SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
Commission File Number 0-16914
THE E. W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)
Ohio 31-1223339
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
312 Walnut Street
Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (513) 977-3000
Title of each class Name of each exchange on
which registered
Securities registered pursuant to
Section 12(b) of the Act:
Class A Common Shares, $.01 par value New York Stock Exchange
Securities registered pursuant to
Section 12(g) of the Act:
Not applicable
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
The aggregate market value of Class A Common Shares of the Registrant held by
nonaffiliates of the Registrant, based on the $62.93 per share closing price for
such stock on February 28, 2001, was approximately $1,421,000,000. As of
February 28, 2001, nonaffiliates held approximately 1,441,000 Common Voting
Shares. There is no active market for such stock.
As of February 28, 2001, there were 59,979,446 of the Registrant's Class A
Common Shares, $.01 par value per share, outstanding and 19,096,913 of the
Registrant's Common Voting Shares, $.01 par value per share, outstanding.
INDEX TO THE E. W. SCRIPPS COMPANY
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000
Item No. Page
PART I
1. Business
Newspapers 3
Scripps Networks 7
Broadcast Television 8
Licensing and Other Media 11
Venture Capital and Other Investments 12
Employees 12
2. Properties 12
3. Legal Proceedings 12
4. Submission of Matters to a Vote of Security Holders 12
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters 13
6. Selected Financial Data 13
7. Management's Discussion and Analysis of Financial
Condition and Results of Operation 13
8. Financial Statements and Supplementary Data 13
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 13
PART III
10. Directors and Executive Officers of the Registrant 14
11. Executive Compensation 15
12. Security Ownership of Certain Beneficial Owners and Management 15
13. Certain Relationships and Related Transactions 15
PART IV
14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 15
PART I
ITEM 1. BUSINESS
The E. W. Scripps Company ("Company") operates in three reportable segments:
Newspapers, Scripps Networks and Broadcast Television.
Newspapers include 21 daily newspapers in the U.S.
Scripps Networks includes three national television networks that are
distributed by cable and satellite television systems: Home & Garden Television
("HGTV"), Food Network and Do It Yourself ("DIY"), and the Company's 12%
interest in FOX Sports South, a regional television network. The Company
expects to launch Fine Living, its fourth national network, in the fourth
quarter of 2001.
Broadcast Television includes ten television stations, nine of which are
affiliated with national television networks.
A summary of segment information for the three years ended December 31, 2000, is
set forth on page F-36 of this Form 10-K. Licensing and other media aggregates
the Company's operating segments that are too small to warrant separate
reporting, primarily syndication and licensing of news features and comics.
Newspapers
Operations - The Company acquired or divested the following newspaper operations
in the five years ended December 31, 2000:
2000 - Acquired the Ft. Pierce, Florida, daily newspaper in exchange for the
Company's Destin, Florida, newspaper and cash. Acquired the Henderson,
Kentucky, daily newspaper and the Marco Island, Florida, weekly
newspaper.
1999 - Acquired the 70% of Colorado Real Estate On-line, an Internet provider
of real estate listings, that the Company did not already own.
1998 - Divested the Dallas Community newspapers, including the Plano daily.
1997 - Acquired daily newspapers in Abilene, Corpus Christi, Plano, San
Angelo and Wichita Falls, Texas, a group of community newspapers in the
Dallas, Texas, market and a daily newspaper in Anderson, South Carolina.
Traded its Monterey and San Luis Obispo, California, daily newspapers for
the daily newspaper in Boulder, Colorado, and terminated the joint
operating agency and ceased operations of its newspaper in El Paso,
Texas.
1996 - Acquired the Vero Beach, Florida, daily newspaper.
The Company publishes daily newspapers in 21 markets. From its Washington
bureau the Company operates the Scripps Howard News Service, a supplemental wire
service covering stories in the capital, other parts of the United States and
abroad. Each of the Company's daily newspapers operates an Internet site
featuring content included in the daily newspaper. Many of the Company's
newspapers provide services such as total market coverage advertising products,
direct mail advertising and commercial printing.
Revenues - Operating revenues for the five years ended December 31, 2000, were
as follows:
( in thousands )
2000 1999 1998 1997 1996
Newspaper advertising:
Local ROP $ 211,568 $ 205,767 $ 201,036 $ 159,752 $ 134,979
Classified ROP 209,942 195,809 180,938 138,282 116,275
National ROP 30,977 27,937 20,576 16,649 14,579
Preprint and other 90,536 79,902 71,286 48,926 40,895
Total newspaper advertising 543,023 509,415 473,836 363,609 306,728
Circulation 133,491 135,029 138,615 112,612 102,005
Joint operating agency distributions 47,412 50,511 48,278 47,052 39,341
Other 10,176 9,735 10,402 7,209 6,071
Total 734,102 704,690 671,131 530,482 454,145
Rocky Mountain News 220,998 209,713 200,442 196,794 182,693
Divested newspapers 886 3,806 17,498 33,100 43,330
Total operating revenues $ 955,986 $ 918,209 $ 889,071 $ 760,376 $ 680,168
Daily newspaper operating revenues are derived primarily from advertising and
circulation. Joint operating agency distributions represent the Company's share
of profits of newspapers managed by the other party to a joint operating agency
(see "Joint Operating Agencies"). Other newspaper operating revenues include
commercial printing.
Advertising rates and revenues vary among the Company's newspapers depending on
circulation, type of advertising, local market conditions and competition.
Advertising revenues are derived from run-of-paper ("ROP") advertisements
included with news stories in the body of the newspaper, preprinted
advertisements that are generally produced by advertisers and inserted into the
newspaper, and on-line advertising appearing on the newspapers' Internet sites.
ROP is further broken down among "local," "classified" and "national"
advertising. Local refers to advertising that is not in the classified
advertising section and is purchased by in-market advertisers. Classified
refers to advertising that generally is grouped by type of advertising, e.g.,
automotive and help wanted. National refers to advertising purchased by
businesses that operate beyond the local market and purchase advertising from
many newspapers, primarily through advertising agencies. A given volume of ROP
advertisements is generally more profitable to the Company than the same volume
of preprinted advertisements.
On-line advertising, which is included in "preprint and other," ranges from
simple static banners that appear at the top and bottom of a Web page to more
complex advertisements that use animation and allow users to interact with the
advertisements. On-line advertising also includes an allocation of
classified advertising revenues that appear in both the printed editions of
the newspapers and on the newspapers' Internet sites, direct response
campaigns and links to commercial sites. The newspapers generally receive
fees for these links and advertisements. On-line advertising revenues were
$8,300,000 in 2000, $5,400,000 in 1999, $1,800,000 in 1998 and $100,000 in
1997.
Advertising revenues vary through the year, with the first and third quarters
generally having lower revenues than the second and fourth quarters. Print
advertising rates and volume are highest on Sundays, primarily because
circulation and readership is greatest on Sundays.
Circulation revenues are derived from home delivery sales of newspapers to
subscribers and from single-copy sales made through retail outlets and vending
machines. Circulation information for the Company's newspapers is as follows:
( in thousands ) (1) Morning (M)
Newspaper Evening (E) 2000 1999 1998 1997 1996
Daily Paid Circulation
Abilene (TX) Reporter-News M 36 38 40 40 41
Albuquerque (NM) Tribune (2) E 19 21 23 25 27
Anderson (SC) Independent-Mail M 39 40 40 41 42
Birmingham (AL) Post-Herald (2) E 15 18 21 26 50
Boulder (CO) Daily Camera M 34 33 34 34 34
Bremerton (WA) Sun M 34 35 37 38 36
Cincinnati (OH) Post (2) E 60 65 71 77 81
Corpus Christi (TX) Caller-Times M 63 65 66 68 65
Denver (CO) Rocky Mountain News (2) M 427 396 332 303 317
Evansville (IN) Courier & Press (2) M 71 72 61 62 61
Ft. Pierce (FL) Tribune M 27 27 27 27 26
Henderson (KY) Gleaner M 11 11 11 11 11
Knoxville (TN) News-Sentinel M 123 122 122 122 123
Memphis (TN) Commercial Appeal M 175 173 174 186 183
Naples (FL) Daily News M 53 52 50 49 48
Redding (CA) Record-Searchlight M 34 34 35 36 35
San Angelo (TX) Standard-Times M 29 30 31 32 32
Stuart (FL) News M 37 37 36 35 35
Ventura County (CA) Star M 97 93 92 96 95
Vero Beach (FL) Press Journal M 33 32 32 32 33
Wichita Falls (TX) Times Record News M 36 37 37 38 38
Total Daily Circulation 1,451 1,431 1,373 1,379 1,413
Sunday Paid Circulation
Abilene (TX) Reporter-News 45 47 50 50 52
Anderson (SC) Independent-Mail 45 45 46 48 48
Boulder (CO) Daily Camera 41 40 42 41 42
Bremerton (WA) Sun 37 39 40 42 40
Corpus Christi (TX) Caller-Times 81 85 87 89 88
Denver (CO) Rocky Mountain News 530 505 433 416 407
Evansville (IN) Courier & Press 101 105 106 109 110
Ft. Pierce (FL) Tribune 29 29 30 30 29
Henderson (KY) Gleaner 13 13 13 14 14
Knoxville (TN) News-Sentinel 158 159 163 166 168
Memphis (TN) Commercial Appeal 237 238 243 257 259
Naples (FL) Daily News 66 65 64 63 62
Redding (CA) Record-Searchlight 39 38 38 38 38
San Angelo (TX) Standard-Times 35 36 37 38 39
Stuart (FL) News 45 45 46 45 44
Ventura County (CA) Star 110 108 105 103 103
Vero Beach (FL) Press Journal 36 36 36 36 36
Wichita Falls (TX) Times Record News 41 42 43 44 45
Total Sunday Circulation 1,687 1,675 1,619 1,629 1,622
(1) Based on Audit Bureau of Circulation Publisher's Statements
("Statements") for the six-month periods ending September 30, except figures
for the Ft. Pierce Tribune, the Naples Daily News, the Stuart News and the
Vero Beach Press Journal which are from the Statements for the twelve-month
periods ending September 30.
(2) This newspaper is a party to a JOA. The JOA between the Denver Rocky
Mountain News and MediaNews Group Inc.'s Denver Post began operations on
January 22, 2001. The Evansville JOA was terminated in 1998. See "Joint
Operating Agencies."
Joint Operating Agencies - A JOA combines all but the editorial operations of
two competing newspapers in a market in order to reduce aggregate expenses and
take advantage of economies of scale, thereby allowing the continuing operation
of both newspapers in that market. The Newspaper Preservation Act of 1970
("NPA") provides a limited exemption from anti-trust laws, generally permitting
the continuance of JOAs in existence prior to the enactment of the NPA and the
formation, under certain circumstances, of new JOAs between newspapers.
The Company is a partner in newspaper joint operating agencies ("JOAs") in four
markets. The JOA between the Company's Denver Rocky Mountain News and MediaNews
Group Inc.'s Denver Post was approved by the U.S. Attorney General in
January 2001. The 50-year agreement created a new entity called the Denver
Newspaper Agency L.L.C., which is 50%-owned by each partner. Both partners
contributed certain assets used in the operations of their newspapers to the new
entity. In addition, the Company paid $60,000,000 to MediaNews Group Inc. The
JOA commenced operations on January 22, 2001. The other partner manages each of
the Company's other JOAs.
JOA revenues less JOA expenses, as defined in each JOA, equals JOA profits,
which are split between the partners. In each case JOA expenses exclude
editorial expenses. The Company will receive a 50% share of the operating
profits of the Denver JOA, and between 20% and 40% of the operating profits in
the other three markets. The Company includes its portion of JOA operating
profits in operating revenues.
The table below provides certain information about the Company's JOAs.
Year JOA Year of JOA
Newspaper Publisher of Other Newspaper Entered Into Expiration
The Albuquerque Tribune Journal Publishing Company 1933 2022
Birmingham Post-Herald Newhouse Newspapers 1950 2015
The Cincinnati Post Gannett Newspapers 1977 2007
Denver Rocky Mountain News MediaNews Group, Inc. 2001 2051
A JOA in Evansville, Indiana, which was managed by the Company, expired in 1998
and was not renewed. The Company had received approximately 80% of JOA profits.
The Company continues to operate its Evansville newspaper.
Competition - The Company's newspapers compete for advertising revenues
primarily with other local media, including other local newspapers, television
and radio stations, cable television, telephone directories, other Internet
sites and direct mail. Competition for advertising revenues is based upon
audience size and demographics, price and effectiveness. The Company's
newspapers and Internet sites compete with all other information and
entertainment media for consumers' discretionary time.
Newspaper Production - The Company's daily newspapers are printed using offset
presses and use computer systems for writing, editing and composing and
producing the advertising and news material printed in each edition. The
Company is constructing a new production facility for its Knoxville, Tennessee,
daily newspaper.
Raw Materials and Labor Costs - The Company consumed approximately 281,000
metric tons of newsprint in 2000, 270,000 metric tons in 1999, and 240,000
metric tons in 1998. The Company purchases newsprint from various suppliers,
many of which are Canadian. Management believes that the Company's sources of
supply of newsprint are adequate for its anticipated needs.
Newsprint is a basic commodity and its price is sensitive to the worldwide
balance of supply and demand. Because of the capital commitment to construct
and operate a newsprint mill, the supply of newsprint is relatively stable
except for temporary disruptions caused by labor stoppages. However, the
demand for newsprint can change quickly, resulting in wide swings in the price
of newsprint. Newsprint prices were $745 in the first quarter of 1996 before
declining to approximately $500 by March 1997. Newsprint prices fluctuated
between $450 and $590 from 1998 through 2000. The average newsprint price was
approximately $580 per metric ton in the fourth quarter of 2000. The Company
has used newsprint forward contracts to hedge its exposure to changes in the
price of newsprint for up to twelve months. At December 31, 2000, the Company
held no newsprint forward contracts. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Market Risk."
Labor costs accounted for approximately 45% of the Company's newspaper operating
expenses in 2000, 43% in 1999 and 42% in 1998. A substantial number of the
Company's newspaper employees are represented by labor unions. See "Employees."
Scripps Networks
Operations - HGTV features programming focusing on home repair and remodeling,
gardening, decorating and other activities associated with the home. Food
Network features programming focusing on food and entertaining. DIY features
immediate access to step-by-step instructions, in-depth demonstrations and tips
on various topics associated with home improvement, gardening and crafts. Fine
Living, expected to begin telecasting in the fourth quarter of 2001, will help
people explore their passions and interests in the finer things in life,
focusing on the $200 billion-plus luxury consumer goods and services markets.
Food Network began telecasting in December 1993 and HGTV in December 1994. DIY
began telecasting in the fourth quarter of 1999. The Company acquired the
controlling interest in Food Network in October 1997. The Company owned 64% of
Food Network at December 31, 2000.
According to the Nielson Homevideo Index, HGTV was telecast to 67.1 million
homes in December 2000, 59.0 million homes in December 1999 and 48.4 million
homes in December 1998. Food Network was telecast to 54.4 million homes in
December 2000, 44.2 million homes in December 1999 and 37.1 million homes in
December 1998.
Each of the Company's networks operates an Internet site featuring content from
its programs and additional information and products of interest to the
networks' viewers. The Internet sites also permit users to post comments in
response to programs and features, and provide applications to enable users to
communicate with each other and receive updates in subject areas of their
choosing.
Revenues - Operating revenues for the five years ended December 31, 2000, were
as follows:
( in thousands )
2000 1999 1998 1997 1996
Advertising $ 249,619 $ 171,059 $ 95,171 $ 37,473 $ 15,717
Affiliate fees 58,370 50,142 38,063 19,711 6,943
Other 5,750 8,814 14,307 9,617 8,919
Total 313,739 230,015 147,541 66,801 31,579
Unusual item (1,100) 1,100
Total operating revenues $ 313,739 $ 228,915 $ 148,641 $ 66,801 $ 31,579
Revenues are derived from the sale of advertising time and, if provided in the
affiliation agreements, from affiliate fees paid by cable television and other
distribution systems that carry the networks. Affiliate fees are generally
based on the number of subscribers who receive the networks.
On-line advertising primarily includes banner ads and other advertisements.
Advertising opportunities on the Internet sites range from simple static banners
that appear at the top and bottom of a Web page to more complex advertisements
that use animation and allow users to interact with the advertisements. The
Internet sites also provide advertisers with sponsorship opportunities,
promotions, direct response campaigns and links to commercial sites. The
networks generally receive fees for these links and advertisements. On-line
advertising revenues were $5,100,000 in 2000, $3,400,000 in 1999 and $700,000 in
1998.
Programming - The Company both produces and purchases programming for HGTV, DIY
and Food Network. The Company has continually improved the quality and variety
of programming and expanded the hours of original programming presented on its
networks. The costs to purchase or produce programs for the networks totaled
$147,000,000 in 2000, $117,000,000 in 1999, $64,000,000 in 1998, and $24,000,000
in 1997. The Company owns substantially all of the programming airing on its
networks, and expects to telecast such programs over several years. The costs
to acquire programs are expensed as the programs are telecast.
Distribution - Network programming is telecast on cable and satellite television
systems. The Company's networks generally pay fees for long-term distribution
agreements. These fees are usually paid in full when systems launch the
networks. The amounts of the distribution fees depend upon several factors,
including the numbers of subscribers, the duration of the agreements and the
amounts of monthly affiliate fees the systems agree to pay the Company. In
markets where the Company has broadcast television stations, distribution of the
networks may be obtained by granting cable or satellite television systems the
right to carry the local television stations' signals.
Popularity of the programming with subscribers is a primary factor in obtaining
and retaining distribution by system operators.
Competition - In addition to competing with other networks for distribution on
cable television systems, Scripps Networks competes for advertising revenues
with other local and national media, including other cable television networks,
television stations, radio stations, newspapers, Internet sites and direct mail.
Competition for advertising revenues is based upon audience size and
demographics, price and effectiveness. Scripps Networks compete for consumers'
discretionary time with all other information and entertainment media.
Broadcast Television
Operations - The Company acquired television station KMCI in Lawrence, Kansas in
2000. The Company had operated the station under a Local Marketing Agreement
("LMA") since 1996. Revenues from KMCI were included in the Company's results
of operations while the station was operated under the LMA.
Broadcast Television includes nine network-affiliated television stations. The
stations rely on local sales operations for local advertising and national
advertising agencies for obtaining national advertising.
Revenues - Operating revenues for the five years ended December 31, 2000, were
as follows:
( in thousands )
2000 1999 1998 1997 1996
Local advertising $ 173,878 $ 171,353 $ 166,115 $ 171,211 $ 159,412
National advertising 119,428 120,638 125,432 139,322 127,172
Political advertising 34,762 2,478 20,084 2,106 19,505
Other 15,057 17,893 19,083 18,577 17,378
Total operating revenues $ 343,125 $ 312,362 $ 330,714 $ 331,216 $ 323,467
Revenues are derived primarily from the sale of time to businesses for
commercial messages that appear during entertainment and news programming.
Local and national advertising refer to time purchased by local, regional and
national businesses; political refers to campaigns for elective office and
campaigns for political issues. Automobile advertising accounts for
approximately one-fourth of the Company's local and national advertising
revenues.
The first and third quarters of each year generally have lower advertising
revenues than the second and fourth quarters. The increasing political
advertising in even-numbered years when congressional and presidential elections
occur makes it difficult to achieve year-over-year increases in operating
results in odd-numbered years.
Other revenues also include network compensation (see "Network Affiliation and
Programming").
Information concerning the Company's stations and the markets in which they
operate is as follows:
Network Affiliation FCC
Affiliation/ Expires in/ License Rank Stations
DTV DTV Service Expires of in
Station and Market Channel Commenced in Mkt (1) Mkt (3) 2000 1999 1998 1997 1996
WXYZ-TV, Detroit, Ch. 7 ABC 2004 2005 9 7
Digital Service Status 41 1998
Average Audience Share (2) 15 16 17 18 21
Station Rank in Market (4) 2 1 2 2 1
WFTS-TV, Tampa, Ch. 28 ABC 2005 2005 14 12
Digital Service Status 29 1999
Average Audience Share (2) 8 8 9 9 9
Station Rank in Market (4) 4 4 4 4 4
WEWS-TV, Cleveland, Ch. 5 ABC 2004 2005 15 11
Digital Service Status 15 1999
Average Audience Share (2) 14 14 14 17 19
Station Rank in Market (4) 1 1 1 2 1
KNXV-TV, Phoenix, Ch. 15 ABC 2005 2006 17 11
Digital Service Status 56 2000
Average Audience Share (2) 7 9 9 10 10
Station Rank in Market (4) 5 6 5 4 4
WMAR-TV, Baltimore, Ch. 2 ABC 2005 2004 24 6
Digital Service Status 52 1999
Average Audience Share (2) 8 9 10 11 12
Station Rank in Market (4) 3 3 3 3 3
KSHB-TV, Kansas City, Ch. 41 NBC 2004 2006 30 8
Digital Service Status 42 (6)
Average Audience Share (2) 8 7 7 10 10
Station Rank in Market (4) 4 4 4 4 4
KMCI-TV, Lawrence, Ch. 38 Ind. 2006 30 8
Digital Service Status 36 (6)
Average Audience Share (2) 1 2 2 2 2
Station Rank in Market (4) 8 8 8 8 7
WCPO-TV, Cincinnati, Ch. 9 ABC (5) 2006 2005 32 6
Digital Service Status 10 1998
Average Audience Share (2) 14 14 15 17 18
Station Rank in Market (4) 2 2 2 1 1
WPTV-TV, W. Palm Beach, Ch. 5 NBC 2004 2005 43 9
Digital Service Status 55 (6)
Average Audience Share (2) 15 15 16 19 20
Station Rank in Market (4) 1 1 1 1 1
KJRH-TV, Tulsa, Ch. 2 NBC 2004 2006 59 10
Digital Service Status 56 (6)
Average Audience Share (2) 11 12 12 14 14
Station Rank in Market (4) 3 3 3 3 3
All market and audience data is based on the November A.C. Nielsen
Company survey.
(1) Rank of Market represents the relative size of the television
market in the United States.
(2) Represents the number of television households tuned to a
specific station from 6 a.m. to 2 a.m. each day, as a percentage
of total viewing households in Area of Dominant Influence.
(3) Stations in Market does not include public broadcasting stations,
satellite stations, or translators which rebroadcast signals from
distant stations.
(4) Station Rank in Market is based on Average Audience Share as
described in (2).
(5) Prior to June 1996, WCPO was a CBS affiliate.
(6) Construction permits have been filed in all four markets. Permits
have been granted in the West Palm and Tulsa markets. The Company
is required to commence DTV service by May 1, 2002.
Competition - The Company's television stations compete for advertising revenues
primarily with other local media, including other television stations, radio
stations, cable television, newspapers, other Internet sites and direct mail.
Competition for advertising revenue is based upon audience size and
demographics, price and effectiveness. Television stations compete for
consumers' discretionary time with all other information and entertainment
media. The Company's television stations have experienced declines in their
average audience share in recent years due to the creation of new networks and
increased audience share of alternative service providers such as traditional
cable, "wireless" cable and direct broadcast satellite television. Continuing
technological advances will improve the capability of alternative service
providers to offer video services in competition with terrestrial broadcasting.
The degree of competition from such service providers is expected to increase.
The Company intends to undertake upgrades in its services, including development
of digital television broadcasting, to maintain its competitive posture as well
as to comply with government requirements. Technological advances in
interactive media services will further increase these competitive pressures.
Network Affiliation and Programming - Nine of the Company's ten television
stations are affiliated with national television networks. The networks offer a
variety of programs to affiliated stations, which have the right of first
refusal before such programming may be offered to other television stations in
the same market. Networks compensate affiliated stations for carrying network
programming. The national television networks have reduced the amount of such
compensation. The Company received $10,000,0000 in 2000 and $13,100,000 in
network compensation in 1999. The Company expects network compensation to be
approximately $10,000,000 in 2001 and in 2002.
In addition to network programs, the Company's television stations broadcast
locally produced programs, syndicated programs, sports events, movies, public
service programs and "niche" programs focusing on topics of interest in the
stations' local markets. News is the focus of the Company's locally produced
programming. Advertising during local news programs on the Company's stations
account for approximately 30% of revenues.
Federal Regulation of Broadcasting - Television broadcasting is subject to the
jurisdiction of the Federal Communications Commission ("FCC") pursuant to the
Communications Act of 1934, as amended ("Communications Act"). The
Communications Act prohibits the operation of television broadcasting stations
except in accordance with a license issued by the FCC and empowers the FCC to
revoke, modify and renew broadcasting licenses, approve the transfer of control
of any corporation holding such licenses, determine the location of stations,
regulate the equipment used by stations and adopt and enforce necessary
regulations. The FCC also adopts and enforces regulations concerning station
programming, including children's and political programming.
The Telecommunications Act of 1996 (the "1996 Act") significantly relaxed the
regulatory environment applicable to broadcasters. Under the 1996 Act,
television broadcast licenses may be granted for a term of eight years, rather
than five, and they remain renewable upon request. While there can be no
assurance regarding the renewal of the Company's television broadcast licenses,
the Company has never had a license revoked, has never been denied a renewal and
all previous renewals have been for the maximum term.
FCC regulations govern the multiple ownership of television stations and other
media. Under the multiple ownership rule, a license for a television station
will generally not be granted or renewed if the grant of the license would
result in (i) the applicant owning more than one, or in some markets under
certain conditions, two television stations in the same market, or (ii) the
grant of the license would result in the applicant's owning, operating,
controlling, or having an interest in television stations whose total national
audience reach exceeds 35% of all television households. The FCC rules also
generally prohibit "cross-ownership" of a television station and daily newspaper
or cable television system in the same service area. The Company's television
station and daily newspaper in Cincinnati were owned by the Company at the time
the cross-ownership rules were enacted and enjoy "grandfathered" status. These
properties would become subject to the cross-ownership rules upon their sale.
The 1996 Act directed the FCC to periodically review all its ownership rules,
and such a review is ongoing.
The FCC has adopted a series of orders to implement a transition from the
current analog system of broadcast television to a digital transmission
system. It has granted each television station a second channel on which to
begin offering digital service and it currently plans for the transition to be
completed by 2006, at which time each station should have returned one of its
two channels. The FCC can extend this deadline if the transition proceeds
more slowly than it anticipates.
A substantial number of technical, regulatory and market-related issues remain
unresolved regarding digital television, including the timing of the
transition, programming and other rules the FCC may adopt, the willingness of
cable systems to carry the broadcasters' digital offerings and the level of
consumer demand for the new service. The Company cannot predict the effect of
these uncertainties on the Company's offering of digital service or the
Company's business.
Under the Cable Television Consumer Protection and Competition Act of 1992
("1992 Act"), each television broadcast station gained "must-carry" rights on
any cable system defined as "local" with respect to that station. Stations may
waive their must-carry rights and instead negotiate retransmission consent
agreements with local cable companies. The Company's stations have generally
elected to negotiate retransmission consent agreements with cable companies.
While the FCC has recently announced that a station's primary video transmission
will enjoy must-carry rights after the transition to digital broadcasting, the
FCC has so far declined to require carriage of a digital signal in addition to
the station's analog signal.
Licensing and Other Media
Operations - Licensing and other media aggregates the Company's operating
segments that are too small to warrant separate reporting, including syndication
and licensing of news features and comics, and the divested television program
production and independent telephone directories.
The Company acquired or divested the following operations in the five years
ended December 31, 2000:
2000 - Divested independent telephone directories in Memphis, Tennessee;
Kansas City, Missouri; North Palm Beach, Florida; and New Orleans,
Louisiana.
1998 - Acquired the independent telephone directories. Divested Scripps
Howard Productions, the Company's television program production operation
based in Los Angeles.
Revenues - Operating revenues for the five years ended December 31, 2000, were
as follows:
( in thousands )
2000 1999 1998 1997 1996
Licensing $ 68,549 $ 63,755 $ 62,260 $ 56,813 $ 53,672
Newspaper feature distribution 23,590 23,382 22,650 20,920 20,695
Other 4,756 5,433 3,913 2,430 161
Total licensing and other media revenues 96,895 92,570 88,823 80,163 74,528
Divested other media 9,614 19,236 7,379 12,763 21,423
Total operating revenues $ 106,509 $ 111,806 $ 96,202 $ 92,926 $ 95,951
The Company, under the trade name United Media, is a leading distributor of news
columns, comics and other features for the newspaper industry. Included among
these features is "Peanuts," one of the most successful strips in the history of
comic art.
United Media owns and licenses worldwide copyrights relating to "Peanuts,"
"Dilbert" and other character properties for use on numerous products,
including plush toys, greeting cards and apparel, for promotional purposes and
for exhibit on television and other media. Charles Schulz, the author of
"Peanuts," died in February 2000. The Company continues syndication of
previously published "Peanuts" strips, and retains the rights to continue to
license the characters. "Peanuts" provides more than 80% of the Company's
licensing revenues, approximately 70% of which are earned in international
markets, with the Japanese market providing approximately two-thirds of
international revenue. Depending upon market conditions, the Company may use
foreign currency forward and option contracts to hedge its exposure to changes
in the exchange rate for the Japanese yen. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Market Risk."
Merchandise, literary and exhibition licensing revenues are generally a
negotiated percentage of the licensee's sales. The Company generally negotiates
a fixed fee for the use of its copyrighted characters for promotional and
advertising purposes. The Company generally pays a percentage of gross
syndication and licensing royalties to the creators of these properties.
Competition - The Company's newspaper feature distribution operations compete
for a limited amount of newspaper space with other distributors of news columns,
comics and other features. Competition is primarily based on price and
popularity of the features. Popularity of licensed characters is a primary
factor in obtaining and renewing merchandise and promotional licenses.
Venture Capital and Other Investments
Through its Scripps Ventures Fund and other entities the Company invests in
businesses focusing on new media technology. The Company recognized gains
(losses), net of fund management expenses, totaling ($24,800,000) in 2000,
$500,000 in 1999, ($2,700,000) in 1997, and $37,000,000 in 1996.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Market Risk" and Note 6 to the Consolidated Financial
Statements.
Employees
As of December 31, 2000, the Company had approximately 8,400 full-time
employees, of whom approximately 6,100 were with Newspapers, 800 with Scripps
Networks, 1,300 with Broadcast Television and 100 with licensing and other
media. Various labor unions represent approximately 1,800 employees, primarily
in newspapers. At December 31, 2000, the Denver Rocky Mountain News employed
approximately 1,200 employees, approximately 1,000 of who became employees of
Denver Newspaper Agency, LLC. The present operations of the Company have not
experienced any work stoppages since 1985. The Company considers its
relationship with employees to be generally satisfactory.
