UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number 0-16914
THE E. W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)
Ohio 31-1223339
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
312 Walnut Street
Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (513) 977-3000
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities and Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date. As of April 30, 2001 there were 60,101,803 of the
Registrant's Class A Common Shares outstanding and 19,096,913
of the Registrant's Common Voting Shares outstanding.
INDEX TO THE E. W. SCRIPPS COMPANY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2001
Item No. Page
PART I - FINANCIAL INFORMATION
1 Financial Statements 3
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 3
3 Quantitative and Qualitative Disclosures About
Market Risk 3
PART II - OTHER INFORMATION
1 Legal Proceedings 3
2 Changes in Securities 3
3 Defaults Upon Senior Securities 3
4 Submission of Matters to a Vote of
Security Holders 4
5 Other Information 4
6 Exhibits and Reports on Form 8-K 4
PART I
ITEM 1. FINANCIAL STATEMENTS
The information required by this item is filed as part of this
Form 10-Q. See Index to Financial Information at page F-1 of
this Form 10-Q.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item is filed as part of this
Form 10-Q. See Index to Financial Information at page F-1 of
this Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The information required by this item is filed as part of this
Form 10-Q. See Index to Financial Information at page F-1 of
this Form 10-Q.
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in litigation arising in the ordinary
course of business, such as defamation actions and various
governmental and administrative proceedings relating to renewal
of broadcast licenses, none of which is expected to result in
material loss.
ITEM 2. CHANGES IN SECURITIES
There were no changes in the rights of security holders during
the quarter for which this report is filed.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the quarter
for which this report is filed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders
during the quarter for which this report is filed.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
The information required by this item is filed as part of this
Form 10-Q. See Index to Exhibits at page E-1 of this
Form 10-Q.
Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
THE E. W. SCRIPPS COMPANY
Dated: May 10, 2001 BY: D. J. Castellini
D. J. Castellini
Senior Vice President and
Chief Financial Officer
THE E. W. SCRIPPS COMPANY
Index to Financial Information
Item Page
Consolidated Balance Sheets F-2
Consolidated Statements of Income F-4
Consolidated Statements of Cash Flows F-5
Consolidated Statements of Comprehensive Income and
Stockholders' Equity F-6
Notes to Consolidated Financial Statements F-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Forward Looking Statements F-15
Results of Operations F-15
Newspapers F-18
Scripps Networks F-19
Broadcast Television F-20
Liquidity and Capital Resources F-21
Market Risk F-22
CONSOLIDATED BALANCE SHEETS
( in thousands ) As of
March 31, December 31, March 31,
2001 2000 2000
( Unaudited ) ( Unaudited )
ASSETS
Current Assets:
Cash and cash equivalents $ 13,840 $ 14,112 $ 19,670
Accounts and notes receivable (less
allowances -$12,794, $13,891, $10,850) 233,845 289,583 274,812
Program rights and production costs 110,442 115,513 87,699
Network distribution fees 20,892 21,105 22,220
Inventories 10,106 17,802 17,745
Deferred income taxes 30,251 30,421 27,583
Miscellaneous 34,593 35,449 27,738
Total current assets 453,969 523,985 477,467
Investments 395,011 177,922 275,530
Property, Plant and Equipment 383,254 502,041 484,509
Goodwill and Other Intangible Assets 1,212,182 1,209,132 1,222,746
Other Assets:
Program rights and production costs (less current portion) 106,228 96,881 78,679
Network distribution fees (less current portion) 39,487 40,571 41,353
Miscellaneous 20,743 22,334 33,348
Total other assets 166,458 159,786 153,380
TOTAL ASSETS $ 2,610,874 $ 2,572,866 $ 2,613,632
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
( in thousands, except share data ) As of
March 31, December 31, March 31,
2001 2000 2000
( Unaudited ) ( Unaudited )
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 237,742 $ 212,828 $ 274,126
Accounts payable 110,234 114,275 91,206
Customer deposits and unearned revenue 32,976 37,214 35,964
Accrued liabilities:
Employee compensation and benefits 37,766 49,089 40,681
Network distribution fees 51,220 48,257 40,877
Miscellaneous 62,521 71,313 87,506
Total current liabilities 532,459 532,976 570,360
Deferred Income Taxes 138,117 129,932 167,084
Long-Term Debt (less current portion) 508,411 501,781 501,842
Other Long-Term Obligations and Minority Interests (less current portion) 123,704 130,367 140,141
Stockholders' Equity:
Preferred stock, $.01 par - authorized: 25,000,000 shares; none outstanding
Common stock, $.01 par:
Class A - authorized: 120,000,000 shares; issued and
outstanding: 59,987,153; 59,641,828; and 59,033,621 shares 600 596 590
Voting - authorized: 30,000,000 shares; issued and
outstanding: 19,096,913; 19,096,913; and 19,216,913 shares 191 191 192
Total 791 787 782
Additional paid-in capital 170,415 157,394 139,713
Retained earnings 1,147,723 1,093,138 996,262
Unrealized gains (losses) on securities available for sale (779) 31,877 101,573
Foreign currency translation adjustment (221) 361 946
Unvested restricted stock awards (9,746) (5,747) (5,071)
Total stockholders' equity 1,308,183 1,277,810 1,234,205
