ITEM 1. BUSINESS
The E. W. Scripps Company ("Company") operates in three reportable segments: Newspapers, Scripps Networks and Broadcast Television.
Newspapers include 21 daily newspapers in the U.S.
Scripps Networks includes three national television networks that are distributed by cable and satellite television systems: Home & Garden Television ("HGTV"), Food Network and Do It Yourself ("DIY"), and the Company's 12% interest in FOX Sports South, a regional television network. The Company expects to launch Fine Living, its fourth national network, in the fourth quarter of 2001.
Broadcast Television includes ten television stations, nine of which are affiliated with national television networks.
A summary of segment information for the three years ended December 31, 2000, is set forth on page of this Form 10-K. Licensing and other media aggregates the Company's operating segments that are too small to warrant separate reporting, primarily syndication and licensing of news features and comics.
Newspapers
Operations - The Company acquired or divested the following newspaper operations in the five years ended December 31, 2000:
2000 - Acquired the Ft. Pierce, Florida, daily newspaper in exchange for the Company's Destin, Florida, newspaper and cash. Acquired the Henderson, Kentucky, daily newspaper and the Marco Island, Florida, weekly newspaper. 1999 - Acquired the 70% of Colorado Real Estate On-line, an Internet provider of real estate listings, that the Company did not already own. 1998 - Divested the Dallas Community newspapers, including the Plano daily. 1997 - Acquired daily newspapers in Abilene, Corpus Christi, Plano, San Angelo and Wichita Falls, Texas, a group of community newspapers in the Dallas, Texas, market and a daily newspaper in Anderson, South Carolina. Traded its Monterey and San Luis Obispo, California, daily newspapers for the daily newspaper in Boulder, Colorado, and terminated the joint operating agency and ceased operations of its newspaper in El Paso, Texas. 1996 - Acquired the Vero Beach, Florida, daily newspaper.
The Company publishes daily newspapers in 21 markets. From its Washington bureau the Company operates the Scripps Howard News Service, a supplemental wire service covering stories in the capital, other parts of the United States and abroad. Each of the Company's daily newspapers operates an Internet site featuring content included in the daily newspaper. Many of the Company's newspapers provide services such as total market coverage advertising products, direct mail advertising and commercial printing.
Revenues - Operating revenues for the five years ended December 31, 2000, were as follows:
Daily newspaper operating revenues are derived primarily from advertising and circulation. Joint operating agency distributions represent the Company's share of profits of newspapers managed by the other party to a joint operating agency (see "Joint Operating Agencies"). Other newspaper operating revenues include commercial printing.
Advertising rates and revenues vary among the Company's newspapers depending on circulation, type of advertising, local market conditions and competition. Advertising revenues are derived from run-of-paper ("ROP") advertisements included with news stories in the body of the newspaper, preprinted advertisements that are generally produced by advertisers and inserted into the newspaper, and on-line advertising appearing on the newspapers' Internet sites.
ROP is further broken down among "local," "classified" and "national" advertising. Local refers to advertising that is not in the classified advertising section and is purchased by in-market advertisers. Classified refers to advertising that generally is grouped by type of advertising, e.g., automotive and help wanted. National refers to advertising purchased by businesses that operate beyond the local market and purchase advertising from many newspapers, primarily through advertising agencies. A given volume of ROP advertisements is generally more profitable to the Company than the same volume of preprinted advertisements.
On-line advertising, which is included in "preprint and other," ranges from simple static banners that appear at the top and bottom of a Web page to more complex advertisements that use animation and allow users to interact with the advertisements. On-line advertising also includes an allocation of classified advertising revenues that appear in both the printed editions of the newspapers and on the newspapers' Internet sites, direct response campaigns and links to commercial sites. The newspapers generally receive fees for these links and advertisements. On-line advertising revenues were $8,300,000 in 2000, $5,400,000 in 1999, $1,800,000 in 1998 and $100,000 in 1997.
Advertising revenues vary through the year, with the first and third quarters generally having lower revenues than the second and fourth quarters. Print advertising rates and volume are highest on Sundays, primarily because circulation and readership is greatest on Sundays.
Circulation revenues are derived from home delivery sales of newspapers to subscribers and from single-copy sales made through retail outlets and vending machines. Circulation information for the Company's newspapers is as follows:
(1) Based on Audit Bureau of Circulation Publisher's Statements ("Statements") for the six-month periods ending September 30, except figures for the Ft. Pierce Tribune, the Naples Daily News, the Stuart News and the Vero Beach Press Journal which are from the Statements for the twelve-month periods ending September 30.
(2) This newspaper is a party to a JOA. The JOA between the Denver Rocky Mountain News and MediaNews Group Inc.'s Denver Post began operations on January 22, 2001. The Evansville JOA was terminated in 1998. See "Joint Operating Agencies."
Joint Operating Agencies - A JOA combines all but the editorial operations of two competing newspapers in a market in order to reduce aggregate expenses and take advantage of economies of scale, thereby allowing the continuing operation of both newspapers in that market. The Newspaper Preservation Act of 1970 ("NPA") provides a limited exemption from anti-trust laws, generally permitting the continuance of JOAs in existence prior to the enactment of the NPA and the formation, under certain circumstances, of new JOAs between newspapers.
The Company is a partner in newspaper joint operating agencies ("JOAs") in four markets. The JOA between the Company's Denver Rocky Mountain News and MediaNews Group Inc.'s Denver Post was approved by the U.S. Attorney General in January 2001. The 50-year agreement created a new entity called the Denver Newspaper Agency L.L.C., which is 50%-owned by each partner. Both partners contributed certain assets used in the operations of their newspapers to the new entity. In addition, the Company paid $60,000,000 to MediaNews Group Inc. The JOA commenced operations on January 22, 2001. The other partner manages each of the Company's other JOAs.
JOA revenues less JOA expenses, as defined in each JOA, equals JOA profits, which are split between the partners. In each case JOA expenses exclude editorial expenses. The Company will receive a 50% share of the operating profits of the Denver JOA, and between 20% and 40% of the operating profits in the other three markets. The Company includes its portion of JOA operating profits in operating revenues.
The table below provides certain information about the Company's JOAs.
A JOA in Evansville, Indiana, which was managed by the Company, expired in 1998 and was not renewed. The Company had received approximately 80% of JOA profits. The Company continues to operate its Evansville newspaper.
Competition - The Company's newspapers compete for advertising revenues primarily with other local media, including other local newspapers, television and radio stations, cable television, telephone directories, other Internet sites and direct mail. Competition for advertising revenues is based upon audience size and demographics, price and effectiveness. The Company's newspapers and Internet sites compete with all other information and entertainment media for consumers' discretionary time.
Newspaper Production - The Company's daily newspapers are printed using offset presses and use computer systems for writing, editing and composing and producing the advertising and news material printed in each edition. The Company is constructing a new production facility for its Knoxville, Tennessee, daily newspaper.
Raw Materials and Labor Costs - The Company consumed approximately 281,000 metric tons of newsprint in 2000, 270,000 metric tons in 1999, and 240,000 metric tons in 1998. The Company purchases newsprint from various suppliers, many of which are Canadian. Management believes that the Company's sources of supply of newsprint are adequate for its anticipated needs.
Newsprint is a basic commodity and its price is sensitive to the worldwide balance of supply and demand. Because of the capital commitment to construct and operate a newsprint mill, the supply of newsprint is relatively stable except for temporary disruptions caused by labor stoppages. However, the demand for newsprint can change quickly, resulting in wide swings in the price of newsprint. Newsprint prices were $745 in the first quarter of 1996 before declining to approximately $500 by March 1997. Newsprint prices fluctuated between $450 and $590 from 1998 through 2000. The average newsprint price was approximately $580 per metric ton in the fourth quarter of 2000. The Company has used newsprint forward contracts to hedge its exposure to changes in the price of newsprint for up to twelve months. At December 31, 2000, the Company held no newsprint forward contracts. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk."
Labor costs accounted for approximately 45% of the Company's newspaper operating expenses in 2000, 43% in 1999 and 42% in 1998. A substantial number of the Company's newspaper employees are represented by labor unions. See "Employees."
Scripps Networks
Operations - HGTV features programming focusing on home repair and remodeling, gardening, decorating and other activities associated with the home. Food Network features programming focusing on food and entertaining. DIY features immediate access to step-by-step instructions, in-depth demonstrations and tips on various topics associated with home improvement, gardening and crafts. Fine Living, expected to begin telecasting in the fourth quarter of 2001, will help people explore their passions and interests in the finer things in life, focusing on the $200 billion-plus luxury consumer goods and services markets.
Food Network began telecasting in December 1993 and HGTV in December 1994. DIY began telecasting in the fourth quarter of 1999. The Company acquired the controlling interest in Food Network in October 1997. The Company owned 64% of Food Network at December 31, 2000.
