UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 July 31, 2001
there were 60,237,588 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 JUNE 30, 2001
Item No. Page
PART I - FINANCIAL INFORMATION
1 Financial Statements 3
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 3
3 Quantitative and Qualitative Disclosures About
Market Risk 3
PART II - OTHER INFORMATION
1 Legal Proceedings 3
2 Changes in Securities 3
3 Defaults Upon Senior Securities 3
4 Submission of Matters to a Vote of Security Holders 4
5 Other Information 4
6 Exhibits and Reports on Form 8-K 4
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
The following table presents information on matters submitted to a
vote of security holders at the 2001 Annual Meeting of Shareholders.
Broker
Description of Matters Submitted In Favor Against Abstain Non-Votes
Class A Common Shares:
Election of Directors:
Daniel J. Meyer 55,603,637 136,574
Nicholas B. Paumgarten 55,229,706 510,505
Ronald W. Tysoe 55,603,607 136,604
Julie A. Wrigley 55,603,692 136,519
Common Voting Shares:
Election of Directors:
William R. Burleigh 19,047,813
John H. Burlingame 19,047,813
Joseph P. Clayton 19,047,813
Kenneth W. Lowe 19,047,813
Nackey E. Scagliotti 19,047,813
Charles E. Scripps 19,047,813
Edward W. Scripps 19,047,813
Paul K. Scripps 19,047,813
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: August 13, 2001 BY: D. J. Castellini
D. J. Castellini
Senior Vice President and
Chief Financial Officer
THE E. W. SCRIPPS COMPANY
Index to Financial Information
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-16
Results of Operations F-16
Newspapers F-19
Scripps Networks F-20
Broadcast Television F-21
Liquidity and Capital Resources F-22
Market Risk F-23
CONSOLIDATED BALANCE SHEETS
( in thousands ) As of
June 30, December 31, June 30,
2001 2000 2000
( Unaudited ) ( Unaudited )
ASSETS
Current Assets:
Cash and cash equivalents $ 16,519 $ 14,112 $ 15,326
Accounts and notes receivable (less
allowances -$13,618, $13,891, $12,990) 250,845 289,583 286,011
Program rights and production costs 108,561 115,513 80,502
Network distribution fees 21,976 21,105 18,601
Inventories 9,350 17,802 16,852
Deferred income taxes 29,967 30,421 27,035
Miscellaneous 36,035 35,449 32,088
Total current assets 473,253 523,985 476,415
Investments 403,088 177,922 241,007
Property, Plant and Equipment 383,480 502,041 482,497
Goodwill and Other Intangible Assets 1,202,401 1,209,132 1,208,648
Other Assets:
Program rights and production costs (less current portion) 99,185 96,881 81,320
Network distribution fees (less current portion) 42,613 40,571 48,342
Miscellaneous 19,390 22,334 27,128
Total other assets 161,188 159,786 156,790
TOTAL ASSETS $ 2,623,410 $ 2,572,866 $ 2,565,357
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
( in thousands, except share data ) As of
June 30, December 31, June 30,
2001 2000 2000
( Unaudited ) ( Unaudited )
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 202,758 $ 212,828 $ 260,170
Accounts payable 62,902 114,275 91,918
Customer deposits and unearned revenue 35,158 37,214 41,078
Accrued liabilities:
Employee compensation and benefits 36,488 49,089 43,581
Network distribution fees 54,779 48,257 46,696
Miscellaneous 83,118 71,313 65,127
Total current liabilities 475,203 532,976 548,570
Deferred Income Taxes 144,813 129,932 147,275
Long-Term Debt (less current portion) 508,555 501,781 501,855
Other Long-Term Obligations and Minority Interests (less current portion) 129,470 130,367 132,791
Stockholders' Equity:
Preferred stock, $.01 par - authorized: 25,000,000 shares; none outstanding
Common stock, $.01 par:
Class A - authorized: 120,000,000 shares; issued and
outstanding: 60,203,383; 59,641,828; and 59,306,189 shares 602 596 593
Voting - authorized: 30,000,000 shares; issued and
outstanding: 19,096,913; 19,096,913; and 19,216,913 shares 191 191 192
Total 793 787 785
Additional paid-in capital 183,435 157,394 152,395
Retained earnings 1,175,191 1,093,138 1,031,413
Unrealized gains on securities available for sale 17,950 31,877 59,317
Foreign currency translation adjustment (58) 361 700
Unvested restricted stock awards (11,942) (5,747) (9,744)
Total stockholders' equity 1,365,369 1,277,810 1,234,866
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,623,410 $ 2,572,866 $ 2,565,357
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME ( UNAUDITED )
( in thousands, except per share data ) Three months ended Six months ended
June 30, June 30,
2001 2000 2001 2000
Operating Revenues:
Advertising $ 284,451 $ 345,926 $ 557,224 $ 663,625
Circulation 34,058 36,548 70,240 74,897
Affiliate fees 19,935 14,535 39,692 29,165
Licensing 17,251 17,409 35,251 33,660
Joint operating agency distributions 7,727 12,266 16,784 23,149
Other 10,631 12,774 22,241 25,821
Total operating revenues 374,053 439,458 741,432 850,317
Operating Expenses:
Employee compensation and benefits 118,087 129,314 236,842 256,606
Newsprint and ink 22,383 38,646 48,624 75,838
