10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2010
or
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 0-16914
THE E. W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)
|
|
|
Ohio
|
|
31-1223339 |
(State or other jurisdiction of
|
|
(I.R.S. Employer |
incorporation or organization)
|
|
Identification Number) |
|
|
|
312 Walnut Street |
|
|
Cincinnati, Ohio
|
|
45202 |
(Address of principal executive offices)
|
|
(Zip Code) |
Registrants telephone number, including area code: (513) 977-3000
Not Applicable
(Former name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files). Yes o No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or smaller reporting company. See definitions of large accelerated filer,
accelerated filer, or small reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o |
Accelerated filer þ |
Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date. As of July 31, 2010 there were 45,561,779 of the Registrants Class A
Common shares outstanding and 11,932,735 of the Registrants Common Voting shares outstanding.
INDEX TO THE E. W. SCRIPPS COMPANY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED June 30, 2010
2
PART I
As used in this Quarterly Report on Form 10-Q, the terms we, our, us or Scripps may,
depending on the context, refer to The E. W. Scripps Company, to one or more of its consolidated
subsidiary companies or to all of them taken as a whole.
|
|
|
ITEM 1. |
|
FINANCIAL STATEMENTS |
The information required by this item is filed as part of this Form 10-Q. See Index to Financial
Information at page F-1 of this Form 10-Q.
|
|
|
ITEM 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The information required by this item is filed as part of this Form 10-Q. See Index to Financial
Information at page F-1 of this Form 10-Q.
|
|
|
ITEM 3. |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The information required by this item is filed as part of this Form 10-Q. See Index to Financial
Information at page F-1 of this Form 10-Q.
|
|
|
ITEM 4. |
|
CONTROLS AND PROCEDURES |
The information required by this item is filed as part of this Form 10-Q. See Index to Financial
Information at page F-1 of this Form 10-Q.
PART II
|
|
|
ITEM 1. |
|
LEGAL PROCEEDINGS |
We are involved in legal proceedings arising in the ordinary course of business, such as defamation
actions, employment actions and various governmental and administrative proceedings, none of which
is expected to result in material loss.
There have been no material changes to the factors disclosed in Item 1A. Risk Factors in our Annual
Report on Form 10-K for the year ended December 31, 2009.
|
|
|
ITEM 2. |
|
UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS |
There were no sales of unregistered equity securities during the quarter for which this report is
filed.
|
|
|
ITEM 3. |
|
DEFAULTS UPON SENIOR SECURITIES |
There were no defaults upon senior securities during the quarter for which this report is filed.
3
|
|
|
ITEM 4. |
|
(REMOVED AND RESERVED) |
|
|
|
ITEM 5. |
|
OTHER INFORMATION |
None.
The information required by this item is filed as part of this Form 10-Q. See Index to Exhibits at
page E-1 of this Form 10-Q.
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
THE E. W. SCRIPPS COMPANY
|
|
Dated: August 9, 2010 |
BY: |
/s/ Douglas F. Lyons
|
|
|
|
Douglas F. Lyons |
|
|
|
Vice President and Controller |
|
|
5
THE E. W. SCRIPPS COMPANY
Index to Financial Information
|
|
|
Item |
|
Page |
|
|
|
|
|
F-2 |
|
|
|
|
|
F-4 |
|
|
|
|
|
F-5 |
|
|
|
|
|
F-6 |
|
|
|
|
|
F-7 |
|
|
|
|
|
F-19 |
|
|
|
|
|
F-28 |
|
|
|
|
|
F-30 |
|
|
|
F-1
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
122,450 |
|
|
$ |
7,681 |
|
Short-term investments |
|
|
17,361 |
|
|
|
12,180 |
|
Accounts and notes receivable (less
allowances $3,744 and $4,246) |
|
|
102,865 |
|
|
|
115,245 |
|
Inventory |
|
|
7,548 |
|
|
|
6,989 |
|
Deferred income taxes |
|
|
16,614 |
|
|
|
16,614 |
|
Income taxes receivable |
|
|
24,597 |
|
|
|
62,559 |
|
Income tax receivable Scripps Networks Interactive carryback claim |
|
|
9,280 |
|
|
|
|
|
Assets of discontinued operations |
|
|
|
|
|
|
24,948 |
|
Miscellaneous |
|
|
11,694 |
|
|
|
11,959 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
312,409 |
|
|
|
258,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
10,685 |
|
|
|
10,660 |
|
Property, plant and equipment |
|
|
398,527 |
|
|
|
417,745 |
|
Intangible assets |
|
|
23,785 |
|
|
|
23,635 |
|
Deferred income taxes |
|
|
43,675 |
|
|
|
57,132 |
|
Miscellaneous |
|
|
12,338 |
|
|
|
13,176 |
|
Assets of discontinued operations noncurrent |
|
|
|
|
|
|
5,825 |
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
801,419 |
|
|
$ |
786,348 |
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
F-2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
(in thousands, except share data) |
|
2010 |
|
|
2009 |
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
28,209 |
|
|
$ |
25,172 |
|
Customer deposits and unearned revenue |
|
|
25,167 |
|
|
|
26,773 |
|
Accrued liabilities: |
|
|
|
|
|
|
|
|
Employee compensation and benefits |
|
|
33,123 |
|
|
|
29,124 |
|
Miscellaneous |
|
|
20,534 |
|
|
|
21,763 |
|
Liabilities of discontinued operations |
|
|
|
|
|
|
24,362 |
|
Tax refund due to Scripps Networks Interactive |
|
|
9,280 |
|
|
|
|
|
Other current liabilities |
|
|
12,687 |
|
|
|
8,066 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
129,000 |
|
|
|
135,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
935 |
|
|
|
35,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities of discontinued operations noncurrent |
|
|
|
|
|
|
369 |
|
Other liabilities (less current portion) |
|
|
124,057 |
|
|
|
181,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
Preferred stock, $.01 par authorized: 25,000,000 shares; none
outstanding |
|
|
|
|
|
|
|
|
Common stock, $.01 par: |
|
|
|
|
|
|
|
|
Class A authorized: 240,000,000 shares; issued and
outstanding: 45,557,801 and 42,742,190 shares |
|
|
456 |
|
|
|
427 |
|
Voting authorized: 60,000,000 shares; issued and
outstanding: 11,932,735 and 11,932,735 shares |
|
|
119 |
|
|
|
119 |
|
|
|
|
|
|
|
|
Total |
|
|
575 |
|
|
|
546 |
|
Additional paid-in capital |
|
|
547,050 |
|
|
|
531,754 |
|
Retained earnings (accumulated deficit) |
|
|
87,681 |
|
|
|
(10,946 |
) |
Accumulated other comprehensive income (loss), net of income taxes: |
|
|
|
|
|
|
|
|
Pension liability adjustments |
|
|
(90,612 |
) |
|
|
(92,049 |
) |
Foreign currency translation adjustment |
|
|
|
|
|
|
590 |
|
|
|
|
|
|
|
|
Total The E.W. Scripps Company shareholders equity |
|
|
544,694 |
|
|
|
429,895 |
|
Noncontrolling interest |
|
|
2,733 |
|
|
|
3,356 |
|
|
|
|
|
|
|
|
Total equity |
|
|
547,427 |
|
|
|
433,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY |
|
$ |
801,419 |
|
|
$ |
786,348 |
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
F-3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ( UNAUDITED )
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
(in thousands, except per share data) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising |
|
$ |
144,258 |
|
|
$ |
137,425 |
|
|
$ |
282,574 |
|
|
$ |
280,818 |
|
Circulation |
|
|
29,698 |
|
|
|
28,565 |
|
|
|
61,842 |
|
|
|
59,202 |
|
Other |
|
|
14,829 |
|
|
|
13,460 |
|
|
|
28,649 |
|
|
|
26,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
|
188,785 |
|
|
|
179,450 |
|
|
|
373,065 |
|
|
|
366,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
|
|
85,688 |
|
|
|
83,396 |
|
|
|
172,453 |
|
|
|
189,643 |
|
Programs and program licenses |
|
|
15,149 |
|
|
|
12,969 |
|
|
|
29,573 |
|
|
|
25,876 |
|
Newsprint and press supplies |
|
|
11,338 |
|
|
|
13,813 |
|
|
|
23,316 |
|
|
|
31,862 |
|
Other costs and expenses |
|
|
58,079 |
|
|
|
55,631 |
|
|
|
114,726 |
|
|
|
113,456 |
|
Restructuring costs |
|
|
3,720 |
|
|
|
1,441 |
|
|
|
7,063 |
|
|
|
2,934 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
173,974 |
|
|
|
167,250 |
|
|
|
347,131 |
|
|
|
363,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, Amortization, and (Gains) Losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
11,215 |
|
|
|
10,222 |
|
|
|
22,496 |
|
|
|
21,083 |
|
Amortization of intangible assets |
|
|
362 |
|
|
|
383 |
|
|
|
700 |
|
|
|
1,103 |
|
Impairment of goodwill and indefinite-lived assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
216,413 |
|
(Gains) losses, net on disposal of property, plant and
equipment |
|
|
22 |
|
|
|
304 |
|
|
|
735 |
|
|
|
357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net depreciation, amortization and losses |
|
|
11,599 |
|
|
|
10,909 |
|
|
|
23,931 |
|
|
|
238,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
3,212 |
|
|
|
1,291 |
|
|
|
2,003 |
|
|
|
(235,881 |
) |
Interest expense |
|
|
(845 |
) |
|
|
(317 |
) |
|
|
(1,693 |
) |
|
|
(409 |
) |
Miscellaneous, net |
|
|
1,298 |
|
|
|
588 |
|
|
|
911 |
|
|
|
(1,021 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes |
|
|
3,665 |
|
|
|
1,562 |
|
|
|
1,221 |
|
|
|
(237,311 |
) |
Provision (benefit) for income taxes |
|
|
1,817 |
|
|
|
(772 |
) |
|
|
1,438 |
|
|
|
(31,707 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, net of tax |
|
|
1,848 |
|
|
|
2,334 |
|
|
|
(217 |
) |
|
|
(205,604 |
) |
Income (loss) from discontinued operations, net of tax |
|
|
97,659 |
|
|
|
(81 |
) |
|
|
98,844 |
|
|
|
(12,990 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
99,507 |
|
|
|
2,253 |
|
|
|
98,627 |
|
|
|
(218,594 |
) |
Net income (loss) attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(147 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the shareholders of
The E.W. Scripps Company |
|
$ |
99,507 |
|
|
$ |
2,253 |
|
|
$ |
98,627 |
|
|
$ |
(218,447 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per basic share of common stock
attributable
to the shareholders of The E.W. Scripps Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
.03 |
|
|
$ |
.04 |
|
|
$ |
.00 |
|
|
$ |
(3.83 |
) |
Income (loss) from discontinued operations |
|
|
1.53 |
|
|
|
.00 |
|
|
|
1.55 |
|
|
|
(.24 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per basic share of common stock |
|
$ |
1.56 |
|
|
$ |
.04 |
|
|
$ |
1.54 |
|
|
$ |
(4.08 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per diluted share of common stock
attributable
to the shareholders of The E.W. Scripps Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
.03 |
|
|
$ |
.04 |
|
|
$ |
.00 |
|
|
$ |
(3.83 |
) |
Income (loss) from discontinued operations |
|
|
1.52 |
|
|
|
.00 |
|
|
|
1.55 |
|
|
|
(.24 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per diluted share of common stock |
|
$ |
1.55 |
|
|
$ |
.04 |
|
|
$ |
1.54 |
|
|
$ |
(4.08 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
Net income (loss) per share amounts may not foot since each is calculated independently.
