UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 45201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (513) 977-3000
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
and Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. As of
July 15, 1994 the registrant had outstanding 10,325,788 shares of
Common Stock, $.25 par value.
INDEX TO SCRIPPS HOWARD BROADCASTING COMPANY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1994
Item No. Page
PART I - FINANCIAL INFORMATION
1 Financial Statements 3
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 3
PART II - OTHER INFORMATION
1 Legal Proceedings 3
2 Changes in Securities 3
3 Defaults Upon Senior Securities 3
4 Submission of Matters to a Vote of Security Holders 3
5 Other Information 4
6 Exhibits and Reports on Form 8-K 4
PART I
ITEM 1. FINANCIAL STATEMENTS
The information required by this item is filed as part of this Form 10-
Q. See Index to Financial Information at page F-1 of this Form 10-Q.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by this item is filed as part of this Form 10-
Q. See Index to Financial Information at page F-1 of this Form 10-Q.
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in 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 2. CHANGES IN SECURITIES
There were no changes in the rights of security holders during the
quarter for which this report is filed.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the quarter for
which this report is filed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the quarter for which this report is filed.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
None.
Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SCRIPPS HOWARD BROADCASTING COMPANY
Dated: August 3, 1994 BY: /s/ D. J. Castellini
D. J. Castellini
Treasurer
SCRIPPS HOWARD BROADCASTING COMPANY
Index to Financial Information
Item Page
Consolidated Balance Sheets F-2
Consolidated Statements of Income and Retained Earnings F-3
Consolidated Statements of Cash Flows F-4
Notes to Consolidated Financial Statements F-5
Management's Discussion and Analysis of Financial
Condition and Results of Operations F-11
CONSOLIDATED BALANCE SHEETS
( in thousands, except share data ) As of
June 30, December 31, June 30,
1994 1993 1993
ASSETS
Current Assets:
Cash and cash equivalents $ 3,635 $ 2,131 $ 2,816
Accounts and notes receivable (less
allowances - $1,489, $1,595, $1,865) 64,729 66,273 64,764
Program rights and production costs 36,562 42,388 35,599
Deferred income taxes 2,976 2,735 2,504
Miscellaneous 12,254 7,989 8,470
Total current assets 120,156 121,516 114,153
Property, Plant, and Equipment 197,689 191,272 195,216
Goodwill and Other Intangible Assets 250,442 253,592 273,344
Other Assets:
Program rights and production costs (less current portion) 36,622 43,084 33,886
Miscellaneous 10,220 12,444 9,425
Total other assets 46,842 55,528 43,311
TOTAL ASSETS $ 615,129 $ 621,908 $ 626,024
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Program rights payable $ 28,989 $ 30,640 $ 32,101
Accounts payable 10,728 12,422 11,078
Accrued liabilities:
Copyright and programming costs 3,843 4,166 4,497
Employee compensation and benefits 3,273 3,524 3,156
Interest 1,182 1,577 2,267
Income taxes 4,119 13,247 1,411
Miscellaneous 8,911 7,895 6,485
Total current liabilities 61,045 73,471 60,995
Deferred Income Taxes 82,835 85,653 60,685
Advances From Parent Company 104,370 99,926 218,406
Other Long-term Obligations 45,831 59,841 54,084
Stockholders' Equity:
Common stock, $.25 par-authorized: 25,000,000 shares;
issued and outstanding: 10,325,788 shares 2,582 2,582 2,582
Retained earnings 318,466 300,435 229,272
Total stockholders' equity 321,048 303,017 231,854
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 615,129 $ 621,908 $ 626,024
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
( in thousands, except share data ) Three Six
months months
ended ended
June June
30, 30,
1994 1993 1994 1993
Operating Revenues:
Broadcasting $ 73,892 $ 77,401 $ 134,245 $ 139,246
Cable television 28,342 28,731 56,391 57,201
Entertainment 2,073 2,073
Total operating revenues 104,307 106,132 192,709 196,447
Operating Expenses:
Employee compensation and benefits 24,051 24,942 46,647 49,093
