UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended December 31, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from ________________ to ________________
Commission File Number 0-300
SCRIPPS HOWARD BROADCASTING COMPANY
(Exact name of registrant as specified in its charter)
Ohio 31-0438675
(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
Title of each class Name of exchange on which registered
Securities registered pursuant to Section 12(b) of the Act:
Not applicable
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $.25 par value National Over-the-Counter Market
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. X
The aggregate market value of Common stock of the Registrant held by non-
affiliates of the Registrant, based on the $86.00 per share closing price
for such stock on March 1, 1994, was approximately $123,350,000. As of
March 1, 1994 there were 10,325,788 shares outstanding of the Registrant's
Common stock, $.25 par value per share.
INDEX TO SCRIPPS HOWARD BROADCASTING COMPANY 1993 10-K
Item No. Page
PART I
1. Business
Broadcasting 3
Cable Television 6
New Businesses 9
Employees 9
2. Properties 9
3. Legal Proceedings 10
4. Submission of Matters to a Vote of Securities Holders 10
PART II
5. Market for Registrant's Common Stock and Related
Stockholder Matters 11
6. Selected Financial Data 11
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
8. Financial Statements and Supplementary Data 11
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures 11
PART III
10. Directors and Executive Officers of the Registrant 12
11. Executive Compensation 14
12. Security Ownership of Certain Beneficial Owners and Management 20
13. Certain Relationships and Related Transactions 21
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 22
PART I
ITEM 1. BUSINESS
The Company is a diversified media company operating principally in two
segments: broadcasting and cable television. In 1993 the Company
announced plans to introduce the Home & Garden Television Network, a 24-
hour cable channel. In February 1994 the Company acquired Cinetel
Productions, one of the largest independent producers of cable television
programming. See "Business - New Businesses."
The Company is controlled by Scripps Howard, Inc. ("SHI"), an Ohio
corporation, which owns 86.1% of the Company's Common stock. SHI is a
wholly-owned subsidiary of The E.W. Scripps Company ("EWS"), a Delaware
corporation. In February 1994 EWS announced it had offered to acquire the
13.9% of the Company that it does not already own. See Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Proposed Merger."
A summary of segment information for the three years ended December 31,
1993 is set forth on page F-21 of this Form 10-K.
Broadcasting
General - The Company's broadcast operations consist of six network-
affiliated VHF television stations and three Fox-affiliated UHF television
stations. The Company acquired or divested the following broadcast
operations in the three years ended
December 31, 1993:
1993 - The Company sold its radio stations and its Memphis television
station.
1991 - The Company purchased its Baltimore television station.
Revenues - The composition of the Company's broadcasting operating revenues
for the most recent five years is as follows:
( in thousands )
1993 1992 1991 1990 1989
Local advertising $ 130,603 $ 120,148 $ 106,610 $ 98,235 $ 96,206
National advertising 114,558 109,204 99,459 89,110 84,584
Political advertising 1,344 8,836 665 8,292 1,178
Other 8,439 9,037 9,661 9,509 8,996
Total 254,944 247,225 216,395 205,146 190,964
Divested operations 29,350 30,062 29,055 30,434 31,663
Total broadcasting operating revenues $ 284,294 $ 277,287 $ 245,450 $ 235,580 $ 222,627
Substantially all of the Company's broadcasting operating revenues are
derived from advertising. Local advertising consists of short
announcements and sponsored programs on behalf of advertisers in the area
served by the station. National advertising consists of short
announcements and sponsored programs on behalf of regional and national
advertisers.
The first and third quarters of each year generally have lower advertising
revenues than the second and fourth quarters, due in part to higher retail
advertising during the holiday seasons and political advertising in
election years. Advertising rates charged by the stations are based
primarily upon the population of the market, the number of stations
competing in the market, as well as the station's ability to attract
audiences.
Information concerning the Company's stations and the markets in which they
operate is as follows:
Expiration Stations
Network of FCC Rank of in
Station and Market Affiliation License Market Market 1993 1992 1991 1990 1989
VHF Stations:
WXYZ, Detroit, Michigan ABC 1997 9 7
Average Audience Share (2) 21 22 23 22 23
Station Rank in Market (3) 1 1 1 1 1
WEWS, Cleveland, Ohio ABC 1997 12 12
Average Audience Share (2) 20 21 20 21 22
Station Rank in Market (3) 1 1 1 1 1
WMAR, Baltimore, Maryland (6) NBC 1991 (4) 22 6
Average Audience Share (2) 19 17 21 21 22
Station Rank in Market (3) 2 2 1 2 2
WCPO, Cincinnati, Ohio CBS 1997 31 5
Average Audience Share (2) 21 22 20 24 24
Station Rank in Market (3) 1 1 1 1 2
WPTV, W. Palm Beach, Florida NBC 1997 46 6
Average Audience Share (2) 24 23 25 25 29
Station Rank in Market (3) 1 1 1 1 1
KJRH, Tulsa, Oklahoma NBC 1998 59 7
Average Audience Share (2) 15 16 17 17 20
Station Rank in Market (3) 3 3 3 3 3
UHF Stations:
WFTS, Tampa, Florida Fox 1997 16 9
Average Audience Share (2) 8 7 7 8 5
Station Rank in Market (3) 4 4 4 4 5
KNXV, Phoenix, Arizona Fox 1993 (5) 21 10
Average Audience Share (2) 9 10 10 8 7
Station Rank in Market (3) 4 4 4 5 4
KSHB, Kansas City, Missouri Fox 1998 29 7
Average Audience Share (2) 10 11 9 10 9
Station Rank in Market (3) 4 4 4 4 4
All market and audience data is based on November A.C. Nielsen Company or Arbitron Ratings Co. surveys.
(1) Rank of Market represents the relative size of the television market in the United States.
(2) Represents the number of television households tuned to a specific station Sign-On/Sign-Off, Sunday - Saturday,
as a percentage of total viewing households in Area of Dominant Influence.
(3) Stations in Market does not include public broadcasting stations, satellite stations, or translators which rebroadcast
signals from distant stations. Station Rank in Market is based on Average Audience share as described in (2).
(4) The Company filed an application for renewal of the Federal Communications Commission ("FCC") license on June 3, 1991. A
competing application has been filed with the FCC for the Baltimore market.
(5) The Company's application for renewal of the FCC license is pending.
(6) Station purchased May 30, 1991.
Competition - Competition occurs primarily in local markets. The Company's
television stations compete for advertising revenues with other television
stations and other providers of video entertainment in their market, and in
varying degrees with other media, such as newspapers and magazines, radio,
and direct mail. Competition for advertising revenues is based upon
audience levels, demographics, price, and effectiveness. The Company's
television stations compete for viewers' time with other information and
entertainment media. All of the Company's television markets are highly
competitive.
Network Affiliation and Programming - The Company's television stations are
affiliated with national television networks under standard two-year
affiliation agreements. These agreements are customarily renewed for
successive two-year terms. The networks offer a variety of programs to
affiliated stations, which have the right of first refusal before such
programming may be offered to other television stations in the same market.
Pursuant to the affiliation agreements, compensation is paid to the
affiliated station for carrying network programming. The network has the
right to decrease the amount of such compensation during the terms of the
affiliation agreements but, upon any such decrease, an affected station has
the right to terminate the agreement.
The ranking of a station in its local market is affected by fluctuations in
the national ranking of the affiliated network. Management believes such
fluctuations are normal and has not sought to change the Company's network
affiliations because of declines in national rankings of the affiliated
networks.
In addition to network programs, the Company's television stations
broadcast locally produced programs, syndicated programs, sports events,
movies, and public service programs. Local news is the focus of the
Company's network-affiliated stations' locally produced programming and is
an integral factor in developing the station's ties to its community and
viewer loyalty. Advertising relating to local news and information
programs generally represent more than 30% of a station's revenues. The
Company's Kansas City Fox-affiliated station began broadcasting local news
in 1993 and the Company expects to add local news programming at its
Phoenix and Tampa stations.
Federal Regulation of Broadcasting - Television broadcasting is subject to
the jurisdiction of the Federal Communications Commission ("FCC") pursuant
to the Communications Act of 1934, as amended ("Communications Act"). The
Communications Act prohibits the operation of television broadcasting
stations except in accordance with a license issued by the FCC and empowers
the FCC to revoke, modify, and renew broadcasting licenses, approve the
transfer of control of any corporation holding such licenses, determine the
location of stations, regulate the equipment used by stations, and adopt
and enforce necessary regulations.
Television broadcast licenses are granted for a maximum of five years, and
are renewable upon application. Application for renewal of the license for
the Company's Phoenix station was filed in 1993 and is still pending.
While there can be no assurances the Company's existing licenses will be
renewed, the Company has never been denied a renewal and all previous
renewals have been for the maximum term. The Company's application for
renewal of the FCC license for its Baltimore station has been challenged by
a competing applicant. The FCC is required to hold a hearing to assess
which applicant's proposal would better serve the public interest. That
hearing is proceeding on qualifications issues added by the presiding judge
against both applicants, but the FCC has "frozen" its consideration of the
comparative issues in light of an appeals court decision invalidating one
of the principal criteria the FCC had used in assessing new applicants'
qualifications. Revising the process so as to permit continuation of the
comparative hearing may take an extended period of time, but the Company
will continue to operate the station while its renewal of license
application is pending. Management believes that granting of the Company's
renewal would best serve the public interest and thus expects the renewal
application to be granted.
FCC regulations govern the multiple ownership of television stations and
other media. Under the multiple ownership rule, a license for a television
station will generally not be granted or renewed if (i) the applicant
already owns, operates, or controls a television station serving
substantially the same area, or (ii) the grant of the license would result
in the applicant's owning, operating, or controlling, or having an interest
in, more than twelve television stations or in television stations whose
total national audience reach exceeds 25% of all television households.
FCC rules also generally prohibit "cross-ownership" of a television station
and daily newspaper or cable television system in the same service area.
The Company's television station and EWS's daily newspaper in Cincinnati
were owned by the Company at the time the cross-ownership rules were
enacted and enjoy "grandfathered" status. These properties would become
subject to the cross-ownership rules upon their sale.
Under the Cable Television Consumer Protection and Competition Act of 1992
("1992 Act"), each television broadcast station gained "must-carry" rights
on any cable system defined as "local" with respect to that station.
Stations may waive their must-carry rights and instead negotiate
retransmission consent agreements with local cable companies. The
Company's stations have generally elected to negotiate retransmission
consent agreements with cable companies.
Management believes the Company is in substantial compliance with all
applicable regulatory requirements.
Cable Television
General - The Company operates cable television systems in Lake County,
Florida; Sacramento, California; and Longmont, Colorado. In the three
years ended December 31, 1993 the Company purchased several cable
television systems adjacent to existing service areas.
Revenues - The composition of the Company's cable television operating
revenues for the most recent five years is as follows:
( in thousands )
1993 1992 1991 1990 1989
Basic services $ 71,732 $ 71,140 $ 62,735 $ 52,714 $ 45,843
Premium programming services 24,691 23,692 24,461 22,045 20,329
Other monthly services 9,926 8,806 9,253 9,218 7,222
Advertising 4,359 4,121 3,442 2,905 1,420
Installation and other 6,057 4,773 3,200 3,186 2,912
Total cable television operating revenues $ 116,765 $ 112,532 $ 103,091 $ 90,068 $ 77,726
Substantially all of the Company's cable television operating revenues are
derived from services provided to subscribers of the Company's systems.