According to the Nielson Homevideo Index, HGTV was telecast to 67.1 million homes in December 2000, 59.0 million homes in December 1999 and 48.4 million homes in December 1998. Food Network was telecast to 54.4 million homes in December 2000, 44.2 million homes in December 1999 and 37.1 million homes in December 1998.
Each of the Company's networks operates an Internet site featuring content from its programs and additional information and products of interest to the networks' viewers. The Internet sites also permit users to post comments in response to programs and features, and provide applications to enable users to communicate with each other and receive updates in subject areas of their choosing.
Revenues - Operating revenues for the five years ended December 31, 2000, were as follows:
Revenues are derived from the sale of advertising time and, if provided in the affiliation agreements, from affiliate fees paid by cable television and other distribution systems that carry the networks. Affiliate fees are generally based on the number of subscribers who receive the networks.
On-line advertising primarily includes banner ads and other advertisements. Advertising opportunities on the Internet sites range from simple static banners that appear at the top and bottom of a Web page to more complex advertisements that use animation and allow users to interact with the advertisements. The Internet sites also provide advertisers with sponsorship opportunities, promotions, direct response campaigns and links to commercial sites. The networks generally receive fees for these links and advertisements. On-line advertising revenues were $5,100,000 in 2000, $3,400,000 in 1999 and $700,000 in 1998.
Programming - The Company both produces and purchases programming for HGTV, DIY and Food Network. The Company has continually improved the quality and variety of programming and expanded the hours of original programming presented on its networks. The costs to purchase or produce programs for the networks totaled $147,000,000 in 2000, $117,000,000 in 1999, $64,000,000 in 1998, and $24,000,000 in 1997. The Company owns substantially all of the programming airing on its networks, and expects to telecast such programs over several years. The costs to acquire programs are expensed as the programs are telecast.
Distribution - Network programming is telecast on cable and satellite television systems. The Company's networks generally pay fees for long-term distribution agreements. These fees are usually paid in full when systems launch the networks. The amounts of the distribution fees depend upon several factors, including the numbers of subscribers, the duration of the agreements and the amounts of monthly affiliate fees the systems agree to pay the Company. In markets where the Company has broadcast television stations, distribution of the networks may be obtained by granting cable or satellite television systems the right to carry the local television stations' signals.
Popularity of the programming with subscribers is a primary factor in obtaining and retaining distribution by system operators.
Competition - In addition to competing with other networks for distribution on cable television systems, Scripps Networks competes for advertising revenues with other local and national media, including other cable television networks, television stations, radio stations, newspapers, Internet sites and direct mail. Competition for advertising revenues is based upon audience size and demographics, price and effectiveness. Scripps Networks compete for consumers' discretionary time with all other information and entertainment media.
Broadcast Television
Operations - The Company acquired television station KMCI in Lawrence, Kansas in 2000. The Company had operated the station under a Local Marketing Agreement ("LMA") since 1996. Revenues from KMCI were included in the Company's results of operations while the station was operated under the LMA.
Broadcast Television includes nine network-affiliated television stations. The stations rely on local sales operations for local advertising and national advertising agencies for obtaining national advertising.
Revenues - Operating revenues for the five years ended December 31, 2000, were as follows:
Revenues are derived primarily from the sale of time to businesses for commercial messages that appear during entertainment and news programming. Local and national advertising refer to time purchased by local, regional and national businesses; political refers to campaigns for elective office and campaigns for political issues. Automobile advertising accounts for approximately one-fourth of the Company's local and national advertising revenues.
The first and third quarters of each year generally have lower advertising revenues than the second and fourth quarters. The increasing political advertising in even-numbered years when congressional and presidential elections occur makes it difficult to achieve year-over-year increases in operating results in odd-numbered years.
Other revenues also include network compensation (see "Network Affiliation and Programming").
Information concerning the Company's stations and the markets in which they operate is as follows:
All market and audience data is based on the November A.C. Nielsen Company survey.
(1) Rank of Market represents the relative size of the television market in the United States. (2) Represents the number of television households tuned to a specific station from 6 a.m. to 2 a.m. each day, as a percentage of total viewing households in Area of Dominant Influence. (3) Stations in Market does not include public broadcasting stations, satellite stations, or translators which rebroadcast signals from distant stations. (4) Station Rank in Market is based on Average Audience Share as described in (2). (5) Prior to June 1996, WCPO was a CBS affiliate. (6) Construction permits have been filed in all four markets. Permits have been granted in the West Palm and Tulsa markets. The Company is required to commence DTV service by May 1, 2002.
Competition - The Company's television stations compete for advertising revenues primarily with other local media, including other television stations, radio stations, cable television, newspapers, other Internet sites and direct mail. Competition for advertising revenue is based upon audience size and demographics, price and effectiveness. Television stations compete for consumers' discretionary time with all other information and entertainment media. The Company's television stations have experienced declines in their average audience share in recent years due to the creation of new networks and increased audience share of alternative service providers such as traditional cable, "wireless" cable and direct broadcast satellite television. Continuing technological advances will improve the capability of alternative service providers to offer video services in competition with terrestrial broadcasting. The degree of competition from such service providers is expected to increase. The Company intends to undertake upgrades in its services, including development of digital television broadcasting, to maintain its competitive posture as well as to comply with government requirements. Technological advances in interactive media services will further increase these competitive pressures.
Network Affiliation and Programming - Nine of the Company's ten television stations are affiliated with national television networks. The networks offer a variety of programs to affiliated stations, which have the right of first refusal before such programming may be offered to other television stations in the same market. Networks compensate affiliated stations for carrying network programming. The national television networks have reduced the amount of such compensation. The Company received $10,000,0000 in 2000 and $13,100,000 in network compensation in 1999. The Company expects network compensation to be approximately $10,000,000 in 2001 and in 2002.
In addition to network programs, the Company's television stations broadcast locally produced programs, syndicated programs, sports events, movies, public service programs and "niche" programs focusing on topics of interest in the stations' local markets. News is the focus of the Company's locally produced programming. Advertising during local news programs on the Company's stations account for approximately 30% of revenues.
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. The FCC also adopts and enforces regulations concerning station programming, including children's and political programming.
The Telecommunications Act of 1996 (the "1996 Act") significantly relaxed the regulatory environment applicable to broadcasters. Under the 1996 Act, television broadcast licenses may be granted for a term of eight years, rather than five, and they remain renewable upon request. While there can be no assurance regarding the renewal of the Company's television broadcast licenses, the Company has never had a license revoked, has never been denied a renewal and all previous renewals have been for the maximum term.
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 the grant of the license would result in (i) the applicant owning more than one, or in some markets under certain conditions, two television stations in the same market, or (ii) the grant of the license would result in the applicant's owning, operating, controlling, or having an interest in television stations whose total national audience reach exceeds 35% of all television households. The FCC rules also generally prohibit "cross-ownership" of a television station and daily newspaper or cable television system in the same service area. The Company's television station and daily newspaper in Cincinnati were owned by the Company at the time the cross-ownership rules were enacted and enjoy "grandfathered" status. These properties would become subject to the cross-ownership rules upon their sale. The 1996 Act directed the FCC to periodically review all its ownership rules, and such a review is ongoing.
The FCC has adopted a series of orders to implement a transition from the current analog system of broadcast television to a digital transmission system. It has granted each television station a second channel on which to begin offering digital service and it currently plans for the transition to be completed by 2006, at which time each station should have returned one of its two channels. The FCC can extend this deadline if the transition proceeds more slowly than it anticipates.
A substantial number of technical, regulatory and market-related issues remain unresolved regarding digital television, including the timing of the transition, programming and other rules the FCC may adopt, the willingness of cable systems to carry the broadcasters' digital offerings and the level of consumer demand for the new service. The Company cannot predict the effect of these uncertainties on the Company's offering of digital service or the Company's business.
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. While the FCC has recently announced that a station's primary video transmission will enjoy must-carry rights after the transition to digital broadcasting, the FCC has so far declined to require carriage of a digital signal in addition to the station's analog signal.
Licensing and Other Media
Operations - Licensing and other media aggregates the Company's operating segments that are too small to warrant separate reporting, including syndication and licensing of news features and comics, and the divested television program production and independent telephone directories.
The Company acquired or divested the following operations in the five years ended December 31, 2000:
2000 - Divested independent telephone directories in Memphis, Tennessee; Kansas City, Missouri; North Palm Beach, Florida; and New Orleans, Louisiana. 1998 - Acquired the independent telephone directories. Divested Scripps Howard Productions, the Company's television program production operation based in Los Angeles.
Revenues - Operating revenues for the five years ended December 31, 2000, were as follows:
The Company, under the trade name United Media, is a leading distributor of news columns, comics and other features for the newspaper industry. Included among these features is "Peanuts," one of the most successful strips in the history of comic art.