Amortization of purchased programming 33,694 29,332 65,789 57,370
Other operating expenses 98,841 120,008 203,115 237,280
Depreciation 13,595 17,185 27,952 34,259
Amortization of intangible assets 11,122 10,071 21,530 19,805
Total operating expenses 297,722 344,556 603,852 681,158
Operating Income 76,331 94,902 137,580 169,159
Other Credits (Charges):
Interest expense (10,859) (13,481) (23,320) (26,117)
Investment results, net of expenses 2,957 (1,449) 61,742 (10,511)
Net gains on divested operations 6,269
Miscellaneous, net 480 45 833 991
Net other credits (charges) (7,422) (14,885) 39,255 (29,368)
Income Before Taxes and Minority Interests 68,909 80,017 176,835 139,791
Provision for Income Taxes 28,584 32,833 69,226 57,947
Income Before Minority Interests 40,325 47,184 107,609 81,844
Minority Interests 975 1,063 1,821 2,119
Net Income $ 39,350 $ 46,121 $ 105,788 $ 79,725
Net Income per Share of Common Stock:
Basic $.50 $.59 $1.34 $1.02
Diluted .49 .58 1.32 1.01
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS ( UNAUDITED )
( in thousands ) Six months ended
June 30,
2001 2000
Cash Flows from Operating Activities:
Net income $ 105,788 $ 79,725
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation and amortization 49,482 54,064
Net investment results and loss (gain) on divestitures (63,431) 4,242
Deferred income taxes 22,845 2,879
Dividends greater than share of earnings of equity method investments 24,499 1,563
Minority interests in income of subsidiary companies 1,821 2,119
Network distribution fee amortization greater (less) than payments 3,170 5,165
Program cost amortization greater (less) than payments (17,024) (15,400)
Other changes in certain working capital accounts, net (19,031) (23,408)
Miscellaneous, net 15,288 4,691
Net operating activities 123,407 115,640
Cash Flows from Investing Activities:
Additions to property, plant and equipment (29,095) (26,145)
Purchase of subsidiary companies and long-term investments (23,923) (87,058)
Payment for interest in Denver JOA (62,520)
Sale of subsidiary companies and long-term investments 14,048 26,910
Miscellaneous, net 1,298 4,347
Net investing activities (100,192) (81,946)
Cash Flows from Financing Activities:
Increase in long-term debt 6,790 55
Payments on long-term debt (10,103) (7,490)
Repurchase Class A Common shares (1,988)
Dividends paid (23,735) (21,921)
Dividends paid to minority interests (784) (785)
Miscellaneous, net (primarily employee stock compensation) 9,012 1,317
Net financing activities (20,808) (28,824)
Increase in Cash and Cash Equivalents 2,407 4,870
Cash and Cash Equivalents:
Beginning of year 14,112 10,456
End of period $ 16,519 $ 15,326
Supplemental Cash Flow Disclosures:
Interest paid, excluding amounts capitalized $ 22,966 $ 25,784
Income taxes paid 19,989 55,665
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 Comprehensive
Additional Other Restricted Total Income for
Common Paid-in Retained Comprehensive Stock Stockholders' Three Months
Stock Capital Earnings Income Awards Equity Ended June 30
Balances at December 31, 1999 $ 781 $ 136,731 $ 973,609 $ 58,271 $ (4,940)$ 1,164,452
Comprehensive income:
Net income 79,725 79,725 $ 46,121
Unrealized gains, net of tax of $1,525 and ($22,753) 2,824 2,824 (42,256)
Less: reclassification adjustment for gains
in income, net of tax of ($433) (805) (805)
Increase (decrease) in unrealized gains on securities 2,019 2,019 (42,256)
Foreign currency translation adjustments (273) (273) (246)
Total 79,725 1,746 81,471 $ 3,619
Dividends: declared and paid - $.28 per share (21,921) (21,921)
Compensation plans, net: 407,851 shares issued;
1,500 shares forfeited; 25,611 shares repurchased 4 14,404 (4,804) 9,604
Tax benefits of compensation plans 1,260 1,260
Balances at June 30, 2000 $ 785 $ 152,395 $1,031,413 $ 60,017 $ (9,744)$ 1,234,866
Balances at December 31, 2000 $ 787 $ 157,394 $1,093,138 $ 32,238 $ (5,747)$ 1,277,810
Comprehensive income:
Net income 105,788 105,788 $ 39,350
Unrealized gains, net of tax of $19,655 and $14,213 36,523 36,523 26,313
Less: reclassification adjustment for gains
in income, net of tax of ($27,165) and ($4,084) (50,450) (50,450) (7,584)
Increase (decrease) in unrealized gains on securities (13,927) (13,927) 18,729
Foreign currency translation adjustments (419) (419) 163
Total 105,788 (14,346) 91,442 $ 58,242
Dividends: declared and paid - $.30 per share (23,735) (23,735)
Repurchase 35,200 Class A Common Shares (1,988) (1,988)
Compensation plans, net: 706,660 shares issued;
108,505 shares repurchased; 1,400 shares forfeited 6 20,979 (6,195) 14,790
Tax benefits of compensation plans 7,050 7,050
Balances at June 30, 2001 $ 793 $ 183,435 $1,175,191 $ 17,892 $ (11,942)$ 1,365,369
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 in January 2001 by the
U.S. Department of Justice. The JOA commenced operations on
January 22, 2001. The Denver Publishing Company, a wholly
owned subsidiary of the Company, holds a 50% interest in the JOA.