F-4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ( UNAUDITED )
|
|
|
|
|
|
|
|
|
|
|
Six months ended |
|
|
|
June 30, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
98,627 |
|
|
$ |
(218,594 |
) |
(Income) loss from discontinued operations |
|
|
(98,844 |
) |
|
|
12,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
|
(217 |
) |
|
|
(205,604 |
) |
Adjustments to reconcile loss from continuing operations
to net cash flows from operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
23,196 |
|
|
|
22,186 |
|
Impairment of goodwill and indefinite-lived assets |
|
|
|
|
|
|
216,413 |
|
Losses on sale of property, plant and equipment |
|
|
735 |
|
|
|
357 |
|
Deferred income taxes |
|
|
17,290 |
|
|
|
(19,611 |
) |
Excess tax benefits of share-based compensation plans |
|
|
(8,783 |
) |
|
|
|
|
Stock and deferred compensation plans |
|
|
5,203 |
|
|
|
5,358 |
|
Pension expense, net of payments |
|
|
(62,651 |
) |
|
|
17,630 |
|
Other changes in certain working capital accounts, net |
|
|
10,232 |
|
|
|
17,864 |
|
Miscellaneous, net |
|
|
1,465 |
|
|
|
(2,588 |
) |
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operating activities |
|
|
(13,530 |
) |
|
|
52,005 |
|
Net cash provided by (used in) discontinued operating activities |
|
|
2,754 |
|
|
|
(13,710 |
) |
|
|
|
|
|
|
|
Net operating activities |
|
|
(10,776 |
) |
|
|
38,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Proceeds from sale of property, plant and equipment |
|
|
505 |
|
|
|
71 |
|
Additions to property, plant and equipment |
|
|
(7,265 |
) |
|
|
(23,993 |
) |
Increase in short-term investments |
|
|
(5,181 |
) |
|
|
(10,620 |
) |
Increase in investments |
|
|
(23 |
) |
|
|
(3,037 |
) |
Purchase of intangible assets |
|
|
(850 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in continuing investing activities |
|
|
(12,814 |
) |
|
|
(37,579 |
) |
Net cash provided by (used in) discontinued investing
activities |
|
|
162,960 |
|
|
|
(79 |
) |
|
|
|
|
|
|
|
Net investing activities |
|
|
150,146 |
|
|
|
(37,658 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Net borrowings (payments) on variable rate credit facility |
|
|
(34,900 |
) |
|
|
12,000 |
|
Dividends paid to noncontrolling interest |
|
|
(623 |
) |
|
|
|
|
Proceeds from exercise of stock options |
|
|
4,568 |
|
|
|
|
|
Tax payments related to shares withheld for vested stock and RSUs |
|
|
(9,866 |
) |
|
|
|
|
Excess tax benefits from share-based compensation plans |
|
|
8,783 |
|
|
|
|
|
Miscellaneous, net |
|
|
2,208 |
|
|
|
(7,920 |
) |
|
|
|
|
|
|
|
Net cash provided by (used in) continuing financing activities |
|
|
(29,830 |
) |
|
|
4,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash discontinued operations |
|
|
5,229 |
|
|
|
160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
|
114,769 |
|
|
|
4,877 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
Beginning of period |
|
|
7,681 |
|
|
|
3,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period |
|
$ |
122,450 |
|
|
$ |
8,746 |
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
F-5
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY ( UNAUDITED )
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained |
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Earnings |
|
|
Other |
|
|
|
|
|
|
|
|
|
Common |
|
|
Paid-in |
|
|
(Accumulated |
|
|
Comprehensive |
|
|
Noncontrolling |
|
|
Total |
|
(in thousands, except share data) |
|
Stock |
|
|
Capital |
|
|
Deficit) |
|
|
Income (Loss) |
|
|
Interests |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008 |
|
$ |
538 |
|
|
$ |
523,859 |
|
|
$ |
200,827 |
|
|
$ |
(133,655 |
) |
|
$ |
3,398 |
|
|
$ |
594,967 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
(218,447 |
) |
|
|
|
|
|
|
(147 |
) |
|
|
(218,594 |
) |
Changes in defined pension plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,856 |
|
|
|
|
|
|
|
41,856 |
|
Currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(101 |
) |
|
|
|
|
|
|
(101 |
) |
Compensation plans: 156,472 net shares issued |
|
|
1 |
|
|
|
5,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2009 |
|
$ |
539 |
|
|
$ |
529,482 |
|
|
$ |
(17,620 |
) |
|
$ |
(91,900 |
) |
|
$ |
3,251 |
|
|
$ |
423,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 |
|
$ |
546 |
|
|
$ |
531,754 |
|
|
$ |
(10,946 |
) |
|
$ |
(91,459 |
) |
|
$ |
3,356 |
|
|
$ |
433,251 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
98,627 |
|
|
|
|
|
|
|
|
|
|
|
98,627 |
|
Dividends paid to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(623 |
) |
|
|
(623 |
) |
Changes in defined pension plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,437 |
|
|
|
|
|
|
|
1,437 |
|
Currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(590 |
) |
|
|
|
|
|
|
(590 |
) |
Excess tax benefits of compensation plans |
|
|
|
|
|
|
14,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,953 |
|
Compensation plans: 2,815,611 net shares issued* |
|
|
29 |
|
|
|
343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2010 |
|
$ |
575 |
|
|
$ |
547,050 |
|
|
$ |
87,681 |
|
|
$ |
(90,612 |
) |
|
$ |
2,733 |
|
|
$ |
547,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Net of $9,866 of tax payments related to shares withheld for vested stock and RSUs. |
See notes to condensed consolidated financial statements.
F-6
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
As used in the Notes to Consolidated Financial Statements, the terms we, our, us or
Scripps may, depending on the context, refer to The E. W. Scripps Company, to one or more of
its consolidated subsidiary companies or to all of them taken as a whole.
Basis of Presentation The condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. The interim financial statements should be read in conjunction with the audited consolidated
financial statements, including the notes thereto included in our 2009 Annual Report on Form 10-K.
In managements opinion all adjustments (consisting of normal recurring accruals) necessary for a
fair presentation of the interim periods have been made. Certain amounts in prior periods have
been reclassified to conform to the current periods presentation.
Results of operations are not necessarily indicative of the results that may be expected for
future interim periods or for the full year.
Nature of Operations We are a diverse media concern with interests in newspaper publishing and
broadcast television. All of our media businesses provide content and advertising services via the
Internet. Our media businesses are organized into the following reportable business segments:
Newspapers, Television, and Syndication and other. Additional information for our business segments
is presented in Note 12.
Use of Estimates The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires us to make a variety of
decisions that affect the reported amounts and the related disclosures. Such decisions include the
selection of accounting principles that reflect the economic substance of the underlying
transactions and the assumptions on which to base accounting estimates. In reaching such
decisions, we apply judgment based on our understanding and analysis of the relevant circumstances,
including our historical experience, actuarial studies and other assumptions.
Our financial statements include estimates and assumptions used in accounting for our defined
benefit pension plans; the recognition of certain revenues; rebates due to customers; the periods
over which long-lived assets are depreciated or amortized; the fair value of long-lived assets and
goodwill; income taxes payable and deferred income taxes; estimates for uncollectible accounts
receivable; and self-insured risks.
While we re-evaluate our estimates and assumptions on an ongoing basis, actual results could differ
from those estimated at the time of preparation of the financial statements.
Revenue Recognition We recognize revenue when persuasive evidence of a sales arrangement
exists, delivery occurs or services are rendered, the sales price is fixed or determinable and
collectability is reasonably assured. When a sales arrangement contains multiple elements, such as
the sale of advertising and other services, we allocate revenue to each element based upon its
relative fair value. Revenue recognition may be ceased on delinquent accounts depending upon a
number of factors, including the customers credit history, number of days past due, and the terms
of any agreements with the customer. Revenue recognition on such accounts resumes when the
customer has taken actions to remove their accounts from delinquent status, at which time we
recognize any associated deferred revenues. We report revenue net of sales and other taxes
collected from our customers.
Our primary sources of revenue are from the sale of print, broadcast, and Internet advertising and
the sale of newspapers.
The revenue recognition policies for each source of revenue are described in our annual report on
Form 10-K for the year ended December 31, 2009.
Share-Based Compensation On May 13, 2010, we adopted The E.W. Scripps Company 2010 Long-Term
Incentive Plan (the Plan). The Plan replaces The E.W. Scripps 1997 Long-Term Incentive Plan, as
amended (the 1997 Plan). The Plan
permits the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock, Restricted Stock Units and Other Stock-Based Awards. We have reserved 3
million Class A Common Shares for issuance under the Plan. In addition, 1.1 million Class A Common
Shares remain available under the 1997 Plan, and any shares previously granted under the 1997 Plan
that are subsequently forfeited, terminated, settled in cash or used to satisfy tax withholding
obligations become available for issuance under the 2010 Plan. The Plan terminates on February 15,
2020.
F-7
Share-based compensation costs for continuing operations totaled $3.0 million for the second
quarter of 2010 and $2.0 million for the second quarter of 2009. Year-to-date share-based
compensation costs for continuing operations totaled $5.6 million and $5.1 million in 2010 and
2009, respectively.
