10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
For the quarterly period ended March 31, 2009
or
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 |
For the transition period from to
Commission File Number 0-16914
THE E. W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)
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Ohio
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31-1223339 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification Number) |
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312 Walnut Street |
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Cincinnati, Ohio
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45202 |
(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: (513) 977-3000
Not Applicable
(Former name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files). Yes o No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or smaller reporting company. See definitions of large accelerated filer,
accelerated filer, or small reporting company in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date. As of April 30, 2009 there were 41,988,404 of the Registrants Class
A Common shares outstanding and 11,932,735 of the Registrants Common Voting shares outstanding.
INDEX TO THE E. W. SCRIPPS COMPANY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED March 31, 2009
2
PART I
As used in this Quarterly Report on Form 10-Q, the terms we, our, us or Scripps may,
depending on the context, refer to The E. W. Scripps Company, to one or more of its consolidated
subsidiary companies or to all of them taken as a whole.
ITEM 1. FINANCIAL STATEMENTS
The information required by this item is filed as part of this Form 10-Q. See Index to Financial
Information at page F-1 of this Form 10-Q.
ITEM 2. |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS |
The information required by this item is filed as part of this Form 10-Q. See Index to Financial
Information at page F-1 of this Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is filed as part of this Form 10-Q. See Index to Financial
Information at page F-1 of this Form 10-Q.
ITEM 4. CONTROLS AND PROCEDURES
The information required by this item is filed as part of this Form 10-Q. See Index to Financial
Information at page F-1 of this Form 10-Q.
PART II
ITEM 1. LEGAL PROCEEDINGS
We are involved in litigation arising in the ordinary course of business, such as defamation
actions, employment and employee relations and various governmental and administrative proceedings,
none of which is expected to result in material loss.
ITEM 1A. RISK FACTORS
There have been no material changes to the factors disclosed in Item 1A. Risk Factors in our Annual
Report on Form 10-K for the year ended December 31, 2008.
ITEM 2. UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS
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There were no sales of unregistered equity securities during the quarter for which this report is
filed. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the quarter for which this report is filed.
3
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the quarter for which this
report is filed.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The information required by this item is filed as part of this Form 10-Q. See Index to Exhibits at
page E-1 of this Form 10-Q.
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
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THE E. W. SCRIPPS COMPANY
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Dated: May 7, 2009 |
BY: |
/s/ Douglas F. Lyons
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Douglas F. Lyons |
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Vice President and Controller |
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5
THE E. W. SCRIPPS COMPANY
Index to Financial Information
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Item |
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Page |
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F-2 |
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F-4 |
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F-5 |
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F-6 |
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F-7 |
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F-20 |
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F-30 |
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F-31 |
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F-1
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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As of |
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As of |
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March 31, |
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December 31, |
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(in thousands) |
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2009 |
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2008 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
9,958 |
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$ |
5,376 |
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Short-term investments |
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34,889 |
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21,130 |
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Accounts and notes receivable (less
allowances $5,493 and $7,763) |
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116,564 |
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169,010 |
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Inventory |
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9,964 |
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11,952 |
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Deferred income taxes |
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34,622 |
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33,911 |
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Miscellaneous |
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39,075 |
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44,157 |
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Total current assets |
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245,072 |
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285,536 |
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Investments |
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11,722 |
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12,720 |
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Property, plant and equipment |
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429,730 |
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427,138 |
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Goodwill and other intangible assets: |
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Goodwill |
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215,432 |
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Other intangible assets |
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24,743 |
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26,464 |
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Total goodwill and other intangible assets |
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24,743 |
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241,896 |
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Other assets: |
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Deferred income taxes |
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126,906 |
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112,405 |
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Miscellaneous |
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7,885 |
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9,281 |
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Total other assets |
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134,791 |
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121,686 |
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TOTAL ASSETS |
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$ |
846,058 |
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$ |
1,088,976 |
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See notes to condensed consolidated financial statements.
F-2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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As of |
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As of |
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March 31, |
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December 31, |
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(in thousands, except share data) |
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2009 |
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2008 |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
30,285 |
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$ |
55,889 |
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Customer deposits and unearned revenue |
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35,712 |
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38,817 |
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Accrued liabilities: |
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Employee compensation and benefits |
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45,521 |
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38,398 |
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Accrued income taxes |
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497 |
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1,777 |
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Accrued talent payable |
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12,584 |
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15,981 |
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Miscellaneous |
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19,243 |
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21,974 |
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Other current liabilities |
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5,732 |
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14,748 |
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Total current liabilities |
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149,574 |
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187,584 |
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Long-term debt |
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73,130 |
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61,166 |
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Other liabilities (less current portion) |
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228,221 |
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245,259 |
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Equity: |
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The E.W. Scripps Company equity: |
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Preferred stock, $.01 par authorized: 25,000,000 shares; none outstanding
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Common stock, $.01 par: |
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Class A authorized: 240,000,000 shares; issued and
outstanding: 41,942,422 and 41,884,187 shares |
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419 |
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419 |
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Voting authorized: 60,000,000 shares; issued and
outstanding: 11,932,735 and 11,933,401 shares |
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119 |
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119 |
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Total |
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538 |
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538 |
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Additional paid-in capital |
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526,944 |
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523,859 |
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Retained earnings (accumulated deficit) |
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(19,873 |
) |
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200,827 |
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Accumulated other comprehensive income (loss), net of income taxes: |
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Pension liability adjustments |
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(116,214 |
) |
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(134,293 |
) |
Foreign currency translation adjustment |
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487 |
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638 |
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Total equity for The E.W. Scripps Company |
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391,882 |
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591,569 |
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Noncontrolling interest |
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3,251 |
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3,398 |
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Total equity |
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395,133 |
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594,967 |
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TOTAL LIABILITIES AND EQUITY |
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$ |
846,058 |
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$ |
1,088,976 |
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See notes to condensed consolidated financial statements.
F-3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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Three months ended |
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March 31, |
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(in thousands, except per share data) |
|
2009 |
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2008 |
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Operating Revenues: |
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Advertising |
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$ |
143,393 |
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$ |
194,405 |
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Circulation |
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30,637 |
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30,514 |
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Licensing |
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17,203 |
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17,549 |
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Other |
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14,135 |
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13,226 |
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Total operating revenues |
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205,368 |
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255,694 |
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Costs and Expenses: |
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Employee compensation and benefits |
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126,546 |
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127,068 |
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Production and distribution |
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50,155 |
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56,759 |
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Programs and program licenses |
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12,907 |
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11,558 |
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Other costs and expenses |
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40,655 |
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38,781 |
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Separation costs |
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1,493 |
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1,059 |
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Total costs and expenses |
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231,756 |
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235,225 |
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Depreciation, Amortization, and Losses: |
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Depreciation |
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11,043 |
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|
10,286 |
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Amortization of intangible assets |
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720 |
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|
800 |
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Impairment of goodwill and indefinite-lived assets |
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216,413 |
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Losses on disposal of property, plant and equipment |
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338 |
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103 |
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Net depreciation, amortization and losses |
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228,514 |
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11,189 |
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Operating income (loss) |
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(254,902 |
) |
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9,280 |
|
Interest expense |
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(246 |
) |
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(6,101 |
) |
Equity in earnings of JOAs and other joint ventures |
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(419 |
) |
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|
8,513 |
|
Miscellaneous, net |
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(1,028 |
) |
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|
899 |
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Income (loss) from continuing operations before income taxes |
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(256,595 |
) |
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|
12,591 |
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Provision (benefit) for income taxes |
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(35,748 |
) |
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|
3,970 |
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|
|
|
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|
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|
|
|
|
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Income (loss) from continuing operations, net of tax |
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(220,847 |
) |
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|
8,621 |
|
Income from discontinued operations, net of tax |
|
|
|
|
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|
97,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
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|
(220,847 |
) |
|
|
106,361 |
|
Net income (loss) attributable to noncontrolling interests |
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|
(147 |
) |
|
|
22,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Net income (loss) attributable to the shareholders of
The E.W. Scripps Company |
|
$ |
(220,700 |
) |
|
$ |
84,068 |
|
|
|
|
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|
Net income (loss) per basic share of common stock attributable
to the shareholders of The E.W. Scripps Company: |
|
|
|
|
|
|
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Income (loss) from continuing operations |
|
$ |
(4.12 |
) |
|
$ |
.16 |
|
Income from discontinued operations |
|
|
.00 |
|
|
|
1.39 |
|
|
|
|
|
|
|
|
Net income (loss) per basic share of common stock |
|
$ |
(4.12 |
) |
|
$ |
1.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net income (loss) per diluted share of common stock attributable
to the shareholders of The E.W. Scripps Company: |
|
|
|
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|
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Loss from continuing operations |
|
$ |
(4.12 |
) |
|
$ |
.16 |
|
Income from discontinued operations |
|
|
.00 |
|
|
|
1.38 |
|
|
|
|
|
|
|
|
Net income (loss) per diluted share of common stock |
|
$ |
(4.12 |
) |
|
$ |
1.54 |
|
|
|
|
|
|
|
|
Net income (loss) per share amounts may not foot since each is calculated independently.
See notes to condensed consolidated financial statements.
