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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001

Commission File Number 0-16914

THE E. W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)

Ohio
  31-1223339
(State or other jurisdiction of
  (IRS Employer
incorporation or organization)
  Identification Number)
   
312 Walnut Street
   
Cincinnati, Ohio
  45202
(Address of principal executive offices)
  (Zip Code)
     
Registrant's telephone number, including area code: (513) 977-3000
     
Title of each class
  Name of each exchange on which registered
     
Securities registered pursuant to Section 12(b) of the Act:    
  Class A Common Shares, $.01 par value  
New York Stock Exchange
     
Securities registered pursuant to Section 12(g) of the Act:    
  Not applicable    

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 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     X             No        

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
                  

The aggregate market value of Class A Common Shares of the Registrant held by nonaffiliates of the Registrant, based on the $75.20 per share closing price for such stock on February 28, 2002, was approximately $1,693,000,000. As of February 28, 2002, nonaffiliates held approximately 1,441,000 Common Voting Shares. There is no active market for such stock.

As of February 28, 2002, there were 60,312,116 of the Registrant's Class A Common Shares, $.01 par value per share, outstanding and 19,096,913 of the Registrant's Common Voting Shares, $.01 par value per share, outstanding.

INDEX TO THE E. W. SCRIPPS COMPANY

ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001

Item No.
 
Page
       
         
 
PART I
   
         
1.
  Business      
    Newspapers   4  
    Scripps Networks   8  
    Broadcast Television   10  
    Licensing and Other Media   14  
    Venture Capital and Other Investments   14  
    Employees   15  
2.
  Properties   15  
3.
  Legal Proceedings   15  
4.
  Submission of Matters to a Vote of Security Holders   15  
         
 
PART II
   
         
5.
  Market for Registrant's Common Equity and Related Stockholder Matters  
16
 
6.
  Selected Financial Data   16  
7.
  Management's Discussion and Analysis of Financial Condition and Results of Operation  
16
 
8.
  Financial Statements and Supplementary Data  
16
 
9.
  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  
16
 
         
 
PART III
   
         
10.
  Directors and Executive Officers of the Registrant   17  
11.
  Executive Compensation   18  
12.
  Security Ownership of Certain Beneficial Owners and Management  
18
 
13.
  Certain Relationships and Related Transactions   18  
         
 
PART IV
   
         
14.
  Exhibits, Financial Statement Schedules and Reports on Form 8-K  
18
 

2

PART I

ITEM 1.    BUSINESS

The E. W. Scripps Company ("Company") operates in three reportable segments: newspapers, cable television networks (referred to as "Scripps Networks") and broadcast television.

Newspapers include 21 daily newspapers in the U.S.

Scripps Networks includes three national television networks that are distributed by cable and satellite television systems: Home & Garden Television ("HGTV"), Food Network and Do It Yourself ("DIY"), and the Company's 12% interest in FOX SportsSouth, a regional television network. The Company launched Fine Living, its fourth national network, in March 2002.

Broadcast Television includes ten television stations, nine of which are affiliated with national television networks.

Each of the Company's businesses relies upon advertising as a primary source of revenue. Advertising comprises 75% to 80% of the Company's total revenues. Declines in advertising spending, particularly in recessionary periods, adversely affect the newspaper, cable television network and broadcast television businesses.

A summary of segment information for the three years ended December 31, 2001, is set forth on page F-36 of this Form 10-K. Licensing and other media aggregates the Company's operating segments that are too small to warrant separate reporting, primarily syndication and licensing of news features and comics.