Earnings Per Share (EPS) Unvested awards of share-based payments with rights to receive
dividends or dividend equivalents, such as our restricted stock and restricted stock units (RSUs),
are considered participating securities for purposes of calculating EPS. Under the two-class
method, we allocate a portion of net income to these participating securities and therefore exclude
that income from the calculation of EPS allocated to common stock. We do not allocate losses to the
participating securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator (for basic earnings per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the shareholders of
The E.W. Scripps Company |
|
$ |
99,507 |
|
|
$ |
2,253 |
|
|
$ |
98,627 |
|
|
$ |
(218,447 |
) |
Less income allocated to unvested restricted stock and RSUs |
|
|
(10,672 |
) |
|
|
(341 |
) |
|
|
(12,154 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per share |
|
$ |
88,835 |
|
|
$ |
1,912 |
|
|
$ |
86,473 |
|
|
$ |
(218,447 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average shares outstanding |
|
|
57,001 |
|
|
|
53,636 |
|
|
|
56,044 |
|
|
|
53,605 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options held by employees and directors |
|
|
212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted-average shares outstanding |
|
|
57,213 |
|
|
|
53,636 |
|
|
|
56,044 |
|
|
|
53,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive securities (1) |
|
|
8,925 |
|
|
|
22,146 |
|
|
|
17,911 |
|
|
|
22,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amount outstanding at Balance Sheet date, before
application of the treasury stock method and not weighted for period
outstanding. |
For the year-to-date 2009 period we incurred a net loss from continuing operations and the
inclusion of unvested stock, RSUs and stock options held by employees and directors would have
been anti-dilutive and accordingly the diluted EPS calculation for the period excludes those common
share equivalents.
F-8
2. ACCOUNTING CHANGES AND RECENTLY ISSUED ACCOUNTING STANDARDS
Accounting Changes In June 2009, the FASB issued new accounting guidance which amended
the consolidation guidance applicable to variable interest entities and was effective for us on
January 1, 2010. The adoption of this new guidance did not have an impact on our financial
condition or results of operations.
New Accounting Pronouncements In October 2009, the FASB issued amendments to the
accounting and disclosure for revenue recognition. These amendments, effective for fiscal years
beginning on or after June 15, 2010 (early adoption is permitted), modify the criteria for
recognizing revenue in multiple element arrangements and the scope of what constitutes a
non-software deliverable. The Company is currently assessing the impact on its consolidated
financial position and results of operations.
3. DISCONTINUED OPERATIONS
Sale of Licensing
On June 3, 2010, the Company and its wholly owned subsidiary, United Feature Syndicate, Inc.
(UFS) completed the sale of its character licensing business (UML) to Iconix Brand Group. The
sale also included certain intellectual property including the rights to syndicate the Peanuts and
Dilbert comic strips. The aggregate cash sale price was $175 million resulting in a pre-tax gain
of $162 million. The results of operations of UML and the gain on sale are presented as
discontinued operations in our financial statements for all periods.
In connection with the sale, Iconix assumed UFSs real estate lease, which expires in February
2016. We were not released from our obligations as guarantor of that lease by the lessor. Total
remaining lease payments at June 30, 2010 are approximately $9 million. We believe that the
likelihood of incurring future costs for this guarantee to be remote, and therefore we have not
recorded a related liability.
Closure of Rocky Mountain News
After an unsuccessful search for a buyer, we closed the Rocky Mountain News after it published its
final edition on February 27, 2009.
Our Rocky Mountain News and Media News Group, Inc.s (MNG) Denver Post were partners in The Denver
Newspaper Agency (the Denver JOA), a limited liability partnership, which operated the sales,
production and business operations of the Rocky Mountain News prior to its closure. Each newspaper
owned 50% of the Denver JOA and received a 50% share of the profits. Each newspaper provided the
Denver JOA with the independent editorial content published in its newspaper.
Under the terms of an agreement with MNG, we transferred our interests in the Denver JOA to MNG in
the third quarter of 2009.
The results of the operations of the Rocky Mountain News and the earnings from our interest in the
Denver JOA are presented as discontinued operations in our financial statements for all periods.
F-9
Operating results of our discontinued operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UML |
|
$ |
13,244 |
|
|
$ |
14,456 |
|
|
$ |
27,979 |
|
|
$ |
31,680 |
|
Rocky Mountain News |
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
$ |
13,244 |
|
|
$ |
14,474 |
|
|
$ |
27,979 |
|
|
$ |
31,717 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of Licensing, before tax |
|
$ |
162,001 |
|
|
$ |
|
|
|
$ |
162,001 |
|
|
$ |
|
|
Income (loss) from discontinued operations, before tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UML |
|
|
1,822 |
|
|
|
2,003 |
|
|
|
4,000 |
|
|
|
5,494 |
|
Rocky Mountain News |
|
|
|
|
|
|
(804 |
) |
|
|
|
|
|
|
(22,017 |
) |
Income tax (expense) benefit |
|
|
(66,164 |
) |
|
|
(1,280 |
) |
|
|
(67,157 |
) |
|
|
3,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations |
|
$ |
97,659 |
|
|
$ |
(81 |
) |
|
$ |
98,844 |
|
|
$ |
(12,990 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
4. OTHER CHARGES AND CREDITS
2010 Restructuring costs include the costs to restructure our newspaper and television
operations. These costs before taxes were $3.7 million in the second quarter and $7.1 million
year-to-date.
2009 Restructuring costs include the costs to separate and install separate information systems
as well as other costs related to our separation from SNI. These costs before taxes were $1.4
million in the second quarter and $2.9 million year-to-date.
In the first quarter we recorded a $215 million, non-cash charge to reduce the carrying value of
our goodwill for our Television division. See Note 6.
We also recorded a $1 million non-cash charge to reduce the carrying value of the FCC license for
our Lawrence, Kansas television station.
5. INCOME TAXES
We file a consolidated federal income tax return, unitary tax returns in certain states, and other
separate state income tax returns for certain of our subsidiary companies.
The income tax provision for interim periods is determined based upon the expected effective income
tax rate for the full year and the tax rate applicable to certain discrete transactions in the
interim period. To determine the annual effective income tax rate, we must estimate both the total
income (loss) before income tax for the full year and the jurisdictions in which that income (loss) is
subject to tax. The actual effective income tax rate for the full year may differ from these
estimates if income (loss) before
income tax is greater or less than what was estimated or if the allocation of income (loss) to
jurisdictions in which it is taxed is different from the estimated allocations. We review and
adjust our estimated effective income tax rate for the full year each quarter based upon our most
recent estimates of income (loss) before income tax for the full year and the jurisdictions in which we
expect that income (loss) will be taxed.
The effective income tax rate for continuing operations was 118% for the six months ended June 30,
2010. The primary difference between this rate and the U.S. Federal statutory rate of 35% is the
impact of state taxes, the accrual of taxes and interest for uncertain tax positions and
non-deductible expenses.
F-10
The effective income tax rate for continuing operations was 13.4% for the six months ended June 30,
2009. The primary difference between this rate and the U.S. Federal statutory rate of 35% is that
approximately $150 million of the goodwill impairment recorded is not deductible for income tax
purposes.
At June 30, 2010, we had net deferred tax assets of $60 million. We assess the realizability of
our deferred tax assets as of each balance sheet date and record a valuation allowance when it is
more likely than not that a portion, or all, of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the timing of the reversal of
temporary differences giving rise to the deferred tax assets, the generation of taxable income in
the periods in which the temporary differences reverse, or, if taxable income is not expected in
those periods, the ability to use the resulting tax losses to recover taxes paid in prior periods.
Management believes that it is more likely than not that we will realize the benefits of our
Federal deferred tax assets and therefore has not recorded a valuation allowance for our deferred
tax assets. Our current estimates of future taxable income could change based on economic
conditions or our operating performance, which could require a valuation allowance to be recorded
in future reporting periods.
State carryforwards are recognized as deferred tax assets, subject to valuation allowances. At each
balance sheet date, we estimate the amount of carryforwards that are not expected to be used prior
to expiration of the carryforward period. The tax effect of the carryforwards that are not expected
to be used prior to their expiration is included in the valuation allowance.
Our liability for uncertain tax positions increased by $7.1 million for the second quarter of 2010
primarily due to accruals for tax issues related to unitary vs. separate state filing positions.
Under the Tax Allocation Agreement between Scripps and SNI, SNI is responsible for its own
pre-spin-off tax obligations. However due to regulations governing the U.S. federal consolidated
tax return and certain combined state tax returns, we remain severally liable for SNIs
pre-spin-off federal taxes as well as certain state taxes. The June 30, 2010, liability for
uncertain tax positions includes approximately $13 million of state taxes which, if paid by us,
would be reimbursed by SNI.
6. GOODWILL AND OTHER INTANGIBLE ASSETS
Intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
As of |
|
|
|
June 30, |
|
|
December 31, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
Intangible assets: |
|
|
|
|
|
|
|
|
Amortizable intangible assets: |
|
|
|
|
|
|
|
|
Carrying amount: |
|
|
|
|
|
|
|
|
Television network affiliation relationships |
|
$ |
5,641 |
|
|
$ |
5,641 |
|
Customer lists |
|
|
12,469 |
|
|
|
12,469 |
|
Other |
|
|
6,942 |
|
|
|
6,092 |
|
|
|
|
|
|
|
|
Total carrying amount |
|
|
25,052 |
|
|
|
24,202 |
|
|
|
|
|
|
|
|
Accumulated amortization: |
|
|
|
|
|
|
|
|
Television network affiliation relationships |
|
|
(1,770 |
) |
|
|
(1,617 |
) |
Customer lists |
|
|
(8,241 |
) |
|
|
(7,831 |
) |
Other |
|
|
(4,451 |
) |
|
|
(4,314 |
) |
|
|
|
|
|
|
|
Total accumulated amortization |
|
|
(14,462 |
) |
|
|
(13,762 |
) |
|
|
|
|
|
|
|
Net amortizable intangible assets |
|
|
10,590 |
|
|
|
10,440 |
|
|
|
|
|
|
|
|
Indefinite-lived intangible assets FCC licenses |
|
|
13,195 |
|
|
|
13,195 |
|
|
|
|
|
|
|
|
Total intangible assets |
|
$ |
23,785 |
|
|
$ |
23,635 |
|
|
|
|
|
|
|
|
F-11
Activity related to goodwill by business segment was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syndication |
|
|
|
|
(in thousands) |
|
Television |
|
|
and Other |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill: |
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2008 |
|
$ |
215,414 |
|
|
$ |
18 |
|
|
$ |
215,432 |
|
Impairment of goodwill |
|
|
(215,414 |
) |
|
|
|
|
|
|
(215,414 |
) |
Other adjustments |
|
|
|
|
|
|
(18 |
) |
|
|
(18 |
) |
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2009 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Estimated amortization expense of intangible assets for each of the next five years is expected to
be $0.7 million for the remainder of 2010, $1.3 million in 2011, $1.0 million in 2012, $0.9million
in 2013, $0.7 million in 2014, $0.7 million in 2015 and $5.3 million in later years.
