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 1-10701
THE E.W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 51-0304972
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1105 N. Market Street
Wilmington, Delaware 19801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (302) 478-4141
Title of each class Name of exchange on which registered
Securities registered pursuant to
Section 12(b) of the Act:
Class A Common stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Not applicable
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.
The aggregate market value of Class A Common stock of the Registrant held
by non-affiliates of the Registrant, based on the $28.375 per share closing
price for such stock on March 1, 1994, was approximately $618,600,000. As
of March 1, 1994 non-affiliates held approximately 870,000 shares of Common
Voting stock. There is no active market for such stock.
As of March 1, 1994 there were 54,586,495 shares outstanding of the
Registrant's Class A Common stock, $.01 par value per share and 20,174,833
shares outstanding of the Registrant's Common Voting stock, $.01 par value
per share.
Document incorporated by reference Part
Proxy Statement for the 1994 Annual Meeting of Stockholders III
INDEX TO THE E.W. SCRIPPS COMPANY 1993 10-K
Item No. Page
PART I
1. Business
Publishing 3
Broadcasting 7
Cable Television 10
New Businesses 13
Employees 13
2. Properties 13
3. Legal Proceedings 14
4. Submission of Matters to a Vote of Securities Holders 14
PART II
5. Market for Registrant's Common Stock and Related
Stockholder Matters 15
6. Selected Financial Data 15
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
8. Financial Statements and Supplementary Data 15
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures 15
PART III
10. Directors and Executive Officers of the Registrant 16
11. Executive Compensation 16
12. Security Ownership of Certain Beneficial Owners and Management 16
13. Certain Relationships and Related Transactions 16
PART IV
14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 17
PART I
ITEM 1. BUSINESS
The Company is a diversified media company operating principally in
three segments: publishing, broadcasting, and cable television. In
1993 the Company announced plans to introduce the Home & Garden
Television Network, a 24-hour cable channel, and established a new
business, Scripps Howard Productions, to develop news and
entertainment programming for domestic and international distribution.
In February 1994 the Company acquired Cinetel Productions, one of the
largest independent producers of cable television programming. See
"Business - New Businesses."
A summary of segment information for the three years ended December 31,
1993 is set forth on page F-30 of this Form 10-K.
Publishing
General - The Company publishes 19 metropolitan and suburban daily
newspapers. From its Washington bureau the Company operates the
Scripps Howard News Service ("SHNS"), a supplemental wire service
covering stories in the capital, other parts of the United States, and
abroad. While the revenue for this service is not significant,
management believes the Company's image is enhanced by the wide
distribution of SHNS. In addition to its newspaper operations, the
Company, under the trade name United Media, is a leading distributor of
news columns, comics, and other features for the newspaper industry.
United Media owns and licenses worldwide copyrights relating to
"Peanuts" and "Garfield," and other character properties for use on
numerous products, including plush toys, greeting cards, and apparel,
and for exhibit on television, video cassettes, and other media.
The Company acquired or divested the following publishing operations in the
three years ended December 31, 1993:
1993 - The Company acquired the remaining 2.7% minority interest in the
Knoxville News-Sentinel. The Company divested its book publishing
operations and its newspapers in Tulare, California, and San Juan.
1992 - The Company purchased three daily newspapers in California
(including The Monterey County Herald in connection with the sale of The
Pittsburgh Press). The Company sold The Pittsburgh Press and its
television listings business.
Revenues - The composition of the Company's publishing operating revenues
for the most recent five years is as follows:
( in thousands )
1993 1992 1991 1990 1989
Newspaper advertising:
Local $ 178,253 $ 169,634 $ 167,307 $ 176,903 $ 179,793
Classified 143,258 123,314 119,866 124,916 125,841
National 12,042 12,138 12,523 14,870 15,594
Preprint 57,639 51,083 46,035 44,824 43,868
Total newspaper advertising 391,192 356,169 345,731 361,513 365,096
Circulation 112,937 103,238 98,659 95,885 92,968
Joint operating agency distributions 38,647 40,018 36,647 37,394 36,825
Other newspaper revenues 9,126 9,285 8,319 8,457 9,390
Total newspaper operating revenues 551,902 508,710 489,356 503,249 504,279
Licensing 55,083 57,136 62,167 63,127 69,131
Miscellaneous 29,658 30,053 29,444 28,585 30,702
Total 636,643 595,899 580,967 594,961 604,112
Divested operations 24,278 144,169 246,087 252,809 246,189
Total publishing operating revenues $ 660,921 $ 740,068 $ 827,054 $ 847,770 $ 850,301
Substantially all of the Company's newspaper publishing operating revenues
are derived from advertising and circulation. Advertising rates and
revenues vary among the Company's newspapers depending on circulation
demographics, type of advertising, local market conditions, and
competition. Advertising revenues are derived from "run-of-paper"
advertisements included in each copy of a newspaper's editions, from
"zoned" editions which feature sections with stories and advertisements
intended for limited areas of distribution, from "preprinted"
advertisements that are inserted into newspapers, and from "shoppers" which
have little or no news content and contain primarily advertising run in the
regular edition of the newspaper. Run-of-paper advertisements are
generally more profitable to the Company than other advertisements.
Advertising revenues vary through the year, with the first and third
quarters generally having lower revenues than the second and fourth
quarters. Advertising rates and volume are highest on Sundays, primarily
because circulation and readership is greater on Sundays.
Circulation revenues are derived from home delivery sales of newspapers to
subscribers and from single-copy sales made through retail outlets and
vending machines serviced by delivery and collection agents. Circulation
information for the Company's newspapers is as follows:
( in thousands ) (1) Morning (M) Daily Paid Circulation
Newspaper Evening (E) 1993 1992 1991 1990 1989
Albuquerque (New Mexico) Tribune (2) E 34.7 35.5 38.6 40.1 39.9
Birmingham (Alabama) Post (2) M (3) 60.1 61.9 60.6 62.0 61.8
Bremerton (Washington) Sun E 39.6 38.6 40.4 41.2 40.0
Cincinnati (Ohio) Post (2) E (6) 95.1 98.5 100.9 104.3 107.4
Denver (Colorado) Rocky Mountain News M 342.9 356.9 355.9 352.0 343.6
El Paso (Texas) Herald Post (2) E 25.2 27.6 28.3 28.2 29.7
Evansville (Indiana) Courier (2) M 64.3 63.9 62.8 63.2 63.4
Knoxville (Tennessee) News-Sentinel M 123.9 126.0 103.9 104.2 100.3
Memphis (Tennessee) Commercial Appeal M 202.7 191.8 194.9 210.5 209.2
Monterey County (California) Herald M (5) 34.3 36.7 35.3 35.6 34.8
Naples (Florida) Daily News M 44.1 42.0 39.8 36.7 34.1
Redding (California) Record-Searchlight E 38.4 38.6 40.6 40.4 38.6
San Luis Obispo (California)
Telegram-Tribune E 32.5 31.5 32.5 32.3 31.8
Stuart (Florida) News M 31.0 28.5 27.7 27.0 25.8
Ventura County (California):
Star Free Press M (4) 79.2 61.1 60.0 59.8 59.9
News-Chronicle (Thousand Oaks) E 21.1 21.3 22.3 22.4 23.5
Enterprise (Simi Valley) E (5) 14.9 15.4 16.6 17.4 16.3
Watsonville (California) Register Pajaronian E 12.1 12.3 13.2 13.8 14.2
Total Daily Circulation 1,296.1 1,288.1 1,274.3 1,291.1 1,274.3
(1) Based on Audit Bureau of Circulation Publisher's Statements ("Statements") for the six-month periods ending September 30,
except for 1) the Naples Daily News which are from the Statements for the twelve-month periods ending September 30, and
2) The Knoxville News-Sentinel which are based on a three-month average.
(2) This newspaper is published under a JOA with another newspaper in its market. See "Joint Operating Agencies."
(3) Will move to evening distribution in 2000.
(4) Moved from evening to morning distribution in March 1990. Includes the Camarillo Daily News, acquired November 1992, for
the years 1989 through 1992.
(5) Acquired in 1992.
(6) Includes circulation of The Kentucky Post.
( in thousands ) (1) Sunday Paid Circulation
Newspaper 1993 1992 1991 1990 1989
Bremerton (Washington) Sun 40.7 39.5
Denver (Colorado) Rocky Mountain News 453.3 430.1 425.4 407.9 401.5
Evansville (Indiana) Courier 118.6 118.1 117.7 116.9 115.7
Knoxville (Tennessee) News-Sentinel 183.5 182.9 174.9 171.9 167.6
Memphis (Tennessee) Commercial Appeal 279.5 282.3 282.4 288.8 290.2
Monterey County (California) Herald (3) 35.1 38.2 37.3 37.2 35.9
Naples (Florida) Daily News 57.4 54.8 51.7 48.5 45.9
Redding (California) Record-Searchlight 40.7 40.9 40.0 39.3 36.8
Stuart (Florida) News 38.5 34.8 33.3 32.5 30.4
Ventura County (California):
Star Free Press (2) 83.9 67.0 66.5 66.3 66.5
News-Chronicle (Thousand Oaks) 22.0 22.3 23.5 23.5 24.9
Enterprise (Simi Valley) (3) 15.5 16.1 17.2 18.0 17.0
Total Sunday Circulation (3) 1,368.7 1,327.0 1,269.9 1,250.8 1,232.4
(1) Based on Audit Bureau of Circulation Publisher's Statements ("Statements") for the six-month periods ending September 30,
except figures for 1) the Naples Daily News which are from the Statements for the twelve-month periods ending September 30, and
2) The Knoxville News-Sentinel which are based on a three-month average.
(2) Includes the Camarillo Daily News, acquired November 1992, for the years 1989 through 1992.
(3) Acquired in 1992.
Joint operating agency distributions represent the Company's share of
profits of newspapers managed by the other party to a joint operating
agency (see "Joint Operating Agencies"). Other newspaper operating
revenues include commercial printing.
