The E.W. Scripps Company (SSP) 10-Q 2002 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission File Number 0-16914

THE E. W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)
Ohio	31-1223339
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
312 Walnut Street Cincinnati, Ohio	45202
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code:  (513) 977-3000
Not Applicable
(Former name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.  As of October 31, 2002 there were 61,384,683 of the Registrant’s Class A Common Shares outstanding and 18,616,913 of the Registrant’s Common Voting Shares outstanding.

INDEX TO THE E. W. SCRIPPS COMPANY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2002
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
4	Controls and Procedures	3
PART II - OTHER INFORMATION
1	Legal Proceedings	3
2	Changes in Securities and Use of Proceeds	3
3	Defaults Upon Senior Securities	4
4	Submission of Matters to a Vote of Security Holders	4
5	Other Information	4
6	Exhibits and Reports on Form 8-K	4
	Signatures	4
	Certifications	5

2

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.

ITEM 4.      CONTROLS AND PROCEDURES

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 AND USE OF PROCEEDS

There were no changes in the rights of security holders during the quarter for which this report is filed. 

There were no sales of unregistered equity securities during the quarter for which this report is filed.

3

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

A Current Report on Form 8-K reporting the Company’s Principal Executive Officer and Principal Financial Officer had signed sworn statements pursuant to Securities and Exchange Commission Order No. 4-460 was filed on August 12, 2002. 

A Current Report on Form 8-K reporting the Company’s agreement to acquire controlling interest in the Shop At Home television retailing network was filed on August 16, 2002.

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:	November 6, 2002	BY:	/s/ JOSEPH G. NECASTRO
			Joseph G. NeCastro Senior Vice President and Chief Financial Officer

4

CERTIFICATIONS
I, Kenneth W. Lowe, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of The E.W. Scripps Company;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
	a)		designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	b)		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
	c)		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
	a)		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date:		November 6, 2002		BY:	/s/ KENNETH W. LOWE
					Kenneth W. Lowe President and Chief Executive Officer

5

CERTIFICATIONS
I, Joseph G. NeCastro, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of The E.W. Scripps Company;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
	a)		designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	b)		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
	c)		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
	a)		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date:		November 6, 2002		BY:	/s/ JOSEPH G. NECASTRO
					Joseph G. NeCastro Senior Vice President and Chief Financial Officer

6

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
Condensed Notes to Consolidated Financial Statements		F-7
Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Critical Accounting Policies and Estimates	F-16
	Forward-Looking Statements	F-18
	Results of Operations	F-18
	Newspapers	F-21
	Scripps Networks	F-22
	Broadcast Television	F-24
	Liquidity and Capital Resources	F-25
Quantitative and Qualitative Disclosures About Market Risk		F-26
Controls and Procedures		F-27

F-1

CONSOLIDATED BALANCE SHEETS
		September 30, 2002		As of December 31, 2001		September 30, 2001
(in thousands)		(Unaudited)				(Unaudited)
ASSETS
Current Assets:
	Cash and cash equivalents	$	34,361	$	17,419	$	15,332
	Accounts and notes receivable (less allowances -$18,323, $13,964, $14,304)		218,241		236,311		228,734
	Program rights and production costs		155,311		120,715		145,432
	Inventories		7,393		7,345		7,521
	Deferred income taxes		36,204		30,850		30,747
	Miscellaneous		38,272		38,018		36,217
	Total current assets		489,782		450,658		463,983
Investments			245,694		331,542		355,261
Property, Plant and Equipment			406,312		394,677		387,438
Goodwill			1,143,560		1,138,232		1,142,292
Other Assets:
	Program rights and production costs (less current portion)		121,191		122,620		91,770
	Network distribution incentives		178,725		124,639		79,326
	Other intangible assets		62,391		64,959		66,167
	Miscellaneous		14,539		16,433		16,711
	Total other assets		376,846		328,651		253,974
TOTAL ASSETS		$	2,662,194	$	2,643,760	$	2,602,948

See notes to consolidated financial statements.

F-2

CONSOLIDATED BALANCE SHEETS
			September 30, 2002			As of December 31, 2001			September 30, 2001
(in thousands, except share data)			(Unaudited)						(Unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
	Current portion of long-term debt		$	132,471		$	613,878		$	460,630
	Accounts payable			90,729			81,690			84,762
	Customer deposits and unearned revenue			29,584			29,381			32,686
	Accrued liabilities:
		Employee compensation and benefits		50,228			44,792			44,762
		Network distribution incentives		40,916			64,624			67,407
		Miscellaneous		57,292			71,146			85,056
	Total current liabilities			401,220			905,511			775,303
Deferred Income Taxes				142,471			146,989			155,941
Long-Term Debt (less current portion)				512,967			109,966			209,814
Other Long-Term Obligations and Minority Interests (less current portion)				137,255			129,394			127,953
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: 61,367,470; 60,103,746; and 60,020,711 shares		614			601			600
		Voting - authorized:  30,000,000 shares; issued and outstanding:  18,616,913; 19,096,913; and 19,096,913 shares		186			191			191
	Total			800			792			791
	Additional paid-in capital			216,434			174,485			170,844
	Retained earnings			1,260,239			1,183,595			1,185,918
	Unrealized gains (losses) on securities available for sale			(2,793	)		5,067			(12,546	)
	Foreign currency translation adjustment			20			(554	)		(203	)
	Unvested restricted stock awards			(6,419	)		(11,485	)		(10,867	)
	Total stockholders’ equity			1,468,281			1,351,900			1,333,937
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	2,662,194		$	2,643,760		$	2,602,948

See notes to consolidated financial statements.

F-3

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
		Three months ended September 30,						Nine months ended September 30,
(in thousands, except per share data)		2002			2001			2002			2001
Operating Revenues:
	Advertising	$	273,160		$	247,617		$	833,342		$	804,841
	Circulation		33,566			34,850			103,385			105,090
	Network affiliate fees, net		20,902			14,509			59,410			43,257
	Licensing		16,082			14,269			50,348			49,520
	Share of joint operating agency profits		17,238			14,280			51,833			31,064
	Other		10,557			10,527			32,902			32,768
	Total operating revenues		371,505			336,052			1,131,220			1,066,540
Operating Expenses:
	Employee compensation and benefits		123,766			114,588			368,749			351,430
	Newsprint and ink		15,838			20,035			49,957			68,659
	Amortization of program rights and production costs		38,004			33,971			113,836			99,760
	Other operating expenses		84,452			82,721			267,569			274,892
	Depreciation		14,053			13,189			41,370			41,141
	Amortization of goodwill and other intangible assets		973			10,793			2,967			32,323
	Total operating expenses		277,086			275,297			844,448			868,205
Operating Income			94,419			60,755			286,772			198,335
Other Credits (Charges):
	Interest expense		(7,843	)		(8,417	)		(21,064	)		(31,737	)
	Investment results, net of expenses		(10,052	)		(10,917	)		(83,991	)		50,825
	Miscellaneous, net		675			240			57			1,073
	Net other credits (charges)		(17,220	)		(19,094	)		(104,998	)		20,161
Income Before Taxes and Minority Interests			77,199			41,661			181,774			218,496
Provision for Income Taxes			30,622			18,023			66,575			87,249
Income Before Minority Interests			46,577			23,638			115,199			131,247
Minority Interests			901			1,005			2,687			2,826
Net Income		$	45,676		$	22,633		$	112,512		$	128,421
Net Income per Share of Common Stock:
	Basic	$	.57		$	.29		$	1.42		$	1.63
	Diluted		.57			.28			1.40			1.61

See notes to consolidated financial statements.