ITEM 2. PROPERTIES
Newspapers require business and editorial offices and printing plants.
Scripps Networks requires offices and studios and other real and personal
property to produce programs and to transmit the network programming via
satellite. Scripps Networks operates from a production facility in Knoxville
and leased facilities in New York.
Broadcast Television requires offices and studios and other real property for
towers upon which broadcasting transmitters and antenna equipment are located.
The Company owns substantially all of the properties used by its operations.
Management believes the Company's facilities are generally well maintained and
are sufficient to serve its present needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in litigation arising in the ordinary course of
business, such as defamation actions and various governmental and administrative
proceedings primarily relating to renewal of broadcast licenses, none of which
is expected to result in material loss.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 2000.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Class A Common Shares are traded on the New York Stock Exchange
("NYSE") under the symbol "SSP." There are approximately 8,000 owners of the
Company's Class A Common shares, based on security position listings, and 18
owners of the Company's Common Voting shares (which do not have a public
market). The Company has declared cash dividends in every year since its
incorporation in 1922. Future dividends are, however, subject to the Company's
earnings, financial condition and capital requirements.
The range of market prices of the Company's Class A Common shares, which
represents the high and low sales prices for each full quarterly period, and
quarterly cash dividends are as follows:
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
2000
Market price of common stock:
High $49.500 $51.625 $54.188 $63.250
Low 42.375 43.625 47.438 50.750
Cash dividends per share of common stock $ .14 $ .14 $ .14 $ .14 $ .56
1999
Market price of common stock:
High $50.250 $51.563 $53.000 $51.375
Low 40.500 41.125 46.313 41.500
Cash dividends per share of common stock $ .14 $ .14 $ .14 $ .14 $ .56
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data required by this item is filed as part of this Form
10-K. See Index to Consolidated Financial Statement Information at page F-1 of
this Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Management's Discussion and Analysis of Financial Condition and Results of
Operation required by this item is filed as part of this Form 10-K. See Index
to Consolidated Financial Statement Information at page F-1 of this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Supplementary Data required by this item is filed
as part of this Form 10-K. See Index to Consolidated Financial Statement
Information at page F-1 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers
Executive officers serve at the pleasure of the Board of Directors. Certain
information about such officers appears in the table below.
Name Age Position
Kenneth W. Lowe 50 Chief Executive Officer (since October 2000);
President and Director (since January 2000); Chairman
and Chief Executive Officer, Scripps Networks (1993 to
2000)
Richard A. Boehne 44 Executive Vice President (since 1999); Vice
President/Communications and Investor Relations (1995
to 1999)
Daniel J. Castellini 61 Senior Vice President and Chief Financial Officer
(since 1986)
Frank Gardner 58 Senior Vice President/Interactive Media (since
March 2000); Senior Vice President/Television (1993 to
2000)
Alan M. Horton 57 Senior Vice President/Newspapers (since 1994)
B. Jeff Craig 42 Vice President and Chief Technology Officer (since
February 2001); Senior Vice President, Interactive
Technology and New Media Development, Discovery
Communications, Inc. (1998 to 2000); Managing Partner
and founder, AAJ Interactive Technologies (1997 to
1998); Vice President, System Design and Engineering,
TELE-TV (1995 to 1997)
Gregory L. Ebel 45 Vice President/Human Resources (since 1994)
James M. Hart 58 Vice President/Television (since 1995)
J. Robert Routt 46 Vice President and Controller (since 1985)
Paul K. Scripps 55 Vice President/Newspapers (since 1986)
Timothy E. Stautberg 38 Vice President/Communications and Investor
Relations (since April 1999); General Manager, Redding
Record Searchlight (1997 to 1999); Assistant to the
Publisher, Denver Rocky Mountain News (1992 to 1997)
Stephen W. Sullivan 54 Vice President/Newspaper Operations (since 2000);
Vice President/Newspapers (1997 to 2000); President,
Harte-Hanks Newspapers and Senior Vice President,
Harte-Hanks Communications (1991 to 1997)
M. Denise Kuprionis 44 Corporate Secretary and Director of Legal Affairs
(since 1987)
E. John Wolfzorn 55 Treasurer (since 1979)
Directors
The information required by Item 10 of Form 10-K relating to directors of the
Company is incorporated by reference to the material captioned "Election of
Directors" in the Company's definitive proxy statement for the Annual Meeting of
Shareholders ("Proxy Statement"). The Proxy Statement will be filed with the
Securities and Exchange Commission on or before April 28, 2001.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 of Form 10-K is incorporated by reference to
the material captioned "Executive Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 of Form 10-K is incorporated by reference to
the material captioned "Security Ownership of Certain Beneficial Owners and
Management" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 of Form 10-K is incorporated by reference to
the material captioned "Certain Transactions" in the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Financial Statements and Supplemental Schedules
(a) The consolidated financial statements of the Company are filed as part of
this Form 10-K. See Index to Consolidated Financial Statement
Information at page F-1.
The report of Deloitte & Touche LLP, Independent Auditors, dated January
23, 2001, is filed as part of this Form 10-K. See Index to Consolidated
Financial Statement Information at page F-1.
(b) The consolidated supplemental schedules of the Company are filed as part
of this Form 10-K. See Index to Consolidated Financial Statement
Schedules at page S-1.
Exhibits
The information required by this item appears at page E-1 of this Form 10-K.
Reports on Form 8-K
No Current Reports on Form 8-K were filed in the fourth quarter of 2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934 the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 28, 2001.
THE E. W. SCRIPPS COMPANY
By /s/ Kenneth W. Lowe
Kenneth W. Lowe
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities indicated, on March 28, 2001.
Signature Title
/s/ Kenneth W. Lowe President and Chief Executive Officer
Kenneth W. Lowe (Principal Executive Officer)
/s/ Daniel J. Castellini Senior Vice President and Chief
Daniel J. Castellini Financial Officer
/s/ William R. Burleigh Chairman of the Board of Directors
William R. Burleigh
/s/ Charles E. Scripps Chairman of the Executive Committee
Charles E. Scripps of the Board of Directors
/s/ John H. Burlingame Director
John H. Burlingame
/s/ Daniel J. Meyer Director
Daniel J. Meyer
/s/ Nicholas B. Paumgarten Director
Nicholas B. Paumgarten
/s/ Paul K. Scripps Director
Paul K. Scripps
/s/ Edward Scripps, Jr. Director
Edward Scripps, Jr.
/s/ Nackey E. Scagliotti Director
Nackey E. Scagliotti
/s/ Ronald W. Tysoe Director
Ronald W. Tysoe
/s/ Julie A. Wrigley Director
Julie A. Wrigley
/s/ Joseph P. Clayton Director
Joseph P. Clayton
THE E. W. SCRIPPS COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENT INFORMATION
Item No. Page
1. Selected Financial Data F-2
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Forward Looking Statements F-5
Results of Operations F-5
Newspapers F-8
Scripps Networks F-10
Broadcast Television F-12
Liquidity and Capital Resources F-14
Market Risk F-15
3. Consolidated Balance Sheets F-16
4. Consolidated Statements of Income F-18
5. Consolidated Statements of Cash Flows F-19
6. Consolidated Statements of Comprehensive Income and
Stockholders' Equity F-20
7. Notes to Consolidated Financial Statements F-21
8. Independent Auditors' Report F-43
ELEVEN-YEAR FINANCIAL HIGHLIGHTS
( in millions, except share data )
2000(1) 1999(1) 1998(1) 1997(1) 1996(1) 1995(1) 1994(1) 1993(1) 1992(1) 1991(1) 1990(1)
Summary of Operations
Operating Revenues:
Other newspapers $ 734 $ 704 $ 672 $ 530 $ 454 $ 426 $ 402 $ 369 $ 353 $ 339 $ 348
Denver Rocky Mountain News(10) 221 210 200 197 183 184 170 154 146 140 143
Newspapers 955 914 872 727 637 610 572 523 499 479 490
Scripps Networks 314 229 149 67 32 19 5
Broadcast Television 343 312 331 331 323 295 288 255 247 216 205
Licensing and other media 97 93 89 80 75 68 68 85 87 92 92
Total 1,709 1,548 1,441 1,205 1,067 992 933 863 833 787 787
Divested operating units (2) 10 23 24 46 64 49 43 93 195 298 320
Total operating revenues $ 1,719 $ 1,571 $ 1,465 $ 1,251 $ 1,131 $ 1,041 $ 976 $ 956 $1,028 $1,085 $1,107
Operating Income (Loss):
Other newspapers $ 230 $ 231 $ 204 $ 171 $ 133 $ 126 $ 118 $ 93 $ 96 $ 81 $ 83
Denver Rocky Mountain News(10) (24) (16) (8) 2 (4) (2) (2) (20) (12) (15) (7)
Newspapers 206 215 196 173 129 124 116 73 84 66 76
Scripps Networks 54 23 (8) (14) (17) (19) (9) (1)
Broadcast Television 100 68 93 104 100 87 95 69 62 50 61
Licensing and other media 15 11 11 10 9 7 5 5 8 10 10
Corporate (21) (19) (17) (17) (18) (17) (15) (14) (15) (13) (15)
Total 354 298 275 256 203 182 192 132 139 113 132
Divested operating units (2) (3) 3 2 1 10 22 36 37
Unusual items (3) (10) (3) 1 (4) (8) (1) (33) (36)
Total operating income 345 295 276 252 202 185 185 142 128 149 133
Interest expense (52) (45) (47) (19) (10) (11) (16) (26) (34) (38) (43)
Gains (losses) on divested 6 48 92 78
operations (1)
Gain on sale of Garfield copyrights(4) 32
Investment results, net of expenses(5) (25) 1 (3) 37
Other unusual credits (charges) (6) (15) (17) 3 (4)
Miscellaneous, net 1 4 3 2 2 (1) (2) (4) (2)
Income taxes (7) (108) (104) (93) (118) (84) (76) (81) (86) (65) (48) (44)
Minority interests (4) (4) (5) (5) (3) (3) (8) (16) (9) (7) (8)
Income from continuing operations $ 163 $ 146 $ 131 $ 158 $ 127 $ 96 $ 93 $ 105 $ 91 $ 55 $ 35
Share Data
Income from continuing operations $2.06 $ 1.85 $ 1.62 $ 1.94 $ 1.58 $1.19 $1.22 $1.40 $1.22 $.74 $.46
Adjusted income from continuing
operations (excluding unusual
items and net gains) 2.20 1.87 1.61 1.64 1.38 1.19 1.26 .72 .80 .74 .77
Cash dividends .56 .56 .54 .52 .52 .50 .44 .44 .40 .40 .40
Market value of proceeds from 19.83
Cable Transaction (8)
Market Value of Common Shares at
December 31
Per share $62.88 $44.81 $49.75 $48.44 $35.00 $39.38 $30.25 $27.50 $24.75 $24.13 $17.00
Total 4,951 3,502 3,908 3,906 2,827 3,153 2,415 2,056 1,847 1,798 1,267
EBITDA (excluding divested operating
units and unusual items):
Other newspapers $ 279 $ 279 $ 254 $ 201 $ 156 $ 147 $ 139 $ 116 $ 117 $ 101 $ 103
Denver Rocky Mountain News (10) (10) (3) 6 16 10 11 11 (7) 1 (6) (2)
Newspapers 269 276 260 217 166 158 150 109 118 95 101
Scripps Networks 69 35 5 (9) (14) (17) (8) (1)
Broadcast Television 129 96 118 128 126 113 116 89 82 66 75
Licensing and other media 16 13 12 10 10 8 6 6 9 11 11
Corporate (20) (18) (16) (16) (17) (16) (15) (13) (13) (12) (14)
Total $ 464 $ 401 $ 378 $ 331 $ 269 $ 247 $ 249 $ 190 $ 196 $ 161 $ 173
Scripps Cable Financial Data (8)
Operating revenues $ 270 $ 280 $ 255 $ 252 $ 238 $ 218 $ 193
Operating income excluding unusual items 61 65 43 46 44 36 27
Net income 40 40 30 24 15 11 14
Net income per share of common stock .49 .50 .39 .32 .20 .14 .18
EBITDA - excluding unusual items 109 119 101 106 102 92 85
Capital expenditures (58) (48) (42) (67) (58) (37) (36)
Note: Certain amounts may not foot as each is rounded independently.
ELEVEN-YEAR FINANCIAL HIGHLIGHTS
( in millions, except share data )
2000(1) 1999(1) 1998(1) 1997(1) 1996(1) 1995(1) 1994(1) 1993(1) 1992(1) 1991(1) 1990(1)
Cash Flow Statement Data
Net cash provided by continuing $ 256 $ 194 $ 239 $ 193 $ 176 $ 114 $ 170 $ 142 $ 127 $ 136 $ 155
operations
Depreciation and amortization of 109 104 104 78 69 67 59 61 64 56 49
intangible assets
Investing activity:
Capital expenditures (75) (80) (67) (57) (53) (57) (54) (37) (87) (114) (49)
Business acquisitions and investments (139) (70) (29) (745) (128) (12) (32) (42) (17) (131) (9)
Other (investing)/divesting activity, net 62 33 10 31 35 (19) 51 147 38 3 23
Financing activity:
Increase (decrease) in long-term debt (54) (1) (4) 651 41 (30) (138) (194) (50) 124 (96)
Dividends paid (47) (47) (47) (46) (45) (43) (37) (37) (34) (35) (36)
Common stock issued (retired) (5) (35) (108) (26)
Other finanacing activity 6 1 6 4 9 6 1 2 (1)
Balance Sheet Data
Total assets 2,573 2,520 2,361 2,289 1,469 1,353 1,293 1,260 1,291 1,301 1,098
Long-term debt (including current 715 769 771 773 122 81 110 248 442 492 368
portion) (9)
Stockholders' equity (9) 1,278 1,164 1,070 1,050 945 1,194 1,084 860 733 677 640
Note: Certain amounts may not foot as each is rounded independently.
Notes to Selected Financial Data
The income statement and cash flow data for the eleven years ended December 31,
2000, and the balance sheet data as of the same dates have been derived from the
audited consolidated financial statements of the Company. The data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and notes thereto included elsewhere herein. All per share amounts are
presented on a diluted basis. EBITDA is defined as earnings before interest,
income taxes, depreciation and amortization. See page F-7.
(1) In the periods presented the Company acquired and divested the following:
Acquisitions
2000 - Daily newspapers in Ft. Pierce, Florida (in exchange for the
Company's newspaper in Destin, Florida, and cash), and Henderson,
Kentucky, weekly newspaper in Marco Island, Florida, and television
station KMCI in Lawrence, Kansas.
1999 - Additional 70% interest of Colorado Real Estate On-line that the
Company did not already own and an additional 7.0% interest in Food
Network.
1998 - Independent telephone directories in Memphis, Tennessee; Kansas
City, Missouri; North Palm Beach, Florida; and New Orleans,
Louisiana.
1997 - Daily newspapers in Abilene, Corpus Christi, Plano, San Angelo and
Wichita Falls, Texas; community newspapers in the Dallas, Texas,
market; daily newspapers in Anderson, South Carolina, and Boulder,
Colorado (in exchange for the Company's daily newspapers in
Monterey and San Luis Obispo, California). Approximate 56%
interest in Food Network.
1996 - Vero Beach, Florida, daily newspaper.
1994 - The remaining 13.9% minority interest in Scripps Howard Broadcasting
Company ("SHB") in exchange for 4,952,659 Class A Common Shares.
Cinetel Productions (an independent producer of programs for cable
television).
1993 - The remaining 2.7% minority interest in the Knoxville News-Sentinel
and 5.7% of the outstanding shares of SHB.
1992 - Three daily newspapers in California (including The Monterey County
Herald in connection with the sale of The Pittsburgh Press).
1991 - Baltimore television station WMAR.
Divestitures
2000 - Destin, Florida, newspaper (in exchange for Ft. Pierce, Florida,
newspaper), independent yellow page directories. The divestitures
resulted in net pre-tax gains of $6.2 million, increasing income from
continuing operations $4.0 million, $.05 per share.
1998 - Dallas community newspapers, including the Plano daily, and Scripps
Howard Productions, the Company's television program production
operation based in Los Angeles, California. No material gain or
loss was realized as proceeds approximated the book value of net
assets sold.
1997 - Monterey and San Luis Obispo, California, daily newspapers (in
exchange for Boulder, Colorado, daily newspaper). Terminated joint
operating agency ("JOA") and ceased operations of El Paso, Texas,
daily newspaper. The JOA termination and trade resulted in pre-tax
gains totaling $47.6 million, increasing income from continuing
operations by $26.2 million, $.32 per share.
1995 - Watsonville, California, daily newspaper. No material gain or loss
was realized as proceeds approximated the book value of net assets
sold.
1993 - Book publishing operations; newspapers in Tulare, California, and
San Juan; Memphis television station; radio stations. The
divestitures resulted in net pre-tax gains of $91.9 million,
increasing income from continuing operations by $46.8 million,
$.63 per share.
1992 - The Pittsburgh Press; TV Data; certain other investments. The
divestitures resulted in net pre-tax gains of $78.0 million,
increasing income from continuing operations $45.6 million,
$.61 per share.
1991 - George R. Hall Company (contracting firm specializing in the
installation, relocation, and rebuilding of newspaper presses).
No gain or loss was realized as proceeds equaled the book value
of net assets sold.
(2) Operating units other than cable television systems sold prior to December
31, 2000.
(3) The following unusual items affected operating income:
2000 - Expenses of $9.5 million associated with preparations for the Denver
JOA reduced income from continuing operations $6.2 million, $.08 per
share.
1999 - A $1.1 million accrual for "make-goods" related to HGTV advertising
in 1998, $0.8 million of costs incurred to move Food Network's
operations to a different location in Manhattan, and severance
payments of $1.2 million to certain television station employees
reduced operating income $3.1 million. Income from continuing
operations was reduced $1.9 million, $.03 per share.
1998 - "Make-goods" totaling $1.1 million (see above) increased income from
continuing operations $0.7 million, $.01 per share.
1996 - A $4.0 million charge for the Company's share of certain costs
associated with restructuring portions of the distribution system
of the Cincinnati JOA. The charge reduced income from continuing
operations by $2.6 million, $.03 per share.
1994 - A $7.9 million loss on program rights expected to be sold as a
result of changes in television network affiliations. The loss
reduced income from continuing operations by $4.9 million,
$.07 per share.
1993 - A change in estimate of disputed music license fees increased
operating income by $4.3 million; a gain on the sale of certain
publishing equipment increased operating income by $1.1 million;
a charge for workforce reductions at 1) the Company's Denver
newspaper and 2) the newspaper feature and the licensing operations
of United Media decreased operating income by $6.3 million.
The planned workforce reductions were fully implemented in 1994.
These items totaled $0.9 million and reduced income from
continuing operations by $0.6 million, $.01 per share.
1992 - Operating losses of $32.7 million during the Pittsburgh Press strike
reduced income from continuing operations $20.2 million, $.27 per
share.
1990 - A $36.4 million charge associated with an agreement to terminate the
Knoxville joint operating agency. The charge reduced income from
continuing operations by $23.7 million, $.31 per share.
(4) In 1994 the Company sold its worldwide GARFIELD and U.S. ACRES copyrights.
The sale resulted in a pre-tax gain of $31.6 million, increasing income from
continuing operations $17.4 million, $.23 per share.
(5) Investment results include i) gains and losses from the sale or
write-down of investments and ii) accrued incentive compensation and other
expenses associated with the management of the Scripps Ventures investment
portfolios. Investment results include the following:
2000 - Net realized losses of $19.4 million. Accrued incentive
compensation was increased $4.5 million, to $11.5 million, in
conjunction with the increase in the net gain on Scripps Venture's I
investment portfolio of $29.9 million, to $76.9 million. Net
investment results reduced income from continuing operations
$15.8 million, $.20 per share.
1999 - Net realized gains of $8.6 million. Accrued incentive compensation
was increased $7.0 million, to $7.0 million, in conjunction with the
increase in the net gain Scripps Venture's I investment portfolio to
$47.0 million.
1997 - Write-down of investments totaling $2.7 million. Income from
continuing operations was reduced $1.7 million, $.02 per share.
1996 - A $40.0 million gain on the Company's investment in Turner
Broadcasting Systems when Turner was merged into Time Warner and
a $3.0 million write-off of an investment in Patient Education
Media, Inc. Income from continuing operations was increased
$24.3 million, $.30 per share.
(6) Other unusual credits (charges) included the following:
1996 - $15.5 million contribution of appreciated Time Warner stock to a
charitable foundation, decreasing income from continuing
operations by $5.2 million, $.07 per share.
1994 - An estimated $2.8 million loss on real estate expected to be sold as
a result of changes in television network affiliations;
an $8.0 million contribution to a charitable foundation; and a
$6.1 million accrual for lawsuits associated with a divested
operating unit. These items totaled $16.9 million and reduced
income from continuing operations by $9.8 million, $.13 per share.
1993 - A $2.5 million fee received in connection with the change in
ownership of the Ogden, Utah, newspaper. Income from continuing
operations was increased $1.6 million, $.02 per share.
1992 - Write-downs of real estate and investments totaling $3.5 million.
Income from continuing operations was reduced $2.3 million,
$.03 per share.
(7) The provision for income taxes was affected by the following unusual
items:
2000 - A change in estimated tax liability for prior years reduced the tax
provision, increasing income from continuing operations by
$7.2 million, $.09 per share.
1994 - A change in estimated tax liability for prior years increased the
tax provision, reducing income from continuing operations by
$5.3 million, $.07 per share.
1993 - A change in estimated tax liability for prior years decreased the
tax provision, increasing income from continuing operations by $5.4
million, $.07 per share; the effect of the increase in the federal
income tax rate to 35% from 34% on the beginning of the year
deferred tax liabilities increased the tax provision, reducing
income from continuing operations by $2.3 million, $.03 per share.
1992 - A change in estimated tax liability for prior years decreased the
tax provision, increasing income from continuing operations
$8.4 million, $.11 per share.
(8) The Company's cable television systems ("Scripps Cable") were acquired
by Comcast Corporation ("Comcast") on November 13, 1996, ("Cable
Transaction") through a merger whereby the Company's shareholders received,
tax-free, a total of 93 million shares of Comcast's Class A Special Common
Stock. The aggregate market value of the Comcast shares was $1.593 billion
and the net book value of Scripps Cable was $356 million, yielding an
economic gain of $1.237 billion to the Company's shareholders. This gain is
not reflected in the Company's financial statements as accounting rules
required the Company to record the transaction at book value. Unless
otherwise noted, the data excludes the cable television segment, which is
reported as a discontinued business operation.
(9) Includes effect of discontinued cable television operations prior to
completion of the Cable Transaction.
(10) 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 by the U.S. Department of Justice in January 2001. The JOA
commenced operations on January 22, 2001. The 50-year agreement created
a new entity called the Denver Newspaper Agency, L.L.C., which is
50%-owned by each partner. Both partners contributed certain assets
used in the operations of their newspapers to the new entity. The
Company will receive a 50% share of the operating profits of the
Denver JOA. These profits will be reported as "joint operating agency
distributions" in the Company's financial statements. The Company
will also include in its operating expenses its editorial costs
associated with the RMN. However, the Company's financial statements
will no longer include the advertising and other revenue produced by
the RMN, nor the costs to produce and distribute the newspaper or
to sell advertising. To enhance comparability of year-over-year operating
results, the Company is reporting RMN operating results separate from
its other newspapers.
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 operations for acquired operations from the dates of acquisition.
The results of operations of divested operating units are removed from segment
operating results and reported separately because management believes they
impede analysis of the Company's on-going operations.
See Note 2 to the Consolidated Financial Statements on page F-26 regarding
acquisitions and divestitures in the three years ending December 31, 2000.
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 by the U.S. Department of Justice in January 2001. The JOA commenced
operations on January 22, 2001. The 50-year agreement created a new entity
called the Denver Newspaper Agency, L.L.C., which is 50%-owned by each partner.
Both partners contributed certain assets used in the operations of their
newspapers to the new entity.
The Company will receive a 50% share of the operating profits of the Denver JOA.
These profits will be reported as "joint operating agency distributions" in the
Company's financial statements. The Company will also include in its operating
expenses editorial costs associated with the RMN. However, the Company's
financial statements will no longer include the advertising and other revenue
produced by the RMN, nor the costs to produce and distribute the newspaper or to
sell advertising. To enhance comparability of year-over-year operating results,
the Company is reporting RMN operating results separate from its other
newspapers in Management's Discussion and Analysis of Results of Operations.
All per share disclosures included in management's discussion and analysis of
financial condition and results of operation are on a diluted basis.
Consolidated results of operations are presented on the following page.
( in thousands, except per share data )
For the years ended December 31,
2000 Change 1999 Change 1998
Operating revenues:
Newspapers $ 734,102 4.2 % $ 704,690 5.0 % $ 671,131
Scripps Networks 313,739 36.4 % 230,015 55.9 % 147,541
Broadcast Television 343,125 9.8 % 312,362 (5.5)% 330,714
Licensing and other media 96,895 4.7 % 92,570 4.2 % 88,823
Total 1,487,861 11.1 % 1,339,637 8.2 % 1,238,209
Denver Rocky Mountain News 220,998 5.4 % 209,713 4.6 % 200,442
Unusual item (1,100) 1,100
Divested operating units 10,500 23,042 24,877
Total operating revenues $ 1,719,359 9.4 % $ 1,571,292 7.3 % $ 1,464,628
Operating income (loss):
Newspapers $ 229,717 (0.5)% $ 230,810 12.9 % $ 204,428
Scripps Networks 54,471 22,770 (7,735)
Broadcast Television 100,270 46.4 % 68,491 (26.3)% 92,966
Licensing and other media 15,330 40.3 % 10,924 (0.8)% 11,016
Corporate (20,797) (12.1)% (18,558) (7.7)% (17,231)
Total 378,991 20.5 % 314,437 10.9 % 283,444
Denver Rocky Mountain News (24,104) (16,178) (7,962)
Unusual items (9,523) (3,100) 1,100
Divested operating units (275) 195 (385)
Total operating income 345,089 16.8 % 295,354 6.9 % 276,197
Interest expense (51,934) (45,219) (47,108)
Investment results, net of expenses (24,834) 544
Net gains on divested operations 6,196
Miscellaneous, net 1,485 3,505 226
Income taxes (108,090) (103,612) (93,130)
Minority interest (4,459) (4,450) (4,873)
Net income $ 163,453 11.9 % $ 146,122 11.3 % $ 131,312
Per share of common stock:
Net income $ 2.06 11.4 % $ 1.85 14.2 % $ 1.62
Weighted-average shares outstanding 79,161 78,951 80,921
Reconciliation to earnings from core operations:
Reported net income $ 163,453 11.9 % $ 146,122 11.3 % $ 131,312
Net investment results 15,835 (355)
Net gains on divested operations (3,955)
Denver JOA preparatory expenses 6,190
Income tax liability adjustments (7,170)
Scripps Networks (HGTV makegoods/Food Network move) 1,182 (684)
Broadcast Television severance 746
Net income from core operations $ 174,353 18.0 % $ 147,695 13.1 % $ 130,628
Per share of common stock:
Reported net income $ 2.06 11.4 % $ 1.85 14.2 % $ 1.62
Net investment results .20
Net gains on divested operations (.05)
Denver JOA preparatory expenses .08
Income tax liability adjustments (.09)
Scripps Networks (HGTV makegoods/Food Network move) .02 (.01)
Broadcast Television severance .01
Net income from core operations $ 2.20 17.6 % $ 1.87 16.1 % $ 1.61
See Notes to Selected Financial Data on pages F-3 and F-4 regarding items excluded from core operations.
( in thousands )
For the years ended December 31,
2000 Change 1999 Change 1998
Other Financial and Statistical Data - excluding
divested operating units and unusual items:
Total advertising revenues $ 1,133,474 14.3 % $ 991,557 10.2 % $ 899,633
Advertising revenues as a percentage of total revenues 76.2 % 74.0 % 72.7 %
EBITDA:
Newspapers $ 279,050 0.1 % $ 278,803 9.8 % $ 253,933
Scripps Networks 68,770 98.4 % 34,667 4,542
Broadcast Television 129,018 34.5 % 95,955 (18.7)% 118,012
Licensing and other media 16,144 27.7 % 12,640 5.7 % 11,964
Corporate (19,825) (13.2)% (17,519) (8.1)% (16,207)
Total 473,157 17.0 % 404,546 8.7 % 372,244
Denver Rocky Mountain News (9,641) (3,132) 6,056
Total EBITDA $ 463,516 15.5 % $ 401,414 6.1 % $ 378,300
Effective income tax rate for core operations 41.2 % 40.7 % 40.6 %
Statement of Cash Flows Information:
Net cash provided by operating activities $ 255,743 32.2 % $ 193,515 (19.1)% $ 239,173
Capital expenditures (74,577) (79,826) (66,969)
Business acquisitions and other
additions to long-lived assets (158,238) (88,132) (48,653)
Increase (decrease) in long-term debt (53,958) (1,256) (3,800)
Dividends paid, including to minority interests (47,202) (47,094) (46,571)
Purchase and retirement of common stock (4,571) (34,951) (108,421)
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.
Interest expense increased $6,700,000 in 2000 primarily due to higher interest
rates on variable rate credit facilities. The weighted-average interest rate on
such facilities at December 31 was 6.6% in 2000, 6.0% in 1999, and 5.25% in
1998. The monthly average balance of interest bearing obligations was
$767,000,000 in 2000, $780,000,000 in 1999 and $762,000,000 in 1998. Interest
expense decreased $1,900,000 in 1999 as lower interest rates more than offset
increased borrowings.
Amortization of intangible assets reduced earnings per share approximately $.37
in 2000, $.35 in 1999, and $.36 in 1998.
Capital expenditures in 2001 are estimated to be approximately $80,000,000.
NEWSPAPERS - RMN operating results are presented separately as a single line
item to enhance comparability of year-over-year results for Newspapers.