F-4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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|
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Three months ended |
|
|
|
March 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(220,847 |
) |
|
$ |
106,361 |
|
Income from discontinued operations, net of noncontrolling interest |
|
|
|
|
|
|
(97,740 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(220,847 |
) |
|
|
8,621 |
|
Adjustments to reconcile income (loss) from continuing operations
to net cash flows from operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
11,763 |
|
|
|
11,086 |
|
Impairment
of goodwill and indefinite-lived assets |
|
|
216,413 |
|
|
|
|
|
Losses on sale of property, plant and equipment |
|
|
338 |
|
|
|
103 |
|
Gains on sale of investments |
|
|
|
|
|
|
(696 |
) |
Equity in earnings of JOAs and other joint ventures |
|
|
419 |
|
|
|
(8,513 |
) |
Deferred income taxes |
|
|
(23,865 |
) |
|
|
1,234 |
|
Excess tax benefits of stock compensation plans |
|
|
|
|
|
|
335 |
|
Stock and deferred compensation plans |
|
|
1,165 |
|
|
|
11,307 |
|
Dividends received from JOAs and other joint ventures |
|
|
650 |
|
|
|
10,561 |
|
Prepaid and accrued pension expense |
|
|
11,036 |
|
|
|
533 |
|
Other changes in certain working capital accounts, net |
|
|
32,017 |
|
|
|
21,366 |
|
Miscellaneous, net |
|
|
640 |
|
|
|
(1,310 |
) |
|
|
|
|
|
|
|
Net cash provided by continuing operating activities |
|
|
29,729 |
|
|
|
54,627 |
|
Net cash provided by discontinued operating activities |
|
|
|
|
|
|
101,901 |
|
|
|
|
|
|
|
|
Net operating activities |
|
|
29,729 |
|
|
|
156,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Proceeds from sale of property, plant and equipment |
|
|
12 |
|
|
|
49 |
|
Additions to property, plant and equipment |
|
|
(14,266 |
) |
|
|
(19,141 |
) |
Decrease (increase) in short-term investments |
|
|
(13,759 |
) |
|
|
10,372 |
|
Proceeds from sale of investments |
|
|
|
|
|
|
698 |
|
Increase in investments |
|
|
|
|
|
|
(562 |
) |
|
|
|
|
|
|
|
Net cash used in continuing investing activities |
|
|
(28,013 |
) |
|
|
(8,584 |
) |
Net cash used in discontinued investing activities |
|
|
|
|
|
|
(11,551 |
) |
|
|
|
|
|
|
|
Net investing activities |
|
|
(28,013 |
) |
|
|
(20,135 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Increase in long-term debt |
|
|
12,000 |
|
|
|
8,934 |
|
Payments on long-term debt |
|
|
(36 |
) |
|
|
(40,026 |
) |
Dividends paid |
|
|
|
|
|
|
(22,840 |
) |
Dividends paid to noncontrolling interests |
|
|
|
|
|
|
(8 |
) |
Repurchase Class A Common shares |
|
|
|
|
|
|
(11,442 |
) |
Proceeds from employee stock options |
|
|
|
|
|
|
3,310 |
|
Excess tax benefits of stock compensation plans |
|
|
|
|
|
|
335 |
|
Miscellaneous, net |
|
|
(9,098 |
) |
|
|
(2,147 |
) |
|
|
|
|
|
|
|
Net cash provided by (used in) continuing financing activities |
|
|
2,866 |
|
|
|
(63,884 |
) |
Net cash
used in discontinued financing activities |
|
|
|
|
|
|
(46,840 |
) |
|
|
|
|
|
|
|
Net financing activities |
|
|
2,866 |
|
|
|
(110,724 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
|
123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash discontinued operations |
|
|
|
|
|
|
(31,641 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
4,582 |
|
|
|
(5,849 |
) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
Beginning of year |
|
|
5,376 |
|
|
|
19,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period |
|
$ |
9,958 |
|
|
$ |
13,251 |
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
F-5
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained |
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Earnings |
|
|
Other |
|
|
|
|
|
|
|
|
|
Common |
|
|
Paid-in |
|
|
(Accumulated |
|
|
Comprehensive |
|
|
Noncontrolling |
|
|
Total |
|
(in thousands, except share data) |
|
Stock |
|
|
Capital |
|
|
Deficit) |
|
|
Income (Loss) |
|
|
Interests |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007 |
|
$ |
543 |
|
|
$ |
476,142 |
|
|
$ |
1,971,848 |
|
|
$ |
1,828 |
|
|
$ |
141,930 |
|
|
$ |
2,592,291 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
84,068 |
|
|
|
|
|
|
|
22,293 |
|
|
|
106,361 |
|
Unrealized gains (losses) on investments,
net of tax of $1,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,291 |
) |
|
|
|
|
|
|
(3,291 |
) |
Amortization of prior service costs, actuarial losses,
and transition obligations, net of tax of $(378) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
669 |
|
|
|
|
|
|
|
669 |
|
Equity in investees adjustments for FAS 158,
net of tax of $30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47 |
) |
|
|
|
|
|
|
(47 |
) |
Currency translation adjustment, net of tax of $386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41 |
) |
|
|
|
|
|
|
(41 |
) |
Dividends: declared and paid $.42 per share |
|
|
|
|
|
|
|
|
|
|
(22,840 |
) |
|
|
|
|
|
|
|
|
|
|
(22,840 |
) |
Dividends: minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56,191 |
) |
|
|
(56,191 |
) |
Repurchase 93,333 Class A Common shares |
|
|
(1 |
) |
|
|
(957 |
) |
|
|
(10,484 |
) |
|
|
|
|
|
|
|
|
|
|
(11,442 |
) |
Compensation plans: 130,291 net shares issued |
|
|
1 |
|
|
|
12,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,008 |
|
Tax benefits of compensation plans |
|
|
|
|
|
|
348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008 |
|
$ |
543 |
|
|
$ |
487,540 |
|
|
$ |
2,022,592 |
|
|
$ |
(882 |
) |
|
$ |
108,032 |
|
|
$ |
2,617,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008 |
|
$ |
538 |
|
|
$ |
523,859 |
|
|
$ |
200,827 |
|
|
$ |
(133,655 |
) |
|
$ |
3,398 |
|
|
$ |
594,967 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
(220,700 |
) |
|
|
|
|
|
|
(147 |
) |
|
|
(220,847 |
) |
Amortization of prior service costs, actuarial losses,
and transition obligations, net of tax of $1,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,026 |
|
|
|
|
|
|
|
3,026 |
|
Pension liability adjustment, net of tax of $9,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,056 |
|
|
|
|
|
|
|
15,056 |
|
Currency
translation adjustment, net of tax of $0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(154 |
) |
|
|
|
|
|
|
(154 |
) |
Compensation plans: 56,297 net shares issued |
|
|
|
|
|
|
3,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2009 |
|
$ |
538 |
|
|
$ |
526,944 |
|
|
$ |
(19,873 |
) |
|
$ |
(115,727 |
) |
|
$ |
3,251 |
|
|
$ |
395,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
F-6
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
As used in the Notes to Consolidated Financial Statements, the terms we, our, us or
Scripps may, depending on the context, refer to The E. W. Scripps Company, to one or more of
its consolidated subsidiary companies or to all of them taken as a whole.
Basis of Presentation The condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. The interim financial statements should be read in conjunction with the audited consolidated
financial statements, including the notes thereto included in our 2008 Annual Report on Form 10-K.
In managements opinion all adjustments (consisting of normal recurring accruals) necessary for a
fair presentation of the interim periods have been made.
Results of operations are not necessarily indicative of the results that may be expected for
future interim periods or for the full year.
Nature of Operations We are a diverse media concern with interests in newspaper publishing,
broadcast television, and licensing and syndication. All of our media businesses provide content
and advertising services via the Internet. Our media businesses are organized into the following
reportable business segments: Newspapers, JOAs and newspaper partnerships, Television, and
Licensing and other. Additional information for our business segments is presented in Note 13.
On July 1, 2008, we distributed our national cable television networks and interactive media
business to shareholders in a tax free spin-off. The national cable television networks and
interactive media division has been presented as discontinued operations for all periods presented.
Information on the spin-off is in Note 3.
Use of Estimates The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires us to make a variety of decisions that
affect the reported amounts and the related disclosures. Such decisions include the selection of
accounting principles that reflect the economic substance of the underlying transactions and the
assumptions on which to base accounting estimates. In reaching such decisions, we apply judgment
based on our understanding and analysis of the relevant circumstances, including our historical
experience, actuarial studies and other assumptions.
Our financial statements include estimates and assumptions used in accounting for our defined
benefit pension plans; the recognition of certain revenues; rebates due to customers; the periods
over which long-lived assets are depreciated or amortized; the fair value of long-lived assets and
goodwill; income taxes payable and deferred income taxes; estimates for uncollectible accounts
receivable; and self-insured risks.
While we re-evaluate our estimates and assumptions on an ongoing basis, actual results could differ
from those estimated at the time of preparation of the financial statements.
Concentration of Credit Risk In order to reduce our price of newsprint and to manage delivery and
supply of newsprint, we purchase and arrange delivery of newsprint for other newspaper companies.
Beginning in 2009 credit risk for newsprint shipped to other newspaper companies is retained by the
newsprint vendor. Prior to 2009, we retained credit risk for newspaper shipments to other
newspaper companies. As of the date of the issuance of these financial statements all amounts
owed to us by other newspaper companies have been paid in full.
Newspaper Joint Operating Agreements (JOA) We include our share of JOA earnings in Equity in
earnings of JOAs and other joint ventures in our Condensed Consolidated Statements of Operations.
The related editorial costs and expenses are included within costs and expenses in our Condensed
Consolidated Statements of Operations.
Revenue Recognition Revenue is recognized when persuasive evidence of a sales arrangement exists,
delivery occurs or services are rendered, the sales price is fixed or determinable and
collectability is reasonably assured. When a sales arrangement contains multiple elements, such as
the sale of advertising and other services, revenue is allocated to each element based upon its
relative fair value. Revenue recognition may be ceased on delinquent accounts depending upon a
number of factors, including the customers credit history, number of days past due, and the terms
of any agreements with the customer. Revenue recognition on such accounts resumes when the
customer has taken actions to remove their accounts from delinquent status, at which time any
associated deferred revenues would also be recognized. Revenue is reported net of our remittance
of sales taxes, value added taxes and other taxes collected from our customers.
F-7
Our primary sources of revenue are from:
|
|
|
The sale of print, broadcast, and Internet advertising |
|
|
|
|
The sale of newspapers |
|
|
|
|
Licensing royalties |
The revenue recognition policies for each source of revenue are described in our annual report on
Form 10-K for the year ended December 31, 2008.
Share-Based Compensation We have a Long-Term Incentive Plan (the Plan) which is described more
fully in our Annual Report on Form 10-K for the year ended December 31, 2008. The Plan provides
for the award of incentive and nonqualified share options, share appreciation rights, restricted
and unrestricted Class A Common shares and restricted share units, and performance units to key
employees and non-employee directors. In the three months ended March 31, 2009, we issued 9.1
million restricted share units with an aggregate fair value of $7.9 million. The fair value will
be recognized straight-line over the vesting period of three to four years.
Share-Based Equity Awards
Share based compensation costs for continuing operations totaled $3.0 million for the first quarter
of 2009 and $8.2 million for the first quarter of 2008.
Share based compensation costs for discontinued operations, totaled $1.4 million for the first
quarter of 2008.