Subscriber information as of December 31 for the Company's cable television
systems is as follows:
( in thousands ) Premium
Subs. as
Homes Basic Penetration Premium a % of
Cable Television System Cluster Passed Subscribers Rate Subscribers Basic
(1)
1993
Longmont, Colorado cluster 48.8 32.5 67% 28.0 86%
Lake County, Florida cluster 67.2 47.4 71% 18.8 40%
Sacramento, California cluster 436.4 210.8 48% 307.8 146%
Total 552.4 290.7 53% 354.6 122%
1992
Longmont, Colorado cluster 47.2 29.9 63% 27.1 91%
Lake County, Florida cluster 65.8 45.4 69% 17.9 39%
Sacramento, California cluster 427.9 204.7 48% 270.5 132%
Total 540.9 280.0 52% 315.5 113%
1991
Longmont, Colorado cluster 45.8 27.3 60% 23.2 85%
Lake County, Florida cluster 63.4 42.7 67% 14.7 34%
Sacramento, California cluster 418.0 203.8 49% 245.1 120%
Total 527.2 273.8 52% 283.0 103%
1990
Longmont, Colorado cluster 44.6 25.0 56% 20.4 82%
Lake County, Florida cluster 59.5 39.3 66% 14.9 38%
Sacramento, California cluster 401.3 196.0 49% 224.4 114%
Total 505.4 260.3 52% 259.7 100%
1989
Longmont, Colorado cluster 46.1 23.2 50% 20.1 87%
Lake County, Florida cluster 56.4 35.9 64% 14.2 40%
Sacramento, California cluster 370.0 166.2 45% 195.7 118%
Total 472.5 225.3 48% 230.0 102%
(1) Each subscription to a premium programming service is counted as one subscriber.
The Company's cable television systems carry a wide variety of
entertainment and information services. Basic cable generally consists
of video programming broadcast by local television stations, locally
produced programming, and distant broadcast television signals. Advertiser-
supported video programming such as ESPN and CNN and other entertainment
and information services are included in various "enhanced basic" service
packages. Premium programming consists of non-advertiser supported
entertainment services such as Home Box Office and Showtime. Certain of
the Company's systems are equipped with addressable decoding converters
which enable the Company to offer interactive services, such as pay-per-
view programming, and to change customer services without visiting the
customer's home. Other monthly services includes revenues from services
such as remote control and converter rental and audio programming.
Competition - Competition occurs primarily in local markets. The Company's
cable television systems compete for subscribers with other cable
television systems in certain of its franchise areas. All of the Company's
cable television systems compete for subscribers with other methods of
delivering entertainment and information programming to the subscriber's
home, such as broadcast television, multi-point distribution systems,
master and satellite antenna systems, television receive-only satellite
dishes, and home systems such as video cassette and laser disc players. In
the future the Company's cable television systems may compete with new
technologies such as more advanced "wireless cable systems" and broadcast
satellite delivery services, as well as "video dial tone" services whereby
the local telephone company leases video distribution lines to programmers
on a common carrier basis. Management believes additional technologies for
delivering entertainment and information programming to the home will
continue to be developed, and that some of these competitive services will
be capable of offering interactive services.
Programming - The Company purchases programming from a variety of
suppliers, the charge for which is generally based upon the number of
subscribers receiving the service. Programming expenses as a percentage of
basic and premium programming service revenues have risen in recent years,
primarily due to additional and improved services provided to basic
subscribers and to discounts offered to subscribers receiving multiple
premium channels. See Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Under the Copyright Act of 1976 cable television system operators are
granted compulsory licenses permitting the carriage of the copyrighted
works of local and distant broadcast signals for a statutory fee. The
Copyright Royalty Tribunal is empowered to review and adjust such fees.
FCC rules on syndicated exclusivity provide that if a local broadcast
licensee has purchased the exclusive local distribution rights for a
particular syndicated program, such licensee is generally entitled to
insist that a local cable television system operator delete that program
from any distant television signal carried by the cable television system.
Regulation and Legislation - Cable television systems are regulated by
federal, local, and in some instances, state authorities. Certain powers
of regulatory agencies and officials, as well as various rights and
obligations of cable television operators, are specified under the Cable
Communications Policy Act of 1984 ("1984 Act") and the 1992 Act.
Pursuant to the 1984 Act, local franchising authorities are given the right
to award and renew one or more franchises for the community over which they
have jurisdiction, the fees for which are prohibited from exceeding 5% of a
cable television system's gross annual revenues.
The 1992 Act, among other things: (i) reimposes rate regulations on most
cable television systems; (ii) reimposes "must carry" rules with respect to
local broadcast television signals (see "Federal Regulation of
Broadcasting"); (iii) grants all broadcasters the option to refuse carriage
of their signals; (iv) requires that vertically integrated cable television
companies not unreasonably refuse to deal with any multichannel programming
distributor or discriminate in the price, terms, and conditions of carriage
of programming between cable television operators and other multichannel
programming distributors if the effect would be to impede retail
competition; and (v) establishes cross-ownership rules with respect to
cable television systems and direct broadcast satellite systems, multi-
channel multipoint distribution systems, and satellite master antenna
systems.
In April 1993 the FCC issued rules that established allowable rates for
cable television services (other than programming offered on a per-channel
or per-program basis) and for cable equipment based on benchmarks
established by the FCC. The rules require rates for equipment to be cost-
based, and require reasonable rates for regulated cable television services
based upon, at the election of the cable television system operator,
application of the benchmarks established by the FCC or a cost-of-service
showing based upon standards established by the FCC. The rules became
effective in September 1993 and were recently revised to further reduce
regulated rates. The revised rules are expected to become effective in May
1994.
Management believes the Company is in substantial compliance with all
applicable regulatory requirements.
New Businesses
Entertainment - The Company plans to introduce the Home & Garden Television
Network ("Home & Garden") in late 1994. This network will feature 24 hours
of daily programming focused on home repair and remodeling, gardening,
decorating, and home electronics. While most of the programming will be
produced by the new network, local television stations affiliated with the
network will have the opportunity for daily programming and advertised
inserts. The subscriber base of the new network will be established
through a collaboration of local television stations and cable television
systems. Several cable television system operators, including Time Warner
Cable and Continental Cablevision, the nation's second- and third-largest
cable television system operators, have entered into agreements to carry
the new network in exchange for permission to carry the signals of local
television stations affiliated with the network. The Company is discussing
carriage agreements with other cable television systems and intends to
expand the network's affiliate group to include additional broadcast
stations. The Company's cable television systems will carry the network
and all of the Company's television stations (except the Fox-affiliated
stations) are members of the network's affiliate group.
In February 1994 the Company announced that it had agreed to purchase
Cinetel Productions in Knoxville, Tennessee. Cinetel is one of the largest
independent producers of cable television programming. Cinetel's
production facility will also be the primary production facility for Home &
Garden.
Employees
As of December 31, 1993 the Company had approximately 1,700 full-time
employees, of whom approximately 1,200 were engaged in broadcasting and 500
in cable television. Less than 20% of the Company's employees are
represented by labor unions. The Company considers its relationship with
employees to be generally satisfactory.
ITEM 2. PROPERTIES
The Company's broadcasting operations require offices and studios and other
real property for towers upon which broadcasting transmitters and antenna
equipment are located. Ongoing advances in the technology for delivering
video signals to the home, such as "high definition television" may, in the
future, require a high level of expenditures by the Company for new
equipment in order to maintain its competitive position of the Company's
television stations.
The properties required to support the Company's cable television
operations generally include offices and other real property for towers,
antennas, and satellite earth stations. The Company is currently upgrading
the distribution system for its Sacramento system. Ongoing advances in the
technology for delivering video signals to the home and emergence of the
multimedia marketplace could require a high level of expenditures to
further upgrade the Company's cable television distribution systems.
The Company's new entertainment operations will require offices and studios
and other real and personal property to deliver programming product. The
Company plans to expand the 60,000 square foot Cinetel production facility
by approximately one-third to accommodate Home & Garden.
Management believes the Company's present facilities are generally well-
maintained and are sufficient to serve its present needs.
ITEM 3. LEGAL PROCEEDINGS
In September 1991 Four Jacks Broadcasting, Inc., a company whose principals
own and operate an existing Baltimore television station, submitted to the
FCC an application for a construction permit to build and operate a new
television station on channel 2 in Baltimore. This application is mutually
exclusive with the Company's application for renewal of its license for its
Baltimore television station. See Item 1 "Business - Broadcasting -
Federal Regulation of Broadcasting."
The Company is involved in other litigation arising in the ordinary course
of business, such as defamation actions. In addition, the Company is
involved from time to time in various governmental and administrative
proceedings relating to, among other things, renewal of broadcast licenses,
none of which is expected to result in material loss.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders for the
quarter ended December 31, 1993.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Shares of the Company's Common stock are traded on the Nasdaq Stock
Exchange under the symbol "SCRP." There are approximately 600 owners of
the Company's Common stock, based on security position listings.
The range of market prices of the Company's Common stock, which represents
the high and low sales prices for each full quarterly period, and quarterly
cash dividends are as follows:
( in thousands )
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
1993
Market price of common stock:
High $58.000 $73.000 $75.000 $84.000
Low 44.000 60.000 67.000 70.000
Cash dividends per share of common stock $ .30 $ .30 $ .30 $ .30 $ 1.20
1992
Market price of common stock:
High $48.000 $46.000 $52.000 $52.000
Low 38.000 39.000 38.000 40.000
Cash dividends per share of common stock $ .25 $ .25 $ .25 $ .25 $ 1.00
Future dividends are subject to the Company's earnings, financial
condition, and capital requirements.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is filed as part of this Form 10-
K. See Index to Consolidated Financial Statement Information at page F-
1 of this Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is filed as part of this Form 10-
K. See Index to Consolidated Financial Statement Information at page F-
1 of this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is filed as part of this Form 10-
K. See Index to Consolidated Financial Statement Information at page F-
1 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors of the Company are as follows:
Director Principal Occupation or
Name Age Since Occupations/Business
Daniel J. Castellini (1) 54 1987 Senior Vice President/Finance and
Administration of EWS, parent of
the Company,since September 1986;
Financial Vice President of EWS from
January 1985 to September 1986.
Lawrence A. Leser (2) 58 1981 President and Chief Executive
Officer of EWS since July 1985.
President of the Company since
September 16, 1992.
Donald L. Perris 70 1966 President and Chief Executive
Officer of the Company from May
1974 to May 1988.
Charles E. Scripps (3) 74 1983 Chairman of the Board of Directors
of EWS and Chairman of the Board of
Trustees of The Edward W. Scripps
Trust.
Gordon E. Heffern 70 1989 President and Chief Executive
Officer of Akron Community
Foundation since 1990; Director of
Society Corporation a Society
National Bank from 1983 to 1990.
Robert E. Stautberg 59 1989 Retired; former partner and
Director of KPMG Peat Marwick.
John H. Burlingame 60 1990 Executive Partner of Baker &
Hostetler; Director of EWS since 1990.
(1) Mr. Castellini is a director of the Gradison Growth Trust (a
regulated investment trust).
(2) Mr. Leser is a director of Union Central Life Insurance Company,
KeyCorp, and EWS.
(3) Mr. Scripps is a director of EWS.
Directors who are also officers or former officers of the Company or
officer or directors of the Company's affiliates receive no separate
remuneration for their services as directors or committee members. All
other directors receive an annual fee of $15,000 and an additional $1,000
for each meeting of the Board of Directors or committee thereof that they
attend.