Due primarily to increases in the cost of capital for local media businesses and declines in our
stock price and that of other publicly traded television companies during the first quarter of
2009, we determined that indications of impairment existed for our Television goodwill as of March
31, 2009. We concluded the fair value of our television reporting unit did not exceed the carrying
value of our television net assets as of March 31, 2009, and we recorded a $215 million, non-cash
charge in the first quarter of 2009 to reduce the carrying value of goodwill. We also recorded a
$1 million non-cash charge in the first quarter of 2009 to reduce the carrying value of the FCC
license for our Lawrence, Kansas, television station to its estimated fair value.
7. LONG-TERM DEBT
Long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
As of |
|
|
|
June 30, |
|
|
December 31, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Variable rate credit facility |
|
$ |
|
|
|
$ |
34,900 |
|
Other notes |
|
|
935 |
|
|
|
1,016 |
|
|
|
|
|
|
|
|
Total long-term debt |
|
$ |
935 |
|
|
$ |
35,916 |
|
|
|
|
|
|
|
|
Fair value of long-term debt* |
|
$ |
935 |
|
|
$ |
35,916 |
|
|
|
|
|
|
|
|
|
|
|
* |
|
Fair value was estimated based on current rates available to the Company for debt of the same remaining maturity. |
On August 5, 2009, we entered into an Amended and Restated Revolving Credit Agreement (Agreement),
which expires June 30, 2013. The maximum amount of availability under the facility is $150 million.
Borrowings under the Agreement are limited to a borrowing base, as follows:
a) 100% of cash maintained in a blocked account (up to $20 million),
b) 85% of eligible accounts receivable,
c) 40% of eligible newsprint inventory, and
d) 50% of the fair market value of eligible real property (limited to $60 million).
At June 30, 2010, we had borrowing capacity of $118 million under our credit facility.
Under the terms of the Agreement we granted the lenders mortgages on certain of our real property,
pledges of our equity interests in its subsidiaries and security interests in substantially all
other personal property, including cash, accounts receivables, inventories and equipment. If at any
time, the amount of excess availability (defined as the amount by which the borrowing base exceeds
the aggregate borrowings and letters of credit under the Agreement) is equal to or less than $22.5
million, we must then maintain a fixed charge coverage ratio (as defined therein) of at least 1.1
to 1.0.
F-12
Borrowings under the Agreement bear interest at variable interest rates based on either LIBOR or a
base rate, in either case plus an applicable margin that varies depending upon average excess
availability. The margin for LIBOR based loans ranges from 2.75% to 3.25% per annum. The margin for
base rate loans ranges from 1.75% to 2.25% per annum. The weighted-average interest rate on
borrowings under the credit facility was 3.0% at June 30, 2010 and December 31, 2009.
Commitment fees ranging from 0.50% to 0.75% per annum (depending on utilization) of the total
unused commitment are payable under the credit facility.
As of June 30, 2010, and December 31, 2009, we had outstanding letters of credit totaling $10.4
million and $9.7 million, respectively.
In October 2008, we entered into a 2-year $30 million notional interest rate swap expiring in
October 2010. Under this agreement we receive payments based on the 3-month LIBOR and make payments
based on a fixed rate of 3.2%. This swap has not been designated as a hedge in accordance with
generally accepted accounting principles and changes in fair value are recorded in
miscellaneous-net with a corresponding adjustment to other long-term liabilities. The fair value at
June 30, 2010, and December 31, 2009, was $0.4 million and $0.8 million liability, respectively.
For the six-months ended June 30, 2010, a $0.4 million gain was recorded in miscellaneous, net
while a $0.2 million loss was recorded for the six-months ended June 30, 2009.
8. OTHER LIABILITIES
Other liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
As of |
|
|
|
June 30, |
|
|
December 31, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
Employee compensation and benefits |
|
$ |
16,691 |
|
|
$ |
17,805 |
|
Liability for pension benefits |
|
|
59,508 |
|
|
|
124,412 |
|
Liabilities for uncertain tax positions |
|
|
33,144 |
|
|
|
25,490 |
|
Other |
|
|
14,714 |
|
|
|
13,845 |
|
|
|
|
|
|
|
|
Other liabilities (less current portion) |
|
$ |
124,057 |
|
|
$ |
181,552 |
|
|
|
|
|
|
|
|
F-13
9. FAIR VALUE MEASUREMENT
We measure certain financial assets at fair value on a recurring basis, including short-term
investments and derivatives. The fair value of these financial assets was determined based on three
levels of inputs, of which the first two are considered observable and the last unobservable, that
may be used to measure fair value which are the following:
|
|
|
Level 1 Quoted prices in active markets for identical assets or liabilities. |
|
|
|
Level 2 Inputs, other than quoted market prices in active markets, that are
observable either directly or indirectly. |
|
|
|
Level 3 Unobservable inputs based on our own assumptions. |
The following tables set forth our assets and liabilities that are measured at fair value on a
recurring basis at June 30, 2010 and December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010 |
|
(in thousands) |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments |
|
$ |
17,361 |
|
|
$ |
17,361 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap |
|
$ |
424 |
|
|
$ |
|
|
|
$ |
424 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
(in thousands) |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments |
|
$ |
12,180 |
|
|
$ |
12,180 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap |
|
$ |
844 |
|
|
$ |
|
|
|
$ |
844 |
|
|
$ |
|
|
10. NONCONTROLLING INTERESTS
There are noncontrolling interests of approximately 4% in the capital stock of the subsidiary
company that publishes our Memphis newspaper and approximately 6% in the capital stock of the
subsidiary company that publishes our Evansville newspaper. The terms of the stock of these
companies does not provide for or require the redemption of the noncontrolling interests by us.
A summary of the components of net income (loss) attributable to The E.W. Scripps Company
shareholders is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to The E.W. Scripps Company shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, net of tax |
|
$ |
1,848 |
|
|
$ |
2,334 |
|
|
$ |
(217 |
) |
|
$ |
(205,457 |
) |
Income (loss) from discontinued operations, net of tax |
|
|
97,659 |
|
|
|
(81 |
) |
|
|
98,844 |
|
|
|
(12,990 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
99,507 |
|
|
$ |
2,253 |
|
|
$ |
98,627 |
|
|
$ |
(218,447 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
F-14
11. EMPLOYEE BENEFIT PLANS
We sponsor defined benefit pension plans that cover substantially all non-union and certain
union-represented employees. Benefits are generally based upon the employees compensation and
years of service.
We also have a non-qualified Supplemental Executive Retirement Plan (SERP). The SERP, which is
unfunded, provides defined pension benefits in addition to the defined benefit pension plan to
eligible participants based on average earnings, years of service and age at retirement.
Effective June 30, 2009, we froze the accrual of benefits under defined benefit pension plans that
cover a majority of our employees, including our SERP. The freeze resulted in the recognition of a
curtailment loss of $4.2 million in the first quarter of 2009 and a gain of $1.1 million in the
second quarter of 2009. In addition we recognized a curtailment loss of $0.9 million in 2009
related to the closure of our Denver newspaper.
We sponsor a defined contribution plan covering substantially all non-union and certain union
employees. We match a portion of employees voluntary contributions to this plan. We suspended
our matching contributions in the second quarter of 2009. Our matching contributions were
reinstated effective July 1, 2010.
Other union-represented employees are covered by union-sponsored multi-employer plans.
The components of the benefit plans expense consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
153 |
|
|
$ |
1,718 |
|
|
$ |
306 |
|
|
$ |
4,523 |
|
Interest cost |
|
|
6,368 |
|
|
|
6,605 |
|
|
|
12,736 |
|
|
|
13,335 |
|
Expected return on plan assets, net of expenses |
|
|
(6,039 |
) |
|
|
(5,116 |
) |
|
|
(12,078 |
) |
|
|
(10,402 |
) |
Amortization of prior service cost |
|
|
5 |
|
|
|
64 |
|
|
|
10 |
|
|
|
291 |
|
Amortization of actuarial loss |
|
|
1,057 |
|
|
|
3,088 |
|
|
|
2,114 |
|
|
|
6,431 |
|
Curtailment loss |
|
|
50 |
|
|
|
12 |
|
|
|
50 |
|
|
|
5,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for defined benefit plans |
|
|
1,594 |
|
|
|
6,371 |
|
|
|
3,138 |
|
|
|
19,289 |
|
Multi-employer plans |
|
|
85 |
|
|
|
145 |
|
|
|
339 |
|
|
|
319 |
|
SERP |
|
|
279 |
|
|
|
(610 |
) |
|
|
559 |
|
|
|
(107 |
) |
Defined contribution plans |
|
|
|
|
|
|
(78 |
) |
|
|
|
|
|
|
1,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
|
1,958 |
|
|
|
5,828 |
|
|
|
4,036 |
|
|
|
20,817 |
|
Allocated to discontinued operations |
|
|
48 |
|
|
|
(293 |
) |
|
|
(103 |
) |
|
|
(1,944 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost continuing operations |
|
$ |
2,006 |
|
|
$ |
5,535 |
|
|
$ |
3,933 |
|
|
$ |
18,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We contributed $1.1 million to fund current benefit payments for our SERP during the first half of
2010. We anticipate contributing an additional $3.7 million to fund the SERPs benefit payments
during the remainder of 2010. We contributed $65.3 million to our defined benefit plans during
the second quarter of 2010.
In the quarter ended March 31, 2009, we completed the actuarial valuation of our defined benefit
pension plan obligations, including final demographic information and updated assumptions related
to future salaries as a result of pay and bonus decreases implemented in the first quarter. In
addition the split of plan assets with SNI was completed in the first quarter of 2009. The changes
in actuarial assumptions and plan assets reduced our pension liability and accumulated
comprehensive loss by $23.4 million.
We remeasured our plan assets and liabilities in the second quarter of 2009, reflecting the
freezing of benefit accruals under the plans. The actuarial assumptions used to remeasure the plan
assets and liabilities were substantially the same as those used in the December 31, 2008,
measurement, except for an increase in the discount rate to 7%. The remeasurement reduced our
pension liabilities and accumulated comprehensive loss by $36 million.