Excluding Divested Operating Units and unusual items, Newspapers operating
results were as follows:
( in thousands )
For the years ended December 31,
2000 Change 1999 Change 1998
Operating revenues:
Local $ 211,568 2.8 % $ 205,767 2.4 % $ 201,036
Classified 209,942 7.2 % 195,809 8.2 % 180,938
National 30,977 10.9 % 27,937 35.8 % 20,576
Preprint and other 90,536 13.3 % 79,902 12.1 % 71,286
Total advertising 543,023 6.6 % 509,415 7.5 % 473,836
Circulation 133,491 (1.1)% 135,029 (2.6)% 138,615
Joint operating agency distributions 47,412 (6.1)% 50,511 4.6 % 48,278
Other 10,176 4.5 % 9,735 (6.4)% 10,402
Total operating revenues 734,102 4.2 % 704,690 5.0 % 671,131
Operating expenses, excluding depreciation and amortization:
Editorial and newspaper content 85,637 0.6 % 85,158 1.5 % 83,875
Newsprint and ink 80,830 10.7 % 73,022 (9.1)% 80,314
Other press and production 66,668 5.0 % 63,507 (2.2)% 64,904
Circulation and distribution 61,281 10.3 % 55,566 3.3 % 53,789
Other advertising products, internet and printing 23,779 20.1 % 19,807 36.0 % 14,562
Advertising sales and marketing 64,393 7.4 % 59,932 4.8 % 57,162
General and administrative 69,847 2.4 % 68,196 8.8 % 62,661
Total 452,435 6.4 % 425,188 1.9 % 417,267
EBITDA 281,667 0.8 % 279,502 10.1 % 253,864
Share of pre-tax earnings of equity-method investments (2,617) (699) 69
Total EBITDA 279,050 0.1 % 278,803 9.8 % 253,933
Depreciation and amortization 49,333 2.8 % 47,993 (3.1)% 49,505
Operating income 229,717 (0.5)% 230,810 12.9 % 204,428
Denver Rocky Mountain News operating income (24,104) (16,178) (7,962)
Total operating income $ 205,613 (4.2)% $ 214,632 9.2 % $ 196,466
Other Financial and Statistical Data:
Percent of operating revenues:
EBITDA 38.0 % 39.6 % 37.8 %
Operating income 31.3 % 32.8 % 30.5 %
Capital expenditures $ 29,834 $ 30,693 $ 23,296
Business acquisitions and other
additions to long-lived assets 74,878 4,005 3,570
The average price of newsprint increased 7% in 2000, and declined 15% in 1999.
The average price of newsprint was $580 per metric ton in the fourth quarter of
2000.
Circulation and distribution costs increased primarily due to efforts to gain
circulation at the Company's larger newspapers.
Capital expenditures in 2001 are estimated to be approximately $38,000,000,
excluding the RMN. Expected capital expenditures in 2001 include construction
of a new production facility for the Knoxville newspaper. Depreciation and
amortization is expected to be approximately $52,000,000.
SCRIPPS NETWORKS - Operating results, excluding unusual items, were as follows:
( in thousands )
For the years ended December 31,
2000 Change 1999 Change 1998
Operating revenues:
Advertising $ 249,619 45.9 % $ 171,059 79.7 % $ 95,171
Affiliate fees 58,370 16.4 % 50,142 31.7 % 38,063
Other 5,750 (34.8)% 8,814 (38.4)% 14,307
Total operating revenues 313,739 36.4 % 230,015 55.9 % 147,541
Operating expenses, excluding depreciation and amortization:
Programming and production 89,274 31.7 % 67,804 55.9 % 43,482
Operations and distribution 31,127 10.5 % 28,169 48.4 % 18,978
Amortization of distribution fees 18,058 12.9 % 15,993 1.9 % 15,697
Sales and marketing 69,442 29.7 % 53,530 28.6 % 41,624
General and administrative 41,992 26.3 % 33,254 28.3 % 25,924
Total 249,893 25.7 % 198,750 36.4 % 145,705
EBITDA - consolidated networks 63,846 31,265 1,836
Share of pre-tax earnings of equity-method investments 4,924 3,402 2,706
Total EBITDA 68,770 98.4 % 34,667 4,542
Depreciation and amortization 14,299 11,897 12,277
Operating income (loss) $ 54,471 $ 22,770 $ (7,735)
Other Financial and Statistical Data:
Percent of operating revenues:
EBITDA 21.9 % 15.1 % 3.1 %
Operating income (loss) 17.4 % 9.9 % (5.2)%
Payments for programming and distribution
less (greater) than amounts
recognized as expense $ (35,678) $ (57,770) $ (26,793)
Capital expenditures 12,236 21,557 7,936
Business acquisitions and other
additions to long-lived assets 15,035 39,899 17,431
According to the Nielsen Homevideo Index, HGTV was telecast to 67.1 million
homes in December 2000, 59.0 million homes in December 1999, and 48.4 million
homes in December 1998. Food Network was telecast to 54.4 million homes in
December 2000, 44.2 million homes in December 1999, and 37.1 million homes in
December 1998.
The Company launched DIY, its third network, in the fourth quarter of 1999,
and in 2000 announced plans to launch a fourth network, Fine Living, in the
fourth quarter of 2001. Start-up costs associated with DIY and Fine Living
reduced EBITDA by $10,900,000 in 2000, $3,700,000 in 1999 and $1,500,000 in
1998. Start up costs for DIY and Fine Living are expected to reduce EBITDA by
approximately $20,000,000 to $25,000,000 for the full year. The cash required
by DIY and Fine Living will substantially exceed the reported operating losses
in 2001.
Programming and production expense has increased as the Company improves the
quality and variety of programming and expands the hours of original programming
presented on its networks. Expenditures to purchase or produce programs totaled
$147,000,000 in 2000, $117,000,000 in 1999 and $64,000,000 in 1998. The Company
owns the rights to substantially all of the programming it produces and expects
to telecast the programs over several years. The costs are recognized as
expense as the programs are telecast. Programming and production expense in
2001 is expected to increase approximately 10% for HGTV and approximately 40%
for Food Network, and approximately 30% for the two networks combined.
Capital expenditures in 1999 included expansion of the studio and office
facilities for HGTV and DIY. Capital expenditures in 2001 are expected to be
approximately $12,000,000. Depreciation and amortization is expected to be
approximately $16,000,000.
BROADCAST TELEVISION - Operating results, excluding divested operations and
unusual items, were as follows:
( in thousands )
For the years ended December 31,
2000 Change 1999 Change 1998
Operating revenues:
Local $ 173,878 1.5 % $ 171,353 3.2 % $ 166,115
National 119,428 (1.0)% 120,638 (3.8)% 125,432
Political 34,762 2,478 20,084
Other 15,057 (15.8)% 17,893 (6.2)% 19,083
Total operating revenues 343,125 9.8 % 312,362 (5.5)% 330,714
Operating expenses, excluding depreciation and amortization:
Programming and station operations 146,630 (2.5)% 150,444 (0.2)% 150,735
Sales and marketing 40,807 4.3 % 39,110 4.1 % 37,557
General and administrative 26,670 (0.7)% 26,853 10.0 % 24,410
Total 214,107 (1.1)% 216,407 1.7 % 212,702
EBITDA 129,018 34.5 % 95,955 (18.7)% 118,012
Depreciation and amortization 28,748 4.7 % 27,464 9.7 % 25,046
Operating income $ 100,270 46.4 % $ 68,491 (26.3)% $ 92,966
Other Financial and Statistical Data:
Percent of operating revenues:
EBITDA 37.6 % 30.7 % 35.7 %
Operating income 29.2 % 21.9 % 28.1 %
Capital expenditures $ 31,280 $ 25,749 $ 33,454
Business acquisitions and other
additions to long-lived assets 14,710 130 218
Year-over-year revenue comparisons are difficult because of the political
advertising revenue in even-numbered years.
Average audience shares for broadcast television stations have declined in
recent years due to the creation of new television networks and increases in the
audience share of alternative service providers such as cable television and
direct broadcast satellite systems. Technological advancement in interactive
media services will further increase these competitive pressures.
Other revenue includes compensation paid to the Company's television stations
in exchange for carrying network programming. National television networks
have reduced the amount of compensation paid to affiliated stations. The
Company received network compensation of $10,000,000 in 2000, $13,100,000 in
1999 and $16,000,000 in 1998. Network compensation is expected to be
$10,000,000 in 2001 and in 2002.
Operating expenses, excluding depreciation and amortization, are expected to
decrease approximately 4% in 2001.
Capital expenditures include the construction of a new building for the West
Palm Beach station in 2000 and for the Phoenix station in 1998. Capital
spending also increased as five of the Company's stations were equipped to
broadcast a digital signal. The Company has received construction permits for
digital broadcasting in two additional stations, and has filed requests for
construction permits for the other three stations. The Company is required to
begin digital broadcasting in all of its markets by May 2002. Capital
expenditures in 2001 are expected to be approximately $20,000,000.
Depreciation and amortization in 2001 is expected to be approximately
$31,500,000.
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 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.
Authorizations in 1997 and 1998 by the Board of Directors allow for the
repurchase of an additional 2,111,600 Class A Common shares.
The Company's Scripps Ventures Funds invest in new businesses focusing
primarily on new media technology. See Note 6 to the Consolidated Financial
Statements. The Board of Directors has authorized up to $150 million of such
investments. At December 31, 2000, an additional $58,000,000 remains to be
invested under the authorization.
The terms of the Denver JOA required the Company to make a $60,000,000 payment
to MediaNews in January 2001.
Net debt (borrowings less cash equivalent and other short-term investments)
decreased $55,300,000 in 2000, to $714,000,000 at December 31, 2000.
MARKET RISK
The Company's earnings and cash flow can be affected by, among other things,
interest rate changes, foreign currency fluctuations (primarily in the exchange
rate for the Japanese yen) and changes in the price of newsprint. See "Business
- - Newspapers - Raw Materials and Labor Costs." The Company is also exposed to
changes in the market value of its investments.
The Company may use foreign currency forward and option contracts to hedge its
cash flow exposures denominated in Japanese yen and forward contracts to reduce
the risk of changes in the price of newsprint on anticipated newsprint
purchases. The Company held no foreign currency or newsprint forward contracts
at December 31, 2000, or during the year then ended.
The following table presents additional information about the Company's market-
risk-sensitive financial instruments:
( in thousands )
As of December 31, 2000 As of December 31, 1999
Cost Fair Cost Fair
Basis Value Basis Value
Financial instruments subject to interest rate risk:
Variable rate credit facilities, including commercial $ 512,788 $ 512,788 $ 565,689 $ 565,689
paper
$100 million, 6.625% note, due in 2007 99,901 97,900 99,887 94,668
$100 million, 6.375% note, due in 2002 99,964 99,800 99,944 98,107
Other notes 1,956 812 3,927 2,836
Total long-term debt $ 714,609 $ 711,300 $ 769,447 $ 761,300
Financial instruments subject to market value risk:
Time Warner common stock (1,344,000 shares) $ 27,816 $ 70,239 $ 27,816 $ 97,227
Centra Software (1,792,500 common shares) 3,652 6,946
garden.com Inc. (2,414,000 common shares
and 276,000 warrants) 9,625 22,636
iVillage Inc. (41,000 common shares at December 31, 2000,
and 270,000 common shares at December 31, 1999) 40 40 5,897 5,897
Other available-for-sale securities 599 3,929 3,385 9,177
Total investments in publicly-traded companies 32,107 81,154 46,723 134,937
Securities that do not trade in a public market 87,266 (a) 68,089 (a)
(a) Investments in private companies do not trade in public markets,
so they do not have readily determinable fair values. However,
based upon amounts paid for such securities by other investors
in subsequent rounds of financing, if any, the estimated value
of these investments exceeded their cost by approximately
$75,500,000 on December 31, 2000, and $27,900,000 on
December 31, 1999.
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 5 to the Consolidated Financial Statements. The weighted-
average interest rate on borrowings under the Variable Rate Credit Facilities at
December 31 was 6.6% in 2000, 6.0% in 1999 and 5.25% in 1998.
The Company holds 1,792,500 shares of Centra Software, which became publicly
traded in January 2000. The Company's investment in Centra Software was
included in "securities that do not trade in a public market" in the above
table in 1999. The estimated fair value of the investment in Centra Software
was $6,000,000 on December 31, 1999.
The Company's investments in iVillage, garden.com and Caredata (included in
other available for sale securities) declined below historical cost during
2000 and were written down to fair value.
CONSOLIDATED BALANCE SHEETS
( in thousands )
As of December 31,
2000 1999
(Restated)
ASSETS
Current Assets:
Cash and cash equivalents $ 14,112 $ 10,456
Accounts and notes receivable (less allowances - 2000, $13,891; 1999, $11,266 289,583 280,829
Program rights and production costs 115,513 93,001
Network distribution fees 21,105 17,899
Inventories 17,802 16,538
Deferred income taxes 30,421 27,643
Miscellaneous 35,449 31,095
Total current assets 523,985 477,461
Investments 177,922 210,308
Property, Plant and Equipment 502,041 485,596
Goodwill and Other Intangible Assets 1,209,132 1,187,274
Other Assets:
Program rights and production costs (less current portion) 96,881 75,702
Network distribution fees (less current portion) 40,571 50,066
Miscellaneous 22,334 33,974
Total other assets 159,786 159,742
TOTAL ASSETS $ 2,572,866 $ 2,520,381
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
( in thousands, except share data )
As of December 31,
2000 1999
(Restated)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 212,828 $ 267,600
Accounts payable 114,275 116,201
Customer deposits and unearned revenue 37,214 40,583
Accrued liabilities:
Employee compensation and benefits 49,089 46,464
Network distribution fees 48,257 41,712
Miscellaneous 71,313 64,908
Total current liabilities 532,976 577,468
Deferred Income Taxes 129,932 143,912
Long-Term Debt (less current portion) 501,781 501,847
Other Long-Term Obligations and Minority Interests (less current portion) 130,367 132,702
Commitments and Contingencies (Note 13)
Stockholders' Equity:
Preferred stock, $.01 par - authorized: 25,000,000 shares; none outstanding
Common stock, $.01 par:
Class A - authorized: 120,000,000 shares; issued and
outstanding: 2000 - 59,641,828 shares; 1999 - 58,925,449 shares 596 589
Voting - authorized: 30,000,000 shares; issued and
outstanding: 2000 - 19,096,913 shares; 1999 - 19,216,913 shares 191 192
Total 787 781
Additional paid-in capital 157,394 136,731
Retained earnings 1,093,138 973,609
Unrealized gains on securities available for sale 31,877 57,298
Foreign currency translation adjustment 361 973
Unvested restricted stock awards (5,747) (4,940)
Total stockholders' equity 1,277,810 1,164,452
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,572,866 $ 2,520,381
CONSOLIDATED STATEMENTS OF INCOME
( in thousands, except per share data )
For the years ended December 31,
2000 1999 1998
(Restated) (Restated)
Operating Revenues:
Advertising $ 1,346,477 $ 1,198,306 $ 1,093,333
Circulation 147,391 153,742 163,861
Licensing 68,549 63,755 62,260
Affiliate fees 58,370 50,142 38,063
Joint operating agency distributions 47,412 50,511 48,278
Other 51,160 54,836 58,833
Total operating revenues 1,719,359 1,571,292 1,464,628
Operating Expenses:
Employee compensation and benefits 516,707 492,162 454,486
Newsprint and ink 156,369 143,183 147,916
Amortization of purchased programming 121,044 98,810 82,246
Other operating expenses 470,985 437,932 399,938
Depreciation 69,057 65,300 63,722
Amortization of intangible assets 40,108 38,551 40,123
Total operating expenses 1,374,270 1,275,938 1,188,431
Operating Income 345,089 295,354 276,197
Other Credits (Charges):
Interest expense (51,934) (45,219) (47,108)
Investment results, net of expenses (24,834) 544
Net gains on divested operations 6,196
Miscellaneous, net 1,485 3,505 226
Net other credits (charges) (69,087) (41,170) (46,882)
Income Before Taxes and Minority Interests 276,002 254,184 229,315
Provision for Income Taxes 108,090 103,612 93,130
Income Before Minority Interests 167,912 150,572 136,185
Minority Interests 4,459 4,450 4,873
Net Income $ 163,453 $ 146,122 $ 131,312
Net Income per Share of Common Stock:
Basic $2.09 $1.87 $1.65
Diluted $2.06 $1.85 $1.62
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
( in thousands, except share data )
For the years ended December 31,
2000 1999 1998
(Restated) (Restated)
Cash Flows from Operating Activities:
Net income $ 163,453 $ 146,122 $ 131,312
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation and amortization 109,165 103,851 103,845
Deferred income taxes (3,119) 14,333 10,323
Minority interests in income of subsidiary companies 4,459 4,450 4,873
Net investment results and loss (gain) on divestitures 17,732 (1,554)
Network distribution fee amortization greater (less) than payments 9,831 (4,931) (6,610)
Program cost amortization greater (less) than payments (44,049) (51,810) (17,431)
Other changes in certain working capital accounts, net (18,773) (29,130) 9,579
Miscellaneous, net 17,044 12,184 3,282
Net operating activities 255,743 193,515 239,173
Cash Flows from Investing Activities:
Additions to property, plant and equipment (74,577) (79,826) (66,969)
Purchase of subsidiary companies and long-term investments (139,056) (69,515) (28,774)
Change in short-term investments, net 20,551 (17,446)
Sale of subsidiary companies and long-term investments 50,940 9,344 32,389
Miscellaneous, net 10,789 2,602 (4,758)
Net investing activities (151,904) (116,844) (85,558)
Cash Flows from Financing Activities:
Increase in long-term debt 737 4,340
Payments on long-term debt (54,695) (5,596) (3,800)
Dividends paid (43,924) (43,816) (43,228)
Dividends paid to minority interests (3,278) (3,278) (3,343)
Repurchase Class A Common shares (4,571) (34,951) (108,421)
Miscellaneous, net (primarily exercise of employee stock options) 5,548 1,667 6,180
Net financing activities (100,183) (81,634) (152,612)
Increase (Decrease) in Cash and Cash Equivalents 3,656 (4,963) 1,003
Cash and Cash Equivalents:
Beginning of year 10,456 15,419 14,416
End of year $ 14,112 $ 10,456 $ 15,419
Supplemental Cash Flow Disclosures:
Interest paid, excluding amounts capitalized $ 51,434 $ 45,162 $ 46,300
Income taxes paid 110,065 89,117 76,237
Destin newspaper traded for Fort Pierce newspaper (see Note 2) 3,857
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND STOCKHOLDERS' EQUITY
( in thousands, except share data ) Accumulated Unvested
Additional Other Restricted Total
Common Paid-in Retained Comprehensive Stock Stockholders'
Stock Capital Earnings Income Awards Equity
As of December 31, 1997 as reported $ 806 $ 259,739 $ 782,329 $ 11,690 $ (5,602) $ 1,048,962
Change in accounting principle (see Note 1) 890 890
Restated balances at December 31, 1997 806 259,739 783,219 11,690 (5,602) 1,049,852
Comprehensive income
Net income 131,312 131,312
Unrealized gains, net of tax of $15,080 28,006 28,006
Reclassification adjustment for losses (gains)
in income, net of tax of ($268) (499) (499)
Increase in unrealized gains 27,507 27,507
Foreign currency translation adjustments 288 288
Total 131,312 27,795 159,107
Dividends: declared and paid - $.54 per share (43,228) (43,228)
Convert 114,798 Voting Shares to Class A shares
Repurchase 2,402,100 Class A Common shares (24) (108,397) (108,421)
Compensation plans, net: 345,053 shares issued;
1,500 shares forfeited; 27,441 shares repurchased 3 6,536 1,871 8,410
Tax benefits of compensation plans 4,000 4,000
As of December 31, 1998 785 161,878 871,303 39,485 (3,731) 1,069,720
Comprehensive income:
Net income 146,122 146,122
Unrealized gains, net of tax of $9,393 17,358 17,358
Reclassification adjustment for losses (gains)
in income, net of tax of $558 1,036 1,036
Increase in unrealized gains 18,394 18,394
Foreign currency translation adjustments 392 392
Total 146,122 18,786 164,908
Dividends: declared and paid - $.56 per share (43,816) (43,816)
Convert 2,000 Voting Shares to Class A shares
Repurchase 784,793 Class A Common shares (8) (34,943) (34,951)
Compensation plans, net: 430,896 shares issued;
200 shares forfeited; 47,421 shares repurchased 4 5,984 (1,209) 4,779
Tax benefits of compensation plans 3,812 3,812
As of December 31, 1999 781 136,731 973,609 58,271 (4,940) 1,164,452
Comprehensive income:
Net income 163,453 163,453
Unrealized gains (losses), net of tax of ($17,973) (32,819) (32,819)
Reclassification adjustment for losses (gains)
in income, net of tax of $4,233 7,398 7,398
Increase (decrease) in unrealized gains (25,421) (25,421)
Foreign currency translation adjustments (612) (612)
Total 163,453 (26,033) 137,420
Dividends: declared and paid - $.56 per share (43,924) (43,924)
Convert 120,000 Voting Shares to Class A shares
Repurchase 80,500 Class A Common shares (1) (4,570) (4,571)
Compensation plans, net: 742,915 shares issued;
15,445 shares forfeited; 50,591 shares repurchased 7 20,275 (807) 19,475
Tax benefits of compensation plans 4,958 4,958
As of December 31, 2000 $ 787 $ 157,394 $ 1,093,138 $ 32,238 $ (5,747) $ 1,277,810
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations - The E. W. Scripps Company ("Company") operates in
three reportable segments: Newspapers, Scripps Networks and Broadcast
Television.
Newspapers include 21 daily newspapers in the U.S., and primarily derive
revenue from the sale of advertising space to local and national
advertisers and from the sale of the newspapers to readers.
Scripps Networks includes three national television networks that are
distributed by cable and satellite television systems: Home & Garden
Television ("HGTV"), Food Network and Do It Yourself ("DIY"), and the
Company's 12% interest in FOX Sports South, a regional television network.
The Company owned 64% of Food Network on December 31, 2000. The Company
expects to launch Fine Living, its fourth national network, in the fourth
quarter of 2001. Revenues are primarily derived from the sale of
advertising time and from affiliate fees paid by distributors.
Broadcast Television includes ten stations, nine of which are affiliated
with national broadcast networks. Broadcast Television derives revenue
from the sale of advertising time to local and national advertisers and
receives compensation for broadcasting network programming.
The relative importance of each line of business is indicated in the
segment information presented in Note 12. Licensing and other media
aggregates the Company's operating segments that are too small to report
separately, and primarily includes syndication and licensing of news
features and comics.
The Company's operations are geographically dispersed and its customer base
is diverse. However, more than 75% of the Company's operating revenues are
derived from advertising. Operating results can be affected by changes in
the demand for advertising both nationally and in individual markets.
The Company grants credit to substantially all of its customers.
Management believes bad debt losses resulting from default by a single
customer, or defaults by customers in any depressed region or business
sector, would not have a material effect on the Company's financial
position.
Use of Estimates - Preparation of the financial statements requires the use
of estimates. The Company's financial statements include estimates for
such items as income taxes payable and self-insured risks. The Company
self insures for employees' medical and disability income benefits,
workers' compensation and general liability. The recorded liability for
self-insured risks is calculated using actuarial methods and is not
discounted. The recorded liability for self-insured risks totaled
$19,300,000 at December 31, 2000. Management does not believe it is likely
that its estimates for such items will change materially in the near term.
In the first quarter of 1999 the Company increased the estimated useful
lives of network distribution fees to the greater of five years or the
remaining terms of the distribution contracts. Because of the previous
uncertainty regarding the conditions under which the distribution contracts
would be renewed, such fees had been amortized over the terms of the
contracts. The Company has committed to pay certain cable television
system operators additional distribution fees to carry the networks on
systems not included in the original distribution contracts. Management
believes the expanded distribution of the networks will increase affiliate
fee and advertising revenue beyond the remaining terms of the original
distribution contracts. The change in the estimated amortization period
was made to better match revenue and expense. Also in the first quarter of
1999 the Company increased the estimated useful lives of certain newspaper
presses from 20 years to 30 years. The changes in estimated useful lives
of the network distribution fees and newspaper presses were made
prospectively. The effect of these changes was to increase 1999 operating
income $11,900,000 and net income $7,500,000 ($.09 per share).
Consolidation - The consolidated financial statements include the accounts
of the Company and its majority-owned subsidiary companies.
Revenue Recognition - Significant revenue recognition policies are as
follows:
Advertising revenues are recognized based on dates of publication or
broadcast, net of agency commissions. Revenues from advertising on the
Company's Internet sites are recognized over the terms of the advertising
contracts.
Circulation revenue is recognized based on date of publication. The
Company's newspapers are either: 1) sold directly to subscribers and
delivered by employees or independent newspaper carriers, or 2) sold to
independent newspaper distributors who resell the paper to subscribers.
Circulation revenue from newspapers sold directly to subscribers is based
on the subscription price, with delivery costs charged to operating
expenses. Circulation revenue from newspapers sold to independent
newspaper distributors is based upon the price charged the distributor.
Affiliate fees are recognized as programming is provided to cable
television and direct broadcast satellite services.
Royalties from merchandise licensing are recognized as the licensee
sells products. Royalties from promotional licensing are recognized over
the lives of the licensing agreements.
Network Distribution Fees - Network distribution fees are incentives paid
to cable television and direct broadcast satellite system operators in
exchange for long-term contracts to carry the Company's television
networks. These fees are amortized based upon the percentage of the
current period's affiliate fee revenues to the estimated total of such
revenue over estimated useful lives, or, for contracts that do not provide
for the Company to receive affiliate fees, on a straight-line basis over
estimated useful lives. Useful lives are estimated at the greater of five
years or the duration of the contracts. The portion of the unamortized
balance expected to be amortized within one year is classified as a current
asset.
Program Rights and Production Costs - Program rights are recorded when
programs become available for broadcast. Amortization is computed using the
straight-line method based on the license period or based on usage,
whichever yields the greater accumulated amortization for each program.
The liability for program rights is not discounted for imputed interest.
Production costs are primarily costs incurred in the production of
programming for internal use. Programs produced for internal use are
amortized over the estimated useful lives of the programs. Program and
production costs are stated at the lower of unamortized cost or fair value.
The portion of the unamortized balance expected to be amortized within one
year is classified as a current asset.
Program rights liabilities payable within the next twelve months are
included in accounts payable. Noncurrent program rights liabilities are
included in other long-term obligations.
Long-Lived Assets - Long-lived assets used in business operations are
recorded at unamortized cost. Management reviews long-lived assets,
including related goodwill and other intangible assets, for impairment
whenever events or changes in circumstances indicate the carrying amounts
of the assets may not be recoverable. Recoverability is determined by
comparing the forecasted undiscounted cash flows of the operation to which
the assets relate to the carrying amount of the assets. If the operation
is determined to be unable to recover the carrying amount of its assets,
then goodwill and other intangible assets are written down first, followed
by other long-lived assets of the operation, to fair value. Fair value is
determined based on discounted cash flows. Long-lived assets to be
disposed of are reported at the lower of carrying amount or fair value less
costs to sell.
Goodwill and Other Intangible Assets - Goodwill represents the cost of
acquisitions in excess of the acquired businesses' tangible assets and
identifiable intangible assets. Cable and direct broadcast satellite
network affiliation contracts are amortized on a straight-line basis over
the greater of five years or the remaining duration of the agreements.
Goodwill, customer lists and other intangible assets are amortized on a
straight-line basis over periods of up to 40 years.
Property, Plant and Equipment - Depreciation is computed using the straight-
line method over maximum estimated useful lives as follows:
Buildings and improvements 35 years
Printing presses 30 years
Other newspaper production equipment 5 to 10 years
Television transmission towers and related equipment 15 years
Other television and program production equipment 5 to 15 years
Office and other equipment 3 to 10 years
In the first quarter of 1999 the Company increased the estimated useful
lives of certain newspaper presses from 20 years to 30 years. Interest
costs related to major capital projects are capitalized and classified as
property, plant and equipment.
Income Taxes - Deferred income taxes are provided for temporary differences
between the tax basis and reported amounts of assets and liabilities that
will result in taxable or deductible amounts in future years. The
Company's temporary differences primarily result from accelerated
depreciation and amortization for tax purposes, investment gains and losses
not yet recognized for tax purposes and accrued expenses not deductible for
tax purposes until paid.
Investments - The Company records its investments at fair value, except for
securities accounted for under the equity method or that do not trade in a
public market. All investments recorded at fair value have been classified
as available for sale. The fair value of available-for-sale investments is
determined by quoted market prices. The cost basis of available for sale
securities is adjusted when a decline in market value is determined to be
other than temporary, with the resulting adjustment charged against net
income. The difference between adjusted cost basis and fair value, net of
related tax effects, is recorded in the accumulated other comprehensive
income component of stockholders' equity. Investments in private companies
are recorded at cost, net of impairment write-downs, because no readily
determinable market price is available.
Investments in 20%- to 50%-controlled companies and in all joint ventures
are accounted for using the equity method.
The cost of securities sold is determined by specific identification.
Newspaper Joint Operating Agencies - A JOA combines all but the editorial
operations of two competing newspapers in a market in order to reduce
aggregate expenses and take advantage of economies of scale, thereby
allowing the continuing operation of both newspapers in that market. The
Newspaper Preservation Act of 1970 provides a limited exemption from anti-
trust laws, generally permitting the continuance of JOAs in existence prior
to its enactment and the formation, under certain circumstances, of new
JOAs between newspapers.
The Company is a partner in newspaper joint operating agencies ("JOAs") in
four markets. The JOA between the Company's Denver Rocky Mountain News and
MediaNews Group Inc.'s Denver Post was approved by the U.S. Attorney
General in January 2001. The 50-year agreement created a new entity called
the Denver Newspaper Agency L.L.C., which is 50%-owned by each partner.
Both partners contributed certain assets used in the operations of their
newspapers to the new entity. In addition, the Company paid $60,000,000 to
MediaNews Group Inc. The JOA commenced operations on January 22, 2001.
The Company will receive a 50% share of the operating profits of the Denver
JOA, and between 20% and 40% of the operating profits in the other three
markets. The Company includes its portion of JOA operating profits in
operating revenues, and includes its residual interest in the net assets of
the Denver and Albuquerque JOAs in Investments in the Consolidated Balance
Sheets. The Company does not include any assets or liabilities related to
its other JOAs in its Consolidated Balance Sheets because the Company has
no residual interest in the net assets of those JOAs.
A JOA in Evansville, Indiana, which was managed by the Company, expired in
1998 and was not renewed. The Company included the full amounts of this
JOA's revenues and expenses in the consolidated financial statements.
Distributions of JOA operating profits to the other partner were included
in other operating expenses. The Company continues to operate its
newspaper in Evansville.
Inventories - Inventories are stated at the lower of cost or market. The
cost of inventories is computed using the first in, first out ("FIFO")
method.
Effective July 1, 2000, the Company began accounting for newsprint
inventories by the first in, first out ("FIFO") method. Newsprint
inventories were previously valued using the last in, first out ("LIFO")
method. The Company typically maintains a 30-day supply of newsprint and
FIFO more accurately reflects the current value of the Company's
newsprint inventory. Financial statements for all prior periods have
been restated to apply the new method retroactively. Retained earnings
at December 31, 1997, were increased $890,000.