F-4

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
		Nine months ended September 30,
(in thousands)		2002			2001
Cash Flows from Operating Activities:
Net income		$	112,512		$	128,421
Adjustments to reconcile net income to net cash flows from operating activities:
	Depreciation and amortization		44,337			72,990
	Net investment results and other nonrecurring items		44,938			(37,099	)
	Deferred income taxes		22,852			18,823
	Tax benefits of stock compensation plans		13,453			8,903
	Dividends received greater than share of profits of JOAs and equity method investments		7,896			19,572
	Stock and deferred compensation plans		6,755			1,641
	Minority interests in income of subsidiary companies		2,687			2,826
	Affiliate fees billed greater than amounts recognized as revenue		9,686			16,578
	Network launch incentive payments		(89,017	)		(13,668	)
	Payments for programming less (greater) than program cost amortization		(13,257	)		(23,516	)
	Other changes in certain working capital accounts, net		9,987			15,445
	Miscellaneous, net		3,337			4,593
Net operating activities			176,166			215,509
Cash Flows from Investing Activities:
Additions to property, plant and equipment			(53,300	)		(46,054	)
Purchase of subsidiary companies and long-term investments			(19,581	)		(33,595	)
Investments in Denver JOA						(62,117	)
Sale of investments			280			14,694
Miscellaneous, net			3,974			1,508
Net investing activities			(68,627	)		(125,564	)
Cash Flows from Financing Activities:
Increase in long-term debt			202,446			8,059
Payments on long-term debt			(280,909	)		(52,249	)
Dividends paid			(35,868	)		(35,641	)
Dividends paid to minority interests			(1,175	)		(1,176	)
Repurchase Class A Common shares						(20,671	)
Miscellaneous, net (primarily employee stock options)			24,909			12,953
Net financing activities			(90,597	)		(88,725	)
Increase in Cash and Cash Equivalents			16,942			1,220
Cash and Cash Equivalents:
Beginning of year			17,419			14,112
End of period		$	34,361		$	15,332
Supplemental Cash Flow Disclosures:
	Interest paid, excluding amounts capitalized	$	16,778		$	27,946
	Income taxes paid		80,012			26,964
	Denver newspaper assets contributed to JOA					160,064

See notes to consolidated financial statements.

F-5

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND STOCKHOLDERS’ EQUITY (UNAUDITED)
(in thousands, except share data)							Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income			Unvested Restricted Stock Awards			Total Stockholders’ Equity			Comprehensive Income for the Three Months Ended Sept. 30
As of December 31, 2000							$	787		$	157,394		$	1,093,138		$	32,238		$	(5,747	)	$	1,277,810
Comprehensive income:
						Net income								128,421									128,421		$	22,633
					Unrealized gains (losses), net of tax of $3,065 and ($16,590)												6,116						6,116			(30,407	)
				Adjustment for losses (gains) in income, net of tax of ($27,213) and ($48)													(50,539	)					(50,539	)		(89	)
			Increase (decrease) in unrealized gains (losses)														(44,423	)					(44,423	)		(30,496	)
		Currency translation															(564	)					(564	)		(145	)
		Total												128,421			(44,987	)					83,434		$	(8,008	)
Dividends:  declared and paid - $.45 per share														(35,641	)								(35,641	)
Repurchase 352,200 Class A Common Shares								(4	)		(20,667	)											(20,671	)
Compensation plans, net: 843,008 shares issued; 109,425 shares repurchased; 2,500 shares forfeited								8			25,214									(5,120	)		20,102
Tax benefits of compensation plans											8,903												8,903
As of September 30, 2001							$	791		$	170,844		$	1,185,918		$	(12,749	)	$	(10,867	)	$	1,333,937
As of December 31, 2001							$	792		$	174,485		$	1,183,595		$	4,513		$	(11,485	)	$	1,351,900
Comprehensive income:
	Net income													112,512									112,512		$	45,676
	Unrealized gains (losses), net of tax of ($4,170) and ($2,381)																(7,768	)					(7,768	)		(4,480	)
	Adjustment for losses (gains) in income, net of tax of ($50) and ($15)																(92	)					(92	)		(28	)
	Increase (decrease) in unrealized gains (losses)																(7,860	)					(7,860	)		(4,508	)
	Currency translation, net of tax of $112 and $67																574						574			15
	Total													112,512			(7,286	)					105,226		$	41,183
Dividends:  declared and paid - $.45 per share														(35,868	)								(35,868	)
Convert 480,000 Voting Shares to Class A Common Shares
Compensation plans, net:  821,631 shares issued; 37,307 shares repurchased; 600 shares forfeited								8			28,496									5,066			33,570
Tax benefits of compensation plans											13,453												13,453
As of September 30, 2002							$	800		$	216,434		$	1,260,239		$	(2,773	)	$	(6,419	)	$	1,468,281

See notes to consolidated financial statements.

F-6

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The condensed 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, 2001, has not changed materially unless otherwise disclosed herein.  Financial information as of December 31, 2001, 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.

Use of Estimates - Preparation of the financial statements requires the use of estimates.  The Company’s financial statements include estimates for such items as self-insured risks and income taxes payable.  The Company self-insures for employees’ medical and disability income benefits, workers’ compensation and general liability.  The recorded liability for self-insured risks is calculated using actuarial methods and is not discounted.  The recorded liability for self-insured risks totaled $20.6 million at September 30, 2002.  Management does not believe it is likely that its estimates for self-insured risks will change materially in the near term. 

The Company reached agreement with the Internal Revenue Service (“IRS”) to settle the audit of its 1992 through 1995 consolidated federal income tax returns in the second quarter of 2002.  As a result, the Company reduced its estimated liability for prior year income taxes by $8.0 million.  The Company’s 1996 through 2001 consolidated federal income tax returns are currently under examination by the IRS.  Management believes that adequate provision has been made for all open years.

Joint Operating Agencies - - The 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. Attorney General in January 2001.  The 50-year agreement created a new entity called the Denver Newspaper Agency L.L.P., which is 50% owned by each partner.  Both partners contributed certain assets used in the operations of their newspapers to the new entity.  In addition, the Company paid $60 million to MediaNews Group Inc.  The JOA commenced operations on January 22, 2001. 

Net Income Per Share - The following table presents additional information about basic and diluted weighted-average shares outstanding:

		Three months ended September 30,				Nine months ended September 30,
(in thousands)		2002		2001		2002		2001
Basic weighted-average shares outstanding			79,661		78,977		79,408		78,847
Effect of dilutive securities:
	Unvested restricted stock held by employees		160		180		161		162
	Stock options held by employees and directors		847		1,010		985		1,002
Diluted weighted-average shares outstanding			80,668		80,167		80,554		80,011

F-7

Goodwill and Other Intangible Assets - The Company adopted Financial Accounting Standard (“FAS”) No. 142 - Goodwill and Other Intangible Assets effective January 1, 2002.  Recorded goodwill and intangible assets with indefinite lives are no longer amortized, but instead are tested for impairment at least annually.  Other intangible assets are reviewed for impairment in accordance with FAS No. 144.  The Company has determined that there was no impairment of goodwill or other intangible assets on the date of adoption of FAS No. 142. 

If the non-amortization provisions of FAS No. 142 had been effective in 2001, reported results of operations would have been as follows:

		Three months ended September 30, 2001						Nine months ended September 30, 2001
(in thousands, except per share data)		Net Income		Basic EPS		Diluted EPS		Net Income		Basic EPS		Diluted EPS
As reported		$	22,633	$	0.29	$	0.28	$	128,421	$	1.63	$	1.61
Add back amortization of:
	Goodwill		6,882		.09		.09		20,481		.26		.26
	FCC licenses		117						352
	Network affiliation and other		58						174
As adjusted		$	29,690	$	0.38	$	0.37	$	149,428	$	1.90	$	1.87

Reclassifications - For comparative purposes, certain 2001 amounts have been reclassified to conform to 2002 classifications.