F-15
12. SEGMENT INFORMATION
We determine our business segments based upon our management and internal reporting structure. Our
reportable segments are strategic businesses that offer different products and services.
Our newspaper business segment includes daily and community newspapers in 13 markets in the U.S.
Newspapers earn revenue primarily from the sale of advertising to local and national advertisers
and from the sale of newspapers to readers.
Our television business segment includes six ABC-affiliated stations, three NBC-affiliated stations
and one independent station. Our television stations reach approximately 10% of the nations
households. Television stations earn revenue primarily from the sale of advertising to local and
national advertisers.
We allocate a portion of certain corporate costs and expenses, including information technology,
pensions and other employee benefits, and other shared services, to our business segments. The
allocations are generally amounts agreed upon by management, which may differ from an arms-length
amount. Corporate assets are primarily cash, cash equivalents and other short-term investments,
property and equipment primarily used for corporate purposes, and deferred income taxes.
Our chief operating decision maker evaluates the operating performance of our business segments and
makes decisions about the allocation of resources to our business segments using a measure called
segment profit. Segment profit excludes interest, income taxes, depreciation and amortization,
divested operating units, restructuring activities, investment results and certain other items that
are included in net income (loss) determined in accordance with accounting principles generally
accepted in the United States of America.
F-16
Information regarding our business segments is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Segment operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newspapers |
|
$ |
107,988 |
|
|
$ |
112,538 |
|
|
$ |
220,600 |
|
|
$ |
233,634 |
|
Television |
|
|
74,810 |
|
|
|
61,098 |
|
|
|
141,649 |
|
|
|
121,504 |
|
Syndication and other |
|
|
5,987 |
|
|
|
5,814 |
|
|
|
10,816 |
|
|
|
11,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
$ |
188,785 |
|
|
$ |
179,450 |
|
|
$ |
373,065 |
|
|
$ |
366,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newspapers |
|
$ |
14,561 |
|
|
$ |
15,430 |
|
|
$ |
31,130 |
|
|
$ |
18,377 |
|
JOAs and newspaper partnerships |
|
|
|
|
|
|
78 |
|
|
|
|
|
|
|
(211 |
) |
Television |
|
|
13,309 |
|
|
|
4,849 |
|
|
|
19,953 |
|
|
|
2,436 |
|
Syndication and other |
|
|
(192 |
) |
|
|
(419 |
) |
|
|
(1,299 |
) |
|
|
(818 |
) |
Corporate and shared services |
|
|
(9,147 |
) |
|
|
(6,175 |
) |
|
|
(16,787 |
) |
|
|
(13,987 |
) |
Depreciation and amortization |
|
|
(11,577 |
) |
|
|
(10,605 |
) |
|
|
(23,196 |
) |
|
|
(22,186 |
) |
Impairment of goodwill and indefinite-lived assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(216,413 |
) |
Gains (losses), net on disposal of property, plant and
equipment |
|
|
(22 |
) |
|
|
(304 |
) |
|
|
(735 |
) |
|
|
(357 |
) |
Interest expense |
|
|
(845 |
) |
|
|
(317 |
) |
|
|
(1,693 |
) |
|
|
(409 |
) |
Restructuring costs |
|
|
(3,720 |
) |
|
|
(1,441 |
) |
|
|
(7,063 |
) |
|
|
(2,934 |
) |
Miscellaneous, net |
|
|
1,298 |
|
|
|
466 |
|
|
|
911 |
|
|
|
(809 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes |
|
$ |
3,665 |
|
|
$ |
1,562 |
|
|
$ |
1,221 |
|
|
$ |
(237,311 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newspapers |
|
$ |
6,366 |
|
|
$ |
5,546 |
|
|
$ |
13,152 |
|
|
$ |
11,311 |
|
Television |
|
|
4,554 |
|
|
|
4,335 |
|
|
|
8,707 |
|
|
|
9,094 |
|
Syndication and other |
|
|
133 |
|
|
|
157 |
|
|
|
285 |
|
|
|
315 |
|
Corporate and shared services |
|
|
162 |
|
|
|
184 |
|
|
|
352 |
|
|
|
363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation |
|
$ |
11,215 |
|
|
$ |
10,222 |
|
|
$ |
22,496 |
|
|
$ |
21,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newspapers |
|
$ |
258 |
|
|
$ |
300 |
|
|
$ |
513 |
|
|
$ |
937 |
|
Television |
|
|
104 |
|
|
|
83 |
|
|
|
187 |
|
|
|
166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amortization of intangibles |
|
$ |
362 |
|
|
$ |
383 |
|
|
$ |
700 |
|
|
$ |
1,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newspapers |
|
$ |
124 |
|
|
$ |
9,193 |
|
|
$ |
664 |
|
|
$ |
22,265 |
|
Television |
|
|
1,286 |
|
|
|
522 |
|
|
|
3,120 |
|
|
|
1,479 |
|
Syndication and other |
|
|
103 |
|
|
|
24 |
|
|
|
121 |
|
|
|
154 |
|
Corporate and shared services |
|
|
|
|
|
|
34 |
|
|
|
290 |
|
|
|
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total additions to property, plant and equipment |
|
$ |
1,513 |
|
|
$ |
9,773 |
|
|
$ |
4,195 |
|
|
$ |
23,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No single customer provides more than 10% of our revenue.
F-17
13. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the shareholders of The E.W.
Scripps Company |
|
$ |
99,507 |
|
|
$ |
2,253 |
|
|
$ |
98,627 |
|
|
$ |
(218,447 |
) |
Changes in defined pension plans, net of tax of $(419) and $(820) |
|
|
734 |
|
|
|
23,774 |
|
|
|
1,437 |
|
|
|
41,856 |
|
Currency translation adjustment, net of tax of $0 and $0 |
|
|
(590 |
) |
|
|
53 |
|
|
|
(590 |
) |
|
|
(101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) |
|
$ |
99,651 |
|
|
$ |
26,080 |
|
|
$ |
99,474 |
|
|
$ |
(176,692 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no material items of other comprehensive income (loss) for the noncontrolling
interest.
14. SPIN-OFF OF SCRIPPS NETWORKS INTERACTIVE, INC.
On July 1, 2008, we distributed all of the shares of Scripps Networks Interactive, Inc. (SNI).
SNI owned and operated our national lifestyle cable television networks and interactive media
businesses.
In connection with the spin-off, the following agreements between Scripps and SNI became effective:
|
|
|
Separation and Distribution Agreement |
|
|
|
|
Transition Services Agreement |
|
|
|
|
Employee Matters Agreement |
|
|
|
|
Tax Allocation Agreement |
These agreements are described in detail in our 2009 Annual Report on Form 10-K.
For the three-and-six- month periods ended June 30, 2009, we charged SNI $1.0 million and $2.9
million, respectively for services rendered under the terms of these agreements. In 2010 and
2009, SNI reimbursed us $6 million and $16 million, respectively for its share of estimated
taxes prior to the Spin-off under the Tax Allocation Agreement.
In the second quarter of 2010 we agreed to settle the audit of certain municipal tax returns for
$700,000. Under the Tax Allocation agreement, SNI will reimburse us for this amount, since it
related to operations of SNI prior to the spin-off.
At June 30, 2010, we recorded a $9.3 million income tax receivable for capital losses incurred
by SNI subsequent to the spin-off. Under the terms of the Tax Allocation Agreement, these
capital losses were carried back to our consolidated federal income tax returns for periods
prior to the spin-off. We will pay SNI for the loss carryback when the refund claim is received
from the IRS.
F-18
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis of financial condition and results of operations is based upon
the condensed consolidated financial statements and the condensed notes to the consolidated
financial statements. You should read this discussion in conjunction with those financial
statements.
Forward-Looking Statements
Certain forward-looking statements related to our businesses are included in this discussion.
Those forward-looking statements reflect our current expectations. Forward-looking statements
are subject to certain risks, trends and uncertainties that could cause actual results to differ
materially from the expectations expressed in the forward-looking statements. Such risks,
trends and uncertainties, which in most instances are beyond our control, include changes in
advertising demand and other economic conditions; consumers tastes; newsprint prices; program
costs; labor relations; technological developments; competitive pressures; interest rates;
regulatory rulings; and reliance on third-party vendors for various products and services. The
words believe, expect, anticipate, estimate, intend and similar expressions identify
forward-looking statements. You should evaluate our forward-looking statements, which are as of
the date of this filing, with the understanding of their inherent uncertainty. We undertake no
obligation to update any forward-looking statements to reflect events or circumstances after the
date the statement is made.
Executive Overview
The E. W. Scripps Company (Scripps) is a diverse media company with interests in newspaper
publishing and television stations. The companys portfolio of media properties includes: daily
and community newspapers in 13 markets and 10 television stations, including six ABC-affiliated
stations, three NBC affiliates and one independent station.
We closed the sale of United Feature Syndicate, Inc. (UFS) character licensing business (UML)
in the second quarter of 2010 for $175 million in cash. The operations of the character licensing
business and the $162 million pre-tax gain on sale are classified as discontinued operations for
all periods presented. We used $65 million of the proceeds from the sale of UML to make a
contribution to our defined benefit pension plans.
We are optimistic about the improving business climate in which our local television stations
operate as the economy recovers from the recession. We have seen an improvement in the flow of
advertising in all of our television markets, and key television revenue categories have shown
year-over-year growth. The rate of decline in newspaper advertising revenues continued to moderate
in the second quarter. We expect the year-over-year increase in television advertising revenues to
exceed 30% in the third quarter and the rate of decline in newspaper advertising revenues to
moderate slightly in the third quarter.
In 2009 we began a reorganization of the operations of our newspaper division. Where we had
previously operated each of our newspapers as independent businesses within their markets, we are
now managing our newspaper business vertically by function. We expect these efforts to focus local
management in each market on news coverage and revenue-producing activities. One of the primary
benefits of this reorganization is to implement successful products and revenue-producing
strategies across all markets with greater speed and efficiency. The new structure also enables us
to standardize and centralize functions that do not require a physical presence in the markets,
producing significant cost efficiencies. Implementing the reorganization plan, known as Scripps
3.0, is a major focus of the newspaper division. Our Scripps 3.0 initiative may result in
additional reductions in-force and the deployment of new software systems.