The executive officers of the Company are as follows:
Name Age Position
Lawrence A. Leser 58 President and Chief Executive Officer
of the Company (since 1992); President,
Chief Executive Officer and Director of
EWS (since 1985)
Paul F. Gardner 51 Executive Vice President (since 1993);
Senior Vice President, News Programming,
Fox Broadcasting Company (1991 to 1993);
Vice President and General Manager, WCPO
(1989 to 1991)
Daniel J. Castellini 54 Secretary and Treasurer of the Compa
ny; Senior Vice President, Finance and
Administration of EWS (since 1986)
E. John Wolfzorn 48 Assistant Treasurer of the Company;
Treasurer of EWS (since 1979)
Albert J. Schottelkotte 67 Senior Vice President (since 1981)
Warren P. Happel 62 Vice President, Engineering (since 1
983)
Kenneth W. Lowe 44 Vice President (since 1989)
Terry H. Schroeder 40 Vice President, Administration (since
1989)
William J. Brooks 60 Vice President and General Manager,
WPTV (since 1986)
J. B. Chase 57 Vice President and General Manager,
WCPO (since 1990); Assistant General
Manager, WCPO (1986 to 1990)
William J. Donahue 53 Vice President and General Manager,
KJRH (since 1989)
Charlotte M. English 45 Vice President and General Manager,
KSHB (since 1992); Station Manager, KSHB
(1990 to 1992); Assistant General
Manager, Programming, WMC (1987 to 1990)
Thomas C. Griesdorn 44 Vice President and General Manager,
WXYZ (since 1989)
Raymond Hunt 50 Vice President (since 1991) and Gene
ral Manager, KNXV (since 1990); General
Sales Manager, KNXV (1989 to 1990)
H. Joseph Lewin 54 Vice President and General Manager,
WMAR (since 1993); General Manager,
WRIC, Richmond, Virginia (1984 to 1993)
James F. Major 59 Vice President and General Manager,
WFTS (since 1989)
Garland R. Robinson 52 Vice President and General Manager,
WEWS (since 1992); Vice President and
General Manager, WLWT, Cincinnati, Ohio
(1991 to 1992); Vice President and
General Manager, WCMH, Columbus, Ohio
(1982 to 1991)
The executive officers of the Company serve at the pleasure of the Board of
Directors.
ITEM 11. EXECUTIVE COMPENSATION
Report on Executive Compensation
Introduction - This report is submitted by the members of the Compensation
Committee, Messrs. Charles E. Scripps and John H. Burlingame. The
Committee makes decisions on the compensation of the Company's senior
executives. All Committee actions are reviewed by the full Board.
Philosophy - The Company is approximately 86% owned by SHI, which in turn
is 100% owned by EWS. In recognition of its close relationship with its
parent, the Company has endorsed the compensation philosophy of EWS. This
philosophy is designed to accomplish three goals. First, the policy is
designed to attract a well-qualified management team. Second, the
compensation policy supports a pay-for-performance program designed to
motivate executives to achieve target operating results set forth in the
Company's strategic plan and to reward them for accomplishing these
targets. Finally, the policy is designed to retain a competent management
team, which is critical to the Company's long-term success.
The compensation program is comprised primarily of cash compensation,
including salary and annual bonus, and grants of restricted stock and non-
qualified stock options under EWS's 1987 Long-Term Incentive Plan. The
Company believes its compensation policy is fair to both its employees and
its shareholders and is competitive within the broadcasting industry.
Descriptions of the Components of the Compensation Program
Base Salary - EWS participates annually in the Towers Perrin Media Industry
Compensation Survey (the "Survey") which is widely used in the media
industry and gives relevant compensation information on executive
positions. The Company strives to place fully competent and high
performing executives at the median level of compensation no later than two
to three years after attaining their position. The 75th percentile may be
in reach for exceptional performers.
The Survey provides compensation analyses for executives in the media
industry based on revenues, industry segments (e.g., publishing,
broadcasting, cable) and market type and size. The statistical
information, including revenues and compensation levels, provided by survey
participants is utilized by the Survey to develop statistical equations
based on revenues, industry segments and markets. These equations, along
with other data, are used by the Company to determine the median and other
levels of compensation of executives of media companies with profiles
comparable to those of the Company.
In deciding if an annual base salary increase is appropriate for a specific
individual, consideration is given to several factors, including the
following: a qualitative review of the individual's contributions to the
Company during the year and over the course of his employment by the
Company; his expected future performance; the performance of the Company
during the year; and information received from the Survey. In determining
eligibility for base salary increases, the Company considers overall
corporate performance during the year, i.e. operating profit and cash flow
figures, as opposed to specific measures of corporate performance.
Mr. Lawrence A. Leser is President and Chief Executive Officer of the
Company. He is also President and Chief Executive Officer of EWS and his
compensation is paid solely by EWS. Mr. Leser receives no additional
compensation from the Company.
The other senior executives were granted salary increases effective January
1, 1994. These increases were based on a recommendation by the President,
the Survey results and a review of their individual performance during
1993.
Annual Bonus - The purpose of the annual bonus plan is to motivate and
reward executives so that they consistently achieve specific financial
targets. This incentive is a pay-for-performance essential which aids in
maximizing shareholder value. The bonus is payable on an annual basis,
although executives may elect to defer payment of the bonus until
retirement. Financial goals for 1993 focused on a comparison of actual
operating cash flow versus planned operating cash flow.
The Executive Vice President of the Company was eligible for a target bonus
equal to 40% of his annual base salary. The other named executives were
eligible for a target bonus 30% of their base salary. Because operating
cash flow goals were achieved, each of the eligible executives received his
full target bonus.
Long-Term Incentives - The Company does not have an independent long-term
incentive plan. In 1987, however, EWS adopted a Long-Term Incentive Plan
(the "Plan") for its key employees, including executives of the Company.
Although the Plan allows for several different types of stock-based awards,
to date only two types of awards have been granted: 1) stock options, which
represent a right to purchase shares of EWS's Class A Common stock at the
fair market value per share as of the date the option is granted, and 2)
restricted stock, which represents shares of EWS's Class A Common stock
which the recipient cannot sell or otherwise dispose of until the
applicable restriction period lapses and which are subject to forfeiture.
When this report refers to "stock" in the next two sections of this report,
the stock referred to is that of the Class A Common stock of EWS.
Restricted Stock - Generally executives receive restricted stock awards
with a three-year vesting period when they first attain an executive
position. When executives are promoted to new positions or assume
additional responsibility, they may be granted additional restricted stock
awards. When awarding the shares of restricted stock, consideration is not
given to the total number of shares of restricted stock outstanding.
Of the named executives, only Mr. Gardner received a restricted stock award
in 1993. The award was made by EWS's Compensation Committee based on
additional responsibilities that he assumed.
Stock Options - The Committee agrees with EWS's compensation committee in
that stock option grants are a valuable motivating tool and provide a long-
term incentive to management. Annual stock option grants reinforce long-
term goals by providing the proper nexus between the interests of
management and the interests of the Company's shareholders.
A determination of the number of stock options to be granted to senior
executives in 1993 was made by EWS's Compensation Committee which reviewed
an analysis that was provided by its compensation consultant. Awards were
based on a multiple of base pay, using four times salary for Mr. Gardner.
Awards for the other named executives were based on a proportionally lesser
multiple of base salary which reflects their respective organizational
levels.
The shares will be exercisable one year after the grant date, at $26.44,
the fair market value on the date of the grant. However, in Mr. Gardner's
case, the shares will be exercisable at a range of prices between $26.44
and $34.
The compensation tables which follow are intended to better enable our
shareholders to understand the compensation practices of the Company.
The Compensation Committee
John H. Burlingame, Chairman
Charles E. Scripps
The following table sets forth information regarding the compensation of
the Company's five most highly compensated officers during each of the
Company's last three fiscal years.
SUMMARY COMPENSATION TABLE
Long-term Compensation
Awards Payouts
Name Restricted Securities
and Stock Underlying LTIP All Other
Principal Annual Compensation Award(s) Options/ Payouts Compen-
Position Year Salary ($) Bonus ($) ($) (1) SARs (#) ($) (2) sation (3)
Lawrence A. Leser (4) 1993 (4) (4) (4) (4) (4) (4)
President and Chief 1992 ---- ---- ---- ---- ---- ----
Executive Officer 1991 ---- ---- ---- ---- ---- ----
(elected 9/16/92)
Paul F. Gardner (5) 1993 $225,000 $120,000 $413,925 56,500 ---- $6,000
Executive Vice President 1992 ---- ---- ---- ---- ---- ----
(elected 4/1/93) 1991 ---- ---- ---- ---- ---- ----
Thomas C. Griesdorn 1993 $200,000 $60,000 ---- 11,000 ---- $6,000
Vice President 1992 $185,000 $46,250 ---- 6,000 $25,531 $5,550
1991 $160,000 $38,700 $36,389 9,250 $27,930 ----
Terry H. Schroeder 1993 $165,000 $49,500 ---- 5,000 ---- $138
Vice President 1992 $145,000 $43,500 ---- 4,300 ---- ----
1991 $135,000 $30,000 $22,743 7,250 ---- ----
Garland R. Robinson 1993 $165,000 $49,500 ---- 9,000 ---- $1,650
Vice President 1992 $103,333 $31,000 $40,875 8,000 ---- ----
(elected 5/1/92) 1991 ---- ---- ---- ---- ---- ----
J.B. Chase 1993 $160,000 $48,000 ---- 9,000 ---- $4,800
Vice President 1992 $150,000 $37,500 ---- 4,800 ---- $4,500
(elected 6/13/91) 1991 $130,000 $32,700 $57,463 7,500 ---- ----
Notes to Summary Compensation Table
(1) Restricted stock awards and stock option awards refer to shares of Class A Common stock of EWS. The aggregate number
and value of stock holdings for each named executive as of the end of 1993 were as follows: Mr. Gardner held 15,000
shares with a value of $411,600; Mr. Griesdorn held 1,520 shares with a value of $41,709; Mr.
Schroeder held 950 shares with a value of $26,068; Mr. Robinson held 1,500 shares with a value of $41,160; Mr. Chase held
2,780 shares with a value of $76,283. Dividends were paid during 1993 on the shares of restricted stock held by
each named executive officer at a rate of eleven cents per share per quarter.
(2) Represents compensation paid pursuant to the Company's Medium Term Bonus Plan. This Plan terminated in 1991 and the
payment identified for 1992 represents the final vested amount.
(3) Represents compensation paid pursuant to the Company's Media Savings and Thrift Plan.
(4) Mr. Leser is President and Chief Executive Officer of the Company and President and Chief Executive Officer of
EWS. He is not paid any compensation by the Company. His total compensation is paid by EWS and is disclosed in that
company's 1994 proxy statement under the section entitled "Executive Compensation."
(5) Mr. Gardner assumed the position of Executive Vice President on April 1, 1993.
The following table sets forth certain information regarding options for
shares of Class A Common stock granted to the Company's named executives
under EWS's Long-Term Incentive Plan in 1993. The 12,500 option shares
granted to Mr. Gardner, which expire on April 1, 2003, will be 100%
exercisable on April 1, 1995. All other option awards to the named
executives during 1993 will be 100% execisable on and after December 16,
1995.
OPTION/SAR GRANTS IN 1993
Potential
Realizable Value at
Individual Grants Assumed Annual
Rates of Stock Price
Appreciation
for Option Term
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees Price Expiration
Name Granted (#) in 1993 ($/Sh) Date 5% ($) 10% ($)
Paul F. Gardner 12,500 1.87% $28.75 4/1/2003 $226,000 $573,000
Paul F. Gardner 22,000 3.30% $26.44 12/16/2003 $366,000 $927,000
Paul F. Gardner 11,000 1.65% $30.00 12/16/2003 $144,000 $424,000
Paul F. Gardner 11,000 1.65% $34.00 12/16/2003 $100,000 $380,000
Thomas C. Griesdorn 11,000 1.65% $26.44 12/16/2003 $183,000 $464,000
Terry H. Schroeder 5,000 0.75% $26.44 12/16/2003 $83,000 $211,000
Garland R. Robinson 9,000 1.35% $26.44 12/16/2003 $150,000 $379,000
J.B. Chase 9,000 1.35% $26.44 12/16/2003 $150,000 $379,000
The following table sets forth certain information regarding the number of
options for shares of Class A Common stock exercised by the Company's named
executives. Only Mr. Schroeder exercised options in 1993. The table also
sets forth certain information regarding option values for each named
executive.