United Media owns and licenses worldwide copyrights relating to "Peanuts," "Dilbert" and other character properties for use on numerous products, including plush toys, greeting cards and apparel, for promotional purposes and for exhibit on television and other media. Charles Schulz, the author of "Peanuts," died in February 2000. The Company continues syndication of previously published "Peanuts" strips, and retains the rights to continue to license the characters. "Peanuts" provides more than 80% of the Company's licensing revenues, approximately 70% of which are earned in international markets, with the Japanese market providing approximately two-thirds of international revenue. Depending upon market conditions, the Company may use foreign currency forward and option contracts to hedge its exposure to changes in the exchange rate for the Japanese yen. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk."
Merchandise, literary and exhibition licensing revenues are generally a negotiated percentage of the licensee's sales. The Company generally negotiates a fixed fee for the use of its copyrighted characters for promotional and advertising purposes. The Company generally pays a percentage of gross syndication and licensing royalties to the creators of these properties.
Competition - The Company's newspaper feature distribution operations compete for a limited amount of newspaper space with other distributors of news columns, comics and other features. Competition is primarily based on price and popularity of the features. Popularity of licensed characters is a primary factor in obtaining and renewing merchandise and promotional licenses.
Venture Capital and Other Investments
Through its Scripps Ventures Fund and other entities the Company invests in businesses focusing on new media technology. The Company recognized gains (losses), net of fund management expenses, totaling ($24,800,000) in 2000, $500,000 in 1999, ($2,700,000) in 1997, and $37,000,000 in 1996.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk" and Note 6 to the Consolidated Financial Statements.
Employees
As of December 31, 2000, the Company had approximately 8,400 full-time employees, of whom approximately 6,100 were with Newspapers, 800 with Scripps Networks, 1,300 with Broadcast Television and 100 with licensing and other media. Various labor unions represent approximately 1,800 employees, primarily in newspapers. At December 31, 2000, the Denver Rocky Mountain News employed approximately 1,200 employees, approximately 1,000 of who became employees of Denver Newspaper Agency, LLC. The present operations of the Company have not experienced any work stoppages since 1985. The Company considers its relationship with employees to be generally satisfactory.
ITEM 2.
ITEM 2. PROPERTIES
Newspapers require business and editorial offices and printing plants.
Scripps Networks requires offices and studios and other real and personal property to produce programs and to transmit the network programming via satellite. Scripps Networks operates from a production facility in Knoxville and leased facilities in New York.
Broadcast Television requires offices and studios and other real property for towers upon which broadcasting transmitters and antenna equipment are located.
The Company owns substantially all of the properties used by its operations. Management believes the Company's facilities are generally well maintained and are sufficient to serve its present needs.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in litigation arising in the ordinary course of business, such as defamation actions and various governmental and administrative proceedings primarily relating to 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
No matters were submitted to a vote of security holders during the fourth quarter of 2000.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Class A Common Shares are traded on the New York Stock Exchange ("NYSE") under the symbol "SSP." There are approximately 8,000 owners of the Company's Class A Common shares, based on security position listings, and 18 owners of the Company's Common Voting shares (which do not have a public market). The Company has declared cash dividends in every year since its incorporation in 1922. Future dividends are, however, subject to the Company's earnings, financial condition and capital requirements.
The range of market prices of the Company's Class A Common shares, which represents the high and low sales prices for each full quarterly period, and quarterly cash dividends are as follows:
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data required by this item is filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page of this Form 10-K.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Management's Discussion and Analysis of Financial Condition and Results of Operation required by this item is filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page of this Form 10-K.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Supplementary Data required by this item is filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page of this Form 10-K.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers
Executive officers serve at the pleasure of the Board of Directors. Certain information about such officers appears in the table below.
Name Age Position
Kenneth W. Lowe 50 Chief Executive Officer (since October 2000); President and Director (since January 2000); Chairman and Chief Executive Officer, Scripps Networks (1993 to 2000)
Richard A. Boehne 44 Executive Vice President (since 1999); Vice President/Communications and Investor Relations (1995 to 1999)
Daniel J. Castellini 61 Senior Vice President and Chief Financial Officer (since 1986)
Frank Gardner 58 Senior Vice President/Interactive Media (since March 2000); Senior Vice President/Television (1993 to 2000)
Alan M. Horton 57 Senior Vice President/Newspapers (since 1994)
B. Jeff Craig 42 Vice President and Chief Technology Officer (since February 2001); Senior Vice President, Interactive Technology and New Media Development, Discovery Communications, Inc. (1998 to 2000); Managing Partner and founder, AAJ Interactive Technologies (1997 to 1998); Vice President, System Design and Engineering, TELE-TV (1995 to 1997)
Gregory L. Ebel 45 Vice President/Human Resources (since 1994)
James M. Hart 58 Vice President/Television (since 1995)
J. Robert Routt 46 Vice President and Controller (since 1985)
Paul K. Scripps 55 Vice President/Newspapers (since 1986)
Timothy E. Stautberg 38 Vice President/Communications and Investor Relations (since April 1999); General Manager, Redding Record Searchlight (1997 to 1999); Assistant to the Publisher, Denver Rocky Mountain News (1992 to 1997)
Stephen W. Sullivan 54 Vice President/Newspaper Operations (since 2000); Vice President/Newspapers (1997 to 2000); President, Harte-Hanks Newspapers and Senior Vice President, Harte-Hanks Communications (1991 to 1997)
M. Denise Kuprionis 44 Corporate Secretary and Director of Legal Affairs (since 1987)
E. John Wolfzorn 55 Treasurer (since 1979)
Directors
The information required by Item 10 of Form 10-K relating to directors of the Company is incorporated by reference to the material captioned "Election of Directors" in the Company's definitive proxy statement for the Annual Meeting of Shareholders ("Proxy Statement"). The Proxy Statement will be filed with the Securities and Exchange Commission on or before April 28, 2001.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 of Form 10-K is incorporated by reference to the material captioned "Executive Compensation" in the Proxy Statement.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 of Form 10-K is incorporated by reference to the material captioned "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 of Form 10-K is incorporated by reference to the material captioned "Certain Transactions" in the Proxy Statement.
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 LLP, Independent Auditors, dated January 23, 2001, 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 Current Reports on Form 8-K were filed in the fourth quarter of 2000.
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, thereunto duly authorized, on March 28, 2001.
THE E. W. SCRIPPS COMPANY
By /s/ Kenneth W. Lowe Kenneth W. Lowe 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, 2001.
Signature Title
/s/ Kenneth W. Lowe President and Chief Executive Officer Kenneth W. Lowe (Principal Executive Officer)
/s/ Daniel J. Castellini Senior Vice President and Chief Daniel J. Castellini Financial Officer
/s/ William R. Burleigh Chairman of the Board of Directors William R. Burleigh
/s/ Charles E. Scripps Chairman of the Executive Committee Charles E. Scripps of the Board of Directors
/s/ John H. Burlingame Director John H. Burlingame
/s/ Daniel J. Meyer Director Daniel J. Meyer
/s/ Nicholas B. Paumgarten Director Nicholas B. Paumgarten
/s/ Paul K. Scripps Director Paul K. Scripps
/s/ Edward Scripps, Jr. Director Edward Scripps, Jr.
/s/ Nackey E. Scagliotti Director Nackey E. Scagliotti
/s/ Ronald W. Tysoe Director Ronald W. Tysoe
/s/ Julie A. Wrigley Director Julie A. Wrigley
/s/ Joseph P. Clayton Director Joseph P. Clayton
THE E. W. SCRIPPS COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENT INFORMATION
Item No. Page
1. Selected Financial Data 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward Looking Statements Results of Operations Newspapers Scripps Networks Broadcast Television Liquidity and Capital Resources Market Risk 3. Consolidated Balance Sheets 4. Consolidated Statements of Income 5. Consolidated Statements of Cash Flows 6. Consolidated Statements of Comprehensive Income and Stockholders' Equity 7. Notes to Consolidated Financial Statements 8. Independent Auditors' Report
Notes to Selected Financial Data
The income statement and cash flow data for the eleven years ended December 31, 2000, and the balance sheet data as of the same dates have been derived from the audited consolidated financial statements of the Company. The data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and notes thereto included elsewhere herein. All per share amounts are presented on a diluted basis. EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. See page.