3

Newspapers

Operations - The Company acquired or divested the following newspaper operations in the five years ended December 31, 2001:

2000 -
Acquired the Ft. Pierce, Florida, daily newspaper in exchange for the Company's Destin, Florida, newspaper and cash.
Acquired the Henderson, Kentucky, daily newspaper and the Marco Island, Florida, weekly newspaper.
1998 -
Divested the Dallas Community newspapers, including the Plano daily.
1997 -
Acquired daily newspapers in Abilene, Corpus Christi, Plano, San Angelo and Wichita Falls, Texas, a group of community
  newspapers in the Dallas, Texas, market and a daily newspaper in Anderson, South Carolina. Traded its Monterey and San
  Luis Obispo, California, daily newspapers for the daily newspaper in Boulder, Colorado, and terminated the joint operating
  agency and ceased operations of its newspaper in El Paso, Texas.

The Company publishes daily newspapers in 21 markets. From its Washington bureau the Company operates the Scripps Howard News Service, a supplemental wire service covering stories in the capital, other parts of the United States and abroad.

The Company's newspapers operate Internet sites focusing on local news content. The Internet sites include expanded coverage of stories in the newspapers and content that is not in the newspapers.

Many of the Company's newspapers provide services such as total-market-coverage advertising products, direct-mail advertising and commercial printing.

Revenues - Operating revenues for the five years ended December 31, 2001, were as follows:


( in thousands )                              
    2001     2000     1999     1998     1997  

Newspaper advertising:                              
     Local ROP
$
203,610
$
211,568
$
205,767
$
201,036
$
159,752
     Classified ROP
196,842
209,942
195,809
180,938
138,282
     National ROP
32,947
30,977
27,937
20,576
16,649
     Preprint and other
92,204
90,536
79,902
71,286
48,926

Total newspaper advertising
525,603
543,023
509,415
473,836
363,609
Circulation
139,358
133,948
135,029
138,615
112,612
Share of joint operating agency profits
43,285
47,412
50,511
48,278
47,052
Other
11,744
10,176
9,735
10,402
7,209

Total
719,990
734,559
704,690
671,131
530,482
Rocky Mountain News
19,441
220,998
209,713
200,442
196,794
Unusual item
(5,881
)
Divested newspapers
886
3,806
17,498
33,100

Total operating revenues
$
733,550
$
956,443
$
918,209
$
889,071
$
760,376

Daily newspaper operating revenues are derived primarily from advertising and circulation. Other newspaper operating revenues include commercial printing.

4

Advertising revenues are derived from run-of-paper ("ROP") advertisements included with news stories in the body of the newspaper, preprinted advertisements that are generally produced by advertisers and inserted into the newspaper, and on-line advertising appearing on the newspapers' Internet sites.

ROP is further broken down among "local," "classified" and "national" advertising. Local refers to advertising that is not in the classified advertising section and is purchased by in-market advertisers. Classified refers to advertising that generally is grouped by type of advertising, e.g., automotive and help wanted. National refers to advertising purchased by businesses that operate beyond the local market and purchase advertising from many newspapers, primarily through advertising agencies. A given volume of ROP advertisements is generally more profitable to the Company than the same volume of preprinted advertisements.

Advertising rates and revenues vary among the Company's newspapers depending on circulation, type of advertising, local market conditions and competition. Contracts with advertisers, which are typically for one-year terms, may provide for discounted rates based upon advertising volume.

On-line advertising, which is included in "preprint and other," ranges from simple static banners that appear at the top and bottom of a Web page to more complex advertisements that use animation and allow users to interact with the advertisements.
On-line advertising also includes an allocation of classified advertising revenues that appear in both the printed editions of the newspapers and on the newspapers' Internet sites, direct response campaigns and links to commercial sites. The newspapers generally receive fees for these links and advertisements. On-line advertising revenues were $6,500,000 in 2001, $8,300,000 in 2000, $5,400,000 in 1999, $1,800,000 in 1998 and $100,000 in 1997.

The first and third quarters generally have lower advertising revenues than the second and fourth quarters. Print advertising rates and volume are highest on Sundays, primarily because circulation and readership is greatest on Sundays.