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,610,874 $ 2,572,866 $ 2,613,632
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME ( UNAUDITED )
( in thousands, except per share data ) Three months ended
March 31,
2001 2000
Operating Revenues:
Advertising $ 272,773 $ 317,699
Circulation 36,182 38,349
Affiliate fees 19,757 14,630
Licensing 18,000 16,251
Joint operating agency distributions 9,057 10,883
Other 11,610 13,047
Total operating revenues 367,379 410,859
Operating Expenses:
Employee compensation and benefits 118,755 127,292
Newsprint and ink 26,241 37,192
Amortization of purchased programming 32,095 28,038
Other operating expenses 104,274 117,272
Depreciation 14,357 17,074
Amortization of intangible assets 10,408 9,734
Total operating expenses 306,130 336,602
Operating Income 61,249 74,257
Other Credits (Charges):
Interest expense (12,461) (12,636)
Investment results, net of expenses 58,785 (9,062)
Net gains on divested operations 6,269
Miscellaneous, net 353 946
Net other credits (charges) 46,677 (14,483)
Income Before Taxes and Minority Interests 107,926 59,774
Provision for Income Taxes 40,642 25,114
Income Before Minority Interests 67,284 34,660
Minority Interests 846 1,056
Net Income $ 66,438 $ 33,604
Net Income per Share of Common Stock:
Basic $.84 $.43
Diluted .83 .43
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS ( UNAUDITED )
( in thousands ) Three months ended
March 31,
2001 2000
Cash Flows from Operating Activities:
Net income $ 66,438 $ 33,604
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation and amortization 24,765 26,808
Net investment results and loss (gain) on divestitures (59,789) 1,347
Deferred income taxes 25,992 (613)
Dividends greater than share of earnings of equity method investments 11,004 561
Minority interests in income of subsidiary companies 846 1,056
Network distribution fee amortization greater (less) than payments 3,711 3,182
Program cost amortization greater (less) than payments (11,344) (8,950)
Other changes in certain working capital accounts, net 5,195 (4,643)
Miscellaneous, net 8,597 4,788
Net operating activities 75,415 57,140
Cash Flows from Investing Activities:
Additions to property, plant and equipment (14,716) (15,014)
Purchase of subsidiary companies and long-term investments (20,348) (52,093)
Payment for interest in Denver JOA (62,520)
Sale of subsidiary companies and long-term investments 145 24,660
Miscellaneous, net 210 (630)
Net investing activities (97,229) (43,077)
Cash Flows from Financing Activities:
Increase in long-term debt 31,552 7,900
Payments on long-term debt (17) (1,394)
Repurchase Class A Common shares (1,988)
Dividends paid (11,853) (10,951)
Dividends paid to minority interests (392) (392)
Miscellaneous, net (primarily employee stock compensation) 4,240 (12)
Net financing activities 21,542 (4,849)
Increase (Decrease) in Cash and Cash Equivalents (272) 9,214
Cash and Cash Equivalents:
Beginning of year 14,112 10,456
End of period $ 13,840 $ 19,670
Supplemental Cash Flow Disclosures:
Interest paid, excluding amounts capitalized $ 9,217 $ 9,236
Income taxes paid 10,909 8,948
Denver newspaper assets contributed to JOA 162,227
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 ( UNAUDITED )
( in thousands, except share data )
Accumulated Unvested
Additional Other Restricted Total
Common Paid-in Retained Comprehensive Stock Stockholders'
Stock Capital Earnings Income Awards Equity
Balances at December 31, 1999 $ 781 $ 136,731 $ 973,609 $ 58,271 $ (4,940)$ 1,164,452
Comprehensive income:
Net income 33,604 33,604
Unrealized gains, net of tax of $24,278 45,080 45,080
Less: reclassification adjustment for gains
in income, net of tax of ($433) (805) (805)
Increase in unrealized gains on securities 44,275 44,275
Foreign currency translation adjustments (27) (27)
Total 33,604 44,248 77,852
Dividends: declared and paid - $.14 per share (10,951) (10,951)
Compensation plans, net: 133,251 shares issued;
25,079 shares repurchased 1 1,982 (131) 1,852
Tax benefits of compensation plans 1,000 1,000
Balances at March 31, 2000 $ 782 $ 139,713 $ 996,262 $ 102,519 $ (5,071)$ 1,234,205
Balances at December 31, 2000 $ 787 $ 157,394 $1,093,138 $ 32,238 $ (5,747)$ 1,277,810
Comprehensive income:
Net income 66,438 66,438
Unrealized gains, net of tax of $5,442 10,210 10,210
Less: reclassification adjustment for gains
in income, net of tax of ($23,081) (42,866) (42,866)
Increase (decrease) in unrealized gains on securities (32,656) (32,656)
Foreign currency translation adjustments (582) (582)
Total 66,438 (33,238) 33,200
Dividends: declared and paid - $.15 per share (11,853) (11,853)
Repurchase 35,200 Class A Common Shares (1,988) (1,988)
Compensation plans, net: 482,294 shares issued;
101,769 shares repurchased 4 9,356 (3,999) 5,361
Tax benefits of compensation plans 5,653 5,653
Balances at March 31, 2001 $ 791 $ 170,415 $1,147,723 $ (1,000)$ (9,746)$ 1,308,183
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
_______________________________________________________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial
information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. The information disclosed in the
notes to consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended
December 31, 2000, has not changed materially unless otherwise
disclosed herein. Financial information as of December 31,
2000, included in these financial statements has been derived
from the audited consolidated financial statements included in
that report. In management's opinion all adjustments
(consisting of normal recurring accruals) necessary for a fair
presentation of the interim periods have been made.
