ITEM 1. BUSINESS
The Company is a diversified media company operating principally in two segments: broadcasting and cable television. In 1993 the Company announced plans to introduce the Home & Garden Television Network, a 24- hour cable channel. In February 1994 the Company acquired Cinetel Productions, one of the largest independent producers of cable television programming. See "Business - New Businesses."
The Company is controlled by Scripps Howard, Inc. ("SHI"), an Ohio corporation, which owns 86.1% of the Company's Common stock. SHI is a wholly-owned subsidiary of The E.W. Scripps Company ("EWS"), a Delaware corporation. In February 1994 EWS announced it had offered to acquire the 13.9% of the Company that it does not already own. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations - Proposed Merger."
A summary of segment information for the three years ended December 31, 1993 is set forth on page of this Form 10-K.
Broadcasting
General - The Company's broadcast operations consist of six network- affiliated VHF television stations and three Fox-affiliated UHF television stations. The Company acquired or divested the following broadcast operations in the three years ended December 31, 1993:
1993 - The Company sold its radio stations and its Memphis television station.
1991 - The Company purchased its Baltimore television station.
Revenues - The composition of the Company's broadcasting operating revenues for the most recent five years is as follows:
Substantially all of the Company's broadcasting operating revenues are derived from advertising. Local advertising consists of short announcements and sponsored programs on behalf of advertisers in the area served by the station. National advertising consists of short announcements and sponsored programs on behalf of regional and national advertisers.
The first and third quarters of each year generally have lower advertising revenues than the second and fourth quarters, due in part to higher retail advertising during the holiday seasons and political advertising in election years. Advertising rates charged by the stations are based primarily upon the population of the market, the number of stations competing in the market, as well as the station's ability to attract audiences.
Information concerning the Company's stations and the markets in which they operate is as follows:
Competition - Competition occurs primarily in local markets. The Company's television stations compete for advertising revenues with other television stations and other providers of video entertainment in their market, and in varying degrees with other media, such as newspapers and magazines, radio, and direct mail. Competition for advertising revenues is based upon audience levels, demographics, price, and effectiveness. The Company's television stations compete for viewers' time with other information and entertainment media. All of the Company's television markets are highly competitive.
Network Affiliation and Programming - The Company's television stations are affiliated with national television networks under standard two-year affiliation agreements. These agreements are customarily renewed for successive two-year terms. The networks offer a variety of programs to affiliated stations, which have the right of first refusal before such programming may be offered to other television stations in the same market. Pursuant to the affiliation agreements, compensation is paid to the affiliated station for carrying network programming. The network has the right to decrease the amount of such compensation during the terms of the affiliation agreements but, upon any such decrease, an affected station has the right to terminate the agreement.
The ranking of a station in its local market is affected by fluctuations in the national ranking of the affiliated network. Management believes such fluctuations are normal and has not sought to change the Company's network affiliations because of declines in national rankings of the affiliated networks.
In addition to network programs, the Company's television stations broadcast locally produced programs, syndicated programs, sports events, movies, and public service programs. Local news is the focus of the Company's network-affiliated stations' locally produced programming and is an integral factor in developing the station's ties to its community and viewer loyalty. Advertising relating to local news and information programs generally represent more than 30% of a station's revenues. The Company's Kansas City Fox-affiliated station began broadcasting local news in 1993 and the Company expects to add local news programming at its Phoenix and Tampa stations.
Federal Regulation of Broadcasting - Television broadcasting is subject to the jurisdiction of the Federal Communications Commission ("FCC") pursuant to the Communications Act of 1934, as amended ("Communications Act"). The Communications Act prohibits the operation of television broadcasting stations except in accordance with a license issued by the FCC and empowers the FCC to revoke, modify, and renew broadcasting licenses, approve the transfer of control of any corporation holding such licenses, determine the location of stations, regulate the equipment used by stations, and adopt and enforce necessary regulations.
Television broadcast licenses are granted for a maximum of five years, and are renewable upon application. Application for renewal of the license for the Company's Phoenix station was filed in 1993 and is still pending. While there can be no assurances the Company's existing licenses will be renewed, the Company has never been denied a renewal and all previous renewals have been for the maximum term. The Company's application for renewal of the FCC license for its Baltimore station has been challenged by a competing applicant. The FCC is required to hold a hearing to assess which applicant's proposal would better serve the public interest. That hearing is proceeding on qualifications issues added by the presiding judge against both applicants, but the FCC has "frozen" its consideration of the comparative issues in light of an appeals court decision invalidating one of the principal criteria the FCC had used in assessing new applicants' qualifications. Revising the process so as to permit continuation of the comparative hearing may take an extended period of time, but the Company will continue to operate the station while its renewal of license application is pending. Management believes that granting of the Company's renewal would best serve the public interest and thus expects the renewal application to be granted.
FCC regulations govern the multiple ownership of television stations and other media. Under the multiple ownership rule, a license for a television station will generally not be granted or renewed if (i) the applicant already owns, operates, or controls a television station serving substantially the same area, or (ii) the grant of the license would result in the applicant's owning, operating, or controlling, or having an interest in, more than twelve television stations or in television stations whose total national audience reach exceeds 25% of all television households. FCC rules also generally prohibit "cross-ownership" of a television station and daily newspaper or cable television system in the same service area. The Company's television station and EWS's daily newspaper in Cincinnati were owned by the Company at the time the cross-ownership rules were enacted and enjoy "grandfathered" status. These properties would become subject to the cross-ownership rules upon their sale.
Under the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Act"), each television broadcast station gained "must-carry" rights on any cable system defined as "local" with respect to that station. Stations may waive their must-carry rights and instead negotiate retransmission consent agreements with local cable companies. The Company's stations have generally elected to negotiate retransmission consent agreements with cable companies.
Management believes the Company is in substantial compliance with all applicable regulatory requirements.
Cable Television
General - The Company operates cable television systems in Lake County, Florida; Sacramento, California; and Longmont, Colorado. In the three years ended December 31, 1993 the Company purchased several cable television systems adjacent to existing service areas.