Earnings Per Share (EPS) In 2008, the FASB issued FSP EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities, and it
became effective for us beginning January 1, 2009. Under this standard, unvested awards of
share-based payments with rights to receive dividends or dividend equivalents, such as our
restricted stock and restricted stock units (RSUs), are considered participating securities for
purposes of calculating EPS. Under the two-class method required by EITF 03-6-1, a portion of net
income is allocated to these participating securities and therefore is excluded from the
calculation of EPS allocated to common stock. In periods of loss no portion of the loss is
allocated to the participating securities. This FSP requires retrospective application for periods
prior to the effective date and as a result, all prior period earnings per share data presented
herein have been adjusted to conform to these provisions. The adoption of this FSP did not result
in a change to the previously reported basic EPS and diluted EPS for the three months ended March
31, 2008.
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Basic weighted-average shares outstanding |
|
|
53,573 |
|
|
|
54,218 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
Unvested restricted stock and share units held by employees |
|
|
|
|
|
|
87 |
|
Stock options held by employees and directors |
|
|
|
|
|
|
248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted-average shares outstanding |
|
|
53,573 |
|
|
|
54,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive stock securities (before application of treasury
stock method) |
|
|
21,956 |
|
|
|
2,884 |
|
|
|
|
|
|
|
|
For the quarter ended March 31, 2009, we incurred a net loss and the inclusion of unvested stock,
share units and stock options held by employees and directors would have been anti-dilutive and
accordingly the diluted EPS calculation for the period excludes those common share equivalents.
For 2008, we had stock options that were anti-dilutive and accordingly were not included in the
computation of diluted weighted-average shares outstanding.
F-8
2. ACCOUNTING CHANGES AND RECENTLY ISSUED ACCOUNTING STANDARDS
Accounting Changes In September 2006, the Financial Accounting Standards Board (FASB) issued
FAS 157, Fair Value Measurements (FAS 157), which defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements. In February 2008, the
FASB issued Staff Position 157-2 (FSP), Effective Date of FASB Statement No. 157, which delayed
the effective date of FAS 157 for non-financial assets and liabilities, except for those that are
recognized or disclosed at fair value in the financial statements on a recurring basis, until
January 1, 2009. The adoption of FAS 157 did not have a material impact on our financial
statements.
In December 2007, the FASB issued FAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51 (FAS 160). FAS 160 establishes accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. FAS 160 provides guidance related to accounting for noncontrolling (minority)
interests as equity in the consolidated financial statements at fair value. We adopted FAS 160 as
of January 1, 2009. As a result of the adoption of FAS 160 we reclassified our noncontrolling
interest in subsidiary companies to shareholders equity and changed the presentation of our
statement of operations. We have retroactively reclassified all periods presented.
In December 2007, the FASB issued FAS No. 141(R), Business Combinations (FAS 141(R)). FAS 141(R)
provides guidance relating to recognition of assets acquired and liabilities assumed in a business
combination. FAS 141(R) also establishes expanded disclosure requirements for business
combinations. We adopted FAS 141(R) effective January 1, 2009, prospectively for all business
combinations subsequent to the effective date.
In March 2008, the FASB issued FAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement No. 133 (FAS 161). FAS 161 amends and expands the
disclosure requirements of Statement 133 to provide a better understanding of how and why an entity
uses derivative instruments, how derivative instruments and related hedged items are accounted for,
and their effect on an entitys financial position, financial performance, and cash flows. We
adopted FAS 161 effective January 1, 2009. The adoption of FAS 161 had no impact on our financial
statements.
3. DISCONTINUED OPERATIONS
On October 16, 2007, the Company announced that its Board of Directors had authorized management to
pursue a plan to separate E. W. Scripps (Scripps or EWS) into two independent, publicly-traded
companies (the Separation) through the spin-off of Scripps Networks Interactive, Inc. (SNI) to
Scripps shareholders. To effect the Separation, SNI was formed on October 23, 2007, as a wholly
owned subsidiary of Scripps. All assets and liabilities of the Scripps Networks and Interactive
Media businesses of Scripps were transferred to SNI prior to the effective date of the Separation.
The distribution of all of the shares of SNI was made on July 1, 2008, to shareholders of record as
of the close of business on June 16, 2008 (the Record Date). The shareholders of record
received one SNI Class A Common Share for every Scripps Class A Common Share held as of the Record
Date and one SNI Common Voting Share for every Scripps Common Voting Share held as of the Record
Date.
As a result of the spin-off, SNI has been presented as discontinued operations for all periods in
our financial statements.
In connection with the Separation, the following agreements between Scripps and SNI became
effective:
|
|
|
Separation and Distribution Agreement |
|
|
|
|
Transition Services Agreement |
|
|
|
|
Employee Matters Agreement |
|
|
|
|
Tax Allocation Agreement |
These agreements are described in detail in our 2008 Annual Report on Form 10-K.
For the quarter ended March 31, 2009, we charged SNI $1.9 million for services rendered under the
terms of these agreements. SNI also reimbursed us $16 million for its share of estimated taxes
prior to the Spin-off under the Tax Allocation Agreement.
F-9
Operating results of our discontinued operations were as follows:
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, |
|
(in thousands) |
|
2008 |
|
|
|
|
|
|
Operating revenues |
|
$ |
387,674 |
|
|
|
|
|
Equity in earnings of JOAs and other joint ventures |
|
$ |
4,007 |
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations: |
|
|
|
|
Income from discontinued operations, before tax |
|
$ |
144,781 |
|
Income taxes |
|
|
(47,041 |
) |
|
|
|
|
Income from discontinued operations |
|
$ |
97,740 |
|
|
|
|
|
The Company incurred certain non-recurring costs directly related to the spin-off of SNI of $5.3
million for the three -month period ending March 31, 2008. Of these amounts, which were primarily
for investment banking fees, legal, accounting and other professional and consulting fees, $4.2
million has been allocated to discontinued operations in the Condensed Consolidated Statements of
Operations. All remaining amounts ($1.1 million) are recorded in earnings from continuing
operations.
4. OTHER CHARGES AND CREDITS
2009 Separation costs include the costs to separate and install separate information systems as
well as other costs related to our separation from SNI. Efforts to separate and install separate
systems are expected to continue through the end of the second quarter. These costs increased loss
from continuing operations before taxes by $1.5 million in the first quarter.
In the first quarter we recorded a $215 million, non-cash charge to reduce the carrying value of
our goodwill for our Television division. See Note 7.
We also recorded a $1 million non-cash charge to reduce the carrying value of the FCC license for
our Lawrence, Kansas television station.
5. INCOME TAXES
We file a consolidated federal income tax return, consolidated unitary returns in certain states,
and other separate state income tax returns for certain of our subsidiary companies.
The income tax provision for interim periods is determined based upon the expected effective income
tax rate for the full year and the tax rate applicable to certain discrete transactions in the
interim period. To determine the annual effective income tax rate, we must estimate both the total
income (loss) before income tax for the full year and the jurisdictions in which that income is
subject to tax. The actual effective income tax rate for the full year may differ from these
estimates if income (loss) before income tax is greater or less than what was estimated or if the
allocation of income to jurisdictions in which it is taxed is different from the estimated
allocations. We review and adjust our estimated effective income tax rate for the full year each
quarter based upon our most recent estimates of income before income tax for the full year and the
jurisdictions in which we expect that income will be taxed.
The effective income tax rate for the three months ended March 31, 2009 was 13.9 %. The primary
difference between this rate and the U.S. Federal statutory rate of 35% is that approximately $150
million of the goodwill impairment recorded in the quarter is non deductable for income tax
purposes.
F-10
At March 31, 2009 we had net deferred tax assets of $162 million. We assess the realizability of
our deferred tax assets as of each balance sheet date and record a valuation allowance when it is
more likely than not that a portion, or all, of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the timing of the reversal of
temporary differences giving rise to the deferred tax assets, the generation of taxable income in
the periods in which the temporary differences reverse, or, if taxable income is not expected in
those periods, the ability to use the resulting tax losses to recover taxes paid in prior periods.
Approximately $70 million of our deferred tax assets are scheduled to reverse in 2009 and 2010,
which can either be carried back to years with taxable income or used to reduce taxable income in
those years. Management believes that it is more likely than not that we will realize the benefits
of our Federal deferred tax assets and therefore has not recorded a valuation allowance for those
deferred tax assets. If current economic conditions persist or worsen, future estimates of taxable
income could be negatively impacted, which may require valuation allowances to be recorded in
future reporting periods. We have recorded a valuation allowance for the net operating losses of
certain states.
Liabilities for uncertain tax positions totaled $20.5 million at March 31, 2009. Under the Tax
Allocation Agreement between Scripps and SNI, SNI is responsible for its own pre-spin-off tax
obligations. However, due to regulations governing the U.S. federal consolidated tax return and
certain combined state tax returns, we remain severally liable for SNIs pre-spin-off federal taxes
as well as certain state taxes. The liability for uncertain tax positions includes $3.1 million
for amounts for which we would be indemnified by SNI.
It is reasonably possible that within the next 12 months we will reach agreement with the Internal
Revenue Service to settle the examinations of our 2005 and 2006 federal income tax returns.
Unrecognized tax benefits that affect the effective tax rate total approximately $1.7 million for
those tax years. Audit outcomes and the timing of audit settlements are subject to significant
uncertainty.
6. JOINT OPERATING AGREEMENT AND NEWSPAPER PARTNERSHIPS
In December 2008, we announced that we were seeking a buyer for the Rocky Mountain News and that if
we did not find a buyer we would consider other options. In
February 2009, we announced our
decision to exit the Denver market and to close the Rocky Mountain News after its final edition was
published on February 27, 2009.
Prior to ceasing publication, the Rocky Mountain News operated pursuant to the terms of a joint
operating agreement (JOA). The other publisher in the JOA is a subsidiary of MediaNews Group,
Inc. (MNG). The sales, production and business operations of the Denver newspapers were operated
by the Denver Newspaper Agency, a limited liability partnership (the Denver JOA). Each newspaper
owns 50% of the Denver JOA and receives a 50% share of the Denver JOA profits. Each newspaper in
the JOA maintained a separate and independent editorial operation.
JOA editorial costs and expenses in 2009 include additional costs associated with our decision to
exit the Denver newspaper market. Such costs include severance and other payments to terminated
employees. Of these costs, approximately $12 million will be paid in the second quarter of 2009.
We have a 50% interest in Prairie Mountain Publishing (PMP), a newspaper partnership with a
subsidiary of MNG that operates certain of both companies newspapers in Colorado contributed to
the partnership, including their editorial operations.
Under the terms of an agreement with MNG we will transfer our interests in the Denver JOA and PMP
prior to the end of the third quarter of 2009.
