Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2011
or
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o |
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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)
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Ohio
(State or other jurisdiction of
incorporation or organization)
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31-1223339
(I.R.S. Employer
Identification Number) |
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312 Walnut Street |
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Cincinnati, Ohio
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45202 |
(Address of principal executive offices)
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(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 þ 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):
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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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 29, 2011 there were 45,384,345 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, 2011
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 litigation arising in the ordinary course of business, such as defamation
actions and governmental proceedings primarily relating to renewal of broadcast licenses, none of
which is expected to result in material loss.
ITEM 1A. RISK FACTORS
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, 2010.
3
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.
The following table provides information about Company purchases of Class A Common shares during the
quarter ended June 30, 2011 and the remaining amount that may still be repurchased under the
program:
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Weighted |
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Total market |
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Maximum value that |
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Total number |
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average |
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value of |
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may yet be |
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of shares |
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price paid |
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shares |
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purchased under the |
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Period |
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purchased |
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per share |
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purchased |
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plans or programs |
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4/1/11 - 4/30/11 |
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285,727 |
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$ |
9.41 |
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$ |
2,687,749 |
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$ |
65,688,236 |
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5/1/11 - 5/31/11 |
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623,092 |
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$ |
9.17 |
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$ |
5,711,474 |
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$ |
59,976,762 |
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6/1/11 - 6/30/11 |
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969,227 |
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$ |
8.53 |
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$ |
8,271,391 |
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$ |
51,705,371 |
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Total |
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1,878,046 |
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$ |
8.88 |
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$ |
16,670,614 |
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We are authorized to repurchase up to $75 million of our Class A Common Shares under a share
repurchase program authorized by the board of directors in October 2010. The authorization
expires December 31, 2012.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the quarter for which this report is filed.
ITEM 4. (REMOVED AND RESERVED)
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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.
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THE E. W. SCRIPPS COMPANY
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Dated: August 9, 2011 |
BY: |
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/s/ Douglas F. Lyons |
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Douglas F. Lyons |
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Vice President and Controller |
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(Principal Accounting Officer) |
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5
THE E. W. SCRIPPS COMPANY
Index to Financial Information
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Item |
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Page |
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F-2 |
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F-4 |
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F-5 |
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F-6 |
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F-7 |
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F-16 |
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F-24 |
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F-25 |
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F-1
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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As of |
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As of |
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June 30, |
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December 31, |
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(in thousands) |
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2011 |
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2010 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
156,974 |
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$ |
204,924 |
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Restricted cash |
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10,010 |
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2,500 |
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Accounts and notes receivable (less
allowances $2,302 and $2,789) |
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101,735 |
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115,568 |
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Inventory |
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6,951 |
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7,859 |
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Deferred income taxes |
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8,914 |
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8,914 |
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Income taxes receivable |
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30,359 |
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14,596 |
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Miscellaneous |
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9,436 |
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8,218 |
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Total current assets |
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324,379 |
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362,579 |
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Investments |
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12,080 |
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10,652 |
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Property, plant and equipment |
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371,216 |
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389,650 |
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Intangible assets |
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22,473 |
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23,107 |
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Deferred income taxes |
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25,618 |
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30,844 |
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Miscellaneous |
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12,907 |
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10,710 |
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TOTAL ASSETS |
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$ |
768,673 |
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$ |
827,542 |
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See notes to condensed consolidated financial statements.
F-2
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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As of |
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As of |
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June 30, |
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December 31, |
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(in thousands, except share data) |
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2011 |
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2010 |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
18,515 |
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$ |
34,091 |
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Customer deposits and unearned revenue |
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26,101 |
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26,072 |
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Accrued liabilities: |
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Employee compensation and benefits |
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27,932 |
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36,981 |
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Income taxes payable |
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7,310 |
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Miscellaneous |
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24,642 |
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25,528 |
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Other current liabilities |
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9,908 |
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8,502 |
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Total current liabilities |
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107,098 |
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138,484 |
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Other liabilities (less current portion) |
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98,606 |
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97,526 |
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Equity: |
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Preferred stock, $.01 par authorized: 25,000,000 shares; none outstanding |
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Common stock, $.01 par: |
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Class A authorized: 240,000,000 shares; issued and
outstanding: 45,849,103 and 46,403,887 shares |
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458 |
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464 |
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Voting authorized: 60,000,000 shares; issued and
outstanding: 11,932,735 and 11,932,735 shares |
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119 |
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119 |
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Total |
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577 |
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583 |
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Additional paid-in capital |
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539,856 |
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558,225 |
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Retained earnings |
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100,535 |
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111,641 |
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Accumulated other comprehensive loss, net of income taxes: |
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Pension liability adjustments |
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(80,629 |
) |
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(81,547 |
) |
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Total The E.W. Scripps Company shareholders equity |
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560,339 |
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588,902 |
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Noncontrolling interest |
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2,630 |
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2,630 |
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Total equity |
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562,969 |
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591,532 |
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TOTAL LIABILITIES AND EQUITY |
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$ |
768,673 |
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$ |
827,542 |
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See notes to condensed consolidated financial statements.