The effect of the accounting change on net income as previously reported
for the years ended December 31 was as follows:
( in thousands )
For the years ended
December 31,
1999 1998
Net income as previously reported $ 146,933 $ 131,214
Change in accounting for newsprint inventories (811) 98
Net income as adjusted $ 146,122 $ 131,312
Net income per share of common stock - basic:
As previously reported $1.89 $1.65
As adjusted $1.87 $1.65
Net income per share of common stock - diluted:
As previously reported $1.86 $1.62
As adjusted $1.85 $1.62
Stock-Based Compensation - The Company's incentive plans provide for awards
of options to purchase Class A Common shares and awards of Class A Common
shares. Stock options are awarded to purchase Class A Common shares at not
less than 100% of the fair market value on the date of the award. Stock
options and awards of Class A Common shares vest over an incentive period
conditioned upon the individual's employment through that period. The
Company measures compensation expense using the intrinsic-value-based
method (see Note 14).
Cash equivalent and Short-term Investments - Cash equivalents represent
debt instruments with an original maturity of less than three months.
Short-term investments represent excess cash invested in securities not
meeting the criteria to be classified as cash equivalents. Cash equivalent
and short-term investments are carried at cost plus accrued income, which
approximates fair value.
Risk Management Contracts - The Company does not hold derivative financial
instruments for trading or speculative purposes, and does not hold
leveraged contracts. The impact of risk management activities on the
Company's financial position, its results of operations, and its cash flows
is immaterial.
The Company has used foreign currency forward and option contracts to hedge
cash flow exposures denominated in Japanese yen. Such contracts reduce the
risk of changes in the exchange rate for Japanese yen on the Company's
anticipated net licensing receipts (licensing royalties less amounts due
creators of the properties and certain direct expenses) for the following
year. They are recorded at fair value in the Consolidated Balance Sheets
and gains or losses are recognized in income as changes occur in the
exchange rate for the Japanese yen. The Company held no foreign currency
derivative financial instruments at December 31, 2000, or at December 31,
1999.
The Company has used off-balance-sheet financial instruments, such as
forward contracts, to reduce the risk of changes in the price of newsprint
on anticipated newsprint purchases. Gains or losses on such contracts are
deferred and charged to newsprint and ink expense as the newsprint is
consumed. The Company held no derivative financial instruments associated
with newsprint at December 31, 2000, or at December 31, 1999.
The Company has also used put options and zero-cost collars to hedge the
proceeds from the expected sale of certain investments. These contracts
are recorded at fair value in the Consolidated Balance Sheets. Gains or
losses are recognized in net income or in other comprehensive income
depending upon the treatment of changes in the unrealized gain or loss on
the underlying investment. Several of the Company's investments include
embedded puts or other derivative financial instruments. These instruments
are currently accounted for at cost with the underlying investment.
The Company adopted FAS No. 133 - Accounting for Derivative Instruments
and Hedging Activities effective January 1, 2001. The standard
establishes accounting and reporting standards for derivative financial
instruments and hedging activities. The standard requires the
recognition of all derivative financial instruments on the balance sheet
as either assets or liabilities and measurement at fair value. The
accounting for changes in the value of a derivative financial instrument
depends upon its intended use, and if designated as a hedge, its
effectiveness in hedging the identified risk. Adoption of the standard
did not have a material 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 )
For the years ended December 31,
2000 1999 1998
Basic weighted-average shares outstanding 78,170 77,936 79,715
Effect of dilutive securities:
Unvested restricted stock held by employees 165 179 197
Stock options held by employees 826 836 1,009
Diluted weighted-average shares outstanding 79,161 78,951 80,921
Reclassifications - For comparative purposes, certain 1999 and 1998 amounts
have been reclassified to conform to 2000 classifications.
2. ACQUISITIONS AND DIVESTITURES
Acquisitions
2000 - The Company acquired the daily newspaper in Fort Pierce, Florida,
in exchange for its newspaper in Destin, Florida, and cash; the
daily newspaper in Henderson, Kentucky; the weekly newspaper in
Marco Island, Florida; and television station KMCI in Lawrence,
Kansas.
1999 - The Company acquired the 70% of Colorado Real Estate On-line, a
provider of real estate listings on the Internet, that it did not
already own and an additional 6.86% interest in the Food Network.
1998 - The Company acquired independent telephone directories in
Memphis, Tennessee; Kansas City, Missouri; New Orleans, Louisiana; and
North Palm Beach, Florida.
The following table presents additional information about the
acquisitions:
( in thousands )
For the years ended December 31,
2000 1999 1998
Goodwill and other intangible assets acquired $ 73,305 $ 20,571 $ 12,553
Other assets acquired (primarily property and equipment) 14,495 85 4,154
Total 87,800 20,656 16,707
Fair value of Destin newspaper (3,857)
Liabilities assumed (1,876) (1,902) (2,448)
Cash paid $ 82,067 $ 18,754 $ 14,259
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 previous owner. Pro forma results are not presented
because the combined results of operations would not be significantly
different than the reported amounts.
Divestitures
2000 - The Company sold its independent telephone directories, and
traded its Destin, Florida, newspaper and cash for the daily
newspaper in Fort Pierce, Florida. The sales and trade resulted in
year-to-date net gains of $6,196,000, $4,000,000 after-tax
($.05 per share).
1998 - The Company sold Scripps Howard Productions, its program
television production operation based in Los Angeles, and the Dallas
Community newspapers, including the Plano daily newspaper. No
material gain or loss was realized on either divestiture as proceeds
approximated the book value of the net assets sold.
Included in the consolidated financial statements were the following
results of divested operating units (excluding gains on sales):
( in thousands, except per share data )
For the years ended December 31,
2000 1999 1998
Operating revenues $ 10,500 $ 23,042 $ 24,877
Operating income (loss) (275) 195 (385)
3. UNUSUAL CREDITS AND CHARGES
2000 - In addition to the gains on divested operations described in
Note 2, the Company's reported results of operations were affected
by the following items:
Recognized net investment losses totaling $19,400,000. Accrued
incentive compensation for Scripps Ventures I's portfolio managers was
increased $4,500,000, to $11,500,000 in conjunction with the
$29,900,000 increase in the net gain on Scripps Ventures I's
portfolio, to $76,900,000. Net investment results reduced net
income $15,800,000 ($.20 per share).
$9,500,000 of expenses associated with preparations for the
anticipated joint newspaper operations in Denver. Net income was
reduced $6,200,000 ($.08 per share).
Reduction of the estimated liability for prior year income taxes and a
reduction in the estimate of unrealizable state net operating loss
carryforwards (see Note 4). Net income was increased $7,200,000
($.09 per share).
The combined effect of the above items was to reduce 2000 net income
$10,900,000 ($.14 per share).
1999 - The Company's reported results of operations were affected by the
following items:
Recognized net investment gains totaling $8,600,000. Accrued
incentive compensation for Scripps Ventures I's portfolio managers was
increased $7,000,000 in conjunction with the increase in the net gain on
Scripps Ventures I's portfolio to $47,000,000. Net investment results
increased net income $400,000 ($.00 per share).
A $1,100,000 accrual for "make goods" to Home & Garden Television
("HGTV") advertisers and $800,000 of costs incurred to move the Food
Network's operations to a different location in Manhattan. Net income
was reduced $1,200,000 ($.02 per share).
Severance payments totaling $1,200,000 to certain television station
employees, reducing net income $700,000 ($.01 per share).
The combined effect of the above items was to reduce 1999 net income
$1,600,000 ($.02 per share).
1998 - The Company's reported results of operations were affected by the
$1,100,000 related to the "make goods" to HGTV advertisers referred
to above. Net income was increased $700,000 ($.01 per share).
4. INCOME TAXES
The Company's 1992 through 1995 consolidated federal income tax returns are
currently under examination by the IRS. In 2000 the Company reduced its
liability for prior year income taxes by $4,200,000. Management believes
that adequate provision for income taxes has been made for all open years.
The approximate effects of the temporary differences giving rise to the
Company's deferred income tax liabilities (assets) were as follows:
( in thousands )
As of December 31,
2000 1999
Accelerated depreciation and amortization $ 146,295 $ 131,305
Investments, primarily gains and losses not yet recognized for tax 12,266 34,836
Accrued expenses not deductible until paid (10,575) (11,567)
Deferred compensation and retiree benefits not deductible until paid (31,682) (27,201)
Other temporary differences, net (11,217) (8,433)
Total 105,087 118,940
State net operating loss carryforwards (12,128) (10,386)
Valuation allowance for state deferred tax assets 6,552 7,715
Net deferred tax liability $ 99,511 $ 116,269
The Company's state net operating loss carryforwards expire from 2003
through 2015. At each balance sheet date management estimates the amount
of state net operating loss carryforwards that are not expected to be used
prior to expiration of the carryforward period. The tax effect of these
unused state net operating loss carryforwards is included in the valuation
allowance. Based upon expected taxable income of subsidiary companies with
state net operating loss carryforwards during the carryforward periods, the
Company reduced its valuation allowance by $3,000,000 in 2000.
The provision for income taxes consisted of the following:
( in thousands )
For the years ended December 31,
2000 1999 1998
Current:
Federal $ 82,514 $ 67,247 $ 62,730
State and local 18,361 13,588 12,028
Foreign 5,376 4,485 3,878
Total current 106,251 85,320 78,636
Deferred:
Federal (13,340) 22,111 23,590
Other (3,519) 2,144 1,545
Total deferred (16,859) 24,255 25,135
Total income taxes 89,392 109,575 103,771
Income taxes allocated to stockholders' equity 18,698 (5,963) (10,641)
Provision for income taxes $ 108,090 $ 103,612 $ 93,130
The difference between the statutory rate for federal income tax and the
effective income tax rate was as follows:
For the years ended December 31,
2000 1999 1998
Statutory rate 35.0 % 35.0 % 35.0 %
Effect of:
State and local income taxes 3.5 4.0 3.8
Adjustment of liability for prior year income taxes (1.5)
Amortization of nondeductible goodwill 1.4 1.4 1.6
Miscellaneous 0.8 0.4 0.2
Effective income tax rate 39.2 % 40.8 % 40.6 %
5. LONG-TERM DEBT
Long-term debt consisted of the following:
( in thousands )
As of December 31,
2000 1999
Variable rate credit facilities, including commercial paper $ 512,788 $ 565,689
$100 million, 6.625% note, due in 2007 99,901 99,887
$100 million, 6.375% note, due in 2002 99,964 99,944
Other notes 1,956 3,927
Total long-term debt 714,609 769,447
Current portion of long-term debt 212,828 267,600
Long-term debt (less current portion) $ 501,781 $ 501,847
Fair value of long-term debt * $ 711,300 $ 761,300
* Fair value was estimated based on current rates available to the Company
for debt of the same remaining maturity.
The Company has a Competitive Advance and Revolving Credit Facility
Agreement, which permits aggregate borrowings up to $700,000,000 (the
"Variable Rate Credit Facilities"). The Variable Rate Credit Facilities
are comprised of two unsecured lines, one limited to $400,000,000 principal
amount maturing in 2001, and the other limited to $300,000,000 principal
amount maturing in 2002. Borrowings under the Variable Rate Credit
Facilities are available on a committed revolving credit basis at the
Company's choice of three short-term rates or through an auction procedure
at the time of each borrowing. The Variable Rate Credit Facilities are
also used by the Company in whole or in part, in lieu of direct borrowings,
as credit support for its commercial paper. The weighted-average interest
rates on the Variable Rate Credit Facilities at December 31 was 6.6% in
2000 and 6.0% in 1999.
Certain long-term debt agreements contain maintenance requirements for net
worth and coverage of interest expense and restrictions on incurrence of
additional indebtedness. The Company is in compliance with all debt
covenants.
Current maturities of long-term debt are classified as long-term to the
extent they can be refinanced under existing long-term credit commitments.
Interest costs capitalized were $200,000 in 2000, $400,000 in 1999, and
$300,000 in 1998.
6. INVESTMENTS
Investments consisted of the following:
( in thousands, except share data )
As of December 31,
2000 1999
Securities available for sale (at market value):
Time Warner common stock (1,344,000 shares) $ 70,239 $ 97,227
Centra Software (1,792,500 common shares) 6,946
garden.com Inc. (2,414,000 common shares and 276,000 warrants) 22,636
iVillage Inc. (41,000 common shares at December 31, 2000
and 270,000 common shares at December 31, 1999) 40 5,897
Other 3,929 9,177
Total available-for-sale securities 81,154 134,937
FOX SportSouth and other joint ventures 9,502 7,282
Other (primarily securities that do not trade in a public market, at adjusted cost) 87,266 68,089
Total investments $ 177,922 $ 210,308
Unrealized gains on securities available for sale $ 49,047 $ 88,214
Investments available for sale represent securities in publicly traded
companies, which are recorded at fair value. Fair value is based upon the
closing price of the security on the reporting date. In the first quarter
of 2000 Centra Software completed an initial public offering of its common
stock. This investment had previously been included in the "other"
category.
The values of several of the Company's investments in available-for-sale
securities declined below historical cost in 2000. Investment results (see
Note 3) include a total of $13,000,000 in write-downs to market value for
such investments. During 2000 the Company received $5,000,000 upon
delivery of 229,000 iVillage shares under the provisions of a zero-cost
collar.
Securities of private companies do not trade in public markets, so they do
not have readily determinable fair values. However, if fair value is
assumed to be the price from the most recent round of financing or, for
some securities, less based on management's judgment of the circumstances,
then the total estimated value of these investments was $163,000,000 on
December 31, 2000, and $95,800,000 on December 31, 1999. 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 that
portfolio's cumulative net gain (realized and unrealized) through December
2002 if a specified minimum return is achieved. Based on the portfolio's
cumulative net gain of $76,900,000 through December 31, 2000, the incentive
compensation accrual was $11,500,000. The incentive compensation accrual
will change as the net gain changes through December 2002. Scripps
Ventures II is authorized to invest up to $100,000,000, of which
$38,200,000 was invested as of December 31, 2000. The managers have a
minority equity interest in the return on Scripps Ventures II's investments
if a specified minimum return is achieved.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
( in thousands )
As of December 31,
2000 1999
Land and improvements $ 47,395 $ 44,382
Buildings and improvements 255,320 240,513
Equipment 685,314 669,302
Total 988,029 954,197
Accumulated depreciation 485,988 468,601
Net property, plant and equipment $ 502,041 $ 485,596
8. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets arising from business acquisitions
consisted of the following:
( in thousands )
As of December 31,
2000 1999
Goodwill $ 1,248,095 $ 1,211,462
Customer lists 153,660 145,358
Cable and direct broadcast satellite network affiliation contracts 20,669 20,554
Licenses and copyrights 43,469 28,221
Other 28,174 29,233
Total 1,494,067 1,434,828
Accumulated amortization 284,935 247,554
Net goodwill and other intangible assets $ 1,209,132 $ 1,187,274
9. OTHER LONG-TERM OBLIGATIONS AND MINORITY INTERESTS
Other long-term obligations and minority interests consisted of the
following:
( in thousands )
As of December 31,
2000 1999
Program rights payable $ 50,928 $ 50,870
Employee compensation and benefits 96,952 91,725
Network distribution fees 55,235 50,951
Minority interests 13,274 12,094
Other 16,054 21,746
Total other long-term obligations and minority interests 232,443 227,386
Current portion of other long-term obligations 102,076 94,684
Other long-term obligations and minority interests (less current portion) $ 130,367 $ 132,702
10. SUPPLEMENTAL CASH FLOW INFORMATION
The following table presents additional information about the change in
certain working capital accounts:
( in thousands )
For the years ended December 31,
2000 1999 1998
Other changes in certain working capital accounts, net:
Accounts receivable $ (24,238) $ (53,847) $ (5,701)
Accounts payable (2,120) 13,374 4,139
Accrued income taxes 586 503 2,250
Other accrued liabilities 8,024 3,356 6,413
Other, net (1,025) 7,484 2,478
Total $ (18,773) $ (29,130) $ 9,579
11. EMPLOYEE BENEFIT PLANS
Retirement plans expense consisted of the following:
( in thousands )
For the years ended December 31,
2000 1999 1998
Service cost $ 13,857 $ 14,078 $ 11,718
Interest cost 19,198 17,012 14,757
Actual (return) loss on plan assets, net of expenses 799 (50,022) (35,773)
Net amortization and deferral (29,654) 27,120 17,098
Total for defined benefit plans 4,200 8,188 7,800
Multi-employer plans 1,248 1,162 1,051
Defined contribution plans 6,208 5,698 5,370
Total $ 11,656 $ 15,048 $ 14,221
The following table presents information about the Company's employee
benefit plan assets and obligations:
( in thousands )
For the years ended December 31,
2000 1999 1998
Change in benefit obligation
Benefit obligation at beginning of year $ 268,810 $ 269,493 $ 236,260
Service cost 13,857 14,078 11,718
Interest cost 19,198 17,012 14,757
Actuarial losses (gains) (10,288) (15,549) 21,708
Benefits paid (16,606) (16,224) (14,950)
Benefit obligation at end of year 274,971 268,810 269,493
Change in plan assets
Fair value at beginning of year 302,934 268,386 246,811
Actual return (loss) on plan assets (799) 50,022 35,773
Company contributions 809 750 752
Benefits paid (16,606) (16,224) (14,950)
Fair value at end of year 286,338 302,934 268,386
Plan assets greater than (less than) projected benefits 11,367 34,124 (1,107)
Unrecognized net loss (gain) (38,904) (57,774) (14,732)
Unrecognized prior service cost 2,629 3,547 4,620
Unrecognized net asset at the date FAS No. 87 was
adopted, net of amortization (2,012) (3,434) (4,881)
Net pension asset (liability) recognized in the balance sheet $ (26,920) $ (23,537) $ (16,100)
Assumptions used in the accounting for the defined benefit plans were as
follows:
2000 1999 1998
Discount rate for determining annual expense 7.5% 6.5% 6.5%
Discount rate for determining year-end obligation 8.0% 7.5% 6.5%
Assumed long-term rate of return on plan assets 9.5% 8.5% 7.5%
Assumed rate of increase in compensation levels 5.0% 4.0% 3.0%
Management believes the discount rate plus two percentage points is the
best estimate of the long-term return on plan assets at any point in time,
and the discount rate minus two and one-half percentage points is the best
estimate of the long-term increase in compensation levels. Therefore, when
the discount rate changes, management's expectation for the future long-
term rate of return on plan assets and increase in compensation levels
changes in tandem. For 2001 the assumed return on plan assets is 10% and
the assumed rate of increase in compensation levels is 5.5%.
Plan assets consist of marketable equity and fixed-income securities.
12. 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, unusual items and all credits and charges classified as
non-operating in the Consolidated Statements of Income. No single customer
provides more than 10% of the Company's revenue. International revenues
are primarily derived from licensing comic characters and HGTV and Food
Network programming in international markets. Total international revenues
were less than $50,000,000. Licensing of comic characters in Japan
provides more than 50% of the Company's international revenues.
Information regarding the Company's business segments is presented on the
following page.
( in thousands )
For the years ended December 31,
2000 1999 1998
OPERATING REVENUES
Newspapers $ 955,100 $ 914,403 $ 871,573
Scripps Networks 313,739 230,015 147,541
Broadcast Television 343,125 312,362 330,714
Licensing and other media 96,895 92,570 88,823
Total 1,708,859 1,549,350 1,438,651
Unusual item (1,100) 1,100
Divested operating units 10,500 23,042 24,877
Per consolidated financial statements $ 1,719,359 $ 1,571,292 $ 1,464,628
EBITDA
Newspapers $ 269,409 $ 275,671 $ 259,989
Scripps Networks 68,770 34,667 4,542
Broadcast Television 129,018 95,955 118,012
Licensing adn other media 16,144 12,640 11,964
Corporate (19,825) (17,519) (16,207)
Total 463,516 401,414 378,300
Unusual items (9,523) (3,100) 1,100
Divested operating units 261 891 642
Per consolidated financial statements $ 454,254 $ 399,205 $ 380,042
DEPRECIATION
Newspapers $ 40,574 $ 38,925 $ 40,825
Scripps Networks 7,063 5,533 4,738
Broadcast Television 19,277 17,962 15,529
Licensing and other media 814 1,472 946
Corporate 972 1,039 1,024
Total 68,700 64,931 63,062
Divested operating units 357 369 660
Per consolidated financial statements $ 69,057 $ 65,300 $ 63,722
AMORTIZATION OF INTANGIBLE ASSETS
Newspapers $ 23,222 $ 22,114 $ 22,698
Scripps Networks 7,236 6,364 7,539
Broadcast Television 9,471 9,502 9,517
Licensing and other media 244 2
Total 39,929 38,224 39,756
Divested operating units 179 327 367
Per consolidated financial statements $ 40,108 $ 38,551 $ 40,123
OPERATING INCOME
Newspapers $ 205,613 $ 214,632 $ 196,466
Scripps Networks 54,471 22,770 (7,735)
Broadcast Television 100,270 68,491 92,966
Licensing and other media 15,330 10,924 11,016
Corporate (20,797) (18,558) (17,231)
Total 354,887 298,259 275,482
Unusual items (9,523) (3,100) 1,100
Divested operating units (275) 195 (385)
Per consolidated financial statements $ 345,089 $ 295,354 $ 276,197
( in thousands )
For the years ended December 31,
2000 1999 1998
PAYMENTS (GREATER) LESS THAN PROGRAM AMORTIZATION
AND NETWORK DISTRIBUTION COSTS
Scripps Networks $ (35,678) $ (57,770) $ (26,793)
Broadcast Television 1,460 1,029 (76)
Total (34,218) (56,741) (26,869)
Divested operating units 2,828
Per consolidated financial statements $ (34,218) $ (56,741) $ (24,041)
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Newspapers $ 29,834 $ 30,693 $ 23,296
Scripps Networks 12,236 21,557 7,936
Broadcast Television 31,280 25,749 33,454
Licensing and other media 586 491 1,041
Corporate 548 796 806
Total 74,484 79,286 66,533
Divested operating units 93 540 436
Per consolidated financial statements $ 74,577 $ 79,826 $ 66,969
BUSINESS ACQUISITIONS AND
OTHER ADDITIONS TO LONG-LIVED ASSETS
Newspapers $ 74,878 $ 4,005 $ 3,570
Scripps Networks 15,035 39,899 17,431
Broadcast Television 14,710 130 218
Venture capital and other investments 53,615 43,298 13,184
Total 158,238 87,332 34,403
Divested operating units 800 14,250
Per consolidated financial statements $ 158,238 $ 88,132 $ 48,653
ASSETS
Newspapers $ 1,274,189 $ 1,226,749 $ 1,245,465
Scripps Networks 523,694 462,287 340,852
Broadcast Television 509,597 500,068 509,285
Licensing and other media 26,800 28,318 30,195
Venture capital and other investments 170,156 198,984 120,099
Corporate 60,379 63,515 70,763
Total 2,564,815 2,479,921 2,316,659
Divested operating units 8,051 40,460 43,965
Total $ 2,572,866 $ 2,520,381 $ 2,360,624
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.
13. COMMITMENTS AND CONTINGENCIES
The Company is involved in litigation arising in the ordinary course of
business, none of which is expected to result in material loss.
The Company's cable television systems were acquired by Comcast Corporation
("Comcast") in 1996. Pursuant to the terms of its agreement with Comcast,
the Company remains liable for any losses resulting from certain lawsuits,
certain other expenses and tax liabilities of its cable television systems
attributable to periods prior to the transactions.
The Company purchased program rights totaling $189,000,000 in 2000,
$131,000,000 in 1999, and $100,000,000 in 1998, the payments for which are
generally made over the lives of the contracts. At December 31, 2000, the
Company was committed to purchase approximately $120,000,000 of program
rights that are not currently available for broadcast, substantially all of
which is for programs not yet produced. If such programs are not produced
the Company's commitments would expire without obligation.
Minimum payments on noncancelable leases at December 31, 2000, were: 2001,
$12,900,000; 2002, $10,600,000; 2003, $9,400,000; 2004, $8,600,000; 2005,
$8,200,000 and later years, $20,700,000. Rental expense for cancelable and
noncancelable leases was $19,300,000 in 2000, $16,300,000 in 1999, and
$15,000,000 in 1998.
14. CAPITAL STOCK AND INCENTIVE PLANS
Capital Stock - The capital structure of the Company includes Common Voting
Shares and Class A Common Shares. The articles provide that the holders of
Class A Common Shares, who are not entitled to vote on any other matters
except as required by Ohio law, are entitled to elect the greater of three
or one-third of the directors. In 1997 and 1998 the Board of Directors
authorized the purchase of a total of 6,000,000 of the Company's Class A
Common Shares. The Company repurchased 3,888,400 shares through
December 31, 2000.
Incentive Plans - The Company's Long-Term Incentive Plans (the "Plans")
provide for the award of incentive and nonqualified stock options with 10-
year terms, stock appreciation rights, performance units and restricted and
unrestricted Class A Common Shares to key employees and non-employee
directors. The Plans expire in 2007, except for options then outstanding.
The number of shares authorized for issuance under the plans at December
31, 2000, was 10,913,000, of which approximately 3,275,000 had not been
issued.
Stock Options - Stock options may be awarded to purchase Class A Common
Shares at not less than 100% of the fair market value on the date the
option is granted. Stock options will vest over an incentive period,
conditioned upon the individual's employment through that period. The
following table presents information about stock options:
Weighted- Range of
Number Average Exercise
of Shares Exercise Price Prices
Outstanding at December 31, 1997 2,825,525 $21.00 $11 - 43
Granted in 1998 634,450 47.32 39 - 56
Exercised in 1998 (274,239) 16.02 11 - 39
Forfeited in 1998 (31,316) 35.04 35 - 39
Outstanding at December 31, 1998 3,154,420 26.58 11 - 56
Granted in 1999 792,200 47.19 41 - 52
Exercised in 1999 (295,104) 16.80 11 - 47
Forfeited in 1999 (24,749) 45.76 35 - 54
Outstanding at December 31, 1999 3,626,767 31.75 11 - 56
Granted in 2000 1,025,550 49.27 43 - 60
Exercised in 2000 (401,380) 21.38 11 - 50
Forfeited in 2000 (1,500) 49.00 49
Outstanding at December 31, 2000 (by year granted):
1991 66,850 11.95 11 - 12
1992 126,300 15.13 15 - 17
1993 546,100 17.92 16 - 21
1994 523,900 18.83 19 - 21
1995 9,800 20.01 20
1996 127,300 27.20 24 - 29
1997 470,800 35.26 35 - 43
1998 598,682 47.35 39 - 56
1999 756,655 47.19 42 - 52
2000 1,023,050 49.32 43 - 60
Total options outstanding 4,249,437 $36.98 $11 - 60
Exercisable at December 31:
1998 2,204,089 $19.41 $11 - 43
1999 2,323,844 23.85 11 - 56
2000 2,601,809 29.66 11 - 56
Substantially all options granted prior to 1997 are exercisable. Options
issued in 1997 through 1999 generally become exercisable over a three-year
period.
The Company has adopted the "disclosure-only" provisions of FAS No. 123;
therefore no compensation expense has been recognized for stock option
grants. Had compensation expense been determined based upon the fair value
(determined using the Black-Scholes option pricing model) at the grant date
consistent with the provisions of FAS No. 123, the Company's income from
continuing operations would have been reduced to the pro forma amounts as
follows:
( in thousands, except per share data )
For the years ended December 31,
2000 1999 1998
Pro forma net income $ 155,200 $ 139,700 $ 126,500
Pro forma net income per share of common stock:
Basic $1.99 $1.79 $1.59
Diluted 1.96 1.77 1.56
Information related to the fair value of stock option grants is presented
below:
For the years ended December 31,
2000 1999 1998
Weighted-average fair value of options granted $15.87 $13.23 $14.33
Assumptions used to determine fair value:
Dividend yield 1.5% 1.5% 1.5%
Expected volatility 24% 23% 24%
Risk-free rate of return 6.5% 5.0% 5.7%
Expected life of options 7 years 7 years 7 years
Restricted Stock - Awards of Class A Common Shares vest over an incentive
period conditioned upon the individual's employment throughout that period.
During the vesting period shares issued are nontransferable, but the shares
are entitled to all the rights of an outstanding share. Compensation
expense is determined based upon the fair value of the shares at the grant
date. Information related to awards of Class A Common Shares is presented
below:
( in thousands, except share data )
For the years ended December 31,
2000 1999 1998
Class A Common Shares:
Shares awarded 296,903 85,400 20,500
Weighted-average price of shares awarded $49.31 $46.70 $51.22
Shares forfeited 15,445 200 1,500
Compensation expense recognized $ 7,063 $ 2,779 $ 2,863
15. SUMMARIZED QUARTERLY FINANCIAL INFORMATION (Unaudited)
Summarized financial information is as follows:
( in thousands, except per share data )
1st 2nd 3rd 4th
2000 Quarter Quarter Quarter Quarter Total
Operating revenues $ 410,859 $ 439,224 $ 409,635 $ 459,641 $ 1,719,359
Operating expenses:
Employee compensation and benefits 127,292 129,314 129,672 130,429 516,707
Newsprint and ink 37,192 38,646 38,228 42,303 156,369
Amortization of purchased programming 28,038 29,332 30,176 33,498 121,044
Other operating expenses 117,272 119,774 109,920 124,019 470,985
Depreciation and amortization 26,808 27,256 27,288 27,813 109,165
Total operating expenses 336,602 344,322 335,284 358,062 1,374,270
Operating income 74,257 94,902 74,351 101,579 345,089
Interest expense (12,636) (13,481) (13,393) (12,424) (51,934)
Investment results, net of expense (9,062) (1,449) 900 (15,223) (24,834)
Net gains (losses) on divested operations 6,269 (73) 6,196
Miscellaneous, net 946 45 1,002 (508) 1,485
Income taxes (25,114) (32,833) (26,319) (23,824) (108,090)
Minority interests (1,056) (1,063) (1,040) (1,300) (4,459)
Net income $ 33,604 $ 46,121 $ 35,428 $ 48,300 $ 163,453
Net income per share of common stock:
Basic $ .43 $ .59 $ .45 $ .62 $ 2.09
Diluted $ .43 $ .58 $ .45 $ .61 $ 2.06
Basic weighted-average shares outstanding 77,977 78,115 78,186 78,336 78,170
Diluted weighted-average shares outstanding 78,824 78,995 79,173 79,589 79,161
Cash dividends per share of common stock $ .14 $ .14 $ .14 $ .14 $ .56
The sum of the quarterly net income per share amounts may not equal the
reported annual amount because each is computed independently based
upon the weighted-average number of shares outstanding for the period.