In the first quarter of 2008, we ceased publication of our Albuquerque Tribune newspaper. At the
same time we also reached an agreement with the Journal Publishing Company (JPC), the publisher
of the Albuquerque Journal (Journal), to terminate the Albuquerque joint operating agreement
between the Journal and our Albuquerque Tribune newspaper. Under an amended agreement with the
JPC, we own an approximate 40% residual interest in the Albuquerque Publishing Company, G.P. (the
Partnership) and we pay JPC an amount equal to a portion of the editorial savings realized from
ceasing publication of our newspaper. The Partnership directs and manages the operations of the
continuing Journal newspaper.
Our share of the operating profit (loss) of our JOA and our newspaper partnerships is reported as
Equity in earnings of JOAs and other joint ventures in our financial statements.
F-11
7. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
As of |
|
|
|
March 31, |
|
|
December 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
$ |
|
|
|
$ |
215,432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets: |
|
|
|
|
|
|
|
|
Amortizable intangible assets: |
|
|
|
|
|
|
|
|
Carrying amount: |
|
|
|
|
|
|
|
|
Television network affiliation relationships |
|
|
5,641 |
|
|
|
5,641 |
|
Customer lists |
|
|
12,794 |
|
|
|
12,794 |
|
Other |
|
|
6,193 |
|
|
|
6,193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total carrying amount |
|
|
24,628 |
|
|
|
24,628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization: |
|
|
|
|
|
|
|
|
Television network affiliation relationships |
|
|
(1,386 |
) |
|
|
(1,310 |
) |
Customer lists |
|
|
(7,489 |
) |
|
|
(6,919 |
) |
Other |
|
|
(4,205 |
) |
|
|
(4,130 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated amortization |
|
|
(13,080 |
) |
|
|
(12,359 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amortizable intangible assets |
|
|
11,548 |
|
|
|
12,269 |
|
|
|
|
|
|
|
|
Indefinite-lived intangible assets FCC licenses |
|
|
13,195 |
|
|
|
14,195 |
|
|
|
|
|
|
|
|
Total other intangible assets |
|
|
24,743 |
|
|
|
26,464 |
|
|
|
|
|
|
|
|
Total goodwill and other intangible assets |
|
$ |
24,743 |
|
|
$ |
241,896 |
|
|
|
|
|
|
|
|
Activity related to goodwill by business segment was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licensing |
|
|
|
|
(in thousands) |
|
Newspapers |
|
|
Television |
|
|
and Other |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2007 |
|
$ |
785,621 |
|
|
$ |
215,414 |
|
|
$ |
18 |
|
|
$ |
1,001,053 |
|
Other adjustments |
|
|
(6,721 |
) |
|
|
|
|
|
|
|
|
|
|
(6,721 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2008 |
|
$ |
778,900 |
|
|
$ |
215,414 |
|
|
$ |
18 |
|
|
$ |
994,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2008 |
|
$ |
|
|
|
$ |
215,414 |
|
|
$ |
18 |
|
|
$ |
215,432 |
|
Impairment of goodwill |
|
|
|
|
|
|
(215,414 |
) |
|
|
|
|
|
|
(215,414 |
) |
Other adjustments |
|
|
|
|
|
|
|
|
|
|
(18 |
) |
|
|
(18 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2009 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated amortization expense of intangible assets for each of the next five years is expected to
be $1.1 million for the remainder of 2009, $1.4 million in 2010, $1.3 million in 2011, $1.0 million
in 2012, $0.8 million in 2013, $0.7 million in 2014 and $5.2 million in later years.
F-12
SFAS 142, Goodwill and Other Intangible Assets (SFAS 142), requires goodwill and other
indefinite-lived assets to be tested for impairment annually, or more frequently if an event or
conditions change that would more likely than not reduce the fair value of a reporting unit below
its carrying value. Such indicators of impairment include, but are not limited to, changes in
business climate and operating or cash flow losses related to such assets. The testing for
impairment is a two-step process. The first step is the estimation of the fair value of each of the
reporting units, which is then compared to their carrying value. If the fair value is less than
the carrying value of the reporting unit then an impairment of goodwill possibly exists. Step two
is then performed to determine the amount of impairment.
Due primarily to increases in the cost of capital for local media businesses and declines in our
stock price and that of other publicly traded television companies during the first quarter of
2009, we determined that indications of impairment existed for our Television goodwill as of March
31, 2009.
Under the two-step impairment testing process required by SFAS 142, we made a determination of the
fair value of our television business. The estimated fair value was determined using a combination
of an income approach, which estimated fair value based upon future revenues, expenses and cash
flows discounted to their present value, and a market approach, which estimated fair value using
market multiples of various financial measures compared to a set of comparable public companies.
The discounted cash flow approach utilized unobservable factors such as projected revenues and
expenses and a discount rate applied to the estimated cash flows. The determination of the discount
rate was based on a cost of equity model, using a risk-free rate, adjusted by a stock-beta adjusted
risk premium and a size premium. The inputs to the nonrecurring fair value determination of our
reporting units are classified as Level 3 fair value measurements under FAS 157.
The valuation methodology and underlying financial information that are used to determine fair
value require significant judgments to be made by management. These judgments include, but are not
limited to, long-term projections of future financial performance and the selection of appropriate
discount rates used to determine the present value of future cash flows. Changes in such estimates
or the application of alternative assumptions could produce significantly different results.
We concluded the fair value of our television reporting unit did not exceed the carrying value of
our television net assets as of March 31, 2009. Because of the timing and complexity of the
calculations required under step two of the process, we have not yet completed that process as of
the issuance of our March 31, 2009 financial statements. However, based upon our preliminary
valuations, we recorded a $215 million, non-cash charge in the three months ended March 31, 2009 to
reduce the carrying value of goodwill. This amount is our estimate of the goodwill impairment loss
that is probable and can be reasonably estimated. We expect to complete step two of the goodwill
impairment analysis for our television business in the second quarter of 2009 and any adjustment
will be recorded then.
We also recorded a $1 million non-cash charge to reduce the carrying value of the FCC license for
our Lawrence, Kansas, television station to its estimated fair value.
8. LONG-TERM DEBT
Long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
As of |
|
|
|
March 31, |
|
|
December 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Revolving credit agreement |
|
$ |
72,000 |
|
|
$ |
60,000 |
|
Other notes |
|
|
1,130 |
|
|
|
1,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt (less current portion) |
|
$ |
73,130 |
|
|
$ |
61,166 |
|
|
|
|
|
|
|
|
On June 30, 2008, we entered into a new Revolving Credit Agreement (Revolver) expiring on June
30, 2013, with a total availability of $200 million. Borrowings under the Revolver are available
on a committed revolving credit basis at our choice of an adjusted rate based on LIBOR plus 0.625%
to 1.5% or the higher of the prime or the Federal Funds rate plus 0.5 %. The weighted-average
interest rate on borrowings under the Revolver was 1.3% and 1.7% at March 31, 2009, and December
31, 2008, respectively.
F-13
The Revolver includes certain affirmative and negative covenants including compliance with
specified financial ratios, including maintenance of minimum interest coverage ratio and leverage
ratio as defined in the agreement. We must maintain a minimum of a 3.0 to 1.0 interest coverage
ratio of Consolidated EBITDA, as defined in the agreement, for the last four quarters to
Consolidated interest expense for the same period. EBITDA is adjusted for unusual and
non-recurring non-cash charges and non-cash compensation expenses arising from share based equity
awards. Maximum Borrowings under the Revolver are limited to 3.0 times Consolidated EBITDA,
adjusted for certain noncash expenses, for the last four quarters. At March 31, 2009, the full
amount of the Revolver was available to us.
Based on our current projections of Consolidated EBITDA, Maximum Borrowings under the Revolver will
be limited to less than $200 million during the second half of 2009. However, we expect such
reduced Maximum Borrowings will be sufficient to meet our operating and capital needs. If we do not
meet our EBITDA projections, and therefore exceed such reduced borrowing limits, we would have to
seek waivers or amendments to the Revolver covenants. We cannot be assured such waivers or
amendments would be granted based upon current credit market conditions.
As of March 31, 2009, and December 31, 2008, we had outstanding letters of credit of $9.7 million
and $8.3 million, respectively.
In October 2008, we entered into a 2-year $30 million notional interest rate swap expiring in
October 2010. Under this agreement we receive payments based on the 3-month LIBOR and make
payments based on a fixed rate of 3.2%. This swap has not been designated as a hedge in accordance
with SFAS 133, Accounting for Derivative Instruments and Hedging Activities and changes in fair
value are recorded in miscellaneous-net with a corresponding adjustment to other long-term
liabilities. The fair value was a $1.0 million liability at March 31, 2009, and a $0.8 million
liability at December 31, 2008. For the three month period ending March 31, 2009, $0.2 million of
losses on this derivative were recorded in miscellaneous, net.
9. OTHER LIABILITIES
Other liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
As of |
|
|
|
March 31, |
|
|
December 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
|
$ |
20,619 |
|
|
$ |
22,412 |
|
Liability for pension benefits |
|
|
168,111 |
|
|
|
183,631 |
|
FIN 48 tax liability |
|
|
20,528 |
|
|
|
19,840 |
|
Other |
|
|
18,963 |
|
|
|
19,376 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities (less current portion) |
|
$ |
228,221 |
|
|
$ |
245,259 |
|
|
|
|
|
|
|
|
10. FAIR VALUE MEASUREMENT
We measure certain financial assets at fair value on a recurring basis, including short-term
investments and derivatives. The fair value of these financial assets was determined based on three
levels of inputs, of which the first two are considered observable and the last unobservable, that
may be used to measure fair value which are the following:
|
|
|
Level 1 Quoted prices in active markets for identical assets or liabilities. |
|
|
|
|
Level 2 Inputs, other than quoted market prices in active markets, that are observable
either directly or indirectly. |
|
|
|
|
Level 3 Unobservable inputs based on our own assumptions. |
F-14
The following tables set forth our assets and liabilities that are measured at fair value on a
recurring basis at March 31, 2009 and December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2009 |
|
(in thousands) |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments |
|
$ |
34,889 |
|
|
$ |
34,889 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap |
|
$ |
963 |
|
|
$ |
|
|
|
$ |
963 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
(in thousands) |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments |
|
$ |
21,130 |
|
|
$ |
21,130 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap |
|
$ |
840 |
|
|
$ |
|
|
|
$ |
840 |
|
|
$ |
|
|
11. NONCONTROLLING INTERESTS
There are noncontrolling interests of approximately 4% in the capital stock of the subsidiary
company that publishes our Memphis newspaper and approximately 6% in the capital stock of the
subsidiary company that publishes our Evansville newspaper. The terms of the stock of these
companies does not provide for or require the redemption of the noncontrolling interests by us.