Under the trade names United Feature Syndicate and Newspaper Enterprise
Association, the Company sells news columns, comic strips, crossword
puzzles, editorial cartoons, and miscellaneous features and games to
newspapers and other organizations throughout the world. Included among
these features are "Peanuts" and "Garfield," two of the most successful
strips in the history of comic art. These syndication revenues are
included in miscellaneous revenues. Licensing revenues are derived from
royalties on the sale of merchandise such as plush toys, greeting cards,
and apparel. Such royalties are generally a negotiated percentage of the
licensee's sales. More than half of the licensing revenues are from
markets outside the United States. The Company generally pays a percentage
of gross syndication and licensing royalties to the creators of these
properties.
Joint Operating Agencies - The Company is currently a party to newspaper
joint operating agencies ("JOAs") in five markets. JOAs combine all but
the editorial operations of two competing newspapers in a market in order
to reduce aggregate expenses and take advantage of economies of scale,
thereby allowing the continuing operation of both newspapers in that
market. The Newspaper Preservation Act of 1970 ("NPA") provides a limited
exemption from anti-trust laws, generally permitting the continuance of
JOAs in existence prior to the enactment of the NPA and the formation,
under certain circumstances, of new JOAs between newspapers. Except for
the Company's JOA in Cincinnati, all of the Company's JOAs were entered
into prior to the enactment of the NPA. From time to time the legality of
pre-NPA JOAs has been challenged on anti-trust grounds but no such
challenge has yet succeeded in the courts.
JOA revenues less JOA expenses, as defined in each JOA, equals JOA profits,
which are split between the parties to the JOA. In each case JOA expenses
exclude editorial expenses. The Company manages the JOA in Evansville and
receives approximately 80% of JOA profits. Each of the other four JOAs are
managed by the other party to the JOA. The Company receives approximately
20% to 40% of JOA profits for those JOAs.
The table below provides certain information about the Company's JOAs.
Year JOA Year of JOA
Newspaper Publisher of Other Newspaper Entered Into Expiration
Managed by the Company:
The Evansville Courier Hartmann Publications 1938 1998
Managed by Other Publisher:
The Albuquerque Tribune Journal Publishing Company 1933 2022
Birmingham Post Newhouse Newspapers 1950 2015
The Cincinnati Post Gannett Newspapers 1977 2007
El Paso Herald Post Gannett Newspapers 1936 2015
The JOAs generally provide for automatic renewal terms of ten years unless
an advance notice of termination ranging from two to five years is given by
either party. The Company has notified Hartmann Publications of its intent
to terminate the Evansville JOA.
Competition - Competition occurs primarily in local markets, however
certain newspapers, such as The New York Times and The Wall Street Journal,
are sold in all of the Company's markets. The Company's newspapers
compete for advertising revenues in varying degrees with other types of
publications, such as magazines, and with other media such as television,
radio, cable television, and direct mail. Competition for advertising
revenues is based upon circulation levels, readership demographics, price,
and effectiveness. The Company's newspapers compete for readership with
other publications and compete for readers' discretionary time with other
information and entertainment media.
All of the Company's newspaper markets are highly competitive, particularly
Denver, which is the largest market in which the Company operates a
newspaper.
Newspaper Production - The Company's daily newspapers are printed using
letterpress, offset, or flexographic presses and use computer systems for
writing, editing, and composing and producing the printing plates used in
each edition.
Raw Materials and Labor Costs - The Company consumed approximately 188,000
metric tonnes of newsprint in 1993. The Company purchases newsprint from
various suppliers, many of which are Canadian. Management believes that
the Company's sources of supply of newsprint are adequate for its
anticipated needs. Newsprint costs accounted for approximately 17% of the
Company's newspaper operating expenses in 1993.
Labor costs accounted for approximately 47% of the Company's newspaper
operating expenses in 1993. A substantial number of the Company's
newspaper employees are represented by labor unions. See "Employees."
Broadcasting
General - The Company's broadcasting operations are owned by Scripps Howard
Broadcasting Company ("SHB"), an Ohio corporation. The Company, through
Scripps Howard, Inc. (its wholly-owned subsidiary), owns 86.1% of the
outstanding shares of SHB Common stock. The remainder of the shares trade
in the over-the-counter market under the NASDAQ symbol "SCRP." On February
17, 1994 the Company announced it had offered to acquire the 13.9% of SHB
that it does not already own. See Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Proposed
Merger."
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 purchased 589,000 shares of SHB Common stock,
increasing the Company's ownership from 80.4% to 86.1%, and 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(1) Market(3) 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 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's cable television systems in Lake County, Florida;
Sacramento, California; and the Longmont, Colorado cluster are owned by
SHB. Other wholly-owned subsidiaries of the Company operate cable
television systems in Florida, Georgia, Indiana, Kentucky, South Carolina,
Tennessee, Virginia, and West Virginia. 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 $ 176,390 $ 170,012 $ 152,316 $ 131,854 $ 116,804
Premium programming services 47,566 45,293 45,280 42,050 40,316
Other monthly services 14,894 13,259 13,807 13,634 11,218
Advertising 9,071 8,394 7,071 5,663 3,623
Installation and other 12,635 9,092 6,775 6,212 5,334
Total cable television operating revenues $ 260,556 $ 246,050 $ 225,249 $ 199,413 $ 177,295
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(1) Basic
1993
Atlanta, Georgia cluster 97.6 66.9 69% 38.1 57%
Chattanooga, Tennessee cluster 175.5 105.8 60% 71.4 67%
Knoxville, Tennessee cluster 146.0 101.5 70% 50.3 50%
Rome, Georgia cluster 56.3 44.6 79% 33.9 76%
Elizabethtown, Kentucky cluster 48.3 40.3 83% 20.7 51%
Bluefield, West Virginia cluster 73.3 51.2 70% 30.6 60%
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 1,149.4 701.0 61% 599.6 86%
1992
Atlanta, Georgia cluster 97.4 64.6 66% 40.2 62%
Chattanooga, Tennessee cluster 173.0 99.8 58% 76.8 77%
Knoxville, Tennessee cluster 143.1 97.0 68% 50.7 52%
Rome, Georgia cluster 53.8 42.4 79% 41.7 98%
Elizabethtown, Kentucky cluster 48.0 39.8 83% 17.7 44%
Bluefield, West Virginia cluster 72.6 49.5 68% 34.1 69%
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 1,128.8 673.1 60% 576.7 86%
( in thousands ) Premium
Subs. as
Homes Basic Penetration Premium a % of
Cable Television System Cluster Passed Subscribers Rate Subscribers Basic
(1)
1991
Atlanta, Georgia cluster 95.2 58.8 62% 36.1 61%
Chattanooga, Tennessee cluster 164.1 96.0 59% 68.4 71%
Knoxville, Tennessee cluster 140.6 90.9 65% 46.2 51%
Rome, Georgia cluster 52.2 40.2 77% 36.1 90%
Elizabethtown, Kentucky cluster 47.5 38.2 80% 14.2 37%
Bluefield, West Virginia cluster 66.3 47.6 72% 29.8 63%
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 1,093.1 645.5 59% 513.8 80%
1990
Atlanta, Georgia cluster 93.7 57.5 61% 39.0 68%
Chattanooga, Tennessee cluster 157.3 88.3 56% 61.2 69%
Knoxville, Tennessee cluster 138.0 83.9 61% 42.6 51%
Rome, Georgia cluster 54.4 42.2 78% 22.5 53%
Elizabethtown, Kentucky cluster 46.9 36.2 77% 13.8 38%
Bluefield, West Virginia cluster 65.8 46.3 70% 24.3 52%
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 1,061.5 614.7 58% 463.1 75%
1989
Atlanta, Georgia cluster 91.5 53.3 58% 50.2 94%
Chattanooga, Tennessee cluster 154.0 84.7 55% 57.1 67%
Knoxville, Tennessee cluster 120.5 68.3 57% 36.9 54%
Rome, Georgia cluster 51.3 38.8 76% 22.3 57%
Kentucky/Tennessee cluster 119.2 89.1 75% 38.3 43%
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 1,009.0 559.5 55% 434.8 78%
(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 those 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.
In September 1993 the Company established Scripps Howard Productions to
acquire, create, develop, produce, and own programming product for domestic
and international television, including prime-time series for network and
first-run syndication, movies, and miniseries for network, cable, and pay
cable television broadcast, along with news, information, and entertainment
services for the emerging multimedia marketplace.
Employees
As of December 31, 1993 the Company had approximately 7,600 full-time
employees, of whom approximately 5,100 were engaged in publishing, 1,200 in
broadcasting, and 1,200 in cable television. Various labor unions
represent approximately 2,400 employees, primarily in the publishing
segment. Collective bargaining agreements covering approximately 50% of
union-represented employees are being negotiated currently or will be
negotiated in 1994. Except for work stoppages at The Pittsburgh Press,
which was sold in 1992, the Company has not experienced any work stoppages
since March 1985. The Company considers its relationship with employees to
be generally satisfactory.
ITEM 2. PROPERTIES
The properties used in the Company's publishing operations generally
include business and editorial offices and printing plants. The Company
has added or upgraded production facilities at three of its major daily
newspapers in recent years, including a state-of-the-art production plant
for the Denver Rocky Mountain News.
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. In recent years the Company has
completed rebuilding the cable television distribution system for its Rome,
Georgia, cable television system and the Company is currently upgrading the
distribution systems for its Chattanooga, Knoxville, and Sacramento
systems. 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 Class A Common stock are traded on the New York
Stock Exchange under the symbol "SSP." There are approximately 4,500
owners of the Company's Class A Common stock and 27 owners of the Company's
Common Voting stock, which does not have a public market, based on security
position listings.
The Company has declared cash dividends in every year since its
incorporation in 1922. Future dividends are subject to the Company's
earnings, financial condition, and capital requirements.