( in thousands, except per share data )
1st 2nd 3rd 4th
1999 Quarter Quarter Quarter Quarter Total
Operating revenues $ 376,260 $ 391,285 $ 372,932 $ 430,815 $ 1,571,292
Operating expenses:
Employee compensation and benefits 117,980 123,031 123,647 127,504 492,162
Newsprint and ink 38,045 34,969 32,827 37,342 143,183
Amortization of purchased programming 23,587 22,160 25,264 27,799 98,810
Other operating expenses 105,664 101,771 109,146 121,351 437,932
Depreciation and amortization 25,989 23,767 26,683 27,412 103,851
Total operating expenses 311,265 305,698 317,567 341,408 1,275,938
Operating income 64,995 85,587 55,365 89,407 295,354
Interest expense (11,073) (11,026) (11,279) (11,841) (45,219)
Investment results, net of expenses (66) 581 (1,169) 1,198 544
Miscellaneous, net 1,368 1,071 955 111 3,505
Income taxes (22,659) (31,306) (17,933) (31,714) (103,612)
Minority interests (1,033) (1,113) (1,077) (1,227) (4,450)
Net income $ 31,532 $ 43,794 $ 24,862 $ 45,934 $ 146,122
Net income per share of common stock:
Basic $ .40 $ .56 $ .32 $ .59 $ 1.87
Diluted $ .40 $ .55 $ .32 $ .58 $ 1.85
Basic weighted-average shares outstanding 78,096 77,937 77,874 77,836 77,936
Diluted weighted-average shares outstanding 79,126 78,950 78,925 78,801 78,951
Cash dividends per share of common stock $ .14 $ .14 $ .14 $ .14 $ .56
The sum of the quarterly net income per share amounts may not equal the
reported annual amount because each is computed independently based
upon the weighted-average number of shares outstanding for the period.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders,
The E. W. Scripps Company:
We have audited the accompanying consolidated balance sheets of The E. W.
Scripps Company and subsidiary companies ("Company") as of December 31,
2000 and 1999, and the related consolidated statements of income, cash
flows and comprehensive income and stockholders' equity for each of the
three years in the period ended December 31, 2000. Our audits also
included the financial statement schedule listed in the Index at Item S-1.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December
31, 2000 and 1999, and the results of its operations and cash flows for
each of the three years in the period ended December 31, 2000 in conformity
with generally accepted accounting principles in the United States of
America. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set
forth therein.
As discussed in Note 1 to the financial statements in 2000 the Company
changed its method of accounting for inventory from last-in, first-out to
first-in, first-out and, retroactively, restated the 1999 and 1998
financial statements for the change.
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
January 23, 2001
THE E. W. SCRIPPS COMPANY
Index to Consolidated Financial Statement Schedules
Valuation and Qualifying Accounts S-2
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 SCHEDULE II
( in thousands )
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
INCREASE
ADDITIONS DEDUCTIONS (DECREASE)
BALANCE CHARGED TO AMOUNTS RECORDED BALANCE
BEGINNING COSTS AND CHARGED ACQUISITIONS END OF
CLASSIFICATION OF PERIOD EXPENSES OFF-NET (DIVESTITURES) PERIOD
YEAR ENDED DECEMBER 31, 2000:
Allowance for doubtful
accounts receivable $ 11,266 $ 14,648 $ 11,345 $ (678) $ 13,891
YEAR ENDED DECEMBER 31, 1999:
Allowance for doubtful
accounts receivable $ 7,689 $ 10,754 $ 7,177 $ 11,266
YEAR ENDED DECEMBER 31, 1998:
Allowance for doubtful
accounts receivable $ 6,410 $ 7,634 $ 6,470 $ 115 $ 7,689
THE E. W. SCRIPPS COMPANY
Index to Exhibits
Exhibit Exhibit No.
Number Description of Item Page Incorporated
3.01 Articles of Incorporation (5) 3.01
3.02 Code of Regulations (5) 3.02
4.01 Class A Common Share Certificate (2) 4
4.02A Form of Indenture: 6.375% notes due in 2002 (3) 4.1
4.02B Form of Indenture: 6.625% notes due in 2007 (3) 4.1
4.03A Form of Debt Securities: 6.375% notes due in 2002 (3) 4.2
4.03B Form of Debt Securities: 6.625% notes due in 2007 (3) 4.2
10.01 Amended and Restated Joint Operating Agreement, dated January 1, 1979, among
Journal Publishing Company, New Mexico State Tribune Company and
Albuquerque Publishing Company, as amended (1) 10.01
10.02 Amended and Restated Joint Operating Agreement, dated February 29, 1988, among
Birmingham News Company and Birmingham Post Company (1) 10.02
10.03 Joint Operating Agreement, dated September 23, 1977, between the
Cincinnati Enquirer, Inc. and the Company, as amended (1) 10.03
10.04 Joint Operating Agreement Among The Denver Post Corporation, Eastern
Colorado Production Facilities, Inc., Denver Post Production Facilities LLC
and The Denver Publishing Company dated as May 11, 2000, as amended E-6
10.06 Building Lease, dated April 25, 1984, among Albuquerque Publishing Company,
Number Seven and Jefferson Building Partnership (1) 10.08A
10.06A Ground Lease, dated April 25, 1984, among Albuquerque Publishing Company,
New Mexico State Tribune Company, Number Seven and Jefferson Building
Partnership (1) 10.08B
10.07 Agreement, dated August 17, 1989, between United Feature Syndicate, Inc. and
Charles M. Schulz and the Trustees of the Schulz Family Renewal Copyright
Trust, as amended (1) 10.11
10.40 5-Year Competitive Advance and Revolving Credit Agreement, dated as of
September 26, 1997, among The E. W. Scripps Company, the Banks named
therein, The Chase Manhattan Bank, as Agent, and J. P. Morgan & Co., as
Documentation Agent (3) 10.1
10.41 364-Day Competitive Advance and Revolving Credit Agreement, dated as of
September 26, 1997, among The E. W. Scripps Company, the Banks named
therein, The Chase Manhattan Bank, as Agent, and J. P. Morgan & Co., as
Documentation Agent (3) 10.2
10.53 1987 Long-Term Incentive Plan (1) 10.36
10.54 Agreement, dated December 24, 1959, between the Company and Charles E. Scripps,
as amended (1) 10.39A
10.54A Assignment, Assumption, and Release Agreement, dated December 31, 1987,
between the Company, Scripps Howard, Inc. and Charles E. Scripps (1) 10.39B
10.54B Amendment, dated June 21, 1988 to December 24, 1959 Agreement between
the Company and Charles E. Scripps (1) 10.39C
10.55 Board Representation Agreement, dated March 14, 1986, between
The Edward W. Scripps Trust and John P. Scripps (1) 10.44
10.56 Shareholder Agreement, dated March 14, 1986, between the Company and the
Shareholders of John P. Scripps Newspapers (1) 10.45
10.57 Scripps Family Agreement dated October 15, 1992 (4) 1
10.58 1997 Long-Term Incentive Plan (6) 4B
10.59 Non-Employee Directors' Stock Option Plan (6) 4A
10.60 1997 Deferred Compensation and Phantom Stock Plan for Senior Officers
and Selected Executives (7) 4A
10.61 1997 Deferred Compensation and Stock Plan for Directors (8) 10.61
Exhibit Exhibit No.
Number Description of Item Page Incorporated
10.62 Employment Agreement, dated July 20, 1999, between the Company
and Kenneth W. Lowe E-7
12 Computation of Ratio of Earnings to Fixed Charges for the Three Years Ended
December 31, 2000 E-3
21 Subsidiaries of the Company E-4
23 Independent Auditors' Consent E-5
(1) Incorporated by reference to Registration Statement of
The E. W. Scripps Company on Form S-1 (File No. 33-21714).
(2) Incorporated by reference to The E. W. Scripps
Company Annual Report on Form 10-K for the year ended
December 31, 1990.
(3) Incorporated by reference to Registration
Statement on Form S-3 (File No. 33-36641).
(4) Incorporated by reference to The E. W. Scripps
Company Current Report on Form 8-K dated October 15,
1992.
(5) Incorporated by reference to Scripps Howard, Inc.
Registration Statement on Form 10 (File No. 1-11969).
(6) Incorporated by reference to Registration
Statement of The E. W. Scripps Company on Form S-8
(File No. 333-27623).
(7) Incorporated by reference to Registration
Statement of The E. W. Scripps Company on Form S-8
(File No. 333-27621).
(8) Incorporated by reference to The E. W. Scripps
Company Annual Report on Form 10-K for the year ended
December 31, 1998.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12
( in thousands )
Years ended December 31,
2000 1999 1998
EARNINGS AS DEFINED:
Earnings from operations before income taxes after eliminating
undistributed earnings of 20%- to 50%-owned affiliates $ 279,478 $ 255,247 $ 229,611
Fixed charges excluding capitalized interest and preferred stock
dividends of majority-owned subsidiary companies 58,361 50,668 52,113
Earnings as defined $ 337,839 $ 305,915 $ 281,724
FIXED CHARGES AS DEFINED:
Interest expense, including amortization of debt issue costs $ 51,934 $ 45,219 $ 47,108
Interest capitalized 206 356 341
Portion of rental expense representative of the interest factor 6,427 5,449 5,005
Preferred stock dividends of majority-owned subsidiary companies 80 80 80
Fixed charges as defined $ 58,647 $ 51,104 $ 52,534
RATIO OF EARNINGS TO FIXED CHARGES 5.76 5.99 5.36
SUBSIDIARIES OF THE COMPANY EXHIBIT 21
Jurisidiction of
Name of Subsidiary Incorporation
BRV, Inc. (Bremerton Sun, Redding Record Searchlight, Ventura County Newspapers) California
Birmingham Post Company (Birmingham Post Herald) Alabama
Boulder Publishing Company (Boulder Daily Camera) Colorado
Channel 7 of Detroit, Inc., (WXYZ) Michigan
Collier County Publishing Company (The Naples Daily News) Florida
Denver Publishing Company (Rocky Mountain News) Colorado
Evansville Courier Company, Inc., 91.5%-owned
(The Evansville Courier Company, The Henderson Gleaner) Indiana
Independent Publishing Company (Anderson Independent Mail) South Carolina
Knoxville News-Sentinel Company Delaware
Memphis Publishing Company, 91.3%-owned (The Commercial Appeal) Delaware
New Mexico State Tribune Company (The Albuquerque Tribune) New Mexico
Scripps Texas Newspapers L.P. (Corpus Christi Caller-Times, Abilene Reporter-News,
Wichita Falls Times Record News, San Angelo Standard-Times) Delaware
Scripps Howard Broadcasting Company, (WMAR, Baltimore; WCPO, Cincinnati;
WEWS, Cleveland; KSHB, Kansas City; KMCI, Lawrence; KNXV, Phoenix,
KJRH, Tulsa; WPTV, West Palm Beach) Ohio
Scripps Networks, Inc., (Home & Garden Television, Do It Yourself Network;
The Television Food Network, G.P., 64%-owned) Deleware
Scripps Howard Publishing Co. (Scripps Howard News Service) Delaware
Scripps Ventures, LLC Delaware
Scripps Treasure Coast Publishing Company (Ft. Pierce Tribune, Jupiter Courier,
Stuart News, Vero Beach Press Journal) Florida
Tampa Bay Television, Inc., (WFTS) Delaware
United Feature Syndicate, Inc. (United Media, Newspaper Enterprise Association) New York
INDEPENDENT AUDITORS' CONSENT EXHIBIT 23
We consent to the incorporation by reference in Registration
Statements Nos. 33-53953, 33-32740, 33-35525, 33-47828, 33-
63398, 33-59701, 333-27621, 333-27623 and 333-40767 of The
E. W. Scripps Company and subsidiary companies on Form S-8
and Registration Statement No. 33-36641 of The E. W. Scripps
Company and subsidiary companies on Form S-3 of our report
dated January 23, 2001, appearing in this Annual Report on
Form 10-K of The E. W. Scripps Company and subsidiary
companies for the year ended December 31, 2000.
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
March 27, 2001
FIRST AMENDMENT TO JOINT OPERATING AGREEMENT EXHIBIT 10.04
This FIRST AMENDMENT TO JOINT OPERATING AGREEMENT (this
"Amendment") is dated January 22, 2001, by and among The Denver
Post Corporation, a Delaware corporation ("Denver Post"), Eastern
Colorado Production Facilities, Inc., a Delaware corporation
("Eastern Colorado" and together with Denver Post, the "Post
Entities"), Denver Newspaper Agency LLP, a Delaware limited
liability partnership (the "LLP") and The Denver Publishing
Company, a Colorado corporation ("Denver Publishing").
RECITALS
WHEREAS, the Post Entities, Denver Post Production
Facilities LLC, a Delaware limited liability company (the
"LLC"), and Denver Publishing previously entered into that
certain Joint Operating Agreement (the "Original Agreement"),
dated as of May 11, 2000, pursuant to which the parties agreed
to combine certain newspaper properties into a single business
operation in the form of a Delaware limited liability company;
WHEREAS, the LLC has been converted into a Delaware limited
liability partnership, and in connection therewith, changed its
name to "The Denver Newspaper Agency LLP"; and
WHEREAS, the parties now desire to amend the Original
Agreement to reflect that the business operations described
therein shall be conducted in the form of a Delaware limited
liability partnership and not a Delaware limited liability
company, and to make certain changes as set forth herein.
NOW, THEREFORE, in consideration of the Original Agreement and
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
AGREEMENT
1. Amendment.
(a) The Original Agreement is hereby amended by (i)
substituting "The Denver Newspaper Agency LLP, a Delaware
limited liability partnership" for any and all references to
"Denver Post Production Facilities LLC, a Delaware limited
liability company," (ii) substituting "the LLP" for any and
all references to "the LLC" and (iii) removing any and all
references to the LLC changing its name to "The Denver
Newspaper Agency LLP." This Section 1(a) is intended to
reflect in the Original Agreement the conversion of Denver
Post Production Facilities LLC into Denver Newspaper Agency
LLP and, notwithstanding anything else to the contrary in this
Section 1(a), shall be applied consistently with such intent.
(b) The Original Agreement is hereby amended by adding
the clause", as amended by that certain First Amendment to
Contribution and Sale Agreement, dated January 22, 2001, by and
among the Post Entities, Denver Publishing, and the LLP,"
after any reference therein to "The Denver Newspaper Agency
Contribution and Sale Agreement."
(c) The Original Agreement is hereby amended by
deleting all references to "Limited Liability Company
Operating Agreement" and replacing such references with
"Limited Liability Partnership Agreement."
(d) The Original Agreement is hereby amended by deleting
in its entirety the form of Denver Newspaper Agency Limited
Liability Company Operating Agreement attached as Exhibit B
to the Original Agreement and replacing such Exhibit B with
the form of Denver Newspaper Agency Limited Liability
Partnership Agreement attached as Exhibit A hereto.
(e) The Original Agreement is hereby amended by deleting
Section 1.13 in its entirety and replacing it with the
following:
" 1.13 Limitation on Assumption of Liabilities. On
the Effective Date, the LLP shall assume and be
responsible for only those liabilities or obligations of
Denver Post and Denver Publishing that are specifically
contemplated by this Agreement and The Denver Newspaper
Agency Contribution and Sale Agreement to be assumed by
the LLP and for no others. In addition to any
liabilities which may be defined as Denver Post Excluded
Liabilities or Denver Publishing Excluded Liabilities in
The Denver Newspaper Agency Contribution and Sale
Agreement, the liabilities to be assumed by the LLP on
the Effective Date shall not include any of the
following liabilities (all of which shall hereinafter
collectively be deemed "Excluded Liabilities"): All
intercompany indebtedness, all indebtedness for borrowed
money (other than capital leases related to the
operations of The Denver Post or Denver Rocky Mountain
News), all deferred tax liabilities of whatever nature,
all accrued income or franchise tax liabilities, all
liabilities for failure to perform or discharge in a
timely manner prior to the Effective Date any liability
to be assigned to the LLP as of the Effective Date
hereof, all liabilities arising from any breach
occurring prior to the Effective Date under any
contract, license or other instrument to be assigned to
the LLP as of the Effective Date, all liabilities
arising from any litigation pending or threatened as of
the Effective Date with respect to the operations of
Denver Post or Denver Publishing or any assets to be
transferred to the LLP as of the Effective Date, all
liabilities arising out of any violations occurring
prior to the Effective Date of any law or governmental
regulation applicable to the operations of Denver Post
or Denver Publishing or the assets being transferred to
the LLP as of the Effective Date, and any current
liabilities in the nature of accounts payable or other
accrued liabilities; provided, however, the current
liabilities shall exclude (i) the current portion of the
capital leases relating to the respective operations of
The Denver Post and Denver Rocky Mountain News and (ii)
the unfulfilled portion of the prepaid subscription
liabilities for each of The Denver Post and Denver Rocky
Mountain News, and, thus, each shall not be included in
the term "Excluded Liabilities".
Denver Post and Denver Publishing, respectively,
shall indemnify and hold the other party and the LLP
harmless against any and all damage, loss and cost
(including reasonable attorneys' fees) arising out of or
related to any Excluded Liability or any other liability
or obligation of the indemnifying party that is not to
be assumed by the LLP as of the Effective Date pursuant
to this Agreement or The Denver Newspaper Agency
Contribution and Sale Agreement."
(f) The Original Agreement is hereby amended by
deleting Exhibit C and Exhibit D in their entirety and
replacing them with Exhibit B attached hereto, with respect
to Exhibit C in the Original Agreement, and Exhibit C
attached hereto, with respect to Exhibit D in the Original
Agreement.
(g) Section 1.6(d) of the Original Agreement is hereby
amended by (i) deleting the word "and" immediately before
clause (d) of such Section 1.6(d), and (ii) adding the
following language before the period at the end of such clause
(d) of Section 1.6(d): "and (e) an amount equal to the
Excluded Payables (as such term is defined in The Denver
Newspaper Agency Limited Liability Partnership Agreement)
shall be treated as if such Excluded Payables had been assumed
by the LLP for all purposes of this Section 1.6."
2. Representations and Warranties. Each of the parties hereto
represents and warrants to each of the other parties hereto that
the following statements are true and correct as of the date
hereof:
(a) Such party has all requisite corporate or limited
liability company power and authority to execute and deliver
this Amendment; and
(b) The execution and delivery of this Amendment will not
conflict with, violate, or result in the breach of any term or
provision of, or immediately or with the giving of notice, the
passage of time, or both, constitute a default or event of
default under any agreement, indenture, deed of trust,
mortgage, instrument, order, law, decree or regulation to
which such person is a party.
3. Miscellaneous.
(a) This Amendment may be executed in any number of
counterparts, and each counterpart hereof shall be deemed to
be an original instrument, but all such counterparts shall
constitute but one Agreement.
(b) This Amendment shall bind and inure to the benefit of
the parties hereto, and their respective successors and
assigns.
(c) This Amendment shall be governed by and construed
and interpreted in accordance with the substantive laws of
the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date and year first
written above.
THE DENVER POST CORPORATION
By:
Name: Joseph J. Lodovic, IV
Title: Executive Vice President
and Chief Financial Officer
EASTERN COLORADO PRODUCTION
FACILITIES, INC.
By:
Name: Joseph J. Lodovic, IV
Title: Executive Vice President
and Chief Financial Officer
DENVER NEWSPAPER AGENCY LLP
By: The Denver Post Corporation
By:
Name: Joseph J. Lodovic, IV
Title: Executive Vice President
and Chief Financial Officer
By: The Denver Publishing Company
By:
Name:
Title:
THE DENVER PUBLISHING COMPANY
By:
Name:
Title:
Joint Operating Agreement
Among
The Denver Post Corporation,
Eastern Colorado Production Facilities, Inc.,
Denver Post Production Facilities LLC
And
The Denver Publishing Company
Dated as of
May 11, 2000
TABLE OF CONTENTS
ARTICLE 1
The LLC
1.1 Denver Post Production Facilities LLC. 2
1.2 Amendment and Restatement of Operating Agreement; Change
of Name; Additional Capital Contribution by Denver Post. 3
1.3 Sale of a Portion of Denver Post's Membership Interest in
LLC to Denver Publishing; Initial Capital Contribution
by Denver Publishing. 4
1.4 Form of Additional Capital Contribution of Denver Post. 5
1.5 Form of Initial Capital Contribution of Denver Publishing. 6
1.6 Valuation of Certain Capital Contributions; Adjustment. 7
1.7 Other Capital Contributions. 9
1.8 Failure to Make Payments. 10
1.9 Contracts, Leases, Permits and Commitments; Assumption. 10
1.10 Advertising Contracts. 12
1.11 Subscription Contracts. 13
1.12 Accounts Receivable. 13
1.13 Limitation on Assumption of Liabilities. 14
1.14 Delivery of Books and Records. 15
1.15 Use of Facilities and Properties. 15
1.16 Employees. 15
1.17 Newsprint Purchases. 18
1.18 Initial Activities of the LLC 19
ARTICLE 2
Activities of the LLC
2.1 Publication of Newspapers. 19
2.2 Property Used. 21
2.3 Editorial Independence. 22
2.4 News and Editorial Services and Expenses. 22
2.5 Office Space. 27
ARTICLE 3
Quality of Content and Budgets
3.1 Quality of Content. 27
3.2 Budgets. 28
ARTICLE 4
Duties of LLC, Including Distribution of Available Cash
4.1 Duties of LLC. 28
4.2 Allocation of Profits or Losses and Distributions of Cash. 29
4.3 Books and Records. 30
4.4 Financial Statements. 30
4.5 Auditors and Fiscal Year. 31
4.6 Tax Returns. 32
ARTICLE 5
Governance of LLC
5.1 Management Committee. 33
5.2 The President and Chief Executive Officer. 35
5.3 Certain Other Matters. 35
5.4 Compensation. 35
ARTICLE 6
Other Matters
6.1 Representations and Warranties. 35
6.2 Certain Action. 37
6.3 NPA Filing. 37
6.4 Announcements. 38
6.5 Interim Covenants. 39
ARTICLE 7
Duration; Termination
7.1 Term. 41
7.2 Termination of this Agreement; Dissolution of the LLC. 42
7.3 Termination at End of Term. 44
7.4 Transfers of Interests Under the Agreement and The Denver
Newspaper Agency Limited Liability Company Operating
Agreement. 45
ARTICLE 8
Costs and Liabilities
8.1 Responsibility for Costs. 46
8.2 Nature of Relationship. 47
8.3 Members' Individual Responsibilities. 47
8.4 LLC's Responsibility. 48
8.5 Force Majeure. 48
ARTICLE 9
Miscellaneous
9.1 Notices. 49
9.2 Non-Assignability. 50
9.3 Entire Understanding. 51
9.4 Headings. 51
9.5 Governing Law. 51
9.6 Modifications. 51
9.7 Severability. 51
9.8 Specific Performance. 52
9.9 No Third Party Beneficiaries. 52
EXHIBITS
Exhibit A Denver Newspaper Agency Contribution and Sale
Agreement
Exhibit B Denver Newspaper Agency Limited Liability
Company Operating Agreement
Exhibit C Denver Newspaper Agency License for Denver
Post Names and Denver Post Intangibles
Exhibit D Denver Newspaper Agency License for News
Names and News Intangibles
JOINT OPERATING AGREEMENT
This Joint Operating Agreement (hereinafter the "Agreement"
or "The Denver Newspaper Agency Joint Operating Agreement"),
dated as of May 11, 2000, is entered into by and among The Denver
Post Corporation, a Delaware corporation ("Denver Post"), The
Denver Publishing Company, a Colorado corporation ("Denver
Publishing") and Denver Post Production Facilities LLC, a
Delaware limited liability company.
Denver Post currently publishes The Denver Post each weekday
and weekend morning, in Denver, Colorado. Denver Publishing
currently publishes Denver Rocky Mountain News each weekday and
weekend morning, in Denver, Colorado. Both The Denver Post and
Denver Rocky Mountain News (each, hereinafter, a "Newspaper", and
both hereinafter, the "Newspapers") have substantial paid
circulations in the Denver, Colorado metropolitan area and
throughout the State of Colorado;
Although The Denver Post generates operating profits, Denver
Rocky Mountain News suffers substantial operating losses and is
currently in probable danger of financial failure;
The parties to this Agreement believe that the probable
failure of Denver Rocky Mountain News can be avoided and that
both Newspapers can be published profitably in the future
provided that (1) they enter into a joint newspaper operating
arrangement (a "JOA") pursuant to which their operating and
business functions (but not their news and editorial functions)
are appropriately combined, (2) both The Denver Post and Denver
Rocky Mountain News continue separately to be published each
weekday morning, (3) a special edition of Denver Rocky Mountain
News is published each Saturday morning containing editorial
pages from both Denver Rocky Mountain News and The Denver Post,
under a new, joint masthead and (4) a special edition of The
Sunday Denver Post is published each Sunday morning containing
editorial pages from both The Denver Post and Denver Rocky
Mountain News, under a new joint masthead;
Accordingly, the parties have agreed to enter into a joint
newspaper operating arrangement, which they believe meets the
requirements of and is entitled to the protection afforded by the
Newspaper Preservation Act, 15 U.S.C. 1801 et seq. ("NPA"). The
parties have determined that such an arrangement will serve not
only their best interests, but also those of their employees,
their subscribers, their advertisers and the communities which
they serve.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements hereinafter set forth, the
parties agree as follows:
ARTICLE 1
The LLC
1.1 Denver Post Production Facilities LLC.
Prior to the execution of this Agreement, Denver Post and its
wholly owned subsidiary, Eastern Colorado Production Facilities,
Inc., a Delaware corporation ("Eastern Colorado" and together
with Denver Post the "Post Entities")) caused to be formed under
the laws of the State of Delaware a limited liability company
named "Denver Post Production Facilities LLC" (the "LLC"). In
exchange for its and Eastern Colorado's membership interests
therein, Denver Post itself and on behalf of Eastern Colorado
transferred to the LLC the following assets (hereinafter,
collectively, "Denver Post Initial Capital Contribution"):
(a) all real property and all appurtenances thereto
and equipment thereon located at 4495 Fox Street, Denver,
Colorado (hereinafter, collectively the "Denver Post Production
Facility"); and,
(b) all furniture, fixtures, improvements, equipment,
machinery, parts, computer hardware, tools, printing presses and
other tangible property located at the Denver Post Production
Facility other than vehicles, leased personal property and
Inventory (as defined in the Contribution and Sale Agreement
appended as Exhibit A hereto).
1.2 Amendment and Restatement of Operating Agreement;
Change of Name; Additional Capital Contribution by Denver Post.
(a) As of the Effective Date, as hereinafter defined,
the Post Entities and the LLC shall jointly and severally cause
the LLC to change its name to "The Denver Newspaper Agency LLC,"
to amend and restate the LLC's operating agreement in the form
appended as Exhibit B hereto (hereinafter "The Denver Newspaper
Agency Limited Liability Company Operating Agreement"), and to
cause to be made to and received by the LLC an additional capital
contribution from Denver Post, hereinafter the "Denver Post
Additional Capital Contributions," in the form described in
Section 1.4 of this Agreement.
(b) Concurrently with the foregoing, Post Entities
shall also assign to the LLC, and the LLC shall assume and become
fully liable for, all of the liabilities relating to the
operation of The Denver Post and/or the Denver Post Contributed
Assets which are defined as "Denver Post Assumed Liabilities" in
Section 2.3 of The Denver Newspaper Agency Contribution and Sale
Agreement (hereinafter collectively also, the "Denver Post
Assumed Liabilities"). Upon the LLC's assumption of the Denver
Post Assumed Liabilities, Denver Post shall have no further
obligation or liability with respect thereto, and the LLC shall
pay and discharge all such assumed liabilities in full and in a
timely manner.
(c) As used in this Agreement, the "Effective Date"
shall be the first business day of the first month commencing
following the later of (i) the day on which the written consent
of the Attorney General of the United States becomes effective,
as provided in Section 4(b) of the NPA, and in Section 48.14 of
the Regulations under the NPA (28 CFR 48.1), and as contemplated
by Section 6.3 of this Agreement, provided that no injunction or
restraining order shall then be in effect which restrains or
prohibits the carrying out of this Agreement or the consummation
of any of the transactions contemplated hereby and all of the
material conditions for the closing of such transactions shall
then have been satisfied, or (ii) if such injunction or
restraining order is in effect, the first day on which it is
removed or eliminated without further right of appeal, and all
such conditions have been satisfied.
1.3 Sale of a Portion of Denver Post's Membership Interest
in LLC to Denver Publishing; Initial Capital Contribution by
Denver Publishing.
(a) Immediately following the implementation of the
various matters described and set forth in Section 1.2, Denver
Publishing shall (x) in exchange for a Percentage Interest equal
to Sixty Million Dollars ($60,000,000) divided by the then fair
market value of the net assets of the LLC, pay to Denver Post the
cash sum of Sixty Million Dollars ($60,000,000), hereinafter the
"Purchase Price" and (y) make an initial capital contribution to
the LLC, hereinafter the "Denver Publishing Initial Capital
Contribution," in the form set forth in Section 1.5 of this
Agreement such that after such contribution, the Percentage
Interests in the LLC shall be 50% for Denver Publishing, 49% for
Denver Post and 1% for Eastern Colorado.
(b) Concurrently with the foregoing, Denver Publishing
shall assign to the LLC, and the LLC shall, except as otherwise
provided in this Agreement, assume and become fully liable for,
all of the liabilities relating to the operations of Denver Rocky
Mountain News and/or the Denver Publishing Contributed Assets
which are defined as "Denver Publishing Assumed Liabilities" in
Section 3.3 of The Denver Newspaper Agency Contribution and Sale
Agreement (hereinafter collectively also, the "Denver Publishing
Assumed Liabilities"). Upon the LLC's assumption of the Denver
Publishing Assumed Liabilities, Denver Publishing shall have no
further obligation or liability with respect thereto, and the LLC
shall pay and discharge all such assumed liabilities in full and
in a timely manner.
1.4 Form of Additional Capital Contribution of Denver Post.
(a) Denver Post's Additional Capital Contribution
shall consist of the cash sum of One Million Dollars ($1,000,000)
and all of its rights, title, and interest not previously
contributed to the LLC in and to the specific properties and
assets currently used or held for use in connection with the
production and publication of The Denver Post which are defined
as the "Additional Denver Post Contributed Assets" in Section 2.1
of The Contribution and Sale Agreement of even date herewith
entered into by the parties hereto (hereinafter, "The Denver
Newspaper Agency Contribution and Sale Agreement" and also
hereinafter collectively the "Additional Denver Post Contributed
Assets"). A copy of The Denver Newspaper Agency Contribution and
Sale Agreement is appended as Exhibit B to this Agreement.