Included in JOA distributions in the Consolidated Statements of Income
is the Company's share of the operating profit (loss) of the Denver JOA
from January 22, 2001. The Company also includes in its operating
expenses its editorial costs associated with the RMN. The Company's
financial statements no longer include the advertising and other revenue
of the RMN, the costs to produce, distribute and market the newspaper,
nor related depreciation. The Company's residual interest in the net
assets of the JOA is included in Investments in the Consolidated Balance
Sheets.
Derivative Instruments and Hedging Activities - The Company adopted Financial
Accounting Standard ("FAS") No. 133 - Accounting for Derivative Instruments
and Hedging Activities effective January 1, 2001. Adoption of the new
standard had no effect on the Company's financial statements.
Net Income Per Share - The following table presents additional information
about basic and diluted weighted-average shares outstanding:
( in thousands ) Three months ended Six months ended
June 30, June 30,
2001 2000 2001 2000
Basic weighted-average shares outstanding 78,844 78,115 78,781 78,078
Effect of dilutive securities:
Unvested restricted stock held by employees 160 135 153 125
Stock options held by employees 998 745 999 739
Diluted weighted-average shares outstanding 80,002 78,995 79,933 78,942
Recently Issued Accounting Standards - The Emerging Issues Task Force
reached a consensus on Issue 00-25 - Vendor Income Statement
Characterization of Consideration Paid to a Reseller of the Vendor's
Products in April 2001. The consensus, which must be adopted no later
than January 1, 2002, requires consideration paid to customers to be
deducted from revenue. The Company currently classifies amortization
of distribution fees paid to cable television and satellite broadcast
systems as an operating expense in its financial statements.
The Company plans to adopt this policy effective with its Annual Report on
Form 10-K for the year ended December 31, 2001. Financial statements for
prior periods will be restated. The change in classification will have no
impact on the Company's reported operating income or financial position.
However, operating revenues will be reduced by the amounts of amortization
of distribution fees, which in the six months ended June 30 totaled
$10,900,000 in 2001 and $9,000,000 in 2000.
In July 2001 the Financial Accounting Standards Board issued
FAS No. 141 - Business Combinations and FAS No. 142 - Goodwill and
Other Intangible Assets. FAS No. 141 requires business combinations
initiated after June 30, 2001 to be accounted for using the purchase
method of accounting. FAS 141 also specifies the types of acquired
intangible assets that are required to be recognized and reported
separately from goodwill and those acquired intangible assets
that are required to be included in goodwill.
Currently recorded goodwill and intangibles will be evaluated against
this new criteria and, as a result, certain intangibles may be
subsumed into goodwill, or amounts initially recorded as gooodwill
may be separately identified and recognized apart from goodwill.
Under FAS 142 recorded goodwill will no longer be amortized, but
instead will be tested for impairment at least annually. Recognized
intangible assets will be amortized over their respective estimated
useful lives and reviewed for impairment in accordance with
FAS 121 - Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of. Any recognized intangible
asset determined to have an indefinite useful life will not be
amortized, but will instead be tested for impairment in accordance
with the Standard until its life is determined to no longer be
indefinite.
Goodwill and intangible assets with indefinite lives acquired in
business combinations completed before July 1, 2001 will continue
to be amortized until December 31, 2001. Upon adoption of FAS 142,
management expects amortization of goodwill and other intangible
assets will be substantially reduced commencing January 1, 2002.
In connection with the adoption of FAS 142 the Company will also
make a transitional impairment evaluation of whether goodwill is
impaired as of January 1, 2002. To accomplish this, the Company must
(1) identify its reporting units, (2) determine the carrying value of
each reporting unit by assigning the assets and liabilities, including
the existing goodwill and intangible assets to those reporting units,
and (3) determine the fair value of each reporting unit. This first
step of the transitional assessment must be completed by June 30, 2002.
If the carrying value of any reporting unit exceeds its fair value, then
detailed fair values for each of the assigned assets (excluding goodwill)
and liabilities will be determined to calculate the amount of goodwill
impairment, if any. This second step is required to be completed as
soon as possible, but no later than December 31, 2002. Any
transitional impairment loss resulting from the adoption will be
recognized as the effect of a change in accounting principle.
It is not practicable to reasonably estimate the impact of the
transitional impairment evaluation or to quantify the reduction
in amortization of goodwill and other intangible assets. The recorded
net book value of goodwill and other intangible assets at June 30, 2001,
was $1,202,401,000. Amortization was $21,530,000 for the six months
ended June 30, 2001.
Reclassifications - For comparative purposes, certain 2000 amounts have been
reclassified to conform to 2001 classifications.
2. ACQUISITIONS AND DIVESTITURES
Acquisitions
2001 - In the first quarter the Company acquired an additional 3.5% interest in
The Television Food Network.
2000 - In the first quarter the Company acquired the daily newspaper in Fort
Pierce, Florida, in exchange for its newspaper in Destin, Florida, and
cash; and television station KMCI in Lawrence, Kansas.