The range of market prices of the Company's Class A Common stock, which
represents the high and low sales prices for each full quarterly period,
and quarterly cash dividends are as follows:
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
1993
Market price of common stock:
High $29.125 $28.500 $26.625 $30.875
Low 23.750 24.750 22.875 25.125
Cash dividends per share of common stock $ .11 $ .11 $ .11 $ .11 $ .44
1992
Market price of common stock:
High $26.750 $29.000 $27.875 $26.125
Low 22.125 23.500 24.000 23.000
Cash dividends per share of common stock $ .10 $ .10 $ .10 $ .10 $ .40
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 executive officers of the Company are as follows:
Name Age Position
Charles E. Scripps 74 Chairman of the Board of Directors (
since 1953)
Lawrence A. Leser 58 President, Chief Executive Officer and
Director (since 1985)
William R. Burleigh 58 Executive Vice President and Director
(since 1990); Vice President, Newspapers
and Publishing (1986 to 1990)
Daniel J. Castellini 54 Senior Vice President, Finance and A
dministration (since 1986)
F. Steven Crawford 45 Senior Vice President, Cable Televis
ion (since September 1992); Vice
President, Cable Television (1990 to
September 1992); General Manager,
TeleScripps Cable Company (1983 to 1990)
Paul F. Gardner 51 Vice President, Television (since Ap
ril 1993); Senior Vice President, News
Programming, Fox Broadcasting Company
(1991 to 1993); Vice President and
General Manager, WCPO Television,
Cincinnati (1989 to 1991)
J. Robert Routt 40 Vice President and Controller (since
1985)
E. John Wolfzorn 48 Treasurer (since 1979)
M. Denise Kuprionis 37 Secretary (since 1987)
The executive officers of the Company serve at the pleasure of the Board of
Directors.
The information required by Item 10 of Form 10-K relating to directors of
the Company is incorporated herein by reference to the material captioned
"Election of Directors" in the Company's definitive proxy statement for the
Annual Meeting of Stockholders ("Proxy Statement"). The Proxy Statement
will be filed with the Securities and Exchange Commission on or before
April 11, 1994.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 of Form 10-K is incorporated herein by
reference to the material captioned "Executive Compensation" in the Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 of Form 10-K is incorporated herein by
reference to the material captioned "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 of Form 10-K is incorporated herein by
reference to the material captioned "Certain Transactions" in the Proxy
Statement.
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.
THE E.W. SCRIPPS 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 Senior Vice President, Finance and Administration
Daniel J. Castellini (Principal Financial and Accounting Officer)
/s/ Charles E. Scripps
Charles E. Scripps Chairman of the Board of Directors
/s/ William R. Burleigh
William R. Burleigh Executive Vice President and Director
/s/ John H. Burlingame
John H. Burlingame Director
/s/ Daniel J. Meyer
Daniel J. Meyer Director
/s/ Nicholas B. Paumgarten
Nicholas B. Paumgarten Director
/s/ Paul K. Scripps
Paul K. Scripps Director
/s/ Robert P. Scripps
Robert P. Scripps Director
/s/ David R. Huhn
David R. Huhn Director
THE E.W. SCRIPPS 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-12
Consolidated Balance Sheets F-13
Consolidated Statements of Income F-15
Consolidated Statements of Cash Flows F-16
Consolidated Statements of Stockholders' Equity F-17
Notes to Consolidated Financial Statements F-18
SELECTED FINANCIAL DATA
( in millions, except share data )
1993 1992 1991 1990 1989
Summary of Operations
Operating Revenue:
Publishing $ 660.9 $ 740.1 $ 827.1 $ 847.8 $ 850.3
Broadcasting 284.3 277.3 245.5 235.6 222.6
Cable television 260.6 246.0 225.2 199.4 177.3
Other 1.8 13.8 16.2
Total operating revenue $ 1,205.8 $ 1,263.4 $ 1,299.6 $ 1,296.6 $ 1,266.4
Operating Income:
Publishing $ 77.0 $ 75.1 $ 107.8 $ 80.2 $ 146.7
Broadcasting 82.0 69.9 57.2 69.1 58.5
Cable television 45.2 43.7 23.7 26.8 22.2
Other 0.1 1.3 2.7
Corporate (14.2) (14.9) (12.9) (15.0) (16.4)
Total operating income 190.0 173.8 175.9 162.4 213.7
Interest expense (27.3) (34.2) (38.7) (43.8) (42.9)
Miscellaneous, net 92.8 72.4 0.2 (2.3) 3.1
Income taxes (108.6) (94.0) (63.7) (58.1) (77.1)
Minority interests (18.2) (11.7) (7.1) (9.3) (8.6)
Income before cumulative effect of
accounting change 128.7 106.3 66.6 48.9 88.2
Cumulative effect of accounting change (22.4)
Net income $ 128.7 $ 83.9 $ 66.6 $ 48.9 $ 88.2
Share Data
Income before cumulative effect of
accounting change $1.72 $1.43 $.89 $.64 $1.12
Cumulative effect of accounting change (.30)
Net income $1.72 $1.13 $.89 $.64 $1.12
Dividends $ .44 $ .40 $ .40 $ .40 $ .345
Common stock price:
High $30.875 $29.000 $24.500 $24.000 $27.000
Low 22.875 22.125 14.750 13.000 16.880
Other Financial Data
Depreciation, amortization, and write-down
of intangible assets $ 120.9 $ 121.9 $ 112.1 $ 106.6 $ 102.1
Net cash flow from operating activities 226.8 204.8 210.6 199.1 221.1
Investing Activity:
Capital expenditures (103.9) (145.2) (151.0) (85.0) (86.7)
Other (investing)/divesting activity, net 108.5 19.1 (132.5) 11.0 (11.0)
Total assets 1,676.5 1,700.8 1,711.4 1,525.4 1,568.7
Long-term debt (including current portion) 247.9 441.9 491.8 367.6 421.0
Stockholders' equity 859.6 733.1 676.6 639.0 643.4
Long-term debt % of total capitalization 22% 38% 42% 37% 40%
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:
Publishing $ 660,921 (10.7)% $ 740,068 (10.5)% $ 827,054
Broadcasting 284,294 2.5 % 277,287 13.0 % 245,450
Cable television 260,556 5.9 % 246,050 9.2 % 225,249
Other 1,804
Total operating revenues $ 1,205,771 (4.6)% $ 1,263,405 (2.8)% $ 1,299,557
Operating income:
Publishing $ 76,979 2.6 % $ 75,055 (30.4)% $ 107,805
Broadcasting 81,958 17.2 % 69,932 22.3 % 57,170
Cable television 45,233 3.4 % 43,741 84.7 % 23,682
Other 152
Corporate (14,166) 5.2 % (14,938) (16.1)% (12,870)
Total operating income 190,004 9.3 % 173,790 (1.2)% 175,939
Interest expense (27,286) (34,247) (38,727)
Miscellaneous, net 92,785 72,447 189
Income taxes (108,599) (94,001) (63,654)
Minority interest (18,218) (11,670) (7,117)
Cumulative effect of accounting change (22,413)
Net income $ 128,686 53.4 % $ 83,906 25.9 % $ 66,630
Per share of common stock:
Income before cumulative effect
of accounting change $1.72 20.3 % $1.43 60.7 % $.89
Cumulative effect of accounting change (.30)
Net income $1.72 52.2 % $1.13 27.0 % $.89
Weighted average shares outstanding 74,650 0.1 % 74,602 0.1 % 74,537
Effective income tax rate 42.5 % 44.3 % 46.3 %
The following items affected the comparability of the Company's reported
results of operations:
(i) The Company divested the following operations:
1993 - Book publishing; newspapers in Tulare, California, and San Juan;
Memphis television station; radio stations.
1992 - The Pittsburgh Press; TV Data; certain other investments.
1991 - George R. Hall Company.
The businesses referred to above, and any related gains on the sales of
the businesses, 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 $ 53,600 $ 174,200 $ 276,900
Operating income (loss) 7,600 (15,100) 32,800
Net gains recognized (before minority
interests and income taxes) 91,874 77,983
Net gains recognized (after minority
interests and income taxes) 46,800 45,600
Net gains recognized per share (after minority
interests and income taxes) $ .63 $ .61
The Herald, a newspaper with a circulation of approximately 37,000 in
Monterey, California, was acquired on December 31, 1992 in connection
with the sale of The Pittsburgh Press.
(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 $2,300,000,
$.03 per share. See Note 4 to the Consolidated Financial Statements.
(iii) In 1993 the Company's agreement to guarantee up to $53,000,000 of
the Ogden, Utah, Standard Examiner's debt expired with a change in
ownership of the Standard Examiner. The Company received a $2,500,000
fee in connection with the transaction ("Ogden Fee"). The fee
increased net income $1,600,000, $.02 per share. See Note 4 to the
Consolidated Financial Statements.
(iv) In 1993 the Company realized a gain on the sale of certain
publishing equipment ("Gain on Sale"). The gain increased publishing
operating income $1,100,000 and net income $700,000, $.01 per share.
See Note 4 to the Consolidated Financial Statements.
(v) In 1993 the Company recorded a charge to restructure operations at the
Denver Rocky Mountain News and United Media ("Restructuring Charge").
The charge included severance payments and a write-down of certain
assets to estimated realizable value. The charge reduced publishing
operating income $6,300,000 and net income $3,600,000, $.05 per share.
See Note 4 to the Consolidated Financial Statements.
(vi) 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 increase net income $1,700,000, $.02 per share. See
Note 5 to the Consolidated Financial Statements.
(vii) The Pittsburgh Press was not published after May 17, 1992 due to a
strike ("Pittsburgh Strike"). Reported 1992 results include operating
losses of $32,700,000 and net losses of $20,200,000, $.27 per share,
during the strike period. See Note 4 to the Consolidated Financial
Statements. The Company sold The Pittsburgh Press on December 31, 1992
(see (i) above).
(viii) In 1992 the Company adopted Financial Accounting Standard No. 106
- Employers' Accounting for Postretirement Benefits Other Than
Pensions. The cumulative effect of the accounting change ("Cumulative
Effect") decreased net income $22,413,000, $.30 per share, of which
$18,000,000, $.24 per share, was associated with Divested Operations.
See Note 2 to the Consolidated Financial Statements.