Programming and production costs 20,886 22,027 40,247 41,246
Other operating expenses 21,214 20,326 38,304 34,076
Depreciation 8,275 7,886 15,382 15,077
Amortization of intangible assets 3,301 3,479 6,667 6,855
Total operating expenses 77,727 78,660 147,247 146,347
Operating Income 26,580 27,472 45,462 50,100
Other Credits (Charges):
Interest on advances from parent company (1,958) (3,916) (3,835) (8,352)
Other interest expense (96) (505) (194) (633)
Miscellaneous, net 1 (169) (66) (151)
Net other credits (charges) (2,053) (4,590) (4,095) (9,136)
Income Before Income Taxes 24,527 22,882 41,367 40,964
Provision for Income Taxes 10,163 10,222 17,141 17,977
Net Income 14,364 12,660 24,226 22,987
Retained Earnings, Beginning of Period 307,199 219,709 300,435 212,480
Total 321,563 232,369 324,661 235,467
Dividends (3,097) (3,097) (6,195) (6,195)
Retained Earnings, End of Period $ 318,466 $ 229,272 $ 318,466 $ 229,272
Per Share of Common Stock:
Net Income $1.39 $1.23 $2.35 $2.23
Dividends Declared $0.30 $0.30 $0.60 $0.60
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
( in thousands ) Six
months
ended
June
30,
1994 1993
Cash Flows from Operating Activities:
Net income $ 24,226 $ 22,987
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation 15,382 15,077
Amortization of intangible assets 6,667 6,855
Deferred income taxes (3,059) 314
Changes in certain working capital accounts,
net of effects from subsidiary companies purchased (13,238) (10,833)
Miscellaneous, net 5,550 6,141
Net operating activities 35,528 40,541
Cash Flows from Investing Activities:
Additions to property, plant, and equipment (14,317) (13,584)
Purchase of subsidiary companies, net of cash acquired (17,318) (84)
Miscellaneous, net (13) (87)
Net investing activities (31,648) (13,755)
Cash Flows from Financing Activities:
Increase in advances from parent company 4,444 42,102
Payments on advances from parent company (62,500)
Dividends paid (6,195) (6,195)
Miscellaneous, net (625) (6)
Net financing activities (2,376) (26,599)
Increase in Cash and Cash Equivalents 1,504 187
Cash and Cash Equivalents:
Beginning of year 2,131 2,629
End of period $ 3,635 $ 2,816
Supplemental Cash Flow Disclosures:
Interest paid $ 4,257 $ 11,436
Income taxes paid 28,528 17,177
Increase in program rights and related liabilities 6,164 4,103
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_____________________________________________________________________________
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - The Company is approximately 86% owned by
Scripps Howard, Inc. ("SHI"), a wholly-owned subsidiary of
The E.W. Scripps Company ("EWS").
Basis of Presentation - The financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Except as disclosed herein, there has been no material change
in the information disclosed in the notes to consolidated
financial statements included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1993. In
management's opinion all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of the
interim periods have been made.
Results of operations for the three- and six-month periods
ending June 30, 1994 are not necessarily indicative of the
results that may be expected for future interim periods or
for the year ending December 31, 1994.
Program Rights and Production Costs - Program rights are
recorded at the time such programs become available for
broadcast. Amortization is computed using the straight-line
method based on the license period or based on usage,
whichever yields the greater accumulated amortization for
each program. The liability for program rights is not
discounted for imputed interest.
Production costs represent costs incurred in the production
of programming for distribution. Amortization of capitalized
costs is based on the percentage of current period revenues
to anticipated total revenues for each program.
Program and production costs are stated at the lower of
unamortized cost or fair value. The portion of the
unamortized balance expected to be amortized within one year
is classified as a current asset.
Net Income Per Share - Net income per share computations are
based upon the weighted average common shares outstanding.