F-3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Three months ended |
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Six months ended |
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June 30, |
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June 30, |
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(in thousands, except per share data) |
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2011 |
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2010 |
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2011 |
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2010 |
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Operating Revenues: |
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Advertising |
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$ |
138,748 |
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$ |
144,258 |
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$ |
271,403 |
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$ |
282,574 |
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Circulation |
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29,734 |
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29,698 |
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61,291 |
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61,842 |
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Other |
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14,552 |
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14,829 |
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30,698 |
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28,649 |
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Total operating revenues |
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183,034 |
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188,785 |
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363,392 |
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373,065 |
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Costs and Expenses: |
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Employee compensation and benefits |
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85,266 |
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85,688 |
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176,873 |
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172,453 |
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Programs and program licenses |
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15,519 |
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15,149 |
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30,995 |
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29,573 |
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Newsprint and press supplies |
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12,438 |
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11,338 |
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25,379 |
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23,316 |
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Other expenses |
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59,974 |
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58,079 |
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118,257 |
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114,726 |
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Restructuring costs |
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1,822 |
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3,720 |
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3,915 |
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7,063 |
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Total costs and expenses |
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175,019 |
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173,974 |
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355,419 |
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347,131 |
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Depreciation, Amortization, and (Gains) Losses: |
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Depreciation |
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9,712 |
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11,215 |
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19,816 |
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22,496 |
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Amortization of intangible assets |
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317 |
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362 |
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|
633 |
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|
700 |
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(Gains) losses, net on disposal of property, plant and
equipment |
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205 |
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|
22 |
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|
242 |
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|
|
735 |
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Net depreciation, amortization and losses |
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10,234 |
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|
11,599 |
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|
20,691 |
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|
23,931 |
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Operating income (loss) |
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(2,219 |
) |
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|
3,212 |
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|
|
(12,718 |
) |
|
|
2,003 |
|
Interest expense |
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|
(412 |
) |
|
|
(845 |
) |
|
|
(805 |
) |
|
|
(1,693 |
) |
Miscellaneous, net |
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|
(43 |
) |
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|
1,298 |
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|
|
(732 |
) |
|
|
911 |
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Income (loss) from continuing operations before income taxes |
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(2,674 |
) |
|
|
3,665 |
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|
|
(14,255 |
) |
|
|
1,221 |
|
Provision (benefit) for income taxes |
|
|
(462 |
) |
|
|
1,817 |
|
|
|
(3,148 |
) |
|
|
1,438 |
|
|
|
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|
|
|
|
|
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Income (loss) from continuing operations, net of tax |
|
|
(2,212 |
) |
|
|
1,848 |
|
|
|
(11,107 |
) |
|
|
(217 |
) |
Income from discontinued operations, net of tax |
|
|
|
|
|
|
97,659 |
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|
|
|
|
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|
98,844 |
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Net income (loss) attributable to the shareholders of
The E.W. Scripps Company |
|
$ |
(2,212 |
) |
|
$ |
99,507 |
|
|
$ |
(11,107 |
) |
|
$ |
98,627 |
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Net income (loss) per basic share of common stock
attributable
to the shareholders of The E.W. Scripps Company: |
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Income (loss) from continuing operations |
|
$ |
(.04 |
) |
|
$ |
.03 |
|
|
$ |
(.19 |
) |
|
$ |
.00 |
|
Income from discontinued operations |
|
|
.00 |
|
|
|
1.53 |
|
|
|
.00 |
|
|
|
1.55 |
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|
|
|
|
|
|
|
|
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|
|
Net income (loss) per basic share of common stock |
|
$ |
(.04 |
) |
|
$ |
1.56 |
|
|
$ |
(.19 |
) |
|
$ |
1.54 |
|
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Net income (loss) per diluted share of common stock
attributable
to the shareholders of The E.W. Scripps Company: |
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|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
(.04 |
) |
|
$ |
.03 |
|
|
$ |
(.19 |
) |
|
$ |
.00 |
|
Income from discontinued operations |
|
|
.00 |
|
|
|
1.52 |
|
|
|
.00 |
|
|
|
1.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per diluted share of common stock |
|
$ |
(.04 |
) |
|
$ |
1.55 |
|
|
$ |
(.19 |
) |
|
$ |
1.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) |
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(11,107 |
) |
|
$ |
98,627 |
|
Income from discontinued operations |
|
|
|
|
|
|
(98,844 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
|
(11,107 |
) |
|
|
(217 |
) |
Adjustments to reconcile loss from continuing operations
to net cash flows from operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
20,449 |
|
|
|
23,196 |
|
Losses on sale of property, plant and equipment |
|
|
242 |
|
|
|
735 |
|
Deferred income taxes |
|
|
4,677 |
|
|
|
17,290 |
|
Excess tax benefits of share-based compensation plans |
|
|
(6,021 |
) |
|
|
(8,783 |
) |
Stock and deferred compensation plans |
|
|
5,751 |
|
|
|
5,203 |
|
Pension expense, net of payments |
|
|
1,442 |
|
|
|
(62,651 |
) |
Other changes in certain working capital accounts, net |
|
|
(29,536 |
) |
|
|
10,232 |
|
Miscellaneous, net |
|
|
2,112 |
|
|
|
1,465 |
|
|
|
|
|
|
|
|
Net cash used in continuing operating activities |
|
|
(11,991 |
) |
|
|
(13,530 |
) |
Net cash provided by discontinued operating activities |
|
|
|
|
|
|
2,754 |
|
|
|
|
|
|
|
|
Net operating activities |
|
|
(11,991 |
) |
|
|
(10,776 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Additions to property, plant and equipment |
|
|
(4,544 |
) |
|
|
(7,265 |
) |
Increase in short-term investments |
|
|
|
|
|
|
(5,181 |
) |
Proceeds from sale of long-term investments |
|
|
2,650 |
|
|
|
|
|
Purchase of investments |
|
|
(1,624 |
) |
|
|
(23 |
) |
Proceeds from sale of property, plant and equipment |
|
|
513 |
|
|
|
505 |
|
Changes in restricted cash |
|
|
(7,510 |
) |
|
|
|
|
Purchase of intangible assets |
|
|
|
|
|
|
(850 |
) |
|
|
|
|
|
|
|
Net cash used in continuing investing activities |
|
|
(10,515 |
) |
|
|
(12,814 |
) |
Net cash provided by discontinued investing activities |
|
|
|
|
|
|
162,960 |
|
|
|
|
|
|
|
|
Net investing activities |
|
|
(10,515 |
) |
|
|
150,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Net payments on variable rate credit facility |
|
|
|
|
|
|
(34,900 |
) |
Repurchase of Class A Common shares |
|
|
(23,295 |
) |
|
|
|
|
Dividends paid to noncontrolling interest |
|
|
|
|
|
|
(623 |
) |
Proceeds from exercise of stock options |
|
|
1,670 |
|
|
|
4,568 |
|
Tax payments related to shares withheld for vested stock and RSUs |
|
|
(9,368 |
) |
|
|
(9,866 |
) |
Excess tax benefits from share-based compensation plans |
|
|
6,021 |
|
|
|
8,783 |
|
Miscellaneous, net |
|
|
(472 |
) |
|
|
2,208 |
|
|
|
|
|
|
|
|
Net cash used in continuing financing activities |
|
|
(25,444 |
) |
|
|
(29,830 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash discontinued operations |
|
|
|
|
|
|
5,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
(47,950 |
) |
|
|
114,769 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
Beginning of period |
|
|
204,924 |
|
|
|
7,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period |
|
$ |
156,974 |
|
|
$ |
122,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Disclosures |
|
|
|
|
|
|
|
|
Income taxes paid |
|
$ |
7,995 |
|
|
$ |
1,711 |
|
|
|
|
|
|
|
|
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) |
|
|
Loss |
|
|
Interests |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010 |
|
$ |
583 |
|
|
$ |
558,225 |
|
|
$ |
111,641 |
|
|
$ |
(81,547 |
) |
|
$ |
2,630 |
|
|
$ |
591,532 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
(11,107 |
) |
|
|
|
|
|
|
|
|
|
|
(11,107 |
) |
Repurchase 2,591,464 Class A Common Shares |
|
|
(26 |
) |
|
|
(23,269 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,295 |
) |
Changes in defined pension plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
918 |
|
|
|
|
|
|
|
918 |
|
Excess tax benefits of compensation plans |
|
|
|
|
|
|
6,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,900 |
|
Compensation plans: 2,036,680 net shares
issued* |
|
|
20 |
|
|
|
(2,000 |
) |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
(1,979 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2011 |
|
$ |
577 |
|
|
$ |
539,856 |
|
|
$ |
100,535 |
|
|
$ |
(80,629 |
) |
|
$ |
2,630 |
|
|
$ |
562,969 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Net of $9,368 in 2011 and $9,866 in 2010 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 2010 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 television and newspaper
publishing. All of our media businesses provide content and advertising services via the Internet.
Our media businesses are organized into the following reportable business segments: Television,
Newspapers 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 periods over which long-lived assets are depreciated or amortized; the
liability for uncertain tax positions and valuation allowances against deferred income tax assets;
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, 2010.
