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, 1994
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 1-16914
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 $28.875 per share closing
price for such stock on March 1, 1995, was approximately $700,100,000. As
of March 1, 1995 non-affiliates held approximately 867,000 shares of Common
Voting stock. There is no active market for such stock.
As of March 1, 1995 there were 59,688,242 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 1995 Annual Meeting of Stockholders III
INDEX TO THE E.W. SCRIPPS COMPANY 1994 10-K
Item No. Page
PART I
1. Business
Newspapers 3
Broadcast Television 7
Cable Television 11
Entertainment 15
Employees 16
2. Properties 16
3. Legal Proceedings 17
4. Submission of Matters to a Vote of Securities Holders 17
PART II
5. Market for Registrant's Common Stock and Related Stockholder Matters 18
6. Selected Financial Data 18
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 18
8. Financial Statements and Supplementary Data 18
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures 18
PART III
10. Directors and Executive Officers of the Registrant 19
11. Executive Compensation 19
12. Security Ownership of Certain Beneficial Owners and Management 20
13. Certain Relationships and Related Transactions 20
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 21
PART I
ITEM 1. BUSINESS
The Company is a diversified media company operating principally in four
segments: newspapers, broadcast television, cable television, and
entertainment.
In March 1995 the Company announced plans to evaluate strategic options for
its cable television division and engaged Merrill Lynch & Company to assist
with the process. The Company intends to develop a long-term strategy
which could include seeking joint ventures with other cable operators,
selling some or all of the Company's current systems, or acquiring
additional systems.
A summary of segment information for the three years ended December 31,
1994 is set forth on page F-32 of this Form 10-K.
Newspapers
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.
The Company acquired or divested the following newspaper operations in the
five years ended December 31, 1994:
1993 - The Company acquired the remaining 2.7% minority interest in the
Knoxville News-Sentinel. The Company divested its newspapers in Tulare,
California, and San Juan, Puerto Rico.
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.
Revenues - The composition of the Company's newspaper operating revenues
for the most recent five years is as follows:
( in thousands )
1994 1993 1992 1991 1990
Newspaper advertising:
Local ROP $ 191,330 $ 178,253 $ 169,634 $ 167,307 $ 176,903
Classified ROP 163,111 143,258 123,314 119,866 124,916
National ROP 15,637 12,042 12,138 12,523 14,870
Preprint 63,473 57,639 51,083 46,035 44,824
Total newspaper advertising 433,551 391,192 356,169 345,731 361,513
Circulation 116,684 112,937 103,238 98,659 95,885
Joint operating agency distributions 44,151 38,647 40,018 36,647 37,394
Other 8,552 9,126 9,265 8,319 8,457
Total 602,938 551,902 508,690 489,356 503,249
Divested operations 16,152 99,997 201,530 208,939
Total newspaper operating revenues $ 602,938 $ 568,054 $ 608,687 $ 690,886 $ 712,188
The Company's newspaper operating revenues are derived primarily from
advertising and circulation. Advertising rates and revenues vary among the
Company's newspapers depending on circulation, type of advertising, local
market conditions, and competition. Advertising revenues are derived from
run-of-paper ("ROP") advertisements included with news stories in the body of
the newspaper and from preprinted advertisements that are generally
produced by advertisers and inserted into the newspaper.
ROP is further broken down among "local," "classified," and "national"
advertising. Local refers to advertising that is not in the classified
advertising section and is purchased by in-market advertisers. Classified
refers to advertising in the section of the newspaper that is grouped by
type of advertising, e.g., automotive and help wanted. National refers to
advertising purchased by businesses that operate beyond the local market and
purchase advertising from many newspapers, primarily through advertising
agencies. ROP advertisements are generally more profitable to the Company than
preprinted 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 greatest 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. Circulation information for the Company's newspapers is
as follows:
( in thousands ) (1) Morning (M) Daily Paid Circulation
Newspaper Evening (E) 1994 1993 1992 1991 1990
Albuquerque (NM) Tribune (2) E 32.4 34.7 35.5 38.6 40.1
Birmingham (AL) Post-Herald (2) M (3) 59.6 60.1 61.9 60.6 62.0
Bremerton (WA) Sun E 38.2 39.6 38.6 40.4 41.2
Cincinnati (OH) Post (2) E (6) 90.9 95.1 98.5 100.9 104.3
Denver (CO) Rocky Mountain News M 344.9 342.9 356.9 355.9 352.0
El Paso (TX) Herald Post (2) E 23.7 25.2 27.6 28.3 28.2
Evansville (IN) Courier (2) M 62.8 64.3 63.9 62.8 63.2
Knoxville (TN) News-Sentinel M 127.9 123.9 126.0 103.9 104.2
Memphis (TN) Commercial Appeal M 198.0 196.2 191.8 194.9 210.5
Monterey County (CA) Herald M (5) 35.3 34.3 36.7 35.3 35.6
Naples (FL) Daily News M 45.2 44.1 42.0 39.8 36.7
Redding (CA) Record-Searchlight E 37.1 38.4 38.6 40.6 40.4
San Luis Obispo (CA)
Telegram-Tribune E 32.2 32.5 31.5 32.5 32.3
Stuart (FL) News M 32.0 31.0 28.5 27.7 27.0
Ventura County (CA):
Ventura County Star M (4) 68.3 63.6 61.1 60.0 59.8
Thousand Oaks Star M (8) 20.8 21.1 21.3 22.3 22.4
Simi Valley Star M (5), 13.8 14.9 15.4 16.6 17.4
(8)
Watsonville (CA) Register Pajaronia (7) E 11.0 12.1 12.3 13.2 13.8
Total Daily Circulation 1,274.1 1,274.0 1,288.1 1,274.3 1,291.1
(1) Based on Audit Bureau of Circulation
Publisher's Statements ("Statements") for the
six-month periods ending September 30, except
figures for the Naples Daily News which are from the
Statements for the twelve-month periods ending
September 30.
(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.
(5) Acquired in 1992.
(6) Includes circulation of The Kentucky Post.
(7) Sold in February 1995.
(8) Moved to morning distribution January 1995.
( in thousands ) (1) Sunday Paid
Circulation
Newspaper 1994 1993 1992 1991 1990
Bremerton (WA) Sun 40.5 40.7 39.5
Denver (CO) Rocky Mountain News 447.2 453.3 430.1 425.4 407.9
Evansville (IN) Courier 116.4 118.6 118.1 117.7 116.9
Knoxville (TN) News-Sentinel 177.9 183.5 182.9 174.9 171.9
Memphis (TN) Commercial Appeal 279.9 279.5 282.3 282.4 288.8
Monterey County (CA) Herald (3) 39.1 35.1 38.2 37.3 37.2
Naples (FL) Daily News 58.4 57.4 54.8 51.7 48.5
Redding (CA) Record-Searchlight 40.3 40.7 40.9 40.0 39.3
Stuart (FL) News 40.3 38.5 34.8 33.3 32.5
Ventura County (CA):
Ventura County Star (2) 72.9 68.7 67.0 66.5 66.3
Thousand Oaks Star 21.6 22.0 22.3 23.5 23.5
Simi Valley Star (3) 14.3 15.5 16.1 17.2 18.0
Total Sunday Circulation 1,348.8 1,353.5 1,327.0 1,269.9 1,250.8
(1) Based on Audit Bureau of Circulation
Publisher's Statements ("Statements") for the
six-month periods ending September 30, except
figures for the Naples Daily News which are from the
Statements for the twelve-month periods ending
September 30.
(2) Includes the Camarillo Daily News, acquired
November 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.
Joint Operating Agencies - The Company is currently a party to newspaper
joint operating agencies ("JOAs") in five markets. A JOA combines 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.
Publisher of Year JOA Year of JOA
Newspaper 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-Herald 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 - The Company's newspapers compete for advertising revenues
primarily with other local media, including other local newspapers,
television and radio stations, and direct mail. Competition for
advertising revenues is based upon audience size and demographics, price,
and effectiveness. Newspapers compete with all other information and
entertainment media for consumers' discretionary time.
All of the Company's newspaper markets are highly competitive, particularly
Denver, the largest market in which the Company publishes a
newspaper.
Newspaper Production - The Company's daily newspapers are printed using
offset or flexographic presses and use computer systems for writing,
editing, and composing and producing the advertising and news material
printed in each edition.
Raw Materials and Labor Costs - The Company consumed approximately 202,000
metric tons of newsprint in 1994. 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 20% of the
Company's newspaper operating expenses in 1994.
Labor costs accounted for approximately 46% of the Company's newspaper
operating expenses in 1994. A substantial number of the Company's
newspaper employees are represented by labor unions. See "Employees."
Broadcast Television
General - On September 15, 1994 the Company acquired the remaining 13.9%
minority interest in Scripps Howard Broadcasting Company ("SHB") in
exchange for 4,952,659 shares of Class A Common stock. SHB owns the
Company's television stations and its cable television systems in
Sacramento, California; Lake County, Florida; and Longmont, Colorado.
The Company's television operations consist of nine network-affiliated
television stations. The Company acquired or divested the following
broadcast operations in the five years ended December 31, 1994:
1993 - The Company sold its radio stations and its Memphis television
station.
1991 - The Company purchased Baltimore television station WMAR.
Revenues - The composition of the Company's broadcasting operating revenues
for the most recent five years is as follows:
( in thousands )
1994 1993 1992 1991 1990
Local advertising $ 142,491 $ 130,603 $ 120,148 $ 106,610 $ 98,235
National advertising 122,668 114,558 109,204 99,459 89,110
Political advertising 14,291 1,344 8,836 665 8,292
Other 8,734 8,439 9,037 9,661 9,509
Total 288,184 254,944 247,225 216,395 205,146
Divested operations 29,350 30,062 29,055 30,434
Total broadcasting operating revenues $ 288,184 $ 284,294 $ 277,287 $ 245,450 $ 235,580
The Company's television operating revenues are derived primarily from the
sale of time to businesses for commercial messages that appear during
entertainment and news programming. Local advertising refers to time
purchased by local businesses; national refers to regional and
national businesses; political refers to campaigns for elective office.
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 are based primarily upon the size and
demographics of the audience for each program.
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) 1994 1993 1992 1991 1990
WXYZ, Detroit, Ch. 7 ABC 1997 9 7
Average Audience Share (2) 21 21 22 23 22
Station Rank in Market (3) 1 1 1 1 1
WEWS, Cleveland, Ch. 5 ABC 1997 13 12
Average Audience Share (2) 20 20 21 20 21
Station Rank in Market (3) 1 1 1 1 1
WFTS, Tampa, Ch. 28 ABC (7) 1997 15 9
Average Audience Share (2) 8 8 7 7 8
Station Rank in Market (3) 4 4 4 4 4
KNXV, Phoenix, Ch. 15 ABC (7) 1993 (5) 19 10
Average Audience Share (2) 10 9 10 10 8
Station Rank in Market (3) 4 4 4 4 5
WMAR, Baltimore, Ch. 2 (6) ABC (7) 1991 (4) 23 7
Average Audience Share (2) 17 19 17 21 21
Station Rank in Market (3) 3 2 2 1 2
WCPO, Cincinnati, Ch. 9 CBS 1997 30 5
Average Audience Share (2) 19 21 22 20 24
Station Rank in Market (3) 1 1 1 1 1
KSHB, Kansas City, Ch. 41 NBC (7) 1998 31 7
Average Audience Share (2) 11 10 11 9 10
Station Rank in Market (3) 4 4 4 4 4
WPTV, W. Palm Beach, Ch. 5 NBC 1997 45 6
Average Audience Share (2) 20 24 23 25 25
Station Rank in Market (3) 1 1 1 1 1
KJRH, Tulsa, Ch. 2 NBC 1998 59 7
Average Audience Share (2) 16 15 16 17 17
Station Rank in Market (3) 4 3 3 3 3
All market and audience data is based on
November A.C. Nielsen Company survey.