In 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 )
Six months ended June 30,
2001 2000
Goodwill and other intangible assets acquired $ 14,435 $ 40,357
Other assets acquired 6,518
Total 14,435 46,875
Fair value of Destin newspaper (3,857)
Liabilities assumed (38)
Cash paid $ 14,435 $ 42,980
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 Six months
ended ended
June 30, June 30,
2000 2000
Operating revenues $ 1,262 $ 8,064
Operating income (loss) (261) (372)
3. UNUSUAL CREDITS AND CHARGES
2001 - Included in net investment results are i) recognized net investment
gains and ii) adjustments to accrued incentive compensation related
to changes in the net gains (realized and estimated unrealized) on
the Scripps Ventures I portfolio. Included in year-to-date
recognized net investment gains are i) a gain of $65,900,000 on the
exchange of the Company's investment in Time Warner for America
Online, which acquired Time Warner, and an $11,700,000 gain on the
sale of a portion of the Company's investment in Centra Software, ii)
$22,600,000 in write-downs for several investments, and iii) an
$8,400,000 reduction in accrued incentive compensation, to
$3,100,000 at June 30, 2001, in conjunction with the $56,000,000
decrease in the total realized and estimated unrealized net gain
on Scripps Ventures I's portfolio, to $21,000,000.
Net investment results increased net income $40,500,000 ($.51 per share)
year-to-date and $1,900,000 ($.02 per share) for the quarter.
Costs associated with workforce reductions, including the Company's
share of such costs at the Denver JOA, reduced operating income
$11,200,000 in the second quarter and year-to-date period. Net
income was reduced $7,100,000 ($.09 per share).
The combined effect of the above items was to increase 2001
year-to-date net income $33,400,000 ($.42 per share) and to reduce
2001 second quarter net income $5,100,000 ($.07 per share).
2000 - Included in net investment results are i) realized gains of $5,000,000
on the sale of certain investments, ii) $11,000,000 in write-downs of
certain investments, and iii) a $3,800,000 increase in accrued
incentive compensation, to $10,800,000 at June 30, 2000, in
conjunction with the $25,000,000 increase in the total realized
and estimated unrealized net gain on Scripps Ventures I's portfolio,
to $72,000,000.
Net investment results reduced net income $6,800,000 ($.09 per share)
year-to-date and $1,000,000 ($.01 per share) for the quarter.
$800,000 of expenses associated with preparations for the joint
newspaper operations in Denver, reduced net income $500,000
($.01 per share) in the second quarter.
The combined effect of the above items and the gains on divestitures
(see Note 2) was to reduce 2000 year-to-date net income $3,600,000
($.05 per share) and to reduce second quarter net income $1,500,000
($.02 per share).
4. LONG-TERM DEBT
Long-term debt consisted of the following:
( in thousands ) As of
June 30, December 31, June 30,
2001 2000 2000
Variable rate credit facilities, including commercial paper $ 502,718 $ 512,788 $ 559,950
$100 million, 6.625% note, due in 2007 99,908 99,901 99,894
$100 million, 6.375% note, due in 2002 99,973 99,964 99,954
Other notes 8,714 1,956 2,227
Total long-term debt 711,313 714,609 762,025
Current portion of long-term debt 202,758 212,828 260,170
Long-term debt (less current portion) $ 508,555 $ 501,781 $ 501,855
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 4.1% at June 30, 2001, 6.6% at December 31, 2000,
and 6.7% at June 30, 2000.
5. INVESTMENTS
Investments consisted of the following:
( in thousands, except share data ) As of
June 30, December 31, June 30,
2001 2000 2000
Securities available for sale (at market value):
AOL Time Warner common stock (2,017,000 shares) $ 106,891
Time Warner common stock (1,344,000 shares) $ 70,239 $ 102,185
Centra Software (700,500; 1,792,500; 1,792,500 common shares) 11,901 6,946 17,030
garden.com Inc. (2,414,000 common shares and 276,000 warrants) 5,797
iVillage Inc. (41,000; 270,000; 270,000 common shares) 59 40 5,412
Other 4,542 3,929 4,819
Total available-for-sale securities 123,393 81,154 135,243
Denver newspaper JOA 199,695
FOX SportSouth and other joint ventures 8,787 9,502 7,270
Other equity investments 71,213 87,266 98,494
Total investments $ 403,088 $ 177,922 $ 241,007
Unrealized gains (losses) on securities available for sale $ 27,607 $ 49,047 $ 91,323
Investments available for sale represent securities in publicly traded
companies. Investments available for sale are recorded at fair value.
Fair value is based upon the closing price of the security on the reporting
date.
The Company exchanged its investment in Time Warner for America Online,
which acquired Time Warner, in the first quarter of 2001. The Company
sold 1,092,000 shares of Centra Software in the second quarter of 2001.
See Note 3.
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.
Other equity investments includes 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 based upon 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 $80,000,000 on June 30, 2001, $163,000,000 on December 31,
2000, and $156,000,000 on June 30, 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 $21,000,000 through June 30, 2001, the incentive compensation
accrual was $3,100,000. 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 $41,000,000 was invested
as of June 30, 2001. The managers have a minority equity interest in the
return on Scripps Ventures II's investments if a specified minimum return
is achieved.
6. SEGMENT INFORMATION
The Company's reportable segments are strategic businesses that offer
different products and services. The Company primarily evaluates the
operating performance of its segments based on earnings before interest,
income taxes, depreciation and amortization ("EBITDA"), excluding divested
operating units (see Note 2), unusual items (see Note 3) and all credits
and charges classified as non-operating in the Consolidated Statements
of Income. No single customer provides more than 10% of the Company's
revenue. International revenues are primarily derived from licensing
comic characters and HGTV and Food Network programming in international
markets. Licensing of comic characters in Japan provides more than 50%
of the Company's international revenues, which are less than
$50,000,000 annually.
