UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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 1-16914
THE E.W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 51-0304972
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1105 N. Market Street
Wilmington, Delaware 19801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (302) 478-4141
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
August 1, 1996 the registrant had outstanding 60,997,870 shares of
Class A Common Stock and 19,470,382 shares of Common Voting Stock.
INDEX TO THE E.W. SCRIPPS COMPANY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996
Item No. Page
PART I - FINANCIAL INFORMATION
1 Financial Statements 3
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 3
PART II - OTHER INFORMATION
1 Legal Proceedings 3
2 Changes in Securities 3
3 Defaults Upon Senior Securities 3
4 Submission of Matters to a Vote of Security Holders 4
5 Other Information 4
6 Exhibits and Reports on Form 8-K 4
PART I
ITEM 1. FINANCIAL STATEMENTS
The information required by this item is filed as part of this Form 10-
Q. See Index to Financial Information at page F-1 of this Form 10-Q.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by this item is filed as part of this Form 10-
Q. See Index to Financial Information at page F-1 of this Form 10-Q.
PART II
ITEM 1. LEGAL PROCEEDINGS
Scripps is involved in litigation arising in the ordinary course of
business, such as defamation actions. In addition Scripps is involved
from time to time in various governmental and administrative
proceedings relating to, among other things, renewal of broadcast
licenses. The costs to defend or settle such litigation and other
proceedings are not expected to have a material adverse effect on
Scripps' financial condition or results of operations.
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
The following table presents information on matters submitted to a
vote of security holders at the 1996 Annual Meeting of Shareholders.
Broker
Description of Matter Submitted In Favor Against Abstain Non-Votes
Class A Common stock:
Election of Directors:
Daniel J. Meyer 53,494,371 424,444 6,533,363
Nicholas B. Paumgarten 53,484,471 434,344 6,533,363
Ronald W. Tysoe 53,490,376 428,439 6,533,363
Common voting stock:
Election of Directors 17,991,115 1,815,938
Amend Long-Term Incentive Plan 17,991,115 1,815,938
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. Amendment Numbers 3 through 5 to Scripps' Current
Report on Form 8-K dated December 28, 1995 were filed on May 10, 1996,
May 15, 1996, and July 18, 1996, respectively.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
THE E.W. SCRIPPS COMPANY
Dated: August 14, 1996 BY:/s/ D. J. Castellini
D. J. Castellini
Senior Vice President,
Finance & Administration
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 Stockholders' Equity F-6
Notes to Consolidated Financial Statements F-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations F-11
CONSOLIDATED BALANCE SHEETS
( in thousands ) As of
June 30, December 31, June 30,
1996 1995 1995
( Unaudited ) ( Unaudited )
ASSETS
Current Assets:
Cash and cash equivalents $ 15,594 $ 30,021 $ 25,073
Short-term investments 25,013
Accounts and notes receivable (less
allowances -$3,736, $3,447, $4,193) 157,426 166,867 148,084
Program rights and production costs 32,960 52,402 20,205
Refundable income taxes 7,119 7,828 18,115
Inventories 11,126 11,459 14,210
Deferred income taxes 23,365 21,694 19,177
Miscellaneous 20,748 18,961 21,144
Total current assets 268,338 334,245 266,008
Net assets of discontinued operations 354,234 305,838 307,585
Investments 51,273 53,186 40,885
Property, Plant, and Equipment 437,635 425,959 426,915
Goodwill and Other Intangible Assets 596,454 495,773 505,741
Other Assets:
Program rights and production costs (less current portion) 38,983 26,829 31,298
Miscellaneous 17,511 13,722 9,679
Total other assets 56,494 40,551 40,977
TOTAL ASSETS $ 1,764,428 $ 1,655,552 $ 1,588,111
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
( in thousands, except share data ) As of
June 30, December 31, June 30,
1996 1995 1995
( Unaudited ) ( Unaudited )
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 32,040 $ 78,698 $ 47,046
Accounts payable 68,149 78,538 49,742
Customer deposits and unearned revenue 31,931 21,307 19,363
Accrued liabilities:
Employee compensation and benefits 30,281 32,901 27,295
Artist and author royalties 9,555 6,843 9,805
Interest 1,462 2,169 1,953
Income taxes 1,183 634 3,006
Lawsuits and related settlements 5,745 8,803 11,188
Miscellaneous 20,318 36,226 27,085
Total current liabilities 200,664 266,119 196,483