(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 filed an application for
renewal of the FCC license on June 1, 1993
for a term to expire in 1998. Petitions to
deny or revoke this license are pending.
(6) Station purchased May 30, 1991.
(7) Prior to January 1995 WFTS and KNXV
were FOX affiliates and WMAR was a NBC
affiliate; prior to September 1994 KSHB was
a FOX affiliate.
Competition - The Company's television stations compete for advertising
revenues primarily with other local media, including other television
stations, radio stations, newspapers, and direct mail. Competition for
advertising revenues is based upon audience size and demographics, price,
and effectiveness. Television stations compete for consumers'
discretionary time with all other information and entertainment media.
Continuing technological advances will improve the capability of
alternative service providers such as traditional cable, "wireless" cable,
and direct broadcast satellite television to offer video services in
competition with terrestrial broadcasting. The degree of competition from
such service providers and from local telephone companies which are
pursuing efforts to enter this market is expected to increase. The Company
intends to undertake upgrades in its services as may be permitted by the
FCC to maintain its competitive posture, and such facility upgrades may
require large capital investments. Technological advances in interactive
media services will increase these competitive pressures.
Network Affiliation and Programming - The Company's television stations are
affiliated with national television networks. In 1994 the Company entered
into 10-year affiliation agreements with the ABC television network in five
of the Company's television markets. The agreements with ABC extended
existing affiliation agreements in the Detroit and Cleveland markets, and
replaced the NBC affiliation in Baltimore and Fox affiliations in Phoenix
and Tampa. The Company also reached agreement to affiliate its Kansas City
television station with NBC and to extend the terms of its NBC affiliations
in Tulsa and West Palm Beach.
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. Networks compensate affiliated
stations for carrying network programming.
In addition to network programs, the Company's television stations
broadcast locally produced programs, syndicated programs, sports events,
movies, and public service programs. News is the focus of the Company's
locally produced programming. Advertising during local news programs
accounts for more than 30% of a station's revenues. The Company has
significantly expanded its schedules of local news programming in the
Kansas City, Phoenix, and Tampa markets.
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. A
petition to deny this renewal application, raising Equal Employment
Opportunity issues, has been filed by the League of United Latin American
Citizens ("LULAC") and is still pending. A petition for revocation of the
licenses of the Company's Phoenix, Detroit and Cleveland stations has been
filed by Media America Corporation, licensee of television station KTVK
(TV), Phoenix, Arizona. This petition, which is related to multi-year
affiliation agreements between the Company and the ABC Television Network,
is still pending. While there can be no assurance regarding the outcome of
these petitions, the Company has never had a license revoked, 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 the renewal of its 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. The FCC is actively considering
some relaxation of these ownership restrictions.
Under the Cable Television Consumer Protection and Competition Act of 1992
("1992 Act"), each television broadcast station gained "must-carry" rights
on any cable system defined as "local" with respect to that station.
Stations may waive their must-carry rights and instead negotiate
retransmission consent agreements with local cable companies. The
Company's stations have generally elected to negotiate retransmission
consent agreements with cable companies.
Management believes the Company is in substantial compliance with all
applicable regulatory requirements.
Cable Television
General - The Company operates cable television systems in Florida,
California, Colorado, Georgia, Indiana, Kentucky, South Carolina,
Tennessee, Virginia, and West Virginia. In the five years ended December
31, 1994 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 )
1994 1993 1992 1991 1990
Basic services $ 165,682 $ 171,703 $ 163,069 $ 145,258 $ 125,256
Premium programming services 49,242 46,401 44,559 45,280 42,050
Other monthly services 17,422 14,611 13,002 13,807 13,634
Advertising 11,367 8,870 8,394 7,071 5,663
Installation and other 11,643 10,207 9,092 6,775 6,212
Total cable television operating revenues $ 255,356 $ 251,792 $ 238,116 $ 218,191 $ 192,815
The Company's cable television operating revenues are derived primarily
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
1994
Sacramento, CA cluster 442.0 222.8 50% 361.4 162%
Chattanooga, TN cluster 176.4 110.1 62% 74.9 68%
Knoxville, TN cluster 149.7 105.2 70% 53.3 51%
Atlanta, GA cluster 97.9 71.2 73% 48.4 68%
Bluefield, WV cluster 74.4 54.2 73% 30.9 57%
Lake County, FL cluster 69.0 50.8 74% 20.2 40%
Rome, GA cluster 60.6 47.0 78% 37.3 79%
Elizabethtown, KY cluster 48.8 42.2 86% 24.2 57%
Longmont, CO cluster 51.2 35.7 70% 29.7 83%
Total 1,170.0 739.2 63% 680.3 92%
1993
Sacramento, CA cluster 436.4 210.8 48% 307.8 146%
Chattanooga, TN cluster 172.9 105.8 61% 71.4 67%
Knoxville, TN cluster 146.0 101.5 70% 50.3 50%
Atlanta, GA cluster 97.6 66.9 69% 38.1 57%
Bluefield, WV cluster 73.3 51.2 70% 30.6 60%
Lake County, FL cluster 67.2 47.4 71% 18.8 40%
Rome, GA cluster 56.3 44.6 79% 33.9 76%
Elizabethtown, KY cluster 48.3 40.3 83% 20.7 51%
Longmont, CO cluster 48.8 32.5 67% 28.0 86%
Total 1,146.8 701.0 61% 599.6 86%
( in thousands ) Premium
Subs. as
Homes Basic Penetration Premium a % of
Cable Television System Cluster Passed Subscribers Rate Subscribers (1) Basic
1992
Sacramento, CA cluster 427.9 204.7 48% 270.5 132%
Chattanooga, TN cluster 173.0 99.8 58% 76.8 77%
Knoxville, TN cluster 143.1 97.0 68% 50.7 52%
Atlanta, GA cluster 97.4 64.6 66% 40.2 62%
Bluefield, WV cluster 72.6 49.5 68% 34.1 69%
Lake County, FL cluster 65.8 45.4 69% 17.9 39%
Rome, GA cluster 53.8 42.4 79% 41.7 98%
Elizabethtown, KY cluster 48.0 39.8 83% 17.7 44%
Longmont, CO cluster 47.2 29.9 63% 27.1 91%
Total 1,128.8 673.1 60% 576.7 86%
1991
Sacramento, CA cluster 418.0 203.8 49% 245.1 120%
Chattanooga, TN cluster 164.1 96.0 59% 68.4 71%
Knoxville, TN cluster 140.6 90.9 65% 46.2 51%
Atlanta, GA cluster 95.2 58.8 62% 36.1 61%
Bluefield, WV cluster 66.3 47.6 72% 29.8 63%
Lake County, FL cluster 63.4 42.7 67% 14.7 34%
Rome, GA cluster 52.2 40.2 77% 36.1 90%
Elizabethtown, KY cluster 47.5 38.2 80% 14.2 37%
Longmont, CO cluster 45.8 27.3 60% 23.2 85%
Total 1,093.1 645.5 59% 513.8 80%
1990
Sacramento, CA cluster 401.3 196.0 49% 224.4 114%
Chattanooga, TN cluster 157.3 88.3 56% 61.2 69%
Knoxville, TN cluster 138.0 83.9 61% 42.6 51%
Atlanta, GA cluster 93.7 57.5 61% 39.0 68%
Bluefield, WV cluster 65.8 46.3 70% 24.3 52%
Rome, GA cluster 54.4 42.2 78% 22.5 53%
Lake County, FL cluster 59.5 39.3 66% 14.9 38%
Elizabethtown, KY cluster 46.9 36.2 77% 13.8 38%
Longmont, CO cluster 44.6 25.0 56% 20.4 82%
Total 1,061.5 614.7 58% 463.1 75%
(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.
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.
Competition will increase as new technologies such as more advanced
"wireless cable systems" and broadcast satellite delivery services improve
and gain consumer acceptance. "Video dial tone" services, a regulatory
plan whereby the local telephone company leases video distribution lines to
programmers on a common carrier basis, has been drastically altered by
recent court rulings that hold unconstitutional the statutory ban on a
telephone company's offering of video services directly to customers in its
telephone service area. While the regulatory scheme for telephone company
offerings of video services remains uncertain, telephone companies are
beginning to offer FCC-approved trials of such services. One such trial is
being pursued by Bell South in a segment of the Company's Atlanta, Georgia
cluster. Most observers believe that the telephone companies will be
formidable competitors in offering video services and that their entry into
the video market will hasten consumer demand for interactive
telecommunications capabilities through any system providing video
services. State regulations, however, in many cases restrict a cable
operator's ability to offer competing interactive telecommunications
services. (See "Legislation.") Relatedly, many observers believe that
competition from the telephone companies in the video marketplace will
impose on cable operators the need to serve a sufficiently large number of
subscribers in contiguous regions so as to permit the cable operator to
compete in the offering of interactive telecommunications services. Some
restructuring of the cable industry now appears to be underway in
anticipation of these changes.
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 reductions in basic revenue per subscriber as a result of
re-regulation (see "Regulation and Legislation"), additional and improved
services provided to basic subscribers, and to discounts offered to
subscribers receiving multiple premium channels.
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) reimposed rate regulations on most
cable television systems; (ii) reimposed "must carry" rules with respect to
local broadcast television signals (see "Federal Regulation of
Broadcasting"); (iii) granted all broadcasters the option to refuse
carriage of their signals; (iv) required 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) established 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 and subsequent revisions 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.
It is generally agreed that there is a need for a substantial revision of
the statutes governing telecommunications, and the relationship between
cable television and telephone services is a substantial part of the on-
going legislative effort to accomplish that goal. While legislation is by
no means assured, changes could bring some relief to cable operators from
the 1992 rate regulation requirements as well as provide a frame work for
telephone company competition in the delivery of video services.
Management believes the Company is in substantial compliance with all
applicable regulatory requirements.
Entertainment
General - The Company's Entertainment segment includes United Media
licensing and syndication, Scripps Howard Productions ("SHP"), Home &
Garden Television ("HGTV"), Cinetel Productions ("Cintetel"), one of the
largest independent producers of cable television programming, and the
Company's equity interest in The Television Food Network and SportSouth,
both cable television networks. Cinetel was acquired March 31, 1994.
Revenues - The composition of the Company's entertainment revenues for the
most recent five years is as follows:
( in thousands )
1994 1993 1992 1991 1990
Licensing $ 49,236 $ 55,083 $ 57,136 $ 62,167 $ 63,127
Syndication 17,998 18,814 19,013 19,827 20,689
Film and television production 6,239 10,757 11,060 9,617 7,896
Other 87
Total entertainment operating revenues $ 73,473 $ 84,741 $ 87,209 $ 91,611 $ 91,712
The Company, under the trade name United Media, is a leading distributor of
news columns, comics, and other features for the newspaper industry.