The weighted average common shares outstanding were as
follows:
( in thousands ) Three Six
months months
ended ended
June June
30, 30,
1994 1993 1994 1993
Weighted average shares outstanding 10,326 10,326 10,326 10,326
The sum of the quarterly net income per share amounts may not
equal the reported year-to-date amounts because each is
computed independently based upon the weighted average number
of shares outstanding for that period.
Reclassification - For comparison purposes certain 1993 items have
been reclassified to conform with 1994 classifications.
2.ACQUISITIONS AND DIVESTITURES
A.Acquisitions
1994 - The Company acquired Cinetel Productions (an
independent producer of programs for cable television).
1993 - The Company purchased a cable television system.
The following table presents additional information about the
acquisitions:
( in thousands ) Six months
ended
June 30,
1994 1993
Goodwill and other intangible assets acquired $ 3,445 $ 54
Other assets acquired 14,772 30
Liabilities assumed (899)
Cash paid $ 17,318 $ 84
The acquisitions have been accounted for as purchases, and
accordingly 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. Pro forma results are not presented 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 in the fourth quarter.
Included in the consolidated financial statements are the
following results of divested operations:
( in thousands ) Three Six
months months
ending ending
June 30, June 30,
1993 1993
Operating revenues $ 8,400 $ 15,300
Operating income 2,700 4,200
3.UNUSUAL ITEMS
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 1993 first quarter and year-to-date
operating income $4,300,000 and net income $2,700,000, $.26
per share.
4. INCOME TAXES
The Internal Revenue Service 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.
The provision for income taxes consists of the following:
( in thousands ) Three Six
months months
ended ended
June June
30, 30,
1994 1993 1994 1993
Current:
Federal $ 10,410 $ 8,250 $ 17,518 $ 15,303
State and local 1,233 1,460 2,682 2,360
Total current 11,643 9,710 20,200 17,663
Deferred:
Federal (1,637) 180 (2,362) (603)
State and local 157 332 (697) 917
Total deferred (1,480) 512 (3,059) 314
Provision for income taxes $ 10,163 $ 10,222 $ 17,141 $ 17,977
5.ADVANCES FROM PARENT COMPANY
Advances from SHI consisted of the following:
( in thousands ) As of
June 30, December 31, June 30,
1994 1993 1993
Advance under credit facility, payable 1995 $ 24,370 $ 19,926 $ 58,406
8.5% advance, payable 1995 - 1996 80,000 80,000 160,000
Advances from parent company $ 104,370 $ 99,926 $ 218,406
Weighted average interest rate on
credit facility at balance sheet date 4.6% 3.4% 3.3%
The Company has a credit facility with SHI which permits 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.
6.PROPERTY, PLANT, AND EQUIPMENT AND INTANGIBLE ASSETS
Property, plant, and equipment consisted of the following:
( in thousands ) As of
June 30, December 31, June 30,
1994 1993 1993
Land and improvements $ 12,185 $ 10,023 $ 10,753
Buildings and improvements 36,082 32,401 34,427
Equipment 361,099 347,289 351,629
Total 409,366 389,713 396,809
Accumulated depreciation 211,677 198,441 201,593
Net property, plant, and equipment $ 197,689 $ 191,272 $ 195,216
Goodwill and other intangible assets consisted of the following:
( in thousands ) As of
June 30, December 31, June 30,
1994 1993 1993
Goodwill $ 190,248 $ 190,132 $ 205,250
Cable television franchise costs 10,828 10,819 10,813
Customer lists 58,212 56,712 56,712
Licenses and copyrights 28,221 28,221 28,221
Non-competition agreements 19,415 19,415 19,575
Other 31,156 29,265 30,100
Total 338,080 334,564 350,671
Accumulated amortization 87,638 80,972 77,327
Net goodwill and other intangible assets $ 250,442 $ 253,592 $ 273,344
7.SEGMENT INFORMATION
Broadcasting 1993 first quarter and year-to-date operating
income 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 3).