In our television division, we have centralized functions that do not require a presence in the
local markets at company-owned hubs, enabling each of our stations to increase resources devoted to
creation of content and revenue-producing activities. As consumers increasingly turn to portable
devices for news, our television stations have aggressively transitioned their infrastructure to
support content distribution on multiple platforms. We devote substantial energy and resources to
integrating such media into our business.
F-19
Year-over-year operating costs in the first half of the year benefited from cost reduction
initiatives we undertook late in the first quarter of 2009. Cost comparisons in later quarters
will be more difficult as subsequent quarters of 2009 include the benefit of those cost reduction
initiatives.
We had no outstanding borrowings under our revolving credit facility as of June 30, 2010. Cash and
short-term investments were $140 million as of June 30, 2010.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance with accounting principles generally
accepted in the United States of America (GAAP) requires us to make a variety of decisions which
affect reported amounts and related disclosures, including the selection of appropriate accounting
principles and the assumptions on which to base accounting estimates. In reaching such decisions,
we apply judgment based on our understanding and analysis of the relevant circumstances, including
our historical experience, actuarial studies and other assumptions. We are committed to
incorporating accounting principles, assumptions and estimates that promote the representational
faithfulness, verifiability, neutrality and transparency of the accounting information included in
the financial statements.
Note 1 to the Consolidated Financial Statements included in our Annual Report on Form 10-K
describes the significant accounting policies we have selected for use in the preparation of our
financial statements and related disclosures. An accounting policy is deemed to be critical if it
requires an accounting estimate to be made based on assumptions about matters that are highly
uncertain at the time the estimate is made, and if different estimates that reasonably could have
been used or changes in estimates that are likely to occur could materially change the financial
statements. We believe the accounting for Other Indefinite-Lived Intangible Assets, Income Taxes
and Pension Plans to be our most critical accounting policies and estimates. A detailed
description of these accounting policies is included in the Critical Accounting Policies section of
Managements Discussion and Analysis of Financial Condition and Results of Operations included in
our Annual Report on Form 10-K for the year ended December 31, 2009.
There have been no significant changes in those accounting policies or other significant accounting
policies.
F-20
RESULTS OF OPERATIONS
The trends and underlying economic conditions affecting the operating performance and future
prospects differ for each of our business segments. Accordingly, we believe the following
discussion of our consolidated results of operations should be read in conjunction with the
discussion of the operating performance of our business segments.
Consolidated Results of Operations
Consolidated results of operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Period |
|
|
|
|
|
|
|
|
|
|
Year-to-date |
|
|
|
|
(in thousands, except per share data) |
|
2010 |
|
|
Change |
|
|
2009 |
|
|
2010 |
|
|
Change |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues |
|
$ |
188,785 |
|
|
|
5.2 |
% |
|
$ |
179,450 |
|
|
$ |
373,065 |
|
|
|
1.7 |
% |
|
$ |
366,846 |
|
Costs and expenses less separation and restructuring costs |
|
|
(170,254 |
) |
|
|
2.7 |
% |
|
|
(165,809 |
) |
|
|
(340,068 |
) |
|
|
(5.8 |
)% |
|
|
(360,837 |
) |
Restructuring costs |
|
|
(3,720 |
) |
|
|
|
|
|
|
(1,441 |
) |
|
|
(7,063 |
) |
|
|
|
|
|
|
(2,934 |
) |
Depreciation and amortization |
|
|
(11,577 |
) |
|
|
9.2 |
% |
|
|
(10,605 |
) |
|
|
(23,196 |
) |
|
|
4.6 |
% |
|
|
(22,186 |
) |
Impairment of goodwill and indefinite-lived assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(216,413 |
) |
Gains (losses), net on disposal of property, plant and
equipment |
|
|
(22 |
) |
|
|
|
|
|
|
(304 |
) |
|
|
(735 |
) |
|
|
|
|
|
|
(357 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
3,212 |
|
|
|
|
|
|
|
1,291 |
|
|
|
2,003 |
|
|
|
|
|
|
|
(235,881 |
) |
Interest expense |
|
|
(845 |
) |
|
|
|
|
|
|
(317 |
) |
|
|
(1,693 |
) |
|
|
|
|
|
|
(409 |
) |
Miscellaneous, net |
|
|
1,298 |
|
|
|
|
|
|
|
588 |
|
|
|
911 |
|
|
|
|
|
|
|
(1,021 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income
taxes |
|
|
3,665 |
|
|
|
|
|
|
|
1,562 |
|
|
|
1,221 |
|
|
|
|
|
|
|
(237,311 |
) |
Benefit (provision) for income taxes |
|
|
(1,817 |
) |
|
|
|
|
|
|
772 |
|
|
|
(1,438 |
) |
|
|
|
|
|
|
31,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
1,848 |
|
|
|
|
|
|
|
2,334 |
|
|
|
(217 |
) |
|
|
|
|
|
|
(205,604 |
) |
Income (loss) from discontinued operations, net of tax |
|
|
97,659 |
|
|
|
|
|
|
|
(81 |
) |
|
|
98,844 |
|
|
|
|
|
|
|
(12,990 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
99,507 |
|
|
|
|
|
|
|
2,253 |
|
|
|
98,627 |
|
|
|
|
|
|
|
(218,594 |
) |
Net income (loss) attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(147 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the shareholders of The
E.W.
Scripps Company |
|
$ |
99,507 |
|
|
|
|
|
|
$ |
2,253 |
|
|
$ |
98,627 |
|
|
|
|
|
|
$ |
(218,447 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per basic share of common stock
attributable
to the shareholders of The E.W. Scripps Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
.03 |
|
|
|
|
|
|
$ |
.04 |
|
|
$ |
.00 |
|
|
|
|
|
|
$ |
(3.83 |
) |
Income (loss) from discontinued operations |
|
|
1.53 |
|
|
|
|
|
|
|
.00 |
|
|
|
1.55 |
|
|
|
|
|
|
|
(.24 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per basic share of common stock |
|
$ |
1.56 |
|
|
|
|
|
|
$ |
.04 |
|
|
$ |
1.54 |
|
|
|
|
|
|
$ |
(4.08 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share amounts may not foot since each is calculated independently.
Continuing Operations
Operating results include a number of items that affect the comparisons of 2010 to 2009. The most
significant of these items are as follows:
|
|
|
In the first quarter of 2009, we recorded $216 million in impairment charges to
write-down the value of our Television goodwill and one of our FCC licenses. |
|
|
|
|
In the second quarter of 2009, we recorded a $1.0 million curtailment gain ($3.1 million
charge year-to-date) related to the decision to freeze the accrual of benefits in our
defined benefit pension plans covering a majority of employees. |
|
|
|
|
Restructuring charges were $3.7 million in the second quarter ($7.1 million
year-to-date) of 2010 and $1.4 million ($2.9 million year-to-date) in 2009. The charges
relate to the reorganization of our newspaper and television operations. |
F-21
In the first half of 2010, we have experienced an improving business climate as the economy
recovers from the recession. We have seen a moderation in the rate of decline of our newspaper
advertising revenues and improved advertising volumes and higher rates in all of our television
markets. Our local media businesses derive much of their advertising from the retail, real estate,
employment and automotive categories, sectors that have been particularly weak during the
recession.
Excluding $3.1 million in costs associated with freezing the accrual of pension benefits recorded
in the first half of 2009, and the restructuring costs for 2010 and 2009, costs and expenses
declined by $17.7 million for the six months of 2010 compared with the first half of 2009. We have
reduced the number of employees in our newspaper and television divisions by approximately 10% in
the first half of this year compared to the first half of last year. Late in the first quarter of
2009, we took actions to reduce employee pay and benefits. The combined effects of the reduction
in the number of employees and reductions in pay and benefits led to a $17.2 million decrease in
employee compensation and benefits for the first half of 2010 compared with the first half of 2009.
Year-to-date newsprint costs declined by $7.5 million in 2010 as compared to 2009 due to 16%
decrease in both consumption and newsprint prices. Programs and program licenses increased in the
year-to-date period primarily due to the accrual of estimated network affiliation fees we expect to
pay upon the execution of a new affiliation agreement with ABC and the restoration of marketing and
promotional spending in most of our television markets.
Cost comparisons for the second quarter period were more difficult than for the first half of the
year. Excluding restructuring costs for 2010 and 2009, costs and expenses increased by $3.3
million year-over-year, including performance and incentive bonuses. The second quarter of 2010
includes the accrual of bonuses for the first half of the year while bonuses accrued in the first
quarter of 2009 were reversed in the second quarter of 2009 upon suspension of the bonus program.
Certain compensation programs that were eliminated late in the first and early in the second
quarter of 2009 were restored in the second quarter of 2010. Costs and expenses in the second
quarter of 2010 also increased due to the accrual of estimated network affiliation fees we expect
to pay ABC and marketing and promotional spending in the second quarter of 2010. Newsprint costs
decreased by $1.8 million in the second quarter of 2010 compared to the second quarter of 2009 due to a 14% decline
in consumption and a 4% decrease in newsprint prices.
Cost comparisons in the second half of 2010 will be more difficult as we continue to cycle against
the headcount and compensation program adjustments made in the first half of 2009. In addition,
newsprint prices in the second half of 2010 are expected to be approximately 25% higher than in the
second half of 2009.
Interest expense increased in the second quarter and year-to-date period since we are no longer
capitalizing interest for the construction of our new production facility in Naples.
The effective income tax rate for continuing operations was 118% and 13.4% for the six months ended 2010 and 2009,
respectively. The income tax provision for interim periods is determined by applying the expected
effective income tax rate for the full year to year-to-date income before income tax. Tax
provisions are separately provided for certain discrete transactions in interim periods. To
determine the annual effective income tax rate for the full-year period, we must estimate both the
total income before income tax for the full year and the jurisdictions in which that income is
subject to tax. The effective income tax rate for continuing operations was 118% for the six months
ended June 30, 2010. The primary difference between this rate and the U.S. Federal statutory rate
of 35% is the impact of state taxes, the accrual of taxes and interest for uncertain tax positions
and non-deductible expenses.
The write-down to the carrying value of Television goodwill in 2009 included $150 million
of goodwill that is not deductible for income taxes.
Discontinued Operations Discontinued operations includes the results of the Rocky Mountain News,
which ceased publication in February 2009 and the operating results and after-tax gain on sale of our
licensing business, which was sold during the second quarter of 2010.