Noncontrolling interest from discontinued operations included a 10% interest in Fine Living and
a 30% interest in the Food Network.
A summary of the components of net income (loss) attributable to The E.W. Scripps Company
shareholders is as follows:
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to The E.W. Scripps Company shareholders: |
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, net of tax |
|
$ |
(220,700 |
) |
|
$ |
8,595 |
|
Income from discontinued operations, net of tax |
|
|
|
|
|
|
75,473 |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(220,700 |
) |
|
$ |
84,068 |
|
|
|
|
|
|
|
|
12. EMPLOYEE BENEFIT PLANS
We sponsor defined benefit pension plans that cover substantially all non-union and certain
union-represented employees. Benefits are generally based upon the employees compensation and
years of service.
We also have a non-qualified Supplemental Executive Retirement Plan (SERP). The SERP, which is
unfunded, provides defined pension benefits in addition to the defined benefit pension plan to
eligible participants based on average earnings, years of service and age at retirement.
F-15
During 2009, we will freeze the accrual of benefits under defined benefit pension plans, including
our SERP, covering the majority of our employees. As a result of our decision to undertake this
action, we recognized a curtailment loss of $4.2 million for the quarter ended March 31, 2009. In
addition we recognized a curtailment loss of $.9 million in the 2009 quarter related to the closure
of our Denver newspaper.
Substantially all non-union and certain union employees are also covered by a company-sponsored
defined contribution plan. We match a portion of employees voluntary contributions to this plan.
Effective with the beginning of the second quarter, employer matching contributions under the plan
were suspended.
Other union-represented employees are covered by union-sponsored multi-employer plans.
We use a December 31 measurement date for our retirement plans. Expense for the plans is based on
valuations performed by plan actuaries as of the beginning of each fiscal year. The components of
the expense consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
2,805 |
|
|
$ |
4,934 |
|
Interest cost |
|
|
6,730 |
|
|
|
7,523 |
|
Expected return on plan assets, net of expenses |
|
|
(5,286 |
) |
|
|
(9,183 |
) |
Amortization of prior service cost |
|
|
227 |
|
|
|
161 |
|
Amortization of actuarial (gain)/loss |
|
|
3,343 |
|
|
|
292 |
|
Curtailment loss |
|
|
5,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for defined benefit plans |
|
|
12,918 |
|
|
|
3,727 |
|
Multi-employer plans |
|
|
174 |
|
|
|
318 |
|
SERP |
|
|
503 |
|
|
|
2,079 |
|
Defined contribution plans |
|
|
1,394 |
|
|
|
2,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
|
14,989 |
|
|
|
8,463 |
|
Allocated to discontinued operations |
|
|
|
|
|
|
(3,240 |
) |
|
|
|
|
|
|
|
Net periodic benefit cost continuing operations |
|
$ |
14,989 |
|
|
$ |
5,223 |
|
|
|
|
|
|
|
|
We contributed $0.5 million to fund current benefit payments for our non-qualified SERP plan during
the first quarter of 2009. We anticipate contributing an additional $2.8 million to fund the
SERPs benefit payments during the remainder of fiscal 2009. We have met the minimum funding
requirements of our qualified defined benefit pension plans. No contributions were made to these
plans during the first quarter of 2009.
In the quarter ended March 31, 2009, we completed the actuarial valuation of our defined benefit
pension plan obligations, including final demographic information and updated assumptions related
to future salaries as a result of pay and bonus decreases implemented in the first quarter. In
addition the split of plan assets with SNI was completed in the first quarter of 2009. The changes
in actuarial assumptions and plan assets reduced our pension liability and accumulated
comprehensive loss by $23.4 million.
F-16
13. SEGMENT INFORMATION
We determine our business segments based upon our management and internal reporting structure. Our
reportable segments are strategic businesses that offer different products and services.
Our newspaper business segment includes daily and community newspapers in 14 markets in the U.S.
Newspapers earn revenue primarily from the sale of advertising to local and national advertisers
and from the sale of newspapers to readers.
Prior to ceasing publication, our Denver and Albuquerque newspapers were operated pursuant to the
terms of joint operating agreements. Each of those newspapers maintained an independent editorial
operation and received a share of the operating profits of the combined newspaper operations. We
continue to maintain our ownership interest in the newspaper partnerships that managed the combined
newspaper operations; however upon ceasing publication of our newspapers we no longer include the
equity earnings of the partnerships in segment profit.
Television includes six ABC-affiliated stations, three NBC-affiliated stations and one independent
station. Our television stations reach approximately 10% of the nations television households.
Television stations earn revenue primarily from the sale of advertising to local and national
advertisers.
Licensing and other media primarily include licensing of worldwide copyrights relating to
Peanuts, Dilbert and other properties for use on numerous products, including plush toys,
greeting cards and apparel, for promotional purposes and for exhibit on television and other media
syndication of news features and comics and other features for the newspaper industry.
The accounting policies of each of our business segments are those described in Note 1 in our
Annual Report on Form 10-K for the year ended December 31, 2008.
In addition, certain corporate costs and expenses, including information technology, pensions and
other employee benefits, and other shared services, are allocated to our business segments. The
allocations are generally amounts agreed upon by management, which may differ from amounts that
would be incurred if such services were purchased separately by the business segment. Corporate
assets are primarily cash, cash equivalents and other short-term investments, property and
equipment primarily used for corporate purposes, and deferred income taxes.
Our chief operating decision maker (as defined by FAS 131 Segment Reporting) evaluates the
operating performance of our business segments and makes decisions about the allocation of
resources to our business segments using a measure we call segment profit. Segment profit excludes
interest, income taxes, depreciation and amortization, impairment charges, divested operating
units, restructuring activities (including our proportionate share of JOA restructuring
activities), investment results and certain other items that are included in net income determined
in accordance with accounting principles generally accepted in the United States of America.
F-17
Information regarding our business segments is as follows:
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
Segment operating revenues: |
|
|
|
|
|
|
|
|
Newspapers |
|
$ |
121,825 |
|
|
$ |
155,599 |
|
JOAs and newspaper partnerships |
|
|
19 |
|
|
|
61 |
|
Television |
|
|
60,406 |
|
|
|
76,019 |
|
Licensing and other |
|
|
23,118 |
|
|
|
23,619 |
|
Corporate |
|
|
|
|
|
|
396 |
|
|
|
|
|
|
|
|
Total operating revenues |
|
$ |
205,368 |
|
|
$ |
255,694 |
|
|
|
|
|
|
|
|
|
Segment profit (loss): |
|
|
|
|
|
|
|
|
Newspapers |
|
$ |
2,947 |
|
|
$ |
25,550 |
|
JOAs and newspaper partnerships |
|
|
(21,086 |
) |
|
|
235 |
|
Television |
|
|
(2,413 |
) |
|
|
14,170 |
|
Licensing and other |
|
|
3,135 |
|
|
|
2,088 |
|
Corporate |
|
|
(7,812 |
) |
|
|
(13,782 |
) |
Depreciation and amortization |
|
|
(11,763 |
) |
|
|
(11,086 |
) |
Impairment of goodwill and indefinite-lived assets |
|
|
(216,413 |
) |
|
|
|
|
Equity earnings in investments |
|
|
(85 |
) |
|
|
1,780 |
|
Losses on disposal of property, plant and equipment |
|
|
(338 |
) |
|
|
(103 |
) |
Interest expense |
|
|
(246 |
) |
|
|
(6,101 |
) |
Separation costs |
|
|
(1,493 |
) |
|
|
(1,059 |
) |
Miscellaneous, net |
|
|
(1,028 |
) |
|
|
899 |
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before
income taxes |
|
$ |
(256,595 |
) |
|
$ |
12,591 |
|
|
|
|
|
|
|
|
|
Depreciation: |
|
|
|
|
|
|
|
|
Newspapers |
|
$ |
5,474 |
|
|
$ |
5,373 |
|
JOAs and newspaper partnerships |
|
|
309 |
|
|
|
324 |
|
Television |
|
|
4,759 |
|
|
|
4,413 |
|
Licensing and other |
|
|
322 |
|
|
|
117 |
|
Corporate |
|
|
179 |
|
|
|
59 |
|
|
|
|
|
|
|
|
Total depreciation |
|
$ |
11,043 |
|
|
$ |
10,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles: |
|
|
|
|
|
|
|
|
Newspapers |
|
$ |
637 |
|
|
$ |
519 |
|
Television |
|
|
83 |
|
|
|
281 |
|
|
|
|
|
|
|
|
Total amortization of intangibles |
|
$ |
720 |
|
|
$ |
800 |
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment: |
|
|
|
|
|
|
|
|
Newspapers |
|
$ |
13,072 |
|
|
$ |
13,766 |
|
JOAs and newspaper partnerships |
|
|
|
|
|
|
17 |
|
Television |
|
|
957 |
|
|
|
4,714 |
|
Licensing and other |
|
|
158 |
|
|
|
665 |
|
Corporate |
|
|
61 |
|
|
|
787 |
|
|
|
|
|
|
|
|
Total additions to property, plant and equipment |
|
$ |
14,248 |
|
|
$ |
19,949 |
|
|
|
|
|
|
|
|
No single customer provides more than 10% of our revenue. We also earn international revenues
from the licensing of comic characters.
F-18
14. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) consist of the following:
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(220,847 |
) |
|
$ |
106,361 |
|
Unrealized gains (losses) on investments, net of tax of $1,865 |
|
|
|
|
|
|
(3,291 |
) |
Amortization of prior service costs, actuarial losses, and transition
obligations, net of tax of $(1,777) and $(378) |
|
|
3,026 |
|
|
|
669 |
|
Pension liability adjustment, net of tax of $(9,419) |
|
|
15,056 |
|
|
|
|
|
Equity in investees adjustments for FAS 158, net of tax of $30 |
|
|
|
|
|
|
(47 |
) |
Currency
translation adjustment, net of tax of $0 and $386 |
|
|
(154 |
) |
|
|
(41 |
) |
|
|
|
|
|
|
|
Total comprehensive income (loss) |
|
$ |
(202,919 |
) |
|
$ |
103,651 |
|
|
|
|
|
|
|
|
There were no material items of other comprehensive income (loss) for the noncontrolling
interest.
F-19
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis of financial condition and results of operations is based upon the
condensed consolidated financial statements and the condensed notes to the consolidated
financial statements. You should read this discussion in conjunction with those financial
statements.