(ix) In 1992 the Company reduced the carrying value of certain property
and investments to estimated realizable value ("Write-downs"). The
resultant $3,500,000 charge reduced net income $2,300,000, $.03 per
share. See Note 4 to the Consolidated Financial Statements.
(x) 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 $6,300,000, $.08 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 $ 1.72 52.2% $ 1.13 27.0 % $ .89
Note Ref.
(viii) Cumulative Effect .30
(i) Net gains on sales of Divested Operations ( .63) ( .61)
(ii) - (vi) 1993 unusual items ( .03)
(vii), (ix) Pittsburgh Strike and Write-downs .30
(x) Sacramento Settlement .08
Adjusted net income per share $ 1.06 (5.4)% $ 1.12 15.5 % $ .97
The Company's average debt balance in 1993 was $101,000,000 less than in
1992. The combined effects of reduced rates and lower average debt
balances were in part offset by a decrease in capitalized interest in 1993.
Interest expense decreased in 1992 as reduced rates and an increase in
capitalized interest more than offset a $37,000,000 increase in average
debt balances. Capitalized interest costs, which in 1992 and 1991
primarily related to the construction of the new production facility at the
Denver Rocky Mountain News, were as follows:
( in thousands )
1993 1992 1991
Interest costs capitalized $ 100 $ 4,500 $ 2,500
Miscellaneous includes the net gains described in (i), the Ogden Fee
described in (iii), and the Write-downs described in (ix) above.
In 1993 the Company purchased 589,000 shares of Scripps Howard Broadcasting
Company common stock, increasing the Company's ownership from 80.4% to
86.1%. The Company also acquired the remaining 2.7% minority interest in
the Knoxville News-Sentinel.
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 43%.
RESULTS OF OPERATIONS
CONSOLIDATED - Operating results, excluding the Divested Operations
(including the Pittsburgh Strike), ASCAP Adjustment, Gain on Sale,
Restructuring Charge, and Sacramento Settlement, were as follows:
( in thousands )
1993 Change 1992 Change 1991
Operating revenues:
Publishing $ 636,643 6.8 % $ 595,899 2.6 % $ 580,967
Broadcasting 254,944 3.1 % 247,225 14.2 % 216,395
Cable television 260,556 5.9 % 246,050 9.2 % 225,249
Total operating revenues $ 1,152,143 5.8 % $ 1,089,174 6.5 % $ 1,022,611
Operating income:
Publishing $ 83,147 (15.6)% $ 98,464 19.0 % $ 82,758
Broadcasting 69,071 12.1 % 61,606 24.3 % 49,568
Cable television 45,233 3.4 % 43,741 22.6 % 35,682
Corporate (14,166) 5.2 % (14,938) (16.1)% (12,870)
Total operating income $ 183,285 (3.0)% $ 188,873 21.7 % $ 155,138
Other Financial and Statistical Data:
Total advertising revenues $ 655,207 7.1 % $ 611,788 7.5 % $ 569,197
Advertising revenues as a percentage of total revenues 56.9 % 56.2 % 55.7 %
Total capital expenditures $ 103,115 (27.2)% $ 141,665 (3.4)% $ 146,634
SEGMENTS - Operating results, excluding the Divested Operations (including
the Pittsburgh Strike), ASCAP Adjustment, Gain on Sale, Restructuring
Charge, 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.
PUBLISHING - Operating results for the publishing segment, excluding the
Divested Operations (including the Pittsburgh Strike), Gain on Sale, and
Restructuring Charge, were as follows:
( in thousands, except newsprint information )
1993 Change 1992 Change 1991
Operating revenues:
Local $ 178,253 5.1 % $ 169,634 1.4 % $ 167,307
Classified 143,258 16.2 % 123,314 2.9 % 119,866
National 12,042 (0.8)% 12,138 (3.1)% 12,523
Preprint 57,639 12.8 % 51,083 11.0 % 46,035
Newspaper advertising 391,192 9.8 % 356,169 3.0 % 345,731
Circulation 112,937 9.4 % 103,238 4.6 % 98,659
Licensing 55,083 (3.6)% 57,136 (8.1)% 62,167
Joint operating agency distributions 38,647 (3.4)% 40,018 9.2 % 36,647
Other 38,784 (1.4)% 39,338 4.2 % 37,763
Total operating revenues 636,643 6.8 % 595,899 2.6 % 580,967
Operating expenses:
Employee compensation and benefits 236,167 10.6 % 213,520 5.4 % 202,577
Newsprint and ink 86,063 9.2 % 78,822 (14.3)% 91,980
Royalties 36,592 (2.0)% 37,346 0.5 % 37,161
Other 156,249 17.8 % 132,631 (2.1)% 135,489
Depreciation and amortization 38,425 9.4 % 35,116 13.3 % 31,002
Total operating expenses 553,496 11.3 % 497,435 (0.2)% 498,209
Operating income $ 83,147 (15.6)% $ 98,464 19.0 % $ 82,758
Other Financial and Statistical Data:
Earnings before interest, income taxes,
depreciation, and amortization ("EBITDA") $ 121,572 (9.0)% $ 133,580 17.4 % $ 113,760
Percent of operating revenues:
Operating income 13.1 % 16.5 % 14.2 %
EBITDA 19.1 % 22.4 % 19.6 %
Capital expenditures $ 24,942 (66.2)% $ 73,723 (28.9)% $ 103,759
Advertising inches:
Local 8,167 9.0 % 7,493 (3.7)% 7,779
Classified 11,328 21.0 % 9,362 0.6 % 9,303
National 362 7.7 % 336 (17.8)% 409
Total full run ROP 19,857 15.5 % 17,191 (1.7)% 17,491
Newsprint information:
Consumption (in tonnes) 187,971 6.4 % 176,717 3.4 % 170,981
Weighted average price per tonne $ 439 2.8 % $ 427 (18.1)% $ 522
Publishing revenues in 1993 were boosted by the fourth quarter 1992
acquisition of three California daily newspapers. See Note 3A to the
Consolidated Financial Statements.
Excluding the acquired newspapers, total advertising revenues increased
5.0% in 1993 and 3.0% in 1992. The strengthening demand for classified
advertising that began in 1992 continued throughout 1993. Excluding the
acquired newspapers, classified advertising revenues increased 11.2% and
volume increased 5.7% in 1993.
Demand for local advertising remained sluggish in 1993, particularly in the
Company's California markets, but began to improve in the fourth quarter of
the year. Local advertising revenues increased 1.9% in the fourth quarter
to finish the year up 0.3%, excluding the effects of the acquired
newspapers.
Domestic licensing revenues decreased 0.8% and foreign licensing revenues
decreased 5.3% in 1993, after decreasing 11% and 6.3% in 1992. In Japan,
which accounts for approximately 60% of foreign licensing revenue and 37%
of total licensing revenue, revenues in local currency decreased 12% in
1993 and 8.3% in 1992. The change in the exchange rate for the Japanese
yen increased licensing revenues $2,700,000 in 1993 and $1,100,000 in 1992.
Operating expenses in 1993 were affected by the inclusion of the acquired
newspapers for the full year. Excluding the acquired newspapers, employee
compensation and benefits increased approximately 4% and other expenses
increased approximately 10% in 1993. Other expenses increased primarily
because of start-up costs associated with a new production facility and new
editions at the Denver Rocky Mountain News.
Depreciation expense for 1992 and 1991 includes charges of $5,500,000 and
$4,000,000, respectively, to reduce the book value of certain equipment to
estimated net realizable value. Depreciation and amortization increased in
1993 because of the acquired newspapers and the new production facility in
Denver.
Capital expenditures were unusually high in 1992 and in 1991 due to the
construction of the new production facility in Denver. Capital
expenditures in 1994 are expected to be approximately $20,000,000.
Depreciation and amortization is expected to increase approximately 5% in
1994.
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 20,406 2.0 % 19,998 22.2 % 16,367
Total operating expenses 185,873 0.1 % 185,619 11.3 % 166,827
Operating income $ 69,071 12.1 % $ 61,606 24.3 % $ 49,568
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 27.1 % 24.9 % 22.9 %
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 $ 176,390 3.8 % $ 170,012 11.6 % $ 152,316
Premium programming services 47,566 5.0 % 45,293 0.0 % 45,280
Other monthly service 14,894 12.3 % 13,259 (4.0)% 13,807
Advertising 9,071 8.1 % 8,394 18.7 % 7,071
Installation and miscellaneous 12,635 39.0 % 9,092 34.2 % 6,775
Total operating revenues 260,556 5.9 % 246,050 9.2 % 225,249
Operating expenses:
Employee compensation and benefits 39,237 2.4 % 38,332 5.7 % 36,252
Program costs 55,548 8.4 % 51,225 11.5 % 45,938
Other 60,511 9.4 % 55,328 7.5 % 51,468
Depreciation and amortization 60,027 4.5 % 57,424 2.7 % 55,909
Total operating expenses 215,323 6.4 % 202,309 6.7 % 189,567
Operating income $ 45,233 3.4 % $ 43,741 22.6 % $ 35,682
Other Financial and Statistical Data:
Earnings before interest, income taxes,
depreciation, and amortization ("EBITDA") $ 105,260 4.0 % $ 101,165 10.5 % $ 91,591
Percent of operating revenues:
Operating income 17.4 % 17.8 % 15.8 %
EBITDA 40.4 % 41.1 % 40.7 %
Capital expenditures $ 67,019 15.0 % $ 58,299 58.2 % $ 36,847
Average number of basic subscribers 684.3 4.2 % 656.7 4.1 % 630.9
Average monthly revenue per basic subscriber $ 31.73 1.6 % $ 31.22 4.9 % $ 29.75
Homes passed at December 31 1,149.4 1.8 % 1,128.8 3.3 % 1,093.1
Basic subscribers at December 31 701.0 4.1 % 673.1 4.3 % 645.5
Penetration at December 31 61.0 % 59.6 % 59.1 %
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.