F-8

2.     ACQUISITIONS AND DIVESTITURES

Acquisitions

2002	-	In the first quarter the Company acquired an additional 1% interest in The Television Food Network (“Food Network”) for $5.2 million in cash, increasing the Company’s residual interest in Food Network to 69%.
		In the third quarter the Company reached an agreement to acquire a 70% controlling interest in the Shop At Home television-retailing network for $49.5 million.  The transaction was completed on October 31, 2002.
2001	-	In the first quarter the Company acquired an additional 3% interest in Food Network for $14.4 million.  In the fourth quarter the Company acquired an additional 1% interest in Food Network for $5.0 million.

The acquisitions have been accounted for as purchases.

3.     UNUSUAL CREDITS AND CHARGES

2002	-	Net investment results decreased net income $6.5 million ($.08 per share) in the quarter and $54.6 million ($.68 per share) year-to-date. Included in net investment results for the quarter were $9.6 million in write-downs of investments.  Year-to-date investment results include $3.6 million of costs associated with winding down the Scripps Ventures I and II investment funds and $78.6 million of investment write-downs.  Investment write-downs include $35.1 million due to the decline in value of the Company’s investment in AOL Time Warner (“AOL”) and $22.2 million due to the decline in value of the Scripps Ventures investment portfolios.
		The reduction in the estimated liability for prior year income taxes increased net income by $8.0 million ($.10 per share) in the year-to-date period.
		The combined effect of the above items was to decrease third quarter 2002 net income by $6.5 million ($.08 per share) and to decrease year-to-date 2002 net income by $46.6 million ($.58 per share).
2001	-	Net investment results decreased net income $6.9 million ($.09 per share) in the quarter and increased net income $33.5 million ($.42 per share) year-to-date.  Third quarter net investment results include $12.4 million in write-downs for several investments, and a $3.1 million decrease in accrued incentive compensation. Year-to-date realized gains totaled $77.8 million, including $65.9 million on the exchange of the Company’s investment in Time Warner for America Online, which acquired Time Warner, in January 2001 and an $11.7 million gain on the sale of a portion of the Company’s investment in Centra Software.  Write-downs totaled $35.0 million in the year-to-date period, while accrued incentive compensation decreased $11.5 million, to zero.
		Costs associated with workforce reductions, including the Company’s share of such costs at the Denver JOA, reduced operating income $1.5 million in the third quarter and $12.7 million year-to-date.  Net income was reduced $0.9 million ($.01 per share) in the third quarter and $8.0 million ($.10 per share) year-to-date.
		The combined effect of the above items was to reduce third quarter 2001 net income $7.9 million ($.10 per share) and to increase 2001 year-to-date net income $25.5 million ($.32 per share).

F-9

4.     LONG-TERM DEBT

Long-term debt consisted of the following:

(in thousands)	September 30, 2002		As of December 31, 2001		September 30, 2001
Variable rate credit facilities	$	232,391	$	513,855	$	460,590
$200 million, 5.750% notes, due in 2012		198,777
$100 million, 6.375% notes, due in 2002		99,998		99,983		99,978
$100 million, 6.625% notes, due in 2007		99,926		99,916		99,912
Other notes		14,346		10,090		9,964
Total long-term debt		645,438		723,844		670,444
Current portion of long-term debt		132,471		613,878		460,630
Long-term debt (less current portion)	$	512,967	$	109,966	$	209,814

The Company has Competitive Advance and Revolving Credit Facilities (the “Revolver”) and a commercial paper program that collectively permit aggregate borrowings up to $600 million (the “Variable Rate Credit Facilities”).  The Revolver consists of two facilities, one permitting $400 million in aggregate borrowings expiring in August 2003 and the second a $200 million facility expiring in August 2007.  Borrowings under the Revolver 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 Revolver is primarily used as credit support for the commercial paper program in lieu of direct borrowings under the Revolver.  The weighted-average interest rates on the Variable Rate Credit Facilities were 1.8% at September 30, 2002, 2.0% at December 31, 2001, and 3.2 % at September 30, 2001.

In July 2002 the Company issued $200 million of 5.75% notes due in 2012.  The proceeds from the note issuance were used to reduce the Company’s commercial paper borrowings.  In October 2002 the Company repaid the $100 million, 6.375% notes due in 2002.

F-10

5.     INVESTMENTS

Investments consisted of the following:

(in thousands, except share data)		September 30, 2002			As of December 31, 2001		September 30, 2001
Securities available for sale (at market value):
	AOL Time Warner (2,017,000 common shares)	$	23,597		$	64,740	$	66,757
	Centra Software (700,500 common shares)		869			5,604		5,996
	Other		3,354			4,213		3,483
Total available-for-sale securities			27,820			74,557		76,236
Denver newspaper JOA			189,183			198,527		202,944
FOX SportSouth and other joint ventures			6,969			6,744		8,706
Other equity investments			21,722			51,714		67,375
Total investments		$	245,694		$	331,542	$	355,261
Unrealized gains (losses) on securities available for sale		$	(4,188	)	$	7,793	$	(19,529	)

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.

Other equity investments include securities of start-up enterprises that do not trade in public markets, so they do not have readily determinable fair values.  Management estimates the fair value of these securities approximates their carrying value at September 30, 2002, however, many of the investees have not issued new equity in the past two years.  There can be no assurance that the Company would realize the carrying value of these securities upon their sale.

During the second quarter of 2002, the Company ceased active management of Scripps Ventures Funds I and II (“Scripps Ventures”).  Scripps Ventures invested approximately $100 million in new businesses focusing primarily on new media technology.  The carrying value of the portfolio was $4.5 million as of September 30, 2002.

F-11

6.     SEGMENT INFORMATION

Financial information for the Company’s business segments is as follows:

	Three months ended September 30,						Nine months ended September 30,
(in thousands)	2002			2001			2002			2001
OPERATING REVENUES
Newspapers	$	180,239		$	177,975		$	554,044		$	549,425
Scripps Networks		97,069			77,056			296,737			252,911
Broadcast television		72,745			61,121			213,987			201,241
Licensing and other media		21,452			19,900			66,452			67,012
Total		371,505			336,052			1,131,220			1,070,589
Unusual item											(4,049	)
Per consolidated financial statements	$	371,505		$	336,052		$	1,131,220		$	1,066,540
EBITDA
Newspapers	$	60,706		$	58,200		$	195,039		$	172,482
Scripps Networks		29,872			17,647			82,722			60,061
Broadcast television		20,621			12,478			61,398			53,820
Licensing and other media		4,493			2,513			13,237			11,154
Corporate		(6,247	)		(4,561	)		(21,287	)		(13,465	)
Total		109,445			86,277			331,109			284,052
Unusual items					(1,540	)					(12,253	)
Total	$	109,445		$	84,737		$	331,109		$	271,799
DEPRECIATION
Newspapers	$	6,337		$	6,316		$	19,056		$	19,546
Scripps Networks		2,239			1,582			6,527			5,425
Broadcast television		4,938			4,794			14,355			14,786
Licensing and other media		199			232			583			616
Corporate		340			265			849			705
Total		14,053			13,189			41,370			41,078
Unusual items											63
Per consolidated financial statements	$	14,053		$	13,189		$	41,370		$	41,141
AMORTIZATION OF INTANGIBLE ASSETS
Newspapers	$	170		$	212		$	507		$	469
Scripps Networks		771			944			2,365			2,824
Broadcast television		32			48			95			75
Total		973			1,204			2,967			3,368
Amortization of goodwill and intangible assets with indefinite lives					9,589						28,544
Unusual items											411
Per consolidated financial statements	$	973		$	10,793		$	2,967		$	32,323
OPERATING INCOME
Newspapers	$	54,199		$	51,672		$	175,476		$	152,467
Scripps Networks		26,862			15,121			73,830			51,812
Broadcast television		15,651			7,636			46,948			38,959
Licensing and other media		4,294			2,281			12,654			10,538
Corporate		(6,587	)		(4,826	)		(22,136	)		(14,170	)
Total		94,419			71,884			286,772			239,606
Amortization of goodwill and intangible assets with indefinite lives					(9,589	)					(28,544	)
Unusual items					(1,540	)					(12,727	)
Per consolidated financial statements	$	94,419		$	60,755		$	286,772		$	198,335