Deferred Income Taxes 63,987 82,229 73,631
Long-Term Debt (less current portion) 131,815 2,177 63,433
Other Long-Term Obligations and Minority Interests 114,786 113,601 117,439
Commitments and Contingencies (Note 5)
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: 60,981,720; 60,085,408; and 59,996,430 shares 610 601 600
Voting - authorized: 30,000,000 shares; issued and
outstanding: 19,470,382; 19,978,373; and 19,990,833 shares 195 200 200
Total 805 801 800
Additional paid-in capital 266,833 254,063 251,785
Retained earnings 966,916 916,602 869,282
Unrealized gains on securities available for sale 22,285 20,720 15,952
Unvested restricted stock awards (4,332) (1,573) (2,028)
Foreign currency translation adjustment 669 813 1,334
Total stockholders' equity 1,253,176 1,191,426 1,137,125
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,764,428 $ 1,655,552 $ 1,588,111
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME ( UNAUDITED )
( in thousands, except per share data )
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
Operating Revenues:
Advertising $ 120,746 $ 116,315 $ 234,748 $ 224,566
Circulation 32,102 31,165 65,666 62,485
Other newspaper revenue 14,134 13,632 25,411 25,668
Total newspapers 166,982 161,112 325,825 312,719
Broadcast television 85,203 77,080 155,925 144,048
Entertainment 25,138 21,115 49,819 47,809
Total operating revenues 277,323 259,307 531,569 504,576
Operating Expenses:
Employee compensation and benefits 89,333 84,112 176,216 167,865
Newsprint and ink 33,162 29,381 67,330 56,252
Program, production and copyright costs 16,492 15,146 33,068 32,532
Other operating expenses 66,961 62,689 128,586 123,648
Depreciation 11,742 11,370 24,179 22,387
Amortization of intangible assets 5,210 5,059 10,291 10,105
Total operating expenses 222,900 207,757 439,670 412,789
Operating Income 54,423 51,550 91,899 91,787
Other Credits (Charges):
Interest expense (2,224) (2,829) (3,637) (6,182)
Miscellaneous, net 705 394 323 1,176
Net other credits (charges) (1,519) (2,435) (3,314) (5,006)
Income from Continuing Operations
Before Taxes and Minority Interests 52,904 49,115 88,585 86,781
Provision for Income Taxes 22,998 21,127 38,272 38,098
Income from Continuing Operations
Before Minority Interests 29,906 27,988 50,313 48,683
Minority Interests 798 868 1,485 1,803
Income From Continuing Operations 29,108 27,120 48,828 46,880
Income From Discontinued Operations 12,782 9,019 22,377 18,373
Net Income $ 41,890 $ 36,139 $ 71,205 $ 65,253
Per Share of Common Stock:
Income from continuing operations $.36 $.34 $.61 $.59
Net income $.52 $.45 $.89 $.82
Dividends declared $.13 $.13 $.26 $.24
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS ( UNAUDITED )
( in thousands ) Six months ended
June 30,
1996 1995
Cash Flows from Operating Activities:
Income from continuing operations $ 48,828 $ 46,880
Adjustments to reconcile income from continuing operations
to net cash flows from continuing operating activities:
Depreciation and amortization 34,470 32,492
Deferred income taxes 2,343 1,183
Minority interests in income of subsidiary companies 1,485 1,803
Settlement of 1985 - 1987 federal income tax audits (45,000)
Other changes in certain working capital accounts, net 11,642 (29,663)
Miscellaneous, net (13,987) 11,343
Net cash provided by continuing operating activities 84,781 19,038
Discontinued cable operations:
Income 22,377 18,373
Adjustment to derive cash flows from operating activities 21,259 41,019
Net cash provided 43,636 59,392
Net operating activities 128,417 78,430
Cash Flows from Investing Activities:
Additions to property, plant, and equipment (36,774) (30,816)
Purchase of subsidiary companies and investments (22,678) (4,903)
Change in short-term investments, net 25,013
Sale of subsidiary companies and other investments 11,400 2,729
Miscellaneous, net 7,305 1,152
Net cash provided by (used in) investing activities of continuing operations (15,734) (31,838)
Net cash provided by (used in) investing activities of discontinued cable operations (93,332) (18,918)
Net investing activities (109,066) (50,756)
Cash Flows from Financing Activities:
Increases in long-term debt 32,000
Payments on long-term debt (49,020) (26)
Dividends paid (20,891) (19,175)
Dividends paid to minority interests (838) (832)
Miscellaneous, net 5,596 2,698
Net cash provided by (used in) financing activities of continuing operations (33,153) (17,335)
Net cash provided by (used in) financing activities of discontinued cable operations (625) (1,875)
Net financing activities (33,778) (19,210)
Increase (Decrease) in Cash and Cash Equivalents (14,427) 8,464
Cash and Cash Equivalents:
Beginning of year 30,021 16,609
End of period $ 15,594 $ 25,073