Included among these features is "Peanuts", one of the most successful
strips in the history of comic art. United Media sold its worldwide
"Garfield" and "US Acres" copyrights in 1994.
United Media owns and licenses worldwide copyrights relating to "Peanuts"
and other character properties for use on numerous products, including
plush toys, greeting cards, and apparel, for promotional purposes, and for
exhibit on television, video cassettes, and other media. Merchandise,
literary, and exhibition licensing revenues are generally a negotiated
percentage of the licensee's sales. The Company generally receives a fixed
fee for the use of its copyrights for promotional and advertising purposes.
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.
The Company launched HGTV on December 30,1994. The cable television
network features 24 hours of daily programming focusing on home repair and
remodeling, gardening, decorating, and home electronics. While most of the
programming is transmitted by HGTV, affiliated local television stations
throughout the United States may insert local programming and
advertisements in certain time periods. The subscriber base has been
established through a collaboration of local television stations (one per
market) and cable television systems. Several of the 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 HGTV. The Company's cable television systems
carry HGTV and all of the Company's television stations are members of the
affiliate group.
The Company expects to invest an additional $40,000,000 in HGTV over the
next three years, including capital expenditures and pre-tax operating
losses.
HGTV revenues are derived from the sale of advertising time and from fees
received from cable television and other system operators licensed to carry
the network. Such license fees are generally based on the number of
subscribers receiving HGTV.
HGTV programming is transmitted via satellite to cable television systems.
The HGTV audience includes satellite dish owners, who can view HGTV
programming without paying a fee.
The Company established SHP 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. Cinetel produces programs for cable television,
such as Club Dance at the Whitehorse Cafe and Shadetree Mechanic.
The Company's film and television program production revenues are derived
from the licensing of programming to broadcast and cable television
networks, the fee for which is negotiated with the network. License fees
are recognized as revenue when the program is available for broadcast. The
success of the Company's programs is dependent upon public taste, which is
unpredictable and subject to change without warning. Consequently,
operating revenues are subject to substantial fluctuations.
Programs are developed and produced internally and in collaboration with a
number of independent writers, producers and creative teams under
production arrangements. SHP generally licenses a program prior to
commencing production. The initial license fee generally covers the cost
of production. SHP retains the distribution rights for foreign,
syndicated television, cable television, and home video markets.
Competition - The Company's syndication operations compete for a limited
amount of newspaper space with other distributors of news columns, comics,
and other features. Competition is primarily based on price and popularity
of the features. Popularity of licensed characters is a primary factor in
obtaining and renewing merchandise and promotional licenses.
The Company's program and production operations compete with all forms of
entertainment. In addition to competing for market share with other
entertainment companies, the Company competes to obtain creative talents,
story properties, advertiser support and broadcast rights. A significant
number of other companies produce and/or distribute programs and provide
programming to cable television and other system operators. Competition is
primarily based on price, quality of the programming, and public taste.
Employees
As of December 31, 1994 the Company had approximately 7,700 full-time
employees, of whom approximately 4,800 were engaged in newspapers, 1,500 in
broadcasting, 1,200 in cable television, and 200 in entertainment. Various
labor unions represent approximately 2,500 employees, primarily in
newspapers. Collective bargaining agreements covering approximately 29% of
union-represented employees are being negotiated currently or will be
negotiated in 1995. 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 newspaper 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 television operations require offices and studios and other
real property for towers upon which broadcasting transmitters and antenna
equipment are located. Increased capital expenditures in 1994 and 1995 are
associated with more local news programming, primarily, in Kansas City,
Phoenix, and Tampa. 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 capital expenditures in order to
maintain competitive position.
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 several of its cable television distribution 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 entertainment operations require offices and studios and
other real and personal property to deliver programming product. The
Company is currently expanding the 60,000 square foot Cinetel production
facility by approximately one-third to accommodate HGTV.
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 - Broadcast Television -
Federal Regulation of Broadcasting."
In 1994 the Company accrued an estimate of the ultimate costs of certain
lawsuits associated with divested operations. See Note 3 to the
Consolidated Financial Statements. The Company is also 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, 1994.
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
1994
Market price of common stock:
High $29.250 $29.500 $30.500 $31.000
Low 24.875 23.000 27.875 27.500
Cash dividends per share of common stock $ .11 $ .11 $ .11 $ .11 $ .44
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
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
Lawrence A. Leser 59 Chairman of the Board of Directors
(since August 1994); Chief Executive
Officer (since 1985); Director (since
1977); President (1985 to August 1994)
William R. Burleigh 59 President (since August 1994); Chief
Operating Officer (since May 1994);
Director (since 1990); Executive Vice
President (1990 to August 1994); Vice
President, Newspapers (1986 to 1990)
Daniel J. Castellini 55 Senior Vice President/Finance and
Administration (since 1986)
F. Steven Crawford 46 Senior Vice President/Cable (since
September 1992); Vice President, Cable
Television (1990 to September 1992);
General Manager, TeleScripps Cable
Company (1983 to 1990)
Frank Gardner 52 Senior Vice President/Broadcasting
(since April 1993); Senior Vice
President, News Programming, Fox
Broadcasting Company (1991 to 1993);
Vice President and General Manager, WCPO
Television, Cincinnati (1989 to 1991)
Alan M. Horton 51 Senior Vice President, Newspapers
(since May 1994); Vice
President/Operations, Newspapers (1991
to May 1994); Editor, Naples Daily News
(1987 to 1991)
Craig C. Standen 52 Senior Vice President/Corporate
Development (since August 1994); Vice
President/Marketing-Advertising,
Newspapers (1990 to August 1994)
J. Robert Routt 41 Vice President and Controller (since
1985)
E. John Wolfzorn 49 Treasurer (since 1979)
M. Denise Kuprionis 38 Corporate Secretary (since 1987)
Greg Ebel 39 Vice President/Human Resources (since
1994); Senior Vice President, PNC Bank
Ohio (1990 to 1994)
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 30, 1995.
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 LLP, Independent Auditors, dated
January 23, 1995 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 in the fourth quarter of 1994.
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
29, 1995.
THE E.W. SCRIPPS COMPANY
By /s/ Lawrence A. Leser
Lawrence A. Leser
Chairman of the Board 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 29, 1995.
Signature Title
/s/ Lawrence A. Leser Chairman of the Board and Chief Executive
Lawrence A. Leser Officer (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 Chairman of the Executive Committee of the
Charles E. Scripps Board of Directors
/s/ William R. Burleigh President, Chief Operating Officer and Director
William R. Burleigh
/s/ John H. Burlingame Director
John H. Burlingame
/s/ Daniel J. Meyer Director
Daniel J. Meyer
/s/ Nicholas B. Paumgarten Director
Nicholas B. Paumgarten
/s/ Paul K. Scripps Director
Paul K. Scripps
/s/ Robert P. Scripps Director
Robert P. Scripps
/s/ David R. Huhn Director
David R. Huhn
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-14
Consolidated Balance Sheets F-15
Consolidated Statements of Income F-17
Consolidated Statements of Cash Flows F-18
Consolidated Statements of Stockholders' Equity F-19
Notes to Consolidated Financial Statements F-20
SELECTED FINANCIAL DATA
( in millions, except share data )
1994 1993 1992 1991 1990
Summary of Operations
Operating Revenues:
Newspapers $ 602.9 $ 551.9 $ 508.7 $ 489.4 $ 503.3
Broadcast television 288.2 254.9 247.2 216.4 205.1
Cable television 255.4 251.8 238.1 218.2 192.8
Entertainment 73.5 84.8 87.3 91.6 91.7
Continuing operations 1,220.0 1,143.4 1,081.3 1,015.6 992.9
Divested operations 53.6 174.2 276.9 297.1
Total operating revenues $ 1,220.0 $ 1,197.0 $ 1,255.5 $ 1,292.5 $ 1,290.0
Operating Income:
Newspapers $ 119.5 $ 76.6 $ 88.7 $ 70.8 $ 81.5
Broadcast television 94.6 69.1 61.6 49.6 60.8
Cable television 39.8 45.2 43.7 35.7 26.8
Entertainment (7.1) 3.2 7.7 9.6 9.9
Corporate (14.9) (13.0) (14.6) (12.5) (14.5)
Continuing operations 231.9 181.1 187.1 153.2 164.5
Divested operations 7.6 (14.6) 33.1 31.6
Unusual items (7.9) (0.9) (12.0) (36.4)
Total operating income 224.0 187.8 172.5 174.3 159.7
Interest expense (16.6) (27.3) (34.2) (38.7) (43.8)
Net gains and unusual items 11.2 94.4 74.5
Miscellaneous, net (1.0) (2.5) (3.7) (0.5) (2.3)
Income taxes (86.9) (106.8) (92.6) (62.6) (56.2)
Minority interests (8.0) (16.9) (10.2) (5.9) (8.5)
Income before cumulative effect of accounting change $ 122.7 $ 128.7 $ 106.3 $ 66.6 $ 48.9
Share Data
Income before cumulative effect (excluding unusual items) $1.54 $1.06 $1.12 $.97 $.95
Unusual items .07 .66 .31 (.08) (.31)
Income before cumulative effect $1.61 $1.72 $1.43 $.89 $.64
Dividends $ .44 $ .44 $ .40 $ .40 $ .40
Common stock price:
High $31.000 $30.875 $29.000 $24.500 $24.000
Low 23.000 22.875 22.125 14.750 13.000
Other Financial Data
EBITDA (see page F-4) - excluding divested operations and
unusual items
Newspapers $ 154.8 $ 114.1 $ 123.0 $ 100.9 $ 107.2
Broadcast television 115.8 89.5 81.6 65.9 74.6
Cable television 97.1 105.3 101.2 91.6 84.3
Entertainment (5.3) 4.2 8.5 10.4 10.7
Corporate (14.2) (12.5) (12.9) (11.3) (13.4)
Total continuing operations 348.2 300.6 301.4 257.5 263.4
Depreciation and amortization of intangible assets 116.3 120.9 121.9 112.1 106.6
Net cash flow from operating activities 248.9 225.6 203.1 209.4 198.3
Investing activity:
Capital expenditures (95.6) (103.9) (145.2) (151.0) (85.0)
Other (investing)/divesting activity, net 20.0 108.5 19.1 (132.5) 11.0
Total assets 1,723.0 1,683.1 1,704.9 1,712.9 1,526.9
Long-term debt (including current portion) 110.4 247.9 441.9 491.8 367.6
Stockholders' equity 1,083.5 859.6 733.1 676.6 639.0
Long-term debt % of total capitalization 9% 22% 38% 42% 37%
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 )
1994 Change 1993 Change 1992
Operating revenues:
Newspapers $ 602,938 9.2 % $ 551,902 8.5 % $ 508,690
Broadcast television 288,184 13.0 % 254,944 3.1 % 247,225
Cable television 255,356 1.4 % 251,792 5.7 % 238,116
Entertainment 73,473 (13.3)% 84,741 (2.8)% 87,209
Continuing operations 1,219,951 6.7 % 1,143,379 5.7 % 1,081,240
Divested operations 53,628 174,231
Total operating revenues $ 1,219,951 1.9 % $ 1,197,007 (4.7)% $ 1,255,471
Operating income:
Newspapers $ 119,539 56.1 % $ 76,556 (13.7)% $ 88,743
Broadcast television 94,560 36.9 % 69,071 12.1 % 61,606
Cable television 39,784 (12.0)% 45,233 3.4 % 43,741
Entertainment (7,083) 3,239 (58.0)% 7,708
Corporate (14,838) (14.0)% (13,017) 11.0 % (14,618)
Continuing operations 231,962 28.1 % 181,082 (3.3)% 187,180
Divested operations 7,619 (14,640)
Unusual items (7,915) (900)
Total operating income 224,047 19.3 % 187,801 8.8 % 172,540
Interest expense (16,616) (27,286) (34,247)
Net gains and unusual items 11,151 94,374 74,483
Miscellaneous, net (986) (2,552) (3,696)
Income taxes (86,925) (106,750) (92,585)
Minority interest (7,988) (16,901) (10,176)
Cumulative effect of accounting change (22,413)
Net income $ 122,683 (4.7)% $ 128,686 53.4 % $ 83,906
Per share of common stock:
Net income $1.61 (6.4)% $1.72 52.2 % $1.13
Note Ref.