Financial information relating to the Company's business
segments is as follows:
( in thousands ) Three Six
months months
ended ended
June June
30, 30,
1994 1993 1994 1993
OPERATING REVENUES
Broadcasting $ 73,892 $ 77,401 $ 134,245 $ 139,246
Cable television 28,342 28,731 56,391 57,201
Entertainment 2,073 2,073
Total operating revenues $ 104,307 $ 106,132 $ 192,709 $ 196,447
OPERATING INCOME
Broadcasting $ 26,279 $ 22,686 $ 42,187 $ 39,817
Cable television 2,342 5,962 6,475 12,635
Entertainment (1,135) (1,388)
Corporate (906) (1,176) (1,812) (2,352)
Total operating income $ 26,580 $ 27,472 $ 45,462 $ 50,100
DEPRECIATION
Broadcasting $ 2,292 $ 2,487 $ 4,459 $ 4,926
Cable television 5,759 5,399 10,699 10,151
Entertainment 224 224
Total depreciation $ 8,275 $ 7,886 $ 15,382 $ 15,077
AMORTIZATION OF INTANGIBLE ASSETS
Broadcasting $ 2,743 $ 2,991 $ 5,488 $ 5,839
Cable television 534 488 1,155 1,016
Entertainment 24 24
Total amortization of intangible assets $ 3,301 $ 3,479 $ 6,667 $ 6,855
CAPITAL EXPENDITURES
Broadcasting $ 3,185 $ 2,124 $ 5,877 $ 5,486
Cable television 4,430 5,091 7,987 8,098
Entertainment 451 453
Total capital expenditures $ 8,066 $ 7,215 $ 14,317 $ 13,584
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 ) Quarterly Year-to-
Period date
1994 Change 1993 1994 Change 1993
Operating revenues:
Broadcasting $ 73,892 (4.5)% $ 77,401 $ 134,245 (3.6)% $ 139,246
Cable television 28,342 (1.4)% 28,731 56,391 (1.4)% 57,201
Entertainment 2,073 2,073
Total operating revenues $ 104,307 (1.7)% $ 106,132 $ 192,709 (1.9)% $ 196,447
Operating income:
Broadcasting $ 26,279 15.8 % $ 22,686 $ 42,187 6.0 % $ 39,817
Cable television 2,342 (60.7)% 5,962 6,475 (48.8)% 12,635
Entertainment (1,135) (1,388)
Corporate (906) 23.0 % (1,176) (1,812) 23.0 % (2,352)
Total operating income 26,580 (3.2)% 27,472 45,462 (9.3)% 50,100
Interest expense (2,054) (4,421) (4,029) (8,985)
Miscellaneous, net 1 (169) (66) (151)
Income taxes (10,163) (10,222) (17,141) (17,977)
Net income $ 14,364 13.5 % $ 12,660 $ 24,226 5.4 % $ 22,987
Net income per share of common stock $1.39 13.0 % $1.23 $2.35 5.4 % $2.23
Weighted average shares outstanding 10,326 10,326 10,326 10,326
Effective income tax rate 41.4 % 44.7 % 41.4 % 43.9 %
The following items affected the comparability of the Company's
reported results of operations:
(i) In 1993 the Company sold its Memphis television station and
its radio stations. The stations are hereinafter referred
to as the "Divested Operations." See Note 2B 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 ) Three Six
months months
ending ending
June 30, June 30,
1993 1993
Operating revenues $ 8,400 $ 15,300
Operating income 2,700 4,200
(ii) In the first quarter of 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 ("ASCAP Adjustment"). The
adjustment increased broadcasting operating income
$4,300,000 and net income $2,700,000, $.26 per share. See
Note 3 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:
Quarterly Year-to-
Period Date
1994 Change 1993 1994 Change 1993
Reported net income per share $ 1.39 13.0 % $ 1.23 $ 2.35 5.4 % $ 2.23
Note Ref.