F-22
Business Segment Results
Information regarding the operating performance of our business segments and a reconciliation of
such information to the consolidated financial statements is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Period |
|
|
|
|
|
|
|
|
|
|
Year-to-date |
|
|
|
|
(in thousands) |
|
2010 |
|
|
Change |
|
|
2009 |
|
|
2010 |
|
|
Change |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newspapers |
|
$ |
107,988 |
|
|
|
(4.0 |
)% |
|
$ |
112,538 |
|
|
$ |
220,600 |
|
|
|
(5.6 |
)% |
|
$ |
233,634 |
|
Television |
|
|
74,810 |
|
|
|
22.4 |
% |
|
|
61,098 |
|
|
|
141,649 |
|
|
|
16.6 |
% |
|
|
121,504 |
|
Syndication and other |
|
|
5,987 |
|
|
|
3.0 |
% |
|
|
5,814 |
|
|
|
10,816 |
|
|
|
(7.6 |
)% |
|
|
11,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
$ |
188,785 |
|
|
|
5.2 |
% |
|
$ |
179,450 |
|
|
$ |
373,065 |
|
|
|
1.7 |
% |
|
$ |
366,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newspapers |
|
$ |
14,561 |
|
|
|
(5.6 |
)% |
|
$ |
15,430 |
|
|
$ |
31,130 |
|
|
|
69.4 |
% |
|
$ |
18,377 |
|
JOAs and newspaper partnerships |
|
|
|
|
|
|
|
|
|
|
78 |
|
|
|
|
|
|
|
|
|
|
|
(211 |
) |
Television |
|
|
13,309 |
|
|
|
|
|
|
|
4,849 |
|
|
|
19,953 |
|
|
|
|
|
|
|
2,436 |
|
Syndication and other |
|
|
(192 |
) |
|
|
(54.2 |
)% |
|
|
(419 |
) |
|
|
(1,299 |
) |
|
|
58.8 |
% |
|
|
(818 |
) |
Corporate amd shared services |
|
|
(9,147 |
) |
|
|
48.1 |
% |
|
|
(6,175 |
) |
|
|
(16,787 |
) |
|
|
20.0 |
% |
|
|
(13,987 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
(11,577 |
) |
|
|
|
|
|
|
(10,605 |
) |
|
|
(23,196 |
) |
|
|
|
|
|
|
(22,186 |
) |
Impairment of goodwill and indefinite-lived assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(216,413 |
) |
Gains (losses), net on disposal of property, plant and
equipment |
|
|
(22 |
) |
|
|
|
|
|
|
(304 |
) |
|
|
(735 |
) |
|
|
|
|
|
|
(357 |
) |
Interest expense |
|
|
(845 |
) |
|
|
|
|
|
|
(317 |
) |
|
|
(1,693 |
) |
|
|
|
|
|
|
(409 |
) |
Restructuring costs |
|
|
(3,720 |
) |
|
|
|
|
|
|
(1,441 |
) |
|
|
(7,063 |
) |
|
|
|
|
|
|
(2,934 |
) |
Miscellaneous, net |
|
|
1,298 |
|
|
|
|
|
|
|
466 |
|
|
|
911 |
|
|
|
|
|
|
|
(809 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes |
|
$ |
3,665 |
|
|
|
|
|
|
$ |
1,562 |
|
|
$ |
1,221 |
|
|
|
|
|
|
$ |
(237,311 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-23
Newspapers
We operate daily and community newspapers in 13 markets in the U.S. Our newspapers earn
revenue primarily from the sale of advertising to local and national advertisers and from the sale
of newspapers to readers. Our newspapers operate in mid-size markets, focusing on news coverage
within their local markets. Advertising and circulation revenues provide substantially all of each
newspapers operating revenues, and employee, distribution and newsprint costs are the primary
expenses at each newspaper. The operating performance of our newspapers is most affected by
national and local economic conditions, particularly within the retail, labor, housing and auto
markets, as well as newsprint prices.
Operating results for our newspaper business were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Period |
|
|
|
|
|
|
|
|
|
|
Year-to-date |
|
|
|
|
(in thousands) |
|
2010 |
|
|
Change |
|
|
2009 |
|
|
2010 |
|
|
Change |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local |
|
$ |
21,693 |
|
|
|
(8.1 |
)% |
|
$ |
23,614 |
|
|
$ |
45,464 |
|
|
|
(9.4 |
)% |
|
$ |
50,166 |
|
Classified |
|
|
22,118 |
|
|
|
(8.4 |
)% |
|
|
24,142 |
|
|
|
43,907 |
|
|
|
(13.5 |
)% |
|
|
50,784 |
|
National |
|
|
4,527 |
|
|
|
(10.1 |
)% |
|
|
5,034 |
|
|
|
9,562 |
|
|
|
(13.2 |
)% |
|
|
11,016 |
|
Online |
|
|
6,934 |
|
|
|
(5.5 |
)% |
|
|
7,336 |
|
|
|
13,653 |
|
|
|
(6.8 |
)% |
|
|
14,650 |
|
Preprint and other |
|
|
18,026 |
|
|
|
(6.5 |
)% |
|
|
19,278 |
|
|
|
35,889 |
|
|
|
(6.9 |
)% |
|
|
38,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newspaper advertising |
|
|
73,298 |
|
|
|
(7.7 |
)% |
|
|
79,404 |
|
|
|
148,475 |
|
|
|
(10.1 |
)% |
|
|
165,163 |
|
Circulation |
|
|
29,698 |
|
|
|
4.0 |
% |
|
|
28,565 |
|
|
|
61,842 |
|
|
|
4.5 |
% |
|
|
59,202 |
|
Other |
|
|
4,992 |
|
|
|
9.3 |
% |
|
|
4,569 |
|
|
|
10,283 |
|
|
|
10.9 |
% |
|
|
9,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
|
107,988 |
|
|
|
(4.0 |
)% |
|
|
112,538 |
|
|
|
220,600 |
|
|
|
(5.6 |
)% |
|
|
233,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
|
|
46,052 |
|
|
|
(5.2 |
)% |
|
|
48,594 |
|
|
|
93,939 |
|
|
|
(15.2 |
)% |
|
|
110,714 |
|
Newsprint and press supplies |
|
|
11,338 |
|
|
|
(17.9 |
)% |
|
|
13,813 |
|
|
|
23,316 |
|
|
|
(26.8 |
)% |
|
|
31,862 |
|
Distribution services |
|
|
11,746 |
|
|
|
16.6 |
% |
|
|
10,077 |
|
|
|
23,558 |
|
|
|
13.6 |
% |
|
|
20,742 |
|
Other costs and expenses |
|
|
24,291 |
|
|
|
(1.4 |
)% |
|
|
24,624 |
|
|
|
48,657 |
|
|
|
(6.3 |
)% |
|
|
51,939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
93,427 |
|
|
|
(3.8 |
)% |
|
|
97,108 |
|
|
|
189,470 |
|
|
|
(12.0 |
)% |
|
|
215,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
|
$ |
14,561 |
|
|
|
(5.6 |
)% |
|
$ |
15,430 |
|
|
$ |
31,130 |
|
|
|
69.4 |
% |
|
$ |
18,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
We continued to see moderation in the rate of decline in newspaper advertising revenues as the
economy begins to recover from the recession. Advertising revenues decreased 8% year-over-year in
the second quarter and 12% year-over-year in the first quarter of 2010, respectively. Newspaper
advertising revenues declined 20% and 27% year-over-year in the fourth quarter and the third
quarter of 2009, respectively. Our newspaper business derives much of its advertising revenues
from the retail, real estate, employment and automotive categories, sectors that have been
particularly weak during this recession. The decline in online ad revenue is attributable to the
weakness in print classified advertising, to which most of the online advertising is tied. Pure play online advertising revenue rose 14% in
the quarter and 18% year-to-date.
We have made changes to the business model which we operate with our newspaper distributors in certain of our markets. We are continuing a transition to a model in which we pay most independent
distributors on a per-unit basis. Under this model, we recognize revenue at higher retail rates
and record the per-unit cost as a charge to distribution expense. The change in the business model
increased reported circulation revenue by $2.0 million in the second quarter of 2010 and $3.9
million year-to-date. Adjusting for the change in the business model, circulation revenue
decreased by 3.0% for the second quarter and by 2.2% year-to-date.
Other operating revenues represent revenue earned on ancillary services offered by our newspapers,
including commercial printing and distribution services.
F-24
Costs and expenses
Changes in pension costs affect year-over-year comparisons of employee compensation and benefits.
Pension costs decreased by $2.5 million in the second quarter and by $8.7 million year-to-date due
to freezing the accrual of service credits in plans covering a majority of our newspaper employees
effective July 1, 2009. Pension costs in the first half of 2009 also include $2.4 million in
curtailment charges related to the service credit freeze. Excluding pension costs, employee
compensation and benefits in the second quarter of 2010 were flat compared with the second quarter
of 2009. Employee costs and benefits decreased 8% year-over-year for the year-to-date period.
Attrition resulted in an approximate 11% decrease in the number of employees in the year-to-date
period. In addition, during 2009 we eliminated bonuses (partially reinstated in the second quarter
of 2010) and reduced employee pay.
Newsprint press supplies decreased by $2.5 million in the second quarter primarily due to a $1.8
million decline in newsprint cost. The decline in newsprint cost was due to a 14% decline in
consumption and a 4% decrease in newsprint prices. Newsprint press supplies decreased by $8.5
million in the year-to-date period primarily due to a $7.5 million decline in newsprint cost. The
decline in newsprint cost was due to a 16% decrease in both consumption and newsprint prices.
Distribution service costs increased in the second quarter and year-to-date period as a result of
the change in the business model we operate with our distributors in certain markets.
Other costs and expenses decreased in 2010 due to lower bad debt expenses as well as reductions in
other expense categories.
Year-over-year cost comparisons will be more difficult in the second half of 2010 as we cycle
against the cuts in compensation and benefit programs made in early 2009. In addition, newsprint
prices are expected to be approximately 25% higher in the second half of 2010 compared with the
second half of 2009.
F-25
Television
Television includes six ABC-affiliated stations, three NBC-affiliated stations and one
independent station. Our television stations reach approximately 10% of the nations households.
Our television stations earn revenue primarily from the sale of advertising time to local and
national advertisers.
National television networks offer affiliates a variety of programs and sell the majority of
advertising within those programs. Through 2009 we received compensation from the networks for
carrying their programming. We are currently negotiating the renewal of our affiliation agreement
with ABC and will begin negotiating the renewal of our affiliation agreement with NBC later this
year. These networks are seeking arrangements to have affiliates share in funding network
programming costs and to eliminate network compensation historically paid to such affiliates. We
cannot at this time predict the outcome of our negotiations with ABC or NBC, but we expect the
renewal agreement with ABC will require us to make payments for their programming. In addition to
network programs, we broadcast locally produced programs, syndicated programs, sporting events, and
other programs of interest in each stations market. News is the primary focus of our locally
produced programming.