(i) Garfield gain ( .23)
(ii) Net gains on sales of Divested Operations ( .63) ( .61)
(iii) TV programs/property write-downs .09
(iv) Special charitable contribution .06
(v) Change in tax liability ( .06) ( .07)
(vi) Lawsuits re: divested operations .07
(vii) ASCAP adjustment and other items .04
(viii), (ix) Pittsburgh Strike and Write-downs .30
(x) Cumulative Effect .30
Adjusted net income per share
(excluding net gains and unusual items) $ 1.54 45.3 % $ 1.06 (5.4)% $ 1.12
( in thousands )
1994 Change 1993 Change 1992
Other Financial and Statistical Data - excluding divested
operations and unusual items
Total advertising revenues $ 733,102 11.9 % $ 655,006 7.1 % $ 611,788
Advertising revenues as a percentage of total revenues 60.1 % 57.3 % 56.6 %
EBITDA:
Newspapers $ 154,796 35.7 % $ 114,071 (7.3)% $ 123,024
Broadcast television 115,829 29.5 % 89,477 9.6 % 81,604
Cable television 97,135 (7.7)% 105,260 4.0 % 101,165
Entertainment (5,344) 4,156 (51.4)% 8,544
Corporate (14,187) (14.5)% (12,392) 4.1 % (12,925)
Total continuing operations $ 348,229 15.9 % $ 300,572 (0.3)% $ 301,412
Effective income tax rate 39.9 % 42.3 % 44.3 %
Weighted average shares outstanding 76,246 2.1 % 74,650 0.1 % 74,602
Total capital expenditures $ 95,568 (7.3)% $ 103,115 (27.2)% $ 141,665
For comparison purposes certain 1993 and 1992 operating revenues, operating
expenses, and equity in income of certain joint ventures (see below) have
been reclassified to conform with 1994 classifications.
Previously reported 1993 and 1992 segment information has been restated to
conform with 1994 segment classifications. The Entertainment segment
includes United Media licensing and syndication (previously included in the
Publishing segment), Scripps Howard Productions (a producer of television
programming), Home & Garden Television ("HGTV", a 24-hour cable television
network launched on December 30, 1994), and the Company's equity interest
in The TV Food Network and SportSouth, both cable television networks
(previously reported in Miscellaneous, net). On March 31, 1994 the Company
completed the acquisition of Cinetel Productions (an independent producer
of programs for cable television). Cinetel's operating results from the
date of acquisition are included in the Entertainment segment.
Earnings before interest, income taxes, depreciation, and amortization
("EBITDA") is included in the discussion of segment results because:
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.
Financial analysts use EBITDA to value communications media companies.
Acquisitions of communications media businesses are based on multiples
of EBITDA.
EBITDA should not, however, be construed as an alternative measure of the
amount of the Company's income or cash flows from operating activities.
Operating losses for HGTV amounted to $7,700,000 and reduced the Company's
net income by $4,500,000, $.06 per share, in 1994.
In the third quarter of 1994 the Company acquired the remaining 13.9%
minority interest in Scripps Howard Broadcasting Company ("SHB") in
exchange for 4,952,659 shares of Class A Common stock. In 1993 the Company
purchased 5.7% of the outstanding shares of SHB and the remaining 2.7%
minority interest in the Knoxville News-Sentinel.
The Company's average debt balance decreased $202,000,000 in 1994 and
$101,000,000 in 1993.
The effective income tax rate decreased in 1994 due to the change in
estimate of the tax liability for prior years described in (v) below.
Excluding the effect of that adjustment the effective income tax rate would
have been 42% in 1994. The effective income tax rate in 1995 is expected
to be approximately 42%.
Net gains and unusual items affecting the comparability of the Company's
reported results of operations include the following:
(i) In 1994 the Company sold its worldwide Garfield and U.S. Acres
copyrights. The sale resulted in a pre-tax gain of $31,600,000,
$17,400,000 after-tax, $.23 per share.
(ii) 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.
The business units referred to above, and any related gains on the
sales of the business units, are hereinafter referred to as the
"Divested Operations."
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
Net gains recognized (before minority
interests and income taxes) $ 91,900 $ 78,000
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.
(iii) In late 1994 and early 1995 the Company's three television
stations that had been Fox affiliates changed their network
affiliation. In connection with the change certain program rights
owned by those stations will be sold at an estimated loss of
$7,900,000. Two of the stations are constructing new buildings to
accommodate expanded local news programming, and currently owned real
estate will be sold at an estimated loss of $2,800,000. These
estimated losses were recorded in 1994, reducing net income $6,600,000,
$.09 per share.
(iv) In 1994 the Company made a special contribution to a charitable
foundation that reduced pre-tax income by $8,000,000 and net income by
$4,500,000, $.06 per share.
(v) In 1993 management changed its estimate of the tax basis and lives
of certain intangible assets. The resulting change in the estimated
tax liability for prior years increased net income in 1993 by
$5,400,000, $.07 per share. In 1994 the Internal Revenue Service
proposed adjustments related to those intangible assets. Based upon
the proposed adjustments management again changed its estimate of the
tax liability for prior years, increasing net income in 1994 by
$4,500,000, $.06 per share.
(vi) In 1994 the Company accrued an estimate of the ultimate costs of
certain lawsuits associated with divested operations. The accrual
reduced net income by $5,800,000, $.07 per share.
(vii) Other unusual items in 1993 include the following:
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. The adjustment increased operating income $4,300,000 and
net income $2,300,000, $.03 per share.
The Company realized a $1,100,000 gain on sale of certain publishing
equipment and received a $2,500,000 fee in connection with the sale of
the Ogden, Utah, Standard Examiner. Net income increased $2,300,000,
$.03 per share.
The Company recorded a $6,300,000 restructuring charge. The charge
reduced net income $3,600,000, $.05 per share.
The federal income tax rate was increased to 35%. The effect on the
Company's deferred tax liabilities reduced net income $3,700,000, $.05
per share.
(viii) The Pittsburgh Press was not published after May 17, 1992 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 sold The Pittsburgh Press on December 31, 1992
(see (ii) above).
(ix) In 1992 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.
(x) 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 decreased net
income $22,413,000, $.30 per share, of which $18,000,000, $.24 per
share, was associated with Divested Operations.
Operating results, excluding the Divested Operations and unusual items
described above, for each of the Company's business segments are presented
on the following pages. The effects of the foregoing unusual items and the
Divested Operations are excluded from the consolidated and segment
operating results because management believes they are not relevant to
understanding the Company's ongoing operations.
NEWSPAPERS - Operating results for the newspaper segment, excluding
Divested Operations and unusual items, were as follows:
( in thousands, except newsprint information )
1994 Change 1993 Change 1992
Operating revenues:
Local $ 191,330 7.3 % $ 178,253 5.1 % $ 169,634
Classified 163,111 13.9 % 143,258 16.2 % 123,314
National 15,637 29.9 % 12,042 (0.8)% 12,138
Preprint 63,473 10.1 % 57,639 12.8 % 51,083
Newspaper advertising 433,551 10.8 % 391,192 9.8 % 356,169
Circulation 116,684 3.3 % 112,937 9.4 % 103,238
Joint operating agency distributions 44,151 14.2 % 38,647 (3.4)% 40,018
Other 8,552 (6.3)% 9,126 (1.5)% 9,265
Total operating revenues 602,938 9.2 % 551,902 8.5 % 508,690
Operating expenses:
Employee compensation and benefits 219,990 (1.1)% 222,501 11.1 % 200,259
Newsprint and ink 94,160 9.4 % 86,063 9.2 % 78,822
Other 133,992 3.7 % 129,267 21.3 % 106,585
Depreciation and amortization 35,257 (6.0)% 37,515 9.4 % 34,281
Total operating expenses 483,399 1.7 % 475,346 13.2 % 419,947
Operating income $ 119,539 56.1 % $ 76,556 (13.7)% $ 88,743
Other Financial and Statistical Data:
Earnings before interest, income taxes,
depreciation, and amortization ("EBITDA") $ 154,796 35.7 % $ 114,071 (7.3)% $ 123,024
Percent of operating revenues:
Operating income 19.8 % 13.9 % 17.4 %
EBITDA 25.7 % 20.7 % 24.2 %
Capital expenditures $ 21,226 (12.6)% $ 24,273 (66.9)% $ 73,426
Advertising inches:
Local 8,114 3.0 % 7,880 5.2 % 7,493
Classified 11,739 7.2 % 10,953 17.0 % 9,362
National 403 13.2 % 356 6.0 % 336
Total full run ROP 20,256 5.6 % 19,189 11.6 % 17,191
Newsprint information:
Consumption (in tonnes) 202,309 7.6 % 187,971 6.4 % 176,717
Weighted average price per tonne $ 447 1.8 % $ 439 2.8 % $ 427
Demand for advertising continued to improve in 1994. Advertising revenues
increased for all of the Company's daily newspapers.
Newspaper revenues and expenses in 1993 were boosted by the fourth-quarter-
1992 acquisition of three California daily newspapers.
Because the supply of newsprint exceeded demand, its price generally
declined from 1988 through August 1992. Since the first quarter of 1994
prices have increased sharply. The weighted average price of newsprint was
$492 per metric ton in the fourth quarter of 1994. Based on price
increases announced by suppliers, including an increase effective May 1995,
the weighted average price of newsprint in 1995 will be at least 40% higher
than in 1994.
Depreciation expense for 1992 includes a charge of $5,500,000 to reduce the
book value of certain equipment to estimated net realizable value.
Capital expenditures in 1992 included construction of the new production
facility in Denver. Capital expenditures in 1995 are expected to be
approximately $20,000,000 and depreciation and amortization is expected to
increase approximately 6%.