AGGREGATED OPTION/SAR EXERCISES IN 1993 AND
FISCAL YEAR-END OPTION/SAR VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options at 12/31/93
12/31/93 (#) ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
Paul F. Gardner ---------- ---------- 0/56,500 $0/22,000
Thomas C. Griesdorn ---------- ---------- 18,250/13,000 $99,030/30,120
Terry H. Schroeder 7,250 $41,731 7,300/7,000 $24,889/24,120
Garland R. Robinson ---------- ---------- 8,000/9,000 $16,220/9,000
J.B. Chase ---------- ---------- 13,050/11,750 $77,994/35,290
Set forth below is a line graph comparing the cumulative and total return
on the Company's Common stock, assuming a $100 investment as of December
31, 1988, based on the market prices at the end of each year and assuming
reinvestment of dividends, with the cumulative total return of the Standard
& Poor's Composite-500 Index and an index based on a group of
communications media companies which are peers of EWS.
A narrative description of the performance graph points is as follows (a
hard copy of the graph has been submitted to the Secruities and Exchange
Commission):
1988 1989 1990 1991 1992 1993
S&P 500 100 132 127 166 179 197
Scripps 100 98 65 60 68 122
Media Index 100 123 97 116 133 152
The Companies in the peer group index are A.H. Belo Corporation, Gannett
Co. Inc., Knight-Ridder, Inc., Multimedia, Inc., The New York Times
Company, Times Mirror Company, Tribune Company and The Washington Post
Company. The index is weighted based on market capitalization at December
31, 1988. The companies to be included in the peer group are approved by
the Compensation Committee of EWS.
Compensation Committee Interlocks and Insider Participation - Charles E.
Scripps and John H. Burlingame are the members of the Company's
compensation committee.
Mr. Scripps is a member of the Company's Board of Directors and is Chairman
of the Board of Directors of SHI and EWS.
Mr. Scripps is also a member of EWS's compensation committee. Mr.
Lawrence A. Leser, President and Chief Executive Officer and a director of
the Company, is also President and Chief Executive Officer of SHI and EWS,
and a member of the SHI and EWS Boards of Directors and the executive
committees of each.
Mr. Burlingame is the Executive Partner of Baker & Hostetler, which is
general counsel to the Company, SHI, EWS and The Edward W. Scripps Trust
(the "Trust"). Baker & Hostetler performed legal services for the Company,
EWS, SHI, and the Trust during 1993 and is expected to perform such
services in 1994.
In 1993, Mr. Scripps and Mr. Burlingame served as trustees of the Trust and
will continue to do so in 1994. The Trust is the controlling shareholder
of EWS.
Pension Plan - The Company's executive officers and substantially all other
nonunion employees of the Company are participants in a non-contributory
defined benefit pension plan (the "Pension Plan"). Contributions to the
Pension Plan are based on separate actuarial computations for each business
unit and are made by the business unit compensating the particular
individual.
The following table shows the annual normal retirement benefits which,
absent the maximum benefit limitations (the "Benefit Limitations") imposed
by Section 415(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), would be payable pursuant to the Pension Plan upon retirement at
age 65 (based upon the 1994 Social Security integration level under the
Pension Plan) pursuant to a straight life annuity option, for employees in
the compensation ranges specified and under various assumptions with
respect to average final annual compensation and years of credited service.
Annual Normal Retirement Benefits
(Straight Life Annuity Option)
Final Annual for Years of Credited Service Indicated
Compensation 15 Years 20 Years 25 Years 30 Years 35 Years
$150,000 $27,000 $ 36,000 $ 46,000 $ 55,000 $ 64,000
200,000 37,000 49,000 61,000 73,000 86,000
250,000 46,000 61,000 77,000 92,000 107,000
300,000 55,000 74,000 92,000 111,000 129,000
350,000 65,000 86,000 108,000 130,000 151,000
400,000 74,000 99,000 124,000 148,000 173,000
450,000 87,000 111,000 145,000 167,000 203,000
500,000 93,000 124,000 155,000 186,000 217,000
In general, the Benefit Limitations limit the annual retirement benefits
that may be paid pursuant to the Pension Plan to $118,800 (subject to
further cost of living increases promulgated by the United States Secretary
of Treasury). The Company will supplement payments under the Pension Plan
with direct pension payments from the Company in an amount equal to the
amount, if any, by which the benefits that otherwise would be payable under
the Pension Plan exceed the benefits that are permitted to be paid from the
Pension Plan under the Benefit Limitations. Annual normal retirement
benefits are computed at the rate of 1% of average final annual
compensation up to the applicable Social Security integration level plus
1.25% of average final annual compensation in excess of the Social Security
integration level, multiplied by the employee's years of credited service.
An employee's benefits are actuarially adjusted if paid in a form other
than a life annuity.
An employee's average final annual compensation is the average annual
amount of his total pensionable compensation (generally salary and bonus,
excluding any compensation pursuant to the Medium Term Bonus Plan, the
Medium Savings and Thrift Plan and any other annual or long-term
compensation reflected in the Summary Compensation Table) for service
during the five consecutive years within the last ten years of his
employment for which his total compensation was greatest. The employee's
years of credited service equal the number of years of his employment with
the Company. As of December 31, 1993, the years of credited service of the
individuals named in the foregoing cash compensation table were as follows:
Mr. Gardner-9; Mr. Griesdorn-8; Mr. Schroeder-6;
Mr. Robinson-2; and Mr. Chase-22.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners - As of March 1, 1994, SHI,
312 Walnut Street, Cincinnati, Ohio was the only beneficial owner of more
than 5% of the Company's outstanding Common stock known to management of
the Company. As of such date, SHI beneficially owned 8,890,199 shares of
Common stock, representing 86.1% of the outstanding shares of such stock as
of such date. SHI shares the power to vote and dispose of the shares of
Common stock with EWS, owner of 100% of the outstanding common shares of
SHI. The directors of SHI are also directors of EWS. The Edward W.
Scripps Trust owns approximately 79.5% of the Common Voting stock and
approximately 59.7% of the Class A Common stock of EWS.
Security Ownership of Management - The table below sets forth information
with respect to the shares of the Company's Common stock and the shares of
the Class A Common stock of EWS beneficially owned as of March 1, 1994, by
each director of the Company and by each of the named officers in the
compensation section (the "named officers"), and by all directors and all
officers of the Company as a group.
Unless otherwise indicated, the persons named in the table have sole voting
and investment power with respect to all shares shown as being beneficially
owned by them.
EWS
Company Class
Common Common
Name Stock Percent Stock Percent
D. J. Castellini (1,5) ---- ---- 25,937 *
Gorden E. Heffern ---- ---- 1,500 *
Lawrence A. Leser (2,5) ---- ---- 43,123 *
Donald L. Perris 500 * 1,000 *
Charles E. Scripps (3,5,6) 200 * 44,700 *
Robert E. Staitberg ---- ---- ---- ----
John H. Burlingame(4,5,6) ---- ---- ---- ----
Paul F. Gardner ---- ---- 15,000 *
Thomas C. Griesdorn ---- ---- 3,020 *
Terry H. Schroeder ---- ---- 950 *
Garland R. Robinson ---- ---- 1,500 *
J. B. Chase ---- ---- 4,780 *
All directors and officers as a
group (23 in number) (5,6) 8,891,474 86.11% 32,784,989 60.06%
* Represents less than 1% of the outstanding shares of such stock.
(1) The shares listed include 1,000 shares of EWS Class A Common stock owned by Mr. Castellini's wife, as to which Mr. Castellini
disclaims beneficial ownership.
(2) The shares listed for Mr. Leser include 5,500 shares of EWS Class A Common stock owned by his wife and 840 shares of EWS Class
A Common stock owned by a son. Mr. Leser disclaims any beneficial ownership in these shares.
(3) The shares listed include 300 shares of EWS Class A Common stock owned by Mr. Scripps' wife, as to which Mr. Scripps disclaims
beneficial ownership. Mr. Scripps is a life-interest beneficiary and one of three trustees of The Edward W. Scripps Trust,
which owned 16,040,000 shares of Common Voting stock and 32,610,000 shares of Class A Common stock of
EWS as of March 1, 1994.
(4) Mr. Burlingame is one of three trustees of The Edward W. Scripps Trust.
(5) The total number of shares of Company Common stock owned by all directors and executive officers as a group includes the
number of shares owned by SHI. Mr. Castellini is Senior Vice President/Finance and Administration of SHI;
Mr. Leser is President and Chief Executive Officer and a director of SHI; Messrs. Scripps and Burlingame are
directors of SHI. Messrs. Castellini, Leser, Scripps and Burlingame disclaim beneficial ownership of
the shares owned by SHI.
(6) The total number of shares of EWS Class A Common stock owned by all directors and executive officers as a group includes the
number of shares owned by The Edward W. Scripps Trust (the "Trust"). Messrs. Scripps and Burlingame are
Trustees of the Trust and have the power, together with the other Trustee of the Trust,
to vote and dispose of the 32,610,000 shares of Class A Common stock of EWS held by the Trust.
Mr. Scripps has a life income interest in the Trust. Mr. Burlingame disclaims any beneficial interest in
the shares held by the Trust.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At December 31, 1993, the outstanding principal balance under the Company's
credit facilities with SHI was $99,900,000. The interest rate on
$80,000,000 is fixed at 8.5%. Interest on the remainder is charged at the
average rate (3.4% at December 31, 1993) SHI is able to obtain under its
short-term credit facilities.
The Company receives certain management services from SHI which provides
such services to its parent, EWS, and all of its subsidiaries. Among these
services are the services of certain management officers, a portion of the
services of an independent public accounting firm, legal services of
general counsel, preparation of federal, state, and county tax returns, and
preparation of the reports required by certain regulatory agencies. Each
entity's share of the cost of such services is based on the proportion of
its revenues to the revenues of all entities, except for the cost of
providing certain management services specifically on behalf of particular
entities. This method of allocation of expenses was determined by the
directors of EWS. In 1993, such expenses allocated to the Company amounted
to $8,104,000. Of this amount, $3,491,000 represented expenses incurred
specifically on behalf of the Company and was not shared by other entities;
$1,068,000 represented the Company's share of the costs of SHI's cable
television management services; and $3,545,000 represented the Company's
share of the cost of providing management services generally for all of the
aforesaid entities. This latter amount represented 32.5% of the total cost
of providing such general management services.
Garland R. Robinson, a Vice President of the Company, received an $80,000
relocation loan from the Company on July 22, 1992. The note is non-
interest bearing, due on demand, and was outstanding at December 31, 1993.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Financial Statements and Supplemental Schedules
(a) The consolidated financial statements of the Company are filed as
part of this Form 10-K. See Index to Consolidated Financial
Statement Information at page F-1.
The report of Deloitte & Touche, Independent Auditors, dated January
26, 1994 is filed as part of this Form 10-K. See Index to
Consolidated Financial Statement Information at page F-1.
(b) The consolidated supplemental schedules of the Company are filed as
part of this Form 10-K. See Index to Consolidated Financial
Statement Schedules at page S-1.
Exhibits
The information required by this item appears at page E-1 of this Form 10-K.
Reports on Form 8-K
No reports on Form 8-K were filed for the quarter ended December 31, 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934 the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereby duly authorized, on March
28, 1994.
SCRIPPS HOWARD BROADCASTING COMPANY
By /s/ Lawrence A. Leser
Lawrence A. Leser
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated, on March 28, 1994.