Revenues - The composition of the Company's cable television operating revenues for the most recent five years is as follows:
Substantially all of the Company's cable television operating revenues are derived from services provided to subscribers of the Company's systems. Subscriber information as of December 31 for the Company's cable television systems is as follows:
The Company's cable television systems carry a wide variety of entertainment and information services. Basic cable generally consists of video programming broadcast by local television stations, locally produced programming, and distant broadcast television signals. Advertiser- supported video programming such as ESPN and CNN and other entertainment and information services are included in various "enhanced basic" service packages. Premium programming consists of non-advertiser supported entertainment services such as Home Box Office and Showtime. Certain of the Company's systems are equipped with addressable decoding converters which enable the Company to offer interactive services, such as pay-per- view programming, and to change customer services without visiting the customer's home. Other monthly services includes revenues from services such as remote control and converter rental and audio programming.
Competition - Competition occurs primarily in local markets. The Company's cable television systems compete for subscribers with other cable television systems in certain of its franchise areas. All of the Company's cable television systems compete for subscribers with other methods of delivering entertainment and information programming to the subscriber's home, such as broadcast television, multi-point distribution systems, master and satellite antenna systems, television receive-only satellite dishes, and home systems such as video cassette and laser disc players. In the future the Company's cable television systems may compete with new technologies such as more advanced "wireless cable systems" and broadcast satellite delivery services, as well as "video dial tone" services whereby the local telephone company leases video distribution lines to programmers on a common carrier basis. Management believes additional technologies for delivering entertainment and information programming to the home will continue to be developed, and that some of these competitive services will be capable of offering interactive services.
Programming - The Company purchases programming from a variety of suppliers, the charge for which is generally based upon the number of subscribers receiving the service. Programming expenses as a percentage of basic and premium programming service revenues have risen in recent years, primarily due to additional and improved services provided to basic subscribers and to discounts offered to subscribers receiving multiple premium channels. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Under the Copyright Act of 1976 cable television system operators are granted compulsory licenses permitting the carriage of the copyrighted works of local and distant broadcast signals for a statutory fee. The Copyright Royalty Tribunal is empowered to review and adjust such fees. FCC rules on syndicated exclusivity provide that if a local broadcast licensee has purchased the exclusive local distribution rights for a particular syndicated program, such licensee is generally entitled to insist that a local cable television system operator delete that program from any distant television signal carried by the cable television system.
Regulation and Legislation - Cable television systems are regulated by federal, local, and in some instances, state authorities. Certain powers of regulatory agencies and officials, as well as various rights and obligations of cable television operators, are specified under the Cable Communications Policy Act of 1984 ("1984 Act") and the 1992 Act.
Pursuant to the 1984 Act, local franchising authorities are given the right to award and renew one or more franchises for the community over which they have jurisdiction, the fees for which are prohibited from exceeding 5% of a cable television system's gross annual revenues.
The 1992 Act, among other things: (i) reimposes rate regulations on most cable television systems; (ii) reimposes "must carry" rules with respect to local broadcast television signals (see "Federal Regulation of Broadcasting"); (iii) grants all broadcasters the option to refuse carriage of their signals; (iv) requires that vertically integrated cable television companies not unreasonably refuse to deal with any multichannel programming distributor or discriminate in the price, terms, and conditions of carriage of programming between cable television operators and other multichannel programming distributors if the effect would be to impede retail competition; and (v) establishes cross-ownership rules with respect to cable television systems and direct broadcast satellite systems, multi- channel multipoint distribution systems, and satellite master antenna systems.
In April 1993 the FCC issued rules that established allowable rates for cable television services (other than programming offered on a per-channel or per-program basis) and for cable equipment based on benchmarks established by the FCC. The rules require rates for equipment to be cost- based, and require reasonable rates for regulated cable television services based upon, at the election of the cable television system operator, application of the benchmarks established by the FCC or a cost-of-service showing based upon standards established by the FCC. The rules became effective in September 1993 and were recently revised to further reduce regulated rates. The revised rules are expected to become effective in May 1994.
Management believes the Company is in substantial compliance with all applicable regulatory requirements.
New Businesses
Entertainment - The Company plans to introduce the Home & Garden Television Network ("Home & Garden") in late 1994. This network will feature 24 hours of daily programming focused on home repair and remodeling, gardening, decorating, and home electronics. While most of the programming will be produced by the new network, local television stations affiliated with the network will have the opportunity for daily programming and advertised inserts. The subscriber base of the new network will be established through a collaboration of local television stations and cable television systems. Several cable television system operators, including Time Warner Cable and Continental Cablevision, the nation's second- and third-largest cable television system operators, have entered into agreements to carry the new network in exchange for permission to carry the signals of local television stations affiliated with the network. The Company is discussing carriage agreements with other cable television systems and intends to expand the network's affiliate group to include additional broadcast stations. The Company's cable television systems will carry the network and all of the Company's television stations (except the Fox-affiliated stations) are members of the network's affiliate group.
In February 1994 the Company announced that it had agreed to purchase Cinetel Productions in Knoxville, Tennessee. Cinetel is one of the largest independent producers of cable television programming. Cinetel's production facility will also be the primary production facility for Home & Garden.
Employees
As of December 31, 1993 the Company had approximately 1,700 full-time employees, of whom approximately 1,200 were engaged in broadcasting and 500 in cable television. Less than 20% of the Company's employees are represented by labor unions. The Company considers its relationship with employees to be generally satisfactory.
ITEM 2.
ITEM 2. PROPERTIES
The Company's broadcasting operations require offices and studios and other real property for towers upon which broadcasting transmitters and antenna equipment are located. Ongoing advances in the technology for delivering video signals to the home, such as "high definition television" may, in the future, require a high level of expenditures by the Company for new equipment in order to maintain its competitive position of the Company's television stations.
The properties required to support the Company's cable television operations generally include offices and other real property for towers, antennas, and satellite earth stations. The Company is currently upgrading the distribution system for its Sacramento system. Ongoing advances in the technology for delivering video signals to the home and emergence of the multimedia marketplace could require a high level of expenditures to further upgrade the Company's cable television distribution systems.
The Company's new entertainment operations will require offices and studios and other real and personal property to deliver programming product. The Company plans to expand the 60,000 square foot Cinetel production facility by approximately one-third to accommodate Home & Garden.