(1) In the periods presented the Company acquired and divested the following:
Acquisitions 2000 - Daily newspapers in Ft. Pierce, Florida (in exchange for the Company's newspaper in Destin, Florida, and cash), and Henderson, Kentucky, weekly newspaper in Marco Island, Florida, and television station KMCI in Lawrence, Kansas. 1999 - Additional 70% interest of Colorado Real Estate On-line that the Company did not already own and an additional 7.0% interest in Food Network. 1998 - Independent telephone directories in Memphis, Tennessee; Kansas City, Missouri; North Palm Beach, Florida; and New Orleans, Louisiana. 1997 - Daily newspapers in Abilene, Corpus Christi, Plano, San Angelo and Wichita Falls, Texas; community newspapers in the Dallas, Texas, market; daily newspapers in Anderson, South Carolina, and Boulder, Colorado (in exchange for the Company's daily newspapers in Monterey and San Luis Obispo, California). Approximate 56% interest in Food Network. 1996 - Vero Beach, Florida, daily newspaper. 1994 - The remaining 13.9% minority interest in Scripps Howard Broadcasting Company ("SHB") in exchange for 4,952,659 Class A Common Shares. Cinetel Productions (an independent producer of programs for cable television). 1993 - The remaining 2.7% minority interest in the Knoxville News-Sentinel and 5.7% of the outstanding shares of SHB. 1992 - Three daily newspapers in California (including The Monterey County Herald in connection with the sale of The Pittsburgh Press). 1991 - Baltimore television station WMAR.
Divestitures 2000 - Destin, Florida, newspaper (in exchange for Ft. Pierce, Florida, newspaper), independent yellow page directories. The divestitures resulted in net pre-tax gains of $6.2 million, increasing income from continuing operations $4.0 million, $.05 per share. 1998 - Dallas community newspapers, including the Plano daily, and Scripps Howard Productions, the Company's television program production operation based in Los Angeles, California. No material gain or loss was realized as proceeds approximated the book value of net assets sold. 1997 - Monterey and San Luis Obispo, California, daily newspapers (in exchange for Boulder, Colorado, daily newspaper). Terminated joint operating agency ("JOA") and ceased operations of El Paso, Texas, daily newspaper. The JOA termination and trade resulted in pre-tax gains totaling $47.6 million, increasing income from continuing operations by $26.2 million, $.32 per share. 1995 - Watsonville, California, daily newspaper. No material gain or loss was realized as proceeds approximated the book value of net assets sold. 1993 - Book publishing operations; newspapers in Tulare, California, and San Juan; Memphis television station; radio stations. The divestitures resulted in net pre-tax gains of $91.9 million, increasing income from continuing operations by $46.8 million, $.63 per share. 1992 - The Pittsburgh Press; TV Data; certain other investments. The divestitures resulted in net pre-tax gains of $78.0 million, increasing income from continuing operations $45.6 million, $.61 per share. 1991 - George R. Hall Company (contracting firm specializing in the installation, relocation, and rebuilding of newspaper presses). No gain or loss was realized as proceeds equaled the book value of net assets sold.
(2) Operating units other than cable television systems sold prior to December 31, 2000.
(3) The following unusual items affected operating income:
2000 - Expenses of $9.5 million associated with preparations for the Denver JOA reduced income from continuing operations $6.2 million, $.08 per share. 1999 - A $1.1 million accrual for "make-goods" related to HGTV advertising in 1998, $0.8 million of costs incurred to move Food Network's operations to a different location in Manhattan, and severance payments of $1.2 million to certain television station employees reduced operating income $3.1 million. Income from continuing operations was reduced $1.9 million, $.03 per share. 1998 - "Make-goods" totaling $1.1 million (see above) increased income from continuing operations $0.7 million, $.01 per share. 1996 - A $4.0 million charge for the Company's share of certain costs associated with restructuring portions of the distribution system of the Cincinnati JOA. The charge reduced income from continuing operations by $2.6 million, $.03 per share. 1994 - A $7.9 million loss on program rights expected to be sold as a result of changes in television network affiliations. The loss reduced income from continuing operations by $4.9 million, $.07 per share. 1993 - A change in estimate of disputed music license fees increased operating income by $4.3 million; a gain on the sale of certain publishing equipment increased operating income by $1.1 million; a charge for workforce reductions at 1) the Company's Denver newspaper and 2) the newspaper feature and the licensing operations of United Media decreased operating income by $6.3 million. The planned workforce reductions were fully implemented in 1994. These items totaled $0.9 million and reduced income from continuing operations by $0.6 million, $.01 per share. 1992 - Operating losses of $32.7 million during the Pittsburgh Press strike reduced income from continuing operations $20.2 million, $.27 per share. 1990 - A $36.4 million charge associated with an agreement to terminate the Knoxville joint operating agency. The charge reduced income from continuing operations by $23.7 million, $.31 per share.
(4) In 1994 the Company sold its worldwide GARFIELD and U.S. ACRES copyrights. The sale resulted in a pre-tax gain of $31.6 million, increasing income from continuing operations $17.4 million, $.23 per share.
(5) Investment results include i) gains and losses from the sale or write-down of investments and ii) accrued incentive compensation and other expenses associated with the management of the Scripps Ventures investment portfolios. Investment results include the following:
2000 - Net realized losses of $19.4 million. Accrued incentive compensation was increased $4.5 million, to $11.5 million, in conjunction with the increase in the net gain on Scripps Venture's I investment portfolio of $29.9 million, to $76.9 million. Net investment results reduced income from continuing operations $15.8 million, $.20 per share. 1999 - Net realized gains of $8.6 million. Accrued incentive compensation was increased $7.0 million, to $7.0 million, in conjunction with the increase in the net gain Scripps Venture's I investment portfolio to $47.0 million. 1997 - Write-down of investments totaling $2.7 million. Income from continuing operations was reduced $1.7 million, $.02 per share. 1996 - A $40.0 million gain on the Company's investment in Turner Broadcasting Systems when Turner was merged into Time Warner and a $3.0 million write-off of an investment in Patient Education Media, Inc. Income from continuing operations was increased $24.3 million, $.30 per share.
(6) Other unusual credits (charges) included the following:
1996 - $15.5 million contribution of appreciated Time Warner stock to a charitable foundation, decreasing income from continuing operations by $5.2 million, $.07 per share. 1994 - An estimated $2.8 million loss on real estate expected to be sold as a result of changes in television network affiliations; an $8.0 million contribution to a charitable foundation; and a $6.1 million accrual for lawsuits associated with a divested operating unit. These items totaled $16.9 million and reduced income from continuing operations by $9.8 million, $.13 per share. 1993 - A $2.5 million fee received in connection with the change in ownership of the Ogden, Utah, newspaper. Income from continuing operations was increased $1.6 million, $.02 per share. 1992 - Write-downs of real estate and investments totaling $3.5 million. Income from continuing operations was reduced $2.3 million, $.03 per share.
(7) The provision for income taxes was affected by the following unusual items:
2000 - A change in estimated tax liability for prior years reduced the tax provision, increasing income from continuing operations by $7.2 million, $.09 per share. 1994 - A change in estimated tax liability for prior years increased the tax provision, reducing income from continuing operations by $5.3 million, $.07 per share. 1993 - A change in estimated tax liability for prior years decreased the tax provision, increasing income from continuing operations by $5.4 million, $.07 per share; the effect of the increase in the federal income tax rate to 35% from 34% on the beginning of the year deferred tax liabilities increased the tax provision, reducing income from continuing operations by $2.3 million, $.03 per share. 1992 - A change in estimated tax liability for prior years decreased the tax provision, increasing income from continuing operations $8.4 million, $.11 per share.
(8) The Company's cable television systems ("Scripps Cable") were acquired by Comcast Corporation ("Comcast") on November 13, 1996, ("Cable Transaction") through a merger whereby the Company's shareholders received, tax-free, a total of 93 million shares of Comcast's Class A Special Common Stock. The aggregate market value of the Comcast shares was $1.593 billion and the net book value of Scripps Cable was $356 million, yielding an economic gain of $1.237 billion to the Company's shareholders. This gain is not reflected in the Company's financial statements as accounting rules required the Company to record the transaction at book value. Unless otherwise noted, the data excludes the cable television segment, which is reported as a discontinued business operation.
(9) Includes effect of discontinued cable television operations prior to completion of the Cable Transaction.
(10) The application for a Joint Operating Agency ("JOA") between the Company's Denver Rocky Mountain News ("RMN") and MediaNews Group Inc.'s Denver Post was approved by the U.S. Department of Justice in January 2001. The JOA commenced operations on January 22, 2001. The 50-year agreement created a new entity called the Denver Newspaper Agency, L.L.C., which is 50%-owned by each partner. Both partners contributed certain assets used in the operations of their newspapers to the new entity. The Company will receive a 50% share of the operating profits of the Denver JOA. These profits will be reported as "joint operating agency distributions" in the Company's financial statements. The Company will also include in its operating expenses its editorial costs associated with the RMN. However, the Company's financial statements will no longer include the advertising and other revenue produced by the RMN, nor the costs to produce and distribute the newspaper or to sell advertising. To enhance comparability of year-over-year operating results, the Company is reporting RMN operating results separate from its other newspapers.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company operates in three reportable segments: Newspapers, Scripps Networks, and Broadcast Television.