Signature Title
/s/ Lawrence A. Leser President, Chief Executive Officer and Director
Lawrence A. Leser (Principal Executive Officer)
/s/ Daniel J. Castellini Secretary and Treasurer and Director
Daniel J. Castellini (Principal Financial and Accounting Officer)
/s/ Charles E. Scripps Director
Charles E. Scripps
/s/ Donald L. Perris Director
Donald L. Perris
/s/ John H. Burlingame Director
John H. Burlingame
Director
Gordon E. Heffern
/s/ Robert E. Stautberg Director
Robert E. Stautberg
SCRIPPS HOWARD BROADCASTING COMPANY
Index to Consolidated Financial Statement Information
Selected Financial Data F-2
Management's Discussion and Analysis of Financial Condition and
Results of Operations F-3
Independent Auditors' Report F-9
Consolidated Balance Sheets F-10
Consolidated Statements of Income and Retained Earnings F-11
Consolidated Statements of Cash Flows F-12
Notes to Consolidated Financial Statements F-13
SELECTED FINANCIAL DATA
( in millions, except share data )
Summary of Operations 1993 1992 1991 1990 1989
Operating Revenue:
Broadcasting $ 284.3 $ 277.3 $ 245.5 $ 235.6 $ 222.6
Cable television 116.8 112.5 103.0 90.0 77.8
Total operating revenue $ 401.1 $ 389.8 $ 348.5 $ 325.6 $ 300.4
Operating Income:
Broadcasting $ 82.6 $ 70.3 $ 57.6 $ 69.5 $ 58.8
Cable television 20.0 23.5 3.4 14.3 11.7
Corporate (3.7) (3.6) (2.7) (3.1) (2.8)
Total operating income 98.9 90.2 58.3 80.7 67.7
Interest expense (16.1) (22.7) (24.2) (23.4) (27.3)
Miscellaneous, net 84.2 0.1 (0.7) (0.3)
Income taxes (66.7) (30.8) (17.9) (26.6) (19.1)
Net income $ 100.3 $ 36.8 $ 16.2 $ 30.0 $ 21.0
Share Data
Net income $ 9.72 $ 3.56 $ 1.56 $ 2.91 $ 2.04
Dividends $ 1.20 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Common stock price:
High $84.000 $52.000 $58.000 $67.000 $81.000
Low 44.000 38.000 38.000 35.000 57.500
Other Financial Data
Depreciation, amortization, and write-down
of intangible assets $ 44.4 $ 41.7 $ 38.9 $ 36.5 $ 37.1
Net cash flow from operating activities 88.4 92.3 60.3 82.9 82.7
Investing Activity:
Capital expenditures (30.9) (26.5) (22.3) (22.5) (19.8)
Other (investing)/divesting activity, net 94.3 (0.6) (129.2) (3.3) (2.0)
Total assets 621.9 653.6 682.2 554.0 575.2
Total debt and advances (including current portion) 99.9 238.8 294.0 193.3 238.5
Stockholders' equity 303.0 215.1 188.6 182.9 163.2
Debt and advances % of total capitalization 25% 53% 61% 51% 59%
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Consolidated results of operations were as follows:
(in thousands, except per share data)
1993 Change 1992 Change 1991
Operating revenues:
Broadcasting $ 284,294 2.5 % $ 277,287 13.0 % $ 245,450
Cable television 116,765 3.8 % 112,532 9.2 % 103,091
Total operating revenues $ 401,059 2.9 % $ 389,819 11.8 % $ 348,541
Operating income:
Broadcasting $ 82,574 17.4 % $ 70,332 22.2 % $ 57,564
Cable television 20,061 (14.6)% 23,480 3,453
Corporate (3,734) (4.2)% (3,583) (31.2)% (2,731)
Total operating income 98,901 9.6 % 90,229 54.8 % 58,286
Interest expense (16,144) (22,707) (24,239)
Miscellaneous, net 84,302 38 49
Income taxes (66,713) (30,801) (17,941)
Net income $ 100,346 173.0 % $ 36,759 127.5 % $ 16,155
Net income per share of common stock $9.72 173.0 % $3.56 128.2 % $1.56
Weighted average shares outstanding 10,326 10,326 10,327
Effective income tax rate 39.9 % 45.6 % 52.6 %
The following items affected the comparability of the Company's reported
results of operations:
(i) The Company sold its Memphis television station and its radio
stations. The stations, and any related gains on the sales, are
hereinafter referred to as the "Divested Operations." See Note 3B to
the Consolidated Financial Statements.
The following items related to Divested Operations affected the
comparability of the Company's reported results of operations:
( in thousands, except per share data )
1993 1992 1991
Operating revenues $ 29,400 $ 30,100 $ 29,100
Operating income 8,700 8,400 7,700
Gains recognized (before income taxes) 84,471
Gains recognized (after income taxes) 53,000
Gains recognized per share (after income taxes) $ 5.13
(ii) In 1993 management changed the estimate of the additional amount
of copyright fees the Company would owe when a dispute between the
television industry and the American Society of Composers, Authors and
Publishers was resolved ("ASCAP Adjustment"). The adjustment increased
broadcasting operating income $4,300,000 and net income $2,700,000,
$.26 per share. See Note 4 to the Consolidated Financial Statements.
(iii) In August 1993 the federal income tax rate was increased to 35%,
retroactive to January 1, 1993, and management changed its estimate of
the tax basis and lives of certain assets ("Income Tax Changes"). The
net effect was to decrease net income $100,000, $.01 per share. See
Note 5 to the Consolidated Financial Statements.
(iv) In 1991 the Company agreed to settle a lawsuit filed in 1988 by
Pacific West Cable Company that alleged violations of antitrust and
unfair trade practice laws ("Sacramento Settlement"). The resultant
charge reduced cable television operating income by $12,000,000 and net
income by $7,900,000, $.77 per share. See Note 4 to the Consolidated
Financial Statements.
The items above are excluded from the consolidated and segment operating
results presented in the following pages of this Management's Discussion
and Analysis. Management believes they are not relevant to understanding
the Company's ongoing operations.
Net income per share was as follows:
1993 Change 1992 Change 1991
Reported net income per share $ 9.72 173.0 % $ 3.56 128.2 % $ 1.56
Note Ref.
(i) Gains on sales of Divested Operations ( 5.13)
(ii), (iii) 1993 unusual items ( .25)
(iv) Sacramento Settlement .77
Adjusted net income per share $ 4.34 21.9 % $ 3.56 52.8 % $ 2.33
The Company's average advances from parent company in 1993 were $70,600,000
less than in 1992. The combined effects of reduced advances and lower
interest rates resulted in the decrease in interest expense in 1993.
Average advance balances were $14,000,000 greater in 1992 than in 1991,
primarily due to the May 30, 1991 acquisition of Baltimore television
station WMAR. Interest expense decreased in 1992 as the effect of the
increase in average advance balances on interest expense was more than
offset by the effect of lower interest rates.
Miscellaneous includes the gains referred to in (i) above.
The effective income tax rate decreased in 1993 and 1992 because pre-tax
income increased, thereby reducing the relative impact of non-deductible
amortization of goodwill. The rate in 1993 was also affected by the Income
Tax Changes. See Note 5 to the Consolidated Financial Statements. The
effective income tax rate in 1994 is expected to be approximately 42%.
RESULTS OF OPERATIONS
CONSOLIDATED - Operating results, excluding the Divested Operations, ASCAP
Adjustment, and Sacramento Settlement, were as follows:
( in thousands )
1993 Change 1992 Change 1991
Operating revenues:
Broadcasting $ 254,944 3.1 % $ 247,225 14.2 % $ 216,395
Cable television 116,765 3.8 % 112,532 9.2 % 103,091
Total operating revenues $ 371,709 3.3 % $ 359,757 12.6 % $ 319,486
Operating income:
Broadcasting $ 69,567 12.3 % $ 61,926 24.1 % $ 49,882
Cable television 20,061 (14.6)% 23,480 51.9 % 15,453
Corporate (3,734) (4.2)% (3,583) (31.2)% (2,731)
Total operating income $ 85,894 5.0 % $ 81,823 30.7 % $ 62,604
Other Financial and Statistical Data:
Total advertising revenues $ 259,303 3.2 % $ 251,346 14.3 % $ 219,837
Advertising revenues as a
percentage of total revenues 69.8 % 69.9 % 68.8 %
Total capital expenditures $ 30,352 19.8 % $ 25,338 18.4 % $ 21,394
SEGMENTS - Operating results, excluding the Divested Operations, ASCAP
Adjustment, and Sacramento Settlement, for each of the Company's business
segments are presented on the following pages.
Earnings before interest, income taxes, depreciation, and amortization
("EBITDA") is included in the discussion of segment results because:
- Acquisitions of communications media businesses are based on multiples
of EBITDA.
- Financial analysts use EBITDA to value communications media companies.
- Changes in depreciation and amortization are often unrelated to current
performance. Management believes the year-over-year change in EBITDA
is a more useful measure of year-over-year performance than the change
in operating income because, combined with information on capital
spending plans, it is a more reliable indicator of results that may be
expected in future periods.
- Banks and other lenders use EBITDA to determine the Company's borrowing
capacity.
EBITDA should not, however, be construed as an alternative measure of the
amount of the Company's income or cash flows from operating activities.
BROADCASTING - Operating results for the broadcasting segment, excluding
the Divested Operations and ASCAP Adjustment, were as follows:
( in thousands )
1993 Change 1992 Change 1991
Operating revenues:
Local $ 130,603 8.7 % $ 120,148 12.7 % $ 106,610
National 114,558 4.9 % 109,204 9.8 % 99,459
Political 1,344 8,836 665
Other 8,439 (6.6)% 9,037 (6.5)% 9,661
Total operating revenues 254,944 3.1 % 247,225 14.2 % 216,395
Operating expenses:
Employee compensation and benefits 70,213 5.1 % 66,814 13.7 % 58,739
Program costs 53,621 (7.5)% 57,992 5.5 % 54,965
Other 41,633 2.0 % 40,815 11.0 % 36,756
Depreciation and amortization 19,910 1.2 % 19,678 22.6 % 16,053
Total operating expenses 185,377 0.0 % 185,299 11.3 % 166,513
Operating income $ 69,567 12.3 % $ 61,926 24.1 % $ 49,882
Other Financial and Statistical Data:
Earnings before interest, income taxes,
depreciation, and amortization ("EBITDA") $ 89,477 9.6 % $ 81,604 23.8 % $ 65,935
Percent of operating revenues:
Operating income 27.3% 25.0% 23.1%
EBITDA 35.1% 33.0% 30.5%
Capital expenditures $ 9,234 32.9 % $ 6,948 25.7 % $ 5,529
Revenues increased at most of the Company's television stations in 1993 and
in 1992. Revenues at the Fox affiliates have been particularly strong.
Program costs decreased in 1993 as several syndicated programs previously
aired by the Company's stations were replaced with
less-costly programs.
Revenues and operating expenses in 1992 were affected by the inclusion of
Baltimore television station WMAR, acquired
May 30, 1991, for the full year.
Capital expenditures in 1994 are expected to be approximately $14,000,000.
Depreciation and amortization is expected to increase approximately 5% in
1994.