Share-Based Compensation We have a Long-Term Incentive Plan (the Plan) which is described more
fully in our Annual Report on Form 10-K for the year ended December 31, 2010. The Plan provides
for the award of incentive and nonqualified share options, share appreciation rights, restricted
and unrestricted Class A Common shares and restricted share units, and performance units to key
employees and non-employee directors.
Share-based compensation costs for continuing operations totaled $2.1 million and $3.0 million for
the second quarter of 2011 and 2010, respectively. Year-to-date share-based compensation for
continuing operations was $5.6 million in both 2011 and 2010.
F-7
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 share 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.
The following table presents information about basic and diluted weighted-average shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
(in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator (for basic earnings per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the shareholders of
The E.W. Scripps Company |
|
$ |
(2,212 |
) |
|
$ |
99,507 |
|
|
$ |
(11,107 |
) |
|
$ |
98,627 |
|
Less income allocated to unvested restricted stock
and RSUs |
|
|
|
|
|
|
(10,672 |
) |
|
|
|
|
|
|
(12,154 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per share |
|
$ |
(2,212 |
) |
|
$ |
88,835 |
|
|
$ |
(11,107 |
) |
|
$ |
86,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average shares outstanding |
|
|
58,707 |
|
|
|
57,001 |
|
|
|
58,698 |
|
|
|
56,044 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options held by employees and directors |
|
|
|
|
|
|
212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted-average shares outstanding |
|
|
58,707 |
|
|
|
57,213 |
|
|
|
58,698 |
|
|
|
56,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive securities (1) |
|
|
14,332 |
|
|
|
8,925 |
|
|
|
14,332 |
|
|
|
17,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amount outstanding at Balance Sheet date, before application of the
treasury stock method and not weighted for period outstanding. |
For the quarter ended and the year-to-date period ended June 30, 2011, we incurred a net loss
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.
2. ACCOUNTING CHANGES AND RECENTLY ISSUED ACCOUNTING STANDARDS
Accounting Changes In October 2009, the FASB issued amendments to the accounting and
disclosure for revenue recognition. These amendments, which were effective for us on January 1,
2011, modified the criteria for recognizing revenue in multiple element arrangements and the
scope of what constitutes a non-software deliverable. The adoption of this standard did not
have a material impact on our financial condition or results of operations.
Recently Issued Accounting Standards In May 2011, the FASB issued amendments to
disclosure requirements for common fair value measurement. These amendments, effective for the
interim and annual periods beginning on or after December 15, 2011 (early adoption is
prohibited), result in common definition of fair value and common requirements for measurement
of and disclosure requirements between U.S. GAAP and IFRS. Consequently, the amendments change
some fair value measurement principles and disclosure requirements. The implementation of this
amended accounting guidance is not expected to have a material impact on our consolidated
financial position and results of operations.
In June 2011, the FASB issued amendments to disclosure requirements for presentation of
comprehensive income. This guidance, effective retrospectively for the interim and annual
periods beginning on or after December 15, 2011 (early adoption is permitted), requires presentation of total comprehensive income, the components of
net income, and the components of other comprehensive income either in a single continuous
statement of comprehensive income or in two separate but consecutive statements. The
implementation of this amended accounting guidance is not expected to have a material impact on
our consolidated financial position and results of operations.
3. DISCONTINUED OPERATIONS
On June 3, 2010, the Company and its wholly owned subsidiary, United Feature Syndicate, Inc.
(UFS) completed the sale of its character licensing business United Media Licensing (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 in the second quarter of 2010. The results of
operations of UML and the gain on sale are presented as discontinued operations in our financial
statements for all periods.
F-8
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, 2011, are approximately $7.4 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.
Operating results of our discontinued operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
(in thousands) |
|
2010 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
Operating revenues |
|
$ |
13,244 |
|
|
$ |
27,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of Licensing, before tax |
|
$ |
162,001 |
|
|
$ |
162,001 |
|
Income from Licensing, before tax |
|
|
1,822 |
|
|
|
4,000 |
|
Income tax expense |
|
|
(66,164 |
) |
|
|
(67,157 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of tax |
|
$ |
97,659 |
|
|
$ |
98,844 |
|
|
|
|
|
|
|
|
4. INCOME TAXES
We file a consolidated federal income tax return, consolidated 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 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 will be taxed.
The effective income tax rate for the six months ended June 30, 2011, was 22.1%. The primary
difference between this rate and the U.S. Federal statutory rate of 35% is the impact of state
taxes and non-deductible expenses.
The effective income tax rate of the six months ended June 30, 2010, was 118%. The primary
difference between this rate and the U.S. Federal statutory rate of 35% is the impact of state
taxes, and the accrual of taxes and interest on uncertain tax positions and non-deductible expenses.
At June 30, 2011, we had net deferred tax assets of $35 million. Substantially all of our deferred
tax assets reverse in 2011 and 2012. We can use any tax losses resulting from the deferred tax
assets reversing in 2011 or 2012 to claim refunds of taxes paid in prior years. 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 them. If current economic
conditions persist or worsen, future estimates of taxable income could be lower than our current
estimates, which may require valuation allowances 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 as a valuation allowance.
F-9
5. RESTRICTED CASH
At June 30, 2011 and December 31, 2010, we had $10.0 million and $2.5 million, respectively in a
restricted cash account on deposit with our insurance carrier. The restricted cash serves as
collateral, in place of an irrevocable stand-by letter of credit, to provide financial assurance
that we will fulfill our obligations with respect to cash requirements associated with workers
compensation self-insurance. This cash is to remain on deposit with the carrier until all claims
have been paid or we provide a letter of credit in lieu of the cash deposit.
6. INTANGIBLE ASSETS
Intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
As of |
|
|
|
June 30, |
|
|
December 31, |
|
(in thousands) |
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
Intangible assets: |
|
|
|
|
|
|
|
|
Amortizable intangible assets: |
|
|
|
|
|
|
|
|
Carrying amount: |
|
|
|
|
|
|
|
|
Television network affiliation relationships |
|
$ |
5,641 |
|
|
$ |
5,641 |
|
Customer lists |
|
|
12,469 |
|
|
|
12,469 |
|
Other |
|
|
6,942 |
|
|
|
6,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total carrying amount |
|
|
25,052 |
|
|
|
25,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization: |
|
|
|
|
|
|
|
|
Television network affiliation relationships |
|
|
(2,048 |
) |
|
|
(1,925 |
) |
Customer lists |
|
|
(9,065 |
) |
|
|
(8,657 |
) |
Other |
|
|
(4,661 |
) |
|
|
(4,558 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated amortization |
|
|
(15,774 |
) |
|
|
(15,140 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amortizable intangible assets |
|
|
9,278 |
|
|
|
9,912 |
|
|
|
|
|
|
|
|
|
|
Indefinite-lived intangible assets FCC licenses |
|
|
13,195 |
|
|
|
13,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets |
|
$ |
22,473 |
|
|
$ |
23,107 |
|
|
|
|
|
|
|
|
Estimated amortization expense of intangible assets for each of the next five years is $0.6 million
for the remainder of 2011, $1.0 million in 2012, $0.9 million in 2013, $0.7 million in 2014, $0.7
million in 2015, $0.6 million in 2016 and $4.8 million in later years.