Management believes the Company's present facilities are generally well- maintained and are sufficient to serve its present needs.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
In September 1991 Four Jacks Broadcasting, Inc., a company whose principals own and operate an existing Baltimore television station, submitted to the FCC an application for a construction permit to build and operate a new television station on channel 2 in Baltimore. This application is mutually exclusive with the Company's application for renewal of its license for its Baltimore television station. See Item 1 "Business - Broadcasting - Federal Regulation of Broadcasting."
The Company is involved in other litigation arising in the ordinary course of business, such as defamation actions. In addition, the Company is involved from time to time in various governmental and administrative proceedings relating to, among other things, renewal of broadcast licenses, none of which is expected to result in material loss.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders for the quarter ended December 31, 1993.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Shares of the Company's Common stock are traded on the Nasdaq Stock Exchange under the symbol "SCRP." There are approximately 600 owners of the Company's Common stock, based on security position listings.
The range of market prices of the Company's Common stock, which represents the high and low sales prices for each full quarterly period, and quarterly cash dividends are as follows:
Future dividends are subject to the Company's earnings, financial condition, and capital requirements.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is filed as part of this Form 10- K. See Index to Consolidated Financial Statement Information at page F- 1 of this Form 10-K.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required by this item is filed as part of this Form 10- K. See Index to Consolidated Financial Statement Information at page F- 1 of this Form 10-K.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is filed as part of this Form 10- K. See Index to Consolidated Financial Statement Information at page F- 1 of this Form 10-K.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors of the Company are as follows:
Director Principal Occupation or Name Age Since Occupations/Business
Daniel J. Castellini (1) 54 1987 Senior Vice President/Finance and Administration of EWS, parent of the Company,since September 1986; Financial Vice President of EWS from January 1985 to September 1986.
Lawrence A. Leser (2) 58 1981 President and Chief Executive Officer of EWS since July 1985. President of the Company since September 16, 1992.
Donald L. Perris 70 1966 President and Chief Executive Officer of the Company from May 1974 to May 1988.
Charles E. Scripps (3) 74 1983 Chairman of the Board of Directors of EWS and Chairman of the Board of Trustees of The Edward W. Scripps Trust.
Gordon E. Heffern 70 1989 President and Chief Executive Officer of Akron Community Foundation since 1990; Director of Society Corporation a Society National Bank from 1983 to 1990.
Robert E. Stautberg 59 1989 Retired; former partner and Director of KPMG Peat Marwick.
John H. Burlingame 60 1990 Executive Partner of Baker & Hostetler; Director of EWS since 1990.
(1) Mr. Castellini is a director of the Gradison Growth Trust (a regulated investment trust).
(2) Mr. Leser is a director of Union Central Life Insurance Company, KeyCorp, and EWS.
(3) Mr. Scripps is a director of EWS.
Directors who are also officers or former officers of the Company or officer or directors of the Company's affiliates receive no separate remuneration for their services as directors or committee members. All other directors receive an annual fee of $15,000 and an additional $1,000 for each meeting of the Board of Directors or committee thereof that they attend.
The executive officers of the Company are as follows:
Name Age Position
Lawrence A. Leser 58 President and Chief Executive Officer of the Company (since 1992); President, Chief Executive Officer and Director of EWS (since 1985)
Paul F. Gardner 51 Executive Vice President (since 1993); Senior Vice President, News Programming, Fox Broadcasting Company (1991 to 1993); Vice President and General Manager, WCPO (1989 to 1991)
Daniel J. Castellini 54 Secretary and Treasurer of the Compa ny; Senior Vice President, Finance and Administration of EWS (since 1986)
E. John Wolfzorn 48 Assistant Treasurer of the Company; Treasurer of EWS (since 1979)
Albert J. Schottelkotte 67 Senior Vice President (since 1981)
Warren P. Happel 62 Vice President, Engineering (since 1 983)
Kenneth W. Lowe 44 Vice President (since 1989)
Terry H. Schroeder 40 Vice President, Administration (since 1989)
William J. Brooks 60 Vice President and General Manager, WPTV (since 1986)
J. B. Chase 57 Vice President and General Manager, WCPO (since 1990); Assistant General Manager, WCPO (1986 to 1990)
William J. Donahue 53 Vice President and General Manager, KJRH (since 1989)
Charlotte M. English 45 Vice President and General Manager, KSHB (since 1992); Station Manager, KSHB (1990 to 1992); Assistant General Manager, Programming, WMC (1987 to 1990)
Thomas C. Griesdorn 44 Vice President and General Manager, WXYZ (since 1989)
Raymond Hunt 50 Vice President (since 1991) and Gene ral Manager, KNXV (since 1990); General Sales Manager, KNXV (1989 to 1990)
H. Joseph Lewin 54 Vice President and General Manager, WMAR (since 1993); General Manager, WRIC, Richmond, Virginia (1984 to 1993)
James F. Major 59 Vice President and General Manager, WFTS (since 1989)
Garland R. Robinson 52 Vice President and General Manager, WEWS (since 1992); Vice President and General Manager, WLWT, Cincinnati, Ohio (1991 to 1992); Vice President and General Manager, WCMH, Columbus, Ohio (1982 to 1991)
The executive officers of the Company serve at the pleasure of the Board of Directors.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Report on Executive Compensation Introduction - This report is submitted by the members of the Compensation Committee, Messrs. Charles E. Scripps and John H. Burlingame. The Committee makes decisions on the compensation of the Company's senior executives. All Committee actions are reviewed by the full Board.
Philosophy - The Company is approximately 86% owned by SHI, which in turn is 100% owned by EWS. In recognition of its close relationship with its parent, the Company has endorsed the compensation philosophy of EWS. This philosophy is designed to accomplish three goals. First, the policy is designed to attract a well-qualified management team. Second, the compensation policy supports a pay-for-performance program designed to motivate executives to achieve target operating results set forth in the Company's strategic plan and to reward them for accomplishing these targets. Finally, the policy is designed to retain a competent management team, which is critical to the Company's long-term success.
The compensation program is comprised primarily of cash compensation, including salary and annual bonus, and grants of restricted stock and non- qualified stock options under EWS's 1987 Long-Term Incentive Plan. The Company believes its compensation policy is fair to both its employees and its shareholders and is competitive within the broadcasting industry.