Program costs as a percent of basic and premium programming service
revenues increased from 23.2% in 1991 to 24.8% 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 Company is upgrading the distribution systems for its Knoxville,
Chattanooga, and Sacramento systems. Capital expenditures on these and
other projects are expected to be approximately $60,000,000 in 1994.
Depreciation and amortization is expected to increase approximately 3% in
1994.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities was $227,000,000 in 1993 compared to
$205,000,000 in 1992.
Cash flow from operating activities and cash received in the sales of
subsidiary companies totaled $367,000,000 in 1993 and was used primarily
for capital expenditures of $104,000,000, acquisitions (including minority
interests in subsidiary companies) and investments of $41,700,000, debt
reduction of $194,000,000, and dividend payments of $38,300,000. The debt
to total capitalization ratio at December 31 was .22 in 1993 and .38 in
1992.
Consolidated capital expenditures are expected to total approximately
$100,000,000 in 1994, including The Home & Garden Television Network ("Home
& Garden"), a 24-hour cable channel set for launch in late 1994. Scheduled
maturities of long-term debt in 1994 total $96,400,000. The Company
expects to finance its capital requirements and start-up costs for Home &
Garden primarily through cash flow from operations.
EFFECTS OF PRICE CHANGES
General inflation has not been detrimental to the Company's long-term
operating results. However, year-to-year comparisons can be significantly
affected by newsprint price changes. Because the supply of newsprint has
exceeded demand, its price generally declined from 1988 through August
1992. The price of newsprint has moved in a narrow band since that time,
but has trended higher. The price of newsprint peaked in 1988 when it was
approximately 25% higher than the current price.
PROPOSED MERGER
On February 17, 1994 the Company announced it had offered to acquire the
13.9% of Scripps Howard Broadcasting Company ("SHB") that it does not
already own. In a merger proposal made to the SHB board of directors, the
Company offered to exchange three shares of Class A Common stock for each
SHB share. Directors of SHB 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 SHB shareholders.
If the merger is effected under the terms proposed by the Company, an
additional 4,300,000 shares of Class A Common stock would be issued. 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,
The E.W. Scripps Company:
We have audited the accompanying consolidated balance sheets of The E.W.
Scripps Company and subsidiary companies (Company) as of December 31, 1993
and 1992, and the related consolidated statements of income, stockholders'
equity, and 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.
As discussed in Note 2 to the consolidated financial statements, as of
December 31, 1993 the Company changed its method of accounting for certain
investments to conform with Statement of Financial Accounting Standards No.
115.
As discussed in Note 2 to the consolidated financial statements, in 1992
the Company changed its method of accounting for postretirement benefits
other than pensions to conform with Statement of Financial Accounting
Standards No. 106.
DELOITTE & TOUCHE
Cincinnati, Ohio
January 26, 1994
CONSOLIDATED BALANCE SHEETS
( in thousands )
As of December 31,
1993 1992
ASSETS
Current Assets:
Cash and cash equivalents $ 18,606 $ 18,976
Accounts and notes receivable (less allowances - 1993, $6,995; 1992, $12,325) 150,671 154,609
Program rights 42,388 46,436
Inventories 23,748 34,475
Deferred income taxes 18,097 10,638
Miscellaneous 19,485 22,798
Total current assets 272,995 287,932
Investments 73,287 28,223
Property, Plant, and Equipment 712,726 719,097
Goodwill and Other Intangible Assets 552,989 602,567
Other Assets:
Program rights (less current portion) 43,257 45,996
Miscellaneous 21,228 16,940
Total other assets 64,485 62,936
TOTAL ASSETS $ 1,676,482 $ 1,700,755
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
( in thousands, except share data )
As of December 31,
1993 1992
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 96,383 $ 66,152
Accounts payable 79,334 98,664
Customer deposits and unearned revenue 17,480 13,223
Accrued liabilities:
Employee compensation and benefits 31,599 29,169
Copyright and programming costs 6,986 12,738
Artist and author royalties 10,985 11,522
Interest 2,834 8,560
Income taxes 7,763 2,996
Miscellaneous 34,959 26,306
Total current liabilities 288,323 269,330
Deferred Income Taxes 175,308 110,201
Long-Term Debt (less current portion) 151,535 375,705
Other Long-Term Obligations and Minority Interests 201,681 212,415
Stockholders' Equity:
Preferred stock, $.01 par - authorized: 25,000,000 shares; none outstanding
Common stock, $.01 par:
Class A - authorized: 120,000,000 shares; issued and
outstanding: 1993 - 54,586,495 shares; 1992 - 54,442,061 shares 546 544
Voting - authorized: 30,000,000 shares; issued and
outstanding: 1993 and 1992 - 20,174,833 shares 202 202
Total 748 746
Additional paid-in capital 97,945 94,366
Retained earnings 733,978 638,139
Unrealized gains on securities available for sale 27,381
Unvested restricted stock awards (1,009) (516)
Foreign currency translation adjustment 592 369
Total stockholders' equity 859,635 733,104
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,676,482 $ 1,700,755
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
( in thousands, except per share data )
Years ended December 31,
1993 1992 1991
Operating Revenues:
Advertising $ 401,247 $ 432,799 $ 496,535
Circulation 116,413 123,375 145,730
Other publishing 143,261 183,894 184,789
Total publishing 660,921 740,068 827,054
Broadcasting 284,294 277,287 245,450
Cable television 260,556 246,050 225,249
Other 1,804
Total operating revenues 1,205,771 1,263,405 1,299,557
Operating Expenses:
Employee compensation and benefits 375,846 417,090 427,970
Broadcast and cable television programming costs 111,286 111,645 103,262
Newsprint and ink 89,062 90,044 122,027
Settlement of Sacramento cable television litigation 12,000
Other operating expenses 318,695 348,907 346,234
Depreciation 88,745 88,330 81,311
Amortization of intangible assets 32,133 33,599 30,814
Total operating expenses 1,015,767 1,089,615 1,123,618
Operating Income 190,004 173,790 175,939
Other Credits (Charges):
Interest expense (27,286) (34,247) (38,727)
Net gains on sales of subsidiary companies 91,874 77,983
Miscellaneous, net 911 (5,536) 189
Net other credits (charges) 65,499 38,200 (38,538)
Income Before Income Taxes, Minority Interests,
and Cumulative Effect of Accounting Change 255,503 211,990 137,401
Provision for Income Taxes 108,599 94,001 63,654
Income Before Minority Interests and
Cumulative Effect of Accounting Change 146,904 117,989 73,747
Minority Interests 18,218 11,670 7,117
Income Before Cumulative Effect of Accounting Change 128,686 106,319 66,630
Cumulative Effect of Accounting Change
(net of deferred income tax of $15,533) (22,413)
Net Income $ 128,686 $ 83,906 $ 66,630
Per Share of Common Stock:
Income before cumulative effect of accounting change $1.72 $1.43 $.89
Cumulative effect of accounting change (.30)
Net income $1.72 $1.13 $.89
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 $ 128,686 $ 83,906 $ 66,630
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation 88,745 88,330 81,311
Amortization of intangible assets 32,133 33,599 30,814
Deferred income taxes 37,308 16,873 7,832
Minority interests in income of subsidiary companies 18,218 11,670 7,117
Net gains on sales of subsidiary companies (91,874) (77,983)
Cumulative effect of an accounting change 22,413
Portion of Knoxville JOA termination costs paid in 1991 (17,225)
Changes in certain working capital accounts, net of effects
from subsidiary companies purchased and sold 4,406 6,210 22,285
Miscellaneous, net 9,224 19,772 11,787
Net operating activities 226,846 204,790 210,551
Cash Flows From Investing Activities:
Additions to property, plant, and equipment (103,864) (145,218) (151,029)
Purchase of subsidiary companies, net of cash acquired (32,024) (12,510) (131,053)
Investments in securities and unconsolidated affiliates (9,686) (6,607) (4,092)
Sales of subsidiary companies 140,509 36,919 1,269
Miscellaneous, net 9,690 1,295 1,394
Net investing activities 4,625 (126,121) (283,511)
Cash Flows From Financing Activities:
Increases in long-term debt 50,500 273,970
Payments on long-term debt (194,086) (100,602) (149,747)
Dividends paid (32,847) (29,841) (29,814)
Dividends paid to minority interests (5,483) (6,160) (5,469)
Miscellaneous, net 575 (690) (456)
Net financing activities (231,841) (86,793) 88,484
Increase (Decrease) in Cash and Cash Equivalents (370) (8,124) 15,524
Cash and Cash Equivalents:
Beginning of year 18,976 27,100 11,576
End of year $ 18,606 $ 18,976 $ 27,100
Supplemental Cash Flow Disclosures:
Interest paid, excluding amounts capitalized $ 33,012 $ 36,129 $ 41,364
Income taxes paid 68,008 60,409 53,169
Increase in program rights and related liabilities 51,614 48,251 42,862
Received in the sale of The Pittsburgh Press:
Net tangible assets of The Monterey County Herald 20,375
Pittsburgh Post-Gazette preferred stock 14,000
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
( in thousands, except share data )
Unrealized
Gains on Unvested Foreign
Additional Securities Restricted Currency
Common Paid-in Retained Available Stock Translation
Stock Capital Earnings for Sale Awards Adjustment
As of December 31, 1990 $ 745 $ 92,148 $ 547,258 $ (1,398) $ 219
Net income 66,630
Dividends: declared and paid - $.40 per share (29,814)
Shares issued pursuant to compensation plans:
15,550 shares of Class A Common,
net of forfeitures of 4,000 shares 1 203 (204)
Amortization of restricted stock awards 751
Foreign currency translation adjustment 55
As of December 31, 1991 746 92,351 584,074 (851) 274
Net income 83,906
Dividends: declared and paid - $.40 per share (29,841)
Shares issued pursuant to compensation plans:
86,164 shares of Class A Common,
net of forfeitures of 3,500 shares 2,015 (373)
Amortization of restricted stock awards 708
Foreign currency translation adjustment 95
As of December 31, 1992 746 94,366 638,139 (516) 369
Net income 128,686
Dividends: declared and paid - $.44 per share (32,847)
Shares issued pursuant to compensation plans:
165,775 shares of Class A Common,
net of 4,270 shares forfeited and 17,071 shares
repurchased by the Company 2 3,054 (817)
Tax benefits on compensation plans 525
Amortization of restricted stock awards 324
Foreign currency translation adjustment 223
As of December 31, 1993 748 97,945 733,978 (1,009) 592
Adoption of FAS No. 115, net of
deferred income tax of $14,744 $ 27,381
Adjusted balances as of December 31, 1993 $ 748 $ 97,945 $ 733,978 $ 27,381 $ (1,009) $ 592
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 The E.W. Scripps Company and its majority-owned subsidiary companies
("Company").