Supplemental Cash Flow Disclosures:
Interest paid, excluding amounts capitalized $ 4,344 $ 6,228
Income taxes paid 32,246 78,348
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY ( UNAUDITED )
( in thousands, except share data )
Unrealized
Gains on Unvested Foreign
Additional Securities Restricted Currency
Common Paid-in Retained Available Stock Translation
Stock Capital Earnings for Sale Awards Adjustment
Balances at December 31, 1994 $ 799 $ 248,098 $ 823,204 $ 12,518 $ (2,036) $ 885
Net income 65,253
Dividends: declared and
paid - $.24 per share (19,175)
Conversion of 184,000 Voting common shares
to 184,000 Class A common shares
Class A Common shares issued pursuant to
compensation plans, net:
157,950 shares issued,
and 16,762 shares repurchased 1 3,194 (492)
Tax benefits of compensation plans 493
Amortization of restricted stock awards 500
Foreign currency translation adjustment 449
Increase in unrealized gains on
securities available for sale, net
of deferred income taxes of $1,849 3,434
Balances at June 30, 1995 $ 800 $ 251,785 $ 869,282 $ 15,952 $ (2,028) $ 1,334
Balances at December 31, 1995 $ 801 $ 254,063 $ 916,602 $ 20,720 $ (1,573) $ 813
Net income 71,205
Dividends: declared and
paid - $.26 per share (20,891)
Conversion of 507,991 Common Voting shares
to 507,991 Class A Common shares
Class A Common shares issued pursuant to
compensation plans, net:
390,950 shares issued,
and 2,629 shares repurchased 4 11,195 (5,598)
Tax benefits of compensation plans 1,575
Amortization of restricted stock awards 2,839
Foreign currency translation adjustment (144)
Increase in unrealized gains on
securities available for sale, net
of deferred income taxes of $843 1,565
Balances at June 30, 1996 $ 805 $ 266,833 $ 966,916 $ 22,285 $ (4,332) $ 669
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ( UNAUDITED )
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The financial statements have been prepared
in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. Except as disclosed herein, there
has been no material change in 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, 1995.
Financial information as of December 31, 1995 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 - Net income per share computations are based
upon the weighted average common shares outstanding. The weighted
average common shares outstanding were as follows:
( in thousands ) Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
Weighted average shares outstanding 80,308 79,927 80,256 79,891
2. ACQUISITIONS AND DIVESTITURES
A. Acquisitions
1996 - In May the Company purchased the Vero Beach, Florida, Press-
Journal.
1995 - There were no acquisitions in the six months ended June 30, 1995.
The following table presents additional information about the
acquisitions:
( in thousands ) Six months
ended
June 30,
1996
Goodwill and other intangible assets acquired $ 110,967
Other assets acquired 10,900
Total 121,867
Liabilities assumed (1,794)
6.17% note issued to seller, due in 1997 (100,000)
Cash paid $ 20,073
The acquisition has been accounted for as a purchase and accordingly
the purchase price has been allocated to assets and liabilities
based on the estimated fair values, which are subject to adjustment,
as of the date of acquisition.
The acquired operation has been included in the Consolidated
Statements of Income from the date of acquisition. The following
table summarizes, on an unaudited, pro forma basis, the estimated
combined results of operations of Scripps and the Press-Journal
assuming the acquisition had taken place at the beginning of the
respective periods. The pro forma information includes adjustments
for interest expense that would have been incurred to finance the
acquisition, additional depreciation based on the fair market value
of the property, plant, and equipment, and the amortization of
intangible assets resulting from the acquisition. The unaudited pro
forma results of operations are not necessarily indicative of the
results which actually would have occurred had the acquisition been
completed at the beginning of the respective periods.
( in thousands ) Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
Operating revenues $ 278,958 $ 262,880 $ 537,524 $ 512,229
Income from continuing operations 28,079 26,035 46,718 45,070
Net income 40,861 35,054 69,095 63,443
Per share of common stock:
Income from continuing operations $.35 $.33 $.58 $.56
Net income .51 .44 .86 .79
B. Divestitures
1996 - Scripps sold its equity interest in The Television Food
Network, a cable programming network. No material gain or loss was
realized as proceeds approximated the net book value of the net
assets sold.