BROADCAST TELEVISION - Operating results for the broadcast television
segment, excluding Divested Operations and unusual items, were as follows:
( in thousands )
1994 Change 1993 Change 1992
Operating revenues:
Local $ 142,491 9.1 % $ 130,603 8.7 % $ 120,148
National 122,668 7.1 % 114,558 4.9 % 109,204
Political 14,291 1,344 8,836
Other 8,734 3.5 % 8,439 (6.6)% 9,037
Total operating revenues 288,184 13.0 % 254,944 3.1 % 247,225
Operating expenses:
Employee compensation and benefits 76,535 9.0 % 70,213 5.1 % 66,814
Program rights 48,759 (9.1)% 53,621 (7.5)% 57,992
Other 47,061 13.0 % 41,633 2.0 % 40,815
Depreciation and amortization 21,269 4.2 % 20,406 2.0 % 19,998
Total operating expenses 193,624 4.2 % 185,873 0.1 % 185,619
Operating income $ 94,560 36.9 % $ 69,071 12.1 % $ 61,606
Other Financial and Statistical Data:
Earnings before interest, income taxes,
depreciation, and amortization ("EBITDA") $ 115,829 29.5 % $ 89,477 9.6 % $ 81,604
Percent of operating revenues:
Operating income 32.8 % 27.1 % 24.9 %
EBITDA 40.2 % 35.1 % 33.0 %
Capital expenditures $ 23,532 154.8 % $ 9,234 32.9 % $ 6,948
Increased demand for advertising time led to increased EBITDA at all the
television stations.
Program rights decreased in 1994 because the Baltimore television station
no longer carried Orioles baseball games. Program rights decreased in 1993
as several syndicated programs previously aired by the Company's stations
were replaced with less-costly programs.
The Company has entered into 10-year affiliation agreements with the ABC
television network in five of the Company's television markets. The
agreements with ABC extend existing affiliation agreements in the Detroit
and Cleveland markets, and replaced the NBC affiliation in Baltimore and
Fox affiliations in Phoenix and Tampa. The Company entered into a 10-year
affiliation agreement with NBC in Kansas City and extended the terms of its
NBC affiliations in Tulsa and West Palm Beach for 10 years. The increase
in employee costs and other operating expenses is due primarily to the
Company's expanded schedules of local news programming in Kansas City,
Phoenix, and Tampa.
Capital expenditures in 1995 are expected to be approximately $28,000,000.
The increased capital expenditures in 1994 and 1995 is also associated with
more local news programming. Depreciation and amortization is expected to
increase approximately 25% in 1995.
CABLE TELEVISION - Operating results for the cable television segment were
as follows:
( in thousands, except per subscriber information )
1994 Change 1993 Change 1992
Operating revenues:
Basic services $ 165,682 (3.5)% $ 171,703 5.3 % $ 163,069
Premium programming services 49,242 6.1 % 46,401 4.1 % 44,559
Other monthly service 17,422 19.2 % 14,611 12.4 % 13,002
Advertising 11,367 28.2 % 8,870 5.7 % 8,394
Installation and miscellaneous 11,643 14.1 % 10,207 12.3 % 9,092
Total operating revenues 255,356 1.4 % 251,792 5.7 % 238,116
Operating expenses:
Employee compensation and benefits 41,343 5.4 % 39,237 2.4 % 38,332
Program costs 61,614 10.9 % 55,548 8.4 % 51,225
Other 55,264 6.8 % 51,747 9.2 % 47,394
Depreciation and amortization 57,351 (4.5)% 60,027 4.5 % 57,424
Total operating expenses 215,572 4.4 % 206,559 6.3 % 194,375
Operating income $ 39,784 (12.0)% $ 45,233 3.4 % $ 43,741
Other Financial and Statistical Data:
Earnings before interest, income taxes,
depreciation, and amortization ("EBITDA") $ 97,135 (7.7)% $ 105,260 4.0 % $ 101,165
Percent of operating revenues:
Operating income 15.6 % 18.0 % 18.4 %
EBITDA 38.0 % 41.8 % 42.5 %
Capital expenditures $ 41,616 (37.9)% $ 67,019 15.0 % $ 58,299
Average number of basic subscribers 717.7 4.9 % 684.3 4.2 % 656.7
Average monthly revenue per basic subscriber $ 29.65 (3.3)% $ 30.66 1.5 % $ 30.22
Homes passed at December 31 1,170.0 2.0 % 1,146.8 1.6 % 1,128.8
Basic subscribers at December 31 739.2 5.4 % 701.0 4.1 % 673.1
Penetration at December 31 63.2 % 61.1 % 59.6 %
Re-regulation of the cable television industry significantly affected the
Company's cable television operations in 1994 and in 1993. The effects of
price decreases resulting from re-regulation were partially offset by
growth in subscribers in 1994. After declining year-over-year for five
straight quarters, EBITDA increased in the fourth quarter of 1994.
Other operating expenses in 1994 includes a $3,000,000 charge for special
rebates to the Company's Sacramento system customers and related legal
costs. The rebate was awarded by a federal court in connection with
litigation concerning the system's pricing policies in the late 1980s.
Program costs increased in 1994 as a result of the growth in the number of
subscribers. Program costs as a percent of basic and premium programming
service revenues increased from 24.7% in 1992 to 28.7% in 1994, primarily
due to re-regulation that reduced basic revenue per subscriber.
Capital expenditures are expected to be approximately $50,000,000 in 1995
and depreciation and amortization is expected to decrease approximately 4%.
ENTERTAINMENT - Operating results for the entertainment segment, excluding
unusual items, were as follows:
( in thousands )
1994 Change 1993 Change 1992
Operating revenues:
Licensing $ 49,236 (10.6)% $ 55,083 (3.6)% $ 57,136
Syndication 17,998 (4.3)% 18,814 (1.0)% 19,013
Film and television production 6,239 (42.0)% 10,757 (2.7)% 11,060
Other 87
Total operating revenues 73,473 (13.3)% 84,741 (2.8)% 87,209
Operating expenses:
Employee compensation and benefits 15,084 8.9 % 13,849 1.4 % 13,656
Artists' royalties 34,668 (5.3)% 36,592 (2.0)% 37,346
Production costs 3,413 (57.3)% 7,993 (3.3)% 8,267
Other 25,652 15.8 % 22,151 14.2 % 19,396
Depreciation and amortization 1,739 89.6 % 917 9.7 % 836
Total operating expenses 80,556 (1.2)% 81,502 2.5 % 79,501
Operating income (loss) $ (7,083) $ 3,239 (58.0)% $ 7,708
Other Financial and Statistical Data:
Earnings before interest,
income taxes, depreciation,
and amortization ("EBITDA") $ (5,344) $ 4,156 (51.4)% $ 8,544
Percent of operating revenues:
Operating income (loss) (9.6)% 3.8 % 8.8 %
EBITDA (7.3)% 4.9 % 9.8 %
Capital expenditures $ 7,989 $ 981 $ 297
HGTV is a 24-hour cable television network, launched on December 30, 1994.
The Company expects to invest an additional $40,000,000 in HGTV in the next
three years, including capital expenditures and pre-tax operating losses.
Operating losses for HGTV amounted to $7,700,000 in 1994.
The Company acquired Cinetel Productions in Knoxville, Tennessee, on March
31, 1994. Cinetel is one of the largest independent producers of programs
for cable television. Cinetel's results of operations are included in the
Entertainment segment from the date of acquisition.
In 1994 the Company completed the sale of its Garfield and U.S. Acres
copyrights, resulting in the decrease in licensing and syndication
revenues.
Excluding Garfield, domestic licensing revenues increased 7.6% and foreign
licensing revenues were flat in 1994. In Japan, which accounts for
approximately 70% of foreign licensing revenue and 47% of total licensing
revenue, revenues in local currency decreased 8% in 1994 and 12% in 1993.
The change in the exchange rate for the Japanese yen increased licensing
revenues $1,600,000 in 1994 and $2,700,000 in 1993.
Capital expenditures are expected to be approximately $11,000,000 in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities was $249,000,000 in 1994 compared to
$226,000,000 in 1993.
Cash flow from operating activities and from the sale of copyrights and
investments totaled $296,000,000 in 1994 and was used primarily for capital
expenditures of $95,600,000, acquisitions and investments of $32,900,000,
debt reduction of $138,000,000, and dividend payments of $37,300,000. The
debt to total capitalization ratio at December 31 was .09 in 1994 and .22
in 1993.
Consolidated capital expenditures are expected to total approximately
$109,000,000 in 1995. There are no scheduled maturities of long-term debt
in 1995. The Company expects to finance its capital requirements primarily
through cash flow from operations.