Results of operations are not necessarily indicative of the
results that may be expected for future interim periods or for
the full year.
Joint Operating Agencies - The application for a joint operating
agency ("JOA") between the Company's Denver Rocky Mountain News ("RMN")
and MediaNews Group Inc.'s Denver Post was approved by the U.S.
Department of Justice. The JOA commenced operations on
January 22, 2001. The Denver Publishing Company, a wholly owned
subsidiary of the Company, holds a 50% interest in the JOA.
Included in JOA distributions in the Consolidated Statements of
Income is the Company's share of the operating profit (loss) of
the Denver JOA from January 22, 2001. The Company also includes
in its operating expenses its editorial costs associated with
the RMN. The Company's financial statements no longer include
the advertising and other revenue of the RMN, the costs to
produce, distribute and market the newspaper, or related
depreciation. The Company's residual interest in the net assets
of the JOA is included in Investments in the Consolidated
Balance Sheets.
Derivative Instruments and Hedging Activities - The Company
adopted Financial Accounting Standard No. 133 - Accounting for
Derivative Instruments and Hedging Activities effective January
1, 2001. Adoption of the new standard had no effect on the
Company's financial statements.
Net Income Per Share - The following table presents additional
information about basic and diluted weighted-average shares
outstanding:
( in thousands ) Three months ended
March 31,
2001 2000
Basic weighted-average shares outstanding 78,719 77,977
Effect of dilutive securities:
Unvested restricted stock held by employees 146 116
Stock options held by employees 999 731
Diluted weighted-average shares outstanding 79,864 78,824
Reclassifications - For comparative purposes, certain 2000
amounts have been reclassified to conform to 2001
classifications.
2. ACQUISITIONS AND DIVESTITURES
Acquisitions
2001 - The Company acquired an additional 3.5% interest in
The Television Food Network.
2000 - In the first quarter the Company acquired the daily
newspaper in Fort Pierce, Florida, in exchange for its
newspaper in Destin, Florida, and cash; and television
station KMCI in Lawrence, Kansas.
In later periods the Company acquired the daily
newspaper in Henderson, Kentucky, and the weekly newspaper
in Marco Island, Florida.
The following table presents additional information about the
acquisitions:
( in thousands )
Three months ended
March 31,
2001 2000
Goodwill and other intangible assets acquired $ 14,429 $ 44,381
Other assets acquired 2,646
Total 14,429 47,027
Fair value of Destin newspaper (3,857)
Liabilities assumed (38)
Cash paid $ 14,429 $ 43,132
The acquisitions have been accounted for as purchases. The
allocations of the purchase prices are based on preliminary
appraised values of the assets acquired and liabilities
assumed, and are therefore subject to change. Operating results
are included in the Consolidated Statements of Income from the
dates of acquisitions, with the exception of KMCI whose results
were included while the Company operated the station under a
contract with the former owner. Pro forma results are not
presented because the combined results of operations would not
be significantly different than the reported amounts.
Divestitures
2000 - In the first quarter the Company sold its independent
telephone directories in Memphis, Tennessee; Kansas City,
Missouri; and North Palm Beach, Florida, and traded its
Destin, Florida, newspaper and cash for the daily
newspaper in Fort Pierce, Florida. The sales and trade
resulted in net gains of $6,269,000, $3,800,000 after-tax
($.05 per share).
In the third quarter the Company sold its remaining
independent telephone directories in Louisiana.