F-12

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2002		2001		2002		2001
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Newspapers	$	7,044	$	8,334	$	27,304	$	24,097
Scripps Networks		3,917		5,523		9,835		10,812
Broadcast television		4,912		2,951		12,920		10,295
Licensing and other media		146		21		228		301
Corporate		518		130		3,013		549
Per consolidated financial statements	$	16,537	$	16,959	$	53,300	$	46,054
BUSINESS ACQUISITIONS AND OTHER ADDITIONS TO LONG-LIVED ASSETS
Newspapers	$	390	$	80	$	454	$	63,796
Scripps Networks		20,334		18,070		70,566		45,920
Broadcast television						20		27
Venture capital and other investments		7,801		8,623		13,872		15,995
Total	$	28,525	$	26,773	$	84,912	$	125,738
ASSETS
Newspapers					$	1,263,725	$	1,282,028
Scripps Networks						726,637		576,627
Broadcast television						502,800		499,407
Licensing and other media						24,787		29,595
Venture capital and other investments						50,089		143,687
Corporate						94,156		71,604
Per consolidated financial statements					$	2,662,194	$	2,602,948

Other additions to long-lived assets include investments and launch incentives capitalized.  Corporate assets are primarily cash, cash equivalent and other short-term investments, and refundable and deferred income taxes.

F-13

7.     STOCK COMPENSATION PLANS

The Company’s Long-Term Incentive Plans (the “Plans”) provide for the award of incentive and nonqualified stock options with 10-year terms, stock appreciation rights, performance units and restricted and unresticted Class A Common Shares to key employees and directors.  The Plans expire in 2007, except for awards then outstanding. 

Stock options may be awarded to purchase Class A Common Shares at not less than 100% of the fair market value on the date the option is granted.  Stock options vest over an incentive period, conditioned upon the individual’s employment throughout that period.  The following table presents information about stock options:

		Nine months ended September 30, 2002							Nine months ended September 30, 2001
		Number of Shares		Weighted Average Exercise Price			Range of Exercise Prices		Number of Shares		Weighted Average Exercise Price			Range of Exercise Prices
Options granted during the period			1,087,300	$	75.26		$	73 - 78		1,088,750	$	64.24		$	58 - 70
Options exercised during the period			760,562		29.96			15 - 67		649,276		27.32			11 - 56
Options forfeited during the period										47,898		48.72			35 - 64
Options outstanding at end of period			4,858,276		54.08			15 - 78		4,642,013		44.59			12 - 70
Options exercisable at end of period			2,867,119		43.64			15 - 68		2,728,468		35.64			12 - 70
Weighted-average fair value of options granted				$	22.18						$	18.93
Assumptions used to determine fair value:
	Dividend yield				0.8	%						1.5	%
	Expected volatility				22.1	%						23.1	%
	Risk-free rate of return				4.5	%						5.5	%
	Expected life of options				7 years							7 years

Awards of Class A Common Shares vest over an incentive period conditioned upon the individual’s employment throughout that period.  During the vesting period shares issued are nontransferable, but the shares are entitled to all the rights of an outstanding share.  Information related to awards of Class A Common Shares is presented below:

	Nine months ended September 30, 2002						Nine months ended September 30, 2001
	Number of Shares		Price at Award Dates				Number of Shares		Price at Award Dates
			Weighted Average		Range of Prices				Weighted Average		Range of Prices
Shares awarded during the period		32,305	$	72.43	$	72 - 77		165,120	$	63.41	$	57 - 71
Shares vested during the period		114,515		62.03		42 - 84		120,497		49.26		45 - 56
Shares forfeited during the period		600		47.39		47 - 48		2,500		52.54		45 - 63
Unvested shares at end of period		340,071		55.65		43 - 77		436,054		50.24		26 - 71

F-14

The Company has adopted the “disclosure-only” provisions of FAS No. 123.  Compensation expense is determined by the intrinsic value of the stock option or restricted stock award at the grant date, or on the vesting date for certain restricted stock awards which vest based upon the Company’s stock price.  Therefore, no compensation expense is recognized for stock options unless the terms of the options are modified subsequent to the grant date.

Compensation expense recognized in the Company’s financial statements and pro forma net income assuming compensation expense had been determined based upon the fair value provisions of FAS No. 123 (determined using the Black-Scholes option pricing model) are as follows:

			Three months ended September 30,						Nine months ended September 30,
(in thousands)			2002			2001			2002			2001
COMPENSATION EXPENSE RECOGNIZED
Restricted stock awards			$	848		$	1,299		$	6,116		$	3,700
Stock options							303						1,356
PRO FORMA RESULTS UNDER FAS NO. 123
Net income as reported			$	45,676		$	22,633		$	112,512		$	128,421
Additional stock option expense, net of income tax effects				(3,689	)		(3,047	)		(10,145	)		(8,740	)
Pro forma net income			$	41,987		$	19,586		$	102,367		$	119,681
Pro forma net income per share of common stock:
	Basic earnings per share:
		As reported	$	0.57		$	0.29		$	1.42		$	1.63
		Additional stock option expense, net of income tax effects		(0.05	)		(0.04	)		(0.13	)		(0.11	)
		Pro forma basic earnings per share	$	0.53		$	0.25		$	1.29		$	1.52
	Diluted earnings per share:
		As reported	$	0.57		$	0.28		$	1.40		$	1.61
		Additional stock option expense, net of income tax effects		(0.05	)		(0.04	)		(0.13	)		(0.11	)
		Pro forma diluted earnings per share	$	0.52		$	0.24		$	1.27		$	1.50

The sum of the net income per share amounts may not equal the pro forma amounts because each is computed independently.

F-15

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s discussion of and analysis of its financial condition and results of operations is based upon the Company’s consolidated financial statements.  Note 1 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K describes the significant accounting policies adopted by the Company.  The most critical accounting policies and estimates relate to revenue recognition, receivable allowances, programming, investments, long-lived assets, employee benefits and income taxes.

Revenue Recognition - The Company’s primary sources of revenue are from the sales of:
•	advertising space, time and on the Company’s Internet sites
•	newspapers to distributors and individual subscribers; and
•	programming services to cable and satellite television systems (“network affiliate fees”).

Advertising.  Advertising revenue is recorded, net of agency commissions, when advertisements are published in newspapers, are broadcast on television stations or cable television networks, and over the terms of the contracts for advertising appearing on the Company’s Internet sites.  Advertising contracts, which generally have a term of one year or less, may provide discounts based upon the volume of advertising purchased during the terms of the contracts.  This requires management to make certain estimates regarding future advertising volumes.  Estimated rebates are recorded as a reduction of revenue in the period the advertisement is displayed and are revised as necessary based on actual volume realized.  Broadcast and cable television network advertising contracts may guarantee the advertiser a minimum audience, requiring management to make estimates of audience size.  If management determines the Company will not deliver the guaranteed audience, an accrual for “make-good” advertisements is recorded as a reduction of revenue.  The estimated make-good accrual is adjusted over the terms of the advertising contracts.

Newspaper Subscriptions.  Prepaid newspaper subscriptions are deferred and are included in circulation revenue on a pro-rata basis over the term of the subscriptions.  Circulation revenue includes sales to retail outlets and newsstands, which are subject to returns.  The Company records these retail sales upon delivery, net of estimated returns.  Estimated returns are based on historical return rates and are adjusted based on actual returns realized.

Network Affiliate Fees.  Cable and satellite television services generally pay a per subscriber fee for the right to distribute the Company’s networks on their systems.  The Company may make cash payments to cable and satellite television systems and may provide an initial period in which payment of affiliate fees by the systems are waived in exchange for such long-term distribution contracts.  Network affiliate fee revenues are reported net of incentives in the Consolidated Statements of Income and are recognized over the terms of the contracts.