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, 1994
and 1993, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1994. Our audits also included the financial statement
schedule listed in the Index at Item 14. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements and financial statement schedule 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, 1994 and 1993, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1994 in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As discussed in Note 1 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 1 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 LLP
Cincinnati, Ohio
January 23, 1995
CONSOLIDATED BALANCE SHEETS
( in thousands )
As of December 31,
1994 1993
ASSETS
Current Assets:
Cash and cash equivalents $ 16,609 $ 18,606
Accounts and notes receivable (less allowances - 1994, $5,653; 1993, $6,995) 155,917 150,671
Program rights and production costs 35,073 42,823
Refundable income taxes 25,214
Inventories 22,201 23,748
Deferred income taxes 22,007 18,097
Miscellaneous 20,007 19,050
Total current assets 297,028 272,995
Investments 35,146 79,870
Property, Plant, and Equipment 713,763 712,726
Goodwill and Other Intangible Assets 616,113 552,989
Other Assets:
Program rights and production costs (less current portion) 38,779 43,257
Miscellaneous 22,131 21,228
Total other assets 60,910 64,485
TOTAL ASSETS $ 1,722,960 $ 1,683,065
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
( in thousands, except share data )
As of December 31,
1994 1993
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 96,383
Accounts payable $ 131,592 79,334
Customer deposits and unearned revenue 23,846 17,480
Accrued liabilities:
Employee compensation and benefits 32,648 31,599
Artist and author royalties 8,177 10,985
Copyright and programming costs 7,522 6,986
Interest 1,999 2,834
Income taxes 2,507 7,763
Miscellaneous 50,533 41,859
Total current liabilities 258,824 295,223
Deferred Income Taxes 158,868 175,308
Long-Term Debt (less current portion) 110,431 151,535
Other Long-Term Obligations and Minority Interests 111,369 201,364
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: 1994 - 59,671,242 shares; 1993 - 54,586,495 shares 597 546
Voting - authorized: 30,000,000 shares; issued and
outstanding: 1994 and 1993 - 20,174,833 shares 202 202
Total 799 748
Additional paid-in capital 248,098 97,945
Retained earnings 823,204 733,978
Unrealized gains on securities available for sale 12,518 27,381
Unvested restricted stock awards (2,036) (1,009)
Foreign currency translation adjustment 885 592
Total stockholders' equity 1,083,468 859,635
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,722,960 $ 1,683,065
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
( in thousands, except per share data )
Years ended December 31,
1994 1993 1992
Operating Revenues:
Advertising $ 433,551 $ 401,247 $ 432,799
Circulation 116,684 116,413 123,375
Other newspaper revenue 52,703 50,394 52,513
Total newspapers 602,938 568,054 608,687
Broadcasting 288,184 284,294 277,287
Cable television 255,356 251,792 238,116
Entertainment 73,473 84,741 87,209
Other 8,126 44,172
Total operating revenues 1,219,951 1,197,007 1,255,471
Operating Expenses:
Employee compensation and benefits 359,972 375,846 417,090
Program rights and production costs 121,696 119,279 119,592
Newsprint and ink 94,160 89,062 90,044
Other operating expenses 303,809 304,141 334,276
Depreciation 85,883 88,745 88,330
Amortization of intangible assets 30,384 32,133 33,599
Total operating expenses 995,904 1,009,206 1,082,931
Operating Income 224,047 187,801 172,540
Other Credits (Charges):
Interest expense (16,616) (27,286) (34,247)
Net gains and unusual items 11,151 94,374 74,483
Miscellaneous, net (986) (2,552) (3,696)
Net other credits (charges) (6,451) 64,536 36,540
Income Before Income Taxes, Minority Interests,
and Cumulative Effect of Accounting Change 217,596 252,337 209,080
Provision for Income Taxes 86,925 106,750 92,585
Income Before Minority Interests and
Cumulative Effect of Accounting Change 130,671 145,587 116,495
Minority Interests 7,988 16,901 10,176
Income Before Cumulative Effect of Accounting Change 122,683 128,686 106,319
Cumulative Effect of Accounting Change - Adoption of FAS No. 106
(net of deferred income tax of $15,533) (22,413)
Net Income $ 122,683 $ 128,686 $ 83,906
Per Share of Common Stock:
Income before cumulative effect of accounting change $1.61 $1.72 $1.43
Cumulative effect of accounting change (0.30)
Net income $1.61 $1.72 $1.13
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
( in thousands, except share data )
Years ended December 31,
1994 1993 1992
Cash Flows From Operating Activities:
Net income $ 122,683 $ 128,686 $ 83,906
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation and amortization 116,267 120,878 121,929
Deferred income taxes 2,743 37,308 16,873
Minority interests in income of subsidiary companies 7,988 16,901 10,176
Net gains and unusual items (7,409) (91,874) (77,983)
Cumulative effect of an accounting change 22,413
Changes in certain working capital accounts, net of effects
from subsidiary companies purchased and sold 3,769 4,168 5,987
Miscellaneous, net 2,816 9,485 19,819
Net operating activities 248,857 225,552 203,120
Cash Flows From Investing Activities:
Additions to property, plant, and equipment (95,568) (103,864) (145,218)
Purchase of subsidiary companies and investments (32,936) (41,710) (19,117)
Sale of subsidiary companies, investments, and copyrights 47,593 140,509 36,919
Miscellaneous, net 5,325 9,690 1,295
Net investing activities (75,586) 4,625 (126,121)
Cash Flows From Financing Activities:
Increases in long-term debt 50,500
Payments on long-term debt (137,885) (194,086) (100,602)
Dividends paid (33,457) (32,847) (29,841)
Dividends paid to minority interests (3,817) (4,189) (4,490)
Miscellaneous, net (109) 575 (690)
Net financing activities (175,268) (230,547) (85,123)
Increase (Decrease) in Cash and Cash Equivalents (1,997) (370) (8,124)
Cash and Cash Equivalents:
Beginning of year 18,606 18,976 27,100
End of year $ 16,609 $ 18,606 $ 18,976
Supplemental Cash Flow Disclosures:
Acquisition of remaining minority interest in Scripps Howard
Broadcasting Company in exchange for 4,952,659 shares
of Class A Common stock $ 146,724
Interest paid, excluding amounts capitalized 17,117 $ 33,012 $ 36,129
Income taxes paid 143,455 68,008 60,409
Increase in program rights and related liabilities 30,685 51,614 48,251
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, 1991 $ 746 $ 92,351 $ 584,074 $ (851) $ 274
Net income 83,906
Dividends: declared and paid - $.40 per share (29,841)
Class A Common shares issued pursuant to
compensation plans, net:
86,164 shares issued, 3,500 shares forfeited 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)
Class A Common shares issued pursuant to
compensation plans, net:
165,775 shares issued, 4,270 shares forfeited,
and 17,071 shares repurchased 2 3,054 (817)
Tax benefits on compensation plans 525
Amortization of restricted stock awards 324
Foreign currency translation adjustment 223
Adoption of FAS No. 115, net of
deferred income tax of $14,744 $ 27,381
As of December 31, 1993 748 97,945 733,978 27,381 (1,009) 592
Net income 122,683
Dividends: declared and paid - $.44 per share (33,457)
Acquisition of minority interest in Scripps Howard
Broadcasting Company in exchange for
4,952,659 shares of Class A Common stock 49 146,675
Class A Common shares issued pursuant to
compensation plans:
140,025 shares issued, 2,810 shares forfeited,
and 5,127 shares repurchased 2 3,226 (1,527)
Tax benefits on compensation plans 252
Amortization of restricted stock awards 500
Foreign currency translation adjustment 293
Increase (decrease) in unrealized gains
on securities available for sale, net
of deferred income tax of $7,992 (14,863)
As of December 31, 1994 $ 799 $ 248,098 $ 823,204 $ 12,518 $ (2,036) $ 885
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").
Program Rights and Production Costs - Program rights are recorded at the
time such programs become available for broadcast. Amortization is computed
using the straight-line method based on the license period or based on
usage, whichever yields the greater accumulated amortization for each
program. The liability for program rights is not discounted for imputed
interest.
Production costs represent costs incurred in the production of programming
for distribution. Amortization of capitalized costs is based on the
percentage of current period revenues to anticipated total revenues for
each program.
Program and production costs are stated at the lower of unamortized cost or
fair value. The portion of the unamortized balance expected to be
amortized within one year is classified as a current asset.
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 )
1994 1993
Liabilities for programs available for broadcast:
Carrying amount $ 48,300 $ 64,300
Fair value 42,800 58,700
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 unamortized cost of the asset exceeds the
undiscounted estimated future net cash flows. 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.
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.
Income Taxes - Deferred income taxes 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.
Investments - The Company adopted Statement of Financial Accounting
Standards ("FAS") No. 115 - Accounting for Certain Investments in Debt and
Equity Securities on December 31, 1993.
Investments in 20%- to 50%-owned companies and in all joint ventures are
accounted for under the equity method. Investments in other debt and
equity securities are classified as available for sale and 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 those
securities are recognized as a separate component of stockholders' equity.
The cost of securities sold is determined by specific identification.
Newspaper Joint Operating Agencies - The Company is currently a party to
newspaper joint operating agencies ("JOAs") in five markets. A JOA
combines 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.
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.
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 58% of total inventories in 1994 and 25% in 1993. The cost
of other inventories is computed using the first in, first out ("FIFO")
method. Inventories would have been $1,200,000 and $200,000 higher at
December 31, 1994 and 1993 if FIFO (which approximates current cost) had
been used to compute the cost of newsprint.
Postemployment Benefits - The Company adopted FAS No. 106 - Employers'
Accounting for Postretirement Benefits Other Than Pensions in 1992.
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.
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 )
1994 1993 1992
Weighted average shares outstanding 76,246 74,650 74,602
Reclassifications - For comparison purposes certain 1993 and 1992 items
have been reclassified to conform with 1994 classifications.
2.ACQUISITIONS AND DIVESTITURES
A.Acquisitions
1994 - The Company acquired the remaining 13.9% minority interest in
Scripps Howard Broadcasting Company in exchange for 4,952,659 shares of
Class A Common stock. The Company acquired Cinetel Productions (an
independent producer of programs for cable television). The Company
also purchased a cable television system.
1993 - The Company acquired the remaining 2.7% minority interest in the
Knoxville News-Sentinel for $2,800,000. The Company purchased 5.7% of
the outstanding shares of Scripps Howard Broadcasting Company for
$28,900,000. The Company also 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 2B) and several cable television systems.
The following table presents additional information about the
acquisitions:
( in thousands )
1994 1993 1992
Goodwill and other intangible assets acquired $ 108,923 $ 19,647 $ 8,001
Other assets acquired 14,748 90 9,167
Reduction in minority interests 45,958 12,287
Previous interest in acquired newspaper (3,936)
Class A Common stock issued (146,724)
Liabilities assumed and notes issued (899) (722)
Cash paid 22,006 32,024 12,510
Net assets of The Herald:
Tangible assets 21,602
Liabilities assumed (1,227)
Total acquisitions $ 22,006 $ 32,024 $ 32,885
The acquisitions have been accounted for as purchases. The acquired
operations have been included in the Consolidated Statements of Income
from the dates of acquisition. Pro forma results are not presented
because the combined results of operations would not be significantly
different from the reported amounts.
B.Divestitures
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.
The following table presents additional information about the
divestitures:
( in thousands, except per share data )
1993 1992
Cash received $ 140,509 $ 36,919
Notes and preferred stock 14,150
Net assets of The Herald:
Tangible assets 21,602
Liabilities assumed (1,227)
Total proceeds 140,509 71,444
Net assets (liabilities) disposed 48,635 (6,539)
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
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
Operating revenues $ 53,600 $ 174,200
Operating income (loss) 7,600 (14,600)
3.UNUSUAL CREDITS AND CHARGES
1994 - The Company sold its worldwide Garfield and U.S. Acres copyrights.
The sale resulted in a pre-tax gain of $31,600,000, $17,400,000 after tax,
$.23 per share.
The Company's three television stations that had been Fox affiliates
changed their network affiliation. In connection with the change certain
program rights owned by those stations will be sold at an estimated loss of
$7,900,000. Two of the stations are constructing new buildings to
accommodate expanded local news staffs, and currently owned real estate
will be sold at an estimated loss of $2,800,000. These estimated losses
were recorded in 1994, reducing net income $6,600,000, $.09 per share.
The Company made a special contribution of 589,165 shares of Turner
Broadcasting Class B common stock to a charitable foundation. The
contribution reduced pre-tax income by $8,000,000 and net income by
$4,500,000, $.06 per share.
Management changed its estimate of the tax liability for prior years as a
result of an audit by the Internal Revenue Service ("IRS"). The adjustment
increased net income by $4,500,000, $.06 per share (see Note 4).
The Company accrued an estimate of the ultimate costs of certain lawsuits
associated with divested operations. The accrual reduced net income by
$5,800,000, $.07 per share.
1993 - Operating results include net pre-tax gains of $91,900,000,
$46,800,000 after-tax, $.63 per share (see Note 2).
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 Company realized a $1,100,000 gain on sale of certain publishing
equipment and received a $2,500,000 fee in connection with the sale of the
Ogden, Utah, Standard Examiner. Net income increased $2,300,000, $.03 per
share.
The Company recorded a $6,300,000 restructuring charge. The charge reduced
net income $3,600,000, $.05 per share.
Management changed its estimate of the tax liability for prior years (see
Note 4). The adjustment increased net income $5,400,000, $.07 per share.
The federal income tax rate was increased to 35%. The effect on the
Company's deferred tax liabilities reduced net income $3,700,000, $.05 per
share.
1992 - Operating results include pre-tax gains of $78,000,000, $45,600,000
after-tax, $.61 per share (see Note 2).
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.
4.INCOME TAXES
The IRS is currently examining the Company's consolidated income tax
returns for the years 1985 through 1990.
In 1993 management changed its estimate of the tax basis and lives of
certain intangible assets. The resulting change in the estimated tax
liability for prior years increased net income $5,400,000, $.07 per share.
In 1994 the IRS proposed adjustments related to those intangible assets.
Based upon the proposed adjustments management again changed its estimate
of the tax liabilities for prior years, increasing net income in 1994
$4,500,000, $.06 per share.
Management believes that adequate provision for income taxes has been made
for all open years.