Newspaper Joint Operating Agencies - The Company is currently a party to
newspaper joint operating agencies ("JOAs") in five markets. JOAs combine
all but the editorial operations of two competing newspapers in a market.
In each JOA the managing party distributes a portion of JOA profits to the
other party. The Company manages the JOA in Evansville. The JOAs in
Albuquerque, Birmingham, Cincinnati, and El Paso are managed by the other
parties to the JOAs. The Company managed the JOA in Pittsburgh prior to
the sale of The Pittsburgh Press (see Note 3B).
The Company includes the full amount of Company-managed JOA assets and
liabilities, and revenues earned and expenses incurred in the operation of
the JOA, in the consolidated financial statements. Distributions of JOA
operating profits to the non-managing party are included in other operating
expenses in the Consolidated Statements of Income.
For JOAs managed by the other party, the Company includes distributions of
JOA operating profits in operating revenues in the Consolidated Statements
of Income. The Company does not include any assets or liabilities of JOAs
managed by other parties in its Consolidated Balance Sheets as the Company
has no residual interest in the net assets of the JOAs.
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 ($6,600,000) 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.
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. The current portion of the liability
is included in accounts payable in the Consolidated Balance Sheets.
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
Investments - The Company adopted Financial Accounting Standard ("FAS") No.
115 - Accounting for Certain Investments in Debt and Equity Securities
effective December 31, 1993 (see Note 2). Investments in such securities
are classified as either held to maturity, trading, or available for sale.
Securities classified as held to maturity are carried at amortized cost.
Securities classified as trading and available for sale are carried at fair
value. Fair value is determined by reference to quoted market prices for
those or similar securities. Unrealized gains or losses on securities
classified as trading are recognized in income and unrealized gains or
losses on securities available for sale are recognized as a separate
component of stockholders' equity. The cost of securities sold is
determined by specific identification.
Investments in 20%- to 50%-owned companies and joint ventures are accounted
for under the equity method.
Inventories - Inventories are stated at the lower of cost or market. The
cost of newsprint included in inventory is computed using the last in,
first out ("LIFO") method. At December 31 newsprint inventories were
approximately 25% of total inventories in 1993 and in 1992. The cost of
other inventories is computed using the first in, first out ("FIFO")
method. Inventories would have been $200,000 higher at December 31, 1993
and 1992 if FIFO (which approximates current cost) had been used to compute
the cost of newsprint.
Postemployment Benefits - The Company adopted FAS No. 112 - Employers'
Accounting for Postemployment Benefits in 1993 (see Note 2).
Postretirement benefits are recognized during the years that employees
render service. Other postemployment benefits, such as disability-related
benefits and severance, are recognized when the benefits become payable.
Self Insurance - The Company is primarily self-insured for employee health,
workers' compensation, and general liability insurance. Self-insurance
liabilities are estimated based upon claims filed and estimated claims
incurred but not reported. The self-insurance liabilities are not
discounted. Amounts estimated to be paid within one year are included in
accrued liabilities in the Consolidated Balance Sheets.
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. Common stock equivalents in
the form of stock options are excluded from the computations as they have
no material effect on the per share amounts. Weighted average shares
outstanding were as follows:
( in thousands )
1993 1992 1991
Weighted average shares outstanding 74,650 74,602 74,537
Reclassifications - For comparison purposes certain 1992 and 1991 items
have been reclassified to conform with 1993 classifications.
2. ACCOUNTING CHANGES
The Company adopted FAS No. 115 - Accounting for Certain Investments in
Debt and Equity Securities on December 31, 1993. As a result of the
change, total assets increased $42,125,000 and stockholders' equity
increased $27,381,000. Adoption of the new standard had no effect on
retained earnings. The Company also adopted FAS No. 112 - Employers'
Accounting for Postemployment Benefits in 1993. The change had no effect
on the Company's financial statements.
In 1992 the Company adopted FAS No. 106 - Employers' Accounting for
Postretirement Benefits Other Than Pensions. As a result of the change,
operating income decreased $2,100,000 and income before the cumulative
effect decreased $1,400,000, $.02 per share. The Pittsburgh Press
accounted for $1,800,000 of the decrease in operating income and
$1,200,000, $.02 per share, of the decrease in income before the cumulative
effect (see Note 3B).
3. ACQUISITIONS AND DIVESTITURES
A. Acquisitions
1993 - The Company purchased 589,000 shares of Scripps Howard
Broadcasting Company common stock for $28,900,000, increasing the
Company's ownership percentage from 80.4% to 86.1%. The Company also
acquired the remaining 2.7% minority interest in the Knoxville News-
Sentinel for $2,800,000 and purchased a cable television system.
1992 - The Company purchased three daily newspapers in California
(including The Herald in connection with the sale of The Pittsburgh
Press - see Note 3B) and 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 $ 19,647 $ 8,001 $ 101,873
Other assets acquired 90 9,167 57,828
Reduction in minority interests 12,287
Previous interest in acquired newspaper (3,936)
Liabilities assumed and notes issued (722) (28,648)
Cash paid 32,024 12,510 131,053
Net assets of The Herald:
Tangible assets 21,602
Liabilities assumed (1,227)
Total acquisitions $ 32,024 $ 32,885 $ 131,053
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 $ 1,313,200
Operating income 173,500
Net income 63,800
Net income per share $ .86
Pro forma results are not presented for the California newspaper, cable
television, and minority interest acquisitions because the combined
results of operations would not be significantly different from the
reported amounts.
B. Divestitures
The Company divested the following operations:
1993 - Book publishing; newspapers in Tulare, California, and San Juan;
Memphis television station; radio stations.
1992 - The Pittsburgh Press; TV Data; certain other investments.
1991 - George R. Hall Company.
The following table presents additional information about the
divestitures:
( in thousands, except per share data )
1993 1992 1991
Cash received $ 140,509 $ 36,919 $ 1,269
Notes and preferred stock 14,150 826
Net assets of The Herald:
Tangible assets 21,602
Liabilities assumed (1,227)
Total proceeds 140,509 71,444 2,095
Net assets (liabilities) disposed 48,635 (6,539) 2,095
Net gains recognized (before minority
interests and income taxes) $ 91,874 $ 77,983
Net gains recognized (after minority
interests and income taxes) $ 46,800 $ 45,600
Net gains recognized per share (after minority
interests and income taxes) $ .63 $ .61 $ .00
Included in net assets (liabilities) disposed in 1992 are pension and
other postretirement benefit obligations totaling $36,500,000.
Included in the consolidated financial statements are the following
results of divested operations (excluding gains on sales):
( in thousands )
1993 1992 1991
Operating revenues $ 53,600 $ 174,200 $ 276,900
Operating income (loss) 7,600 (15,100) 32,800
4. UNUSUAL CREDITS AND CHARGES
The Company's operating results include net after-tax gains on the sales of
subsidiary companies of $46,800,000, $.63 per share, in 1993 and
$45,600,000, $.61 per share, in 1992 (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 $2,300,000, $.03 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.
The Company's agreement to guarantee up to $53,000,000 of the Ogden, Utah,
Standard Examiner's debt expired with a change in ownership of the Standard
Examiner. The Company received a $2,500,000 fee in connection with the
transaction. The fee increased net income $1,600,000, $.02 per share.
The Company realized a gain of $1,100,000 on the sale of certain publishing
equipment. The gain increased net income $700,000, $.01 per share.
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
increase net income $1,700,000, $.02 per share (see Note 5).
The Company recorded a $6,300,000 charge to restructure operations at the
Denver Rocky Mountain News and United Media. The charge included severance
payments and a write-down of certain assets to estimated realizable value.
The charge reduced net income $3,600,000, $.05 per share.
1992 - The Pittsburgh Press was not published after May 17 due to a strike.
Reported 1992 results include operating losses of $32,700,000 and net
losses of $20,200,000, $.27 per share, during the strike period.
The Company reduced the carrying value of certain property and investments
to estimated realizable value. The resultant $3,500,000 charge reduced net
income $2,300,000, $.03 per share.
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 $6,300,000, $.08 per share.
5. INCOME TAXES
The Internal Revenue Service ("IRS") is currently examining the Company's
consolidated income tax returns 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 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 $3,700,000. The resultant charge to
income taxes reduced net income $3,700,000, $.05 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 $5,400,000, $.07 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 $ 161,830 $ 133,666
Deferred gain on sale of Memphis television and radio stations 23,126
Investments 12,900 (1,423)
Accrued expenses not deductible until paid (20,625) (15,400)
Deferred compensation and retiree benefits (10,380) (9,784)
Other temporary differences, net (260) 1,020
Total 166,591 108,079
State net operating loss carryforwards (14,774) (13,468)
Foreign tax credits and other carryforwards (1,371) (874)
Valuation allowance for state deferred tax assets and foreign tax credits 6,765 5,826
Net deferred tax liability $ 157,211 $ 99,563
The Company's state net operating loss carryforwards expire from 2000
through 2018.