CABLE TELEVISION - Operating results for the cable television segment,
excluding the Sacramento Settlement, were as follows:
( in thousands, except per subscriber information )
1993 Change 1992 Change 1991
Operating revenues:
Basic services $ 71,732 0.8 % $ 71,140 13.4 % $ 62,735
Premium programming services 24,691 4.2 % 23,692 (3.1)% 24,461
Other monthly service 9,926 12.7 % 8,806 (4.8)% 9,253
Advertising 4,359 5.8 % 4,121 19.7 % 3,442
Installation and miscellaneous 6,057 26.9 % 4,773 49.2 % 3,200
Total operating revenues 116,765 3.8 % 112,532 9.2 % 103,091
Operating expenses:
Employee compensation and benefits 17,613 8.3 % 16,263 (1.2)% 16,468
Program costs 27,273 7.7 % 25,330 7.6 % 23,536
Other 28,470 6.8 % 26,648 2.1 % 26,089
Depreciation and amortization 23,348 12.2 % 20,811 (3.4)% 21,545
Total operating expenses 96,704 8.6 % 89,052 1.6 % 87,638
Operating income $ 20,061 (14.6)% $ 23,480 51.9 % $ 15,453
Other Financial and Statistical Data:
Earnings before interest, income taxes,
depreciation, and amortization ("EBITDA") $ 43,409 (2.0)% $ 44,291 19.7 % $ 36,998
Percent of operating revenues:
Operating income 17.2% 20.9% 15.0%
EBITDA 37.2% 39.4% 35.9%
Capital expenditures $ 21,118 14.8 % $ 18,390 15.9 % $ 15,865
Average number of basic subscribers 283.6 2.8 % 275.9 3.2 % 267.4
Average monthly revenue per basic subscriber $34.31 0.9 % $33.99 5.8 % $32.13
Homes passed at December 31 552.4 2.1 % 540.9 2.6 % 527.2
Basic subscribers at December 31 290.7 3.8 % 280.1 2.3 % 273.8
Penetration at December 31 52.6% 51.8% 51.9%
The legislation passed in October 1992 to re-regulate the cable television
industry affected the Company's cable television operations in 1993. Basic
rates were frozen April 5, 1993 and new regulated rates became effective
September 1, 1993. The Federal Communications Commission recently
announced revised rules that will further reduce regulated rates. Based
upon the revised rules, revenues and EBITDA will decline in 1994.
Revenue growth also slowed in 1993 as the weak California economy inhibited
subscriber growth at the Company's Sacramento cable television system,
which serves 72% of the Company's total basic subscribers. Basic
subscribers at the Sacramento system increased 2.9% in 1993.
Program costs as a percent of basic and premium programming service
revenues increased from 27.0% in 1991 to 28.3% in 1993, primarily due to
expanded and improved programming offered to basic subscribers and
discounts provided to customers receiving multiple premium channels.
Program costs as a percentage of basic and premium programming service
revenues are expected to increase in 1994.
The estimated useful life of the distribution system for the Company's
Sacramento system was reduced as the Company is upgrading the system,
contributing to the increase in depreciation and amortization. Capital
expenditures on the rebuild and other projects are expected to be
approximately $30,000,000 in 1994. Depreciation and amortization is
expected to increase approximately 10% in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities was $88,400,000 in 1993 compared to
$92,300,000 in 1992.
Cash flow from operations and cash received in the sales of subsidiary
companies totaled $183,000,000 in 1993 and was used primarily for capital
expenditures of $30,900,000, reduction of advances of $138,900,000, and
dividend payments of $12,400,000. The debt to total capitalization ratio
at December 31 was .25 in 1993 and .53 in 1992.
Consolidated capital expenditures are expected to total approximately
$50,000,000 in 1994, including The Home & Garden Television Network ("Home
& Garden"), a 24-hour cable channel set for launch in late 1994. The
Company expects to finance its capital requirements and start-up costs for
Home & Garden primarily through cash flow from operations.
PROPOSED MERGER
On February 17, 1994 The E.W. Scripps Company ("EWS"), which through
Scripps Howard, Inc. (its wholly-owned subsidiary) owns 86.1% of the
Company's common stock, announced it had offered to acquire the 13.9% of
the Company that it does not already own. In a merger proposal made to the
Company's board of directors, EWS offered to exchange three shares of Class
A Common stock for each of the Company's shares. Directors of the Company
have formed a special committee to evaluate the offer. The merger is
subject to the execution of a mutually agreeable definitive agreement,
regulatory approvals, and a vote of the Company's shareholders. There can
be no assurance that the merger will be entered into or that any
transaction will be consummated.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders,
Scripps Howard Broadcasting Company:
We have audited the accompanying consolidated balance sheets of Scripps
Howard Broadcasting Company and subsidiary companies (Company) as of
December 31, 1993 and 1992, and the related consolidated statements of
income and retained earnings and of cash flows for each of the three years
in the period ended December 31, 1993. Our audits also included the
financial statement schedules listed in the Index at Item 14. These
financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December
31, 1993 and 1992, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1993 in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE
Cincinnati, Ohio
January 26, 1994
CONSOLIDATED BALANCE SHEETS
( in thousands, except share data )
As of December 31,
1993 1992
ASSETS
Current Assets:
Cash and cash equivalents $ 2,131 $ 2,629
Accounts and notes receivable (less allowances - 1993, $1,595; 1992, $1,978) 66,273 61,521
Program rights 42,388 46,436
Deferred income taxes 2,735 2,543
Miscellaneous 7,989 7,869
Total current assets 121,516 120,998
Property, Plant, and Equipment 191,272 196,754
Goodwill and Other Intangible Assets 253,592 280,139
Other Assets:
Program rights (less current portion) 43,084 45,996
Miscellaneous 12,444 9,695
Total other assets 55,528 55,691
TOTAL ASSETS $ 621,908 $ 653,582
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Program rights payable $ 30,640 $ 42,625
Accounts payable 12,422 9,935
Accrued liabilities:
Copyright and programming costs 4,166 10,207
Income taxes 13,247 3,375
Employee compensation and benefits 3,524 2,844
Interest 1,577 4,949
Miscellaneous 7,895 4,573
Total current liabilities 73,471 78,508
Deferred Income Taxes 85,653 60,410
Advances from Parent Company 99,926 238,804
Other Long-Term Obligations 59,841 60,798
Stockholders' Equity:
Common stock, $.25 par-authorized: 25,000,000 shares;
issued and outstanding: 10,325,788 shares 2,582 2,582
Retained earnings 300,435 212,480
Total stockholders' equity 303,017 215,062
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 621,908 $ 653,582
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
( in thousands, except share data )
Years ended December 31,
1993 1992 1991
Operating Revenues:
Broadcasting $ 284,294 $ 277,287 $ 245,450
Cable television 116,765 112,532 103,091
Total operating revenues 401,059 389,819 348,541
Operating Expenses:
Employee compensation and benefits 98,978 94,509 86,288
Broadcast and cable television programming costs 83,011 85,750 80,860
Settlement of Sacramento cable television litigation 12,000
Other operating expenses 75,755 77,597 72,240
Depreciation 30,772 27,733 27,773
Amortization of intangible assets 13,642 14,001 11,094
Total operating expenses 302,158 299,590 290,255
Operating Income 98,901 90,229 58,286
Other Credits (Charges):
Interest on advances from parent company (15,245) (22,190) (23,681)
Other interest expense (899) (517) (558)
Gains on sales of subsidiary companies 84,471
Miscellaneous, net (169) 38 49
Net other credits (charges) 68,158 (22,669) (24,190)
Income Before Income Taxes 167,059 67,560 34,096
0
Provision for Income Taxes 66,713 30,801 17,941
Net Income 100,346 36,759 16,155
Retained Earnings, Beginning of Year 212,480 186,047 180,339
Total 312,826 222,806 196,494
Less:
Dividends - $1.20, $1.00, and $1.00 per share 12,391 10,326 10,326
Purchase and retirement of 2,411 shares of common stock 121
Retained Earnings, End of Year $ 300,435 $ 212,480 $ 186,047
Net Income Per Share of Common Stock $9.72 $3.56 $1.56
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
( in thousands )
Years ended December 31,
1993 1992 1991
Cash Flows From Operating Activities:
Net income $ 100,346 $ 36,759 $ 16,155
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation 30,772 27,733 27,773
Amortization of intangible assets 13,642 14,001 11,094
Deferred income taxes 23,596 1,267 1,727
Gains on sales of subsidiary companies (84,471)
Changes in certain working capital accounts, net of effects
from subsidiary companies purchased and sold 2,076 5,146 (1,812)
Miscellaneous, net 2,456 7,430 5,344
Net operating activities 88,417 92,336 60,281
Cash Flows From Investing Activities:
Additions to property, plant, and equipment (30,851) (26,519) (22,304)
Purchase of subsidiary companies, net of cash acquired (251) (838) (128,902)
Sales of subsidiary companies 94,262
Miscellaneous, net 277 218 (334)
Net investing activities 63,437 (27,139) (151,540)
Cash Flows From Financing Activities:
Increase in advances from parent company 3,622 200,000
Payments on advances from parent company (142,500) (55,158) (98,848)
Payments on long-term debt (450)
Dividends paid (12,391) (10,326) (10,326)
Purchase and retirement of common stock (121)
Miscellaneous, net (1,083) (11) (261)
Net financing activities (152,352) (65,495) 89,994
Increase (Decrease) in Cash and Cash Equivalents (498) (298) (1,265)
Cash and Cash Equivalents:
Beginning of year 2,629 2,927 4,192
End of year $ 2,131 $ 2,629 $ 2,927
Supplemental Cash Flow Disclosures:
Interest paid $ 19,032 $ 24,013 $ 24,523
Income taxes paid 31,642 19,252 20,721
Increase in program rights and related liabilities 51,614 48,251 42,862
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation - The consolidated financial statements include the accounts
of Scripps Howard Broadcasting Company and its majority-owned subsidiary
companies ("Company"). The Company is 86.1% owned by Scripps Howard, Inc.
("SHI"), a wholly-owned subsidiary of The E.W. Scripps Company ("EWS").
Goodwill and Other Intangible Assets - Goodwill and other intangible assets
are stated at the lower of unamortized cost or fair value. Fair value is
estimated based upon estimated future net cash flows. An impairment loss
is recognized when the undiscounted estimated future net cash flows exceed
the unamortized cost of the asset. Goodwill represents the cost of
acquisitions in excess of tangible assets and identifiable intangible
assets received. Cable television franchises are amortized generally over
the remaining terms of acquired cable systems' franchise agreements and non-
competition agreements over the terms of the agreements. Goodwill acquired
after October 1970, customer lists, and other intangible assets are
amortized over periods of up to 40 years. Goodwill acquired before
November 1970 ($6,500,000) is not amortized.
Income Taxes - Deferred income tax liabilities are provided for temporary
differences between the tax basis and reported amounts of assets and
liabilities that will result in taxable or deductible amounts in future
years. The Company's temporary differences primarily result from
accelerated depreciation and amortization for tax purposes and accrued
expenses not deductible for tax purposes until paid. Also, the Company
received a tax certificate from the Federal Communications Commission upon
the sale of the Memphis television and radio stations, enabling the Company
to defer payment of income taxes on the $60,500,000 tax-basis gain for a
minimum of two years.
The Company is included in the consolidated federal income tax return of
EWS. However, the provision is computed as if the Company filed a separate
federal income tax return.
Property, Plant, and Equipment - Depreciation is computed using the
straight-line method over estimated useful lives. Interest costs related
to major capital projects are capitalized and classified as property,
plant, and equipment.
Program Rights - Program rights are recorded at the time such programs
become available for broadcast. Program rights are stated at the lower of
unamortized cost or fair value. Amortization is computed using the
straight-line method based on the license period or based on usage,
whichever yields the greater accumulated amortization for each program.
The portion of the unamortized balance expected to be amortized within one
year is classified as a current asset. The liability for program rights is
not discounted for imputed interest. Estimated fair values (which are
based on current rates available to the Company for debt of the same
remaining maturity) and the carrying amounts of the Company's program
rights liabilities were as follows:
( in thousands )
1993 1992
Liabilities for programs available for broadcast:
Carrying amount $ 64,300 $ 68,300
Fair value 58,700 64,500
Cash and Cash Equivalents - Cash and cash equivalents represent cash on
hand, bank deposits, and highly liquid debt instruments with an original
maturity of up to three months. Cash equivalents are stated at cost plus
accrued interest, which approximates fair value.