The approximate effects of the temporary differences giving rise to the
Company's deferred income tax liabilities (assets) are as follows:
( in thousands )
1994 1993
Accelerated depreciation and amortization $ 153,857 $ 161,830
Deferred gain on sale of Memphis television and radio stations 23,599 23,126
Investments 4,927 12,900
Accrued expenses not deductible until paid (27,745) (20,625)
Deferred compensation and retiree benefits (12,470) (10,380)
Other temporary differences, net 4,116 (260)
Total 146,284 166,591
State net operating loss carryforwards (16,871) (14,774)
Foreign tax credits and other carryforwards (1,371)
Valuation allowance for state deferred tax assets and foreign tax credits 7,448 6,765
Net deferred tax liability $ 136,861 $ 157,211
The Company's state net operating loss carryforwards expire from 2000
through 2019.
The provision for income taxes consists of the following:
( in thousands )
1994 1993 1992
Current:
Federal $ 64,699 $ 55,295 $ 62,401
State and local 14,819 9,877 9,294
Foreign 4,412 3,745 4,017
Total current 83,930 68,917 75,712
Deferred:
Federal (8,269) 47,672 13,384
Other 3,020 4,380 3,489
Total deferred (5,249) 52,052 16,873
Total income taxes 78,681 120,969 92,585
Income taxes allocated to stockholders' equity 8,244 (14,219)
Provision for income taxes $ 86,925 $ 106,750 $ 92,585
The difference between the statutory rate for federal income tax
and the effective income tax rate is summarized as follows:
1994 1993 1992
Statutory rate 35.0 % 35.0 % 34.0 %
Effect of:
State and local income taxes 4.5 3.6 4.0
Amortization of goodwill 2.0 1.4 4.3
Increase in tax rate to 35% on deferred tax liabilities 1.4
Change in estimated tax basis and lives of certain assets (2.1) (1.5)
Difference between foreign and U.S. tax rates,
including foreign tax credits 0.3 0.3 0.7
Miscellaneous 0.2 2.1 1.3
Effective income tax rate 39.9 % 42.3 % 44.3 %
5.LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
( in thousands )
1994 1993
Variable Rate Credit Facilities $ 88,000
7.375% notes, due in 1998 $ 61,161 99,264
9.0% notes, due in 1996 47,000 50,000
8.5% notes, payable through 1994 8,334
Other notes 2,270 2,320
Total long-term debt 110,431 247,918
Current portion of long-term debt 96,383
Long-term debt (less current portion) $ 110,431 $ 151,535
Fair value of long-term debt * $ 109,600 $ 260,900
Weighted average interest rate on Variable Rate
Credit Facilities at December 31 3.4%
* 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
expires in September 1995 and permits maximum borrowings up to $50,000,000,
and additional lines of credit totaling $20,000,000 which expire at various
dates through June 1995 (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 may be extended upon mutual agreement.
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 )
1994 1993 1992
Capitalized interest costs $ 0 $ 100 $ 4,500
6.INVESTMENTS
Investments consisted of the following at December 31:
( in thousands, except share data )
1994 1993
Securities available for sale:
Turner Broadcasting Class C preferred stock
(convertible into 1,309,092 shares of Class B common stock) $ 21,436 $ 35,345
Pittsburgh Post-Gazette preferred stock,
$25 million face value, 8% cumulative dividend 14,000
Turner Broadcasting Class B common stock (589,165 shares) 15,907
Other 2,456 4,043
Total securities available for sale 23,892 69,295
Investments accounted for under the equity method 11,254 10,575
Total investments $ 35,146 $ 79,870
Unrealized gains on securities available for sale $ 19,270 $ 42,125
There were no unrealized losses in either year.
7.PROPERTY, PLANT, AND EQUIPMENT AND INTANGIBLE ASSETS
Property, plant, and equipment consisted of the following at December 31:
( in thousands )
1994 1993
Land and improvements $ 44,372 $ 45,199
Buildings and improvements 185,999 184,708
Equipment 1,032,770 972,674
Total 1,263,141 1,202,581
Accumulated depreciation 549,378 489,855
Net property, plant, and equipment $ 713,763 $ 712,726
Goodwill and other intangible assets consisted of the following at December 31:
( in thousands )
1994 1993
Goodwill $ 472,207 $ 387,868
Cable television franchise costs 167,467 167,378
Customer lists 135,053 133,427
Licenses and copyrights 28,221 28,221
Non-competition agreements 24,489 32,089
Other 39,300 31,870
Total 866,737 780,853
Accumulated amortization 250,624 227,864
Net goodwill and other intangible assets $ 616,113 $ 552,989
8.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 )
1994 1993 1992
Service cost $ 9,413 $ 8,434 $ 8,282
Interest cost 11,830 13,395 14,266
Actual return on plan assets 1,617 (13,420) (13,374)
Net amortization and deferral (14,932) (2,662) (4,780)
Defined benefit plans 7,928 5,747 4,394
Multi-employer plans 1,028 1,044 1,664
Defined contribution plans 4,002 3,943 4,100
Total 12,958 10,734 10,158
Curtailment losses (gains) included in gain
on the sales of subsidiary companies 253 (3,632)
Total retirement plans expense $ 12,958 $ 10,987 $ 6,526
Assumptions used in the accounting for the defined benefit plans
were as follows:
1994 1993 1992
Discount rate as of December 31 8.5% 7.0% 8.0%
Expected long-term rate of return on plan assets 9.5% 8.0% 9.0%
Rate of increase in compensation levels 5.0% 3.5% 4.5%
The funded status of the defined benefit plans at December 31 was
as follows:
( in thousands )
1994 1993
Actuarial present value of vested benefits $ (106,416) $ (136,719)
Actuarial present value of accumulated benefits $ (113,930) $ (146,178)
Actuarial present value of projected benefits $ (164,333) $ (180,843)
Plan assets at fair value 157,694 172,688
Projected benefits in excess of plan assets (6,639) (8,155)
Unrecognized net loss 3,464 11,025
Unrecognized prior service cost 9,492 9,836
Unrecognized net asset at the date FAS No. 87 was
adopted, net of amortization (10,669) (12,116)
Net pension asset (liability) recognized in the balance sheet $ (4,352) $ 590
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 $6,900,000 in 1994 and $6,300,000 in 1993. The cost of the plan was:
1994, $500,000; 1993, $600,000; and 1992, $600,000 (excluding $3,200,000
related to divested operations).
9.SEGMENT INFORMATION
Previously reported 1993 and 1992 segment information has been restated to
conform with 1994 segment classifications. The Entertainment segment
includes United Media licensing and syndication (previously included in the
Publishing segment), Scripps Howard Productions (a producer of television
programming), The Home & Garden Television Network (a 24-hour cable
television channel that was launched on December 30, 1994), and the
Company's equity interest in The Food Network and SportSouth cable
television networks (previously reported in Miscellaneous, net). On March
31, 1994 the Company completed the acquisition of Cinetel Productions (an
independent producer of programs for cable television). Cinetel's
operating results from the date of acquisition are included in the
Entertainment segment.
The Other segment includes book publishing operations which were sold in
1993 and TV Data which was sold in 1992.
Broadcasting operating income in 1994 was reduced by $7,900,000 as a result
of the program rights write-down and was increased in 1993 by $4,300,000 as
a result of the change in estimate of the additional amount of copyright
fees owed ASCAP (see Note 3).
Financial information relating to the Company's business segments is as
follows:
( in thousands )
1994 1993 1992
OPERATING REVENUES
Newspapers $ 602,938 $ 568,054 $ 608,687
Broadcasting 288,184 284,294 277,287
Cable television 255,356 251,792 238,116
Entertainment 73,473 84,741 87,209
Other 8,126 44,172
Total operating revenues $ 1,219,951 $ 1,197,007 $ 1,255,471
OPERATING INCOME
Newspapers $ 119,539 $ 75,389 $ 60,234
Broadcasting 86,645 81,958 69,932
Cable television 39,784 45,233 43,741
Entertainment (7,083) (1,561) 8,151
Other (201) 5,100
Corporate (14,838) (13,017) (14,618)
Total operating income $ 224,047 $ 187,801 $ 172,540
DEPRECIATION
Newspapers $ 28,399 $ 30,070 $ 31,879
Broadcasting 9,323 9,470 9,174
Cable television 45,843 47,656 44,025
Entertainment 1,667 899 826
Other 25 733
Corporate 651 625 1,693
Total depreciation $ 85,883 $ 88,745 $ 88,330
AMORTIZATION OF INTANGIBLE ASSETS
Newspapers $ 6,858 $ 6,902 $ 6,636
Broadcasting 11,946 12,212 12,142
Cable television 11,508 12,371 13,399
Entertainment 72 18 10
Other 630 1,412
Total amortization of intangible assets $ 30,384 $ 32,133 $ 33,599
ASSETS
Newspapers $ 621,008 $ 667,167 $ 705,112
Broadcasting 517,982 465,622 492,373
Cable television 430,610 425,168 414,518
Entertainment 84,816 82,538 39,037
Other 25,393
Corporate 68,544 42,570 28,512
Total assets $ 1,722,960 $ 1,683,065 $ 1,704,945
CAPITAL EXPENDITURES
Newspapers $ 21,226 $ 24,523 $ 75,648
Broadcasting 23,532 9,733 8,129
Cable television 41,616 67,019 58,299
Entertainment 7,989 981 297
Other 150
Corporate 1,205 1,608 2,695
Total capital expenditures $ 95,568 $ 103,864 $ 145,218
Corporate assets are primarily cash, investments, and refundable and
deferred income taxes.
10. COMMITMENTS AND CONTINGENCIES
The Company accrued an estimate of the ultimate costs of certain lawsuits
associated with divested operations (see Note 3). The Company is also
involved in other 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 $118,000,000 of program
rights that are not currently 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, 1994 were as
follows:
( in thousands )
1995 $ 10,800
1996 9,000
1997 8,000
1998 7,900
1999 8,000
Later years 42,900
Total $ 86,600
Rental expense for cancelable and non-cancelable leases was as follows:
( in thousands )
1994 1993 1992
Rental expense, net of sublease income $ 15,500 $ 14,000 $ 15,800
11. 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 3,250,000.