Financial information for the Company's business segments is as follows:
( in thousands ) Three months ended Six months ended
June 30, June 30,
2001 2000 2001 2000
OPERATING REVENUES
Newspapers $ 181,902 $ 239,507 $ 371,450 $ 469,531
Scripps Networks 99,182 86,466 186,799 159,789
Broadcast Television 74,199 87,471 140,120 164,158
Licensing and other media 22,819 24,752 47,112 48,775
Total 378,102 438,196 745,481 842,253
Unusual item (4,049) (4,049)
Divested operating units 1,262 8,064
Per consolidated financial statements $ 374,053 $ 439,458 $ 741,432 $ 850,317
EBITDA
Newspapers $ 60,059 $ 65,635 $ 114,282 $ 128,096
Scripps Networks 26,593 25,179 42,414 40,517
Broadcast Television 25,255 32,910 41,342 56,464
Licensing and other media 3,902 4,154 8,641 8,630
Corporate (4,048) (4,735) (8,904) (9,561)
Total 111,761 123,143 197,775 224,146
Unusual items (10,713) (836) (10,713) (836)
Divested operating units (149) (87)
Per consolidated financial statements $ 101,048 $ 122,158 $ 187,062 $ 223,223
DEPRECIATION
Newspapers $ 6,085 $ 10,359 $ 13,230 $ 20,360
Scripps Networks 1,958 1,584 3,843 3,441
Broadcast Television 5,076 4,725 9,992 9,409
Licensing and other media 190 193 384 384
Corporate 223 267 440 504
Total 13,532 17,128 27,889 34,098
Unusual items 63 63
Divested operating units 57 161
Per consolidated financial statements $ 13,595 $ 17,185 $ 27,952 $ 34,259
AMORTIZATION OF INTANGIBLE ASSETS
Newspapers $ 6,460 $ 5,787 $ 12,732 $ 11,373
Scripps Networks 1,899 1,873 3,706 3,600
Broadcast Television 2,352 2,356 4,681 4,708
Total 10,711 10,016 21,119 19,681
Unusual items 411 411
Divested operating units 55 124
Per consolidated financial statements $ 11,122 $ 10,071 $ 21,530 $ 19,805
OPERATING INCOME
Newspapers $ 47,514 $ 49,489 $ 88,320 $ 96,363
Scripps Networks 22,736 21,722 34,865 33,476
Broadcast Television 17,827 25,829 26,669 42,347
Licensing and other media 3,712 3,961 8,257 8,246
Corporate (4,271) (5,002) (9,344) (10,065)
Total 87,518 95,999 148,767 170,367
Unusual items (11,187) (836) (11,187) (836)
Divested operating units (261) (372)
Per consolidated financial statements $ 76,331 $ 94,902 $ 137,580 $ 169,159
( in thousands ) Three months ended Six months ended
June 30, June 30,
2001 2000 2001 2000
PAYMENTS (GREATER) LESS THAN PROGRAM AMORTIZATION
AND NETWORK DISTRIBUTION COSTS
Scripps Networks $ (7,658) $ (4,665) $ (15,218) $ (10,089)
Broadcast Television 1,437 198 1,364 (146)
Total $ (6,221) $ (4,467) $ (13,854) $ (10,235)
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Newspapers $ 5,375 $ 5,150 $ 15,763 $ 9,354
Scripps Networks 3,650 1,654 5,289 3,250
Broadcast Television 4,816 3,979 7,344 12,822
Licensing and other media 182 231 280 316
Corporate 356 72 419 293
Total 14,379 11,086 29,095 26,035
Divested operating units 45 110
Per consolidated financial statements $ 14,379 $ 11,131 $ 29,095 $ 26,145
BUSINESS ACQUISITIONS AND
OTHER ADDITIONS TO LONG-LIVED ASSETS
Newspapers $ 382 $ 805 $ 64,650 $ 32,806
Scripps Networks 9,299 8,415 27,850 8,992
Broadcast Television 27 55 27 14,660
Licensing and other media 5 10
Venture capital and other investments 3,161 37,101 7,372 46,052
Total $ 12,869 $ 46,381 $ 99,899 $ 102,520
ASSETS
Newspapers $ 1,280,470 $ 1,230,571
Scripps Networks 569,280 492,002
Broadcast Television 473,584 491,804
Licensing and other media 25,870 31,243
Venture capital and other investments 196,066 231,874
Corporate 70,250 56,282
Total 2,615,520 2,533,776
Divested operating units 7,890 31,581
Total $ 2,623,410 $ 2,565,357
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-9 regarding
acquisitions and divestitures.