Descriptions of the Components of the Compensation Program
Base Salary - EWS participates annually in the Towers Perrin Media Industry Compensation Survey (the "Survey") which is widely used in the media industry and gives relevant compensation information on executive positions. The Company strives to place fully competent and high performing executives at the median level of compensation no later than two to three years after attaining their position. The 75th percentile may be in reach for exceptional performers.
The Survey provides compensation analyses for executives in the media industry based on revenues, industry segments (e.g., publishing, broadcasting, cable) and market type and size. The statistical information, including revenues and compensation levels, provided by survey participants is utilized by the Survey to develop statistical equations based on revenues, industry segments and markets. These equations, along with other data, are used by the Company to determine the median and other levels of compensation of executives of media companies with profiles comparable to those of the Company.
In deciding if an annual base salary increase is appropriate for a specific individual, consideration is given to several factors, including the following: a qualitative review of the individual's contributions to the Company during the year and over the course of his employment by the Company; his expected future performance; the performance of the Company during the year; and information received from the Survey. In determining eligibility for base salary increases, the Company considers overall corporate performance during the year, i.e. operating profit and cash flow figures, as opposed to specific measures of corporate performance.
Mr. Lawrence A. Leser is President and Chief Executive Officer of the Company. He is also President and Chief Executive Officer of EWS and his compensation is paid solely by EWS. Mr. Leser receives no additional compensation from the Company.
The other senior executives were granted salary increases effective January 1, 1994. These increases were based on a recommendation by the President, the Survey results and a review of their individual performance during 1993.
Annual Bonus - The purpose of the annual bonus plan is to motivate and reward executives so that they consistently achieve specific financial targets. This incentive is a pay-for-performance essential which aids in maximizing shareholder value. The bonus is payable on an annual basis, although executives may elect to defer payment of the bonus until retirement. Financial goals for 1993 focused on a comparison of actual operating cash flow versus planned operating cash flow.
The Executive Vice President of the Company was eligible for a target bonus equal to 40% of his annual base salary. The other named executives were eligible for a target bonus 30% of their base salary. Because operating cash flow goals were achieved, each of the eligible executives received his full target bonus.
Long-Term Incentives - The Company does not have an independent long-term incentive plan. In 1987, however, EWS adopted a Long-Term Incentive Plan (the "Plan") for its key employees, including executives of the Company. Although the Plan allows for several different types of stock-based awards, to date only two types of awards have been granted: 1) stock options, which represent a right to purchase shares of EWS's Class A Common stock at the fair market value per share as of the date the option is granted, and 2) restricted stock, which represents shares of EWS's Class A Common stock which the recipient cannot sell or otherwise dispose of until the applicable restriction period lapses and which are subject to forfeiture. When this report refers to "stock" in the next two sections of this report, the stock referred to is that of the Class A Common stock of EWS.
Restricted Stock - Generally executives receive restricted stock awards with a three-year vesting period when they first attain an executive position. When executives are promoted to new positions or assume additional responsibility, they may be granted additional restricted stock awards. When awarding the shares of restricted stock, consideration is not given to the total number of shares of restricted stock outstanding.
Of the named executives, only Mr. Gardner received a restricted stock award in 1993. The award was made by EWS's Compensation Committee based on additional responsibilities that he assumed.
Stock Options - The Committee agrees with EWS's compensation committee in that stock option grants are a valuable motivating tool and provide a long- term incentive to management. Annual stock option grants reinforce long- term goals by providing the proper nexus between the interests of management and the interests of the Company's shareholders.
A determination of the number of stock options to be granted to senior executives in 1993 was made by EWS's Compensation Committee which reviewed an analysis that was provided by its compensation consultant. Awards were based on a multiple of base pay, using four times salary for Mr. Gardner. Awards for the other named executives were based on a proportionally lesser multiple of base salary which reflects their respective organizational levels.
The shares will be exercisable one year after the grant date, at $26.44, the fair market value on the date of the grant. However, in Mr. Gardner's case, the shares will be exercisable at a range of prices between $26.44 and $34.
The compensation tables which follow are intended to better enable our shareholders to understand the compensation practices of the Company.
The Compensation Committee John H. Burlingame, Chairman Charles E. Scripps
The following table sets forth information regarding the compensation of the Company's five most highly compensated officers during each of the Company's last three fiscal years.
The following table sets forth certain information regarding options for shares of Class A Common stock granted to the Company's named executives under EWS's Long-Term Incentive Plan in 1993. The 12,500 option shares granted to Mr. Gardner, which expire on April 1, 2003, will be 100% exercisable on April 1, 1995. All other option awards to the named executives during 1993 will be 100% execisable on and after December 16, 1995.
The following table sets forth certain information regarding the number of options for shares of Class A Common stock exercised by the Company's named executives. Only Mr. Schroeder exercised options in 1993. The table also sets forth certain information regarding option values for each named executive.
Set forth below is a line graph comparing the cumulative and total return on the Company's Common stock, assuming a $100 investment as of December 31, 1988, based on the market prices at the end of each year and assuming reinvestment of dividends, with the cumulative total return of the Standard & Poor's Composite-500 Index and an index based on a group of communications media companies which are peers of EWS.
A narrative description of the performance graph points is as follows (a hard copy of the graph has been submitted to the Secruities and Exchange Commission):
1988 1989 1990 1991 1992 1993 S&P 500 100 132 127 166 179 197 Scripps 100 98 65 60 68 122 Media Index 100 123 97 116 133 152
The Companies in the peer group index are A.H. Belo Corporation, Gannett Co. Inc., Knight-Ridder, Inc., Multimedia, Inc., The New York Times Company, Times Mirror Company, Tribune Company and The Washington Post Company. The index is weighted based on market capitalization at December 31, 1988. The companies to be included in the peer group are approved by the Compensation Committee of EWS.
Compensation Committee Interlocks and Insider Participation - Charles E. Scripps and John H. Burlingame are the members of the Company's compensation committee.