1995 - Scripps sold its Watsonville, California, daily newspaper.
No material gain or loss was realized as proceeds approximated the
net book value of the net assets sold.
3. LONG-TERM DEBT
Long-term debt consisted of the following:
( in thousands ) As of
June 30, December 31, June 30,
1996 1995 1995
6.17% note, due in 1997 $ 100,000
7.375% notes, due in 1998 29,658 $ 31,658 $ 61,235
Variable Rate Credit Facilities 32,000
9.0% notes, due in 1996 47,000 47,000
Other notes 2,197 2,217 2,244
Total long-term debt 163,855 80,875 110,479
Current portion of long-term debt 32,040 78,698 47,046
Long-term debt (less current portion) $ 131,815 $ 2,177 $ 63,433
Scripps has a Competitive Advance/Revolving Credit Agreement and
other variable rate credit facilities ("Variable Rate Credit
Facilities") which expire through September 1996 and permit maximum
borrowings up to $50,000,000. Maximum borrowings under the
facilities are changed as Scripps' anticipated needs change and are
not indicative of Scripps' short-term borrowing capacity. The
credit facilities may be extended upon mutual agreement.
Certain long-term debt agreements contain maintenance requirements
on net worth and coverage of interest expense and restrictions on
dividends and incurrence of additional indebtedness. Scripps is in
compliance with all debt covenants.
4. DISCONTINUED CABLE TELEVISION OPERATIONS
On October 28, 1995, Scripps and Comcast Corporation ("Comcast")
reached an agreement pursuant to which Scripps will contribute all
of its non-cable television assets to Scripps Howard, Inc. ("SHI" -
a wholly-owned subsidiary of Scripps and the direct or indirect
parent of all of Scripps' operations) and SHI's cable television
system subsidiaries ("Scripps Cable") will be transferred to and
held directly by Scripps. Scripps Cable will be acquired by Comcast
through a tax-free merger (the "Merger") with Scripps. The
remaining SHI business will continue as "New Scripps", which will be
distributed in a tax-free "spin-off" to Scripps shareholders (the
"Spin-Off") prior to the Merger and thereafter renamed The E.W.
Scripps Company. The Merger and Spin-off are collectively referred
to as the "Transactions."
The closing of the Transactions is expected to occur prior to the
end of 1996, subject to regulatory approvals and certain other
conditions. Controlling shareholders in Scripps and Comcast have
agreed to vote in favor of the Merger, and as a result completion of
the Transactions is assured so long as such conditions are satisfied
and such regulatory approvals are received. While there can be no
assurances regarding such approvals, management believes all such
approvals will be obtained.
Because Scripps Cable represents an entire business segment that
will be divested, its results are reported as "discontinued
operations" for all periods presented.
Summarized operating results for the discontinued cable television
operations are as follows:
( in thousands ) Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
Operating revenues $ 77,182 $ 69,750 $ 153,432 $ 136,745
Income before income taxes 21,191 14,956 37,098 29,314
Income taxes (8,409) (5,937) (14,721) (10,941)
Income from discontinued cable operations $ 12,782 $ 9,019 $ 22,377 $ 18,373
Summarized balance sheet data for the discontinued cable television
operations are as follows:
( in thousands ) As of
June 30, December 31, June 30,
1996 1995 1995
Property, plant, and equipment $ 314,363 $ 294,557 $ 289,694
Goodwill and other intangible assets 138,933 93,496 97,306
Other assets 28,204 26,014 26,112
Deferred income tax liabilities (97,435) (76,210) (76,642)
Other liabilities (29,831) (32,019) (28,885)
Net assets of discontinued cable television operations $ 354,234 $ 305,838 $ 307,585
The major components of cash flow for discontinued operations are as
follows:
( in thousands ) Six months ended
June 30,
1996 1995
Income from discontinued operations $ 22,377 $ 18,373
Depreciation and amortization 27,923 27,862
Other, net (6,664) 13,157
Net cash provided by discontinued cable operating activities $ 43,636 $ 59,392
Capital expenditures $ (31,378) $ (18,808)
Acquisition of cable television systems (primarily equipment and intangible assets) (62,152) (222)
Other, net 198 112
Net cash used in investing activities of discontinued cable operations $ (93,332) $ (18,918)
In January 1996 Scripps Cable acquired cable television systems
adjacent to its Knoxville and Chattanooga systems (the "Mid-Tenn.
Purchase") for $62,500,000, including assumed liabilities. The
acquired cable television systems are included in the results of
discontinued operations from the date of acquisition.