FORWARD-LOOKING STATEMENTS
This discussion and the information contained in the notes to the consolidated financial statements contain certain forward-looking statements that are based on management's 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 the Company's control, include changes in advertising demand and other economic conditions; consumers' taste; 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. All forward-looking statements, which are as of the date of this filing, should be evaluated with the understanding of their inherent uncertainty.
RESULTS OF OPERATIONS
Acquisitions and divestitures can affect the comparability of year-over-year reported results. Amounts included in the accompanying tables include the results of operations for acquired operations from the dates of acquisition. The results of operations of divested operating units are removed from segment operating results and reported separately because management believes they impede analysis of the Company's on-going operations.
See Note 2 to the Consolidated Financial Statements on page regarding acquisitions and divestitures in the three years ending December 31, 2000.
The application for a Joint Operating Agency ("JOA") between the Company's Denver Rocky Mountain News ("RMN") and MediaNews Group Inc.'s Denver Post was approved by the U.S. Department of Justice in January 2001. The JOA commenced operations on January 22, 2001. The 50-year agreement created a new entity called the Denver Newspaper Agency, L.L.C., which is 50%-owned by each partner. Both partners contributed certain assets used in the operations of their newspapers to the new entity.
The Company will receive a 50% share of the operating profits of the Denver JOA. These profits will be reported as "joint operating agency distributions" in the Company's financial statements. The Company will also include in its operating expenses editorial costs associated with the RMN. However, the Company's financial statements will no longer include the advertising and other revenue produced by the RMN, nor the costs to produce and distribute the newspaper or to sell advertising. To enhance comparability of year-over-year operating results, the Company is reporting RMN operating results separate from its other newspapers in Management's Discussion and Analysis of Results of Operations.
All per share disclosures included in management's discussion and analysis of financial condition and results of operation are on a diluted basis.
Consolidated results of operations are presented on the following page.
Earnings before interest, income taxes, depreciation and amortization ("EBITDA") is included in the discussion of results of operations because:
Management believes the year-over-year change in EBITDA, combined with information on historical and anticipated capital spending, is a more useful and reliable measure of year-over-year performance than the change in operating income.
Banks and other lenders use EBITDA to determine the Company's borrowing capacity.
Financial analysts and acquirors use EBITDA, combined with capital spending requirements, to value communications media companies.
EBITDA should not, however, be construed as an alternative measure of the amount of the Company's income or cash flows from operating activities.
Interest expense increased $6,700,000 in 2000 primarily due to higher interest rates on variable rate credit facilities. The weighted-average interest rate on such facilities at December 31 was 6.6% in 2000, 6.0% in 1999, and 5.25% in 1998. The monthly average balance of interest bearing obligations was $767,000,000 in 2000, $780,000,000 in 1999 and $762,000,000 in 1998. Interest expense decreased $1,900,000 in 1999 as lower interest rates more than offset increased borrowings.
Amortization of intangible assets reduced earnings per share approximately $.37 in 2000, $.35 in 1999, and $.36 in 1998.
Capital expenditures in 2001 are estimated to be approximately $80,000,000.
NEWSPAPERS - RMN operating results are presented separately as a single line item to enhance comparability of year-over-year results for Newspapers. Excluding Divested Operating Units and unusual items, Newspapers operating results were as follows:
The average price of newsprint increased 7% in 2000, and declined 15% in 1999. The average price of newsprint was $580 per metric ton in the fourth quarter of 2000.
Circulation and distribution costs increased primarily due to efforts to gain circulation at the Company's larger newspapers.
Capital expenditures in 2001 are estimated to be approximately $38,000,000, excluding the RMN. Expected capital expenditures in 2001 include construction of a new production facility for the Knoxville newspaper. Depreciation and amortization is expected to be approximately $52,000,000.
SCRIPPS NETWORKS - Operating results, excluding unusual items, were as follows:
According to the Nielsen Homevideo Index, HGTV was telecast to 67.1 million homes in December 2000, 59.0 million homes in December 1999, and 48.4 million homes in December 1998. Food Network was telecast to 54.4 million homes in December 2000, 44.2 million homes in December 1999, and 37.1 million homes in December 1998.
The Company launched DIY, its third network, in the fourth quarter of 1999, and in 2000 announced plans to launch a fourth network, Fine Living, in the fourth quarter of 2001. Start-up costs associated with DIY and Fine Living reduced EBITDA by $10,900,000 in 2000, $3,700,000 in 1999 and $1,500,000 in 1998. Start up costs for DIY and Fine Living are expected to reduce EBITDA by approximately $20,000,000 to $25,000,000 for the full year. The cash required by DIY and Fine Living will substantially exceed the reported operating losses in 2001.
Programming and production expense has increased as the Company improves the quality and variety of programming and expands the hours of original programming presented on its networks. Expenditures to purchase or produce programs totaled $147,000,000 in 2000, $117,000,000 in 1999 and $64,000,000 in 1998. The Company owns the rights to substantially all of the programming it produces and expects to telecast the programs over several years. The costs are recognized as expense as the programs are telecast. Programming and production expense in 2001 is expected to increase approximately 10% for HGTV and approximately 40% for Food Network, and approximately 30% for the two networks combined.
Capital expenditures in 1999 included expansion of the studio and office facilities for HGTV and DIY. Capital expenditures in 2001 are expected to be approximately $12,000,000. Depreciation and amortization is expected to be approximately $16,000,000.
BROADCAST TELEVISION - Operating results, excluding divested operations and unusual items, were as follows:
Year-over-year revenue comparisons are difficult because of the political advertising revenue in even-numbered years.
Average audience shares for broadcast television stations have declined in recent years due to the creation of new television networks and increases in the audience share of alternative service providers such as cable television and direct broadcast satellite systems. Technological advancement in interactive media services will further increase these competitive pressures.
Other revenue includes compensation paid to the Company's television stations in exchange for carrying network programming. National television networks have reduced the amount of compensation paid to affiliated stations. The Company received network compensation of $10,000,000 in 2000, $13,100,000 in 1999 and $16,000,000 in 1998. Network compensation is expected to be $10,000,000 in 2001 and in 2002.
Operating expenses, excluding depreciation and amortization, are expected to decrease approximately 4% in 2001.
Capital expenditures include the construction of a new building for the West Palm Beach station in 2000 and for the Phoenix station in 1998. Capital spending also increased as five of the Company's stations were equipped to broadcast a digital signal. The Company has received construction permits for digital broadcasting in two additional stations, and has filed requests for construction permits for the other three stations. The Company is required to begin digital broadcasting in all of its markets by May 2002. Capital expenditures in 2001 are expected to be approximately $20,000,000. Depreciation and amortization in 2001 is expected to be approximately $31,500,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow from operating activities is expected to substantially exceed the total of its capital expenditure requirements and cash dividends in 2001, as it has since 1992. The excess cash flow from existing businesses and the Company's substantial borrowing capacity have been used primarily to fund acquisitions, investments, and to develop new businesses. There are essentially no legal or other restrictions on the transfer of funds among the Company's business segments.
Authorizations in 1997 and 1998 by the Board of Directors allow for the repurchase of an additional 2,111,600 Class A Common shares.
The Company's Scripps Ventures Funds invest in new businesses focusing primarily on new media technology. See Note 6 to the Consolidated Financial Statements. The Board of Directors has authorized up to $150 million of such investments. At December 31, 2000, an additional $58,000,000 remains to be invested under the authorization.
The terms of the Denver JOA required the Company to make a $60,000,000 payment to MediaNews in January 2001.
Net debt (borrowings less cash equivalent and other short-term investments) decreased $55,300,000 in 2000, to $714,000,000 at December 31, 2000.
MARKET RISK
The Company's earnings and cash flow can be affected by, among other things, interest rate changes, foreign currency fluctuations (primarily in the exchange rate for the Japanese yen) and changes in the price of newsprint. See "Business - - Newspapers - Raw Materials and Labor Costs." The Company is also exposed to changes in the market value of its investments.
The Company may use foreign currency forward and option contracts to hedge its cash flow exposures denominated in Japanese yen and forward contracts to reduce the risk of changes in the price of newsprint on anticipated newsprint purchases. The Company held no foreign currency or newsprint forward contracts at December 31, 2000, or during the year then ended.
The following table presents additional information about the Company's market- risk-sensitive financial instruments:
The Company manages interest rate risk primarily by maintaining a mix of fixed- rate and variable-rate debt. The Company currently does not use interest rate swaps, forwards or other derivative financial instruments to manage its interest rate risk. See Note 5 to the Consolidated Financial Statements. The weighted- average interest rate on borrowings under the Variable Rate Credit Facilities at December 31 was 6.6% in 2000, 6.0% in 1999 and 5.25% in 1998.
The Company holds 1,792,500 shares of Centra Software, which became publicly traded in January 2000. The Company's investment in Centra Software was included in "securities that do not trade in a public market" in the above table in 1999. The estimated fair value of the investment in Centra Software was $6,000,000 on December 31, 1999.