Customer Billed Revenue - Amounts due to the Company for network affiliate fees are determined by cable and satellite television systems based upon subscribers receiving the Company’s programming.  Licensees determine royalties due to the Company based upon their sales of licensed products.  This requires management to make estimates of the number of subscribers receiving the Company’s networks and licensed merchandise sales.  Estimated network affiliate fee and licensing revenues are adjusted based upon actual amounts realized.

Receivable Allowances - The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments.  Allowances are based on historical experience and other assumptions, and are adjusted based on write-offs realized.  Actual write-offs of bad debts have historically been insignificant, less than 1.0% of revenues.

F-16

Programming - Programming assets include licensed programs and programs produced by or for the Company.  These costs are expensed over the estimated useful life of the programming based upon expected future cash flows.  Estimated future cash flows can change based upon market acceptance, advertising rates, subscriber fees and program usage.  Accordingly, revenue estimates and planned usage are reviewed periodically and are revised if necessary.  If actual demand or market conditions are less favorable than projected, programming cost write-downs may be required.  Programming asset write-downs are determined using a day-part methodology, whereby programs broadcast during a particular time of day are evaluated on an aggregate basis.

Investments - The Company holds investments in several companies, including publicly traded securities and others that have no active market.  Future adverse changes in market conditions, poor operating results, or the inability of certain development stage companies to find additional financing could result in losses that may not be reflected in an investment’s current carrying value, thereby requiring an impairment charge in the future. The Company’s investments are regularly reviewed to determine if there has been an other-than-temporary decline in market value.  In making that determination, management considers the extent to which cost exceeds market value, the duration of the market decline and the investees’ earnings and cash forecasts, and current cash position, among other factors.

Long-lived Assets - Management also exercises judgment in determining the estimated useful life of long lived assets, specifically plant and property and certain intangible assets with a finite life.  Management bases its judgment on estimated lives of these assets based on actual experienced length of service of similar assets and expert opinions.

Certain events or changes in circumstances may indicate that the carrying value of the Company’s property, plant and equipment, intangible assets, and goodwill may not be recoverable and require an impairment review.  In assessing impairment, the Company must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets.  Based on that review, if the carrying value of these assets exceeds fair value and is determined to not be recoverable, an impairment loss representing the amount of excess over its fair value would be recognized in income.

In accordance with FAS No. 142 the Company reviews for goodwill impairment based upon its reporting units.  Reporting units are operating segments or businesses one level below the operating segment.  Scripps Networks comprises one reporting unit.  The Company’s newspaper and broadcast television reporting units are based on size of newspaper market and broadcast television affiliation.

Employee Benefits - The Company is self-insured for employee-related health and disability benefits and workers compensation claims. A third-party administrator is used to process all claims.  Liabilities for unpaid claims are based on the Company’s historical claims experience rate and are developed from actuarial valuations.  However, actual amounts could vary significantly from such estimates, which would require the Company to record adjustments to expense in that period.

Management relies on actuarial valuations to determine pension costs.  Inherent in these valuations are assumptions of discount rates and expected return on plan assets.  Management considers current market conditions, including changes in interest rates, in selecting these assumptions.  Changes in market conditions and changes in assumptions regarding plan participants may cause volatility in year-over-year pension expense.

Income Taxes - The Company’s accounting for income taxes is sensitive to interpretation of various laws and regulations.  The Internal Revenue Service is currently examining the Company’s 1996 to 2001 consolidated federal income tax returns.  Management reviews its provision for open tax years on an ongoing basis. 

The company records a tax valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized.  The Company’s deferred tax assets subject to a valuation allowance primarily relate to state net operating loss carryforwards and capital loss carryforwards.  The Company considers ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance.  In the event the Company determined the deferred tax asset it would realize was greater or less than the net amount recorded, an adjustment would be made to the tax provision in that period.

F-17

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

The Company operates in three reportable segments: newspapers, cable television networks (referred to as “Scripps Networks”), and broadcast television. 

Income from core operations represents net income as defined under generally accepted accounting principles (“GAAP”) excluding certain unusual items.  These items are excluded because management believes the items are unlikely to recur or they otherwise impede analysis of the Company’s on-going operations.

Management uses earnings before interest, income taxes, depreciation and amortization (“EBITDA”), along with operating income and other GAAP measures to evaluate the performance of the Company’s operating segments.  Management uses EBITDA to evaluate the performance of the Company’s operating segments because:
	•	EBITDA, combined with information on historical and planned capital spending, is a useful and reliable measure of year-over-year operating performance.
	•	Banks and other lenders use EBITDA and other cash flow measures to evaluate the Company’s ability to meet its debt service requirements and its other obligations.
	•	Financial analysts and investors use EBITDA, combined with capital spending requirements, to estimate the value of communications media companies.

Income from core operations and EBITDA should not be construed as alternative measures of, but as supplemental information to, the Company’s net income and cash flows from operating activities as defined under GAAP.

Acquisitions and divestitures can affect the comparability of year-over-year reported results.  The accompanying tables include the results of operations for acquired operations from the dates of acquisition.  Divested operating units are removed from segment operating results and reported separately because management believes they impede analysis of the Company’s on-going operations. 

See Note 2 to the Consolidated Financial Statements on page F-9 regarding acquisitions and divestitures.

The application for a 50-year Joint Operating Agency (“JOA”) between the Company’s Denver Rocky Mountain News (“RMN”) and MediaNews Group Inc.’s (“MediaNews”) Denver Post was approved in January 2001 by the U.S. Department of Justice.  The JOA commenced operations on January 22, 2001.  The RMN received a 50% interest in the JOA in exchange for the contribution of most of its assets to the JOA and the payment of $60 million to MediaNews.

The RMN’s 50% share of the operating profit (loss) of the Denver JOA is reported as “Share of Joint Operating Agency Profits” revenue in the financial statements.  Editorial costs associated with the RMN are included in operating expenses.  The financial statements do not include advertising and other revenue of the JOA, nor the costs to produce, distribute and market the newspapers, nor related depreciation.  The RMN is reported separately in Management’s Discussion and Analysis.

In August 2002 the Company reached an agreement to acquire a 70% controlling interest in the Shop At Home television-retailing network.  The acquisition was completed on October 31, 2002.

F-18

Consolidated results of operations were as follows:

			Quarterly Period									Year-to-Date
(in thousands, except per share data)			2002			Change			2001			2002			Change			2001
Operating revenues:
	Newspapers excluding RMN		$	174,102			(0.1	)%	$	174,315		$	534,426			0.0	%	$	534,189
	Rocky Mountain News			6,137						3,660			19,618						15,236
	Total newspapers			180,239			1.3	%		177,975			554,044			0.8	%		549,425
	Scripps Networks			97,069			26.0	%		77,056			296,737			17.3	%		252,911
	Broadcast television			72,745			19.0	%		61,121			213,987			6.3	%		201,241
	Licensing and other media			21,452			7.8	%		19,900			66,452			(0.8	)%		67,012
Revenues from core operations			$	371,505			10.5	%	$	336,052		$	1,131,220			5.7	%	$	1,070,589
Operating income:
	Newspapers excluding RMN		$	53,410			0.7	%	$	53,056		$	171,954			3.8	%	$	165,630
	Rocky Mountain News			789						(1,384	)		3,522						(13,163	)
	Total newspapers			54,199			4.9	%		51,672			175,476			15.1	%		152,467
	Scripps Networks			26,862			77.6	%		15,121			73,830			42.5	%		51,812
	Broadcast television			15,651						7,636			46,948			20.5	%		38,959
	Licensing and other media			4,294			88.3	%		2,281			12,654			20.1	%		10,538
	Corporate			(6,587	)					(4,826	)		(22,136	)					(14,170	)
Operating income from core operations				94,419			31.3	%		71,884			286,772			19.7	%		239,606
Interest expense				(7,843	)					(8,417	)		(21,064	)					(31,737	)
Miscellaneous, net				675						240			57						1,073
Income taxes				(34,146	)					(25,160	)		(104,007	)					(82,212	)
Minority interest				(901	)					(1,005	)		(2,687	)					(2,826	)
Income from core operations				52,204			39.1	%		37,542			159,071			28.4	%		123,904
Unusual credits (charges):
	Employee work force reduction									(1,540	)								(12,727	)
	Amortization of goodwill and intangible assets with indefinite lives									(9,589	)								(28,544	)
	Investment results, net of expenses			(10,052	)					(10,917	)		(83,991	)					50,825
	Tax effect of unusual credits (charges)			3,524						7,137			29,432						(5,037	)
	Prior year tax liability adjustments												8,000
Net income			$	45,676					$	22,633		$	112,512			(12.4	)%	$	128,421
Per share of common stock:
	Income from core operations		$	.65			38.3	%	$	.47		$	1.97			27.1	%	$	1.55
	Unusual credits (charges):
		Employee work force reduction								(.01	)								(.10	)
		Amortization of goodwill and intangible assets with indefinite lives								(.09	)								(.26	)
		Net investment results		(.08	)					(.09	)		(.68	)					.42
		Prior year tax liability adjustments											.10
	Net income		$	.57					$	.28		$	1.40			(13.0	)%	$	1.61
Weighted-average shares outstanding				80,668						80,167			80,554						80,011

 See Note 1 - Goodwill and Other Intangible Assets on page F-8 and Note 3 on page F-9 regarding items excluded from core operations.

The sum of per share from core operations and unusual credits (charges) may not equal the reported net income per share amount because each is computed independently.

All per share disclosures are on a diluted basis. 

F-19

Other financial and statistical data, excluding unusual items, are as follows:

		Quarterly Period									Year-to-Date
(in thousands)		2002			Change			2001			2002			Change			2001
Total advertising revenues, excluding RMN		$	273,160			10.3	%	$	247,617		$	833,342			4.9	%	$	794,062
Advertising revenues as a percentage of total revenues			74.8	%					74.5	%		75.0	%					75.2	%
EBITDA:
	Newspapers excluding RMN	$	59,783			0.5	%	$	59,470		$	191,138			3.6	%	$	184,424
	Rocky Mountain News		923						(1,270	)		3,901						(11,942	)
	Total newspapers		60,706			4.3	%		58,200			195,039			13.1	%		172,482
	Scripps Networks		29,872			69.3	%		17,647			82,722			37.7	%		60,061
	Broadcast television		20,621			65.3	%		12,478			61,398			14.1	%		53,820
	Licensing and other media		4,493			78.8	%		2,513			13,237			18.7	%		11,154
	Corporate		(6,247	)					(4,561	)		(21,287	)					(13,465	)
EBITDA from core operations		$	109,445			26.9	%	$	86,277		$	331,109			16.6	%	$	284,052
Effective income tax rate for core operations			39.1	%					39.5	%		39.1	%					39.3	%
Net cash provided by operating activities		$	75,398					$	92,102		$	176,166					$	215,509
Capital expenditures			(16,537	)					(16,959	)		(53,300	)					(46,054	)
Business acquisitions and investments			(8,186	)					(9,269	)		(19,581	)					(95,712	)
Increase (decrease) in long-term debt			(23,499	)					(40,877	)		(78,463	)					(44,190	)
Dividends paid, including to minority interests			(12,378	)					(12,298	)		(37,043	)					(36,817	)
Purchase and retirement of common stock									(18,683	)								(20,671	)

Certain restricted stock awards issued in 2001 are earned based upon the market price of the Company’s Class A Common Shares.  The Company records expense related to these awards when the shares are earned.  Corporate expense increased year-over-year in the first quarter when 20,000 shares were earned.  An additional 20,000 shares were earned in April 2002.  The remaining 20,000 shares under the award can be earned in 2003 if certain targets are met in 2003.  Corporate expenses in 2002 also include the accrual of performance bonuses, which were not earned in 2001.

Lower borrowing rates under short-term credit facilities led to lower period-over-period interest expense.  Average daily borrowings under short-term credit facilities in the third quarter were $233 million in 2002 and $457 million in 2001.  The weighted-average interest rate on such borrowings in the third quarter was 1.8% in 2002 and 3.6% in 2001.  For the year-to-date period the weighted-average interest rate was 1.8% in 2002 and 4.8% in 2001. The Company is currently rolling over short-term debt at an effective 90-day yield of 1.6%.

In July 2002 the Company issued $200 million of 5.75% notes due in 2012.  The proceeds from the note issuance were used to reduce the Company’s commercial paper borrowings.  The average balance of all interest bearing obligations year-to-date was $704 million in 2002 and $747 million in 2001.  In October 2002 the Company repaid its $100 million, 6.375% notes.

The Company adopted Financial Accounting Standard (“FAS”) No. 142 - Goodwill and Other Intangible Assets effective January 1, 2002.  See Note 1 to the Consolidated Financial Statements.  Amortization of goodwill and other intangible assets with indefinite lives, primarily FCC licenses and broadcast television station network affiliation agreements, was $9.6 million, $7.1 million after-tax, $.09 per share in the third quarter and $28.5 million, $21.0 million after tax, $.26 per share.

Third quarter 2001 operating results were affected by a downturn in business immediately following the September 11 terrorist attacks, which exacerbated an already weak market.  The Company’s nine network-affiliated television stations broadcast 36 hours of continuous, commercial free network and local news coverage following the attacks, and for the next several days there was little demand for television advertising. 

Operating results for each of the Company’s reportable segments, excluding divested operating units and unusual items, are presented on the following pages. 

F-20

NEWSPAPERS - RMN operating results are presented separately as a single line item to enhance comparability of year-over-year Newspaper operating results.  Excluding unusual items, operating results were as follows:

		Quarterly Period									Year-to-Date
(in thousands)		2002			Change			2001			2002			Change			2001
Operating revenues:
	Local	$	41,115			(3.0	)%	$	42,376		$	131,033			(1.2	)%	$	132,688
	Classified		53,420			(0.7	)%		53,783			163,220			(2.5	)%		167,335
	National		8,359			2.3	%		8,170			24,424			(0.6	)%		24,572
	Preprint and other		23,950			9.0	%		21,964			71,452			9.5	%		65,271
	Newspaper advertising		126,844			0.4	%		126,293			390,129			0.1	%		389,866
	Circulation		33,566			(3.7	)%		34,850			103,385			(0.9	)%		104,310
	Share of joint operating agency profits		11,141			4.9	%		10,620			32,334			2.5	%		31,547
	Other		2,551			(0.0	)%		2,552			8,578			1.3	%		8,466
Total operating revenues			174,102			(0.1	)%		174,315			534,426			0.0	%		534,189
Expenses, excluding depreciation and amortization:
	Editorial and newspaper content		21,746			(0.7	)%		21,910			65,748			0.1	%		65,682
	Newsprint and ink		15,345			(21.0	)%		19,424			48,505			(23.5	)%		63,396
	Other press and production		17,103			2.4	%		16,708			52,490			2.7	%		51,097
	Circulation and distribution		15,978			(1.7	)%		16,257			48,751			1.5	%		48,041
	Other advertising, internet and printing		7,895			8.9	%		7,251			23,360			6.9	%		21,849
	Advertising sales and marketing		16,229			7.4	%		15,104			49,882			5.3	%		47,376
	General and administrative		19,945			12.6	%		17,719			54,213			7.5	%		50,421
Total			114,241			(0.1	)%		114,373			342,949			(1.4	)%		347,862
EBITDA before equity-method investments			59,861			(0.1	)%		59,942			191,477			2.8	%		186,327
Share of pre-tax earnings (losses) of equity-method investments			(78	)					(472	)		(339	)					(1,903	)
EBITDA			59,783			0.5	%		59,470			191,138			3.6	%		184,424
Depreciation and amortization			6,373			(0.6	)%		6,414			19,184			2.1	%		18,794
Operating income before RMN			53,410			0.7	%		53,056			171,954			3.8	%		165,630
Rocky Mountain News			789						(1,384	)		3,522						(13,163	)
Operating income		$	54,199			4.9	%	$	51,672		$	175,476			15.1	%	$	152,467
Percent of operating revenues:
	EBITDA		34.3	%					34.1	%		35.8	%					34.5	%
	Operating income, excluding RMN		30.7	%					30.4	%		32.2	%					31.0	%
Supplemental Statement of Cash Flows Information:
Dividends received greater (less) than share of profits of JOAs and equity-method investments		$	3,325					$	(3,473	)	$	9,484					$	19,370
Capital expenditures			7,044						8,334			27,304						24,097
Business acquisitions and other additions to long-lived assets			390						80			454						63,796