The provision for income taxes consists of the following:
( in thousands )
1993 1992 1991
Current:
Federal $ 57,144 $ 63,817 $ 41,261
State and local 9,877 9,294 10,327
Foreign 3,745 4,017 4,234
Total current 70,766 77,128 55,822
Deferred:
Federal 47,672 13,384 7,518
Other 4,380 3,489 314
Total deferred 52,052 16,873 7,832
Total income taxes 122,818 94,001 63,654
Income taxes allocated to stockholders' equity (14,219)
Provision for income taxes $ 108,599 $ 94,001 $ 63,654
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 3.6 4.0 4.1
Amortization of goodwill 1.4 4.3 5.5
Increase in tax rate to 35% on deferred tax liabilities 1.4
Change in estimated tax basis and lives of certain assets (1.5)
Difference between foreign and U.S. tax rates,
including foreign tax credits 0.3 0.7 0.4
Miscellaneous 2.3 1.3 2.3
Effective income tax rate 42.5 % 44.3 % 46.3 %
6. LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
( in thousands )
1993 1992
Variable Rate Credit Facilities $ 88,000 $ 190,500
7.375% notes, due in 1998 99,264 99,117
9.0% notes, due in 1996 50,000 50,000
8.5% notes, payable through 1994 8,334 36,667
10.3% note 62,500
Other notes 2,320 3,073
Total long-term debt 247,918 441,857
Current portion of long-term debt 96,383 66,152
Long-term debt (less current portion) $ 151,535 $ 375,705
Fair value of long-term debt * $ 260,900 $ 451,300
Weighted average interest rate on Variable Rate
Credit Facilities at balance sheet date 3.4% 4.0%
* Fair value is estimated based on current rates available to the Company for
debt of the same remaining maturity.
The Company has a Competitive Advance/Revolving Credit Agreement which, at
December 31, 1993, permitted maximum borrowings up to $165,000,000, and
additional lines of credit which, at December 31, 1993, totaled $60,000,000
(collectively "Variable Rate Credit Facilities"). Maximum borrowings under
the Variable Rate Credit Facilities are changed as the Company's
anticipated needs change and are not indicative of the Company's short-term
borrowing capacity. The Variable Rate Credit Facilities expire at various
dates through September 1994 and may be extended upon mutual agreement.
In 1993 the Company prepaid the scheduled 1994 payment on the 10.3% note.
Certain long-term debt agreements contain maintenance requirements on net
worth and coverage of interest expense and restrictions on dividends and
incurrence of additional indebtedness.
Interest costs capitalized were as follows:
( in thousands )
1993 1992 1991
Capitalized interest costs $ 100 $ 4,500 $ 2,500
7. INVESTMENTS
Investments consisted of the following at December 31:
( in thousands, except share data )
1993 1992
Securities available for sale: *
Pittsburgh Post-Gazette preferred stock,
$25 million face value, 8% cumulative dividend $ 14,000 $ 14,000
Turner Broadcasting Class B common stock (589,165 shares) 15,907 7,985
Turner Broadcasting Class C preferred stock
(convertible into 1,309,092 shares of Class B common stock) 35,345 3,285
Other 4,043 579
Total securities available for sale 69,295 25,849
Investments accounted for under the equity method 3,992 2,374
Total investments $ 73,287 $ 28,223
Unrealized gains on securities available for sale $ 42,125 $ 29,688
* Effective December 31, 1993 the Company adopted FAS No. 115 (see Note 2).
Investments classified as available for sale are carried at market
value at December 31, 1993. At December 31, 1992 such securities were
carried at the lower of cost or market. There were no unrealized losses
in either year.
8. 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 $ 45,199 $ 48,265
Buildings and improvements 184,708 189,419
Equipment 972,674 971,490
Total 1,202,581 1,209,174
Accumulated depreciation 489,855 490,077
Net property, plant, and equipment $ 712,726 $ 719,097
Goodwill and other intangible assets consisted of the following at
December 31:
( in thousands )
1993 1992
Goodwill $ 387,868 $ 404,742
Cable television franchise costs 167,378 167,356
Customer lists 133,427 133,397
Licenses and copyrights 28,221 28,263
Non-competition agreements 32,089 34,211
Other 31,870 38,858
Total 780,853 806,827
Accumulated amortization 227,864 204,260
Net goodwill and other intangible assets $ 552,989 $ 602,567
9. EMPLOYEE BENEFIT PLANS
The Company sponsors defined benefit plans covering substantially all non-
union 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 non-union employees. The Company matches a portion of employees'
voluntary contributions to these plans.
Union-represented employees are covered by retirement plans jointly
administered by subsidiaries of the Company and the unions or by union-
administered, multi-employer plans. Funding is based upon negotiated
agreements.
Retirement plans expense consisted of the following:
( in thousands )
1993 1992 1991
Service cost $ 8,434 $ 8,282 $ 7,200
Interest cost 13,395 14,266 14,132
Actual return on plan assets (13,420) (13,374) (36,727)
Net amortization and deferral (2,662) (4,780) 18,911
Defined benefit plans 5,747 4,394 3,516
Multi-employer plans 1,044 1,664 2,694
Defined contribution plans 3,943 4,100 3,913
Total 10,734 10,158 10,123
Curtailment losses (gains) included in gain
on the sales of subsidiary companies 253 (3,632)
Total retirement plans expense $ 10,987 $ 6,526 $ 10,123
Assumptions used in the accounting for the defined benefit 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 plans at December 31 was
as follows:
( in thousands )
1993 1992
Actuarial present value of vested benefits $ (136,719) $ (132,491)
Actuarial present value of accumulated benefits $ (146,178) $ (140,642)
Actuarial present value of projected benefits $ (180,843) $ (170,539)
Plan assets at fair value 172,688 177,786
Plan assets in excess of (less than) projected benefits (8,155) 7,247
Unrecognized net loss (gain) 11,025 1,714
Unrecognized prior service cost 9,836 9,222
Unrecognized net asset at the date FAS No. 87 was
adopted, net of amortization (12,116) (13,503)
Net pension asset recognized in the balance sheet $ 590 $ 4,680
Plan assets consist of marketable equity and fixed-income
securities.
The Company has unfunded health and life insurance benefit plans that are
provided to certain retired employees. The combined number of 1) active
employees eligible for such benefits and 2) retired employees receiving
such benefits is approximately 5% of the Company's current workforce. The
actuarial present value of the projected benefit obligation at December 31
was $6,300,000 in 1993 and $6,100,000 in 1992. The cost of the plan was
$600,000 in 1993 and in 1992 (excluding $3,200,000 attributable to The
Pittsburgh Press in 1992).
10. SEGMENT INFORMATION
The net effect of the gain on sale of equipment and the restructuring
charges reduced publishing operating income $5,200,000 in 1993 (see Note
4). The change in accounting for health and life insurance benefits
provided to certain retired employees reduced publishing operating income
in 1992 by $2,100,000 (of which $1,800,000 relates to The Pittsburgh Press)
(see Note 2).
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).
Other segment amounts represent the operating results of George R. Hall
Company, which was sold by the Company in March 1991 (see Note 3B).
Financial information relating to the Company's business segments is as
follows:
( in thousands )
1993 1992 1991
OPERATING REVENUES
Publishing $ 660,921 $ 740,068 $ 827,054
Broadcasting 284,294 277,287 245,450
Cable television 260,556 246,050 225,249
Other 1,804
Total operating revenues $ 1,205,771 $ 1,263,405 $ 1,299,557
OPERATING INCOME
Publishing $ 76,979 $ 75,055 $ 107,805
Broadcasting 81,958 69,932 57,170
Cable television 45,233 43,741 23,682
Other 152
Corporate (14,166) (14,938) (12,870)
Total operating income $ 190,004 $ 173,790 $ 175,939
DEPRECIATION
Publishing $ 30,987 $ 33,437 $ 29,461
Broadcasting 9,470 9,174 8,237
Cable television 47,656 44,025 42,566
Other 21
Corporate 632 1,694 1,026
Total depreciation $ 88,745 $ 88,330 $ 81,311
AMORTIZATION OF INTANGIBLE ASSETS
Publishing $ 7,550 $ 8,058 $ 7,990
Broadcasting 12,212 12,142 9,478
Cable television 12,371 13,399 13,343
Other 3
Total amortization of intangible assets $ 32,133 $ 33,599 $ 30,814
ASSETS
Publishing $ 692,015 $ 758,037 $ 725,704
Broadcasting 465,622 492,373 520,284
Cable television 425,168 414,518 413,734
Corporate 93,677 35,827 51,713
Total assets $ 1,676,482 $ 1,700,755 $ 1,711,435
CAPITAL EXPENDITURES
Publishing $ 25,192 $ 76,095 $ 107,244
Broadcasting 9,733 8,129 6,439
Cable television 67,019 58,299 36,847
Corporate 1,920 2,695 499
Total capital expenditures $ 103,864 $ 145,218 $ 151,029
Corporate assets are primarily cash, investments, and deferred income taxes.
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 as
follows:
( in thousands )
1994 $ 7,500
1995 4,000
1996 2,100
1997 1,900
1998 1,900
Later years 12,800
Total $ 30,200
Rental expense for cancelable and non-cancelable leases was as follows:
( in thousands )
1993 1992 1991
Rental expense, net of sublease income $ 14,000 $ 15,800 $ 14,600
12. CAPITAL STOCK AND INCENTIVE PLANS
The capital structure of the Company includes Common Voting stock and Class
A Common stock. The articles of the Company provide that the holders of
Class A Common stock, who are not entitled to vote on any other matters
except as required by Delaware law, are entitled to elect the greater of
three or one-third of the directors of the Company.
The 1987 Long-Term Incentive Plan ("1987 Plan") provides for the awarding
of stock options, stock appreciation rights, performance units, and Class A
Common stock to key employees. The number of shares authorized for
issuance under the 1987 Plan is 2,500,000.
Stock options may be awarded to purchase Class A Common stock at not less
than 100% of the fair market value on the date the option is granted.
Stock options will vest over an incentive period, conditioned upon the
individual's employment through that period. The plan expires on December
9, 1997, except for options then outstanding.