The Company's investments in iVillage, garden.com and Caredata (included in other available for sale securities) declined below historical cost during 2000 and were written down to fair value.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations - The E. W. Scripps Company ("Company") operates in three reportable segments: Newspapers, Scripps Networks and Broadcast Television.
Newspapers include 21 daily newspapers in the U.S., and primarily derive revenue from the sale of advertising space to local and national advertisers and from the sale of the newspapers to readers.
Scripps Networks includes three national television networks that are distributed by cable and satellite television systems: Home & Garden Television ("HGTV"), Food Network and Do It Yourself ("DIY"), and the Company's 12% interest in FOX Sports South, a regional television network. The Company owned 64% of Food Network on December 31, 2000. The Company expects to launch Fine Living, its fourth national network, in the fourth quarter of 2001. Revenues are primarily derived from the sale of advertising time and from affiliate fees paid by distributors.
Broadcast Television includes ten stations, nine of which are affiliated with national broadcast networks. Broadcast Television derives revenue from the sale of advertising time to local and national advertisers and receives compensation for broadcasting network programming.
The relative importance of each line of business is indicated in the segment information presented in Note 12. Licensing and other media aggregates the Company's operating segments that are too small to report separately, and primarily includes syndication and licensing of news features and comics.
The Company's operations are geographically dispersed and its customer base is diverse. However, more than 75% of the Company's operating revenues are derived from advertising. Operating results can be affected by changes in the demand for advertising both nationally and in individual markets.
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.
Use of Estimates - Preparation of the financial statements requires the use of estimates. The Company's financial statements include estimates for such items as income taxes payable and self-insured risks. The Company self insures for employees' medical and disability income benefits, workers' compensation and general liability. The recorded liability for self-insured risks is calculated using actuarial methods and is not discounted. The recorded liability for self-insured risks totaled $19,300,000 at December 31, 2000. Management does not believe it is likely that its estimates for such items will change materially in the near term.
In the first quarter of 1999 the Company increased the estimated useful lives of network distribution fees to the greater of five years or the remaining terms of the distribution contracts. Because of the previous uncertainty regarding the conditions under which the distribution contracts would be renewed, such fees had been amortized over the terms of the contracts. The Company has committed to pay certain cable television system operators additional distribution fees to carry the networks on systems not included in the original distribution contracts. Management believes the expanded distribution of the networks will increase affiliate fee and advertising revenue beyond the remaining terms of the original distribution contracts. The change in the estimated amortization period was made to better match revenue and expense. Also in the first quarter of 1999 the Company increased the estimated useful lives of certain newspaper presses from 20 years to 30 years. The changes in estimated useful lives of the network distribution fees and newspaper presses were made prospectively. The effect of these changes was to increase 1999 operating income $11,900,000 and net income $7,500,000 ($.09 per share).
Consolidation - The consolidated financial statements include the accounts of the Company and its majority-owned subsidiary companies.
Revenue Recognition - Significant revenue recognition policies are as follows: Advertising revenues are recognized based on dates of publication or broadcast, net of agency commissions. Revenues from advertising on the Company's Internet sites are recognized over the terms of the advertising contracts.
Circulation revenue is recognized based on date of publication. The Company's newspapers are either: 1) sold directly to subscribers and delivered by employees or independent newspaper carriers, or 2) sold to independent newspaper distributors who resell the paper to subscribers. Circulation revenue from newspapers sold directly to subscribers is based on the subscription price, with delivery costs charged to operating expenses. Circulation revenue from newspapers sold to independent newspaper distributors is based upon the price charged the distributor.
Affiliate fees are recognized as programming is provided to cable television and direct broadcast satellite services.
Royalties from merchandise licensing are recognized as the licensee sells products. Royalties from promotional licensing are recognized over the lives of the licensing agreements.
Network Distribution Fees - Network distribution fees are incentives paid to cable television and direct broadcast satellite system operators in exchange for long-term contracts to carry the Company's television networks. These fees are amortized based upon the percentage of the current period's affiliate fee revenues to the estimated total of such revenue over estimated useful lives, or, for contracts that do not provide for the Company to receive affiliate fees, on a straight-line basis over estimated useful lives. Useful lives are estimated at the greater of five years or the duration of the contracts. The portion of the unamortized balance expected to be amortized within one year is classified as a current asset.
Program Rights and Production Costs - Program rights are recorded when programs become available for broadcast. Amortization is computed using the straight-line method based on the license period or based on usage, whichever yields the greater accumulated amortization for each program. The liability for program rights is not discounted for imputed interest.
Production costs are primarily costs incurred in the production of programming for internal use. Programs produced for internal use are amortized over the estimated useful lives of the programs. Program and production costs are stated at the lower of unamortized cost or fair value. The portion of the unamortized balance expected to be amortized within one year is classified as a current asset.
Program rights liabilities payable within the next twelve months are included in accounts payable. Noncurrent program rights liabilities are included in other long-term obligations.
Long-Lived Assets - Long-lived assets used in business operations are recorded at unamortized cost. Management reviews long-lived assets, including related goodwill and other intangible assets, for impairment whenever events or changes in circumstances indicate the carrying amounts of the assets may not be recoverable. Recoverability is determined by comparing the forecasted undiscounted cash flows of the operation to which the assets relate to the carrying amount of the assets. If the operation is determined to be unable to recover the carrying amount of its assets, then goodwill and other intangible assets are written down first, followed by other long-lived assets of the operation, to fair value. Fair value is determined based on discounted cash flows. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.
Goodwill and Other Intangible Assets - Goodwill represents the cost of acquisitions in excess of the acquired businesses' tangible assets and identifiable intangible assets. Cable and direct broadcast satellite network affiliation contracts are amortized on a straight-line basis over the greater of five years or the remaining duration of the agreements. Goodwill, customer lists and other intangible assets are amortized on a straight-line basis over periods of up to 40 years.
Property, Plant and Equipment - Depreciation is computed using the straight- line method over maximum estimated useful lives as follows:
Buildings and improvements 35 years Printing presses 30 years Other newspaper production equipment 5 to 10 years Television transmission towers and related equipment 15 years Other television and program production equipment 5 to 15 years Office and other equipment 3 to 10 years
In the first quarter of 1999 the Company increased the estimated useful lives of certain newspaper presses from 20 years to 30 years. Interest costs related to major capital projects are capitalized and classified as property, plant and equipment.
Income Taxes - Deferred income taxes are provided for temporary differences between the tax basis and reported amounts of assets and liabilities that will result in taxable or deductible amounts in future years. The Company's temporary differences primarily result from accelerated depreciation and amortization for tax purposes, investment gains and losses not yet recognized for tax purposes and accrued expenses not deductible for tax purposes until paid.
Investments - The Company records its investments at fair value, except for securities accounted for under the equity method or that do not trade in a public market. All investments recorded at fair value have been classified as available for sale. The fair value of available-for-sale investments is determined by quoted market prices. The cost basis of available for sale securities is adjusted when a decline in market value is determined to be other than temporary, with the resulting adjustment charged against net income. The difference between adjusted cost basis and fair value, net of related tax effects, is recorded in the accumulated other comprehensive income component of stockholders' equity. Investments in private companies are recorded at cost, net of impairment write-downs, because no readily determinable market price is available.
Investments in 20%- to 50%-controlled companies and in all joint ventures are accounted for using the equity method.
The cost of securities sold is determined by specific identification.
Newspaper Joint Operating Agencies - A JOA combines all but the editorial operations of two competing newspapers in a market in order to reduce aggregate expenses and take advantage of economies of scale, thereby allowing the continuing operation of both newspapers in that market. The Newspaper Preservation Act of 1970 provides a limited exemption from anti- trust laws, generally permitting the continuance of JOAs in existence prior to its enactment and the formation, under certain circumstances, of new JOAs between newspapers.
The Company is a partner in newspaper joint operating agencies ("JOAs") in four markets. The JOA between the Company's Denver Rocky Mountain News and MediaNews Group Inc.'s Denver Post was approved by the U.S. Attorney General in January 2001. The 50-year agreement created a new entity called the Denver Newspaper Agency L.L.C., which is 50%-owned by each partner. Both partners contributed certain assets used in the operations of their newspapers to the new entity. In addition, the Company paid $60,000,000 to MediaNews Group Inc. The JOA commenced operations on January 22, 2001.
The Company will receive a 50% share of the operating profits of the Denver JOA, and between 20% and 40% of the operating profits in the other three markets. The Company includes its portion of JOA operating profits in operating revenues, and includes its residual interest in the net assets of the Denver and Albuquerque JOAs in Investments in the Consolidated Balance Sheets. The Company does not include any assets or liabilities related to its other JOAs in its Consolidated Balance Sheets because the Company has no residual interest in the net assets of those JOAs.