Mr. Scripps is a member of the Company's Board of Directors and is Chairman of the Board of Directors of SHI and EWS. Mr. Scripps is also a member of EWS's compensation committee. Mr. Lawrence A. Leser, President and Chief Executive Officer and a director of the Company, is also President and Chief Executive Officer of SHI and EWS, and a member of the SHI and EWS Boards of Directors and the executive committees of each.
Mr. Burlingame is the Executive Partner of Baker & Hostetler, which is general counsel to the Company, SHI, EWS and The Edward W. Scripps Trust (the "Trust"). Baker & Hostetler performed legal services for the Company, EWS, SHI, and the Trust during 1993 and is expected to perform such services in 1994.
In 1993, Mr. Scripps and Mr. Burlingame served as trustees of the Trust and will continue to do so in 1994. The Trust is the controlling shareholder of EWS.
Pension Plan - The Company's executive officers and substantially all other nonunion employees of the Company are participants in a non-contributory defined benefit pension plan (the "Pension Plan"). Contributions to the Pension Plan are based on separate actuarial computations for each business unit and are made by the business unit compensating the particular individual.
The following table shows the annual normal retirement benefits which, absent the maximum benefit limitations (the "Benefit Limitations") imposed by Section 415(b) of the Internal Revenue Code of 1986, as amended (the "Code"), would be payable pursuant to the Pension Plan upon retirement at age 65 (based upon the 1994 Social Security integration level under the Pension Plan) pursuant to a straight life annuity option, for employees in the compensation ranges specified and under various assumptions with respect to average final annual compensation and years of credited service.
Annual Normal Retirement Benefits (Straight Life Annuity Option) Final Annual for Years of Credited Service Indicated Compensation 15 Years 20 Years 25 Years 30 Years 35 Years
$150,000 $27,000 $ 36,000 $ 46,000 $ 55,000 $ 64,000 200,000 37,000 49,000 61,000 73,000 86,000 250,000 46,000 61,000 77,000 92,000 107,000 300,000 55,000 74,000 92,000 111,000 129,000 350,000 65,000 86,000 108,000 130,000 151,000 400,000 74,000 99,000 124,000 148,000 173,000 450,000 87,000 111,000 145,000 167,000 203,000 500,000 93,000 124,000 155,000 186,000 217,000
In general, the Benefit Limitations limit the annual retirement benefits that may be paid pursuant to the Pension Plan to $118,800 (subject to further cost of living increases promulgated by the United States Secretary of Treasury). The Company will supplement payments under the Pension Plan with direct pension payments from the Company in an amount equal to the amount, if any, by which the benefits that otherwise would be payable under the Pension Plan exceed the benefits that are permitted to be paid from the Pension Plan under the Benefit Limitations. Annual normal retirement benefits are computed at the rate of 1% of average final annual compensation up to the applicable Social Security integration level plus 1.25% of average final annual compensation in excess of the Social Security integration level, multiplied by the employee's years of credited service. An employee's benefits are actuarially adjusted if paid in a form other than a life annuity.
An employee's average final annual compensation is the average annual amount of his total pensionable compensation (generally salary and bonus, excluding any compensation pursuant to the Medium Term Bonus Plan, the Medium Savings and Thrift Plan and any other annual or long-term compensation reflected in the Summary Compensation Table) for service during the five consecutive years within the last ten years of his employment for which his total compensation was greatest. The employee's years of credited service equal the number of years of his employment with the Company. As of December 31, 1993, the years of credited service of the individuals named in the foregoing cash compensation table were as follows: Mr. Gardner-9; Mr. Griesdorn-8; Mr. Schroeder-6; Mr. Robinson-2; and Mr. Chase-22.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners - As of March 1, 1994, SHI, 312 Walnut Street, Cincinnati, Ohio was the only beneficial owner of more than 5% of the Company's outstanding Common stock known to management of the Company. As of such date, SHI beneficially owned 8,890,199 shares of Common stock, representing 86.1% of the outstanding shares of such stock as of such date. SHI shares the power to vote and dispose of the shares of Common stock with EWS, owner of 100% of the outstanding common shares of SHI. The directors of SHI are also directors of EWS. The Edward W. Scripps Trust owns approximately 79.5% of the Common Voting stock and approximately 59.7% of the Class A Common stock of EWS.
Security Ownership of Management - The table below sets forth information with respect to the shares of the Company's Common stock and the shares of the Class A Common stock of EWS beneficially owned as of March 1, 1994, by each director of the Company and by each of the named officers in the compensation section (the "named officers"), and by all directors and all officers of the Company as a group.
Unless otherwise indicated, the persons named in the table have sole voting and investment power with respect to all shares shown as being beneficially owned by them.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At December 31, 1993, the outstanding principal balance under the Company's credit facilities with SHI was $99,900,000. The interest rate on $80,000,000 is fixed at 8.5%. Interest on the remainder is charged at the average rate (3.4% at December 31, 1993) SHI is able to obtain under its short-term credit facilities.
The Company receives certain management services from SHI which provides such services to its parent, EWS, and all of its subsidiaries. Among these services are the services of certain management officers, a portion of the services of an independent public accounting firm, legal services of general counsel, preparation of federal, state, and county tax returns, and preparation of the reports required by certain regulatory agencies. Each entity's share of the cost of such services is based on the proportion of its revenues to the revenues of all entities, except for the cost of providing certain management services specifically on behalf of particular entities. This method of allocation of expenses was determined by the directors of EWS. In 1993, such expenses allocated to the Company amounted to $8,104,000. Of this amount, $3,491,000 represented expenses incurred specifically on behalf of the Company and was not shared by other entities; $1,068,000 represented the Company's share of the costs of SHI's cable television management services; and $3,545,000 represented the Company's share of the cost of providing management services generally for all of the aforesaid entities. This latter amount represented 32.5% of the total cost of providing such general management services.
Garland R. Robinson, a Vice President of the Company, received an $80,000 relocation loan from the Company on July 22, 1992. The note is non- interest bearing, due on demand, and was outstanding at December 31, 1993.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Financial Statements and Supplemental Schedules
(a) The consolidated financial statements of the Company are filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page.
The report of Deloitte & Touche, Independent Auditors, dated January 26, 1994 is filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page.