5. COMMITMENTS AND CONTINGENCIES
In 1994 Scripps accrued an estimate of the ultimate costs, including
attorneys' fees and settlements, of lawsuits filed by certain former
employees and independent contractors of a divested operating unit.
The lawsuits allege that the employees were due severance pay and
that certain contractual obligations were unfulfilled, respectively.
In April 1996 Scripps reached an agreement to settle the severance
pay lawsuits. There was no additional charge resulting from the
settlement. Management believes the possibility of incurring a loss
greater than the amount accrued for the independent contractor
lawsuits is remote.
In 1994 Scripps Cable accrued an estimate of the ultimate costs,
including attorneys' fees and settlements, of certain lawsuits
against the Sacramento cable television system related primarily to
employment issues and to the timing and amount of late-payment fees
assessed to subscribers. In May 1996 Scripps Cable agreed to settle
the late-payment fee lawsuits. There was no additional charge
resulting from the settlement. Management believes the possibility
of incurring a loss greater than the amount accrued for the
employment issues lawsuits is remote. Pursuant to the terms of the
Merger, New Scripps will indemnify Comcast against losses related to
these lawsuits.
Amounts accrued, less payments for settlements and attorneys fees,
are included in accrued lawsuits and related settlements in the
Consolidated Balance Sheets.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Consolidated results of continuing operations were as follows:
( in thousands, except per share data ) Quarterly Period Year-to-Date
1996 Change 1995 1996 Change 1995
Operating revenues:
Newspapers $ 166,982 3.6 % $ 161,112 $ 325,825 4.3 % $ 312,425
Broadcast television 85,203 10.5 % 77,080 155,925 8.2 % 144,048
Entertainment 25,138 19.1 % 21,115 49,819 4.2 % 47,809
Total 277,323 6.9 % 259,307 531,569 5.4 % 504,282
Divested operating units 294
Total operating revenues $ 277,323 6.9 % $ 259,307 $ 531,569 5.3 % $ 504,576
Operating income:
Newspapers $ 35,234 1.4 % $ 34,755 $ 61,505 (4.3)% $ 64,277
Broadcast television 29,994 20.5 % 24,890 47,477 15.3 % 41,186
Entertainment (2,161) (2,882) (3,811) (3,352)
Corporate (4,644) (4,266) (8,854) (8,895)
Total 58,423 11.3 % 52,497 96,317 3.3 % 93,216
Unusual items (4,000) (4,000)
Divested operating units (947) (418) (1,429)
Total operating income 54,423 5.6 % 51,550 91,899 0.1 % 91,787
Interest expense (2,224) (2,829) (3,637) (6,182)
Miscellaneous, net 705 394 323 1,176
Income taxes (22,998) (21,127) (38,272) (38,098)
Minority interest (798) (868) (1,485) (1,803)
Income from continuing operations $ 29,108 $ 27,120 $ 48,828 $ 46,880
Per share of common stock:
Income from continuing operations $.36 5.9 % $.34 $.61 3.4 % $.59
Unusual charge .03 .03
Adjusted income from continuing operations $.39 14.7 % $.34 $.64 8.5 % $.59
( in thousands ) Quarterly Period Year-to-Date
1996 Change 1995 1996 Change 1995
Other Financial and Statistical Data - excluding divested operating units and unusual items:
Total advertising revenues $ 210,194 7.5 % $ 195,495 $ 398,106 7.1 % $ 371,726
Advertising revenues as a
percentage of total revenues 75.8 % 75.4 % 74.9 % 73.7 %
EBITDA:
Newspapers $ 44,200 1.1 % $ 43,718 $ 79,979 (2.9)% $ 82,347
Broadcast television 36,757 17.4 % 31,307 61,096 13.5 % 53,822
Entertainment (1,256) (2,144) (1,981) (2,046)
Corporate (4,326) (3,955) (8,307) (8,418)
Total $ 75,375 9.4 % $ 68,926 $ 130,787 4.0 % $ 125,705
Effective income tax rate 43.5 % 43.0 % 43.2 % 43.9 %
Weighted average shares outstanding 80,308 0.5 % 79,927 80,256 0.5 % 79,891
Total capital expenditures $ 19,378 6.6 % $ 18,178 $ 36,774 19.3 % $ 30,816
Earnings before interest, income taxes, depreciation, and
amortization ("EBITDA") is included in the discussion of segment
results because:
Changes in depreciation and amortization are often unrelated to
current performance. Management believes the year-over-year
change in EBITDA is a more useful measure of year-over-year
performance than the change in operating income because,
combined with information on capital spending plans, it is a
more reliable indicator of results that may be expected in
future periods. However, management's belief that EBITDA is a
more useful measure of year-over-year performance is not shared
by the accounting profession.