The demand for advertising stabilized in many of the Company’s markets in the third quarter of 2002, although help wanted advertising volume remains below that of prior periods.   Newspaper advertising revenues are expected to increase modestly year-over-year in the fourth quarter.

Newsprint and ink decreased in the quarter primarily due to a 24% decrease in year-over-year newsprint prices.

Third quarter and year-to-date results at the Denver newspaper were substantially improved over 2001 due to advertising and circulation rate increases and cost cutting measures implemented by the JOA, including the publication of combined weekend editions and a single classified advertising section distributed daily in both newspapers.

F-21

SCRIPPS NETWORKS – Operating results, excluding unusual items, were as follows:

		Quarterly Period									Year-to-Date
(in thousands)		2002			Change			2001			2002			Change			2001
Operating revenues:
	Advertising	$	74,803			22.2	%	$	61,234		$	233,345			13.4	%	$	205,753
	Network affiliate fees, net		20,902			44.1	%		14,509			59,410			37.3	%		43,257
	Other		1,364			3.9	%		1,313			3,982			2.1	%		3,901
Total operating revenues			97,069			26.0	%		77,056			296,737			17.3	%		252,911
Operating expenses, excluding depreciation and amortization:
	Programming and production		30,389			18.0	%		25,747			90,615			21.1	%		74,833
	Operations and distribution		7,090			(10.0	)%		7,878			24,276			(9.4	)%		26,795
	Sales and marketing		17,416			10.9	%		15,701			54,157			(2.1	)%		55,307
	General and administrative		14,365			19.4	%		12,027			48,955			22.7	%		39,891
Total			69,260			12.9	%		61,353			218,003			10.8	%		196,826
EBITDA before equity-method investments			27,809			77.1	%		15,703			78,734			40.4	%		56,085
Share of pre-tax earnings of equity-method investments			2,063						1,944			3,988						3,976
EBITDA			29,872			69.3	%		17,647			82,722			37.7	%		60,061
Depreciation and amortization			3,010			19.2	%		2,526			8,892			7.8	%		8,249
Operating income		$	26,862			77.6	%	$	15,121		$	73,830			42.5	%	$	51,812
Percent of operating revenues:
	EBITDA		30.8	%					22.9	%		27.9	%					23.7	%
	Operating income		27.7	%					19.6	%		24.9	%					20.5	%
Supplemental Statement of Cash Flows Information:
Billed network affiliate fees		$	23,880					$	19,290		$	69,096					$	59,835
Network launch incentive payments			19,176						5,816			89,017						13,668
Payments for programming less (greater) than program cost amortization			378						(7,315	)		(13,447	)					(25,703	)
Dividends received greater (less) than share of earnings of equity-method investments			(383	)					(745	)		(1,588	)					164
Capital expenditures			3,917						5,523			9,835						10,812
Business acquisitions and investments												5,240						14,429
Supplemental balance sheet information:
Program assets											$	232,227					$	198,120
Network distribution incentives												178,725						79,326
Launch incentive payments due to cable and satellite television systems for launches through the end of the period												44,684						72,809

F-22

According to the Nielsen Homevideo Index, HGTV was distributed to 79.8 million homes in September 2002, up 5.5 million from September 2001 and 1.2 million in the quarter.  Food Network was distributed to 76.6 million homes in September 2002, up 8.9 million from September 2001 and 1.3 million in the quarter.  Prime-time viewership was up 29% for Food and 35% for HGTV compared to the prior year. 

Wider distribution of the networks and the increase in viewership led to increased demand for advertising and higher advertising rates at the Company’s networks.  Advertising revenues in the prior year were reduced due to lost sales in the days immediately following the September 11 terrorist attacks.  The networks were off the air for 24 hours and experienced weakened demand and canceled advertising.  Advertising revenues are expected to increase between 40% and 45% year-over-year in the fourth quarter.

Network affiliate fee revenue increased 36% for HGTV and 20% for Food Network in the year-to-date period.  The Company changed its estimate of the lives of certain network distribution contracts in the second quarter of 2002, increasing network affiliate fee revenue by $1.7 million in the quarter and $3.4 million in the year-to-date period.  Network affiliate fee revenues are expected to increase approximately 35% year-over-year in the fourth quarter.

Programming and production expenses have increased as the Company improves the quality and variety of programming and expands the hours of original programming presented on its networks.  Programming expense increased 17% for HGTV and 23% for Food Network in the year-to-date period. 

The Company launched DIY in the fourth quarter of 1999 and launched Fine Living, its fourth network, in March 2002.  DIY was distributed to 12 million homes in September 2002.  Fine Living signed a long-term distribution agreement with DIRECTV in September, increasing distribution of the network to 13 million homes on October 1, 2002. 

Start-up losses associated with DIY and Fine Living reduced EBITDA in the third quarter by $7.3 million in 2002 compared to $5.7 million in the third quarter of 2001.  For the year-to-date period, start-up losses reduced EBITDA by $29 million in 2002 and $16 million in 2001.  Full year start-up losses are currently projected to reduce EBITDA by approximately $38 million in 2002.

Excluding the start-up expenses of the new networks, EBITDA at Scripps Networks increased 59% in the quarter and 46% year-to-date.

The year-over-year increase in network launch incentive payments is due to expanded distribution of the Company’s networks.

F-23

BROADCAST TELEVISION – Operating results, excluding unusual items, were as follows:

		Quarterly Period									Year-to-Date
(in thousands)		2002			Change			2001			2002			Change			2001
Operating revenues:
	Local	$	41,138			16.2	%	$	35,389		$	126,238			7.0	%	$	117,927
	National		22,789			7.7	%		21,151			70,491			0.4	%		70,220
	Political		5,470						735			6,453						1,039
	Network compensation		1,870			(20.4	)%		2,348			5,779			(25.0	)%		7,702
	Other		1,478			(1.3	)%		1,498			5,026			15.5	%		4,353
Total operating revenues			72,745			19.0	%		61,121			213,987			6.3	%		201,241
Operating expenses, excluding depreciation and amortization:
	Programming and station operations		35,142			0.4	%		35,002			104,798			1.0	%		103,733
	Sales and marketing		8,998			16.3	%		7,740			27,205			5.6	%		25,767
	General and administrative		7,984			35.3	%		5,901			20,586			14.9	%		17,921
Total			52,124			7.2	%		48,643			152,589			3.5	%		147,421
EBITDA			20,621			65.3	%		12,478			61,398			14.1	%		53,820
Depreciation and amortization			4,970			2.6	%		4,842			14,450			(2.8	)%		14,861
Operating income		$	15,651					$	7,636		$	46,948		$	20.5	%	$	38,959
Percent of operating revenues:
	EBITDA		28.3	%					20.4	%		28.7	%					26.7	%
	Operating income		21.5	%					12.5	%		21.9	%					19.4	%
Supplemental Statement of Cash Flows Information:
Payments for programming less (greater) than program cost amortization		$	4					$	823		$	190					$	2,187
Capital expenditures			4,912						2,951			12,920						10,295
Business acquisitions and other additions to long-lived assets												20						27

Improved demand for advertising led to the increase in advertising revenues.  Local and national advertising revenue increased 13% year-over-year in the third quarter.  Broadcast television advertising revenues in the prior year quarter were reduced by approximately $4 million due to sales lost in the days immediately following the September 11 terrorist attacks.  The Company’s nine network-affiliated television stations broadcast 36 hours of continuous, commercial free network and local news coverage following the attacks, and for the next several days there was little demand for television advertising.