7. LONG-TERM DEBT
We have a Revolving Credit Agreement (Agreement), which expires June 30, 2013. The maximum amount
of availability under the facility is $100 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 $25 million). |
At June 30, 2011, no amounts were outstanding under the credit agreement and we had borrowing
capacity of $90 million.
Under the terms of the Agreement we granted the lenders mortgages on certain of our real property,
pledges of our equity interests in our 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 $30
million, we must then maintain a fixed charge coverage ratio (as defined therein) of at least 1.1
to 1.0.
F-10
The Agreement allows us to make acquisitions or return capital of up to $150 million, respectively,
over the remaining term of the Credit Facility, up to a maximum aggregate of $200 million.
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, 2011 and December 31, 2010.
Commitment fees of 0.50% per annum of the total unused commitment are payable under the credit
facility.
As of June 30, 2011, and December 31, 2010, we had outstanding letters of credit totaling $1.1
million and $10.4 million, respectively.
In October 2008, we entered into a 2-year $30 million notional interest rate swap which expired in
October 2010. Under this agreement we received payments based on the 3-month LIBOR and made
payments based on a fixed rate of 3.2%. This swap was not designated as a hedge in accordance with
generally accepted accounting principles and changes in fair value were recorded in
miscellaneous-net with a corresponding adjustment to other long-term liabilities. For the
six-months ended June 30, 2010, a $0.4 million gain was recorded in miscellaneous, net.
8. OTHER LIABILITIES
Other liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
As of |
|
|
|
June 30, |
|
|
December 31, |
|
(in thousands) |
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
|
$ |
15,548 |
|
|
$ |
16,011 |
|
Liability for pension benefits |
|
|
46,109 |
|
|
|
46,135 |
|
Liabilities for uncertain tax positions |
|
|
16,606 |
|
|
|
16,205 |
|
Other |
|
|
20,343 |
|
|
|
19,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities (less current portion) |
|
$ |
98,606 |
|
|
$ |
97,526 |
|
|
|
|
|
|
|
|
9. NONCONTROLLING INTERESTS
Individuals and other entities own a 4% noncontrolling interest in the capital stock of the
subsidiary company that publishes our Memphis newspaper and a 6% noncontrolling interest in the
capital stock of the subsidiary company that publishes our Evansville newspaper. We are not
required to redeem the noncontrolling interests in these subsidiary companies.
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) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to The E.W. Scripps
Company shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, net
of tax |
|
$ |
(2,212 |
) |
|
$ |
1,848 |
|
|
$ |
(11,107 |
) |
|
$ |
(217 |
) |
Income from discontinued operations, net of tax |
|
|
|
|
|
|
97,659 |
|
|
|
|
|
|
|
98,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(2,212 |
) |
|
$ |
99,507 |
|
|
$ |
(11,107 |
) |
|
$ |
98,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-11
10. SUPPLEMENTAL CASH FLOW INFORMATION
The following table presents additional information about the change in certain working
capital accounts:
|
|
|
|
|
|
|
|
|
|
|
Six months ended |
|
|
|
June 30, |
|
(in thousands) |
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
Other changes in certain working capital accounts, net: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
11,183 |
|
|
$ |
12,380 |
|
Inventory |
|
|
908 |
|
|
|
(559 |
) |
Income taxes receivable/payable net |
|
|
(23,073 |
) |
|
|
(21,505 |
) |
Accounts payable |
|
|
(15,576 |
) |
|
|
6,108 |
|
Customer deposits and unearned revenue |
|
|
29 |
|
|
|
(1,606 |
) |
Accrued employee compensation and benefits |
|
|
(9,049 |
) |
|
|
3,999 |
|
Other, net |
|
|
6,042 |
|
|
|
11,415 |
|
|
|
|
|
|
|
|
Total |
|
$ |
(29,536 |
) |
|
$ |
10,232 |
|
|
|
|
|
|
|
|
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 and SERP that cover the majority of our employees.
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 in July 2010.
Other union-represented employees are covered by defined benefit pension plans jointly sponsored by
us and the union, or 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) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
12 |
|
|
$ |
153 |
|
|
$ |
24 |
|
|
$ |
306 |
|
Interest cost |
|
|
6,369 |
|
|
|
6,368 |
|
|
|
12,738 |
|
|
|
12,736 |
|
Expected return on plan assets, net of expenses |
|
|
(5,752 |
) |
|
|
(6,039 |
) |
|
|
(11,504 |
) |
|
|
(12,078 |
) |
Amortization of prior service cost |
|
|
|
|
|
|
5 |
|
|
|
1 |
|
|
|
10 |
|
Amortization of actuarial loss |
|
|
672 |
|
|
|
1,057 |
|
|
|
1,344 |
|
|
|
2,114 |
|
Curtailment loss |
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for defined benefit plans |
|
|
1,301 |
|
|
|
1,594 |
|
|
|
2,603 |
|
|
|
3,138 |
|
Multi-employer plans |
|
|
126 |
|
|
|
85 |
|
|
|
233 |
|
|
|
339 |
|
SERP |
|
|
270 |
|
|
|
279 |
|
|
|
540 |
|
|
|
559 |
|
Defined contribution plans |
|
|
2,199 |
|
|
|
|
|
|
|
4,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
|
3,896 |
|
|
|
1,958 |
|
|
|
8,121 |
|
|
|
4,036 |
|
Allocated to discontinued operations |
|
|
|
|
|
|
48 |
|
|
|
|
|
|
|
(103 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost continuing
operations |
|
$ |
3,896 |
|
|
$ |
2,006 |
|
|
$ |
8,121 |
|
|
$ |
3,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We contributed $1.7 million to fund current benefit payments for our SERP during the first six
months of 2011. We anticipate contributing an additional $1.7 million to fund the SERPs benefit
payments during the remainder of 2011. No contributions were made to our defined benefit plans
during the first six months of 2011.
F-12
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.
Television includes six ABC-affiliated stations, three NBC-affiliated stations and one independent
station. Our television stations reach approximately 10% of the nations television households.
Television stations earn revenue primarily from the sale of advertising to local and national
advertisers.
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.
Syndication and other media primarily include syndication of news features and comics and other
features for the newspaper industry.