Included in the consolidated financial statements are the
following results of divested operations (excluding gains on
sales):
( in thousands ) Three
months ended
March 31,
2000
Operating revenues $ 6,802
Operating income (loss) (111)
3. UNUSUAL CREDITS AND CHARGES
2001 - Included in net investment results are i) recognized
net investment gains and ii) adjustments to accrued incentive
compensation related to changes in the net gains (realized
and estimated unrealized) on the Scripps Ventures I
portfolio. Included in recognized net investment gains
are i) a gain of $65,900,000 on the exchange of the
Company's investment in Time Warner for America
Online, which acquired Time Warner, ii) $17,900,000
in write-downs for several investments, and
iii) an $11,500,000 reduction in accrued incentive
compensation, to zero at March 31, 2001, in conjunction
with the $68,400,000 decrease in the total realized and
estimated unrealized net gain on Scripps
Ventures I's portfolio, to $8,500,000.
Net investment results in the first quarter increased net
income $38,500,000 ($.48 per share).
2000 - In addition to the gains on divested operations described
in Note 2, net investment results include i) recognized net
investment losses totaling $2,000,000 and ii) a $7,100,000
increase in accrued incentive compensation,
to $14,100,000 at March 31, 2000, in conjunction
with the $47,000,000 increase in the total realized
and estimated unrealized net gain on Scripps Ventures I's
portfolio, to $94,000,000.
The combined effect of the above items was to reduce first
quarter 2000 net income $2,100,000 ($.02 per share).
4. LONG-TERM DEBT
Long-term debt consisted of the following:
( in thousands ) As of
March 31, December 31, March 31,
2001 2000 2000
Variable rate credit facilities, including commercial paper $ 537,701 $ 512,788 $ 573,590
$100 million, 6.625% note, due in 2007 99,905 99,901 99,890
$100 million, 6.375% note, due in 2002 99,968 99,964 99,949
Other notes 8,579 1,956 2,539
Total long-term debt 746,153 714,609 775,968
Current portion of long-term debt 237,742 212,828 274,126
Long-term debt (less current portion) $ 508,411 $ 501,781 $ 501,842
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 were 5.4% at March 31,
2001, 6.6% at December 31, 2000, and 6.1% at March 31, 2000.
5. INVESTMENTS
Investments consisted of the following:
( in thousands, except share data ) As of
March 31, December 31, March 31,
2001 2000 2000
Securities available for sale (at market value):
AOL Time Warner common stock (2,017,000 shares) $ 80,975
Time Warner common stock (1,344,000 shares) $ 70,239 $ 134,455
Centra Software (1,792,500 common shares) 11,651 6,946 37,532
garden.com Inc. (2,414,000 common shares and 276,000 warrants) 21,098
iVillage Inc. (41,000 common shares at March 31, 2001, and
December 31, 2000, 270,000 common shares at March 31, 2000) 20 40 5,699
Other 4,114 3,929 7,686
Total available-for-sale securities 96,760 81,154 206,470
Denver newspaper JOA 216,268
FOX SportSouth and other joint ventures 8,703 9,502 7,210
Other equity investments 73,280 87,266 61,850
Total investments $ 395,011 $ 177,922 $ 275,530
Unrealized gains (losses) on securities available for sale $ (1,252)$ 49,047 $ 156,332
Investments available for sale represent securities in publicly
traded companies that are recorded at fair value. Fair value
is based upon the closing price of the security on the reporting
date.
The Company exchanged its investment in Time Warner for America
Online, which acquired Time Warner, in the first quarter of
2001. See Note 3.
The values of several of the Company's investments in available-
for-sale securities declined below historical cost and were
written down in 2000. During the third quarter of 2000 the
Company received $5,000,000 upon delivery of 229,000 iVillage
shares under the provisions of a zero-cost collar.
Included in other equity investments are securities that do not
trade in public markets, so they do not have readily
determinable fair values. However, based upon the price paid by
other investors for similar securities in subsequent rounds of
financing, if any, and management's assessment when
circumstances indicate fair value is less than the price paid in
the most recent round, the total estimated value of these
investments was $81,000,000 on March 31, 2001, $163,000,000 on
December 31, 2000, and $106,000,000 on March 31, 2000. There
can be no assurance as to the amounts the Company would receive
if these securities were sold.
The Company's Scripps Ventures Funds I and II invest in new
businesses focusing primarily on new media technology.
Scripps Ventures I invested $54,000,000. The managers'
compensation includes a share of the portfolio's cumulative net
gain through December 2002 if a specified minimum return is
achieved. Based on the portfolio's realized and estimated
unrealized net gains of $8,500,000 through March 31, 2001, the
incentive compensation accrual was zero. The incentive
compensation accrual will be subject to change as the net
gain changes through December 2002. Scripps Ventures II is
authorized to invest up to $100,000,000, of which
$40,700,000 was invested as of March 31, 2001. The
managers have a minority equity interest in the return on
Scripps Ventures II's investments if a specified
minimum return is achieved.
6. SEGMENT INFORMATION
The Company's reportable segments are strategic businesses that
offer different products and services. The Company primarily
evaluates the operating performance of its segments based on
earnings before interest, income taxes, depreciation and
amortization ("EBITDA"), excluding divested operating units,
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. Licensing of comic characters in Japan
provides more than 50% of the Company's international revenues,
which are less than $50,000,000 annually.