A JOA in Evansville, Indiana, which was managed by the Company, expired in 1998 and was not renewed. The Company included the full amounts of this JOA's revenues and expenses in the consolidated financial statements. Distributions of JOA operating profits to the other partner were included in other operating expenses. The Company continues to operate its newspaper in Evansville.
Inventories - Inventories are stated at the lower of cost or market. The cost of inventories is computed using the first in, first out ("FIFO") method.
Effective July 1, 2000, the Company began accounting for newsprint inventories by the first in, first out ("FIFO") method. Newsprint inventories were previously valued using the last in, first out ("LIFO") method. The Company typically maintains a 30-day supply of newsprint and FIFO more accurately reflects the current value of the Company's newsprint inventory. Financial statements for all prior periods have been restated to apply the new method retroactively. Retained earnings at December 31, 1997, were increased $890,000.
The effect of the accounting change on net income as previously reported for the years ended December 31 was as follows:
Stock-Based Compensation - The Company's incentive plans provide for awards of options to purchase Class A Common shares and awards of Class A Common shares. Stock options are awarded to purchase Class A Common shares at not less than 100% of the fair market value on the date of the award. Stock options and awards of Class A Common shares vest over an incentive period conditioned upon the individual's employment through that period. The Company measures compensation expense using the intrinsic-value-based method (see Note 14).
Cash equivalent and Short-term Investments - Cash equivalents represent debt instruments with an original maturity of less than three months. Short-term investments represent excess cash invested in securities not meeting the criteria to be classified as cash equivalents. Cash equivalent and short-term investments are carried at cost plus accrued income, which approximates fair value.
Risk Management Contracts - The Company does not hold derivative financial instruments for trading or speculative purposes, and does not hold leveraged contracts. The impact of risk management activities on the Company's financial position, its results of operations, and its cash flows is immaterial.
The Company has used foreign currency forward and option contracts to hedge cash flow exposures denominated in Japanese yen. Such contracts reduce the risk of changes in the exchange rate for Japanese yen on the Company's anticipated net licensing receipts (licensing royalties less amounts due creators of the properties and certain direct expenses) for the following year. They are recorded at fair value in the Consolidated Balance Sheets and gains or losses are recognized in income as changes occur in the exchange rate for the Japanese yen. The Company held no foreign currency derivative financial instruments at December 31, 2000, or at December 31, 1999.
The Company has used off-balance-sheet financial instruments, such as forward contracts, to reduce the risk of changes in the price of newsprint on anticipated newsprint purchases. Gains or losses on such contracts are deferred and charged to newsprint and ink expense as the newsprint is consumed. The Company held no derivative financial instruments associated with newsprint at December 31, 2000, or at December 31, 1999.
The Company has also used put options and zero-cost collars to hedge the proceeds from the expected sale of certain investments. These contracts are recorded at fair value in the Consolidated Balance Sheets. Gains or losses are recognized in net income or in other comprehensive income depending upon the treatment of changes in the unrealized gain or loss on the underlying investment. Several of the Company's investments include embedded puts or other derivative financial instruments. These instruments are currently accounted for at cost with the underlying investment.
The Company adopted FAS No. 133 - Accounting for Derivative Instruments and Hedging Activities effective January 1, 2001. The standard establishes accounting and reporting standards for derivative financial instruments and hedging activities. The standard requires the recognition of all derivative financial instruments on the balance sheet as either assets or liabilities and measurement at fair value. The accounting for changes in the value of a derivative financial instrument depends upon its intended use, and if designated as a hedge, its effectiveness in hedging the identified risk. Adoption of the standard did not have a material effect on the Company's financial statements.
Net Income Per Share - The following table presents additional information about basic and diluted weighted-average shares outstanding:
Reclassifications - For comparative purposes, certain 1999 and 1998 amounts have been reclassified to conform to 2000 classifications.
2. ACQUISITIONS AND DIVESTITURES
Acquisitions
2000 - The Company acquired the daily newspaper in Fort Pierce, Florida, in exchange for its newspaper in Destin, Florida, and cash; the daily newspaper in Henderson, Kentucky; the weekly newspaper in Marco Island, Florida; and television station KMCI in Lawrence, Kansas.
1999 - The Company acquired the 70% of Colorado Real Estate On-line, a provider of real estate listings on the Internet, that it did not already own and an additional 6.86% interest in the Food Network.
1998 - The Company acquired independent telephone directories in Memphis, Tennessee; Kansas City, Missouri; New Orleans, Louisiana; and North Palm Beach, Florida.
The following table presents additional information about the acquisitions:
The acquisitions have been accounted for as purchases. The allocations of the purchase prices are based on preliminary appraised values of the assets acquired and liabilities assumed, and are therefore subject to change. Operating results are included in the Consolidated Statements of Income from the dates of acquisitions, with the exception of KMCI whose results were included while the Company operated the station under a contract with the previous owner. Pro forma results are not presented because the combined results of operations would not be significantly different than the reported amounts.
Divestitures
2000 - The Company sold its independent telephone directories, and traded its Destin, Florida, newspaper and cash for the daily newspaper in Fort Pierce, Florida. The sales and trade resulted in year-to-date net gains of $6,196,000, $4,000,000 after-tax ($.05 per share).
1998 - The Company sold Scripps Howard Productions, its program television production operation based in Los Angeles, and the Dallas Community newspapers, including the Plano daily newspaper. No material gain or loss was realized on either divestiture as proceeds approximated the book value of the net assets sold.
Included in the consolidated financial statements were the following results of divested operating units (excluding gains on sales):
3. UNUSUAL CREDITS AND CHARGES
2000 - In addition to the gains on divested operations described in Note 2, the Company's reported results of operations were affected by the following items:
Recognized net investment losses totaling $19,400,000. Accrued incentive compensation for Scripps Ventures I's portfolio managers was increased $4,500,000, to $11,500,000 in conjunction with the $29,900,000 increase in the net gain on Scripps Ventures I's portfolio, to $76,900,000. Net investment results reduced net income $15,800,000 ($.20 per share).
$9,500,000 of expenses associated with preparations for the anticipated joint newspaper operations in Denver. Net income was reduced $6,200,000 ($.08 per share).
Reduction of the estimated liability for prior year income taxes and a reduction in the estimate of unrealizable state net operating loss carryforwards (see Note 4). Net income was increased $7,200,000 ($.09 per share).
The combined effect of the above items was to reduce 2000 net income $10,900,000 ($.14 per share).
1999 - The Company's reported results of operations were affected by the following items:
Recognized net investment gains totaling $8,600,000. Accrued incentive compensation for Scripps Ventures I's portfolio managers was increased $7,000,000 in conjunction with the increase in the net gain on Scripps Ventures I's portfolio to $47,000,000. Net investment results increased net income $400,000 ($.00 per share).
A $1,100,000 accrual for "make goods" to Home & Garden Television ("HGTV") advertisers and $800,000 of costs incurred to move the Food Network's operations to a different location in Manhattan. Net income was reduced $1,200,000 ($.02 per share).
Severance payments totaling $1,200,000 to certain television station employees, reducing net income $700,000 ($.01 per share).
The combined effect of the above items was to reduce 1999 net income $1,600,000 ($.02 per share).
1998 - The Company's reported results of operations were affected by the $1,100,000 related to the "make goods" to HGTV advertisers referred to above. Net income was increased $700,000 ($.01 per share).
4. INCOME TAXES
The Company's 1992 through 1995 consolidated federal income tax returns are currently under examination by the IRS. In 2000 the Company reduced its liability for prior year income taxes by $4,200,000. Management believes that adequate provision for income taxes has been made for all open years.
The approximate effects of the temporary differences giving rise to the Company's deferred income tax liabilities (assets) were as follows:
The Company's state net operating loss carryforwards expire from 2003 through 2015. At each balance sheet date management estimates the amount of state net operating loss carryforwards that are not expected to be used prior to expiration of the carryforward period. The tax effect of these unused state net operating loss carryforwards is included in the valuation allowance. Based upon expected taxable income of subsidiary companies with state net operating loss carryforwards during the carryforward periods, the Company reduced its valuation allowance by $3,000,000 in 2000.
The provision for income taxes consisted of the following:
The difference between the statutory rate for federal income tax and the effective income tax rate was as follows:
5. LONG-TERM DEBT
Long-term debt consisted of the following:
The Company has a Competitive Advance and Revolving Credit Facility Agreement, which permits aggregate borrowings up to $700,000,000 (the "Variable Rate Credit Facilities"). The Variable Rate Credit Facilities are comprised of two unsecured lines, one limited to $400,000,000 principal amount maturing in 2001, and the other limited to $300,000,000 principal amount maturing in 2002. Borrowings under the Variable Rate Credit Facilities are available on a committed revolving credit basis at the Company's choice of three short-term rates or through an auction procedure at the time of each borrowing. The Variable Rate Credit Facilities are also used by the Company in whole or in part, in lieu of direct borrowings, as credit support for its commercial paper. The weighted-average interest rates on the Variable Rate Credit Facilities at December 31 was 6.6% in 2000 and 6.0% in 1999.