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-13
Information regarding our business segments is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
(in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Segment operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television |
|
$ |
77,042 |
|
|
$ |
74,810 |
|
|
$ |
145,994 |
|
|
$ |
141,649 |
|
Newspapers |
|
|
101,960 |
|
|
|
107,988 |
|
|
|
208,132 |
|
|
|
220,600 |
|
Syndication and other |
|
|
4,032 |
|
|
|
5,987 |
|
|
|
9,266 |
|
|
|
10,816 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
$ |
183,034 |
|
|
$ |
188,785 |
|
|
$ |
363,392 |
|
|
$ |
373,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television |
|
$ |
13,530 |
|
|
$ |
13,309 |
|
|
$ |
19,854 |
|
|
$ |
19,953 |
|
Newspapers |
|
|
4,877 |
|
|
|
14,561 |
|
|
|
10,277 |
|
|
|
31,130 |
|
Syndication and other |
|
|
(1,448 |
) |
|
|
(192 |
) |
|
|
(1,883 |
) |
|
|
(1,299 |
) |
Corporate and shared services |
|
|
(7,122 |
) |
|
|
(9,147 |
) |
|
|
(16,360 |
) |
|
|
(16,787 |
) |
Depreciation and amortization |
|
|
(10,029 |
) |
|
|
(11,577 |
) |
|
|
(20,449 |
) |
|
|
(23,196 |
) |
Gains (losses), net on disposal of property,
plant and equipment |
|
|
(205 |
) |
|
|
(22 |
) |
|
|
(242 |
) |
|
|
(735 |
) |
Interest expense |
|
|
(412 |
) |
|
|
(845 |
) |
|
|
(805 |
) |
|
|
(1,693 |
) |
Restructuring costs |
|
|
(1,822 |
) |
|
|
(3,720 |
) |
|
|
(3,915 |
) |
|
|
(7,063 |
) |
Miscellaneous, net |
|
|
(43 |
) |
|
|
1,298 |
|
|
|
(732 |
) |
|
|
911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before
income taxes |
|
$ |
(2,674 |
) |
|
$ |
3,665 |
|
|
$ |
(14,255 |
) |
|
$ |
1,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television |
|
$ |
3,967 |
|
|
$ |
4,554 |
|
|
$ |
8,176 |
|
|
$ |
8,707 |
|
Newspapers |
|
|
5,398 |
|
|
|
6,366 |
|
|
|
10,881 |
|
|
|
13,152 |
|
Syndication and other |
|
|
58 |
|
|
|
133 |
|
|
|
113 |
|
|
|
285 |
|
Corporate and shared services |
|
|
289 |
|
|
|
162 |
|
|
|
646 |
|
|
|
352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation |
|
$ |
9,712 |
|
|
$ |
11,215 |
|
|
$ |
19,816 |
|
|
$ |
22,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television |
|
$ |
80 |
|
|
$ |
104 |
|
|
$ |
158 |
|
|
$ |
187 |
|
Newspapers |
|
|
237 |
|
|
|
258 |
|
|
|
475 |
|
|
|
513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amortization of intangibles |
|
$ |
317 |
|
|
$ |
362 |
|
|
$ |
633 |
|
|
$ |
700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television |
|
$ |
2,577 |
|
|
$ |
1,286 |
|
|
$ |
3,503 |
|
|
$ |
3,120 |
|
Newspapers |
|
|
402 |
|
|
|
124 |
|
|
|
762 |
|
|
|
664 |
|
Syndication and other |
|
|
295 |
|
|
|
10 |
|
|
|
295 |
|
|
|
121 |
|
Corporate and shared services |
|
|
|
|
|
|
|
|
|
|
41 |
|
|
|
290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total additions to property, plant and equipment |
|
$ |
3,274 |
|
|
$ |
1,420 |
|
|
$ |
4,601 |
|
|
$ |
4,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No single customer provides more than 10% of our revenue.
13. COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
(in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the shareholders of The
E.W. Scripps Company |
|
$ |
(2,212 |
) |
|
$ |
99,507 |
|
|
$ |
(11,107 |
) |
|
$ |
98,627 |
|
Changes in defined pension plans, net of tax of $551 and $419 |
|
|
460 |
|
|
|
734 |
|
|
|
918 |
|
|
|
1,437 |
|
Currency translation adjustment, net of tax of $0 and $0 |
|
|
|
|
|
|
(590 |
) |
|
|
|
|
|
|
(590 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) |
|
$ |
(1,752 |
) |
|
$ |
99,651 |
|
|
$ |
(10,189 |
) |
|
$ |
99,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14. CAPITAL STOCK
Under a share repurchase program authorized by the board of directors in October 2010, we can
repurchase up to $75 million of our Class A Common Shares. A total of $23 million of shares
have been repurchased in the year to date period ended June 30, 2011, at prices ranging from
$8.12 to $9.70 per share. The balance remaining pursuant to the authorization is $52 million.
We are under no obligation to repurchase any particular amount of common shares under the
program. The authorization expires December 31, 2012.
F-14
15. SPIN-OFF OF SCRIPPS NETWORKS INTERACTIVE, INC.
On July 1, 2008, we distributed all of the shares of Scripps Networks Interactive, Inc. (SNI) to
shareholders of record as of the close of business on June 16, 2008. SNI owned and operated our
national lifestyle cable television networks and interactive media businesses.
SNI reimbursed us $6 million in the first half of 2010 for its share of estimated taxes prior to
the spin-off under the Tax Allocation Agreement.
At June 30, 2011 and December 31, 2010, we owed SNI $7.5 million for its share of tax refund claims
for prior years. The amounts will be paid to SNI when the tax refunds to which they relate are
received from the tax authorities.
F-15
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The E. W. Scripps Company (Scripps) is a diverse media company with interests in television
stations and newspaper publishing. The companys portfolio of media properties includes: 10
television stations, including six ABC-affiliated stations, three NBC affiliates and one
independent station: daily and community newspapers in 13 markets and the Washington-based Scripps
Media Center, home to the Scripps Howard News Service.
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
We continue to invest in our strategic initiatives, including employee leadership and training
programs, additional sales resources, marketing and research, and investment in infrastructure and
development of our digital businesses. Operating expenses to support these initiatives totaled
approximately $3 million in the first half of 2011.
In the first half of 2011, we repurchased $23 million of shares under the share repurchase
program authorized by the board of directors in 2010.
In the first quarter of 2011, we entered into a five year agreement with Universal Uclick
(Universal) to provide syndication services for the news features and comics of United Media.
Universal will provide editorial and production services, sales and marketing, sales support and
customer service, and distribution and fulfillment for all the news features and comics of United
Media. Under the terms of the agreement Scripps will receive a fixed fee from Universal and will
continue to own certain copyrights and control the licenses for those properties, and will manage
the business relationships with the creative talent that produces those comics and features. The
transition of the services was completed in June 2011.
Also in the first quarter of 2011, we entered into agreements with Raycom Media, Inc. to produce
news and provide services involving technical, promotional and online operations and certain local
programming for WFLX, Raycoms West Palm Beach, Florida, Fox-affiliated television station. Raycom
will continue to program the station and conduct all advertising sales. Scripps will receive a
minimum annual fee for its news content and the services provided and may receive additional
incentive payments.
Our efforts to restructure our television and newspaper operations continue. We have invested in
technology to automate our television station newsrooms and are installing common advertising,
circulation and editorial systems in our newspapers. We are standardizing processes within our
operating divisions and are centralizing or outsourcing processes that do not require a significant
presence in the local market. Costs related to these efforts totaled $3.9 million in the six
months ended June 30, 2011. The restructuring program and installation of common newspaper systems
is expected to continue through 2012.
F-16
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, 2010.
There have been no significant changes in those accounting policies or other significant accounting
policies.