(b) The assets defined in Section 2.2 of The Denver
Newspaper Agency Contribution and Sale Agreement as "Denver Post
Excluded Assets" shall not constitute any part of the Additional
Denver Post Contributed Assets but shall remain the separate
property of Denver Post from and after the Effective Date.
Notwithstanding the foregoing, Denver Post shall grant to the LLC
a royalty-free license with respect to such of the Denver Post
Excluded Assets as are defined as the Denver Post Names and the
Denver Post Intangibles in Section 2.2 of The Denver Newspaper
Agency Contribution and Sale Agreement. Such license shall be in
the form attached hereto as Exhibit C, which shall be executed by
Denver Post and delivered to the LLC on the Effective Date.
1.5 Form of Initial Capital Contribution of Denver
Publishing.
(a) Denver Publishing's Initial Capital Contribution
shall consist of the cash sum of One Million Dollars ($1,000,000)
and all of its rights, title, and interest in and to the specific
properties and assets used or held for use in connection with the
production and publication of Denver Rocky Mountain News which
are defined as "Denver Publishing Contributed Assets" in Section
3.1 of The Denver Newspaper Agency Contribution and Sale
Agreement (hereinafter collectively also, the "Denver Publishing
Contributed Assets").
(b) The assets defined in Section 3.2 of The Denver
Newspaper Agency Contribution and Sale Agreement as "Denver
Publishing Excluded Assets" shall not constitute any part of the
Denver Publishing Contributed Assets but shall remain the
separate property of Denver Publishing from and after the
Effective Date. Notwithstanding the foregoing, Denver Publishing
shall grant to the LLC a royalty-free license with respect to
such of the Denver Publishing Excluded Assets as are defined as
the News Names and the News Intangibles in Section 3.2 of The
Denver Newspaper Agency Contribution and Sale Agreement. Such
license shall be in the form attached hereto as Exhibit D, which
shall be executed by Denver Publishing and delivered to the LLC
on the Effective Date.
1.6 Valuation of Certain Capital Contributions; Adjustment.
(a) Subject to the making of the True-Up Contribution
(as hereinafter defined), each of the parties to this Agreement
agrees, for all purposes with respect to this Agreement, The
Denver Newspaper Agency Limited Liability Company Operating
Agreement and The Denver Newspaper Agency Contribution and Sale
Agreement, that the fair market value of (i) Denver Post's and
Eastern Colorado's aggregate Initial and Additional Capital
Contributions and aggregate capital account balances and (ii) the
Purchase Price and Denver Publishing's Initial Capital
Contribution and capital account balance, shall be deemed to be
equal.
(b) To the extent that the aggregate value, determined
(except as hereinafter expressly provided) in accordance with
generally accepted accounting principles consistently applied, of
the working capital contributed to the LLC as of the Effective
Date by each of Post Entities and Denver Publishing as a
consequence of Post Entities' Additional Capital Contribution and
Denver Publishing's Initial Capital Contribution differs, the
party whose working capital contribution is the lesser in value
shall promptly following the final determination of such value
(as hereinafter provided) contribute to the LLC an additional
cash sum (the "True-Up Contribution") equal to the difference in
value of the parties' respective working capital contributions.
Once made, such True-Up Contribution shall be deemed to be part
of the capital contribution of the party making such True-Up
Contribution and aggregate capital contributions and aggregate
capital accounts of the Post Entities shall be deemed equal to
the capital contribution and capital account of Denver
Publishing.
(c) For purposes of determining the amount of any
required True-Up Contribution, the determination of the value of
the working capital contributed to the LLC as of the Effective
Date by each of Denver Post and Denver Publishing shall be
determined by the party making such contribution upon written
notice to the other parties to this Agreement and the LLC not
later than one hundred fifty (150) days following the Effective
Date.
(d) Except as expressly hereinafter provided, such
determination shall be similarly made with respect to both Denver
Post and Denver Publishing, on the basis of generally accepted
accounting principles consistently applied. Notwithstanding the
foregoing, for the purpose of such calculations (a) all newsprint
inventories of Denver Post and Denver Publishing shall be valued
at book value (without any corporate or other mark-up), (b)
current liabilities shall include the present value of all
capital leases relating to the respective operations of The
Denver Post and Denver Rocky Mountain News (provided, that for
such purpose The New York Times press lease relating to The
Denver Post shall not be considered a capital lease for this
purpose as long as the revenues derived by the LLC from the
future operations of this press (excluding current commercial
printing jobs currently printed elsewhere by Denver Post) equal
or exceed payments by the LLC for such years pursuant to such
lease), and (c) all trade accounts receivable shall be valued
based upon the actual collections of the LLC with respect thereto
during the 120 day period immediately following the Closing (with
no value being attributed to any receivables remaining unpaid 120
days following the Closing, provided that any sums thereafter
collected with respect to such receivables shall belong
exclusively to the party assigning such receivables to the LLC),
and (d) the unfulfilled portion of the prepaid subscription
liabilities for each of The Denver Post and Denver Rocky Mountain
News as of the Effective Date shall each be valued based upon a
value of Twenty-Five Cents ($0.25) for each copy of the weekday
and Saturday editions of each Newspaper and One Dollar ($1.00)
for each copy of each Sunday edition of each Newspaper due to be
delivered subsequent to the Effective Date.
(e) If either party objects to the other party's
determination of the amount of working capital it contributed to
the LLC, such objection shall be communicated in writing to all
of the other parties to this Agreement and the LLC within forty-
five (45) days of receipt of such determination. All such
objections shall be referred for final resolution to a firm or
firms of independent auditors chosen by mutual agreement of the
independent auditors of the parties. All of the parties to this
Agreement and the LLC shall receive written notification of the
independent auditor's final determination of the value of such
party's working capital contribution (determined in the manner
provided in this Agreement) within thirty (30) days of such
referral.
1.7 Other Capital Contributions.
In the event that the LLC shall subsequent to the Effective
Date require funds other than the capital contributions described
in Sections 1.4 and 1.5 of this Agreement for any authorized
business purpose, all such funds, unless obtained from outside
sources (subject to Section 5.1, hereof), shall be contributed by
Denver Post and Denver Publishing on identical terms and in equal
shares, when and as such additional contributions may be
authorized as provided in Sections 5.1 or 8.1(c) hereof.
1.8 Failure to Make Payments.
If (i) either Denver Post or Denver Publishing (a "Defaulting
Party") fails to make to the LLC any payment required hereunder,
or under the terms of either The Denver Newspaper Agency Limited
Liability Company Operating Agreement or The Denver Newspaper
Agency Contribution and Sale Agreement, including, but not
limited to, any properly authorized capital contribution, the
other party (the "Non-Defaulting Party") may lend the amount
thereof to the LLC on behalf of the Defaulting Party, or (ii) the
Defaulting Party breaches any of its other obligations to the
LLC, the other party may cure such breach. In any such event,
(x) no distributions shall thereafter be made to the Defaulting
Party by the LLC pursuant to Section 4.1(c) hereof or otherwise
until the full amount of such loan that was made or incurred by
the Non-Defaulting Party, plus interest from the date of default
to the date(s) of such repayment(s) at a rate per annum equal to
the rate announced from time to time by The Bank of New York as
its prime or reference rate has been paid in full to the Non-
Defaulting Party by the Defaulting Party and (y) and all such
distributions which are thus withheld by the LLC from the
Defaulting Party shall instead concurrently be paid by the LLC to
the Non-Defaulting Party in repayment of such party's loan.
1.9 Contracts, Leases, Permits and Commitments; Assumption.
On the Effective Date, Denver Post and Denver Publishing each
will make available to the LLC, by way of assignment or
otherwise, and will thereafter permit the LLC to assume and
perform, all contracts, leases, permits and commitments
(collectively, the "Contracts") relating to the operations of The
Denver Post or Denver Rocky Mountain News and/or the Denver Post
Contributed Assets or the Denver Publishing Contributed Assets
exclusive of: (a) those Contracts described in Section 1.4(b) or
Section 1.5(b) hereof, (b) those Contracts defined as Denver Post
Excluded Assets, Denver Post Excluded Liabilities, Denver
Publishing Excluded Assets or Denver Publishing Excluded
Liabilities in The Denver Newspaper Agency Contribution and Sale
Agreement, (c) any other Contracts which relate to the news
and/or editorial functions of The Denver Post or Denver Rocky
Mountain News (except as may otherwise be otherwise expressly
provided herein or in The Denver Newspaper Agency Contribution
and Sale Agreement), and (d) those advertising or subscription
Contracts described in Sections 1.10 or 1.11 hereof (hereafter
collectively, the "Excluded Contracts"). To the extent that any
one or more of the Contracts to be assigned to the LLC may be
assignable only with the consent or consents of third persons,
Denver Post and Denver Publishing agree to use all reasonable
efforts to procure such consent or consents, in cooperation with
the LLC, by the Effective Date or as soon thereafter as is
reasonably practicable. Except as may otherwise be provided in
Section 1.13 hereof, the LLC shall be responsible for, and shall
pay, any cancellation charges or other liabilities of Denver Post
or Denver Publishing under any Excluded Contract. Notwithstanding
the foregoing or any other provision of this Agreement, the LLC
shall not, by virtue of the foregoing, be required hereby, as of
or subsequent to the Effective Date, to assume or otherwise
perform any Contract (including, but not limited to any
collective bargaining agreement other than any such agreement
that requires assignment and assumption in connection with the
transactions contemplated hereby) if the Management Committee (by
Absolute Majority Vote) determines such assumption is not in the
LLC's best interest; provided, that any Contract which the
Management Committee determines not to assume shall be deemed an
Excluded Contract for the purpose of the preceding sentence.
1.10 Advertising Contracts.
In order to implement the Licenses granted pursuant to Exhibits
C and D hereto, Denver Post and Denver Publishing each will
deliver to the LLC (a) on the Effective Date (subject to any
required approval from the Attorney General), the advertising
information required by their respective Licenses, and (b) within
10 days after the Effective Date, a list of the amount of space
used, up to but not including the Effective Date, by each such
advertiser. The LLC will use such efforts as it deems reasonable
and appropriate to fulfill and complete such advertising
contracts and commitments requiring performance on or subsequent
to the Effective Date, and shall have the exclusive right to make
such modifications or short ratings or cancellations thereof as
it deems reasonable and appropriate and shall, except as
otherwise provided in Section 1.13 hereof, indemnify Denver Post
or Denver Publishing with respect to all liabilities arising
thereunder for all periods subsequent to the Effective Date. By
the Effective Date, each of Denver Post and Denver Publishing
shall independently develop standards for determining the
acceptability of advertising for subsequent publication in its
Newspaper (with Denver Publishing developing standards for the
Saturday Edition and Denver Post developing standards for the
Sunday Edition), and the LLC shall subsequent to the Effective
Date apply those standards in determining the acceptability of
advertising copy for subsequent publication in such Newspaper.
1.11 Subscription Contracts.
In order to implement the Licenses granted pursuant to Exhibits
C and D hereto, on the Effective Date (subject to any required
approval from the Attorney General), Denver Post and Denver
Publishing each will deliver and make available to the LLC all
subscription contracts then relating to The Denver Post and
Denver Rocky Mountain News, respectively. The LLC will
subsequent to the Effective Date use such efforts as it deems
reasonable and appropriate to fulfill and perform all such
subscription contracts for the regular weekday editions of The
Denver Post and Denver Rocky Mountain News, and may, if
necessary, use such efforts as it deems reasonable and
appropriate to fulfill and perform such contracts by delivering
subsequent to the Effective Date the Saturday Edition (as defined
in Section 2.1 hereof), to all subscribers who will accept the
same in substitution for the pre-Effective Date Saturday edition
of The Denver Post and the Sunday Edition (as defined in Section
2.1 hereof) to all subscribers who will accept the same in
substitution for the pre-Effective Date Sunday edition of Denver
Rocky Mountain News.
1.12 Accounts Receivable.
Between the date hereof and the Effective Date, Denver Post and
Denver Publishing shall use all reasonable efforts, consistent
with past practices, to collect their respective advertising,
circulation and other trade accounts receivable arising out of
the publication of The Denver Post, and Denver Rocky Mountain
News ("Accounts Receivable"). On and after the Effective Date,
the LLC shall have the sole right to collect all Accounts
Receivable, and to use such methods with respect to such
collection, including settlement, compromise or litigation, as
the LLC shall determine.
1.13 Limitation on Assumption of Liabilities.
On the Effective Date, the LLC shall assume and be responsible
for only those liabilities or obligations of Denver Post and
Denver Publishing that are specifically contemplated by this
Agreement and The Denver Newspaper Agency Contribution and Sale
Agreement to be assumed by the LLC and for no others. In
addition to any liabilities which may be defined as Denver Post
Excluded Liabilities or Denver Publishing Excluded Liabilities in
The Denver Newspaper Agency Contribution and Sale Agreement, the
liabilities to be assumed by the LLC on the Effective Date shall
not include any of the following liabilities (all of which shall
hereinafter collectively be deemed "Excluded Liabilities"): All
intercompany indebtedness, all indebtedness for borrowed money
(other than capital leases related to the operations of The
Denver Post or Denver Rocky Mountain News), all deferred tax
liabilities of whatever nature, all accrued income or franchise
tax liabilities, all liabilities for failure to perform or
discharge in a timely manner prior to the Effective Date any
liability to be assigned to the LLC as of the Effective Date
hereof, all liabilities arising from any breach occurring prior
to the Effective Date under any contract, license or other
instrument to be assigned to the LLC as of the Effective Date,
all liabilities arising from any litigation pending or threatened
as of the Effective Date with respect to the operations of Denver
Post or Denver Publishing or any assets to be transferred to the
LLC as of the Effective Date and all liabilities arising out of
any violations occurring prior to the Effective Date of any law
or governmental regulation applicable to the operations of Denver
Post or Denver Publishing or the assets being transferred to the
LLC as of the Effective Date.
Denver Post and Denver Publishing, respectively, shall
indemnify and hold the other party and the LLC harmless against
any and all damage, loss and cost (including reasonable
attorneys' fees) arising out of or related to any Excluded
Liability or any other liability or obligation of the
indemnifying party that is not to be assumed by the LLC as of the
Effective Date pursuant to this Agreement or The Denver Newspaper
Agency Contribution and Sale Agreement.
1.14 Delivery of Books and Records.
As of the Effective Date, Denver Post and Denver Publishing
each will deliver to the LLC such of their books, records, and
files (not including general books of account) and circulation
and advertising accounts receivables ledgers and accounts payable
ledgers relating to The Denver Post or Denver Rocky Mountain
News, whether or not heretofore expressly referred to herein, as
may be reasonably required in connection with the collection of
accounts receivable and the payment of assumed liabilities and
the production, marketing, and circulation of the newspapers to
be produced, marketed, and circulated hereunder by the LLC.
1.15 Use of Facilities and Properties.
Upon and subsequent to the Effective Date the properties and
assets theretofore or thereupon contributed to the LLC by Denver
Post and Denver Publishing shall be retained and used in
connection with the joint operating arrangement contemplated
hereby, except as the Management Committee shall by Absolute
Majority Vote determine otherwise.
1.16 Employees.
(a) Commencing as of the Effective Date, The President
and Chief Executive Officer of the LLC shall determine the
staffing levels required for the LLC's operations and shall
retain employees to perform non-news and non-editorial
operations, including those employees and former employees of The
Denver Post and Denver Rocky Mountain News, as the President and
Chief Executive Officer shall deem reasonably necessary,
appropriate or desirable to perform the LLC's operations. The
President and Chief Executive Officer shall select those persons
which he or she in his or her reasonable judgment determines to
be qualified persons, including persons from the staffs of The
Denver Post and Denver Rocky Mountain News, consistent with such
legal and contractual obligations which may apply to the LLC, and
shall not be obligated by this Agreement or any other agreement
entered into by and between Denver Post and Denver Publishing to
choose an equal number of employees from, or any specific number
of employees from, The Denver Post and Denver Rocky Mountain
News. Each Newspaper shall continue, however, to be responsible
for the selection, hiring, and employment of the employees used
in its own news and editorial operations.
(b) To the extent that the President and Chief
Executive Officer does offer employment to persons then employed
by The Denver Post or Denver Rocky Mountain News, it is
contemplated that such employment will be offered upon terms
substantially comparable to those applicable to their employment
by The Denver Post or Denver Rocky Mountain News.
(c) Upon the hiring of any such employee of The Denver
Post or Denver Rocky Mountain News, the LLC alone shall on and
after the Effective Date be solely responsible for all
obligations and incurred costs (whether arising under collective
bargaining agreements, individual employment agreements, employee
benefit or welfare plans, severance policies or arrangements or
otherwise) relative to the future employment, termination or
retirement of such employees.
(d) The LLC shall also be solely responsible for
indemnifying both Denver Post and Denver Publishing in full with
respect to any WARN Act, severance or other liability which
arises as a consequence of the LLC's failure to offer employment
as of the Effective Date to any person then employed by The
Denver Post or Denver Rocky Mountain News (other than news or
editorial staff employees) upon terms substantially comparable to
those applicable to their employment by The Denver Post or Denver
Rocky Mountain News.
(e) Upon and subsequent to the Effective Date, Denver
Post and Denver Publishing shall remain independently responsible
for all obligations and incurred costs relating to all persons
thereafter employed relative to the news and editorial staffs of
The Denver Post or Denver Rocky Mountain News. To the extent
such costs are in the first instance paid by the LLC, the LLC
shall be reimbursed for such costs by Denver Post and Denver
Publishing, respectively, in connection with the monthly
distribution to such parties of Net Available Cash From
Operations, as set forth in Article 4 of this Agreement.
(f) Subject to arrangements made by Denver Post and
Denver Publishing prior to the Effective Date and the authority
of the Management Committee, from and after the Effective Date,
the President and Chief Executive Officer shall, commencing as of
the Effective Date, have sole and exclusive authority to handle
all labor relations matters with respect to all non-news and non-
editorial employees of the LLC. All labor relations matters with
respect to employees in the news and editorial departments of The
Denver Post and Denver Rocky Mountain News shall be handled by
(and shall be within the authority of) Denver Post and Denver
Publishing, as the case may be.
(g) (i) It is the intention of Denver Post and Denver
Publishing that those persons who have been employees of
Denver Post, Denver Publishing or their respective
Affiliates and who become employees of the LLC in connection
with the transactions contemplated hereby shall receive
employee benefits substantially comparable to those they
would have received if they had remained with their prior
employer. The parties will endeavor to design and implement
employee benefits plans and arrangements that shall
accomplish this result, subject to collective bargaining
requirements. After consultation with the Management
Committee, the President and Chief Executive Officer will
have the authority to cause to be adopted benefit plans and
arrangements that will in his or her reasonable judgment
accomplish this result.
(ii) Denver Post and Denver Publishing shall not
(nor shall they permit any of their respective Affiliates
to) pay (or defer to the account of) any officer or other
employee of the LLC (including, without limitation, the
President and Chief Executive Officer) any form of
compensation, remuneration or reimbursement, with respect to
any period on or after the date of such officer's or
employee's employment by the LLC, without the consent of the
other Member.
1.17 Newsprint Purchases.
Commencing as of the Effective Date, each of Denver Post and
Denver Publishing shall for each fiscal year of the LLC be
responsible for providing to the LLC at its cost (as hereinafter
defined) one-half of the newsprint needs of the LLC as reasonably
forecast and determined by the LLC's President and Chief
Executive Officer. For such purposes, Denver Post's and Denver
Publishing's costs shall be deemed to be the average price paid
for Denver deliveries by each entity (without any corporate mark-
up) pursuant to newsprint contracts or otherwise. If Denver Post
and/or Denver Publishing shall for any reason be unable to
fulfill such obligations, the President and Chief Executive
Officer shall secure such additional newsprint as he determines
may be needed from whatever source he deems appropriate.
1.18 Initial Activities of the LLC.
The activities of the LLC prior to the Effective Date shall
include the provision of publishing services to the Post Entities
and planning for implementation of the joint newspaper operating
arrangement contemplated by this Agreement and shall be limited
to activities that do not require the prior written consent of
the Attorney General. Prior to the Effective Date, nothing in
this Agreement, the Limited Liability Company Operating Agreement
or The Denver Newspaper Agency Contribution and Sale Agreement
shall limit competition between Denver Post and Denver Publishing
or their Affiliates or business ventures or activities Denver
Post and Denver Publishing or their Affiliates may legally pursue
together.
ARTICLE 2
Activities of the LLC
The parties agree as follows with respect to the activities
of the LLC and their own activities from and after the Effective
Date:
2.1 Publication of Newspapers.
(a) The LLC shall at its expense print, produce,
distribute, and market (both as to circulation and advertising)
The Denver Post (in broadsheet format) each weekday and Sunday
morning and Denver Rocky Mountain News (in tabloid format with
such news sections in broadsheet format as Denver Publishing
chooses to include, consistent with current practices) each
weekday morning and (in tabloid format with conversion to
broadsheet format as soon as reasonably practicable from a
production standpoint in the judgment of the Management Committee
acting by Absolute Majority Vote) each Saturday morning, and
shall otherwise jointly or separately exploit as it determines
appropriate the advertising and/or news content of either or both
publications, by mail, private delivery and/or such other
technologies as the LLC may from time to time determine
appropriate, subject to any separate agreements which may have
been entered into prior to the Effective Date (as hereinafter
defined) by and between Denver Post and Denver Publishing. The
Saturday and Sunday editions of the Newspapers published by the
LLC shall contain editorial pages and selected features from each
of Denver Rocky Mountain News and The Denver Post. The Saturday
edition shall be published under a joint masthead to which Denver
Post and Denver Publishing shall mutually agree (the "Saturday
Edition"). The Sunday edition shall be published under a joint
masthead to which Denver Post and Denver Publishing shall also
mutually agree (the "Sunday Edition").
(b) The LLC shall control, supervise, manage, and
perform all operations (other than news/editorial operations)
involved in printing, producing, distributing, and marketing the
Newspapers; shall determine the edition times after consultation
with the respective editors of such Newspapers; shall purchase
materials, supplies, and national supplements as appropriate;
shall solicit and sell advertising space in such Newspapers;
shall, subsequent to the Effective Date, collect all accounts
receivable, whether such accounts receivable come into existence
prior to, on or after the Effective Date; shall establish
circulation and advertising rates (but not advertising
acceptability standards) for such Newspapers; and shall make all
determinations and decisions and do any and all acts and things
necessarily connected with the foregoing activities.
Additionally, the cost of performing these functions shall be
borne by the LLC.
(c) The LLC will promote circulation and advertising
to enhance or improve the circulation and advertising sales of
each Newspaper and to allow each Newspaper to achieve its full
market potential.
(d) The LLC shall distribute such TMC product relative
to the Denver market as it determines appropriate.
(e) The LLC may also engage in any non-news and non-
editorial activities that would be appropriate for a single
newspaper publisher, including but not limited to commercial
printing and all other activities determined by the Management
Committee to be consistent with the LLC's principal business
purpose. Non-news and non-editorial activities with respect to
any Newspapers published within the State of Colorado by Denver
Post, Denver Publishing or their Affiliates other than The Denver
Post or Denver Rocky Mountain News shall, to the extent permitted
by law, include such joint advertising sales, joint subscription
sales, joint delivery or other services as the LLC may from time
to time determine to be appropriate, upon terms mutually
agreeable to both Denver Post and Denver Publishing.
2.2 Property Used.
In producing and carrying on the businesses of the Newspapers
under this Agreement, the LLC shall print such Newspapers and
conduct all operations under this Agreement, except the
operations of the news and editorial departments of the two
Newspapers, with the LLC's equipment and from the LLC's plant or
plants, or from the plant or plants of independent contractors
selected by the LLC. The LLC may also utilize the Licenses
granted to it to the extent necessary to carry on the activities
of the LLC pursuant to this Agreement.
2.3 Editorial Independence.
Preservation of the editorial independence of each Newspaper is
the essence of this Agreement. To this end, subsequent to the
Effective Date, the news and editorial material for editions of
The Denver Post shall be gathered, prepared, and laid out by
Denver Post and the news and editorial material for editions of
Denver Rocky Mountain News shall be gathered, prepared, and laid
out by Denver Publishing. The Denver Post's and Denver Rocky
Mountain News' news and editorial staffs and news and editorial
policies shall be independent of each other and of the LLC.
Without limiting the generality of the foregoing, Denver Post and
Denver Publishing each shall have the exclusive right to
determine the editorial format, dress, layout, and news and
feature content of editions of its Newspaper published subsequent
to the Effective Date. All personnel responsible for the news
and editorial content of The Denver Post shall be employees of
Denver Post and shall be subject to the direction and authority
of Denver Post, and all personnel responsible for the news and
editorial content of Denver Rocky Mountain News shall be
employees of Denver Publishing and shall be subject to the
direction and authority of Denver Publishing.
2.4 News and Editorial Services and Expenses.
(a) Commencing as of the Effective Date, each
Newspaper shall maintain an adequate staff of news, editorial,
and photographic employees, and shall furnish the LLC complete
news and editorial services necessary and appropriate for the
publication of such Newspaper in the manner provided in this
Agreement. Each Newspaper, in furnishing news and editorial copy
and like materials to the LLC for publication, shall conform to
the mechanical standards and limitations which prevail at the
time of production in the plant or plants used by the LLC for the
printing of such Newspaper, including press times established by
the LLC.
(b) In order to equitably distribute between Denver
Post and Denver Publishing the cost of producing the news for its
Newspaper, and in consideration of evolutionary changes
(attributable to market demand) in the number of pages of various
editions of the Newspapers, the LLC shall credit Denver Post and
Denver Publishing for supplying news to fill basic newsholes (the
"Newshole") as follows:
(i) The President and Chief Executive Officer
shall specify annually a news to advertising ratio for the
Monday through Friday editions in the aggregate (the "Weekly
Ratio") which shall be the same for both The Denver Post and
Denver Rocky Mountain News; and,
(ii) The President and Chief Executive Officer
shall also specify annually separate and discrete news to
advertising ratios for the special edition of Denver Rocky
Mountain News to be published on Saturday (the "Saturday
Ratio") and the special edition of The Denver Post to be
published on Sunday (the "Sunday Ratio").
(c) During the Term of this Agreement, the Newshole
for each Newspaper shall be equivalent from week to week to that
for the other Newspaper after adjustment for format (broadsheet
or tabloid). Denver Post or Denver Publishing may elect to
publish pages of news content in excess of its Newshole, provided
that (1) the LLC has the production capacity to produce the pages
as scheduled, and (2) the Member which elects to publish excess
pages of news content shall be charged for the cost of production
equal to a rate set annually by the President and Chief Executive
Officer based on average set-up costs per page (the "Basic Page
Charge") multiplied by the number of excess pages of news
content, plus the average cost of newsprint, ink, labor, and
other variable costs per page (the "Variable Page Charge")
multiplied by the number of pages to be inserted and multiplied
by the number of copies printed in which the extra news content
pages are inserted (the "Total Excess Page Charge"). There shall
be a Basic Page Charge and a separate Variable Page Charge for
those editions of the Newspapers which are published in
broadsheet and tabloid format, which shall be comparable for both
The Denver Post and Denver Rocky Mountain News.
(d) The President and Chief Executive Officer shall
specify annually allocations of editorial color and color pages
to The Denver Post and Denver Rocky Mountain News (the "Color
Allocations") in the same proportions that the color pages
published by The Denver Post and Denver Rocky Mountain News
individually have to the total of color pages published in The
Denver Post and Denver Rocky Mountain News collectively during
the prior fiscal year.
(e) Denver Post or Denver Publishing may elect to
publish pages using color in excess of their Color Allocations,
provided that (1) the LLC has the production capacity to produce
the pages using excess color as scheduled, and (2) the Member
which elects to use excess color shall be charged for the cost of
production equal to a rate set separately for broadsheet and
tabloid editions of the Newspapers, determined on a comparable
basis annually by the President and Chief Executive Officer based
on average set up costs per page (the "Basic Color Charge")
multiplied by the number of pages on which the excess color is to
be used plus the average cost of ink, labor, and other variable
costs per page (the "Variable Color Charge") multiplied by the
number of pages on which the excess color is to be used and
multiplied by the number of copies printed in which the extra
color is used (the "Total Excess Color Charge"). The Basic Color
Charge and the Variable Color Charge shall be comparable for both
The Denver Post and Denver Rocky Mountain News.
(f) Denver Post or Denver Publishing may elect to
publish any special news section in excess of its Newshole
provided that (i) the LLC has the production capacity to produce
the pages for each section as scheduled and (ii) the party
electing to publishing any such special section shall be charged
for the cost of production thereof in excess of the Total Excess
Page Charge and the Total Excess Color Charge that such party is
required to bear under this Agreement.
(g) Except as adjusted by the charges contemplated in
Sections 2.4(c) and (e), all Editorial Expense (as defined
hereafter) of the news and editorial functions of The Denver Post
shall be borne by Denver Post and all Editorial Expense of the
news and editorial functions of Denver Rocky Mountain News shall
be borne by Denver Publishing. The term "Editorial Expense" as
used in this Agreement (except as may otherwise expressly be
provided herein or otherwise by Denver Post and Denver Publishing
with respect to the Saturday and/or Sunday editions of the
Newspapers) shall mean all costs and expenses associated with the
news and editorial departments of The Denver Post, or Denver
Rocky Mountain News, as the case may be, including but not
limited to: (i) compensation, retirement, pension, health and
death benefits, worker's compensation insurance, and group
insurance of news and editorial employees; (ii) severance pay of
news and editorial employees; (iii) travel and other expenses of
news and editorial employees; (iv) press association assessments
and charges; (v) charges for news services, photo services and
supplies, and editorial wire services; (vi) charges for the right
to publish news and editorial features, comics, and other news
and editorial material of every kind and character; (vii) the
cost of news and editorial materials, printing, stationery,
office supplies, and postage for the news and editorial
departments; (viii) donations and dues; (ix) telegraphic,
telephone, and long-distance telephone charges of such news and
editorial departments; the cost and expense of maintaining the
operation of a newspaper "morgue"; and (x) professional fees;
provided, however, that (a) the term "Editorial Expense" shall
not include the cost of unfurnished office space provided by the
LLC pursuant to Section 2.5 hereof, which shall be provided at
the sole cost and expense of the LLC, and (b) equipment that is
an integral part of the production process even though located in
the news and editorial departments of a Newspaper.