Banks and other lenders use EBITDA to determine Scripps'
borrowing capacity.
Financial analysts use EBITDA to value communications media
companies.
Acquisitions of communications media businesses are based on
multiples of EBITDA.
EBITDA should not, however, be construed as an alternative measure
of the amount of Scripps' income or cash flows from operating
activities as EBITDA excludes significant costs of doing business.
In the second quarter of 1996 Scripps incurred an unusual charge of
approximately $4,000,000, $2,600,000 after-tax, $.03 per share, for
Scripps' share of certain costs associated with restructuring
portions of the distribution system of the Cincinnati joint
operating agency.
Scripps acquired the Vero Beach daily newspaper on May 9, 1996, sold
its equity interest in The Television Food Network ("TV Food") in
the second quarter of 1996, and sold its Watsonville, California,
daily newspaper in the first quarter of 1995.
Year-to-date operating losses for the Home & Garden Television
network ("HGTV") totaled $6,900,000, $4,200,000 after-tax, $.05 per
share in 1996 and $6,600,000, $4,100,000 after-tax, $.05 per share
in 1995. Operating losses for the quarterly periods were
$3,100,000, $1,900,000 after-tax, $.02 per share in 1996 and
$3,400,000, $2,100,000 after-tax, $.03 per share in 1995.
Interest expense decreased in the quarter and year-to-date periods
as a result of reduced average borrowings. However, primarily
because of the acquisition of the Vero Beach newspaper, total long-
term debt increased $97,000,000 in the quarter to $164,000,000,
which is $53,000,000 more than at the end of the second quarter in
1995.
Operating results, excluding TV Food and the Watsonville newspaper,
are presented below and on the following pages. The results of the
divested operating units are excluded from the segment operating
results because management believes they are not relevant to
understanding Scripps' ongoing operations.
NEWSPAPERS - Operating results for the newspaper segment, excluding
the Watsonville newspaper, were as follows:
( in thousands ) Quarterly Period Year-to-Date
1996 Change 1995 1996 Change 1995
Operating revenues:
Local $ 49,617 1.9 % $ 48,683 $ 98,202 2.8 % $ 95,498
Classified 50,204 7.7 % 46,594 95,825 8.0 % 88,688
National 4,751 7.4 % 4,425 8,997 8.2 % 8,314
Preprint 16,174 (2.6)% 16,613 31,724 (0.4)% 31,838
Newspaper advertising 120,746 3.8 % 116,315 234,748 4.6 % 224,338
Circulation 32,102 3.0 % 31,165 65,666 5.2 % 62,435
Joint operating agency distributions 11,704 1.7 % 11,508 20,615 (4.9)% 21,681
Other 2,430 14.4 % 2,124 4,796 20.8 % 3,971
Total operating revenues 166,982 3.6 % 161,112 325,825 4.3 % 312,425
Operating expenses:
Employee compensation and benefits 55,928 2.5 % 54,567 110,644 1.2 % 109,347
Newsprint and ink 33,161 12.9 % 29,381 67,330 19.7 % 56,227
Other 33,693 0.7 % 33,446 67,872 5.2 % 64,504
Depreciation and amortization 8,966 0.0 % 8,963 18,474 2.2 % 18,070
Total operating expenses 131,748 4.3 % 126,357 264,320 6.5 % 248,148
Operating income $ 35,234 1.4 % $ 34,755 $ 61,505 (4.3)% $ 64,277
Other Financial and Statistical Data:
Earnings before interest,
income taxes, depreciation,
and amortization ("EBITDA") $ 44,200 1.1 % $ 43,718 $ 79,979 (2.9)% $ 82,347
Percent of operating revenues:
Operating income 21.1 % 21.6 % 18.9 % 20.6 %
EBITDA 26.5 % 27.1 % 24.5 % 26.4 %
Capital expenditures $ 12,674 85.9 % $ 6,816 $ 17,905 78.9 % $ 10,010
Advertising inches:
Local 1,688 9.5 % 1,541 3,381 3.2 % 3,275
Classified 1,765 6.7 % 1,654 3,295 2.7 % 3,207
National 96 20.0 % 80 179 7.2 % 167
Total full run ROP 3,549 8.4 % 3,275 6,855 3.1 % 6,649
Higher advertising rates were the primary cause of the increase in
advertising revenues as volume decreased in many of Scripps'
newspaper markets. The May 9, 1996 acquisition of The Vero Beach
newspaper also had a slight positive effect on year-over-year
advertising revenues.