Financial information for the Company's business segments is as
follows:
( in thousands ) Three months ended
March 31,
2001 2000
OPERATING REVENUES
Newspapers $ 189,548 $ 230,024
Scripps Networks 87,617 73,323
Broadcast Television 65,921 76,687
Licensing and other media 24,293 24,023
Total 367,379 404,057
Divested operating units 6,802
Per consolidated financial statements $ 367,379 $ 410,859
EBITDA
Newspapers $ 54,223 $ 62,461
Scripps Networks 15,821 15,338
Broadcast Television 16,087 23,554
Licensing and other media 4,739 4,476
Corporate (4,856) (4,826)
Total 86,014 101,003
Divested operating units 62
Per consolidated financial statements $ 86,014 $ 101,065
DEPRECIATION
Newspapers $ 7,145 $ 10,001
Scripps Networks 1,885 1,857
Broadcast Television 4,916 4,684
Licensing and other media 194 191
Corporate 217 237
Total 14,357 16,970
Divested operating units 104
Per consolidated financial statements $ 14,357 $ 17,074
AMORTIZATION OF INTANGIBLE ASSETS
Newspapers $ 6,272 $ 5,586
Scripps Networks 1,807 1,727
Broadcast Television 2,329 2,352
Total 10,408 9,665
Divested operating units 69
Per consolidated financial statements $ 10,408 $ 9,734
OPERATING INCOME
Newspapers $ 40,806 $ 46,874
Scripps Networks 12,129 11,754
Broadcast Television 8,842 16,518
Licensing and other media 4,545 4,285
Corporate (5,073) (5,063)
Total 61,249 74,368
Divested operating units (111)
Per consolidated financial statements $ 61,249 $ 74,257
( in thousands ) Three months ended
March 31,
2001 2000
PAYMENTS (GREATER) LESS THAN PROGRAM AMORTIZATION
AND NETWORK DISTRIBUTION COSTS
Scripps Networks $ (7,560) $ (5,424)
Broadcast Television (73) (344)
Total $ (7,633) $ (5,768)
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Newspapers $ 10,388 $ 4,204
Scripps Networks 1,639 1,596
Broadcast Television 2,528 8,843
Licensing and other media 98 85
Corporate 63 221
Total 14,716 14,949
Divested operating units 65
Per consolidated financial statements $ 14,716 $ 15,014
BUSINESS ACQUISITIONS AND
OTHER ADDITIONS TO LONG-LIVED ASSETS
Newspapers $ 64,268 $ 32,001
Scripps Networks 18,551 577
Broadcast Television 14,605
Licensing and other media 306
Venture capital and other investments 4,211 8,650
Total $ 87,030 $ 56,139
ASSETS
Newspapers $ 1,320,164 $ 1,241,479
Scripps Networks 550,590 470,298
Broadcast Television 482,956 498,172
Licensing and other media 26,514 30,067
Venture capital and other investments 171,784 269,536
Corporate 51,202 55,933
Total 2,603,210 2,565,485
Divested operating units 7,664 48,147
Total $ 2,610,874 $ 2,613,632
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company operates in three reportable segments: Newspapers,
Scripps Networks, and Broadcast Television.
FORWARD-LOOKING STATEMENTS
This discussion and the information contained in the notes to
the consolidated financial statements contain certain
forward-looking statements that are based on management's
current expectations. Forward-looking statements are subject
to certain risks, trends and uncertainties that could cause
actual results to differ materially from the expectations
expressed in the forward-looking statements. Such risks,
trends and uncertainties, which in most instances are beyond
the Company's control, include changes in advertising demand
and other economic conditions; consumers' taste; newsprint
prices; program costs; labor relations; technological
developments; competitive pressures; interest rates; regulatory
rulings; and reliance on third-party vendors for various
products and services. The words "believe," "expect,"
"anticipate," "estimate," "intend" and similar expressions
identify forward-looking statements. All forward-looking
statements, which are as of the date of this filing, should be
evaluated with the understanding of their inherent uncertainty.
RESULTS OF OPERATIONS
Acquisitions and divestitures can affect the comparability of
year-over-year reported results. Amounts included in the
accompanying tables include the results of acquired operations
from the dates of acquisition. The results of divested
operating units are removed from the segment operating results
and reported separately because management believes they impede
analysis of the Company's ongoing operations.
See Note 2 to the Consolidated Financial Statements on page F-8
regarding acquisitions and divestitures.
The application for a JOA between the Company's Denver Rocky
Mountain News ("RMN") and MediaNews Group Inc.'s Denver Post was
approved by the U.S. Department of Justice. The JOA commenced
operations on January 22, 2001. The Denver Publishing
Company, a wholly owned subsidiary of the Company,
holds a 50% interest in the JOA.