F-17
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) |
|
2011 |
|
|
Change |
|
|
2010 |
|
|
2011 |
|
|
Change |
|
|
2010 |
|
|
Operating revenues |
|
$ |
183,034 |
|
|
|
(3.0 |
)% |
|
$ |
188,785 |
|
|
$ |
363,392 |
|
|
|
(2.6 |
)% |
|
$ |
373,065 |
|
Employee compensation and benefits |
|
|
(85,266 |
) |
|
|
(0.5 |
)% |
|
|
(85,688 |
) |
|
|
(176,873 |
) |
|
|
2.6 |
% |
|
|
(172,453 |
) |
Programs and program licenses |
|
|
(15,519 |
) |
|
|
2.4 |
% |
|
|
(15,149 |
) |
|
|
(30,995 |
) |
|
|
4.8 |
% |
|
|
(29,573 |
) |
Newsprint and press supplies |
|
|
(12,438 |
) |
|
|
9.7 |
% |
|
|
(11,338 |
) |
|
|
(25,379 |
) |
|
|
8.8 |
% |
|
|
(23,316 |
) |
Other expenses |
|
|
(59,974 |
) |
|
|
3.3 |
% |
|
|
(58,079 |
) |
|
|
(118,257 |
) |
|
|
3.1 |
% |
|
|
(114,726 |
) |
Restructuring costs |
|
|
(1,822 |
) |
|
|
(51.0 |
)% |
|
|
(3,720 |
) |
|
|
(3,915 |
) |
|
|
(44.6 |
)% |
|
|
(7,063 |
) |
Depreciation and amortization |
|
|
(10,029 |
) |
|
|
(13.4 |
)% |
|
|
(11,577 |
) |
|
|
(20,449 |
) |
|
|
(11.8 |
)% |
|
|
(23,196 |
) |
Gains (losses), net on disposal of property, plant
and equipment |
|
|
(205 |
) |
|
|
|
|
|
|
(22 |
) |
|
|
(242 |
) |
|
|
|
|
|
|
(735 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(2,219 |
) |
|
|
|
|
|
|
3,212 |
|
|
|
(12,718 |
) |
|
|
|
|
|
|
2,003 |
|
Interest expense |
|
|
(412 |
) |
|
|
|
|
|
|
(845 |
) |
|
|
(805 |
) |
|
|
|
|
|
|
(1,693 |
) |
Miscellaneous, net |
|
|
(43 |
) |
|
|
|
|
|
|
1,298 |
|
|
|
(732 |
) |
|
|
|
|
|
|
911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before
income taxes |
|
|
(2,674 |
) |
|
|
|
|
|
|
3,665 |
|
|
|
(14,255 |
) |
|
|
|
|
|
|
1,221 |
|
Benefit (provision) for income taxes |
|
|
462 |
|
|
|
|
|
|
|
(1,817 |
) |
|
|
3,148 |
|
|
|
|
|
|
|
(1,438 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(2,212 |
) |
|
|
|
|
|
|
1,848 |
|
|
|
(11,107 |
) |
|
|
|
|
|
|
(217 |
) |
Income from discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
|
97,659 |
|
|
|
|
|
|
|
|
|
|
|
98,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the shareholders
of The E.W.
Scripps Company |
|
$ |
(2,212 |
) |
|
|
|
|
|
$ |
99,507 |
|
|
$ |
(11,107 |
) |
|
|
|
|
|
$ |
98,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per basic share of common stock
attributable
to the shareholders of The E.W. Scripps Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
(.04 |
) |
|
|
|
|
|
$ |
.03 |
|
|
$ |
(.19 |
) |
|
|
|
|
|
$ |
.00 |
|
Income from discontinued operations |
|
|
.00 |
|
|
|
|
|
|
|
1.53 |
|
|
|
.00 |
|
|
|
|
|
|
|
1.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per basic share of common stock |
|
$ |
(.04 |
) |
|
|
|
|
|
$ |
1.56 |
|
|
$ |
(.19 |
) |
|
|
|
|
|
$ |
1.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share amounts may not foot since each is calculated independently.
Continuing Operations
Operating revenues decreased as continued weakness in newspaper print advertising more than offset
the positive results in local television advertising, increased revenues from our digital
initiatives, higher television retransmission rights fees and fees from our news and television
service agreement with WFLX.
Employee compensation and benefits increased in the 2011 year-to-date period. They were
substantially unchanged in the second quarter of 2011 compared to the 2010 second quarter. The
primary factors affecting employee compensation and benefits for the periods are:
|
|
The restoration of employer matching contributions to our defined contribution plan in the
third quarter of 2010, |
|
|
|
Supplemental retirement plan contributions to employees nearing retirement age associated
with freezing the accrual of benefits under our defined benefit pension plan in 2009 were
instituted in the first quarter of 2011, |
|
|
|
An increase in non-forfeitable contributions made in the first quarter of 2011 to employee
health savings accounts due to greater enrollment in those plans. Contributions made to
employee accounts are generally made in January, |
|
|
|
A decrease in the accrual for employee bonuses under our annual incentive plan. We began
accruing 2010 performance bonuses in the second quarter of 2010, but have made no accruals for
2011 incentives. |
F-18
Expenses for programs and program licenses increased in 2011 year-to-date and second quarter
periods primarily due to network affiliation fees we now pay under new network affiliation
agreements with ABC and NBC.
Newsprint and press supplies increased by $2.1 million in the 2011 year-to-date period primarily
due to increased newsprint costs. The increase in newsprint costs was due to a 14% increase in
newsprint prices which was partially offset by a 0.8% decrease in consumption. Newsprint and press
supplies increased by $1.1 million in the 2011 quarter primarily due to increased newsprint costs.
The increase in newsprint costs was due to a 9.6% increase in newsprint prices and a 1.6% increase
in consumption.
Other expenses increased in the year-to-date and second quarter periods primarily due to higher
newspaper distribution costs and increases in promotional spending.
The effective income tax rate was 22.1% and 118% for 2011 and 2010, 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. The primary difference between
this rate and the U.S. Federal statutory rate of 35% is the impact of state taxes, and changes
in uncertain tax positions (including interest) and non-deductible expenses.
Discontinued Operations - Discontinued operations includes the results of UM Licensing and the
gain on sale, which was sold in the second quarter of 2010.