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, 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
Granted in 1994 493,500 27 - 30
Exercised in 1994 (87,025) 18 - 26
Forfeited in 1994 (20,000) 18 - 26
Outstanding at December 31, 1994 2,125,975 $ 16 - 34
Exercisable at December 31, 1994 1,461,975 $ 16 - 34
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 )
1994 1993 1992
Shares of Class A Common stock:
Awarded 53,000 32,000 16,750
Forfeited 2,810 4,270 3,500
Compensation expense recognized $ 500 $ 300 $ 700
12. SUMMARIZED QUARTERLY FINANCIAL INFORMATION (Unaudited)
Summarized financial information is as follows:
( in thousands, except per share data )
1st 2nd 3rd 4th
1994 Quarter Quarter Quarter Quarter Total
Operating revenues:
Newspapers $ 142,037 $ 151,765 $ 147,145 $ 161,991 $ 602,938
Broadcasting 60,353 73,892 68,200 85,739 288,184
Cable television 62,385 63,266 63,944 65,761 255,356
Entertainment 20,978 18,676 16,689 17,130 73,473
Total operating revenues 285,753 307,599 295,978 330,621 1,219,951
Operating expenses:
Employee compensation and benefits 88,123 90,182 87,550 94,117 359,972
Program rights and production costs 27,224 28,957 28,047 37,468 121,696
Newsprint and ink 20,657 22,131 23,586 27,786 94,160
Other operating expenses 68,622 72,427 74,676 88,084 303,809
Depreciation and amortization 29,025 30,660 28,313 28,269 116,267
Total operating expenses 233,651 244,357 242,172 275,724 995,904
Operating income 52,102 63,242 53,806 54,897 224,047
Interest expense (4,659) (4,613) (3,919) (3,425) (16,616)
Net gains and unusual items 31,621 (734) (19,736) 11,151
Miscellaneous, net 122 (374) 539 (1,273) (986)
Income taxes (20,352) (39,174) (21,358) (6,041) (86,925)
Minority interests (2,116) (2,878) (2,229) (765) (7,988)
Net income $ 25,097 $ 47,824 $ 26,105 $ 23,657 $ 122,683
Net income per share of common stock $ .34 $ .64 $ .35 $ .30 $1.61
Cash dividends per share of common stock $ .11 $ .11 $ .11 $ .11 $ .44
( in thousands, except per share data )
1st 2nd 3rd 4th
1993 Quarter Quarter Quarter Quarter Total
Operating revenues:
Newspapers $ 134,463 $ 143,632 $ 137,414 $ 152,545 $ 568,054
Broadcasting 61,845 77,401 67,178 77,870 284,294
Cable television 63,190 63,715 62,624 62,263 251,792
Entertainment 19,625 18,644 24,964 21,508 84,741
Other 4,529 3,597 8,126
Total operating revenues 283,652 306,989 292,180 314,186 1,197,007
Operating expenses:
Employee compensation and benefits 92,337 94,493 93,461 95,555 375,846
Program rights and production costs 26,674 29,205 35,140 28,260 119,279
Newsprint and ink 21,218 23,386 22,176 22,282 89,062
Other operating expenses 68,560 77,436 73,483 84,662 304,141
Depreciation and amortization 29,626 30,047 30,572 30,633 120,878
Total operating expenses 238,415 254,567 254,832 261,392 1,009,206
Operating income 45,237 52,422 37,348 52,794 187,801
Interest expense (7,911) (7,148) (6,119) (6,108) (27,286)
Net gains and unusual items 23,162 1,774 (2,922) 72,360 94,374
Miscellaneous, net 872 (1,431) (863) (1,130) (2,552)
Income taxes (26,682) (20,975) (11,521) (47,572) (106,750)
Minority interests (2,080) (2,555) (1,856) (10,410) (16,901)
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
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
Valuation and Qualifying Accounts S-2
VALUATION AND QUALIFYING ACCOUNTS SCHEDULE VIII
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, 1992
( 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, 1994:
Allowance for doubtful
accounts receivable $ 6,316 $ 6,512 $ 7,776 $ 5,052
Allowance for sales returns 679 78 601
Total receivable allowances $ 6,995 $ 6,512 $ 7,854 $ 5,653
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
THE E.W. SCRIPPS COMPANY
Index to Exhibits
Exhibit Exhibit No.
Number Description of Item Page Incorporated
3.01 Certificate of Incorporation of the Company (1) 3.01
3.02 By-laws of the Company (1) 3.02
4.01 Class A Common Stock Certificate (4) 4
4.02 Form of Indenture (2) 4.1
4.03 Form of Debt Securities (2) 4.2
4.04 Form of Guarantee (2) 4.3
10.01 Amended and Restated Joint Operating Agreement, dated January 1, 1979, among
Journal Publishing Company, New Mexico State Tribune Company, and
Albuquerque Publishing Company, as amended (1) 10.01
10.02 Amended and Restated Joint Operating Agreement, dated February 29, 1988, among
Birmingham News Company and Birmingham Post Company (1) 10.02
10.03 Joint Operating Agreement, dated September 23, 1977, between the
Cincinnati Enquirer, Inc., and the Company, as amended (1) 10.03
10.04 Joint Operating Agreement, dated May 24, 1989, between the El Paso Times, Inc.
and the Company, as amended (9) 10.04
10.05 Amended and Restated Joint Operating Agreement, dated October 23, 1986, among
Evansville Press Company, Inc., Hartmann Publications, Inc., and Evansville
Printing Corporation (1) 10.05
10.06 Building Lease, dated April 25, 1984, among Albuquerque Publishing Company,
Number Seven, and Jefferson Building Partnership (1) 10.08A
10.06A Ground Lease, dated April 25, 1984, among Albuquerque Publishing Company,
New Mexico State Tribune Company, Number Seven, and Jefferson Building
Partnership (1) 10.08B
10.07 Agreement, dated August 17, 1989, between United Feature Syndicate, Inc. and
Charles M. Schulz and the Trustees of the Schulz Family Renewal Copyright
Trust, as amended (1) 10.11
10.20 Competitive Advance and Revolving Credit Facility Agreement, dated
September 30, 1988, among the Company, Scripps Howard, Inc., and
Chemical Bank, et.al. (3) 10.15
10.20A Consent and Agreement, dated September 22, 1989, among Scripps Howard, Inc.
and each of the banks party to the Competitive Advance and Revolving Credit
Facility Agreement, dated September 30, 1988 (5) 10.29D
10.20B First Amendment, dated June 30, 1990, to the Competitive Advance and Revolving
Credit Facility Agreement, dated September 30, 1988 (5) 10.29B
10.20C Consent and Second Amendment, dated September 23, 1990, among Scripps Howard, Inc.
and each of the banks party to the Competitive Advance and Revolving Credit
Facility Agreement, dated September 30, 1988 (5) 10.29A
10.20D Consent and Second Amendment, dated September 22, 1991, among
Scripps Howard, Inc. and each of the banks party to the Competitive Advance
and Revolving Credit Facility Agreement dated September 30, 1988 (5) 10.29C
10.20E Third Amendment Agreement dated December 6, 1991, amending the Competitive
Advance and Revolving Credit Facility Agreement dated September 30, 1988 (2) 10.03
10.20F Unconditional Guarantee dated December 6, 1991 by The E. W. Scripps Company
of the indebtedness of Scripps Howard, Inc., under the Competitive Advance and
Revolving Credit Agreement dated September 30, 1988 (2) 10.20
10.21 Master Note Agreement dated June 15, 1990 (5) 10.34
10.22 Short-Term/Medium-Term Note Facility (5) 10.33
10.22A First Amendment Agreement, dated December 9, 1991, amending Credit Agreement,
dated September 21, 1990, between Scripps Howard, Inc., the Lenders named
therein, and the Travelers Insurance Company, as agent for the Lenders (2) 10.09
10.22B Guaranty, dated December 9, 1991, by The E. W. Scripps Company of the indebtedness
of Scripps Howard, Inc. under the Credit Agreement, dated September 21, 1990,
between Scripps Howard, Inc., the Lenders named therein, and the Travelers
Insurance Company, as agent for the Lenders (2) 10.32
10.23 9.0% Senior Notes due February 15, 1996 (Various agreements totaling $50,000,000) (5) 10.32
10.25 Scripps Howard, Inc. Guaranteed Medium Term Notes, The E. W. Scripps Company
Guarantor Agency Agreement (8) 1
10.25A Scripps Howard, Inc. Medium Term Note, Series A, Fixed Rate (8) 4.1
10.25B Scripps Howard, Inc. Medium Term Note, Series A, Floating Rate (8) 4.2
10.40 Second Amended and Restated Partnership Agreement for Sacramento Cable
Television, dated January 17, 1985, between Scripps Howard Cable Company
and Sacramento and River City Cablevision, Inc. (1) 10.29
10.42 Asset Exchange Agreement dated December 17, 1992 between
Blade Communications, Inc., Monterey Peninsula Herald Company, Scripps
Howard, Inc., and Pittsburgh Press Company (7) (C)
10.43A Asset Purchase Agreement Among Scripps Howard Broadcasting Company,
Ellis Communications, Inc., and Elcom of Memphis, Inc. (10) (C)
10.43B Asset Purchase Agreement Between Scripps Howard Broadcasting Company
and Capitol Broadcasting Company, Incorporated (10) (C)
10.43C Asset Purchase Agreement Among Scripps Howard Broadcasting Company,
Baycom Oregon L.P., and Baycom Partners, L.P. (10) (C)
10.44 Agreement and Plan of Merger by and among Scripps Howard Broadcasting Company:
The E.W. Scripps Company, and SHB Merger Corporation (11) 10.58
10.52 Description of Annual and Medium Term Bonus Plan (1) 10.34
10.52A Description of Deferred Compensation Plan (1) 10.35A
10.52B Form of Election Agreement for Annual Bonus Plan Deferral (1) 10.35B
10.52C Form of Election Agreement for Medium Term Bonus Plan Deferral (1) 10.35C
10.53 1987 Long-Term Incentive Plan (1) 10.36
10.53A Form of Nonqualified Stock Option Agreement (1) 10.36A
10.53B Form of Restricted Share Award Agreement (1) 10.36B
10.54 Agreement, dated December 24, 1959, between the Company and Charles E. Scripps,
as amended (1) 10.39A
10.54A Assignment, Assumption, and Release Agreement, dated December 31, 1987,
between the Company, Scripps Howard, Inc., and Charles E. Scripps (1) 10.39B
10.54B Amendment, dated June 21, 1988 to December 24, 1959 Agreement between
the Company and Charles E. Scripps (1) 10.39C
10.55 Board Representation Agreement, dated March 14, 1986, between
The Edward W. Scripps Trust and John P. Scripps (1) 10.44
10.56 Shareholder Agreement, dated March 14, 1986, between the Company and the
Shareholders of John P. Scripps Newspapers (1) 10.45
10.57 Scripps Family Trust Agreement dated October 15, 1992 (6) 1
12 Computation of Ratio of Earnings to Fixed Charges E-4
22 Subsidiaries of the Company E-5
24 Consent of Deloitte & Touche LLP E-6
27 Financial Data Schedule E-7
(1) Incorporated by reference to Registration Statement on Form S-1
(File No. 33-21714).
(2) Incorporated by reference to Registration Statement on Form S-3
(File No. 33-43989).
(3) Incorporated by reference to The E.W. Scripps Company Annual
Report on Form 10-K for the year ended December 31, 1988.
(4) Incorporated by reference to The E.W. Scripps Company Annual
Report on Form 10-K for the year ended December 31, 1990.
(5) Incorporated by reference to Form 8 Amendment No. 1 to The E.W.
Scripps Company Annual Report on Form 10-K for the year ended December
31, 1990.
(6) Incorporated by reference to The E.W. Scripps Company Current
Report on Form 8-K dated October 15, 1992.
(7) Incorporated by reference to The E.W. Scripps Company Current
Report on Form 8-K dated December 31, 1992.
(8) Incorporated by reference to The E.W. Scripps Company Current
Report on Form 8-K dated May 15, 1992.
(9) Incorporated by reference to The E.W. Scripps Company Annual
Report on Form 10-K for the year ended December 31, 1991.
(10) Incorporated by reference to Scripps Howard Broadcasting Company
Current Report on Form 8-K dated August 3, 1993.
(11) Incorporated by reference to Registration Statement on Form S-4
(File No. 33-54591)