The application for a JOA between the Company's Denver Rocky Mountain News
("RMN") and MediaNews Group Inc.'s Denver Post was approved 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 ) Quarterly Period Year-to-Date
2001 Change 2000 2001 Change 2000
Operating revenues:
Newspapers $ 181,166 (0.8)% $ 182,537 $ 359,874 (0.4)% $ 361,337
Scripps Networks 99,182 14.7 % 86,466 186,799 16.9 % 159,789
Broadcast Television 74,199 (15.2)% 87,471 140,120 (14.6)% 164,158
Licensing and other media 22,819 (7.8)% 24,752 47,112 (3.4)% 48,775
Total 377,366 (1.0)% 381,226 733,905 (0.0)% 734,059
Rocky Mountain News 736 56,970 11,576 108,194
Unusual item (4,049) (4,049)
Divested operating units 1,262 8,064
Total operating revenues $ 374,053 $ 439,458 $ 741,432 $ 850,317
Operating income:
Newspapers $ 52,394 (7.0)% $ 56,345 $ 100,766 (10.7)% $ 112,821
Scripps Networks 22,736 4.7 % 21,722 34,865 4.1 % 33,476
Broadcast Television 17,827 (31.0)% 25,829 26,669 (37.0)% 42,347
Licensing and other media 3,712 (6.3)% 3,961 8,257 0.1 % 8,246
Corporate (4,271) 14.6 % (5,002) (9,344) 7.2 % (10,065)
Total 92,398 (10.2)% 102,855 161,213 (13.7)% 186,825
Rocky Mountain News (4,880) 28.8 % (6,856) (12,446) 24.4 % (16,458)
Unusual items (11,187) (836) (11,187) (836)
Divested operating units (261) (372)
Total operating income 76,331 94,902 137,580 169,159
Interest expense (10,859) (13,481) (23,320) (26,117)
Investment results, net of expenses 2,957 (1,449) 61,742 (10,511)
Net gains on divested operations 6,269
Miscellaneous, net 480 45 833 991
Income taxes (28,584) (32,833) (69,226) (57,947)
Minority interest (975) (1,063) (1,821) (2,119)
Net income $ 39,350 $ 46,121 $ 105,788 $ 79,725
Net income per share of common stock $.49 $.58 $1.32 $1.01
Weighted-average shares outstanding 80,002 78,995 79,933 78,942
Reconciliations to net income from core operations:
Reported net income $ 39,350 $ 46,121 $ 105,788 $ 79,725
Add back / (deduct):
Net investment results (1,930) 951 (40,454) 6,844
Workforce reductions 7,078 7,078
Net gains on divested operations (3,763)
Denver JOA expenses 543 543
Net income from core operations $ 44,498 (6.5)% $ 47,615 $ 72,412 (13.1)% $ 83,349
Reported net income per share of common stock $.49 $.58 $1.32 $1.01
Add back / (deduct):
Net investment results (.02) .01 (.51) .09
Workforce reductions .09 .09
Net gains on divested operations (.05)
Denver JOA expenses .01 .01
Net income from core operations per
share of common stock $.56 (6.7)% $.60 $.91 (14.2)% $1.06
See Note 3 to the Consolidated Financial Statements on page F-10 regarding items excluded from core operations.
Other financial and statistical data, excluding divested operations and unusual
items, is as follows:
( in thousands ) Quarterly Period Year-to-Date
2001 Change 2000 2001 Change 2000
Total advertising revenues $ 284,451 (2.8)% $ 292,639 $ 546,445 (1.9)% $ 557,084
Advertising revenues as a
percentage of total revenues 75.4 % 76.8 % 74.5 % 75.9 %
EBITDA:
Newspapers $ 64,413 (6.4)% $ 68,812 $ 124,954 (9.0)% $ 137,271
Scripps Networks 26,593 5.6 % 25,179 42,414 4.7 % 40,517
Broadcast Television 25,255 (23.3)% 32,910 41,342 (26.8)% 56,464
Licensing and other media 3,902 (6.1)% 4,154 8,641 0.1 % 8,630
Corporate (4,048) 14.5 % (4,735) (8,904) 6.9 % (9,561)
Total 116,115 (8.1)% 126,320 208,447 (10.7)% 233,321
Denver Rocky Mountain News (4,354) (3,177) (10,672) (9,175)
Total EBITDA $ 111,761 $ 123,143 $ 197,775 $ 224,146
Effective income tax rate for core operations 41.1 % 40.9 % 41.2 % 41.0 %
Net cash provided by operating activities $ 47,992 $ 58,500 $ 123,407 $ 115,640
Capital expenditures (14,379) (11,086) (29,095) (26,035)
Business acquisitions and other
additions to long-lived assets (12,869) (46,381) (99,899) (102,520)
Increase (decrease) in long-term debt (34,848) (13,941) (3,313) (7,435)
Dividends paid, including minority interests (12,274) (11,363) (24,519) (22,706)
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 daily borrowings under short-term credit facilities in the second
quarter were $534 million in 2001 and $568 million in 2000. The
weighted-average interest rate on such borrowings were 4.5% in 2001 and
6.4% in 2000. For the year-to-date period the weighted-average interest
rate on the short-term credit facilities was 5.2% in 2001 and 6.2% in 2000.
The Company is currently rolling over short-term debt at an effective
90-day yield of 3.7%. The average balance of all interest bearing
obligations for the first half of the year was $770 million in 2001
and $799 million in 2000.