Included in RMN revenue is the Company's share of the operating
profit (loss) of the Denver JOA from January 22, 2001. The
Company also includes in its operating expenses its editorial
costs associated with the RMN. The Company's financial
statements no longer include the advertising and other revenue
of the RMN, the costs to produce, distribute and market the
newspaper, nor related depreciation. To enhance comparability
of year-over-year operating results, the Company is reporting
the RMN separately.
All per share disclosures included in management's discussion
and analysis of financial condition and results of operations
are on a diluted basis.
Consolidated results of operations were as follows:
( in thousands, except per share data ) Year-to-Date
2001 Change 2000
Operating revenues:
Newspapers $ 178,708 (0.1)%$ 178,800
Scripps Networks 87,617 19.5 % 73,323
Broadcast Television 65,921 (14.0)% 76,687
Licensing and other media 24,293 1.1 % 24,023
Total 356,539 1.1 % 352,833
Rocky Mountain News 10,840 51,224
Divested operating units 6,802
Total operating revenues $ 367,379 $ 410,859
Operating income:
Newspapers $ 48,372 (14.3)%$ 56,476
Scripps Networks 12,129 3.2 % 11,754
Broadcast Television 8,842 (46.5)% 16,518
Licensing and other media 4,545 6.1 % 4,285
Corporate (5,073) (0.2)% (5,063)
Total 68,815 (18.0)% 83,970
Rocky Mountain News (7,566) 21.2% (9,602)
Divested operating units (111)
Total operating income 61,249 (17.5)% 74,257
Interest expense (12,461) (12,636)
Investment results, net of expenses 58,785 (9,062)
Net gains on divested operations 6,269
Miscellaneous, net 353 946
Income taxes (40,642) (25,114)
Minority interest (846) (1,056)
Net income $ 66,438 97.7 %$ 33,604
Net income per share of common stock $.83 93.0 % $.43
Weighted-average shares outstanding 79,864 78,824
Reconciliations to net income from core operations:
Reported net income $ 66,438 97.7 % $ 33,604
Add back / (deduct):
Net investment results (38,524) 5,893
Net gains on divested operations (3,763)
Net income from core operations $ 27,914 (21.9)%$ 35,734
Reported net income per share of common stock $.83 93.0 % $.43
Add back / (deduct):
Net investment results (.48) .07
Net gains on divested operations (.05)
Net income from core operations per
share of common stock $.35 (22.2)% $.45
See Note 3 to the Consolidated Financial Statements on page F-9 regarding items excluded from core operations.
Other financial and statistical data, excluding divested
operations, is as follows:
( in thousands ) Year-to-Date
2001 Change 2000
Total advertising revenues $ 261,994 (0.9)%$ 264,445
Advertising revenues as a
percentage of total revenues 73.5 % 74.9 %
EBITDA:
Newspapers $ 60,541 (11.6)%$ 68,459
Scripps Networks 15,821 3.1 % 15,338
Broadcast Television 16,087 (31.7)% 23,554
Licensing and other media 4,739 5.9 % 4,476
Corporate (4,856) (0.6)% (4,826)
Total 92,332 (13.7)% 107,001
Denver Rocky Mountain News (6,318) (5.3)% (5,998)
Total EBITDA $ 86,014 (14.8)%$ 101,003
Effective income tax rate for core operations 41.5 % 41.2 %
Net cash provided by operating activities $ 75,415 $ 57,140
Capital expenditures (14,716) (14,949)
Business acquisitions and other
additions to long-lived assets (87,030) (56,139)
Increase (decrease) in long-term debt 31,535 6,506
Dividends paid, including minority interests (12,245) (11,343)
Purchase and retirement of common stock (1,988)
Earnings before interest, income taxes, depreciation and
amortization ("EBITDA") is included in the discussion of results
of operations because:
Management believes the year-over-year change in EBITDA,
combined with information on historical and anticipated
capital spending, is a more useful and reliable measure of
year-over-year performance than the change in operating
income.
Banks and other lenders use EBITDA to determine the
Company's borrowing capacity.
Financial analysts and acquirors use EBITDA, combined with
capital spending requirements, to value communications
media companies.
EBITDA should not, however, be construed as an alternative
measure of the amount of the Company's income or cash flows
from operating activities.
Average borrowings under short-term credit facilities were
$547 million in the first quarter of 2001 and $550 million
in the first quarter of 2000. The weighted-average
interest rate on such facilities in the first quarter
was 6.0% in 2001 and 6.0% in 2000. The Company is
currently rolling over short-term debt at an effective
90-day yield of 4.35%. The average balance of all
interest bearing obligations in the first quarter was
$785 million in 2001 and $800 million in 2000.
Interest capitalized was $230,000 in 2001 and $10,000 in 2000.
Operating results for each of the Company's reportable segments,
excluding divested operating units and unusual items, are
presented on the following pages.