The price of newsprint in the first half of 1996 was approximately
24% higher than in the first half of 1995. However, the rate of
increase in the price of newsprint in the second quarter of 1996 was
reduced to 13% as newsprint prices decreased in April 1996. Newsprint
prices decreased again in July and August. As a result, the year-over-year
third quarter newsprint expense will be approximately 8% less than,
and the fourth quarter expense is expected to be approximately 15%
less than, in 1995. For the first half of 1996 newsprint consumption
decreased 4.4%.
BROADCAST TELEVISION - Operating results for the broadcast
television segment were as follows:
( in thousands ) Quarterly Period Year-to-Date
1996 Change 1995 1996 Change 1995
Operating revenues:
Local $ 42,763 9.4 % $ 39,072 $ 78,323 5.4 % $ 74,328
National 36,479 7.5 % 33,937 65,856 6.9 % 61,605
Political 1,718 310 3,100 371
Other 4,243 12.8 % 3,761 8,646 11.6 % 7,744
Total operating revenues 85,203 10.5 % 77,080 155,925 8.2 % 144,048
Operating expenses:
Employee compensation and benefits 24,446 9.7 % 22,293 48,173 9.5 % 44,003
Program and copyright costs 11,365 (3.5)% 11,774 22,568 (2.6)% 23,182
Other 12,635 7.9 % 11,706 24,088 4.5 % 23,041
Depreciation and amortization 6,763 5.4 % 6,417 13,619 7.8 % 12,636
Total operating expenses 55,209 5.8 % 52,190 108,448 5.4 % 102,862
Operating income $ 29,994 20.5 % $ 24,890 $ 47,477 15.3 % $ 41,186
Other Financial and Statistical Data:
Earnings before interest,
income taxes, depreciation,
and amortization ("EBITDA") $ 36,757 17.4 % $ 31,307 $ 61,096 13.5 % $ 53,822
Percent of operating revenues:
Operating income 35.2 % 32.3 % 30.4 % 28.6 %
EBITDA 43.1 % 40.6 % 39.2 % 37.4 %
Capital expenditures $ 6,077 1.2 % $ 6,007 $ 17,582 70.3 % $ 10,325
The increase in employee costs is due primarily to Scripps' expanded
schedules of local news programs. Construction of new facilities at
the Phoenix and Tampa stations resulted in the increase in capital
spending. Depreciation and amortization in the third quarter of
1996 is expected to be less than it was in the third quarter of 1995
and the second quarter of 1996 as certain intangible assets acquired
in the 1991 purchase of the Baltimore station become fully
amortized.
ENTERTAINMENT - Operating results for the entertainment segment, excluding
TV Food, were as follows:
( in thousands ) Quarterly Period Year-to-Date
1996 Change 1995 1996 Change 1995
Operating revenues:
Licensing $ 12,176 1.1 % $ 12,049 $ 24,782 (10.1)% $ 27,558
Newspaper feature distribution 5,075 14.8 % 4,419 9,883 12.3 % 8,803
Program production 1,734 (3.6)% 1,798 4,375 (34.5)% 6,678
Subscriber fees 1,566 443 2,698 834
Advertising 4,245 2,100 7,433 3,340
Other 342 11.8 % 306 648 8.7 % 596
Total operating revenues 25,138 19.1 % 21,115 49,819 4.2 % 47,809
Operating expenses:
Employee compensation and benefits 5,666 16.0 % 4,885 11,232 19.3 % 9,416
Artists' royalties 8,781 3.8 % 8,456 17,655 (5.8)% 18,741
Programming and production costs 5,095 51.1 % 3,372 10,442 11.7 % 9,350
Other 6,852 4.7 % 6,546 12,471 1.0 % 12,348
Depreciation and amortization 905 22.6 % 738 1,830 40.1 % 1,306
Total operating expenses 27,299 13.8 % 23,997 53,630 4.8 % 51,161
Operating income (loss) $ (2,161) $ (2,882) $ (3,811) $ (3,352)
Other Financial and Statistical Data:
Earnings before interest,
income taxes, depreciation,
and amortization ("EBITDA") $ (1,256) $ (2,144) $ (1,981) $ (2,046)
Capital expenditures $ 504 $ 4,920 $ 1,040 $ 9,113
Program production revenues are subject to substantial fluctuation
due to changes in public tastes and demand for programming by
broadcast and cable television networks. In addition, quarterly
revenues are affected by the timing of completion and delivery of
programming to the networks. Program production revenues decreased
in the year-to-date period as fewer programs were completed and
delivered by Scripps Howard Productions ("SHP") and Cinetel.