Interest capitalized was $410,000 in 2001 and $30,000 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 and unusual items, operating
results were as follows:
( in thousands ) Quarterly Period Year-to-Date
2001 Change 2000 2001 Change 2000
Operating revenues:
Local $ 50,966 (1.8)% $ 51,888 $ 102,777 (1.5)% $ 104,348
Classified 51,228 (5.2)% 54,010 101,625 (3.7)% 105,485
National 8,733 16.5 % 7,498 16,061 14.2 % 14,061
Preprint and other 22,446 4.2 % 21,549 43,110 3.4 % 41,677
Newspaper advertising 133,373 (1.2)% 134,945 263,573 (0.8)% 265,571
Circulation 34,058 3.0 % 33,068 69,460 2.7 % 67,604
Joint operating agency distributions 11,051 (9.9)% 12,266 20,927 (9.6)% 23,149
Other 2,684 18.9 % 2,258 5,914 18.0 % 5,013
Total operating revenues 181,166 (0.8)% 182,537 359,874 (0.4)% 361,337
Expenses, excluding depreciation and amortization:
Editorial and newspaper content 21,883 1.3 % 21,598 43,772 2.1 % 42,889
Newsprint and ink 21,582 11.4 % 19,377 43,972 13.3 % 38,825
Other press and production 17,236 1.3 % 17,020 34,362 4.5 % 32,894
Circulation and distribution 16,652 6.9 % 15,579 33,066 10.0 % 30,058
Other advertising, internet and printing 6,301 3.8 % 6,068 12,607 4.9 % 12,013
Advertising sales and marketing 16,621 3.5 % 16,065 32,978 4.1 % 31,677
General and administrative 15,817 (6.9)% 16,993 32,732 (3.8)% 34,017
Total 116,092 3.0 % 112,700 233,489 5.0 % 222,373
EBITDA 65,074 (6.8)% 69,837 126,385 (9.1)% 138,964
Share of pre-tax earnings of equity-method investments (661) (1,025) (1,431) (1,693)
Total EBITDA 64,413 (6.4)% 68,812 124,954 (9.0)% 137,271
Depreciation and amortization 12,019 (3.6)% 12,467 24,188 (1.1)% 24,450
Operating income, excluding the RMN 52,394 (7.0)% 56,345 100,766 (10.7)% 112,821
RMN operating income (loss) (4,880) 28.8 % (6,856) (12,446) 24.4 % (16,458)
Total operating income $ 47,514 (4.0)% $ 49,489 $ 88,320 (8.3)% $ 96,363
Other Financial and Statistical Data:
Percent of operating revenues:
EBITDA 35.6 % 37.7 % 34.7 % 38.0 %
Operating income 28.9 % 30.9 % 28.0 % 31.2 %
Capital expenditures $ 5,375 $ 5,150 $ 15,763 $ 9,354
Business acquisitions and other
additions to long-lived assets 382 805 64,650 32,806
The demand for advertising was soft in most of the Company's markets for
the first six months of 2001. On a pro forma basis, assuming all
acquisitions had been completed as of January 1, 2000, local advertising
decreased 3.7% in the quarter and 4.4% year-to-date. Classified
advertising decreased 6% in the quarter and 5.3% year-to-date.
Expenses, other than newsprint, decreased approximately 1% on
the same pro forma basis for the quarter, and were flat year-to-date.
Newsprint and ink increased primarily due to a 17% increase in
year-over-year newsprint prices.
The Company's operating results in Denver are beginning to improve due to
advertising and circulation rate increases implemented by the JOA. The
Company also anticipates a substantial reduction in JOA operating
expenses resulting from headcount reductions, and the publication of
combined weekend editions and a single classified advertising section
distributed daily in both newspapers.
SCRIPPS NETWORKS - Operating results, excluding unusual items, were as
follows:
( in thousands ) Quarterly Period Year-to-Date
2001 Change 2000 2001 Change 2000
Operating revenues:
Advertising $ 77,920 10.2 % $ 70,702 $ 144,519 12.7 % $ 128,177
Affiliate fees 19,935 37.2 % 14,535 39,692 36.1 % 29,165
Other 1,327 8.0 % 1,229 2,588 5.8 % 2,447
Total operating revenues 99,182 14.7 % 86,466 186,799 16.9 % 159,789
Operating expenses, excluding depreciation and amortization:
Programming and production 25,025 16.3 % 21,516 49,086 18.4 % 41,474
Operations and distribution 9,317 18.7 % 7,852 18,914 15.6 % 16,368
Amortization of distribution fees 5,645 22.0 % 4,628 10,944 21.3 % 9,024
Sales and marketing 21,012 17.0 % 17,963 39,606 21.7 % 32,549
General and administrative 12,982 29.3 % 10,039 27,867 29.5 % 21,527
Total 73,981 19.3 % 61,998 146,417 21.1 % 120,942
EBITDA - consolidated networks 25,201 3.0 % 24,468 40,382 4.0 % 38,847
Share of pre-tax earnings of equity-method investments 1,392 711 2,032 1,670
Total EBITDA 26,593 5.6 % 25,179 42,414 4.7 % 40,517
Depreciation and amortization 3,857 11.6 % 3,457 7,549 7.2 % 7,041
Operating income $ 22,736 4.7 %$ 21,722 $ 34,865 4.1 %$ 33,476
Other Financial and Statistical Data:
Percent of operating revenues:
EBITDA 26.8 % 29.1 % 22.7 % 25.4 %
Operating income 22.9 % 25.1 % 18.7 % 21.0 %
Payments for programming and network
distribution fees less than (greater than)
amounts recognized as expense $ (7,658) $ (4,665) $ (15,218) $ (10,089)
Capital expenditures 3,650 1,654 5,289 3,250
Business acquisitions and other
additions to long-lived assets 9,299 8,415 27,850 8,992
According to the Nielsen Homevideo Index, HGTV was distributed to
70.5 million homes in June 2001, up 7.6 million from June 2000 and
0.7 million in the second quarter. Food Network was distributed to
60.4 million homes in June 2001, up 11.0 million from June 2000
and 2.5 million in the second quarter.