FORWARD-LOOKING STATEMENTS
This discussion and the information contained in the condensed notes to the consolidated
financial statements contains certain forward-looking statements related to our businesses that
are based on our current expectations. Forward-looking statements are subject to certain risks,
trends and uncertainties that could cause actual results to differ materially from the
expectations expressed in the forward-looking statements. Such risks, trends and uncertainties,
which in most instances are beyond our control, include changes in advertising demand and other
economic conditions; consumers tastes; newsprint prices; program costs; labor relations;
technological developments; competitive pressures; interest rates; regulatory rulings; and
reliance on third-party vendors for various products and services. The words believe,
expect, anticipate, estimate, intend and similar expressions identify forward-looking
statements. All forward-looking statements, which are as of the date of this filing, should be
evaluated with the understanding of their inherent uncertainty. We undertake no obligation to
publicly update any forward-looking statements to reflect events or circumstances after the date
the statement is made.
EXECUTIVE OVERVIEW
The E. W. Scripps Company (Scripps) is a diverse media company with interests in newspaper
publishing, television stations, local internet businesses, and licensing and syndication. The
companys portfolio of media properties includes: daily and community newspapers in 14 markets and
the Washington-based Scripps Media Center, home to the Scripps Howard News Service; 10 television
stations, including six ABC-affiliated stations, three NBC affiliates and one independent; and
United Media, a leading worldwide licensing and syndication company that is the home of PEANUTS,
DILBERT and approximately 150 other features and comics.
On July 1, 2008, we distributed all of the shares of Scripps Networks Interactive, Inc. (SNI) to
the shareholders of record as of the close of business on June 16, 2008 (the Record Date). SNI
included the assets and liabilities of the Scripps Networks and Interactive Media businesses.
In December 2008, we announced that we were seeking a buyer for the Rocky Mountain News and that if
we did not find a buyer we would consider other options. In
February 2009, we announced our
decision to exit the Denver market and to close the Rocky Mountain News after its final edition was
published on February 27, 2009. Under the terms of an agreement with MediaNews Group (MNG) we
will transfer our interests in the Denver Newspaper Agency (DNA) and Prairie Mountain Publishing
(PMP) prior to the end of the third quarter of 2009.
Outstanding borrowings under our credit facility totaled $72 million as of March 31, 2009. Cash
and short-term investments were $45 million. We believe our relatively low level of net debt
(borrowings less cash and short-term investments) provide us with the ability to position our local
media businesses for growth on the other side of the economic cycle. However, to protect our
financial flexibility we have undertaken a number of measures to reduce expenses and to conserve
cash. Some of the initiatives include pay reductions of 3 to 5 percent for all non-union employees
at our newspapers and our corporate office. These cuts are in addition to pay cuts that affected
corporate executives, TV stations general managers and newspaper publishers effective January 1,
2009. The company also will suspend its match of employees contributions to its defined
contribution savings and retirement plans, eliminate for 2009 the portion of bonuses (for
bonus-eligible employees) that is tied to segment profit performance, and will freeze the accrual
of benefits under defined benefit pension plans covering a majority of employees in 2009. It is
expected that the measures listed above will reduce the companys expenses for the full year of
2009 by approximately $35 million. In addition, we suspended our quarterly dividend in the fourth
quarter of 2008 and have reduced spending on capital projects.
In the first quarter of 2009, we concluded that we had indicators of impairment with respect to the
carrying value of our Television goodwill. As a result, we recorded a preliminary $215 million
non-cash charge to write-down the value of our Television goodwill.
F-20
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance with accounting principles generally accepted
in the United States of America (GAAP) requires us to make a variety of decisions which affect
reported amounts and related disclosures, including the selection of appropriate accounting
principles and the assumptions on which to base accounting estimates. In reaching such decisions,
we apply judgment based on our understanding and analysis of the relevant circumstances, including
our historical experience, actuarial studies and other assumptions. We are committed to
incorporating accounting principles, assumptions and estimates that promote the representational
faithfulness, verifiability, neutrality and transparency of the accounting information included in
the financial statements.
Note 1 to the Consolidated Financial Statements included in our Annual Report on Form 10-K
describes the significant accounting policies we have selected for use in the preparation of our
financial statements and related disclosures. An accounting policy is deemed to be critical if it
requires an accounting estimate to be made based on assumptions about matters that are highly
uncertain at the time the estimate is made, and if different estimates that reasonably could have
been used or changes in estimates that are likely to occur could materially change the financial
statements. We believe the accounting for Acquisitions, Goodwill and Other Indefinite-Lived
Intangible Assets, Income Taxes and Pension Plans to be our most critical accounting policies and
estimates. A detailed description of these accounting policies is included in the Critical
Accounting Policies section of Managements Discussion and Analysis of Financial Condition and
Results of Operations included in our Annual Report on Form 10-K for the year ended
December 31, 2008.
There have been no significant changes in those accounting policies or other significant accounting
policies.
RESULTS OF OPERATIONS
The trends and underlying economic conditions affecting the operating performance and future
prospects differ for each of our business segments. Accordingly, we believe the following
discussion of our consolidated results of operations should be read in conjunction with the
discussion of the operating performance of our business segments.
F-21
Consolidated Results of Operations
Consolidated results of operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-date |
|
(in thousands, except per share data) |
|
2009 |
|
|
Change |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues |
|
$ |
205,368 |
|
|
|
(19.7 |
)% |
|
$ |
255,694 |
|
Costs and expenses less separation costs |
|
|
(230,263 |
) |
|
|
(1.7 |
)% |
|
|
(234,166 |
) |
Separation costs |
|
|
(1,493 |
) |
|
|
41.0 |
% |
|
|
(1,059 |
) |
Depreciation and amortization |
|
|
(11,763 |
) |
|
|
6.1 |
% |
|
|
(11,086 |
) |
Impairment of goodwill and indefinite-lived assets |
|
|
(216,413 |
) |
|
|
|
|
|
|
|
|
Losses on disposal of property, plant and equipment |
|
|
(338 |
) |
|
|
|
|
|
|
(103 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(254,902 |
) |
|
|
|
|
|
|
9,280 |
|
Interest expense |
|
|
(246 |
) |
|
|
|
|
|
|
(6,101 |
) |
Equity in earnings of JOAs and other joint ventures |
|
|
(419 |
) |
|
|
|
|
|
|
8,513 |
|
Miscellaneous, net |
|
|
(1,028 |
) |
|
|
|
|
|
|
899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes |
|
|
(256,595 |
) |
|
|
|
|
|
|
12,591 |
|
Benefit (provision) for income taxes |
|
|
35,748 |
|
|
|
|
|
|
|
(3,970 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(220,847 |
) |
|
|
|
|
|
|
8,621 |
|
Income from discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
|
97,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(220,847 |
) |
|
|
|
|
|
|
106,361 |
|
Net income (loss) attributable to noncontrolling interests |
|
|
(147 |
) |
|
|
|
|
|
|
22,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the shareholders of The E.W. Scripps Company |
|
$ |
(220,700 |
) |
|
|
|
|
|
$ |
84,068 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per basic share of common stock attributable
to the shareholders of The E.W. Scripps Company: |
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
(4.12 |
) |
|
|
|
|
|
$ |
.16 |
|
Income from discontinued operations |
|
|
.00 |
|
|
|
|
|
|
|
1.39 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per basic share of common stock |
|
$ |
(4.12 |
) |
|
|
|
|
|
$ |
1.55 |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share amounts may not foot since each is calculated independently.
Continuing Operations
Revenues were lower for the three months ended March 31, 2009, compared with the first quarter of
2008. The lower revenues were primarily due to lower advertising revenues at our newspaper and
television divisions. The decline in revenues at our newspapers was attributed to lower
advertising in all categories. Classified advertising in the real estate, employment and automotive
categories was weak in the first quarter of 2009. Weakness in automotive, retail and financial
services categories contributed to the decline in advertising revenues at our television division.
F-22
Our total cost and expenses were lower for the three months ended March 31, 2009, compared with the
first quarter of 2008. Employee compensation and benefits in the three months ended March 31,
2009, included a $4.2 million curtailment charge related to the decision to freeze the accrual of
benefits in our defined benefit pension plans covering a majority of employees. JOA editorial costs
and expenses were $20.7 million in 2009 (vs. $6.6 million in 2008), reflecting costs associated
with our decision to exit the Denver and Colorado newspaper markets. Excluding these
items, costs and expenses declined by $22.2 million compared to the prior year period. The
decrease was primarily due to lower employee compensation and benefits costs attributable to the
announced wage reductions and declines in the number of employees in our newspaper division as a
result of the reduction in force initiative taken in the fourth quarter of 2008 and other
attrition. We expect additional cost
reductions to be realized in the second quarter as many of the cost reduction initiatives became
effective late in the first quarter of 2009. Costs and expenses also declined due to reduced
newsprint consumption.
In the first quarter of 2009, we recorded a preliminary $215 million non-cash charge for the
impairment of the goodwill of our Television business. See Note 7 to the Condensed Consolidated
Financial Statements. We also recorded a $1 million non-cash charge to reduce the carrying value of
the FCC license for our Lawrence, Kansas television station.
Interest expense was lower for the three months ended March 31, 2009, compared to the first quarter
of 2008 due to lower borrowings following the spin-off of SNI. Interest expense includes interest
incurred on our outstanding borrowings and deferred compensation and other employment agreements
and is net of amounts capitalized for construction in progress.
The income tax provision for interim periods is determined by applying the expected effective
income tax rate for the full year to year-to-date income before income tax. Tax provisions are
separately provided for certain discrete transactions in interim periods. To determine the
annual effective income tax rate for the full-year period, we must estimate both the total
income before income tax for the full year and the jurisdictions in which that income is
subject to tax. The write-down to the carrying value of Television goodwill included $150
million of goodwill that is not deductible for income taxes.
Discontinued Operations Discontinued operations includes the results of SNI, which was spun-off
to our shareholders on July 1, 2008.