5

Circulation revenues are derived from home-delivery sales of newspapers to subscribers and from single-copy sales made through retail outlets and vending machines. Circulation information for the Company's newspapers is as follows:


( in thousands ) (1) Morning (M)                    
      Newspaper
Evening (E) 2001   2000   1999   1998   1997  

             Daily Paid Circulation                      
Abilene (TX) Reporter-News M 35   36   38   40   40  
Albuquerque (NM) Tribune (2) E 17   19   21   23   25  
Anderson (SC) Independent-Mail M 39   39   40   40   41  
Birmingham (AL) Post-Herald (2) E 12   15   18   21   26  
Boulder (CO) Daily Camera M 34   34   33   34   34  
Bremerton (WA) Sun M 33   34   35   37   38  
Cincinnati (OH) Post (2) E 53   60   65   71   77  
Corpus Christi (TX) Caller-Times M 63   63   65   66   68  
Denver (CO) Rocky Mountain News (2) M 323   427   396   332   303  
Evansville (IN) Courier & Press M 70   71   72   61   62  
Ft. Pierce (FL) Tribune M 27   27   27   27   27  
Henderson (KY) Gleaner M 10   11   11   11   11  
Knoxville (TN) News-Sentinel M 121   123   122   122   122  
Memphis (TN) Commercial Appeal M 170   175   173   174   186  
Naples (FL) Daily News M 55   53   52   50   49  
Redding (CA) Record-Searchlight M 34   34   34   35   36  
San Angelo (TX) Standard-Times M 28   29   30   31   32  
Stuart (FL) News M 38   37   37   36   35  
Ventura County (CA) Star M 92   97   93   92   96  
Vero Beach (FL) Press Journal M 33   33   32   32   32  
Wichita Falls (TX) Times Record News M 34   36   37   37   38  

Total Daily Circulation   1,320   1,451   1,431   1,373   1,379  

                       
             Sunday Paid Circulation                      
Abilene (TX) Reporter-News   44   45   47   50   50  
Anderson (SC) Independent-Mail   45   45   45   46   48  
Boulder (CO) Daily Camera   41   41   40   42   41  
Bremerton (WA) Sun   37   37   39   40   42  
Corpus Christi (TX) Caller-Times   81   81   85   87   89  
Denver (CO) Rocky Mountain News (2)   801   530   505   433   416  
Evansville (IN) Courier & Press   98   101   105   106   109  
Ft. Pierce (FL) Tribune   28   29   29   30   30  
Henderson (KY) Gleaner   12   13   13   13   14  
Knoxville (TN) News-Sentinel   156   158   159   163   166  
Memphis (TN) Commercial Appeal   232   237   238   243   257  
Naples (FL) Daily News   67   66   65   64   63  
Redding (CA) Record-Searchlight   39   39   38   38   38  
San Angelo (TX) Standard-Times   34   35   36   37   38  
Stuart (FL) News   45   45   45   46   45  
Ventura County (CA) Star   105   110   108   105   103  
Vero Beach (FL) Press Journal   37   36   36   36   36  
Wichita Falls (TX) Times Record News   39   41   42   43   44  

Total Sunday Circulation   1,943   1,687   1,675   1,619   1,629  

(1) Based on Audit Bureau of Circulation Publisher's Statements ("Statements") for the six-month periods ended September 30, except figures for the Ft. Pierce Tribune, the Naples Daily News, the Stuart News and the Vero Beach Press Journal which are from the Statements for the twelve-month periods ended September 30.
   
(2) This newspaper is a party to a JOA. The JOA between the Denver Rocky Mountain News and MediaNews Group Inc.'s Denver Post began operations on January 22, 2001. The Denver Newspaper Agency publishes the Rocky Mountain News and the Post Monday through Friday, and a joint newspaper on Saturday and Sunday. Reported daily circulation in 2001 represents the Monday through Friday circulation of the Rocky Mountain News and Sunday circulation represents the Sunday circulation of the joint newspaper. Reported circulation prior to 2001 represents the daily and Sunday circulation of the Rocky Mountain News. See "Joint Operating Agencies."