Program production revenues for the full year of 1996 are expected
to increase however, as SHP has commitments for four network prime-
time programs to be delivered in 1996 compared to two in 1995.
Subscriber fees and advertising revenue increased due to the
continued growth of HGTV.
Year-to-date operating losses for HGTV totaled $6,900,000 in 1996
and $6,600,000 in 1995. Operating losses for the quarterly periods
were $3,100,000 in 1996 and $3,400,000 in 1995.
Programming and production costs increased due to higher programming
costs at HGTV.
Author royalties decreased in the year-to-date period due to the
decrease in licensing revenues.
United Media distributes news columns, comics, and features,
and licenses copyrights for "Peanuts" and other character
properties on a worldwide basis. Revenues derived from such
international activities represent less than 5% of Scripps'
total revenues. The Japanese market provides more than two-
thirds of international revenues and approximately 45% of total
licensing revenue. The impact of changes in the value of the
U.S. dollar in foreign exchange markets does not have a
significant effect on the recorded value of Scripps' foreign-
currency-denominated assets, which are primarily related to
uncollected licensing royalties and represent less than 1% of
total assets. Scripps' foreign-currency-denominated
liabilities are primarily related to payments due to creators
of the properties. However, comparison of year-over-year
licensing revenues can be significantly affected by changes in
the exchange rate for the Japanese yen. Japanese licensing
revenues in local currency increased 13% in 1996, however the
change in the exchange rate caused such revenues to decrease 6%
in dollar terms. The effect on licensing revenues of changes
in the exchange rate for other foreign currencies is not
significant.
From time-to-time Scripps uses foreign currency forward and
option contracts to hedge cash flow exposures denominated in
Japanese yen. The purpose of the contracts is to reduce the
risk of changes in the exchange rate on Scripps' anticipated
net licensing receipts (licensing royalties less amounts due
creators of the properties and certain direct expenses) for the
following year. The maturities of the contracts coincide with
the quarterly payments of licensing royalties. Scripps does
not hold foreign currency contracts for trading purposes and
does not hold leveraged contracts.
Information about Scripps' foreign currency contracts, which
require Scripps to sell yen at a specified rate, at June 30, 1996
was as follows:
Maturity Contract Exchange US Dollar
Date Amount (in yen) Rate Equivalent
8/15/96 142,650,000 95.10 1,500,000
11/15/96 143,835,000 95.89 1,500,000
2/18/97 151,635,000 101.09 1,500,000
5/15/97 150,345,000 100.23 1,500,000
Capital expenditures in 1995 primarily relate to the launch of HGTV.
The increase in depreciation and amortization is primarily due to
the start-up of HGTV.
LIQUIDITY AND CAPITAL RESOURCES
Scripps generates significant cash flow from operating activities,
primarily from its newspaper and broadcast television operations.
There are no significant legal or other restrictions on the transfer
of funds among Scripps' business segments. Cash flows provided by
the operating activities of the newspaper and broadcast television
segments in excess of the capital expenditures of those segments are
used to invest in the entertainment segment and to fund corporate
expenses. Management expects total cash flow from continuing
operating activities in 1996 will exceed Scripps' expected total
capital expenditures, debt repayments, and dividend payments.
Cash flow provided by continuing operating activities was
$84,800,000 in 1996 compared to $19,000,000 in 1995. Cash flow
provided by continuing operating activities in 1995 was reduced by a
$45,000,000 payment to settle the audit of Scripps' 1985 through
1987 federal income tax returns.
Net debt (borrowings less cash equivalent and other short-term
investments) totaled $163,900,000 at June 30, 1996 and was 12% of
total capitalization. Management believes Scripps' cash and cash
equivalents and substantial borrowing capacity, taken together,
provide adequate resources to fund the capital expenditures and
future expansion of existing businesses and the development or
acquisition of new businesses. The ability of Scripps' continuing
operations to produce significant cash flow and Scripps' significant
borrowing capacity were primary factors in structuring the
divestiture of its cable television assets so as to transfer the
proceeds of the divestiture tax-free to shareholders.
THE E.W. SCRIPPS COMPANY
Index to Exhibits
Exhibit
No. Item Page
12 Ratio of Earnings to Fixed Charges E-2
27 Financial Data Schedule E-3