Notwithstanding the foregoing, the following Editorial Expenses
for the Saturday and Sunday editions of the Newspapers shall be
the sole responsibility of the LLC and if paid in the first
instance by Denver Post or Denver Publishing shall be promptly
reimbursed by the LLC: (i) the cost of all comics in the
Saturday and Sunday Newspapers, it being the anticipation of the
parties that such Newspapers will have a substantially expanded
comics section; (ii) all costs associated with the Sunday
television book (such book to bear the same joint masthead as the
Sunday Edition); (iii) the costs of weekly stock listings or
other weekly business data included in any Saturday or Sunday
publications; and (iv) the cost of magazine supplements such as
Parade or U.S. Today.
2.5 Office Space.
The LLC shall provide each of Denver Post and Denver Publishing
with comparably furnished, separate office space in Denver,
Colorado which shall be adequate for the separate use of the news
and editorial departments of The Denver Post and Denver Rocky
Mountain News, as the case may be. Such office space shall
include appropriately furnished office space for the news and
editorial executives of each Newspaper. Such office space,
together with utility services (other than telephone or other
voice or data transmission charges), shall be provided at the
expense of the LLC, and no rent or other similar charge shall be
paid for such space by Denver Post or Denver Publishing or
charged by the LLC.
ARTICLE 3
Quality of Content and Budgets
The parties agree that from and after the Effective Date:
3.1 Quality of Content.
Denver Post and Denver Publishing shall use all reasonable
efforts to maintain the status of their respective publications
as leading newspapers in the Denver area and throughout the state
of Colorado. Denver Post and Denver Publishing shall seek to
insure that the editorial quality of each of their respective
publications meets the highest journalistic standards. Each of
Denver Post and Denver Publishing shall be solely responsible for
the news and editorial content of its Newspaper.
3.2 Budgets.
No later than 45 days before the beginning of each fiscal year,
the President and Chief Executive Officer shall submit capital,
operating and cash flow budgets (collectively, the "Budgets")
covering the next succeeding fiscal year of the LLC to the
Management Committee. The Operating Budget will incorporate the
Weekly Ratio, Saturday Ratio, Sunday Ratio, Basic Page Charge,
Variable Page Charge, Color Allocation, Basic Color Charge, and
Variable Color Charge, as authorized for that fiscal year. The
President and Chief Executive Officer shall seek and receive an
approval of all of the Budgets and any amendments thereto in
their entirety by an Absolute Majority Vote of the Management
Committee prior to the implementation of them.
ARTICLE 4
Duties of LLC, Including Distribution of Available Cash
4.1 Duties of LLC.
The LLC agrees that from and after the Effective Date, it will:
(a) manage and operate all of the departments of the
publishing businesses for The Denver Post and Denver Rocky
Mountain News (excluding the news and editorial departments) and
set and establish the respective advertising and subscription
rates (but not advertising acceptability standards) of The Denver
Post and Denver Rocky Mountain News from time to time;
(b) receive and collect all of the receipts and income
relating to The Denver Post and Denver Rocky Mountain News, and
from such income pay all operating expenses incidental to the
publication of the Newspapers (except for news and editorial
expenses, other than as herein expressly provided) in the manner
and to the extent provided in this Agreement and The Denver
Newspaper Agency Limited Liability Company Operating Agreement;
(c) subject to Section 1.8 hereof and any applicable
provisions of The Denver Newspaper Agency Limited Liability
Company Operating Agreement, distribute to Denver Post and Denver
Publishing at least monthly, or at more frequent intervals as may
be directed by the President and Chief Executive Officer, Net
Available Cash From Operations, as defined in The Denver
Newspaper Agency Limited Liability Company Operating Agreement;
(d) collect any amounts required to be collected by it
pursuant to Section 1.7 hereof; and,
(e) account monthly to Denver Post and Denver
Publishing for all revenues and expenditures, and keep Denver
Post and Denver Publishing regularly informed of its affairs and
business.
4.2 Allocation of Profits or Losses and Distributions of
Cash.
(a) Commencing with the Effective Date, Profits and
Losses, as defined in The Denver Newspaper Agency Limited
Liability Company Operating Agreement, shall be allocated among
the Members in accordance with the provisions of The Denver
Newspaper Agency Limited Liability Company Operating Agreement.
(b) Commencing with the Effective Date, distributions
of Net Available Cash From Operations shall, subject to the
provisions of Section 1.8 hereof, be distributed to the Members
in accordance with The Denver Newspaper Agency Limited Liability
Company Operating Agreement.
(c) The LLC shall be reimbursed by the Members for the
Total Excess Page Charges and the Total Excess Color Charges
pursuant to Sections 2.4(c) and 2.4(e) that may be due by them
and for all Editorial Expenses of either party which the LLC in
the first instance may have paid on their behalf, including but
not limited to salaries and related benefits for their respective
news and editorial staffs. In either case the LLC will account
for these items before computing Profits or Losses.
4.3 Books and Records.
Accurate, full, and complete books of accounts and records,
wherein all transactions of the LLC shall be entered, shall be
kept at the principal office of the LLC for the account of the
LLC in accordance with generally accepted accounting principles
consistently applied (except as otherwise agreed by Denver Post
and Denver Publishing) and, additionally, in accordance with the
Code and regulations promulgated thereunder. Commencing with the
Effective Date, Denver Post, Denver Publishing, and their
respective representatives shall have the right to inspect,
audit, copy or reproduce, each at its own expense, the books and
records of the LLC.
4.4 Financial Statements.
Commencing with the Effective Date, the President and Chief
Executive Officer shall cause to be delivered to Denver Post and
to Denver Publishing the following financial statements and
reports of the LLC prepared, in each case, in accordance with
generally accepted accounting principles consistently applied
(except as may be otherwise agreed by Denver Post and Denver
Publishing):
(a) promptly upon their availability and in any event
within four (4) business days after the end of each month,
unaudited statements of income or loss and cash flows and an
unaudited balance sheet for the interim period through such month
and the monthly period then ended and for the fiscal year-to-
date, in reasonable detail, such statements of income or loss and
cash flows for such period and for the fiscal year-to-date to
include (1) a comparison of the fiscal year-to-date and the
interim and monthly periods then ended with the corresponding
periods for the fiscal year immediately preceding, if any, and
(2) a comparison of actual to budgeted cash flows and income or
loss;
(b) promptly upon their availability and in any event
within four (4) business days after the end of each quarterly
period in each fiscal year, an unaudited balance sheet and
unaudited statements of income or loss and cash flows for the
quarterly period then ended and for the fiscal year-to-date, in
reasonable detail, such statement to include (1) a comparison of
the fiscal year-to-date and the interim and quarterly periods
then ended with the corresponding periods of the fiscal year
immediately preceding, if any, and (2) a comparison of actual to
budgeted cash flows and income or loss;
(c) promptly upon their availability and in any event
within four (4) business days after the end of each fiscal year,
an unaudited balance sheet and unaudited statements of income or
loss and cash flows for the fiscal year then ended, all in
reasonable detail, such statements to include (i) a comparison of
the current fiscal year with the fiscal year immediately
preceding, if any, and (ii) a comparison of actual to budgeted
cash flows and income or loss;
(d) promptly upon their availability and in any event
within fourteen (14) days after the end of each fiscal year, an
unaudited balance sheet of the LLC as at the end of such fiscal
year, and unaudited statements of income or loss and cash flows
for such fiscal year, all in reasonable detail, such balance
sheet and statements of income or loss and cash flows to include
a comparison of the current fiscal year with the fiscal year
immediately preceding, if any; and
(e) promptly upon their availability and in any event
within sixty (60) days after the end of each fiscal year, an
audited balance sheet of the LLC as at the end of such fiscal
year, and audited statements of income or loss and cash flows for
such fiscal year, all in reasonable detail and accompanied by an
opinion thereon of the LLC's independent certified public
accountants, such balance sheet and statements of income or loss
and cash flows to include a comparison of the current fiscal year
with the fiscal year immediately preceding, if any.
4.5 Auditors and Fiscal Year.
Commencing with the Effective Date, the independent auditors of
the LLC shall be selected by Denver Publishing and Denver Post on
a four-year rotating basis and shall be one of the five largest
accounting firms in the United States (the "Big Five").
Commencing with the Effective Date, the independent auditors of
the LLC shall be the independent auditors of Denver Publishing,
and such auditors shall serve through the end of the fourth
fiscal year of the LLC following the Effective Date. At least
six months before the end of each four-year period, the Member
who may choose the auditors for the next four-year period shall
give notice to the LLC and the other Member(s) of its election to
select independent auditors for the LLC. Any selection of
auditors hereunder shall be limited to the Big Five firm or firms
then serving as the independent auditors of Denver Post or Denver
Publishing. Failure to give such notice shall be deemed an
election to retain the auditors then engaged by the LLC. The LLC
shall keep its books on a calendar-year basis.
4.6 Tax Returns.
Commencing with the Effective Date, Tax returns for the LLC
shall be dealt with in the manner prescribed in The Denver
Newspaper Agency Limited Liability Company Operating Agreement.
ARTICLE 5
Governance of LLC
5.1 Management Committee.
As of and subsequent to the Effective Date, the
business and affairs of the LLC shall be managed by a committee
(the "Management Committee") to be composed of four (4) members,
two (2) of which shall be appointed collectively by Denver Post
and Eastern Colorado and shall be the Chief Executive Officer and
Chief Financial Officer of Denver Post (or their designees), and
two (2) of which shall be appointed by Denver Publishing and
shall be the Chief Executive Officer and Chief Financial Officer
of The E. W. Scripps Company, an Ohio corporation and parent of
Denver Publishing (or their designees). Commencing as of the
Effective Date, a single member of the Management Committee shall
be selected, as hereinafter provided, to serve as Chairman of the
Management Committee for a four (4) year term or until the
selection of his successor. The Chairman of the Management
Committee shall preside over all meetings of the Management
Committee and shall perform such other functions and
responsibilities as the members of the Management Committee may
from time to time appropriately delegate to such person under the
terms of the Limited Liability Company Operating Agreement or
otherwise. The initial Chairman of the Management Committee
shall, as of the Effective Date, be selected by those members of
the Management Committee appointed by Denver Post and Eastern
Colorado, and thereafter the members of the Management Committee
appointed by Denver Publishing and by Denver Post and Eastern
Colorado, respectively, shall alternate selecting such Chairman
every four (4) years. Commencing as of the Effective Date, the
Management Committee (acting by Absolute Majority Vote) shall
appoint annually a President and Chief Executive Officer of the
LLC, reporting to it, to serve for a term of one year and until
his or her successor is elected. The President and Chief
Executive Officer shall, in consultation with the Management
Committee, oversee all activities of the LLC, consistent with the
terms of this Agreement, the Limited Liability Company Operating
Agreement and the NPA, in accordance with annual operating and
capital budgets approved by the Management Committee. The
Management Committee (acting by Absolute Majority Vote) may
remove the President and Chief Executive Officer at any meeting
and elect his or her successor. In the case of a deadlock with
respect to any matter to be acted upon by the Management
Committee (other than the election or removal of a President and
Chief Executive Officer and such other matters reserved solely
for decision by an Absolute Majority Vote of the Management
Committee or by the Members unanimously under the Limited
Liability Company Operating Agreement and therein designated as
"Reserved Matters," hereafter collectively, the "Reserved
Matters"), the President and Chief Executive Officer of the LLC
shall be empowered to break such deadlock. Any deadlock
concerning any Reserved Matter shall be resolved in the manner
provided in The Denver Newspaper Agency Limited Liability Company
Operating Agreement.
5.2 The President and Chief Executive Officer.
Commencing as of the Effective Date, the President and Chief
Executive Officer shall, in consultation with the Management
Committee, have general charge and supervision of the business of
the LLC, but shall have no duties or authority with respect to
the news and editorial functions of The Denver Post and Denver
Rocky Mountain News.
5.3 Certain Other Matters.
Commencing as of the Effective Date, the President and Chief
Executive Officer shall conduct the business of the LLC pursuant
to the terms hereof as a stand-alone, independent, joint venture
of the Members. Subject to legal and contractual obligations,
the President and Chief Executive Officer shall select qualified
managers, executives, and personnel, and shall supervise the
facilities and equipment used by the LLC and the operating
systems and procedures of the LLC with respect to advertising,
circulation, production, finance, personnel, and promotion. The
President and Chief Executive Officer shall at all times act
independently and disinterestedly as between Post Entities and
Denver Publishing and in the best interests of the LLC.
5.4 Compensation.
The cost (including compensation) of the President and Chief
Executive Officer and his or her staff shall be paid by the LLC.
ARTICLE 6
Other Matters
6.1 Representations and Warranties.
Each of the LLC, Denver Post, Eastern Colorado and Denver
Publishing hereby represents and warrants to each other that:
(a) It is a corporation or limited liability company
(as hereinbefore indicated) which is duly incorporated and in
good standing under the laws of its jurisdiction of incorporation
and is qualified to do business in Colorado.
(b) The consummation of the transactions provided for
herein, in the Licenses, in The Denver Newspaper Agency
Contribution and Sale Agreement and in The Denver Newspaper
Agency Limited Liability Company Operating Agreement, will not
conflict with, or result in a default under, or a violation of,
any provision of its charter, by-laws or operating agreement (as
applicable) or any agreement or instrument to which it is, or on
the Effective Date may be, a party or by which it is, or on the
Effective Date may be, bound.
(c) The execution and delivery by it of this
Agreement, The Denver Newspaper Agency Contribution and Sale
Agreement, the Licenses and The Denver Newspaper Agency Limited
Liability Company Operating Agreement have been duly and validly
authorized by all necessary corporate action on its part; and
this Agreement, The Denver Newspaper Agency Contribution and Sale
Agreement, the Licenses, and The Denver Newspaper Agency Limited
Liability Company Operating Agreement have been duly executed and
delivered by it.
(d) Subject to obtaining the written consent referred
to in Section 6.3 hereof, this Agreement, the Licenses, The
Denver Newspaper Agency Limited Liability Company Operating
Agreement and The Denver Newspaper Agency Contribution and Sale
Agreement constitute its valid and binding obligation, and no
approval or consent is necessary for the execution, delivery and
performance by it of this Agreement, The Denver Newspaper Agency
Contribution and Sale Agreement, the Licenses or The Denver
Newspaper Agency Limited Liability Company Operating Agreement,
except for such as have heretofore been obtained and are in full
force and effect.
(e) It has no knowledge of facts that would materially
adversely affect the value of any material asset (or the assets
in the aggregate) to be transferred by it or its Affiliates to
the LLC.
As used in this Agreement, "Affiliate" means, with respect to any
party, (i) any entity directly or indirectly controlling,
controlled by or under common control with such party, (ii) any
entity owning or controlling ten percent or more of the
outstanding voting securities of such party, (iii) any officer or
director of such party or any entity owning an interest as a
general partner in such party, or (iv) any entity that is a
general partner, trustee or holder of ten percent or more of the
voting securities of any entity described in clauses (i) through
(iii) of this sentence. As used herein, the term "entity" shall
mean any individual, partnership, corporation, trust or other
business organization.
6.2 Certain Action.
Each party agrees to take all actions reasonably necessary
and/or appropriate to carry out and effectuate the intent,
purposes, and provisions of this Agreement and The Denver
Newspaper Agency Limited Liability Company Operating Agreement
and to cooperate with the others in every reasonable and proper
way that will promote the successful operation of the joint
operating arrangement under this Agreement and The Denver
Newspaper Agency Limited Liability Company Operating Agreement.
6.3 NPA Filing.
As soon as practicable after the date hereof, an application
shall be filed by Denver Post and Denver Publishing with the
Department of Justice, and other appropriate procedures shall be
implemented, to secure as soon as possible the written consent of
the Attorney General of the United States as provided in Section
4(b) of the NPA. Each party shall support the application fully
in every reasonable respect and shall cooperate in and coordinate
with respect to the taking of all appropriate steps to secure
approval of the application. Whether or not the Attorney General
determines to give such written consent, this Agreement and The
Denver Newspaper Agency Limited Liability Company Operating
Agreement shall not terminate earlier than May 1, 2005 so long as
either Denver Post or Denver Publishing elects to continue the
process of seeking agency or judicial review. For purposes of
the application, Denver Post and Denver Publishing shall each
promptly designate "contact persons" for such coordination and
consultation as is appropriate and proper and shall each give the
other parties prompt written notice of such designation in the
manner provided in Section 9.1 hereof. Furthermore, Denver Post
and Denver Publishing shall make available, through their
authorized representatives, such information as is necessary and
appropriate in obtaining the Attorney General's approval of the
application. All information which Denver Post, Denver
Publishing or the LLC secure as a result of such access shall be
held in confidence, shall not (except as legally required) be
disclosed without the consent of the party from which the
information is obtained, and shall not be used for competitive
purposes. All documents which Denver Post, Denver Publishing or
the LLC obtain as a result of such access shall be returned or
destroyed in the event the transactions contemplated by this
Agreement are not consummated.
6.4 Announcements.
Except as required by law, no party hereto will make any public
announcement concerning this Agreement and the transactions
contemplated hereby prior to the first mutually agreed upon
announcement thereof without the consent of the other parties and
then only upon the maximum advance notice to the other parties
which is practicable under the circumstances.
6.5 Interim Covenants.
(a) Each of Post Entities and Denver Publishing
covenants and agrees that from the date hereof to and including
the Effective Date it shall, with respect to its Newspaper,
continue to carry on its business in the ordinary course. The
LLC hereby covenants and agrees that from the date hereof to and
including the Effective Date, it shall carry on its business in
the ordinary course consistent with the course of conduct
heretofore and hereafter by Denver Post with respect to its
Newspaper. From the date hereof to and including the Effective
Date, neither the Post Entities nor Denver Publishing, with
respect to its Newspaper, or the LLC with respect to its business
will:
(i) engage in any transaction materially
affecting it, its assets or Liabilities, except in the
normal and ordinary course of that entity's business;
(ii) fail to use reasonable efforts to prevent any
event or transaction from occurring which materially
adversely affects that entity's business, operations,
assets, Liabilities, financial condition or future
prospects;
(iii) fail to use reasonable efforts to
preserve intact its present organization, keep available the
services of its employees, preserve its relationships with
customers, suppliers and others having business dealings
with it, to the end that its goodwill and ongoing business
will not be materially impaired prior to the Closing;
(iv) sell, lease, transfer or agree to sell,
lease or transfer any material asset of its Newspaper or
relating to a Newspaper, except in the ordinary course of
business;
(v) adopt or modify any pension, profit-sharing
or other compensation plan (except as required by law or
except for changes which would not affect the level of
benefits) or enter into any contract of employment or permit
any increases or changes in the compensation of employees of
its Newspaper (including bonuses), except in accordance with
past practices and in the ordinary course, or except as a
result of collective bargaining heretofore or hereafter
undertaken in the ordinary course, except to the extent
required by law and except for retention arrangements made
with employees of its Newspaper as a result of or in
connection with the transactions contemplated by this
Agreement;
(vi) enter into or amend any material contract or
commitment, waive any material right or enter into any other
material transaction, other than in the ordinary course; or
(vii) enter into any agreement to take any
actions specified in this Section 6.5.
(b) Each party will promptly notify the others in
writing upon becoming aware of any order or decree or any
complaint praying for an order or decree restraining or enjoining
the consummation of this Agreement or the transactions
contemplated hereby, or upon receiving any notice from any
governmental department, court, agency or commission of its
intention to institute an investigation into, or institute a suit
or proceeding to restrain or enjoin the consummation of this
Agreement or such transactions, or to nullify or render
ineffective this Agreement or such transactions if consummated.
(c) This Agreement is subject to such obligations and
duties as may be imposed on any party by statute, regulation,
contract or law; and no party shall be liable for any damages to
any other party, or any other person, for reasonable actions
taken in compliance with such obligations. In the event that any
court, administrative agency or tribunal, by order, determination
or administrative action, requires a party to take actions in
compliance with obligations and duties that may be imposed by
statute, regulation, contract or law as a condition or
precondition to the undertakings herein, or determines to
initiate proceedings or does initiate proceedings to compel such
actions of a party, then such party may take such actions as
reasonably are required for compliance with such obligations and
duties, or to discharge, adjust or settle such orders,
determinations, administrative action or proceedings, it being
agreed and understood that the parties will use all reasonable
efforts to oppose the imposition of any such order,
determination, administrative action or proceeding.
(d) Each of Post Entities and Denver Publishing, shall
conscientiously endeavor to perform on a timely basis all
obligations required to be performed by it under all contracts
and leases relating to its Newspaper.
ARTICLE 7
Duration; Termination
7.1 Term.
Unless renewed as provided in this Section 7.1 or terminated
pursuant to Section 7.2, this Agreement and The Denver Newspaper
Agency Limited Liability Company Operating Agreement shall
continue for a term ending at the close of business on the last
day of the fiftieth full fiscal year following the Effective
Date, whereupon this Agreement and The Denver Newspaper Agency
Limited Liability Company Operating Agreement shall expire and
terminate. This Agreement shall automatically renew for
succeeding renewal periods of 25 years each, unless either Denver
Post or Denver Publishing notifies the other in writing at least
five years before the end of the then current period (including
renewal periods), of the election of the party giving the notice
to terminate this Agreement. If such notice is given, this
Agreement shall terminate at the end of the initial period or the
then current renewal period during which the notice is given.
7.2 Termination of this Agreement; Dissolution of the LLC.
(a) Prior to the Effective Date, this Agreement shall
terminate on May 1, 2005, if the Effective Date shall not have
occurred on or before such date, or upon such earlier date, if
any, as the parties hereto may mutually agree upon in writing.
(b) After the Effective Date, this Agreement shall
terminate only as hereinafter provided in this Section 7.2.
(c) After the Effective Date, no Member shall cause
the LLC to be dissolved except as provided herein and in The
Denver Newspaper Agency Limited Liability Company Operating
Agreement. After the Effective Date, the LLC shall continue
until dissolved as herein and thereafter provided. The LLC
shall, subject to the provisions of subsection (e) hereof and to
all applicable provisions of The Denver Newspaper Agency Limited
Liability Company Operating Agreement, be dissolved upon the
occurrence of any of the following:
(i) expiration of the term of this Agreement, as
set forth in Section 7.1 hereof or of the Limited Liability
Company Operating Agreement;
(ii) at the written election of a Member if any
Member willfully or persistently commits one or more
material breaches of this Agreement or The Denver Newspaper
Agency Limited Liability Company Operating Agreement, or
otherwise so conducts itself in matters relating to the LLC
business that it is not reasonably practicable to carry on
the business of the LLC; provided, however, that such
election may be made only if the electing Member has given
written notice to the other Members of such breaches or
conduct and such breaches or conduct have not been
substantially cured within 90 days after such notice has
been given.
(iii) if the LLC experiences a net loss from
its operations, before depreciation and amortization, as
determined in accordance with generally accepted accounting
principles consistently applied, for any three consecutive
fiscal years, then, at any time within six months following
the end of any such three consecutive fiscal years, any
Member may give the others written notice of its intention
to terminate this Agreement, and thereafter this Agreement
shall (subject to the provisions of subsection (e) hereof)
terminate three years after the end of such three
consecutive fiscal years, or earlier if mutually agreed by
Denver Post and Denver Publishing.
(d) No termination of this Agreement or dissolution of
the LLC shall be construed to release any Member from liability
at law or in equity to the other Members or the LLC arising out
of any breach of the terms of this Agreement or The Denver
Newspaper Agency Limited Liability Company Operating Agreement.
(e) As soon as practicable after the termination of
this Agreement by lapse of time or otherwise, the LLC shall
liquidate as provided in Section 7.3 and all applicable
provisions of The Denver Newspaper Agency Limited Liability
Company Operating Agreement.
7.3 Termination at End of Term.
Upon the termination of this Agreement and The Denver Newspaper
Agency Limited Liability Company Operating Agreement, by lapse of
time or otherwise:
(a) Denver Post and Denver Publishing will meet with
each other and use their best efforts to develop a just and
equitable plan for discontinuing and dissolving the LLC and
distributing its assets in kind between Post Entities and Denver
Publishing (after collection of all receivables and payment of
all indebtedness and liabilities of the LLC and all costs of
dissolution and liquidation), in accordance with the Members'
respective Percentage Interests in the LLC, so as to enable
Denver Post and Denver Publishing to resume separate publication
of The Denver Post and Denver Rocky Mountain News, respectively,
as independent businesses (a "Distribution Plan"). If Denver
Post and Denver Publishing agree on a Distribution Plan, the
assets of the LLC shall be distributed in accordance with the
Distribution Plan, all Licenses shall automatically expire and
terminate, and the LLC shall thereupon be dissolved. Except as
provided in the Distribution Plan and upon effective distribution
of assets by the LLC pursuant thereto, neither Denver Post,
Eastern Colorado nor Denver Publishing shall have any separate
right, title or interest in or to any asset of the LLC.
(b) If Denver Post and Denver Publishing are unable to
agree upon a Distribution Plan, all receivables of the LLC shall
be collected and the business affairs and assets of the LLC shall
in accordance with all applicable terms of The Denver Newspaper
Agency Limited Liability Company Operating Agreement be
liquidated as promptly as possible in an orderly and businesslike
manner. The proceeds shall be applied and distributed in
accordance with the terms of The Denver Newspaper Agency Limited
Liability Company Operating Agreement in the following order:
(1) To the payment and discharge of all of the
LLC's debts and liabilities (other than those to Post
Entities and Denver Publishing), including the establishment
of any necessary reserves;
(2) To the payment of any debts and liabilities
to Post Entities and Denver Publishing, including, but not
limited to those arising pursuant to Section 1.8 hereof;
and,
(3) To Denver Post, Eastern Colorado, and Denver
Publishing, or their successors, in accordance with their
respective Percentage Interests.
7.4 Transfers of Interests Under the Agreement and The
Denver Newspaper Agency Limited Liability Company Operating
Agreement.
After the Effective Date, the transfer of the rights of any
party under this Agreement or The Denver Newspaper Agency Limited
Liability Company Operating Agreement or as a Member of the LLC
shall be governed exclusively by the provisions regarding such
transfer set forth in The Denver Newspaper Agency Limited
Liability Company Operating Agreement.
ARTICLE 8
Costs and Liabilities
8.1 Responsibility for Costs.
(a) Costs for the Application to and Proceedings with
the Department of Justice. Each Member shall be responsible for
its own costs, expenses and liabilities which are directly part
of the application to and proceedings with the Department of
Justice. Each of Post Entities (collectively) and Denver
Publishing shall be responsible for one-half of all costs and
expenses of the LLC with respect to such application and
proceedings, including, but without limitation, cost of the hired
economists, accountants, or other experts needed for such
application and proceedings.
(b) Costs for Certain Challenges to the Transactions
Contemplated by this Agreement. Each Member shall be responsible
for its own costs and expenses (including, without limitation,
costs of investigation and preparation) incurred in the defense
of any suit, action or proceeding initiated or threatened by any
governmental authority or any person or entity seeking to
prohibit, enjoin or restrain the transactions contemplated by
this Agreement, or seeking damages in connection with these
transactions or otherwise attempting to challenge the full
implementation of the joint operating arrangement provided in
this Agreement including, without limitation, legal fees and
other costs and expenses incurred in connection with any such
matter. Each of Post Entities, on the one hand, and Denver
Publishing, on the other, shall be responsible for one-half of
all costs and expenses of the LLC incurred in the defense of such
suits, actions or proceedings.
(c) Certain Other Costs and Taxes. Except as
otherwise expressly herein provided, each party shall bear all
fees and expenses incurred by such party in connection with,
relating to or arising out of the consummation of the
transactions contemplated hereby, including, without limitation,
all taxes, attorneys', accountants' and other professional fees
and expenses. All applicable sales, use and real estate transfer
taxes, and all title insurance and survey costs shall be paid by
the LLC.
8.2 Nature of Relationship.
Nothing contained in this Agreement shall constitute the
parties hereto as alter egos or joint employers or as having any
relationship other than as specifically provided herein and in
The Denver Newspaper Agency Limited Liability Company Operating
Agreement. Denver Post, Eastern Colorado and Denver Publishing
each will retain and be responsible for (and will indemnify the
other Members and the LLC against) all of its respective debts,
obligations, liabilities, and commitments which are not
transferred to and assumed by the LLC pursuant to this Agreement.
8.3 Members' Individual Responsibilities.
(a) The entire cost and expense of defending, settling
or paying and discharging any liability or other claim on account
of any article, feature, advertisement, editorial or other item
published in or excluded from The Denver Post or Denver Rocky
Mountain News as a result of any act done or omitted to be done
by the news and editorial departments of The Denver Post or
Denver Rocky Mountain News shall be borne by Denver Post or
Denver Publishing, as the case may be. Each of Denver Post and
Denver Publishing agrees to indemnify and hold the LLC, the other
Members, each of such Member's Affiliates, its and their
directors, officers and employees harmless against any such
liability, cost or expense incurred by such party.
(b) Except as may otherwise be specifically provided
in this Agreement, no Member shall be charged with or held
responsible for any claims arising before or after the Effective
Date hereof by reason of any act or omission on the part of any
other Member, and the responsible Member shall defend, settle,
pay or discharge any such matter, and shall indemnify and hold
harmless the other Members against any such matter, and from any
liability, cost or expense arising therefrom.
8.4 LLC's Responsibility.
After the Effective Date, the entire cost and expense of
defending, settling or paying and discharging any liability or
other claim on account of (a) any article, feature,
advertisement, editorial or other item published in or excluded
from The Denver Post or Denver Rocky Mountain News as a result of
any act done or omitted to be done by the LLC or (b) any other
act done or omitted to be done by the LLC under this Agreement or
The Denver Newspaper Agency Limited Liability Company Operating
Agreement shall be borne by the LLC, except as otherwise
expressly provided herein or therein. The LLC shall indemnify
and hold each of Denver Post, Eastern Colorado and Denver
Publishing and its Affiliates, directors, officers and employees
harmless against any such liability, cost or expense incurred by
any of them.
8.5 Force Majeure.
No party shall be liable to the others for any failure or delay
in performance under this Agreement or The Denver Newspaper
Agency Limited Liability Company Operating Agreement occasioned
by war, riot, act of God or public enemy, strike, labor dispute,
shortage of any supplies, failure of suppliers or workers or
other cause beyond the control of the party required to perform,
and such failure or delay shall not be considered a default
hereunder, but this Section 8.5 shall not excuse any party from
its obligation to pay any sum of money which such party is
otherwise required to pay pursuant to this Agreement or The
Denver Newspaper Agency Limited Liability Company Operating
Agreement.