Certain long-term debt agreements contain maintenance requirements for net worth and coverage of interest expense and restrictions on incurrence of additional indebtedness. The Company is in compliance with all debt covenants.
Current maturities of long-term debt are classified as long-term to the extent they can be refinanced under existing long-term credit commitments.
Interest costs capitalized were $200,000 in 2000, $400,000 in 1999, and $300,000 in 1998.
6. INVESTMENTS
Investments consisted of the following:
Investments available for sale represent securities in publicly traded companies, which are recorded at fair value. Fair value is based upon the closing price of the security on the reporting date. In the first quarter of 2000 Centra Software completed an initial public offering of its common stock. This investment had previously been included in the "other" category.
The values of several of the Company's investments in available-for-sale securities declined below historical cost in 2000. Investment results (see Note 3) include a total of $13,000,000 in write-downs to market value for such investments. During 2000 the Company received $5,000,000 upon delivery of 229,000 iVillage shares under the provisions of a zero-cost collar.
Securities of private companies do not trade in public markets, so they do not have readily determinable fair values. However, if fair value is assumed to be the price from the most recent round of financing or, for some securities, less based on management's judgment of the circumstances, then the total estimated value of these investments was $163,000,000 on December 31, 2000, and $95,800,000 on December 31, 1999. There can be no assurance as to the amounts the Company would receive if these securities were sold.
The Company's Scripps Ventures Funds I and II invest in new businesses focusing primarily on new media technology. Scripps Ventures I invested $54,000,000. The managers' compensation includes a share of that portfolio's cumulative net gain (realized and unrealized) through December 2002 if a specified minimum return is achieved. Based on the portfolio's cumulative net gain of $76,900,000 through December 31, 2000, the incentive compensation accrual was $11,500,000. The incentive compensation accrual will change as the net gain changes through December 2002. Scripps Ventures II is authorized to invest up to $100,000,000, of which $38,200,000 was invested as of December 31, 2000. The managers have a minority equity interest in the return on Scripps Ventures II's investments if a specified minimum return is achieved.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
8. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets arising from business acquisitions consisted of the following:
9. OTHER LONG-TERM OBLIGATIONS AND MINORITY INTERESTS
Other long-term obligations and minority interests consisted of the following:
10. SUPPLEMENTAL CASH FLOW INFORMATION
The following table presents additional information about the change in certain working capital accounts:
11. EMPLOYEE BENEFIT PLANS
Retirement plans expense consisted of the following:
The following table presents information about the Company's employee benefit plan assets and obligations:
Assumptions used in the accounting for the defined benefit plans were as follows:
Management believes the discount rate plus two percentage points is the best estimate of the long-term return on plan assets at any point in time, and the discount rate minus two and one-half percentage points is the best estimate of the long-term increase in compensation levels. Therefore, when the discount rate changes, management's expectation for the future long- term rate of return on plan assets and increase in compensation levels changes in tandem. For 2001 the assumed return on plan assets is 10% and the assumed rate of increase in compensation levels is 5.5%.
Plan assets consist of marketable equity and fixed-income securities.
12. SEGMENT INFORMATION
The Company's reportable segments are strategic businesses that offer different products and services. The Company primarily evaluates the operating performance of its segments based on earnings before interest, income taxes, depreciation and amortization ("EBITDA"), excluding divested operating units, unusual items and all credits and charges classified as non-operating in the Consolidated Statements of Income. No single customer provides more than 10% of the Company's revenue. International revenues are primarily derived from licensing comic characters and HGTV and Food Network programming in international markets. Total international revenues were less than $50,000,000. Licensing of comic characters in Japan provides more than 50% of the Company's international revenues.
Information regarding the Company's business segments is presented on the following page.
Other additions to long-lived assets include investments and network distribution fees. Corporate assets are primarily cash, cash equivalent and other short-term investments, and refundable and deferred income taxes.
13. 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's cable television systems were acquired by Comcast Corporation ("Comcast") in 1996. Pursuant to the terms of its agreement with Comcast, the Company remains liable for any losses resulting from certain lawsuits, certain other expenses and tax liabilities of its cable television systems attributable to periods prior to the transactions.
The Company purchased program rights totaling $189,000,000 in 2000, $131,000,000 in 1999, and $100,000,000 in 1998, the payments for which are generally made over the lives of the contracts. At December 31, 2000, the Company was committed to purchase approximately $120,000,000 of program rights that are not currently available for broadcast, substantially all of which is for programs not yet produced. If such programs are not produced the Company's commitments would expire without obligation.
Minimum payments on noncancelable leases at December 31, 2000, were: 2001, $12,900,000; 2002, $10,600,000; 2003, $9,400,000; 2004, $8,600,000; 2005, $8,200,000 and later years, $20,700,000. Rental expense for cancelable and noncancelable leases was $19,300,000 in 2000, $16,300,000 in 1999, and $15,000,000 in 1998.
14. CAPITAL STOCK AND INCENTIVE PLANS
Capital Stock - The capital structure of the Company includes Common Voting Shares and Class A Common Shares. The articles provide that the holders of Class A Common Shares, who are not entitled to vote on any other matters except as required by Ohio law, are entitled to elect the greater of three or one-third of the directors. In 1997 and 1998 the Board of Directors authorized the purchase of a total of 6,000,000 of the Company's Class A Common Shares. The Company repurchased 3,888,400 shares through December 31, 2000.
Incentive Plans - The Company's Long-Term Incentive Plans (the "Plans") provide for the award of incentive and nonqualified stock options with 10- year terms, stock appreciation rights, performance units and restricted and unrestricted Class A Common Shares to key employees and non-employee directors. The Plans expire in 2007, except for options then outstanding. The number of shares authorized for issuance under the plans at December 31, 2000, was 10,913,000, of which approximately 3,275,000 had not been issued.
Stock Options - Stock options may be awarded to purchase Class A Common Shares at not less than 100% of the fair market value on the date the option is granted. Stock options will vest over an incentive period, conditioned upon the individual's employment through that period. The following table presents information about stock options:
Substantially all options granted prior to 1997 are exercisable. Options issued in 1997 through 1999 generally become exercisable over a three-year period.
The Company has adopted the "disclosure-only" provisions of FAS No. 123; therefore no compensation expense has been recognized for stock option grants. Had compensation expense been determined based upon the fair value (determined using the Black-Scholes option pricing model) at the grant date consistent with the provisions of FAS No. 123, the Company's income from continuing operations would have been reduced to the pro forma amounts as follows:
Information related to the fair value of stock option grants is presented below:
Restricted Stock - Awards of Class A Common Shares vest over an incentive period conditioned upon the individual's employment throughout that period. During the vesting period shares issued are nontransferable, but the shares are entitled to all the rights of an outstanding share. Compensation expense is determined based upon the fair value of the shares at the grant date. Information related to awards of Class A Common Shares is presented below:
15. 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 the period.
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 the period.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders, The E. W. Scripps Company:
We have audited the accompanying consolidated balance sheets of The E. W. Scripps Company and subsidiary companies ("Company") as of December 31, 2000 and 1999, and the related consolidated statements of income, cash flows and comprehensive income and stockholders' equity for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed in the Index at Item S-1. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards in the United States of America. 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, 2000 and 1999, and the results of its operations and cash flows for each of the three years in the period ended December 31, 2000 in conformity with generally accepted accounting principles in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
As discussed in Note 1 to the financial statements in 2000 the Company changed its method of accounting for inventory from last-in, first-out to first-in, first-out and, retroactively, restated the 1999 and 1998 financial statements for the change.
DELOITTE & TOUCHE LLP Cincinnati, Ohio January 23, 2001
THE E. W. SCRIPPS COMPANY
Index to Consolidated Financial Statement Schedules
Valuation and Qualifying Accounts S-2
(1) Incorporated by reference to Registration Statement of The E. W. Scripps Company on Form S-1 (File No. 33-21714).
(2) Incorporated by reference to The E. W. Scripps Company Annual Report on Form 10-K for the year ended December 31, 1990.
(3) Incorporated by reference to Registration Statement on Form S-3 (File No. 33-36641).
(4) Incorporated by reference to The E. W. Scripps Company Current Report on Form 8-K dated October 15, 1992.
(5) Incorporated by reference to Scripps Howard, Inc. Registration Statement on Form 10 (File No. 1-11969).
(6) Incorporated by reference to Registration Statement of The E. W. Scripps Company on Form S-8 (File No. 333-27623).
(7) Incorporated by reference to Registration Statement of The E. W. Scripps Company on Form S-8 (File No. 333-27621).
(8) Incorporated by reference to The E. W. Scripps Company Annual Report on Form 10-K for the year ended December 31, 1998.