NEWSPAPERS - RMN operating results are presented separately as a
single line item to enhance comparability of year-over-year
Newspaper operating results. Excluding divested operations,
operating results were as follows:
( in thousands ) Year-to-Date
2001 Change 2000
Operating revenues:
Local $ 51,811 (1.2)%$ 52,460
Classified 50,397 (2.1)% 51,475
National 7,328 11.7 % 6,563
Preprint and other 20,664 2.7 % 20,128
Newspaper advertising 130,200 (0.3)% 130,626
Circulation 35,402 2.5 % 34,536
Joint operating agency distributions 9,876 (9.3)% 10,883
Other 3,230 17.2 % 2,755
Total operating revenues 178,708 (0.1)% 178,800
Expenses, excluding depreciation and amortization:
Editorial and newspaper content 21,889 2.8 % 21,291
Newsprint and ink 22,390 15.1 % 19,448
Other press and production 17,126 7.9 % 15,874
Circulation and distribution 16,414 13.4 % 14,479
Other advertising, internet and printing 6,306 6.1 % 5,945
Advertising sales and marketing 16,357 4.8 % 15,612
General and administrative 16,915 (0.6)% 17,024
Total 117,397 7.0 % 109,673
EBITDA 61,311 (11.3)% 69,127
Share of pre-tax earnings of equity-method investments (770) (668)
Total EBITDA 60,541 (11.6)% 68,459
Depreciation and amortization 12,169 1.6 % 11,983
Operating income, excluding the RMN 48,372 (14.3)% 56,476
RMN operating income (7,566) 21.2 % (9,602)
Total operating income $ 40,806 (12.9)%$ 46,874
Other Financial and Statistical Data:
Percent of operating revenues:
EBITDA 33.9 % 38.3 %
Operating income 27.1 % 31.6 %
Capital expenditures $ 10,388 $ 4,204
Business acquisitions and other
additions to long-lived assets 64,268 32,001
The demand for advertising was soft in most of the Company's
markets in the first quarter of 2001. On a pro forma basis,
assuming all acquisitions had been completed as of January 1,
2000, local advertising decreased 5.0% and classified
advertising decreased 4.5%.
Operating expenses, other than newsprint, increased less than
2% on the same pro forma basis.
Newsprint and ink increased primarily due to a 17% increase in
year-over-year newsprint prices.
SCRIPPS NETWORKS - Operating results were as follows:
( in thousands ) Year-to-Date
2001 Change 2000
Operating revenues:
Advertising $ 66,599 15.9 %$ 57,475
Affiliate fees 19,757 35.0 % 14,630
Other 1,261 3.5 % 1,218
Total operating revenues 87,617 19.5 % 73,323
Operating expenses, excluding depreciation and amortization:
Programming and production 24,061 20.6 % 19,958
Operations and distribution 9,597 12.7 % 8,516
Amortization of distribution fees 5,299 20.5 % 4,396
Sales and marketing 18,594 27.5 % 14,586
General and administrative 14,885 29.6 % 11,488
Total 72,436 22.9 % 58,944
EBITDA - consolidated networks 15,181 5.6 % 14,379
Share of pre-tax earnings of equity-method investments 640 959
Total EBITDA 15,821 3.1 % 15,338
Depreciation and amortization 3,692 3.0 % 3,584
Operating income $ 12,129 3.2 %$ 11,754
Other Financial and Statistical Data:
Percent of operating revenues:
EBITDA 18.1 % 20.9 %
Operating income (loss) 13.8 % 16.0 %
Payments for programming and network
distribution fees less than (greater than)
amounts recognized as expense $ (7,560) $ (5,424)
Capital expenditures 1,639 1,596
Business acquisitions and other
additions to long-lived assets 18,551 577
According to the Nielsen Homevideo Index, HGTV was distributed
to 69.8 million homes in March 2001, up 9.3 million from March
2000 and up 2.7 million in the quarter. Food Network was
distributed to 57.9 million homes in March 2001, up 11.5
million from March 2000 and up 3.5 million in the quarter.
The Company launched DIY in the fourth quarter of 1999 and
expects to launch Fine Living, its fourth network, in the
fourth quarter of 2001. Start-up expenses associated with DIY
and Fine Living reduced EBITDA in the first quarter by
$5.4 million in 2001 and $2.0 million in 2000. Full year
start-up expenses are expected to reduce EBITDA by
$20 million to $25 million. The cash required by DIY
and Fine Living will substantially exceed the reported
operating losses in 2001.
Excluding the start-up expenses of the new networks, EBITDA
increased 22%.
BROADCAST TELEVISION - Operating results were as follows:
( in thousands ) Year-to-Date
2001 Change 2000
Operating revenues:
Local $ 38,953 (5.2)%$ 41,079
National 22,803 (24.1)% 30,052
Political 1,741
Other 4,165 9.2 % 3,815
Total operating revenues 65,921 (14.0)% 76,687
Operating expenses, excluding depreciation and amortization:
Programming and station operations 34,771 (6.7)% 37,287
Sales and marketing 8,704 (12.0)% 9,891
General and administrative 6,359 6.8 % 5,955
Total 49,834 (6.2)% 53,133
EBITDA 16,087 (31.7)% 23,554
Depreciation and amortization 7,245 3.0 % 7,036
Operating income $ 8,842 (46.5)%$ 16,518
Other Financial and Statistical Data:
Percent of operating revenues:
EBITDA 24.4 % 30.7 %
Operating income 13.4 % 21.5 %
Capital expenditures $ 2,528 $ 8,843
Business acquisitions and other
additions to long-lived assets 14,605
The demand for advertising was weak in most of the Company's
markets in the first quarter. Year-over-year automobile
advertising declined sharply in the quarter.