(b) The consolidated supplemental schedules of the Company are filed as part of this Form 10-K. See Index to Consolidated Financial Statement Schedules at page S-1.
Exhibits
The information required by this item appears at page E-1 of this Form 10-K.
Reports on Form 8-K
No reports on Form 8-K were filed for the quarter ended December 31, 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934 the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereby duly authorized, on March 28, 1994.
SCRIPPS HOWARD BROADCASTING COMPANY
By /s/ Lawrence A. Leser Lawrence A. Leser President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities indicated, on March 28, 1994.
Signature Title
/s/ Lawrence A. Leser President, Chief Executive Officer and Director Lawrence A. Leser (Principal Executive Officer)
/s/ Daniel J. Castellini Secretary and Treasurer and Director Daniel J. Castellini (Principal Financial and Accounting Officer)
/s/ Charles E. Scripps Director Charles E. Scripps
/s/ Donald L. Perris Director Donald L. Perris
/s/ John H. Burlingame Director John H. Burlingame
Director Gordon E. Heffern
/s/ Robert E. Stautberg Director Robert E. Stautberg
SCRIPPS HOWARD BROADCASTING COMPANY
Index to Consolidated Financial Statement Information
Selected Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Independent Auditors' Report Consolidated Balance Sheets Consolidated Statements of Income and Retained Earnings Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Consolidated results of operations were as follows:
The following items affected the comparability of the Company's reported results of operations:
(i) The Company sold its Memphis television station and its radio stations. The stations, and any related gains on the sales, are hereinafter referred to as the "Divested Operations." See Note 3B to the Consolidated Financial Statements.
The following items related to Divested Operations affected the comparability of the Company's reported results of operations:
(ii) In 1993 management changed the estimate of the additional amount of copyright fees the Company would owe when a dispute between the television industry and the American Society of Composers, Authors and Publishers was resolved ("ASCAP Adjustment"). The adjustment increased broadcasting operating income $4,300,000 and net income $2,700,000, $.26 per share. See Note 4 to the Consolidated Financial Statements.
(iii) In August 1993 the federal income tax rate was increased to 35%, retroactive to January 1, 1993, and management changed its estimate of the tax basis and lives of certain assets ("Income Tax Changes"). The net effect was to decrease net income $100,000, $.01 per share. See Note 5 to the Consolidated Financial Statements.
(iv) In 1991 the Company agreed to settle a lawsuit filed in 1988 by Pacific West Cable Company that alleged violations of antitrust and unfair trade practice laws ("Sacramento Settlement"). The resultant charge reduced cable television operating income by $12,000,000 and net income by $7,900,000, $.77 per share. See Note 4 to the Consolidated Financial Statements.
The items above are excluded from the consolidated and segment operating results presented in the following pages of this Management's Discussion and Analysis. Management believes they are not relevant to understanding the Company's ongoing operations.
Net income per share was as follows:
The Company's average advances from parent company in 1993 were $70,600,000 less than in 1992. The combined effects of reduced advances and lower interest rates resulted in the decrease in interest expense in 1993. Average advance balances were $14,000,000 greater in 1992 than in 1991, primarily due to the May 30, 1991 acquisition of Baltimore television station WMAR. Interest expense decreased in 1992 as the effect of the increase in average advance balances on interest expense was more than offset by the effect of lower interest rates.
Miscellaneous includes the gains referred to in (i) above.
The effective income tax rate decreased in 1993 and 1992 because pre-tax income increased, thereby reducing the relative impact of non-deductible amortization of goodwill. The rate in 1993 was also affected by the Income Tax Changes. See Note 5 to the Consolidated Financial Statements. The effective income tax rate in 1994 is expected to be approximately 42%.
RESULTS OF OPERATIONS
CONSOLIDATED - Operating results, excluding the Divested Operations, ASCAP Adjustment, and Sacramento Settlement, were as follows:
SEGMENTS - Operating results, excluding the Divested Operations, ASCAP Adjustment, and Sacramento Settlement, for each of the Company's business segments are presented on the following pages.
Earnings before interest, income taxes, depreciation, and amortization ("EBITDA") is included in the discussion of segment results because: - Acquisitions of communications media businesses are based on multiples of EBITDA. - Financial analysts use EBITDA to value communications media companies. - Changes in depreciation and amortization are often unrelated to current performance. Management believes the year-over-year change in EBITDA is a more useful measure of year-over-year performance than the change in operating income because, combined with information on capital spending plans, it is a more reliable indicator of results that may be expected in future periods. - Banks and other lenders use EBITDA to determine the Company's borrowing capacity.
EBITDA should not, however, be construed as an alternative measure of the amount of the Company's income or cash flows from operating activities.
BROADCASTING - Operating results for the broadcasting segment, excluding the Divested Operations and ASCAP Adjustment, were as follows:
Revenues increased at most of the Company's television stations in 1993 and in 1992. Revenues at the Fox affiliates have been particularly strong.
Program costs decreased in 1993 as several syndicated programs previously aired by the Company's stations were replaced with less-costly programs.
Revenues and operating expenses in 1992 were affected by the inclusion of Baltimore television station WMAR, acquired May 30, 1991, for the full year.
Capital expenditures in 1994 are expected to be approximately $14,000,000. Depreciation and amortization is expected to increase approximately 5% in 1994.
CABLE TELEVISION - Operating results for the cable television segment, excluding the Sacramento Settlement, were as follows:
The legislation passed in October 1992 to re-regulate the cable television industry affected the Company's cable television operations in 1993. Basic rates were frozen April 5, 1993 and new regulated rates became effective September 1, 1993. The Federal Communications Commission recently announced revised rules that will further reduce regulated rates. Based upon the revised rules, revenues and EBITDA will decline in 1994.
Revenue growth also slowed in 1993 as the weak California economy inhibited subscriber growth at the Company's Sacramento cable television system, which serves 72% of the Company's total basic subscribers. Basic subscribers at the Sacramento system increased 2.9% in 1993.
Program costs as a percent of basic and premium programming service revenues increased from 27.0% in 1991 to 28.3% in 1993, primarily due to expanded and improved programming offered to basic subscribers and discounts provided to customers receiving multiple premium channels. Program costs as a percentage of basic and premium programming service revenues are expected to increase in 1994.