The Company launched DIY in the fourth quarter of 1999 and expects to
launch Fine Living, its fourth network, in early 2002. Start-up expenses
associated with DIY and Fine Living reduced EBITDA in the second quarter by
$4.9 million in 2001 compared to $2.5 million in the second quarter of 2000.
DIY and Fine Living reduced year-to-date EBITDA $10.3 million in 2001 and
$4.6 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
14% in the quarter and 17% year-to-date.
BROADCAST TELEVISION - Operating results, excluding unusual items, were as
follows:
( in thousands ) Quarterly Period Year-to-Date
2001 Change 2000 2001 Change 2000
Operating revenues:
Local $ 43,585 (9.3)% $ 48,072 $ 82,538 (7.4)% $ 89,151
National 26,266 (21.3)% 33,362 49,069 (22.6)% 63,414
Political 304 2,165 304 3,906
Other 4,044 4.4 % 3,872 8,209 6.8 % 7,687
Total operating revenues 74,199 (15.2)% 87,471 140,120 (14.6)% 164,158
Operating expenses, excluding depreciation and amortization:
Programming and station operations 33,992 (7.7)% 36,826 68,763 (7.2)% 74,113
Sales and marketing 9,291 (17.5)% 11,258 17,995 (14.9)% 21,149
General and administrative 5,661 (12.6)% 6,477 12,020 (3.3)% 12,432
Total 48,944 (10.3)% 54,561 98,778 (8.3)% 107,694
EBITDA 25,255 (23.3)% 32,910 41,342 (26.8)% 56,464
Depreciation and amortization 7,428 4.9 % 7,081 14,673 3.9 % 14,117
Operating income $ 17,827 (31.0)% $ 25,829 $ 26,669 (37.0)% $ 42,347
Other Financial and Statistical Data:
Percent of operating revenues:
EBITDA 34.0 % 37.6 % 29.5 % 34.4 %
Operating income 24.0 % 29.5 % 19.0 % 25.8 %
Capital expenditures $ 4,816 $ 3,979 $ 7,344 $ 12,822
Business acquisitions and other
additions to long-lived assets 27 55 27 14,660
The Company continues to be adversely affected by its relatively high
exposure to weakly rated ABC television network programming. Six of the
Company's 10 television stations are ABC affiliates. Year-over-year
automobile advertising declined sharply in the quarter.
Operating expenses, excluding depreciation and amortization, are expected
to decrease 6% to 9% 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. At June 30, 2001, an additional $59 million remains
to be invested under the Board of Directors authorization.
Net debt (borrowings less cash equivalent and other short-term investments)
decreased $7 million in the first half of 2001, to $707 million at
June 30, 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 June 30, 2001 As of December 31, 2000
Cost Fair Cost Fair
Basis Value Basis Value
Financial instruments subject to interest rate risk:
Variable rate credit facilities, including commercial paper $502,718 $ 502,718 $ 512,788 $ 512,788
$100 million, 6.625% note, due in 2007 99,908 99,800 99,901 97,900
$100 million, 6.375% note, due in 2002 99,973 101,100 99,964 99,800
Other notes 8,714 7,682 1,956 812
Total long-term debt $711,313 $ 711,300 $ 714,609 $ 711,300
Financial instruments subject to market value risk:
AOL Time Warner common stock (2,017,000 shares) $ 93,719 $ 106,891
Time Warner common stock (1,344,000 shares) $ 27,816 $ 70,239
Centra Software (700,500 and 1,792,500 common shares) 1,427 11,901 3,652 6,946
Other available-for-sale securities 640 4,601 639 3,969
Total investments in publicly-traded companies 95,786 123,393 32,107 81,154
Other equity investments 71,213 (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 similar securities in subsequent
rounds of financing, if any, and based upon 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 $80,000,000 on
June 30, 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 4.1% at June 30, 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 Six months ended
June 30, June 30,
2001 2000 2001 2000
EARNINGS AS DEFINED:
Earnings from operations before income taxes after
eliminating undistributed earnings of 20%- to
50%-owned affiliates $ 82,404 $ 81,082 $ 201,334 $ 141,417
Fixed charges excluding capitalized interest and
preferred stock dividends of majority-owned
subsidiary companies 12,202 15,056 26,035 29,503
Earnings as defined $ 94,606 $ 96,138 $ 227,369 $ 170,920
FIXED CHARGES AS DEFINED:
Interest expense, including amortization of
debt issue costs $ 10,859 $ 13,481 $ 23,320 $ 26,117
Interest capitalized 181 16 412 30
Portion of rental expense representative
of the interest factor 1,343 1,575 2,715 3,386
Preferred stock dividends of majority-owned
subsidiary companies 20 20 40 40
Fixed charges as defined $ 12,403 $ 15,092 $ 26,487 $ 29,573
RATIO OF EARNINGS TO FIXED CHARGES 7.63 6.37 8.58 5.78