Operating expenses, excluding depreciation and amortization, are
expected to decrease 6% to 7% for the full year.
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.
Repurchase of a total of six million Class A Common shares
was authorized by the Board of Directors in 1998. The balance
remaining on this authorization is 2.1 million shares.
The Company's Scripps Ventures Funds invest in new businesses
focusing primarily on new media technology. See Note 5 to the
Consolidated Financial Statements. The Board of Directors has
authorized up to $150 million of such investments. At March
31, 2001, an additional $59 million remains to be invested
under the authorization.
Net debt (borrowings less cash equivalent and other short-term
investments) increased $32 million in the first quarter, to
$746 million at March 31, 2001.
MARKET RISK
The Company's earnings and cash flow can be affected by, among
other things, interest rate changes, foreign currency
fluctuations (primarily in the exchange rate for the Japanese
yen) and changes in the price of newsprint. The information
disclosed in Market Risk in the Company's Annual Report on Form
10-K for the year ended December 31, 2000, has not changed
materially unless otherwise disclosed herein.
The Company may use foreign currency forward and option
contracts to hedge its cash flow exposures denominated in
Japanese yen and forward contracts to reduce the risk of changes
in the price of newsprint on anticipated newsprint purchases.
The Company held no foreign currency or newsprint forward
contracts in 2001 or 2000.
The following table presents additional information about the
Company's market-risk-sensitive financial instruments:
( in thousands, except share data ) As of March 31, 2001 As of December 31, 2000
Cost Fair Cost Fair
Basis Value Basis Value
Financial instruments subject to interest rate risk:
Variable rate credit facilities, including $ 537,701 $ 537,701 $ 512,788 $ 512,788
commercial paper
$100 million, 6.625% note, due in 2007 99,905 99,600 99,901 97,900
$100 million, 6.375% note, due in 2002 99,968 101,100 99,964 99,800
Other notes 8,579 7,499 1,956 812
Total long-term debt $ 746,153 $ 745,900 $ 714,609 $ 711,300
Financial instruments subject to market value risk:
AOL Time Warner common stock (2,017,000 shares) $ 93,719 $ 80,975
Time Warner common stock (1,344,000 shares) $ 27,816 $ 70,239
Centra Software (1,792,500 common shares) 3,652 11,651 3,652 6,946
Other available-for-sale securities 641 4,134 639 3,969
Total investments in publicly-traded companies 98,012 96,760 32,107 81,154
Other equity investments 73,280 (a) 87,266 (a)
(a) Included in other equity investments are securities that do not trade in public markets, so they do not have readily
determinable fair values. However, based upon the price paid by other investors for similiar securities in subsequent
rounds of financing, if any, and managements assessments when circumstances indicate fair value is less than the price
paid in the most recent round, the total estimated value of these investments was $81,000,000 on March 31, 2001, and
$163,000,000 on December 31, 2000. There can be no assurance as to the amounts the Company would receive if these
securities were sold.
The Company manages interest rate risk primarily by maintaining
a mix of fixed-rate and variable-rate debt. The Company
currently does not use interest rate swaps, forwards or other
derivative financial instruments to manage its interest rate
risk. See Note 4 to the Consolidated Financial Statements. The
weighted-average interest rate on borrowings under the Variable
Rate Credit Facilities was 5.4% at March 31, 2001, and 6.6% at
December 31, 2000.
THE E. W. SCRIPPS COMPANY
Index to Exhibits
Exhibit
No. Item Page
12 Ratio of Earnings to Fixed Charges E-2
RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12
( in thousands ) Three months ended
March 31,
2001 2000
EARNINGS AS DEFINED:
Earnings from operations before income taxes after
eliminating undistributed earnings of 20%- to
50%-owned affiliates $ 118,930 $ 60,335
Fixed charges excluding capitalized interest and
preferred stock dividends of majority-owned
subsidiary companies 13,833 14,447
Earnings as defined $ 132,763 $ 74,782
FIXED CHARGES AS DEFINED:
Interest expense, including amortization of
debt issue costs $ 12,461 $ 12,636
Interest capitalized 231 14
Portion of rental expense representative
of the interest factor 1,372 1,811
Preferred stock dividends of majority-owned
subsidiary companies 20 20
Fixed charges as defined $ 14,084 $ 14,481
RATIO OF EARNINGS TO FIXED CHARGES 9.43 5.16