 2000 | 2001 | 2000 | |||||||||
| |
||||||||||||
| EARNINGS AS DEFINED: | ||||||||||||
| Earnings from operations before income taxes after | ||||||||||||
| eliminating undistributed earnings of 20%- to | ||||||||||||
| 50%-owned affiliates | $ | 39,817 | $ | 61,744 | $ | 241,151 | $ | 203,161 | ||||
| Fixed charges excluding capitalized interest and | ||||||||||||
| preferred stock dividends of majority-owned | ||||||||||||
| subsidiary companies | 9,900 | 14,935 | 35,935 | 44,438 | ||||||||
| Earnings as defined | $ | 49,717 | $ | 76,679 | $ | 277,086 | $ | 247,599 | ||||
| FIXED CHARGES AS DEFINED: | ||||||||||||
| Interest expense, including amortization of | ||||||||||||
| debt issue costs | $ | 8,417 | $ | 13,393 | $ | 31,737 | $ | 39,510 | ||||
| Interest capitalized | 179 | 17 | 591 | 47 | ||||||||
| Portion of rental expense representative | ||||||||||||
| of the interest factor | 1,483 | 1,542 | 4,198 | 4,928 | ||||||||
| Preferred stock dividends of majority-owned | ||||||||||||
| subsidiary companies | 20 | 20 | 60 | 60 | ||||||||
| Fixed charges as defined | $ | 10,099 | $ | 14,972 | $ | 36,586 | $ | 44,545 | ||||
| RATIO OF EARNINGS TO FIXED CHARGES | 4.92 | 5.12 | 7.57 | 5.56 | ||||||||
| |
||||||||||||