F-23
Business Segment Results
Information regarding the operating performance of our business segments determined in
accordance with FAS 131 and a reconciliation of such information to the consolidated financial
statements is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-date |
|
(in thousands) |
|
2009 |
|
|
Change |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newspapers |
|
$ |
121,825 |
|
|
|
(21.7 |
)% |
|
$ |
155,599 |
|
JOAs and newspaper partnerships |
|
|
19 |
|
|
|
(68.9 |
)% |
|
|
61 |
|
Television |
|
|
60,406 |
|
|
|
(20.5 |
)% |
|
|
76,019 |
|
Licensing and other |
|
|
23,118 |
|
|
|
(2.1 |
)% |
|
|
23,619 |
|
Corporate |
|
|
|
|
|
|
|
|
|
|
396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
$ |
205,368 |
|
|
|
(19.7 |
)% |
|
$ |
255,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newspapers |
|
$ |
2,947 |
|
|
|
(88.5 |
)% |
|
$ |
25,550 |
|
JOAs and newspaper partnerships |
|
|
(21,086 |
) |
|
|
|
|
|
|
235 |
|
Television |
|
|
(2,413 |
) |
|
|
|
|
|
|
14,170 |
|
Licensing and other |
|
|
3,135 |
|
|
|
50.1 |
% |
|
|
2,088 |
|
Corporate |
|
|
(7,812 |
) |
|
|
(43.3 |
)% |
|
|
(13,782 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
(11,763 |
) |
|
|
|
|
|
|
(11,086 |
) |
Impairment of goodwill and indefinite-lived assets |
|
|
(216,413 |
) |
|
|
|
|
|
|
|
|
Equity
earnings in investments |
|
|
(85 |
) |
|
|
|
|
|
|
1,780 |
|
Losses on disposal of property, plant and equipment |
|
|
(338 |
) |
|
|
|
|
|
|
(103 |
) |
Interest expense |
|
|
(246 |
) |
|
|
|
|
|
|
(6,101 |
) |
Separation costs |
|
|
(1,493 |
) |
|
|
|
|
|
|
(1,059 |
) |
Miscellaneous, net |
|
|
(1,028 |
) |
|
|
|
|
|
|
899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes |
|
$ |
(256,595 |
) |
|
|
|
|
|
$ |
12,591 |
|
|
|
|
|
|
|
|
|
|
|
F-24
Newspapers
We operate daily and community newspapers in 14 markets in the U.S. Our newspapers earn revenue
primarily from the sale of advertising to local and national advertisers and from the sale of
newspapers to readers. Our newspapers operate in mid-size markets, focusing on news coverage
within their local markets. Advertising and circulation revenues provide substantially all of each
newspapers operating revenues, and employee, distribution and newsprint costs are the primary
expenses at each newspaper. The operating performance of our newspapers is most affected by
national and local economic conditions, particularly within the retail, labor, housing and auto
markets, as well as newsprint prices.
Operating results for our newspaper business were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-date |
|
(in thousands) |
|
2009 |
|
|
Change |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Local |
|
$ |
26,552 |
|
|
|
(24.9 |
)% |
|
$ |
35,378 |
|
Classified |
|
|
26,642 |
|
|
|
(37.7 |
)% |
|
|
42,763 |
|
National |
|
|
5,982 |
|
|
|
(25.7 |
)% |
|
|
8,051 |
|
Online |
|
|
7,314 |
|
|
|
(26.5 |
)% |
|
|
9,947 |
|
Preprint and other |
|
|
19,269 |
|
|
|
(19.7 |
)% |
|
|
24,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newspaper advertising |
|
|
85,759 |
|
|
|
(28.6 |
)% |
|
|
120,145 |
|
Circulation |
|
|
30,637 |
|
|
|
0.4 |
% |
|
|
30,514 |
|
Other |
|
|
5,429 |
|
|
|
9.9 |
% |
|
|
4,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
|
121,825 |
|
|
|
(21.7 |
)% |
|
|
155,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
|
|
62,120 |
|
|
|
(7.0 |
)% |
|
|
66,761 |
|
Production and distribution |
|
|
34,674 |
|
|
|
(11.1 |
)% |
|
|
38,989 |
|
Other segment costs and expenses |
|
|
22,084 |
|
|
|
(9.1 |
)% |
|
|
24,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
118,878 |
|
|
|
(8.6 |
)% |
|
|
130,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution to segment profit |
|
$ |
2,947 |
|
|
|
(88.5 |
)% |
|
$ |
25,550 |
|
|
|
|
|
|
|
|
|
|
|
Revenues
Print advertising revenues declined for the three months ended March 31, 2009, compared with the
first quarter of 2008. The decrease was primarily due to continued weakness in local display and
classified advertising in our newspaper markets. Classified advertising was particularly impacted
by decreases in demand for real estate, automotive and employment advertising.
The decline in online advertising revenue is attributable to the weakness in print classified
advertising, to which most of the online advertising is tied. Revenue from pure-play advertisers,
who purchase ads only on the companys newspaper Web sites, rose 30% in the quarter. We have
pursued strategic partnerships with Yahoo! and zillow.com to garner larger shares of local ad
dollars that are spent online.
Circulation revenues were flat for the three months ended March 31, 2009, compared with the first
quarter of 2008. Increases in circulation rates offset declines in circulation volumes.
Revenue in the preprint and other category declined due to continued economic weakness in our
markets.
Other operating revenues, which represent revenue earned on ancillary services offered by our
newspapers, increased $0.5 million.
F-25
Operating costs and expenses
Employee compensation and benefits declined for the three months ended March 31, 2009, compared
with the first quarter of 2008. The reduction in employee compensation and benefits costs
reflects the impact of staff reductions due to attrition and the reduction in force implemented
in the fourth quarter of 2008. Full time equivalent employees were approximately 16% less than
the comparable prior year quarter. First quarter 2009 employee compensation and benefit costs
includes a $2.4 million curtailment charge related to the decision to freeze the accrual of
benefits for certain of our defined benefit plans.
Production
and distribution costs declined for the three months ended March 31, 2009, compared
to the first quarter of 2008. While newsprint prices for the first quarter of 2009 were
approximately 27% higher than the first quarter of 2008, newsprint consumption declined by
approximately 34%.
Other costs declined by approximately $2.2 million compared with the first quarter of 2008 due
to cost cutting initiatives instituted at all of our newspapers.
Joint Operating Agreement and Newspaper Partnerships
We closed the Rocky Mountain News after its final edition was published on February 27, 2009.
Under the terms of an agreement with MediaNews Group, Inc. we will transfer our interests in the
Denver Newspaper Agency and our Colorado newspaper partnership prior to the end of the third
quarter of 2009.
Our share of the operating profit (loss) of our JOA and our newspaper partnerships is reported as
Equity in earnings of JOAs and other joint ventures in our financial statements.
Operating results for our JOA and newspaper partnerships were as follows:
|
|
|
|
|
|
|
|
|
|
|
Year-to-date |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Equity in earnings of JOAs and newspaper partnerships
included in segment profit: |
|
|
|
|
|
|
|
|
Denver |
|
$ |
|
|
|
$ |
6,905 |
|
Colorado |
|
|
(334 |
) |
|
|
(172 |
) |
|
|
|
|
|
|
|
Total equity in earnings |
|
|
(334 |
) |
|
|
6,733 |
|
|
|
|
|
|
|
|
|
|
Operating revenues of JOAs and newspaper partnerships |
|
|
19 |
|
|
|
61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
(315 |
) |
|
|
6,794 |
|
|
|
|
|
|
|
|
|
|
JOA editorial costs and expenses |
|
|
20,771 |
|
|
|
6,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution to segment profit (loss) |
|
$ |
(21,086 |
) |
|
$ |
235 |
|
|
|
|
|
|
|
|
JOA editorial costs and expenses include additional costs associated with our decision to close the
Rocky Mountain News and exit the Denver newspaper market. Such costs include severance and other
payments to terminated employees.
F-26
Television
Television includes six ABC-affiliated stations, three NBC-affiliated stations and one independent
station. Our television stations reach approximately 10% of the nations television households.
Our television stations earn revenue primarily from the sale of advertising time to local and
national advertisers.
National television networks offer affiliates a variety of programs and sell the majority of
advertising within those programs. We receive compensation from the network for carrying its
programming. In addition to network programs, we broadcast locally produced programs, syndicated
programs, sporting events, and other programs of interest in each stations market. News is the
primary focus of our locally produced programming.
The operating performance of our television group is most affected by the health of the national
and local economies, particularly conditions within the services, auto and retail industries,
and by the volume of advertising time purchased by campaigns for elective office and political
issues. The demand for political advertising is significantly higher in even-numbered years,
when congressional and presidential elections occur.
Operating results for television were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-date |
|
(in thousands) |
|
2009 |
|
|
Change |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Local |
|
$ |
35,644 |
|
|
|
(22.1 |
)% |
|
$ |
45,746 |
|
National |
|
|
18,372 |
|
|
|
(16.9 |
)% |
|
|
22,104 |
|
Political |
|
|
177 |
|
|
|
(94.2 |
)% |
|
|
3,055 |
|
Network compensation |
|
|
2,056 |
|
|
|
(5.6 |
)% |
|
|
2,177 |
|
Other |
|
|
4,157 |
|
|
|
41.5 |
% |
|
|
2,937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment operating revenues |
|
|
60,406 |
|
|
|
(20.5 |
)% |
|
|
76,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
|
|
35,241 |
|
|
|
2.4 |
% |
|
|
34,400 |
|
Programs and program licenses |
|
|
12,908 |
|
|
|
11.7 |
% |
|
|
11,558 |
|
Production and distribution |
|
|
3,290 |
|
|
|
(17.4 |
)% |
|
|
3,985 |
|
Other segment costs and expenses |
|
|
11,380 |
|
|
|
(4.4 |
)% |
|
|
11,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment costs and expenses |
|
|
62,819 |
|
|
|
1.6 |
% |
|
|
61,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss) |
|
$ |
(2,413 |
) |
|
|
|
|
|
$ |
14,170 |
|
|
|
|
|
|
|
|
|
|
|
Revenues
Advertising revenues decreased for the three months ended March 31, 2009, compared with the first
quarter of 2008 due to the difficult economic conditions which reduced the demand for national and
local advertising. Weakness in the automotive, retail and financial services categories, among
others, contributed to the year-over-year decline.
Costs and expenses
Our costs and expenses increased slightly for the three months ended March 31, 2009, compared
with the first quarter of 2008. Employee compensation increased by 2.4% due solely to
increased pension costs. Pension costs in 2009 include a $1.1 million curtailment charge
related to the decision to freeze the accrual of benefits under certain of our pension plans.
Wages decreased year-over-year due to the implementation of salary and bonus reduction for
certain management employees.
Programming is acquired under long-term licensing arrangements. The cost of programs and
program licenses increased due primarily to higher costs for syndicated programs in certain of
our markets. Production and distribution expense and other
costs and expenses decreased due to cost reduction initiatives implemented at all of our
television stations. Cost savings resulting from those initiatives were partially offset by
increased bad debt expense.