The estimated useful life of the distribution system for the Company's Sacramento system was reduced as the Company is upgrading the system, contributing to the increase in depreciation and amortization. Capital expenditures on the rebuild and other projects are expected to be approximately $30,000,000 in 1994. Depreciation and amortization is expected to increase approximately 10% in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities was $88,400,000 in 1993 compared to $92,300,000 in 1992.
Cash flow from operations and cash received in the sales of subsidiary companies totaled $183,000,000 in 1993 and was used primarily for capital expenditures of $30,900,000, reduction of advances of $138,900,000, and dividend payments of $12,400,000. The debt to total capitalization ratio at December 31 was .25 in 1993 and .53 in 1992.
Consolidated capital expenditures are expected to total approximately $50,000,000 in 1994, including The Home & Garden Television Network ("Home & Garden"), a 24-hour cable channel set for launch in late 1994. The Company expects to finance its capital requirements and start-up costs for Home & Garden primarily through cash flow from operations.
PROPOSED MERGER
On February 17, 1994 The E.W. Scripps Company ("EWS"), which through Scripps Howard, Inc. (its wholly-owned subsidiary) owns 86.1% of the Company's common stock, announced it had offered to acquire the 13.9% of the Company that it does not already own. In a merger proposal made to the Company's board of directors, EWS offered to exchange three shares of Class A Common stock for each of the Company's shares. Directors of the Company have formed a special committee to evaluate the offer. The merger is subject to the execution of a mutually agreeable definitive agreement, regulatory approvals, and a vote of the Company's shareholders. There can be no assurance that the merger will be entered into or that any transaction will be consummated.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders, Scripps Howard Broadcasting Company:
We have audited the accompanying consolidated balance sheets of Scripps Howard Broadcasting Company and subsidiary companies (Company) as of December 31, 1993 and 1992, and the related consolidated statements of income and retained earnings and of cash flows for each of the three years in the period ended December 31, 1993. Our audits also included the financial statement schedules listed in the Index at Item 14. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 1993 and 1992, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE Cincinnati, Ohio January 26, 1994
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation - The consolidated financial statements include the accounts of Scripps Howard Broadcasting Company and its majority-owned subsidiary companies ("Company"). The Company is 86.1% owned by Scripps Howard, Inc. ("SHI"), a wholly-owned subsidiary of The E.W. Scripps Company ("EWS").
Goodwill and Other Intangible Assets - Goodwill and other intangible assets are stated at the lower of unamortized cost or fair value. Fair value is estimated based upon estimated future net cash flows. An impairment loss is recognized when the undiscounted estimated future net cash flows exceed the unamortized cost of the asset. Goodwill represents the cost of acquisitions in excess of tangible assets and identifiable intangible assets received. Cable television franchises are amortized generally over the remaining terms of acquired cable systems' franchise agreements and non- competition agreements over the terms of the agreements. Goodwill acquired after October 1970, customer lists, and other intangible assets are amortized over periods of up to 40 years. Goodwill acquired before November 1970 ($6,500,000) is not amortized.
Income Taxes - Deferred income tax liabilities are provided for temporary differences between the tax basis and reported amounts of assets and liabilities that will result in taxable or deductible amounts in future years. The Company's temporary differences primarily result from accelerated depreciation and amortization for tax purposes and accrued expenses not deductible for tax purposes until paid. Also, the Company received a tax certificate from the Federal Communications Commission upon the sale of the Memphis television and radio stations, enabling the Company to defer payment of income taxes on the $60,500,000 tax-basis gain for a minimum of two years.
The Company is included in the consolidated federal income tax return of EWS. However, the provision is computed as if the Company filed a separate federal income tax return.
Property, Plant, and Equipment - Depreciation is computed using the straight-line method over estimated useful lives. Interest costs related to major capital projects are capitalized and classified as property, plant, and equipment.
Program Rights - Program rights are recorded at the time such programs become available for broadcast. Program rights are stated at the lower of unamortized cost or fair value. Amortization is computed using the straight-line method based on the license period or based on usage, whichever yields the greater accumulated amortization for each program. The portion of the unamortized balance expected to be amortized within one year is classified as a current asset. The liability for program rights is not discounted for imputed interest. Estimated fair values (which are based on current rates available to the Company for debt of the same remaining maturity) and the carrying amounts of the Company's program rights liabilities were as follows:
Cash and Cash Equivalents - Cash and cash equivalents represent cash on hand, bank deposits, and highly liquid debt instruments with an original maturity of up to three months. Cash equivalents are stated at cost plus accrued interest, which approximates fair value.
Net Income Per Share - Net income per share computations are based upon the weighted average common shares outstanding. Weighted average shares outstanding were as follows:
Reclassifications - For comparison purposes certain 1992 and 1991 items have been reclassified to conform with 1993 classifications.
2. ACCOUNTING CHANGES
The Company adopted Financial Accounting Standard No. 112 - Employers' Accounting for Postemployment Benefits in 1993. The change had no effect on the Company's financial statements.
3. ACQUISITIONS AND DIVESTITURES
A. Acquisitions
1993 and 1992 - The Company purchased several cable television systems.
1991 - The Company purchased Baltimore television station WMAR for $125,000,000 in cash and assumed liabilities totaling $29,000,000. The Company also purchased several cable television systems.
The following table presents additional information about the acquisitions:
The acquisitions have been accounted for as purchases, and accordingly the purchase prices were allocated to assets and liabilities based on the estimated fair value as of the dates of acquisition.
The acquired operations have been included in the consolidated statements of income from the dates of acquisition. The following table summarizes, on an unaudited, pro forma basis, the estimated combined results of the Company and WMAR for 1991, assuming the acquisition was completed at the beginning of the year. These results include certain adjustments, primarily increased interest expense and depreciation and amortization, and are not necessarily indicative of what the results would have been had the Company owned WMAR during 1991:
Pro forma results are not presented for the cable television acquisitions because the combined results of operations would not be significantly different from the reported amounts.