(ii) ASCAP Adjustment ( .26)
Adjusted net income per share $ 1.39 13.0 % $ 1.23 $ 2.35 19.3 % $ 1.97
The Company's average advances from parent company in the first six months
of 1994 were $125 million lower than in the first six months of 1993,
resulting in the decrease in interest expense.
RESULTS OF OPERATIONS
CONSOLIDATED - Operating results, excluding the Divested Operations
and ASCAP Adjustment, were as follows:
( in thousands ) Quarterly Year-to-
Period date
1994 Change 1993 1994 Change 1993
Operating revenues:
Broadcast television $ 73,892 7.0 % $ 69,033 $ 134,245 8.3 % $ 123,959
Cable television 28,342 (1.4)% 28,731 56,391 (1.4)% 57,201
Entertainment 2,073 2,073
Total operating revenues $ 104,307 6.7 % $ 97,764 $ 192,709 6.4 % $ 181,160
Operating income:
Broadcast television $ 26,279 31.7 % $ 19,959 $ 42,187 34.9 % $ 31,276
Cable television 2,342 (60.7)% 5,962 6,475 (48.8)% 12,635
Entertainment (1,135) (1,388)
Corporate (906) 23.0 % (1,176) (1,812) 23.0 % (2,352)
Total operating income $ 26,580 7.4 % $ 24,745 $ 45,462 9.4 % $ 41,559
Other Financial and Statistical Data:
Total advertising revenues $ 75,138 7.1 % $ 70,144 $ 136,495 8.4 % $ 125,919
Advertising revenues as a
percentage of total revenues 72.0 % 71.7 % 70.8 % 69.5 %
Total capital expenditures $ 8,066 14.1 % $ 7,070 $ 14,317 7.2 % $ 13,352
Start-up costs for the Home & Garden Television Network, a 24-hour
cable television channel scheduled for launch in late 1994, totaled
$1,500,000 in the first six months of 1994.
SEGMENTS - Operating results, excluding the Divested Operations and
the ASCAP Adjustment, for the broadcast television and cable
television 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.
BROADCAST TELEVISION - Operating results for the broadcasting
segment, excluding the Divested Operations and the ASCAP
Adjustment, were as follows:
( in thousands ) Quarterly Year-to-
Period date
1994 Change 1993 1994 Change 1993
Operating revenues:
Local $ 38,030 8.6 % $ 35,029 $ 70,517 9.4 % $ 64,446
National 32,507 2.5 % 31,712 57,832 5.4 % 54,894
Political 1,239 33 1,601 209
Other 2,116 (6.3)% 2,259 4,295 (2.6)% 4,410
Total operating revenues 73,892 7.0 % 69,033 134,245 8.3 % 123,959
Operating expenses:
Employee compensation and benefits 18,545 5.3 % 17,613 36,483 5.1 % 34,712
Program costs 13,059 (11.5)% 14,761 25,085 (6.3)% 26,777
Other 10,974 (5.0)% 11,556 20,543 (2.6)% 21,087
Depreciation and amortization 5,035 (2.1)% 5,144 9,947 (1.6)% 10,107
Total operating expenses 47,613 (3.0)% 49,074 92,058 (0.7)% 92,683
Operating income $ 26,279 31.7 % $ 19,959 $ 42,187 34.9 % $ 31,276
Other Financial and Statistical Data:
Earnings before interest,
income taxes, depreciation,
and amortization ("EBITDA") $ 31,314 24.7 % $ 25,103 $ 52,134 26.0 % $ 41,383
Percent of operating revenues:
Operating income 35.6% 28.9% 31.4% 25.2%
EBITDA 42.4% 36.4% 38.8% 33.4%
Capital expenditures $ 3,185 60.9 % $ 1,979 $ 5,877 11.9 % $ 5,254
Improved demand for advertising time led to the increase in revenues
and EBITDA. EBITDA improved sharply at the Company's Baltimore
television station following termination of an agreement to broadcast
Oriole baseball games. The loss of baseball advertising revenue was
more than offset by the switch to lower-cost programming. Excluding
the Baltimore station, revenues increased 12 percent.