Net Income Per Share - Net income per share computations are based upon the
weighted average common shares outstanding. Weighted average shares
outstanding were as follows:
( in thousands )
1993 1992 1991
Weighted average shares outstanding 10,326 10,326 10,327
Reclassifications - For comparison purposes certain 1992 and 1991 items
have been reclassified to conform with 1993 classifications.
2. ACCOUNTING CHANGES
The Company adopted Financial Accounting Standard No. 112 - Employers'
Accounting for Postemployment Benefits in 1993. The change had no effect
on the Company's financial statements.
3. ACQUISITIONS AND DIVESTITURES
A. Acquisitions
1993 and 1992 - The Company purchased several cable television systems.
1991 - The Company purchased Baltimore television station WMAR for
$125,000,000 in cash and assumed liabilities totaling $29,000,000. The
Company also purchased several cable television systems.
The following table presents additional information about the
acquisitions:
( in thousands )
1993 1992 1991
Goodwill and other intangible assets acquired $ 161 $ 425 $ 101,507
Other assets acquired 90 413 56,043
Liabilities assumed (28,648)
Cash paid $ 251 $ 838 $ 128,902
The acquisitions have been accounted for as purchases, and accordingly
the purchase prices were allocated to assets and liabilities based on
the estimated fair value as of the dates of acquisition.
The acquired operations have been included in the consolidated
statements of income from the dates of acquisition. The following table
summarizes, on an unaudited, pro forma basis, the estimated combined
results of the Company and WMAR for 1991, assuming the acquisition was
completed at the beginning of the year. These results include certain
adjustments, primarily increased interest expense and depreciation and
amortization, and are not necessarily indicative of what the results
would have been had the Company owned WMAR during 1991:
( in thousands, except per share data )
1991
Operating revenues $ 362,200
Operating income 55,800
Net income 11,300
Net income per share $ 1.09
Pro forma results are not presented for the cable television
acquisitions because the combined results of operations would not be
significantly different from the reported amounts.
B. Divestitures
1993 - The Company sold its Memphis television station and its radio
stations. The following table presents additional information about the
divestitures:
( in thousands, except per share data )
1993
Cash received $ 94,262
Net assets disposed 9,791
Gains recognized (before income taxes) $ 84,471
Gains recognized (after income taxes) $ 53,000
Gains recognized per share (after income taxes) $ 5.13
Included in the consolidated financial statements are the following
results of divested operations (excluding gains on sales):
( in thousands )
1993 1992 1991
Operating revenues $ 29,400 $ 30,100 $ 29,100
Operating income 8,700 8,400 7,700
4. UNUSUAL CREDITS AND CHARGES
The Company's 1993 operating results include net after-tax gains on the
sales of subsidiary companies of $53,000,000, $5.13 per share (see Note
3B).
1993 - Management changed the estimate of the additional amount of
copyright fees the Company would owe when a dispute between the television
industry and the American Society of Composers, Authors and Publishers
("ASCAP") was resolved. The adjustment increased operating income
$4,300,000 and net income $2,700,000, $.26 per share. The U.S. television
industry challenged the copyright fees required to be paid to ASCAP under a
formula established in 1950. The dispute concerned payments for the past
ten years. The U.S. District Court of the Southern District of New York
ruled on February 26, 1993, and the change in estimate was based on that
ruling.
In August 1993 the federal income tax rate was increased to 35%,
retroactive to January 1, 1993, and management changed its estimate of the
tax basis and lives of certain assets. The net effect was to decrease net
income $100,000, $.01 per share
(see Note 5).
1991 - The Company agreed to settle a lawsuit filed in 1988 by Pacific West
Cable Company that alleged violations of antitrust and unfair trade
practice laws. The resultant charge reduced operating income by
$12,000,000 and net income by $7,900,000, $.77 per share.
5. INCOME TAXES
The Internal Revenue Service ("IRS") is currently examining the
consolidated income tax returns of EWS for the years 1985 through 1990.
Management believes that adequate provision for income taxes has been made
for all open years.
In 1991 the Company reached agreement with the IRS to settle the audits of
its 1982 through 1984 federal income tax returns. The IRS required the
Company's broadcast operations to change to the accrual method of
accounting for income tax purposes. There was no charge to income
resulting from the settlement.
In 1991 SHI reached agreement with the State of Ohio to settle the audits
of its 1980 through 1987 consolidated state franchise tax returns, which
included the Company. The Company recorded additional income tax expense
of $1,900,000 as a result of the settlement.
In August 1993 the federal income tax rate was increased to 35%,
retroactive to January 1, 1993. The change in the tax rate increased the
Company's deferred tax liabilities $2,100,000. The resultant charge to
income taxes reduced net income $2,100,000, $.20 per share. Also in 1993,
management changed its estimate of the tax basis and lives of certain
assets. The resulting change in the estimated tax liabilities for prior
years increased net income $2,000,000, $.19 per share.
The approximate effect of the temporary differences giving rise to the
Company's deferred income tax liabilities (assets) are as follows:
( in thousands )
1993 1992
Accelerated depreciation and amortization $ 61,481 $ 59,387
Deferred gain on sale of Memphis television and radio stations 23,126
Accrued expenses not deductible until paid (1,063) (2,289)
Other temporary differences, net 1,562 4,120
Total 85,106 61,218
State net operating loss carryforwards (2,188) (3,351)
Net deferred tax liability $ 82,918 $ 57,867
The Company's state net operating loss carryforwards expire from 2000
through 2006.
The provision for income taxes consists of the following:
( in thousands )
1993 1992 1991
Current:
Federal $ 38,556 $ 25,858 $ 12,741
State and local 4,561 3,676 1,573
Ohio franchise tax settlement 1,900
Total current 43,117 29,534 16,214
Deferred:
Federal 19,724 275 2,377
State and local 3,872 992 (650)
Total deferred 23,596 1,267 1,727
Provision for income taxes $ 66,713 $ 30,801 $ 17,941
The difference between the statutory rate for federal income tax and the
effective income tax rate is summarized as follows:
1993 1992 1991
Statutory rate 35.0 % 34.0 % 34.0 %
Effect of:
State and local income taxes 3.3 4.6 1.8
Amortization of goodwill 1.2 6.1 9.8
Increase in tax rate to 35% on deferred tax liabilities 1.3
Change in estimated tax basis and lives of certain assets (0.8)
Ohio franchise tax settlement 5.6
Miscellaneous (0.1) 0.9 1.4
Effective income tax rate 39.9 % 45.6 % 52.6 %
6. ADVANCES FROM PARENT COMPANY
Advances from SHI consisted of the following at December 31:
( in thousands )
1993 1992
Advance under credit facility, payable 1995 $ 19,926 $ 16,304
8.5% advance, payable 1995 - 1996 80,000 160,000
10.3% advance 62,500
Advances from parent company $ 99,926 $ 238,804
Fair value of advances from SHI * 103,400 $ 248,500
Weighted average interest rate on credit facility at balance sheet date 3.4% 4.6%
* Fair value is estimated based on current rates available to the Company
for debt of the same remaining maturity.
The Company has a credit facility with SHI which, at December 31, 1993
permitted maximum borrowings up to $75,000,000 ("Credit Facility").
Maximum borrowing under the Credit Facility is changed as the Company's
anticipated needs change and is not indicative of the Company's short-term
borrowing capacity. The Credit Facility expires in September 1995 and may
be extended upon mutual agreement.
In 1993 the Company prepaid the scheduled 1994 payment on the 10.3% advance
and the scheduled 1997 and 1998 payments on the 8.5% advance.
7. PROPERTY, PLANT, AND EQUIPMENT AND INTANGIBLE ASSETS
Property, plant, and equipment consisted of the following at December 31:
( in thousands )
1993 1992
Land and improvements $ 10,023 $ 10,475
Buildings and improvements 32,401 33,722
Equipment 347,289 341,799
Total 389,713 385,996
Accumulated depreciation 198,441 189,242
Net property, plant, and equipment $ 191,272 $ 196,754
Goodwill and other intangible assets consisted of the following at December 31:
( in thousands )
1993 1992
Goodwill $ 190,132 $ 205,195
Cable television franchise costs 10,819 10,808
Customer lists 56,712 56,712
Licenses and copyrights 28,221 28,221
Non-competition agreements 19,415 19,575
Other 29,265 30,101
Total 334,564 350,612
Accumulated amortization 80,972 70,473
Net goodwill and other intangible assets $ 253,592 $ 280,139
8. EMPLOYEE BENEFIT PLANS
The Company sponsors defined benefit plans covering substantially all
employees. Benefits are generally based on the employees' compensation and
years of service. Funding is based on the requirements of the plans and
applicable federal laws. The Company also sponsors defined contribution
plans covering substantially all employees. The Company matches a portion
of employees' voluntary contributions to these plans.
Retirement plans expense consisted of the following:
( in thousands )
1993 1992 1991
Service cost $ 2,135 $ 1,851 $ 1,443
Interest cost 2,096 1,800 1,802
Actual return on plan assets (2,155) (1,921) (5,084)
Net amortization and deferral (642) (977) 2,341
Defined benefit plans 1,434 753 502
Other, including defined contribution plans 1,322 1,201 1,135
Total 2,756 1,954 1,637
Curtailment losses included in
gains on sales of subsidiary companies 198
Total retirement plans expense $ 2,954 $ 1,954 $ 1,637
Assumptions used in the accounting for the defined benefit pension plans
were as follows:
1993 1992 1991
Discount rate as of December 31 7.0% 8.0% 8.5%
Expected long-term rate of return on plan assets 8.0% 9.0% 9.5%
Rate of increase in compensation levels 3.5% 4.5% 5.0%
The funded status of the defined benefit pension plans at December 31 was
as follows:
( in thousands )
1993 1992
Actuarial present value of vested benefits $ (21,724) $ (19,990)
Actuarial present value of accumulated benefits $ (23,750) $ (21,549)
Actuarial present value of projected benefits $ (30,662) $ (26,918)
Plan assets at fair value 30,670 29,303
Plan assets in excess of projected benefits 8 2,385
Unrecognized net loss (gain) 877 (721)
Unrecognized prior service cost 1,151 1,255
Unrecognized net asset at the date FAS No. 87 was
adopted, net of amortization (3,114) (3,449)
Net pension asset (liability) recognized in the balance sheet $ (1,078) $ (530)
Plan assets consist of marketable equity and fixed-income securities.
9. SEGMENT INFORMATION
Broadcasting operating income in 1993 was increased by $4,300,000 as a
result of the change in estimate of the additional amount of copyright fees
owed ASCAP (see Note 4).
Cable television operating income was reduced in 1991 by the $12,000,000
charge related to settlement of the Sacramento cable television litigation
(see Note 4).
Financial information relating to the Company's business segments is as
follows:
( in thousands )
1993 1992 1991
OPERATING REVENUES
Broadcasting $ 284,294 $ 277,287 $ 245,450
Cable television 116,765 112,532 103,091
Total operating revenues $ 401,059 $ 389,819 $ 348,541
OPERATING INCOME
Broadcasting $ 82,574 $ 70,332 $ 57,564
Cable television 20,061 23,480 3,453
Corporate (3,734) (3,583) (2,731)
Total operating income $ 98,901 $ 90,229 $ 58,286
DEPRECIATION
Broadcasting $ 9,470 $ 9,174 $ 8,237
Cable television 21,302 18,559 19,536
Total depreciation $ 30,772 $ 27,733 $ 27,773
AMORTIZATION OF INTANGIBLE ASSETS
Broadcasting $ 11,596 $ 11,749 $ 9,085
Cable television 2,046 2,252 2,009
Total amortization of intangible assets $ 13,642 $ 14,001 $ 11,094
ASSETS
Broadcasting $ 449,552 $ 480,456 $ 507,967
Cable television 168,580 170,448 169,356
Corporate 3,776 2,678 4,877
Total assets $ 621,908 $ 653,582 $ 682,200
CAPITAL EXPENDITURES
Broadcasting $ 9,733 $ 8,129 $ 6,439
Cable television 21,118 18,390 15,865
Total capital expenditures $ 30,851 $ 26,519 $ 22,304
Corporate assets are primarily cash and deferred income taxes.