The operating performance of our television group is most affected by the health of the national
and local economies, particularly conditions within the services, automotive and retail categories,
and by the volume of advertising time purchased by campaigns for elective office and political
issues. The demand for political advertising is significantly higher in the third and fourth
quarters of even-numbered years.
Operating results for television were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Period |
|
|
|
|
|
|
|
|
|
|
Year-to-date |
|
|
|
|
(in thousands) |
|
2010 |
|
|
Change |
|
|
2009 |
|
|
2010 |
|
|
Change |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local |
|
$ |
42,295 |
|
|
|
13.3 |
% |
|
$ |
37,326 |
|
|
$ |
82,034 |
|
|
|
12.4 |
% |
|
$ |
72,970 |
|
National |
|
|
22,214 |
|
|
|
31.5 |
% |
|
|
16,892 |
|
|
|
42,425 |
|
|
|
20.3 |
% |
|
|
35,264 |
|
Political |
|
|
4,386 |
|
|
|
|
|
|
|
333 |
|
|
|
5,226 |
|
|
|
|
|
|
|
510 |
|
Network compensation |
|
|
220 |
|
|
|
(88.7 |
)% |
|
|
1,943 |
|
|
|
993 |
|
|
|
(75.2 |
)% |
|
|
3,999 |
|
Other |
|
|
5,695 |
|
|
|
23.7 |
% |
|
|
4,604 |
|
|
|
10,971 |
|
|
|
25.2 |
% |
|
|
8,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment operating revenues |
|
|
74,810 |
|
|
|
22.4 |
% |
|
|
61,098 |
|
|
|
141,649 |
|
|
|
16.6 |
% |
|
|
121,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
|
|
30,032 |
|
|
|
5.1 |
% |
|
|
28,567 |
|
|
|
59,689 |
|
|
|
(6.5 |
)% |
|
|
63,808 |
|
Programs and program licenses |
|
|
15,149 |
|
|
|
16.8 |
% |
|
|
12,969 |
|
|
|
29,573 |
|
|
|
14.3 |
% |
|
|
25,876 |
|
Other costs and expenses |
|
|
16,320 |
|
|
|
10.9 |
% |
|
|
14,713 |
|
|
|
32,434 |
|
|
|
10.4 |
% |
|
|
29,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment costs and expenses |
|
|
61,501 |
|
|
|
9.3 |
% |
|
|
56,249 |
|
|
|
121,696 |
|
|
|
2.2 |
% |
|
|
119,068 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
|
$ |
13,309 |
|
|
|
|
|
|
$ |
4,849 |
|
|
$ |
19,953 |
|
|
|
|
|
|
$ |
2,436 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
We have experienced an improvement in the flow of advertising in all of our markets, and key
television revenue categories have shown year-over-year growth. The rate of improvement
in advertising revenues increased throughout the second quarter and the first six months of the
year, with advertising revenues, excluding political advertising, up 19% in the second quarter
year-over-year and up 15% in the year-to-date period. Automotive advertising increased 84% in the
second quarter and 72% in the year-to-date period compared with the prior year. Automotive
advertising revenues in 2009 were impacted by the weakened financial condition of the large
automotive manufacturers.
Network compensation revenue decreased in the second quarter (and year-to-date period) of 2010 compared with 2009 due to the expiration of our ABC network affiliation agreements in January
2010. We continue to operate under one-month extensions while we negotiate a long-term network
affiliation agreement with ABC.
F-26
Other revenues include retransmission fees received from cable television systems and Scripps
Networks Interactive. As our retransmission rights revert to us from SNI, we have negotiated
higher fees with cable television and direct broadcast satellite systems.
Costs and expenses
Changes in pension costs affect year-over-year comparisons of employee compensation and
benefits. Pension costs decreased by $1.0 million in the second quarter and by $4.7 million
year-to-date due to freezing the accrual of service credits in plans covering a majority of our
television employees effective July 1, 2009. Pension costs in 2009 also include $1.1 million
in curtailment charges related to the benefit accrual freeze. Excluding pension costs,
employee compensation and benefits increased by 9% in the second quarter and 1% year-to-date.
The 2009 second quarter period includes the effects of temporary pay reductions, which have
since been restored, and the elimination of bonus programs, which were partially restored in
the second quarter of 2010.
Programs and program licenses in 2010 include an estimate of network affiliation fees we expect
to pay upon the execution of a new affiliation agreement with ABC, which is the primary reason
for the quarter and year-to-date increases year-over-year.
Second quarter and year-to-date other costs and expenses increased primarily due to the cost
associated with transitioning to a new national representation contract as well as increases in
promotional spending during the second quarter of 2010.
F-27
LIQUIDITY AND CAPITAL RESOURCES
Our primary source of liquidity is our cash flow from operations and available borrowings
under our credit facility.
We completed the sale of United Media Licensing in the second quarter of 2010, receiving $163
million in cash, net of cash expenses on the sale.
Cash flow from continuing operating activities decreased in the first half of 2010 by $66 million
compared to the first half of 2009, primarily due to $66 million in cash contributions we made to
our defined benefit pension plans. In the first half of 2009, we received $16 million from SNI for
the reimbursement of taxes we paid in 2008 on income attributable to SNI for periods prior to the
spin-off. In the first half of 2010, we received $6 million from SNI for final settlement of taxes
for periods prior to the spin-off and $2 million of refunds of Federal taxes paid in 2008.
Capital expenditures in the first half of 2010 were $4.2 million, down from $24.0 million in the
prior year. Capital expenditures in 2009 primarily related to the construction of our Naples,
Fla., newspaper facility. We completed the construction of this facility in the third quarter of
2009. Capital expenditures for the remainder of 2010 are expected to be approximately $15 million.
At June 30, 2010, we had borrowing capacity of $118 million under our Revolver and held cash and
short-term investments of $140 million. We will carry back losses incurred in 2009 against taxes
paid in prior years when we file our 2009 tax return and expect to receive refunds of at least $57
million. We expect to make estimated payments on our 2010 tax liability of approximately $46
million in the second half of 2010.
We expect that our cash and short-term investments and cash flow from operating activities,
including net tax refunds, will be sufficient to meet our operating and capital needs over the next
twelve months.
We continually evaluate our assets to determine if they remain a strategic fit and, given our
business and the financial performance outlook, make sense to continue to be part of our portfolio.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Earnings and cash flow can be affected by, among other things, economic conditions, interest
rate changes, foreign currency fluctuations and changes in the price of newsprint. We are also
exposed to changes in the market value of our investments.
Our objectives in managing interest rate risk are to limit the impact of interest rate changes on
our earnings and cash flows, and to reduce our overall borrowing costs. We manage interest rate
risk primarily by maintaining a mix of fixed-rate and variable-rate debt.
We also may use forward contracts to reduce the risk of changes in the price of newsprint on
anticipated newsprint purchases. We held no newsprint derivative financial instruments at June
30, 2010.
F-28
The following table presents additional information about market-risk-sensitive financial
instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2010 |
|
|
As of December 31, 2009 |
|
|
|
Cost |
|
|
Fair |
|
|
Cost |
|
|
Fair |
|
(in thousands) |
|
Basis |
|
|
Value |
|
|
Basis |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments subject to interest rate risk: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable rate credit facilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
34,900 |
|
|
$ |
34,900 |
|
Other notes |
|
|
935 |
|
|
|
935 |
|
|
|
1,016 |
|
|
|
1,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt including current portion |
|
$ |
935 |
|
|
$ |
935 |
|
|
$ |
35,916 |
|
|
$ |
35,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments subject to market value risk: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other equity securities |
|
$ |
10,407 |
|
|
$ |
(a |
) |
|
$ |
10,405 |
|
|
$ |
(a |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes securities that do not trade in public markets so the securities do not have readily determinable fair values. We estimate the fair value of these
securities approximates their carrying value. There can be no assurance that we would realize the carrying value upon sale of the securities. |
In October 2008, we entered into a 2 year $30 million notional interest rate swap expiring in
October 2010. Under this agreement we receive payments based on 3-month libor rate and make
payments based on a fixed rate of 3.2%. This swap has not been designated as a hedge in accordance
with generally accepted accounting standards and changes in fair value are recorded in
miscellaneous, net with a corresponding adjustment to other long-term liabilities. The fair value
at June 30, 2010 and December 31, 2009 was a liability of $0.4 million and $0.8 million,
respectively, which is included in other liabilities.
F-29
CONTROLS AND PROCEDURES
Scripps management is responsible for establishing and maintaining adequate internal controls
designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with accounting principles
generally accepted in the United States of America (GAAP). The companys internal control over
financial reporting includes those policies and procedures that:
|
1. |
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; |
|
|
2. |
|
provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP and that receipts and
expenditures of the company are being made only in accordance with authorizations of
management and the directors of the company; and |
|
|
3. |
|
provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the companys assets that could have a material effect on
the financial statements. |
All internal control systems, no matter how well designed, have inherent limitations, including the
possibility of human error, collusion and the improper overriding of controls by management.
Accordingly, even effective internal control can only provide reasonable but not absolute assurance
with respect to financial statement preparation. Further, because of changes in conditions, the
effectiveness of internal control may vary over time.
The effectiveness of the design and operation of our disclosure controls and procedures (as defined
in Rule 13a-15(e) under the Securities Exchange Act of 1934) was evaluated as of the date of the
financial statements. This evaluation was carried out under the supervision of and with the
participation of management, including the Chief Executive Officer and the Chief Financial Officer.
Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded
that the design and operation of these disclosure controls and procedures are effective. There
were no changes to the companys internal controls over financial reporting (as defined in Exchange
Act Rule 13a-15(f)) during the period covered by this report that have materially affected, or are
reasonably likely to materially affect, the companys internal control over financial reporting.
F-30
THE E. W. SCRIPPS COMPANY
Index to Exhibits
|
|
|
|
|
Exhibit |
|
|
|
No. |
|
|
Item |
|
31 |
(a) |
|
Section 302 Certifications |
|
31 |
(b) |
|
Section 302 Certifications |
|
32 |
(a) |
|
Section 906 Certifications |
|
32 |
(b) |
|
Section 906 Certifications |
E-1