ARTICLE 9
Miscellaneous
9.1 Notices.
Each notice or other communication given pursuant to this
Agreement or The Denver Newspaper Agency Limited Liability
Company Operating Agreement shall be deemed to have been duly
given when hand delivered or three days after being deposited in
the United States mail, certified, postage prepaid, return
receipt requested, and addressed to the party to be notified at
such party's address as set forth below:
If to Denver Publishing to: Denver Rocky Mountain News
c/o The E.W. Scripps Company
312 Walnut Street, 28th Floor
Cincinnati, Ohio 45202
Attn: Daniel J. Castellini
Senior Vice President and
Chief Financial Officer
Telecopier: (513) 977-3729
With a Copy to: Baker & Hostetler LLP
312 Walnut Street, Suite 2650
Cincinnati, OH 45202
Attn: William Appleton, Esq.
Telecopier: (513) 929-0303
If to either or both c/o MediaNews Group, Inc.
of the Post Entities 1560 Broadway, Suite 2100
(or to the LLC prior Denver, CO 80202
to the Effective Date) Attn: Joseph J. Lodovic, IV
Executive Vice President and
Chief Financial Officer
Telecopier: (303) 820-1929
With a Copy to: Verner, Liipfert, Bernhard,
McPherson and Hand, Chartered
901 15th Street, N.W., Suite 700
Washington, DC 20005-2301
Attn: Howell E. Begle, Jr., Esq.
Telecopier: (202) 371-6279
The LLC shall on the Effective Date by notice to the other
parties given in accordance with this Section 9.1 designate an
address for receipt on or after such date of notices and
communications hereunder. All such notices to the LLC shall on
or after such date be to the attention of the President and Chief
Executive Officer, with copies to Post Entities and Denver
Publishing at the addresses then designated by them for the
receipt of such notices pursuant to this Section 9.1. Any party
may change its address or the individual to whom notice is to be
directed hereunder by notice to the other parties given in
accordance with this Section 9.1.
9.2 Non-Assignability.
This Agreement shall be binding upon and shall inure to the
benefit of each of the parties hereto and their permitted
successors and assigns, but any attempt by any party to assign
any of its rights or to delegate any of its duties hereunder
shall be subject to Section 7.4.
9.3 Entire Understanding.
This Agreement (including the Exhibits) and The Denver
Newspaper Agency Contribution and Sale Agreement embody the
entire understanding and agreement of the parties on the subject
matter herein and therein contained and supersedes any and all
prior agreements, arrangements, and understandings relative to
the subject matter hereof and thereof.
9.4 Headings.
Titles, captions or headings contained in this Agreement are
inserted only as a matter of convenience and for reference and in
no way define, limit, extend or describe the scope of this
Agreement or the intent of any provisions hereto.
9.5 Governing Law.
This Agreement shall be construed and enforced in accordance
with the internal laws of the State of Colorado.
9.6 Modifications.
This Agreement shall be amended only by an agreement in writing
and signed by the party against whom enforcement or discharge is
sought.
9.7 Severability.
Each provision of this Agreement shall be considered severable
from the rest and if any provision of this Agreement or its
application to any person, entity or circumstance shall be held
invalid and contrary to any existing or future law or
unenforceable to any extent, the remainder of this Agreement and
the application of any other provision to any person, entity or
circumstance shall not be affected thereby and shall be
interpreted and enforced to the greatest extent permitted by law
so as to give effect to the original intent of the parties
hereto.
9.8 Specific Performance.
In addition to any other remedies the parties may have, each
party shall have the right to enforce the provisions of this
Agreement through injunctive relief or by a decree or decrees of
specific performance.
9.9 No Third Party Beneficiaries.
Nothing in this Agreement, express or implied, shall give to
anyone other than the parties hereto and their respective
permitted successors and assigns any benefit, or any legal or
equitable right, remedy or claim, under or in respect of this
Agreement.
IN WITNESS WHEREOF, the parties have signed in multiple
counterparts this Agreement by their respective duly authorized
signatories as of the day and year above written.
THE DENVER POST CORPORATION
By:
Joseph J. Lodovic, IV
Executive Vice President and
Chief Financial Officer
EASTERN COLORADO PRODUCTION
FACILITIES, INC.
By:
Joseph J. Lodovic, IV
Executive Vice President and
Chief Financial Officer
DENVER POST PUBLISHING FACILITIES LLC
By:
Joseph J. Lodovic, IV
Executive Vice President and
Chief Financial Officer
THE DENVER PUBLISHING COMPANY
By:
Daniel J. Castellini
Senior Vice President and
Chief Financial Officer
EMPLOYMENT AGREEMENT EXHIBIT 10.62
THIS EMPLOYMENT AGREEMENT is entered into as of July
20, 1999, between THE E. W. SCRIPPS COMPANY, an Ohio corporation
(the "Company"), and KENNETH W. LOWE ("Executive").
W I T N E S S E T H :
WHEREAS, the Company and Executive desire to enter into
this Employment Agreement to insure the Company of the services
of Executive, to provide for compensation and other benefits to
be paid and provided by the Company and Home & Garden Television,
Television Food Network, and Scripps Howard Productions (Cable
Network Companies) to Executive in connection therewith, and to
set forth the rights and duties of the parties in connection
therewith;
NOW, THEREFORE, in consideration of the mutual promises
herein contained, the parties hereby agree as follows:
1. Employment.
(a) The Company hereby employs Executive as
Chairman, President and Chief Executive Officer of each of the
Cable Network Companies and Executive hereby accepts such
employment, on the terms and conditions set forth herein.
(b) During the term of this Agreement and any
renewal hereof (all references herein to the term of this
Agreement shall include references to the period of renewal
hereof, if any), Executive shall be and have the titles, duties
and authority of Chairman, President and Chief Executive Officer
of each of the Cable Network Companies and shall devote his
entire business time and all reasonable efforts to his employment
and perform diligently such duties as are customarily performed
by the chairman, president and chief executive officer of
companies the size and structure of the Cable Network Companies,
together with such other duties as may be reasonably required
from time to time by the Board of any of the Cable Network
Companies or the Chief Executive Officer or Senior Vice
President/Broadcast Division of the Company, which duties may
include overseeing any new cable networks or related businesses
created or acquired by the Company or the Cable Network Companies
and shall be consistent with his position as set forth above and
as provided in Paragraph 2(b).
(c) Executive shall not, without the prior
written consent of the Company, directly or indirectly, during
the term of this Agreement, other than in the performance of
duties naturally inherent to the businesses of the Company and in
furtherance thereof, render services of a business, professional
or commercial nature to any other person or firm, whether for
compensation or otherwise; provided, however, that so long as it
does not materially interfere with his full-time employment
hereunder, Executive may attend to outside investments, and serve
as a director, trustee or officer of, or otherwise participate
in, educational, welfare, social, religious and civic
organizations.
2. Term and Positions.
(a) Subject to the provisions for renewal and
termination hereinafter provided, the term of this Agreement
shall begin on the date hereof and shall continue for the current
Calendar Year and for the succeeding four Calendar Years. As of
January 1, 2004, and as of January 1 of each succeeding even
number calendar year thereafter (e.g. 2006, 2008, etc.), such
term automatically shall be extended for two (2) additional
years, unless: (i) this Employment Agreement is terminated as
provided in Paragraph 5 hereof, or (ii) either the Company or
Executive shall have given notice of non-renewal of this
Employment Agreement to the other at least six (6) months before
January 1, 2004, or six (6) months before the beginning of any
such succeeding two (2) year period, as the case may be (for
example, unless such written notice of non-renewal is given on or
prior to July 1, 2003, the term of this Employment Agreement
automatically will be extended, effective January 1, 2004, until
December 31, 2006) (a "Non-renewal Notice").
(b) Executive shall serve, and shall be entitled
and have the right to serve, as a member of the Board of each of
the Cable Network Companies and for service on each such Board
Executive will receive only such compensation, if any, that is
paid to officers of the Company for service on each such Board on
which Executive shall serve. Without limiting the generality of
any of the foregoing, except as hereafter expressly agreed in
writing by Executive, Executive shall not be required to report
to any single individual except the Chief Executive Officer or
the Senior VP/Broadcast Division of the Company and shall report
also to the Boards of the Cable Network Companies.
3. Compensation.
(a) For all services he may render to the Company
and the Cable Network Companies during the term of this
Agreement, the Company shall pay to Executive the following:
(i) For the period beginning on the date
hereof and ending December 31, 1999, salary equal to an
annual salary of five-hundred thousand dollars
($500,000), multiplied by the ratio of the number of
days in the period beginning on the date hereof and
ending on the last day of the 1999 year to 365; and
(ii) for the Calendar Year beginning on
January 1, 2000, and for each Calendar Year thereafter
during the term of this Agreement, salary as determined
by the Compensation Committee, which in no event shall
be less than the annual salary that was payable by the
Company to Executive under this Paragraph 3(a) for the
immediately preceding Calendar Year.
Salary payable by the Company to Executive under this Paragraph
3(a) shall be payable in those installments customarily used in
payment of salaries to the Company's executives (but in no event
less frequently than monthly).
(b) In recognition of the value Executive has
created in the Cable Network Companies and in order to encourage
Executive to use his talents to enhance the operations and
profitability of the Cable Network Companies in the future, the
Company hereby grants to Executive 96,038 Deferred Stock Units.
Each Deferred Stock Unit entitles Executive to receive from the
Company on its Maturity Date (as defined herein) one Class A
Common Share. On January 15 of each of Calendar Years 2000
through 2004 (each such date, a "Maturity Date"), 20% of the
Deferred Stock Units shall mature and be exchanged for an equal
number of Class A Common Shares. If Executive's employment
hereunder is terminated for any reason (including for "Cause" as
defined herein) before any Maturity Date, Executive (or his
designated beneficiary or legal representative in case of his
death) shall receive Class A Common Shares for the Deferred Stock
Units on each remaining Maturity Date as if Executive were still
employed at such time. No cash dividends or equivalent amounts
shall be paid on outstanding Deferred Stock Units. On each
Maturity Date, the Company shall pay to Executive an amount in
cash which shall be equal to the cash dividends, if any, which
would have been paid between the date hereof and the particular
Maturity Date with respect to issued and outstanding Class A
Common Shares equal in number to the number of Deferred Stock
Units maturing on such Maturity Date. No interest shall be paid
on any dividend equivalent or any part thereof. All Class A
Common Shares issued in exchange for Deferred Stock Units shall
be treasury shares of the Company.
(c) The Company hereby agrees to grant to
Executive under the Company's 1997 Long-Term Incentive Plan (the
"Incentive Plan") for each of Calendar Years 1999 through 2003
during all or part of which Executive is employed hereunder a
number of Class A Common Shares of the Company to be determined
as follows:
For each such Calendar Year (commencing with 1999) in
which the Cable Network Companies earn at least a 15% Total
Business Return (as defined herein), Executive will receive
a grant of Class A Common Shares equal in value to 1% of the
Total Business Return for that Calendar Year. If the Total
Business Return for the applicable Calendar Year is less
than 15%, Executive will not be entitled to a grant of Class
A Common Shares for that Calendar Year. "Total Business
Return" will equal the percentage obtained by dividing (A)
the excess, if any, of (i) the value of the Cable Network
Companies for such Calendar Year plus the net dividends (as
defined herein) paid by the Cable Network Companies to the
Company in such Calendar Year over (ii) the value of the
Cable Network Companies for the immediately preceding
Calendar Year (the "Prior Year Base") by (B) the Prior Year
Base. Notwithstanding anything to the contrary in the
foregoing, if in any Calendar Year the value of the Cable
Network Companies for such year is less than the value of
the Cable Network Companies for the immediately preceding
Calendar Year, the Total Business Return for each ensuing
Calendar Year shall be calculated using the value of the
Cable Network Companies for such immediately preceding
Calendar Year as the Prior Year Base until such Prior Year
Base is exceeded in one of such ensuing years. "Net
dividends" means cash flows from operation of the Cable
Network Companies on an after-tax basis net of all
additional investment in the operating assets of the Cable
Network Companies. The two charts attached to this
Employment Agreement as Exhibit A will serve as hypothetical
illustrations of the foregoing.
The number of Class A Common Shares subject to each
grant will be determined by dividing one percent (1%) of the
applicable Total Business Return by the Fair Market Value (as
defined in the Incentive Plan) of a Class A Common Share on
December 31 of the Calendar Year with respect to which such Total
Business Return is calculated. Each grant will be made on or
before April 15 (the "grant date") of the Calendar Year following
the Calendar Year with respect to which such grant is to be made.
The shares subject to each grant made to Executive hereunder will
vest at the rate of 20% per year on each anniversary (a "vesting
date") of the applicable grant date over the five years first
following such grant. Unvested shares will remain on deposit
with the Company and Executive will execute a blank stock power
therefor in accordance with the Incentive Plan.
For purposes hereof, the increase in value of the Cable
Network Companies will be determined by no later than March 31 of
each of Calendar Years 2000 through 2004 by Duff & Phelps.
Executive and the Company agree that such firm will take into
consideration in valuing the Cable Network Companies the
following criteria in addition to such other criteria as such
firm determines to be pertinent: (i) revenues and expenses of the
Cable Network Companies stated at levels generally consistent
with those of a stand-alone company; (ii) future earnings and
cash flow stated at levels generally consistent with those of a
stand-alone company; (iii) historical financial performance to
the extent it provides evidence of prospective results; (iv)
current valuation criteria in equity markets; (v) the
contribution of the Cable Network Companies as a whole to the
market value of the Company; and (vi) the impact of any major new
cable network or related business created or acquired by the
Company or the Cable Network Companies during the term of this
Agreement that Executive is required to oversee. Notwithstanding
the foregoing, Executive and the Company agree as follows: (i) in
valuing the Cable Network Companies Duff & Phelps will not take
into consideration the "break-up" value that could be obtained if
the separate companies or businesses then comprised by the Cable
Network Companies were to be sold individually or as a group;
(ii) after consideration of all criteria as aforesaid (except
"break-up" value) the Cable Network Companies will not be valued
at levels exceeding their contribution as a whole to the market
value of the Company as determined by Duff & Phelps; and (iii) if
the Cable Network Companies as a whole are sold or the equity
thereof becomes publicly traded, the market value of the Cable
Network Companies (as evidenced by the sale price or the public
trading price) will be the sole basis for determining the Total
Business Return and neither Duff & Phelps nor any other valuation
firm will be engaged. The methodology used by Duff & Phelps for
the first valuation of the Cable Network Companies that it
provides pursuant to this Section 3(c) will be the methodology
used in all other valuations of the Cable Network Companies
pursuant to this Section 3(c).
If Executive's employment hereunder terminates prior to
any vesting date for reasons other than death, disability (as
defined in Paragraph 4(c) hereof), Change in Control of the
Company or the Cable Network Companies, termination without Cause
(as defined in Paragraph 5(a)(ii) hereof) by the Company, or
termination by Executive in the event of a material breach of
this Agreement by the Company (i) which is not cured in all
material respects within twenty days after Executive gives notice
thereof to the Company and (ii) at a time when the Company does
not have Cause to terminate Executive, all unvested shares and
all rights to future grants hereunder will be forfeited. "Change
in Control" for purposes of this Agreement shall mean (i) with
respect to the Company, an event that would be required to be
reported in response to Item 1 of Form 8-K or any successor form
thereto promulgated under the Securities Exchange Act of 1934
("Exchange Act"); provided, however, that the termination of The
Edward W. Scripps Trust and the effectiveness, as a result of
such termination, of certain provisions of the Scripps Family
Agreement dated October 15, 1992, as it may be amended from time
to time, shall not constitute a "Change in Control" regardless of
whether such events are required to be or are reported pursuant
to the Exchange Act; and (ii) with respect to the Cable Network
Companies, sale by the Company of all or substantially all assets
of, or transfer by the Company of majority voting control of, the
Cable Network Companies as a whole or the Home and Garden
Television Network or the Television Food Network to any person
that is not controlled by, under common control with, or in
control of the Company.
If Executive's employment hereunder terminates prior to any
vesting date by reason of his disability or death, or as a result
of a Change in Control, all unvested shares will vest
automatically at the time of such termination and all rights to
future grants hereunder (other than those for the Calendar Year
preceding such termination or in which such termination occurred,
as provided for in the last paragraph of this section) will be
forfeited.
If Executive's employment hereunder terminates, by reason of
his disability or death, or as a result of a Change in Control,
prior to a grant date following a Calendar Year with respect to
which Executive was employed hereunder and would be entitled to a
grant of Class A Common Shares hereunder, such grant shall
nevertheless be made in accordance herewith, and all shares
subject thereto shall be deemed vested as of the time of such
grant and shall be issued to Executive (or his designated
beneficiary or legal representatives in case of his death) on
such grant date. If such termination occurs prior to the end of
a Calendar Year, any grant to which Executive is entitled for
such Calendar Year shall be prorated based on the ratio of the
number of business days in such Calendar Year Executive was
employed hereunder to the total number of business days in such
Calendar Year.
If Executive's employment terminates as a result of a
termination without Cause by the Company or a termination by
Executive in the event of a material breach of this Agreement by
the Company (i) which is not cured in all material respects
within twenty days after Executive gives notice thereof to the
Company and (ii) at a time when the Company does not have Cause
to terminate Executive, all unvested shares will vest
automatically at the time of such termination and all rights to
future grants hereunder will continue and any grant hereunder to
which Executive would have been entitled had he remained employed
hereunder through Calendar Year 2003 and not been so terminated
shall be made in accordance herewith, and all shares subject to
such grant shall be deemed vested as of the time of such grant
and shall be issued to Executive on the applicable grant date (or
to his designated beneficiary or legal representatives in the
case of his death prior to any applicable grant date).
(d) Executive shall be entitled, subject to the
terms and conditions of the appropriate plans, to all benefits
provided by the Company to Senior Level Executives in accordance
with the Company's policies from time to time in effect.
(e) Upon delivery of proper documentation,
therefore, Executive shall be reimbursed for all first class
travel, hotel and all business expenses when incurred on Cable
Network Companies business.
4. Payment in the Event of Death or Permanent
Disability.
(a) In the event of Executive's death or
"permanent disability" (as hereinafter defined) during the term
of this Employment Agreement, the Company shall for a period
equal to the greater of (i) twenty-four (24) months following the
date of such death or permanent disability or (ii) the balance of the
term remaining at such date continue to pay to Executive (or his
successors and assigns under the applicable laws of descent and
distribution in the event of his death) Executive's then
effective per annum rate of salary, as determined under Paragraph
3(a), and provide to Executive (or to his family members covered
under his family medical coverage) the same "family" medical
coverage as provided to Executive on the date of such death or
disability. Furthermore, in the event of Executive's death or
permanent disability, Executive (or his designated beneficiary or
legal representative in case of his death) shall receive Class A
Common Shares for the Deferred Stock Units on each remaining
Maturity Date as if Executive were still employed at such time.
(b) Except as otherwise provided in Paragraph
4(a), in the event of Executive's death or permanent disability
Executive's employment hereunder shall terminate and Executive
shall be entitled to no further compensation or other payments or
benefits under this Employment Agreement, except as to unmatured
Deferred Stock Units and that portion of any unpaid salary and
other benefits accrued and earned by him hereunder up to and
including the date of such death or permanent disability, as the
case may be.
(c) For purposes of this Employment Agreement,
Executive's "permanent disability" shall be deemed to have
occurred after one hundred fifty (150) days in the aggregate
during any consecutive twelve (12) month period, or after ninety
(90) consecutive days, during which one hundred fifty (150) or
ninety (90) days, as the case may be, Executive, by reason of his
physical or mental disability or illness, shall have been unable
to discharge his duties under this Employment Agreement. The
date of permanent disability shall be such one hundred fiftieth
(150th) or ninetieth (90th) day, as the case may be. In the
event either the Company or Executive, after receipt of notice of
Executive's permanent disability from the other, dispute that
Executive's permanent disability shall have occurred, Executive
shall promptly submit to a physical examination by the chief of
medicine of any major accredited hospital in the Cincinnati,
Ohio, area selected by the Company and, unless such physician
shall issue his written statement to the effect that in his or
her opinion, based on his or her diagnosis, Executive is capable
of resuming his employment and devoting his full time and energy
to discharging his duties within thirty (30) days after the date
of such statement, such permanent disability shall be deemed to
have occurred.
(d) The payments to be made by the Company to
Executive hereunder shall be offset and therefore reduced by the
amount of any insurance proceeds (on a tax-effected basis) paid
to Executive arising out of the events described in this
Paragraph 4 from insurance policies (not including amounts
otherwise payable to Executive pursuant to insurance policies
provided under Company-wide employee benefit and welfare plans)
obtained by the Company.
5. Termination
(a) The employment of Executive under this
Employment Agreement, and the term of this Employment Agreement:
(i) shall be terminated automatically upon
the death or permanent disability of Executive, or
(ii) may be terminated for Cause at any time
by the Company, with any such termination not being in
limitation of any other right or remedy the Company may
have under this Employment Agreement or otherwise (for
purposes of this Employment Agreement, the term "Cause"
meaning:
(A) Executive's fraud or commission of a
felony or of an act or series of acts, which in any case
results in material injury to the business or reputation of
the Company, or Executive's willful failure to perform his
duties under this Employment Agreement, which failure has
not been cured in all material respects within twenty (20)
days after the Company gives notice thereof to Executive;
or
(B) Executive's material breach of any provision of
this Employment Agreement, which breach has not been cured in all
material respects within twenty (20) days after the Company gives
notice thereof to Executive); or
(iii) may be terminated at any time by
the Company other than for the reasons set forth in the
foregoing clauses (i) and (ii); or
(iv) may be terminated at any time (including
following a Change in Control) by Executive with thirty
(30) days' advance notice to the Company; or
(v) shall be terminated automatically at the
end of the term of this Employment Agreement then in
effect in the event either party gives to the other
party a Non-renewal Notice.
Upon any such termination, Executive shall be deemed
automatically to have resigned from all offices and directorships
held by Executive in the Company or the Cable Network Companies.
Notwithstanding anything to the contrary in this Section 5(a),
the term "Cause" shall not include any act or series of acts
taken by Executive in good faith on behalf of the Company,
provided that such act or series of acts was within his authority
as Executive, did not constitute a breach of any fiduciary duty
and was not taken again following his receipt of direction to
cease such act or acts from the Chief Executive Officer or Senior
Vice President/Broadcast Division of the Company or the Board of
any of the Cable Network Companies.
(b) If Executive's employment with the Company is
terminated by the Company without Cause or by Executive following
a Change in Control or at a time when the Company (i) has been in
material breach of this Agreement for twenty (20) days after
receiving notice of such breach from Executive and (ii) does not
have Cause to terminate Executive, the Company shall continue to
pay to Executive the per annum rate of salary then in effect
under Paragraph 3(a) and provide the benefits described in Paragraph
3(d) then in effect (unless the terms of the applicable plans
expressly prohibit the continuation of such benefits after such
termination and cannot be amended, with applicability of such
amendment limited to Executive, to provide for such continuation)
for a period equal to the greater of (A) twenty-four months or
(B) the balance of the term remaining at the time of such
termination.
(c) In the event of termination for any reason
set forth in subparagraph (a) of this Paragraph 5, except as
otherwise provided in Paragraph 5(b), Executive shall be entitled
to no further compensation or other payments or benefits under
this Employment Agreement, except as to that portion of any
unpaid salary and other benefits accrued and earned by him
hereunder up to and including the effective date of such
termination.
(d) In the event of termination for any reason
set forth in subparagraph (a) of this Paragraph 5, Executive's
employment with the Company for all purposes shall be deemed to
have terminated as of the effective date of such termination
hereunder, irrespective of whether the Company has a continuing
obligation under this Employment Agreement to make payments or
provide benefits to Executive after such effective date.
6. Covenants and Confidential Information
(a) Executive acknowledges the Cable Network
Companies' reliance and expectation of Executive's continued
commitment to performance of his duties and responsibilities
during the term of this Employment Agreement. In light of such
reliance and expectation on the part of the Cable Network
Companies, during the term of this Employment Agreement and (i)
for six (6) months after termination of Executive's employment
and this Employment Agreement by the Company under Paragraph
5(a)(iii) hereof or by Executive at a time when the Company has
been in material breach of this Agreement for twenty (20) days
after receiving notice of such breach from Executive and does not
have Cause to terminate Executive ("Company Breach") or (ii) one year
after termination of Executive's employment and this Employment
Agreement by Executive under Paragraph 5 hereof (other than
termination by Executive for Company Breach) or by the Company
under Paragraph 5(a)(ii) hereof, Executive shall not, directly or
indirectly, do or suffer any of the following:
(i) Own, manage, control or participate in
the ownership, management, or control of, or be employed or
engaged by or otherwise affiliated or associated as a consultant,
independent contractor or otherwise with, any other corporation,
partnership, proprietorship, firm, association or other business
entity, or otherwise engage in any business, which is in
competition with the business of the Cable Network Companies as
and where conducted by the Cable Network Companies at the time of
such termination; provided, however, that the ownership of not
more than one percent (1%) of any class of publicly traded
securities of any entity shall not be deemed a violation of this
covenant, and further provided that Executive's ownership of any
interest in DNL, Inc., a corporation formed by Executive and
certain other persons ("DNL"), shall not be deemed a violation of
this covenant so long as DNL is not competing with any of the
Cable Network Companies and Executive's ownership of such
interest, his participation in the management or control of DNL
or his employment or engagement thereby or affiliation or
association therewith does not materially interfere with his full-
time employment hereunder;
(ii) Solicit the employment of, assist in the
soliciting of the employment of, or otherwise solicit the
association in business with any person or entity of, any
employee or officer of the Cable Network Companies.
(iii) Induce any person who is an
employee, officer or agent of the Cable Network Companies to
terminate said relationship.
(b) Executive expressly agrees and understands
that the remedy at law for any breach by him of this Paragraph 6
may be inadequate and that the damages flowing from such breach
are not readily susceptible to being measured in monetary terms.
Accordingly, it is acknowledged that, upon adequate proof of
Executive's violation of any provision of this Paragraph 6, the
Cable Network Companies shall be entitled to immediate injunctive
relief and may obtain a temporary order restraining any
threatened or further breach and may withhold any amounts owed to
Executive pursuant to this Agreement. Nothing in this Paragraph
6 shall be deemed to limit the Cable Network Companies' remedies
at law or in equity for any breach by Executive of any of the
provisions of this Paragraph 6 which may be pursued or availed by
the Cable Network Companies.
(c) In the event Executive shall violate any
legally enforceable provision of this Paragraph 6 as to which
there is a specific time period during which he is prohibited
from taking certain actions or from engaging in certain
activities, as set forth in such provision, then, in such event,
such violation shall toll the running of such time period from
the date of such violation until such violation shall cease.
(d) Executive has carefully considered the nature
and extent of the restrictions upon him and the rights and
remedies conferred upon the Cable Network Companies under this
Paragraph 6, and hereby acknowledges and agrees that the same are
reasonable in time and territory, are designed to eliminate
competition which otherwise would be unfair to the Cable Network
Companies, do not stifle the inherent skill and experience of
Executive, would not operate as a bar to Executive's sole means
of support, are fully required to protect the legitimate
interests of the Cable Network Companies and do not confer a
benefit upon the Cable Network Companies disproportionate to the
detriment to Executive.
7. Withholding Taxes.
All payments to Executive hereunder shall be
subject to withholding on account of federal, state and local
taxes as required by law.
8. No Conflicting Agreements.
Executive represents and warrants that he is not a
party to any agreement, contract or understanding, whether
employment or otherwise, which would restrict or prohibit him
from undertaking or performing employment in accordance with the
terms and conditions of this Employment Agreement.
9. Severable Provisions.
The provisions of this Employment Agreement are
severable and if any one or more provisions may be determined to
be illegal or otherwise unenforceable, in whole or in part, the
remaining provisions and any partially unenforceable provision to
the extent enforceable in any jurisdiction nevertheless shall be
binding and enforceable.
10. Binding Agreement.
The rights and obligations of the Company under
this Employment Agreement shall inure to the benefit of, and
shall be binding on, the Company and its successors and assigns,
and the rights and obligations (other than obligations to perform
services) of Executive under this Employment Agreement shall
inure to the benefit of, and shall be binding upon, Executive and
his heirs, personal representatives and successors and assigns.
11. Arbitration.
Any controversy or claim arising out of or
relating to this Employment Agreement, or the breach thereof,
shall be settled by arbitration in accordance with the Rules of
the American Arbitration Association then pertaining in the City
of Cincinnati, Ohio, and judgment upon the award rendered by the
arbitrator or arbitrators may be entered in any court having
jurisdiction thereof. The arbitrator or arbitrators shall be
deemed to possess the powers to issue mandatory orders and
restraining orders in connection with such arbitration; provided,
however, that nothing in this Paragraph 11 shall be construed so
as to deny the Cable Network Companies the right and power to
seek and obtain injunctive relief in a court of equity for any
breach or threatened breach by Executive of any of his covenants
contained in Paragraph 6 hereof. The parties shall share equally
the fees and other expenses of the arbitrator(s).
12. Notices.
Notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given when
sent by certified mail, postage prepaid, addressed to the
intended recipient at the address set forth at the end of this
Employment Agreement, or at such other address as such intended
recipient hereafter may have designated most recently to the
other party hereto with specific reference to this Paragraph 12.
13. Waiver.
The failure of either party to enforce any
provision or provisions of this Employment Agreement shall not in
any way be construed as a waiver of any such provision or
provisions as to any future violations thereof, nor prevent that
party thereafter from enforcing each and every other provision of
this Employment Agreement. The rights granted the parties herein
are cumulative and the waiver of any single remedy shall not
constitute a waiver of such party's right to assert all other
legal remedies available to it under the circumstances.
14. Miscellaneous.
This Employment Agreement supersedes all prior
agreements and understandings between the parties and may not be
modified or terminated orally. All obligations and liabilities
of each party hereto in favor of the other party hereto relating
to matters arising prior to the date hereof have been fully
satisfied, paid and discharge. No modification, termination or
attempted waiver shall be valid unless in writing and signed by
the party against whom the same is sought to be enforced.
15. Governing Law.
This Employment Agreement shall be governed by and
construed according to the laws of the State of Ohio.
16. Captions and Paragraph Headings.
Captions and paragraph headings used herein are
for convenience and are not a part of this Employment Agreement
and shall not be used in construing it.
IN WITNESS WHEREOF, the parties have executed this
Employment Agreement on the day and year first set forth above.
Attn: Corporate Secretary THE E. W. SCRIPPS COMPANY
P.O. Box 5380
Cincinnati, Ohio 45201-5380 By:
William R. Burleigh
Chairman and President
104 River Place Lane
Louisville, TN 37777
Kenneth W. Lowe