Information related to stock options is as follows:
Number Price
of Shares per Share
Outstanding at December 31, 1990 240,900 $ 16 - 24
Granted in 1991 809,400 18 - 20
Forfeited in 1991 (23,000) 18 - 24
Outstanding at December 31, 1991 1,027,300 16 - 24
Granted in 1992 282,300 24 - 27
Exercised in 1992 (4,050) 18
Forfeited in 1992 (59,000) 20 - 27
Outstanding at December 31, 1992 1,246,550 16 - 27
Granted in 1993 667,500 24 - 34
Exercised in 1993 (133,775) 16 - 24
Forfeited in 1993 (40,775) 18 - 27
Outstanding at December 31, 1993 1,739,500 $ 16 - 34
Exercisable at December 31, 1993 897,200 $ 16 - 27
Awards of Class A Common stock will vest over an incentive period,
conditioned upon the individual's employment throughout that period.
During the vesting period shares issued are non-transferable, but the
shares are entitled to all the rights of an outstanding share. Upon
vesting, when the stock awards become taxable to the employees, additional
awards of cash may also be made.
Information related to awards of Class A Common stock is as follows:
( in thousands, except share data )
1993 1992 1991
Shares of Class A Common stock:
Awarded 32,000 16,750 15,550
Forfeited 4,270 3,500 4,000
Compensation expense recognized $ 300 $ 700 $ 800
13. 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:
Publishing $ 158,617 $ 165,873 $ 162,378 $ 174,053 $ 660,921
Broadcasting 61,845 77,401 67,178 77,870 284,294
Cable television 65,286 66,056 64,810 64,404 260,556
Total operating revenues 285,748 309,330 294,366 316,327 1,205,771
Operating expenses:
Employee compensation and benefits 92,337 94,493 93,461 95,555 375,846
Broadcast and cable television program costs 26,136 28,983 28,892 27,275 111,286
Newsprint and ink 21,218 23,386 22,176 22,282 89,062
Other operating expenses 70,910 79,942 81,257 86,586 318,695
Depreciation and amortization 29,626 30,047 30,572 30,633 120,878
Total operating expenses 240,227 256,851 256,358 262,331 1,015,767
Operating income 45,521 52,479 38,008 53,996 190,004
Interest expense (7,911) (7,148) (6,119) (6,108) (27,286)
Miscellaneous, net 23,961 613 (3,035) 71,246 92,785
Income taxes (26,768) (21,166) (12,055) (48,610) (108,599)
Minority interests (2,205) (2,691) (2,732) (10,590) (18,218)
Net income $ 32,598 $ 22,087 $ 14,067 $ 59,934 $ 128,686
Net income per share of common stock $ .44 $ .30 $ .19 $ .80 $1.72
Cash dividends per share of common stock $ .11 $ .11 $ .11 $ .11 $ .44
( in thousands, except per share data )
1st 2nd 3rd 4th
1992 Quarter Quarter Quarter Quarter Total
Operating revenues:
Publishing $ 195,703 $ 191,282 $ 166,290 $ 186,793 $ 740,068
Broadcasting 58,737 74,264 67,061 77,225 277,287
Cable television 59,148 60,935 61,785 64,182 246,050
Total operating revenues 313,588 326,481 295,136 328,200 1,263,405
Operating expenses:
Employee compensation and benefits 111,618 106,636 98,191 100,645 417,090
Broadcast and cable television program costs 26,917 29,323 28,641 26,764 111,645
Newsprint and ink 26,093 22,688 19,656 21,607 90,044
Other operating expenses 81,587 84,355 87,838 95,127 348,907
Depreciation and amortization 28,567 29,494 29,433 34,435 121,929
Total operating expenses 274,782 272,496 263,759 278,578 1,089,615
Operating income 38,806 53,985 31,377 49,622 173,790
Interest expense (8,212) (7,534) (9,441) (9,060) (34,247)
Miscellaneous, net (190) (1,186) 188 73,635 72,447
Income taxes (14,054) (19,923) (10,227) (49,797) (94,001)
Minority interests (1,653) (3,089) (2,813) (4,115) (11,670)
Income before cumulative effect 14,697 22,253 9,084 60,285 106,319
Cumulative effect (22,413) (22,413)
Net income (loss) $ (7,716) $ 22,253 $ 9,084 $ 60,285 $ 83,906
Per share of common stock:
Income before cumulative effect $ .20 $ .30 $ .12 $ .81 $1.43
Cumulative effect ( .30) ( .30)
Net income (loss) $ ( .10) $ .30 $ .12 $ .81 $1.13
Cash dividends per share of common stock $ .10 $ .10 $ .10 $ .10 $ .40
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.
THE E.W. SCRIPPS COMPANY
Index to Consolidated Financial Statement Schedules
Marketable Securities - Other Investments 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
MARKETABLE SECURITIES - OTHER INVESTMENTS SCHEDULE I
FOR THE YEAR ENDED DECEMBER 31, 1993
(in thousands, except share data)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Market Value Carrying
Of Each Issue Value in
Name of Issuer and Number of Shares or Cost of At December 31, Balance
Title of Each Issue Face Amount of Security Each Issue 1993 Sheet
Securities Available for Sale
Turner Broadcasting Company 218,182 shares (convertible
Class C preferred stock into 1,309,092 shares of
Class B common stock) $ 3,285 $ 35,345 $ 35,345
Turner Broadcasting Company
Class B common stock 589,165 shares 7,985 15,907 15,907
Pittsburgh Post-Gazette $25 million face value,
preferred stock 8% cumulative dividend 14,000 14,000 14,000
Other 1,900 4,043 4,043
Total securities available for sale (1) 27,170 69,295 69,295
Investments accounted for under the equity method (2) 3,992 3,992 3,992
Total Investments $ 31,162 $ 73,287 $ 73,287
(1) Effective December 31, 1993 the Company adopted FAS No. 115. See Note 2 to the Consolidated Financial Statements.
Investments classified as available for sale are carried at market value at December 31, 1993. At December 31, 1992
such securities were carried at the lower of cost or market. There were no unrealized losses in either 1993 or 1992.
(2) Market values could not be reasonably estimated for investments accounted for under the equity method. Amount
reported in Column D represents carrying value.
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 $ 48,265 $ 449 $ 1,848 $ (1,667) $ 45,199
Buildings and improvements 189,419 6,327 3,399 (7,639) 184,708
Equipment 971,490 97,088 78,149 (17,755) 972,674
TOTAL $ 1,209,174 $ 103,864 $ 83,396 $ (27,061) $ 1,202,581
YEAR ENDED DECEMBER 31, 1992:
Land and improvements $ 43,898 $ 2,812 $ 49 $ 1,604 $ 48,265
Buildings and improvements 188,867 9,553 283 (8,718) 189,419
Equipment 885,993 132,853 15,492 (31,864) 971,490
TOTAL $ 1,118,758 $ 145,218 $ 15,824 $ (38,978) $ 1,209,174
YEAR ENDED DECEMBER 31, 1991:
Land and improvements $ 41,238 $ 739 $ 140 $ 2,061 $ 43,898
Buildings and improvements 158,420 25,020 254 5,681 188,867
Equipment 772,632 125,270 24,248 12,339 885,993
TOTAL $ 972,290 $ 151,029 $ 24,642 $ 20,081 $ 1,118,758
1) Other changes include the following acquisitions and divestitures:
1993: Purchase of cable television system. Divestiture of the Company's San Juan
and Tulare, California, newspapers, its book publishing operations,
its Memphis television station, and its radio stations.
1992: Purchase of daily newspapers in California and several cable television systems.
Divestiture of the Company's Pittsburgh newspaper and its television listings
operations.
1991: Purchase of Baltimore television station and several cable television systems.
Divestiture of George R. Hall Company.
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 $ 1,842 $ 277 $ 20 $ (207) $ 1,892
Buildings and improvements 51,287 6,486 2,789 (3,921) 51,063
Equipment 436,948 81,982 69,101 (12,929) 436,900
TOTAL $ 490,077 $ 88,745 $ 71,910 $ (17,057) $ 489,855
YEAR ENDED DECEMBER 31, 1992:
Land and improvements $ 1,654 $ 240 $ (52) $ 1,842
Buildings and improvements 55,999 6,542 $ 177 (11,077) 51,287
Equipment 406,577 81,548 14,771 (36,406) 436,948
TOTAL $ 464,230 $ 88,330 $ 14,948 $ (47,535) $ 490,077
YEAR ENDED DECEMBER 31, 1991:
Land and improvements $ 1,468 $ 253 $ 67 $ 1,654
Buildings and improvements 50,422 5,593 16 55,999
Equipment 355,098 75,465 23,468 $ (518) 406,577
TOTAL $ 406,988 $ 81,311 $ 23,551 $ (518) $ 464,230
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 include the following divestitures:
1993: Divestiture of the Company's San Juan and Tulare, California, newspapers,
its book publishing operations, its Memphis television station, and
its radio stations.
1992: Divestiture of the Company's Pittsburgh newspaper and its
television listings operations.
1991: Divestiture of George R. Hall Company.
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 $ 6,177 $ 9,080 $ 8,414 $ (527) $ 6,316
Allowance for sales returns 6,148 1,262 876 (5,855) 679
Total receivable allowances $ 12,325 $ 10,342 $ 9,290 $ (6,382) $ 6,995
YEAR ENDED DECEMBER 31, 1992:
Allowance for doubtful
accounts receivable $ 5,990 $ 10,637 $ 10,783 $ 333 $ 6,177
Allowance for sales returns 4,631 5,833 4,316 6,148
Total receivable allowances $ 10,621 $ 16,470 $ 15,099 $ 333 $ 12,325
YEAR ENDED DECEMBER 31, 1991:
Allowance for doubtful
accounts receivable $ 5,288 $ 10,792 $ 10,577 $ 487 $ 5,990
Allowance for sales returns 3,524 6,026 4,919 4,631
Total receivable allowances $ 8,812 $ 16,818 $ 15,496 $ 487 $ 10,621
SUPPLEMENTARY INCOME STATEMENT INFORMATION SCHEDULE X
FOR 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 $ 16,333 $ 16,440 $ 15,370
Amortization of intangible assets 32,133 33,599 30,814
Taxes, other than income and payroll 15,067 11,723 10,065
Advertising costs 24,011 22,111 20,928
Royalty expense 35,771 46,140 44,716
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.