B. Divestitures
1993 - The Company sold its Memphis television station and its radio stations. The following table presents additional information about the divestitures:
Included in the consolidated financial statements are the following results of divested operations (excluding gains on sales):
4. UNUSUAL CREDITS AND CHARGES
The Company's 1993 operating results include net after-tax gains on the sales of subsidiary companies of $53,000,000, $5.13 per share (see Note 3B).
1993 - Management changed the estimate of the additional amount of copyright fees the Company would owe when a dispute between the television industry and the American Society of Composers, Authors and Publishers ("ASCAP") was resolved. The adjustment increased operating income $4,300,000 and net income $2,700,000, $.26 per share. The U.S. television industry challenged the copyright fees required to be paid to ASCAP under a formula established in 1950. The dispute concerned payments for the past ten years. The U.S. District Court of the Southern District of New York ruled on February 26, 1993, and the change in estimate was based on that ruling.
In August 1993 the federal income tax rate was increased to 35%, retroactive to January 1, 1993, and management changed its estimate of the tax basis and lives of certain assets. The net effect was to decrease net income $100,000, $.01 per share (see Note 5).
1991 - The Company agreed to settle a lawsuit filed in 1988 by Pacific West Cable Company that alleged violations of antitrust and unfair trade practice laws. The resultant charge reduced operating income by $12,000,000 and net income by $7,900,000, $.77 per share.
5. INCOME TAXES
The Internal Revenue Service ("IRS") is currently examining the consolidated income tax returns of EWS for the years 1985 through 1990. Management believes that adequate provision for income taxes has been made for all open years.
In 1991 the Company reached agreement with the IRS to settle the audits of its 1982 through 1984 federal income tax returns. The IRS required the Company's broadcast operations to change to the accrual method of accounting for income tax purposes. There was no charge to income resulting from the settlement.
In 1991 SHI reached agreement with the State of Ohio to settle the audits of its 1980 through 1987 consolidated state franchise tax returns, which included the Company. The Company recorded additional income tax expense of $1,900,000 as a result of the settlement.
In August 1993 the federal income tax rate was increased to 35%, retroactive to January 1, 1993. The change in the tax rate increased the Company's deferred tax liabilities $2,100,000. The resultant charge to income taxes reduced net income $2,100,000, $.20 per share. Also in 1993, management changed its estimate of the tax basis and lives of certain assets. The resulting change in the estimated tax liabilities for prior years increased net income $2,000,000, $.19 per share.
The approximate effect of the temporary differences giving rise to the Company's deferred income tax liabilities (assets) are as follows:
The Company's state net operating loss carryforwards expire from 2000 through 2006.
The provision for income taxes consists of the following:
The difference between the statutory rate for federal income tax and the effective income tax rate is summarized as follows:
6. ADVANCES FROM PARENT COMPANY
Advances from SHI consisted of the following at December 31:
The Company has a credit facility with SHI which, at December 31, 1993 permitted maximum borrowings up to $75,000,000 ("Credit Facility"). Maximum borrowing under the Credit Facility is changed as the Company's anticipated needs change and is not indicative of the Company's short-term borrowing capacity. The Credit Facility expires in September 1995 and may be extended upon mutual agreement.
In 1993 the Company prepaid the scheduled 1994 payment on the 10.3% advance and the scheduled 1997 and 1998 payments on the 8.5% advance.
7. PROPERTY, PLANT, AND EQUIPMENT AND INTANGIBLE ASSETS
Property, plant, and equipment consisted of the following at December 31:
Goodwill and other intangible assets consisted of the following at December 31:
8. EMPLOYEE BENEFIT PLANS
The Company sponsors defined benefit plans covering substantially all employees. Benefits are generally based on the employees' compensation and years of service. Funding is based on the requirements of the plans and applicable federal laws. The Company also sponsors defined contribution plans covering substantially all employees. The Company matches a portion of employees' voluntary contributions to these plans.
Retirement plans expense consisted of the following:
Assumptions used in the accounting for the defined benefit pension plans were as follows:
The funded status of the defined benefit pension plans at December 31 was as follows:
Plan assets consist of marketable equity and fixed-income securities.
9. SEGMENT INFORMATION
Broadcasting operating income in 1993 was increased by $4,300,000 as a result of the change in estimate of the additional amount of copyright fees owed ASCAP (see Note 4).
Cable television operating income was reduced in 1991 by the $12,000,000 charge related to settlement of the Sacramento cable television litigation (see Note 4).
Financial information relating to the Company's business segments is as follows:
Corporate assets are primarily cash and deferred income taxes.
10. TRANSACTIONS WITH PARENT COMPANY
Intercompany payable (receivable) balances with SHI at December 31 were as follows:
SHI provides general management services to all of its subsidiaries. SHI also provides management specifically for its cable television operations. The Company's share of such services was as follows:
11. COMMITMENTS AND CONTINGENCIES
The Company is involved in litigation arising in the ordinary course of business, none of which is expected to result in material loss.
The Company is committed to purchase approximately $68,000,000 of program rights currently not available for broadcast, including programs not yet produced. If such programs are not produced the Company's commitment would expire without obligation.
The Company is diversified geographically and has a diverse customer base. The Company grants credit to substantially all of its customers. Management believes bad debt losses resulting from default by a single customer, or defaults by customers in any depressed region or business sector, would not have a material effect on the Company's financial position.
Minimum payments on non-cancelable leases at December 31, 1993 were $1,600,000. Rental expense for cancelable and non-cancelable leases was as follows:
12. SUMMARIZED QUARTERLY FINANCIAL INFORMATION (Unaudited)
Summarized financial information is as follows:
The sum of the quarterly net income per share amounts may not equal the reported annual amount because each is computed independently based upon the weighted average number of shares outstanding for that period.
SCRIPPS HOWARD BROADCASTING COMPANY
Index to Consolidated Financial Statement Schedules
Indebtedness to Related Parties S-2 Property, Plant, and Equipment S-3 Accumulated Depreciation of Property, Plant, and Equipment S-4 Valuation and Qualifying Accounts S-5 Supplementary Income Statement Information S-6
In 1993 the Company prepaid the scheduled 1994 payment on the 10.3% advance, and the scheduled 1997 and 1998 payments on the 8.5% advance.
In 1991 the Company prepaid the scheduled 1999 payment on the 8.5% advance.