The Company has entered into 10-year affiliation agreements with the
ABC television network in five of the Company's television markets.
The agreements with ABC extend existing affiliation agreements in the
Detroit and Cleveland markets, and will replace the current NBC
affiliation in Baltimore and Fox affiliations in Phoenix and Tampa.
The Company has reached agreement to affiliate its Kansas City
television station with NBC and to extend its existing NBC
affiliations in Tulsa and West Palm Beach. The Company had previously
been notified of Fox's plans to move its programming to other stations
in the Kansas City, Phoenix, and Tampa markets.
CABLE TELEVISION - Operating results for the cable television segment
were as follows:
( in thousands, except per subscriber Quarterly Year-to-
information ) Period date
1994 Change 1993 1994 Change 1993
Operating revenues:
Basic services $ 16,110 (11.3)% $ 18,160 $ 32,292 (11.2)% $ 36,358
Premium programming services 6,672 13.6 % 5,874 13,164 12.2 % 11,731
Other monthly service 2,850 24.0 % 2,299 5,642 23.1 % 4,584
Advertising 1,246 12.2 % 1,111 2,250 14.8 % 1,960
Installation and miscellaneous 1,464 13.8 % 1,287 3,043 18.5 % 2,568
Total operating revenues 28,342 (1.4)% 28,731 56,391 (1.4)% 57,201
Operating expenses:
Employee compensation and benefits 4,665 7.4 % 4,343 9,209 8.2 % 8,510
Program costs 7,494 11.9 % 6,696 14,829 11.1 % 13,343
Other 7,548 29.2 % 5,843 14,024 21.5 % 11,546
Depreciation and amortization 6,293 6.9 % 5,887 11,854 6.2 % 11,167
Total operating expenses 26,000 14.2 % 22,769 49,916 12.0 % 44,566
Operating income $ 2,342 (60.7)% $ 5,962 $ 6,475 (48.8)% $ 12,635
Other Financial and Statistical Data:
Earnings before interest,
income taxes, depreciation,
and amortization ("EBITDA") $ 8,635 (27.1)% $ 11,849 $ 18,329 (23.0)% $ 23,802
Percent of operating revenues:
Operating income 8.3% 20.8% 11.5% 22.1%
EBITDA 30.5% 41.2% 32.5% 41.6%
Capital expenditures $ 4,430 (13.0)% $ 5,091 $ 7,987 (1.4)% $ 8,098
Average number of basic subscribers 295.1 5.1 % 280.8 293.9 4.7 % 280.6
Average monthly revenue
per basic subscriber $32.01 (6.2)% $34.11 $31.98 (5.9)% $33.98
Homes passed at end of period 555.7 1.6 % 546.8
Basic subscribers at end of period 296.5 5.4 % 281.3
Penetration rate 53.4% 51.4%
Re-regulation of the cable television industry significantly affected
the Company's cable television operations. New rules which became
effective in July 1994 are expected to reduce rates slightly in the
third quarter.
Other operating expenses includes a $1,500,000 charge for special
rebates to the Company's Sacramento system customers and related legal
costs. The rebate was awarded by a federal court in connection with
litigation concerning the system's pricing policies in the late 1980s.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities was $35,500,000 in 1994 compared
to $40,500,000 in 1993.
Cash flow from operating activities in 1994 was used primarily for
capital expenditures of $14,300,000, acquisitions of $17,300,000, and
dividend payments of $6,200,000. The debt to total capitalization
ratio at June 30 was .25 in 1994 and .49 in 1993.
PROPOSED MERGER
On April 7, 1994 the board of directors of the Company approved
a merger proposal from The E.W. Scripps Company, which through
Scripps Howard, Inc. (its wholly-owned subsidiary) owns 86.1% of
the Company's common stock. Under the terms of the proposed
merger EWS would exchange 3.45 shares of its Class A Common
stock for each of the Company's shares. A definitive merger
agreement was executed on May 4, 1994. The merger is subject to
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.