10. TRANSACTIONS WITH PARENT COMPANY
Intercompany payable (receivable) balances with SHI at December 31 were as
follows:
( in thousands )
1993 1992
Accrued federal income tax $ 11,600 $ 2,100
Accrued interest on advances from SHI 1,600 4,900
Advances from SHI 99,900 238,800
SHI provides general management services to all of its subsidiaries. SHI
also provides management specifically for its cable television operations.
The Company's share of such services was as follows:
( in thousands )
1993 1992 1991
General management services $ 3,500 $ 3,600 $ 2,700
Cable television management services 1,100 1,400 1,100
11. COMMITMENTS AND CONTINGENCIES
The Company is involved in litigation arising in the ordinary course of
business, none of which is expected to result in material loss.
The Company is committed to purchase approximately $68,000,000 of program
rights currently not available for broadcast, including programs not yet
produced. If such programs are not produced the Company's commitment would
expire without obligation.
The Company is diversified geographically and has a diverse customer base.
The Company grants credit to substantially all of its customers.
Management believes bad debt losses resulting from default by a single
customer, or defaults by customers in any depressed region or business
sector, would not have a material effect on the Company's financial
position.
Minimum payments on non-cancelable leases at December 31, 1993 were
$1,600,000. Rental expense for cancelable and non-cancelable leases was as
follows:
( in thousands )
1993 1992 1991
Rental expense, net of sublease income $ 2,100 $ 2,000 $ 2,100
12. SUMMARIZED QUARTERLY FINANCIAL INFORMATION (Unaudited)
Summarized financial information is as follows:
( in thousands, except per share data ) 1st 2nd 3rd 4th
1993 Quarter Quarter Quarter Quarter Total
Operating revenues:
Broadcasting $ 61,845 $ 77,401 $ 67,178 $ 77,870 $ 284,294
Cable television 29,384 29,662 28,946 28,773 116,765
Total operating revenues 91,229 107,063 96,124 106,643 401,059
Operating expenses:
Employee compensation and benefits 24,151 24,942 24,687 25,198 98,978
Broadcast and cable television program costs 19,219 22,027 21,696 20,069 83,011
Other operating expenses 14,664 21,257 19,606 20,228 75,755
Depreciation and amortization 10,567 11,365 10,813 11,669 44,414
Total operating expenses 68,601 79,591 76,802 77,164 302,158
Operating income 22,628 27,472 19,322 29,479 98,901
Interest expense (4,564) (4,421) (3,929) (3,230) (16,144)
Miscellaneous, net 18 (169) (27) 84,480 84,302
Income taxes (7,755) (10,222) (7,004) (41,732) (66,713)
Net income $ 10,327 $ 12,660 $ 8,362 $ 68,997 $ 100,346
Net income per share of common stock $ 1.00 $ 1.23 $ .81 $ 6.68 $9.72
Cash dividends per share of common stock $ .30 $ .30 $ .30 $ .30 $ 1.20
( in thousands, except per share data ) 1st 2nd 3rd 4th
1992 Quarter Quarter Quarter Quarter Total
Operating revenues:
Broadcasting $ 58,737 $ 74,264 $ 67,061 $ 77,225 $ 277,287
Cable television 27,134 27,816 28,196 29,386 112,532
Total operating revenues 85,871 102,080 95,257 106,611 389,819
Operating expenses:
Employee compensation and benefits 22,908 23,797 23,626 24,178 94,509
Broadcast and cable television program costs 20,735 23,013 22,019 19,983 85,750
Other operating expenses 18,941 18,937 18,939 20,780 77,597
Depreciation and amortization 10,749 10,804 10,041 10,140 41,734
Total operating expenses 73,333 76,551 74,625 75,081 299,590
Operating income 12,538 25,529 20,632 31,530 90,229
Interest expense (5,911) (5,803) (5,577) (5,416) (22,707)
Miscellaneous, net (10) 5 6 37 38
Income taxes (2,914) (8,681) (6,625) (12,581) (30,801)
Net income $ 3,703 $ 11,050 $ 8,436 $ 13,570 $ 36,759
Net income per share of common stock $ .36 $ 1.07 $ .82 $ 1.31 $ 3.56
Cash dividends per share of common stock $ .25 $ .25 $ .25 $ .25 $ 1.00
The sum of the quarterly net income per share amounts may not equal the
reported annual amount because each is computed independently based upon
the weighted average number of shares outstanding for that period.
SCRIPPS HOWARD BROADCASTING COMPANY
Index to Consolidated Financial Statement Schedules
Indebtedness to Related Parties S-2
Property, Plant, and Equipment S-3
Accumulated Depreciation of Property, Plant, and Equipment S-4
Valuation and Qualifying Accounts S-5
Supplementary Income Statement Information S-6
INDEBTEDNESS TO RELATED PARTIES SCHEDULE
IV
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
( in thousands )
COLUMN A COLUMN F COLUMN G COLUMN H COLUMN I
BALANCE BALANCE
BEGINNING -----INDEBTEDNESS TO----- END OF
OF
NAME OF PERSON PERIOD ADDITIONS DEDUCTIONS PERIOD
YEAR ENDED DECEMBER 31, 1993:
Scripps Howard, Inc.
Advance under credit facility $ 16,304 $ 3,622 $ 19,926
8.5% advance, payable 1995-1996 160,000 $ 80,000 80,000
10.3% advance 62,500 62,500
Total $ 238,804 $ 3,622 $ 142,500 $ 99,926
YEAR ENDED DECEMBER 31, 1992:
Scripps Howard, Inc.
Advance under credit facility $ 40,212 $ 23,908 $ 16,304
8.5% advance, payable 1995-1998 160,000 160,000
10.3% advance, payable through 1994 93,750 31,250 62,500
Total $ 293,962 $ 55,158 $ 238,804
YEAR ENDED DECEMBER 31, 1991:
Scripps Howard, Inc.
Advance under credit facility $ 67,810 $ 27,598 $ 40,212
8.5% advance, payable 1995-1998 $ 200,000 40,000 160,000
10.3% advance, payable through 1994 125,000 31,250 93,750
Total $ 192,810 $ 200,000 $ 98,848 $ 293,962
In 1993 the Company prepaid the scheduled 1994 payment on the 10.3% advance,
and the scheduled 1997 and 1998 payments on the 8.5% advance.
In 1991 the Company prepaid the scheduled 1999 payment on the 8.5% advance.
PROPERTY, PLANT, AND EQUIPMENT SCHEDULE V
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
BALANCE OTHER BALANCE
BEGINNING ADDITIONS RETIRE- ADD (1) END OF
CLASSIFICATION OF PERIOD AT COST MENTS (DEDUCT) PERIOD
YEAR ENDED DECEMBER 31, 1993:
Land and improvements $ 10,475 $ 335 $ 3 $ (784) $ 10,023
Buildings and improvements 33,722 1,938 60 (3,199) 32,401
Equipment 341,799 28,578 11,613 (11,475) 347,289
TOTAL $ 385,996 $ 30,851 $ 11,676 $ (15,458) $ 389,713
YEAR ENDED DECEMBER 31, 1992:
Land and improvements $ 10,331 $ 146 $ 2 $ 10,475
Buildings and improvements 32,658 1,135 71 33,722
Equipment 320,106 25,238 3,958 $ 413 341,799
TOTAL $ 363,095 $ 26,519 $ 4,031 $ 413 $ 385,996
YEAR ENDED DECEMBER 31, 1991:
Land and improvements $ 8,137 $ 138 $ 5 $ 2,061 $ 10,331
Buildings and improvements 26,082 958 42 5,660 32,658
Equipment 300,594 21,208 13,739 12,043 320,106
TOTAL $ 334,813 $ 22,304 $ 13,786 $ 19,764 $ 363,095
1) Other changes include the following acquisitions and divestitures:
1993: Purchase of cable television system.
Divestiture of Memphis television station and radio stations.
1992: Purchase of cable television systems.
1991: Purchase of Baltimore television station and cable television systems.
ACCUMULATED DEPRECIATION OF PROPERTY, PLANT & EQUIPMENT SCHEDULE VI
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
( in thousands )
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
ADDITIONS
BALANCE CHARGED TO OTHER BALANCE
BEGINNING COSTS AND RETIRE- ADD (1) END OF
CLASSIFICATION OF PERIOD EXPENSES MENTS (DEDUCT) PERIOD
YEAR ENDED DECEMBER 31, 1993:
Land and improvements $ 455 $ 42 $ 3 $ (97) $ 397
Buildings and improvements 11,501 1,297 7 (1,766) 11,025
Equipment 177,286 29,433 11,201 (8,499) 187,019
TOTAL $ 189,242 $ 30,772 $ 11,211 $ (10,362) $ 198,441
YEAR ENDED DECEMBER 31, 1992:
Land and improvements $ 414 $ 41 $ 455
Buildings and improvements 10,261 1,258 $ 18 11,501
Equipment 154,673 26,434 3,821 177,286
TOTAL $ 165,348 $ 27,733 $ 3,839 $ 189,242
YEAR ENDED DECEMBER 31, 1991:
Land and improvements $ 375 $ 40 $ 1 $ 414
Buildings and improvements 9,044 1,247 30 10,261
Equipment 141,895 26,486 13,708 154,673
TOTAL $ 151,314 $ 27,773 $ 13,739 $ 165,348
Depreciation is computed using the straight-line method over the following useful lives:
Land improvements and building improvements 5 to 20 years
Buildings 20 to 35 years
Equipment 3 to 20 years
1) Other changes represent divestiture of the Memphis television station and the radio stations.
VALUATION AND QUALIFYING ACCOUNTS SCHEDULE VIII
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
( in thousands )
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
INCREASE
ADDITIONS DEDUCTIONS (DECREASE)
BALANCE CHARGED TO AMOUNTS RECORDED BALANCE
BEGINNING COSTS AND CHARGED ACQUISITIONS END OF
CLASSIFICATION OF PERIOD EXPENSES OFF-NET (DIVESTITURES) PERIOD
YEAR ENDED DECEMBER 31, 1993:
Allowance for doubtful
accounts receivable $ 1,978 2,598 2,981 $ 1,595
YEAR ENDED DECEMBER 31, 1992:
Allowance for doubtful
accounts receivable $ 1,754 3,109 2,885 $ 1,978
YEAR ENDED DECEMBER 31, 1991:
Allowance for doubtful
accounts receivable $ 1,335 4,335 4,528 612 $ 1,754
SUPPLEMENTARY INCOME STATEMENT INFORMATION SCHEDULE X
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
( in thousands )
COLUMN A COLUMN B
CHARGED TO COSTS AND
EXPENSES
ITEM 1993 1992 1991
Maintenance and repairs $ 5,315 $ 4,312 $ 4,305
Amortization of intangible assets 13,642 14,001 11,094
Taxes, other than income and payroll 4,289 4,333 3,698
Advertising costs 8,150 8,657 7,350
Royalty expense (1,134) 6,531 5,608
Royalty expense in 1993 was reduced by the change in estimate of the additional amount of copyright fees the Company
would owe when a dispute between the television industry and the American Society of Composers, Authors and
Publishers was resolved. See Note 4 to the Consolidated Financial Statements.