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) |
|
2011 |
|
|
Change |
|
|
2010 |
|
|
2011 |
|
|
Change |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television |
|
$ |
77,042 |
|
|
|
3.0 |
% |
|
$ |
74,810 |
|
|
$ |
145,994 |
|
|
|
3.1 |
% |
|
$ |
141,649 |
|
Newspapers |
|
|
101,960 |
|
|
|
(5.6 |
)% |
|
|
107,988 |
|
|
|
208,132 |
|
|
|
(5.7 |
)% |
|
|
220,600 |
|
Syndication and other |
|
|
4,032 |
|
|
|
(32.7 |
)% |
|
|
5,987 |
|
|
|
9,266 |
|
|
|
(14.3 |
)% |
|
|
10,816 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
$ |
183,034 |
|
|
|
(3.0 |
)% |
|
$ |
188,785 |
|
|
$ |
363,392 |
|
|
|
(2.6 |
)% |
|
$ |
373,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Television |
|
$ |
13,530 |
|
|
|
|
|
|
$ |
13,309 |
|
|
$ |
19,854 |
|
|
|
|
|
|
$ |
19,953 |
|
Newspapers |
|
|
4,877 |
|
|
|
|
|
|
|
14,561 |
|
|
|
10,277 |
|
|
|
|
|
|
|
31,130 |
|
Syndication and other |
|
|
(1,448 |
) |
|
|
|
|
|
|
(192 |
) |
|
|
(1,883 |
) |
|
|
|
|
|
|
(1,299 |
) |
Corporate amd shared services |
|
|
(7,122 |
) |
|
|
|
|
|
|
(9,147 |
) |
|
|
(16,360 |
) |
|
|
|
|
|
|
(16,787 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
(10,029 |
) |
|
|
|
|
|
|
(11,577 |
) |
|
|
(20,449 |
) |
|
|
|
|
|
|
(23,196 |
) |
Gains (losses), net on disposal
of property, plant and equipment |
|
|
(205 |
) |
|
|
|
|
|
|
(22 |
) |
|
|
(242 |
) |
|
|
|
|
|
|
(735 |
) |
Interest expense |
|
|
(412 |
) |
|
|
|
|
|
|
(845 |
) |
|
|
(805 |
) |
|
|
|
|
|
|
(1,693 |
) |
Restructuring costs |
|
|
(1,822 |
) |
|
|
|
|
|
|
(3,720 |
) |
|
|
(3,915 |
) |
|
|
|
|
|
|
(7,063 |
) |
Miscellaneous, net |
|
|
(43 |
) |
|
|
|
|
|
|
1,298 |
|
|
|
(732 |
) |
|
|
|
|
|
|
911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations before income taxes |
|
$ |
(2,674 |
) |
|
|
|
|
|
$ |
3,665 |
|
|
$ |
(14,255 |
) |
|
|
|
|
|
$ |
1,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-19
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. In the fourth quarter of 2010 and first quarter of 2011 we
completed the renewal of our affiliation agreements with ABC and NBC. Under the renewal with
ABC and NBC we pay for network programming and no longer receive any network compensation. 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 automotive, services 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) |
|
2011 |
|
|
Change |
|
|
2010 |
|
|
2011 |
|
|
Change |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local |
|
$ |
45,712 |
|
|
|
8.1 |
% |
|
$ |
42,295 |
|
|
$ |
86,828 |
|
|
|
5.8 |
% |
|
$ |
82,034 |
|
National |
|
|
22,486 |
|
|
|
1.2 |
% |
|
|
22,214 |
|
|
|
42,490 |
|
|
|
0.2 |
% |
|
|
42,425 |
|
Political |
|
|
938 |
|
|
|
|
|
|
|
4,386 |
|
|
|
1,382 |
|
|
|
|
|
|
|
5,226 |
|
Retransmission |
|
|
3,857 |
|
|
|
30.5 |
% |
|
|
2,955 |
|
|
|
7,813 |
|
|
|
38.2 |
% |
|
|
5,653 |
|
Network compensation |
|
|
|
|
|
|
|
|
|
|
220 |
|
|
|
|
|
|
|
|
|
|
|
993 |
|
Other |
|
|
4,049 |
|
|
|
47.8 |
% |
|
|
2,740 |
|
|
|
7,481 |
|
|
|
40.7 |
% |
|
|
5,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment operating revenues |
|
|
77,042 |
|
|
|
3.0 |
% |
|
|
74,810 |
|
|
|
145,994 |
|
|
|
3.1 |
% |
|
|
141,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and
benefits |
|
|
30,719 |
|
|
|
2.3 |
% |
|
|
30,032 |
|
|
|
62,503 |
|
|
|
4.7 |
% |
|
|
59,689 |
|
Programs and program licenses |
|
|
15,519 |
|
|
|
2.4 |
% |
|
|
15,149 |
|
|
|
30,995 |
|
|
|
4.8 |
% |
|
|
29,573 |
|
Other costs and expenses |
|
|
17,274 |
|
|
|
5.8 |
% |
|
|
16,320 |
|
|
|
32,642 |
|
|
|
0.6 |
% |
|
|
32,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment costs and expenses |
|
|
63,512 |
|
|
|
3.3 |
% |
|
|
61,501 |
|
|
|
126,140 |
|
|
|
3.7 |
% |
|
|
121,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
|
$ |
13,530 |
|
|
|
1.7 |
% |
|
$ |
13,309 |
|
|
$ |
19,854 |
|
|
|
(0.5 |
)% |
|
$ |
19,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
Television time sales increased in the year-to-date period despite the difficult comparison created
by the benefit of $4 million of political advertising in the second quarter and approximately $2
million of incremental advertising revenue associated with the broadcast of the Winter Olympics on
our three NBC affiliates in the prior year period.
Retransmission revenues increased year over year due to the renewal of certain agreements in the
current year. Prior to the spin-off of SNI, the rights to retransmit our broadcast signals were
included as consideration in negotiations between cable and satellite
system operators and the Companys cable networks. SNI pays us fixed fees for the use of our
retransmission rights. As the retransmission contracts negotiated by SNI expire, we will negotiate
standalone retransmission consent agreements with the cable and satellite system operators.
Agreements covering the majority of households in our television markets expire between 2016 and
2019.
Under the renewal of the long-term network affiliation agreements with ABC and NBC, we no longer
receive network compensation revenue.
F-20
Other revenues include revenue from our digital initiatives and revenue from our news and
television services arrangement with WFLX. Other revenues increased
primarily due to our news production agreement with WFLX.
Costs and expenses
Employee compensation and benefits increased in the 2011 year-to-date and second quarter periods
primarily due to increased costs for our defined contribution retirement plans and other employee
benefits. We restored the matching contribution to our defined contribution plan in July 2010 and
in the first quarter of 2011 began making supplemental retirement plan contributions to employees
nearing retirement age. The supplemental contributions are associated with freezing the accrual of
benefits under our defined benefit pension plan in 2009. We reinstated some bonuses in the second
quarter of 2010, but we have no accrual for employee bonuses in 2011.
Programs and program licenses increased in the 2011 year-to-date and second quarter periods
primarily due to network affiliation fees we now pay under new network affiliation agreements
with ABC and NBC. Replacing Oprah with lower-priced programming late in the third quarter is
expected to reduce our programs and program licensing costs by approximately 25% in the fourth
quarter of 2011 compared to the second quarter of 2011.
Other expenses in the 2010 year-to-date period included approximately $1 million in costs
associated with the transition to a new national sales representation arrangement.