Including political revenue, broadcast television advertising revenues are expected to increase between 10% and 15% year-over-year in the fourth quarter.  Political revenues are expected to be approximately $12 million in the fourth quarter compared to $1.4 million in the 2001 period.

In 2001 the Company renegotiated and extended its affiliation agreements with NBC, which were originally scheduled to expire in 2004.  Network compensation is sharply reduced under the new agreements, which expire in 2009.  The Company’s ABC affiliation agreements expire on various dates during the period 2004 through 2006.

F-24

LIQUIDITY AND CAPITAL RESOURCES

The Company’s primary source of liquidity is cash flow from operating activities.  Advertising provides 70% to 80% of the Company’s total revenues, so the Company’s cash flow from operating activities is adversely affected during recessionary periods.  The Company’s cash flow from operating activities in the first nine months of the year was $176 million in 2002 and $216 million in 2001.  Increased launch incentive payments to expand distribution of Scripps Networks was the primary cause of the decrease.  The Company expects to continue to increase the distribution of Scripps Networks. 

Cash flow from operating activities exceeded capital expenditures and cash dividends by $86 million in the first nine months and is expected to substantially exceed the total of its capital expenditure requirements and cash dividends in 2002, as it has each year since 1992. 

The excess cash flow from existing businesses and the Company’s substantial borrowing capacity have been used primarily to fund acquisitions, investments, and to develop new businesses.  There are essentially no legal or other restrictions on the transfer of funds among the Company’s business segments. 

In July the Company issued $200 million of 5.75% notes due in 2012.  The proceeds from the notes were used to reduce the Company’s commercial paper borrowings.  In October 2002 the Company repaid its $100 million, 6.375% notes and filed a shelf registration for up to $500 million in debt securities with the Securities and Exchange Commission.  The Company would use the proceeds for the sale of debt securities for general corporate purposes including capital spending, debt reduction and acquisitions.

Net debt (borrowings less cash equivalents and other short-term investments) decreased $76 million in the first nine months of 2002, to $645 million at September 30, 2002.  Net debt includes commercial paper borrowings totaling $232 million, with average maturities of 90 days or less.  Commercial paper borrowings are supported by bank credit facilities permitting maximum borrowings of $600 million.  The Company’s access to commercial paper markets can be affected by macroeconomic factors outside of its control.  In addition to macroeconomic factors, the Company’s access to commercial paper markets and its borrowing costs are affected by short and long-term debt ratings assigned by independent rating agencies. 

Net debt is expected to increase in the fourth quarter as the Company closes the acquisition of Shop At Home and continues to expand distribution of Scripps Networks.

Repurchase of a total of six million Class A Common shares was authorized by the Board of Directors in 1998.  The Company repurchased a total of 4.3 million Class A Common Shares between June 1997 and October 2001, at prices ranging from $39 to $60 per share.  The balance remaining on this authorization is 1.7 million shares.

F-25

MARKET RISK

The Company’s earnings and cash flow can be affected by, among other things, economic conditions, interest rate changes, foreign currency fluctuations (primarily in the exchange rate for the Japanese yen) and changes in the price of newsprint.  The Company is also exposed to changes in the market value of its investments.  The information disclosed in Market Risk in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, has not changed materially unless otherwise disclosed herein.

The Company held no foreign currency or newsprint derivative financial instruments at September 30, 2002 or at December 31, 2001. 

The following table presents additional information about the Company’s market-risk-sensitive financial instruments:

		As of September 30, 2002					As of December 31, 2001
(in thousands, except share data)		Cost Basis		Fair Value			Cost Basis		Fair Value
Financial instruments subject to interest rate risk:
	Variable rate credit facilities, including commercial paper	$	232,391	$	232,391		$	513,855	$	513,855
	$200 million, 5.75% notes, due in 2012		198,777		216,314
	$100 million, 6.375% notes, due in 2002		99,998		100,180			99,983		102,685
	$100 million, 6.625% notes, due in 2007		99,926		114,327			99,916		104,376
	Other notes		14,346		13,688			10,090		9,084
	Total long-term debt including current portion	$	645,438	$	676,900		$	723,844	$	730,000
Financial instruments subject to market value risk:
	AOL Time Warner (2,017,000 common shares)	$	29,667	$	23,597		$	64,740	$	64,740
	Centra Software (700,500 common shares)		1,427		869			1,427		5,604
	Other available-for-sale securities		914		3,354			597		4,213
	Total investments in publicly-traded companies		32,008		27,820			66,764		74,557
	Other equity investments		21,722		(a	)		51,714		(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.  Management estimates the fair value of these securities approximates their carrying value.  However, many of the investees have not issued new equity in the past two years.  There can be no assurance that the Company would realize the carrying value of these securities upon their sale.

The Company manages interest rate risk primarily by maintaining a mix of fixed-rate and variable-rate debt.  The Company may use interest rate swaps, forwards or other derivative financial instruments to manage its interest rate risk.  The Company did not hold such instruments at September 30, 2002.  The weighted-average interest rate on borrowings under the Variable Rate Credit Facilities was 1.8% at September 30, 2002, and 2.0% at December 31, 2001.  In October 2002, the Company repaid its $100 million, 6.375% notes.

F-26

CONTROLS AND PROCEDURES

The Company’s management is responsible for the preparation, integrity and objectivity of the consolidated financial statements and other information presented in this report.  The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and reflect certain estimates and adjustments by management.  In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management must make a variety of decisions which affect the reported amounts and the related disclosures.  Such decisions include the selection of accounting principles that reflect the economic substance of the underlying transactions and the assumptions on which to base accounting estimates.  In reaching such decisions, management applies judgment based on its understanding and analysis of the relevant circumstances, including its historical experience, actuarial studies and other assumptions.  Management re-evaluates its estimates and assumptions on an ongoing basis.  While actual results could, in fact, differ from those estimated at the time of preparation of the financial statements, management is committed to preparing financial statements incorporating accounting principles, assumptions and estimates that promote the representational faithfulness, verifiability, neutrality and transparency of the accounting information included in the financial statements.

The Company’s management maintains a system of internal accounting controls and disclosure controls and procedures which management believes provide reasonable assurance that transactions are properly recorded and the Company’s assets are protected from loss or unauthorized use.

The integrity of the accounting and disclosure systems are based on written policies and procedures, the careful selection and training of qualified financial personnel, a program of internal audits and direct management review.  The Company’s disclosure control systems and procedures are designed to ensure timely collection and evaluation of information subject to disclosure, to ensure the selection of appropriate accounting polices, and to ensure compliance with the Company’s accounting policies and procedures.  The Audit Committee is composed solely of independent directors and meets periodically with the independent auditors, management and the internal auditors to discuss accounting, financial reporting, auditing and internal auditing matters.  Both the internal and independent auditors have direct and private access to the Audit Committee.

In September and October 2002 an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934).  Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures are effective.  No significant changes were made in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation and there were no corrective actions with regard to significant deficiencies or material weaknesses.

F-27

THE E. W. SCRIPPS COMPANY

Index to Exhibits

Exhibit No.	Item	Page
12	Ratio of Earnings to Fixed Charges	E-2
99(a)	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	E-3
99(b)	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	E-4

E-1