F-27
Licensing and Other
Licensing and other primarily includes syndication and licensing of news features and comics.
Under the trade name United Media, we distribute news and opinion columns, comics and other
features for the newspaper industry.
United Media owns and licenses worldwide copyrights relating to Peanuts, Dilbert and other
properties for use on numerous products, including plush toys, greeting cards and apparel, for
promotional purposes and for exhibit on television and other media. We continue syndication of
previously published Peanuts strips and retain the rights to license the characters.
Peanuts provides approximately 95% of our licensing revenues.
Merchandise, literary and exhibition licensing revenues are generally a negotiated percentage
of the licensees sales. We generally negotiate a fixed fee for the use of our copyrighted
characters for promotional and advertising purposes. We generally pay a percentage of gross
syndication and licensing royalties to the creators of these properties.
We also represent the owners of other copyrights and trademarks in the U.S. and international
markets. Services offered include negotiation and enforcement of licensing agreements and
collection of royalties. We typically retain a percentage of the licensing royalties.
Operating results for licensing and other were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-date |
|
(in thousands) |
|
2009 |
|
|
Change |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Licensing |
|
$ |
17,202 |
|
|
|
(2.0 |
)% |
|
$ |
17,549 |
|
Feature syndication |
|
|
4,224 |
|
|
|
(7.8 |
)% |
|
|
4,581 |
|
Other |
|
|
1,692 |
|
|
|
13.6 |
% |
|
|
1,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment operating revenues |
|
|
23,118 |
|
|
|
(2.1 |
)% |
|
|
23,619 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
|
|
5,140 |
|
|
|
1.0 |
% |
|
|
5,091 |
|
Author royalties and agent commissions |
|
|
11,355 |
|
|
|
(9.9 |
)% |
|
|
12,609 |
|
Other segment costs and expenses |
|
|
3,488 |
|
|
|
(9.0 |
)% |
|
|
3,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment costs and expenses |
|
|
19,983 |
|
|
|
(7.2 |
)% |
|
|
21,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
|
$ |
3,135 |
|
|
|
50.1 |
% |
|
$ |
2,088 |
|
|
|
|
|
|
|
|
|
|
|
Revenues
Revenues declined slightly for the three months ended March 31, 2009. The decline in licensing
revenues is due to lower royalties from our licensees, while feature syndication revenues decreased
due to fewer newspapers syndicating our products.
Costs and expenses
Our costs and expenses decreased for the three months ended March 31, 2009, compared with the
first quarter of 2008.
F-28
LIQUIDITY AND CAPITAL RESOURCES
Our primary source of liquidity is our cash flow from operating activities. Our cash flow from
operating activities has historically been used to invest in and expand our portfolio of local
media businesses, to repay debt and to return cash to our shareholders.
Local and national advertising provides approximately 80% of our total operating revenues, so cash
flow from operating activities is adversely affected during recessionary periods. We believe 2009
will continue to be a challenging year, with broad economic uncertainty and advertising weakness
projected to continue, including the relative lack of political advertising.
Cash flow from operating activities decreased by $25 million. The decrease was primarily due to
lower earnings in the first quarter of 2009 as compared with 2008. Cash flow from continuing
operating activities in 2009 was positively impacted by the receipt of $16 million from SNI for the
payment of taxes paid in 2008 on income attributable to SNI for periods prior to the spin-off. In
the second quarter of 2009 we expect to pay approximately $12 million of costs associated with our
decision to exit the Denver newspaper market that were accrued in the first quarter of 2009.
Capital expenditures in 2009 were $14.3 million, down from $19.1 million in the prior year.
Substantially all of the capital spending in 2009 is related to the completion of a new production
facility for our Naples newspaper.
During the first quarter of 2009 we borrowed $12 million under our credit facilities while cash and
short-term investments increased $18.3 million.
We believe that our low debt level is a competitive advantage during these difficult financial
times. At March 31, 2009, we had drawn $72 million under our Revolving Credit Agreement
(Revolver), and our net debt (borrowings less cash and short-term investments) was $28 million.
Borrowings under our Revolver are limited to $200 million, or a maximum of 3.0 times Consolidated
EBITDA, adjusted for certain noncash expenses, for the last four quarters. At March 31, 2009, the
full $200 million of the Revolving Credit Agreement was available to us, however, we expect Maximum
Borrowings under the Revolver will be less than $200 million for the last half of 2009.
To improve the companys financial flexibility we have suspended our quarterly dividend and have
undertaken a variety of cost-saving measures. These include pay reductions of 3 to 5 percent for
all non-union employees at our newspapers and the corporate office. These cuts are in addition to
pay cuts that affected corporate executives, TV station general managers and newspaper publishers
effective January 1, 2009. We also suspended our match of employees contributions to our defined
contribution retirement and savings plan and have eliminated for 2009 the portion of bonuses (for
bonus-eligible employees) tied to segment profit performance. Later in the year we will freeze the
accrual of benefits under our defined benefit pension plans. Newsprint costs have recently come
off historic highs, providing a measure of cost relief to our newspaper division for the remainder
of 2009. Current newsprint prices are approximately 16% less than prices paid during the first
quarter of 2009.
We have also taken decisive steps to reduce capital spending. This year, excluding capital to
complete construction of the Naples production facility, capital expenditures are expected to be
$10 million, down from $48 million in 2008. Costs associated with construction of the Naples
production facility are expected to be $35 million in 2009, including $12 million incurred in the
first quarter, and were $42 million in 2008.
As of December 31, 2008, the unfunded obligation for our qualified pension plans was approximately
$162 million, as measured in accordance with ERISA. Freezing benefit accruals is expected to
reduce the unfunded obligation by approximately $10 million. We have no required contributions in
2009 to our defined benefit pension plans under the provisions of the Pension Funding Equity Act of
2004 and the Pension Protection Act of 2006.
We expect to realize approximately $70 million of our deferred tax assets in 2009 and 2010, either
through deductions on our 2009 and 2010 tax returns, or through refunds of taxes paid in prior
years.
We expect our cash flow from operating activities and available borrowings under our Revolver will
be sufficient to meet our operating and capital needs. If we do not meet our EBITDA projections,
and therefore exceed such reduced borrowing limits, we would have to seek waivers or amendments to
the Revolver covenants. We cannot be assured such waivers or amendments would be granted based
upon current credit market conditions.
We continually evaluate our assets to determine if they remain a strategic fit and, given our
business and the financial performance outlook, make sense to continue to be part of our portfolio.
F-29
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Earnings and cash flow can be affected by, among other things, economic conditions, interest rate
changes, foreign currency fluctuations and changes in the price of newsprint. We are also exposed
to changes in the market value of our investments.
Our objectives in managing interest rate risk are to limit the impact of interest rate changes on
our earnings and cash flows, and to reduce our overall borrowing costs. We manage interest rate
risk primarily by maintaining a mix of fixed-rate and variable-rate debt.
Our primary exposure to foreign currencies is the exchange rates between the U.S. dollar and the
Japanese yen and the Euro. Reported earnings and assets may be reduced in periods in which the
U.S. dollar increases in value relative to those currencies.
We also may use forward contracts to reduce the risk of changes in the price of newsprint on
anticipated newsprint purchases. We held no newsprint derivative financial instruments at March
31, 2009.
The following table presents additional information about market-risk-sensitive financial
instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2009 |
|
|
As of December 31, 2008 |
|
|
|
Cost |
|
|
Fair |
|
|
Cost |
|
|
Fair |
|
(in thousands) |
|
Basis |
|
|
Value |
|
|
Basis |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments subject to interest rate risk: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving credit agreement |
|
$ |
72,000 |
|
|
$ |
72,000 |
|
|
$ |
60,000 |
|
|
$ |
60,000 |
|
Other notes |
|
|
1,130 |
|
|
|
1,130 |
|
|
|
1,166 |
|
|
|
1,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt including current portion |
|
$ |
73,130 |
|
|
$ |
73,130 |
|
|
$ |
61,166 |
|
|
$ |
61,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments subject to market value risk: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other equity securities |
|
$ |
7,070 |
|
|
$ |
|
(a |
) |
$ |
7,070 |
|
|
$ |
|
(a |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes securities that do not trade in public markets so the securities do not have readily
determinable fair values. We estimate the fair value of these securities approximates their
carrying value. There can be no assurance that we would realize the carrying value upon sale of
the securities. |
In October 2008, we entered into a 2 year $30 million notional interest rate swap expiring in
October 2010. Under this agreement we receive payments based on 3-month libor rate and make
payments based on a fixed rate of 3.2%.
F-30
CONTROLS AND PROCEDURES
Scripps management is responsible for establishing and maintaining adequate internal controls
designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with accounting principles
generally accepted in the United States of America (GAAP). The companys internal control over
financial reporting includes those policies and procedures that:
|
1. |
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; |
|
2. |
|
provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP and that receipts and
expenditures of the company are being made only in accordance with authorizations of
management and the directors of the company; and |
|
3. |
|
provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the companys assets that could have a material effect on
the financial statements. |
All internal control systems, no matter how well designed, have inherent limitations, including the
possibility of human error, collusion and the improper overriding of controls by management.
Accordingly, even effective internal control can only provide reasonable but not absolute assurance
with respect to financial statement preparation. Further, because of changes in conditions, the
effectiveness of internal control may vary over time.
The effectiveness of the design and operation of our disclosure controls and procedures (as defined
in Rule 13a-15(e) under the Securities Exchange Act of 1934) was evaluated as of the date of the
financial statements. This evaluation was carried out under the supervision of and with the
participation of management, including the Chief Executive Officer and the Chief Financial Officer.
Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded
that the design and operation of these disclosure controls and procedures are effective. There
were no changes to the companys internal controls over financial reporting (as defined in Exchange
Act Rule 13a-15(f)) during the period covered by this report that have materially affected, or are
reasonably likely to materially affect, the companys internal control over financial reporting.
F-31
THE E. W. SCRIPPS COMPANY
Index to Exhibits
|
|
|
|
|
Exhibit |
|
|
No. |
|
Item |
|
|
|
|
|
|
31 |
(a) |
|
Section 302 Certifications |
|
|
|
|
|
|
31 |
(b) |
|
Section 302 Certifications |
|
|
|
|
|
|
32 |
(a) |
|
Section 906 Certifications |
|
|
|
|
|
|
32 |
(b) |
|
Section 906 Certifications |
F-32