F-21
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) |
|
2011 |
|
|
Change |
|
|
2010 |
|
|
2011 |
|
|
Change |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local |
|
$ |
20,698 |
|
|
|
(4.6 |
)% |
|
$ |
21,693 |
|
|
$ |
42,006 |
|
|
|
(7.6 |
)% |
|
$ |
45,464 |
|
Classified |
|
|
20,046 |
|
|
|
(9.4 |
)% |
|
|
22,118 |
|
|
|
40,977 |
|
|
|
(6.7 |
)% |
|
|
43,907 |
|
National |
|
|
3,126 |
|
|
|
(30.9 |
)% |
|
|
4,527 |
|
|
|
6,739 |
|
|
|
(29.5 |
)% |
|
|
9,562 |
|
Preprint and other |
|
|
17,395 |
|
|
|
(3.5 |
)% |
|
|
18,026 |
|
|
|
34,664 |
|
|
|
(3.4 |
)% |
|
|
35,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Print advertising |
|
|
61,265 |
|
|
|
(7.7 |
)% |
|
|
66,364 |
|
|
|
124,386 |
|
|
|
(7.7 |
)% |
|
|
134,822 |
|
Circulation |
|
|
29,735 |
|
|
|
0.1 |
% |
|
|
29,698 |
|
|
|
61,292 |
|
|
|
(0.9 |
)% |
|
|
61,842 |
|
Digital |
|
|
6,662 |
|
|
|
(3.9 |
)% |
|
|
6,934 |
|
|
|
12,997 |
|
|
|
(4.8 |
)% |
|
|
13,653 |
|
Other |
|
|
4,298 |
|
|
|
(13.9 |
)% |
|
|
4,992 |
|
|
|
9,457 |
|
|
|
(8.0 |
)% |
|
|
10,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
|
101,960 |
|
|
|
(5.6 |
)% |
|
|
107,988 |
|
|
|
208,132 |
|
|
|
(5.7 |
)% |
|
|
220,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
|
|
47,553 |
|
|
|
3.3 |
% |
|
|
46,052 |
|
|
|
97,742 |
|
|
|
4.0 |
% |
|
|
93,939 |
|
Newsprint and press supplies |
|
|
12,437 |
|
|
|
9.7 |
% |
|
|
11,338 |
|
|
|
25,378 |
|
|
|
8.8 |
% |
|
|
23,316 |
|
Distribution services |
|
|
12,603 |
|
|
|
7.3 |
% |
|
|
11,746 |
|
|
|
25,322 |
|
|
|
7.5 |
% |
|
|
23,558 |
|
Other costs and expenses |
|
|
24,490 |
|
|
|
0.8 |
% |
|
|
24,291 |
|
|
|
49,413 |
|
|
|
1.6 |
% |
|
|
48,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
97,083 |
|
|
|
3.9 |
% |
|
|
93,427 |
|
|
|
197,855 |
|
|
|
4.4 |
% |
|
|
189,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
|
$ |
4,877 |
|
|
|
(66.5 |
)% |
|
$ |
14,561 |
|
|
$ |
10,277 |
|
|
|
(67.0 |
)% |
|
$ |
31,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
The U.S. economic recession and secular changes in the demand for newspaper advertising affected
operating revenue in 2011 and 2010, leading to lower advertising volumes and rate weakness in most
of our local markets. We have seen improvements in help-wanted classified advertising, but real
estate classified advertising and national advertising remain particularly weak.
Digital revenues include advertising on our newspaper Internet sites, digital advertising provided
through audience-extension programs such as our arrangement with Yahoo!, and other digital
marketing services we offer to our local advertising customers, such as managing their search
engine marketing campaigns. In 2011, we began to report revenue from certain of our digital
offerings net of the amounts paid to our partners. Digital revenues increased 2.2% and 3.1% while
pure-play digital advertising increased 6.1% and 10.3% for year-to-date and quarter periods on a
pro forma basis, assuming 2010 revenues were also reported on a net basis.
Circulation revenue has remained substantially unchanged, as higher circulation rates have offset
declines in circulation net paid levels.
The decline in preprint and other revenues in the 2011 year-to-date and second quarter periods is
due to reductions in the number of inserts by large national retailers. Preprint and other
products include niche publications such as community newspapers, lifestyle magazines, publications focused on the classified advertising categories of real estate, employment
and auto, and other publications aimed at younger readers.
Other operating revenues represent revenue earned on ancillary services offered by our newspapers,
including commercial printing and distribution services.
F-22
Costs and expenses
Employee compensation and benefits increased in the 2011 year-to-date and second quarter
periods primarily due to increased costs for our defined contribution retirement plans and
other increased employee benefits. We restored the matching contribution to our defined
contribution plan in July 2010 and in the first quarter of 2011 began making supplemental
retirement plan contributions to employees nearing retirement age, The supplemental
contributions are associated with freezing the accrual of benefits under our defined benefit
pension plan in 2009.
Newsprint and press supplies increased by $2.1 million in the 2011 year-to-date period primarily
due to increased newsprint costs. The increase in newsprint costs was due to a 14% increase in
newsprint prices which was partially offset by a 0.8% decrease in consumption. Newsprint and press
supplies increased by $1.1 million in the 2011 second quarter primarily due to increased newsprint
costs. The increase in newsprint costs was due to a 9.6% increase in newsprint prices and a 1.6%
increase in consumption.
Distribution services increased as part of our transition of distribution processes from internal
personnel to an external vendor.
Other expenses were substantially unchanged in 2011 compared with 2010.
F-23
LIQUIDITY AND CAPITAL RESOURCES
Our primary source of liquidity is our available cash and borrowings under our credit
facility.
Cash flow from continuing operating activities in the first half of 2011 was substantially
unchanged compared to the first half of 2010. The cash flow from operating activities was affected
by the timing of tax payments and refunds and the timing of payment of network affiliation fees and
syndicated programming fees in our television division. Tax benefits associated with 2011 losses
are not available to us until we file our 2011 tax return in 2012. In addition, during the first
half of 2011, we made estimated tax payments for 2010 of $8 million. The 2010 period included $6
million in payments from SNI for the final settlement of taxes for periods prior to the spin-off
and $2 million of refunds of Federal income taxes paid in 2008.
In the first quarter of 2011, we
paid approximately $4.7 million of network affiliation fees for 2010 upon signing a definitive
agreement with ABC.
Capital expenditures in the first half of 2011 were $4.5 million, down from $7.3 million in the
prior year. Capital expenditures for the remainder of 2011 are
expected to be approximately $8
million.
At June 30, 2011, we had no borrowings under our Revolving Credit Agreement, and had cash and cash
equivalents of $157 million. At June 30, 2011, we had borrowing capacity of $90 million under our
Revolver.
In October 2010, the board of directors authorized the repurchase of up to $75 million of our
Class A Common Shares. The shares may be repurchased from time to time at managements
discretion, either in the open market, through pre-arranged trading plans or in negotiated block
transactions. The authorization expires December 31, 2012. In
the first half of 2011, we
repurchased $23 million worth of shares under this program.
We expect that our cash on hand at June 30, 2011, will be sufficient to meet our operating and
capital needs over the next 12 months.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Earnings and cash flow can be affected by, among other things, economic conditions and changes
in the price of newsprint. We are also exposed to changes in the market value of our investments.
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, 2011.
The following table presents additional information about market-risk-sensitive financial
instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2011 |
|
|
As of December 31, 2010 |
|
|
|
Cost |
|
|
Fair |
|
|
Cost |
|
|
Fair |
|
(in thousands) |
|
Basis |
|
|
Value |
|
|
Basis |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments subject to market value risk: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments held at cost |
|
$ |
10,871 |
|
|
$ |
(a |
) |
|
$ |
10,366 |
|
|
$ |
(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. |
F-24
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-25
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