6

Joint Operating Agencies - A JOA combines all but the editorial operations of two competing newspapers in a market in order to reduce aggregate expenses and take advantage of economies of scale, thereby allowing the continuing operation of both newspapers in that market. The Newspaper Preservation Act of 1970 ("NPA") provides a limited exemption from anti-trust laws, generally permitting the continuance of JOAs in existence prior to the enactment of the NPA and the formation, under certain circumstances, of new JOAs between newspapers.

The Company is a partner in JOAs in four markets. The JOA between the Company's Denver Rocky Mountain News and MediaNews Group Inc.'s Denver Post ("MediaNews") was approved by the U.S. Attorney General in January 2001. The JOA commenced operations on January 22, 2001, and is jointly managed by the Company and MediaNews. The other partner manages each of the Company's other JOAs.

JOA revenues less JOA expenses, as defined in each JOA, equals JOA profits, which are split between the partners. In each case JOA expenses exclude editorial expenses. The Denver Publishing Company, a wholly-owned subsidiary of the Company, received a 50% interest in the JOA in exchange for the contribution of most of its assets to the JOA and the payment of $60 million to MediaNews. The Company receives between 20% and 40% of the operating profits in the other three markets.

The table below provides certain information about the Company's JOAs.

    Year JOA   Year of JOA  
           Newspaper
Publisher of Other Newspaper
Entered Into   Expiration  
The Albuquerque Tribune       Journal Publishing Company 1933   2022  
Birmingham Post-Herald       Newhouse Newspapers 1950   2015  
The Cincinnati Post       Gannett Newspapers 1977   2007  
Denver Rocky Mountain News       MediaNews Group, Inc. 2001   2051  

A JOA in Evansville, Indiana, which was managed by the Company, expired in 1998 and was not renewed. The Company had received approximately 80% of JOA profits. The Company continues to operate its Evansville newspaper.

Newspaper Production - The Company's daily newspapers are printed using offset presses and use computer systems for writing, editing and composing and producing the advertising and news material printed in each edition. The Company is constructing a new production facility for its Knoxville, Tennessee, daily newspaper.

Raw Materials and Labor Costs - The Company consumed approximately 231,000 metric tons of newsprint in 2001, including 50% of the newsprint consumed by the Denver JOA. The Company consumed 281,000 metric tons in 2000 and 270,000 metric tons in 1999. Substantially all of the Company's newspapers have converted to a 50-inch web format, and the Knoxville newspaper will convert to the 50-inch format upon construction of the new production facility. Conversion to the 50-inch format has reduced newsprint consumption by approximately 5%.

The Company purchases newsprint from various suppliers, many of which are Canadian. Management believes that the Company's sources of supply of newsprint are adequate for its anticipated needs. Newsprint is a basic commodity and its price is sensitive to the worldwide balance of supply and demand. Because of the capital commitment to construct and operate a newsprint mill, the supply of newsprint is relatively stable except for temporary disruptions caused by labor stoppages. However, the demand for newsprint can change quickly, resulting in wide swings in the price of newsprint. Newsprint prices fluctuated between $450 and $590 from 1998 through 2001. The average newsprint price was approximately $514 per metric ton in the fourth quarter of 2001.

Labor costs accounted for approximately 47% of the Company's newspaper operating expenses in 2001, 45% in 2000 and 43% in 1999. A substantial number of the Company's newspaper employees are represented by labor unions. See "Employees."

Competition - The Company's newspapers compete for advertising revenues primarily with other local media, including other local newspapers, television and radio stations, cable television, telephone directories, other Internet sites and direct mail. The rate of development of opportunities in, and competition from, electronic communications services, including the Internet, is increasing. Competition for advertising revenues is based upon audience size and demographics, price and effectiveness.

The Company's newspapers and Internet sites compete with all other information and entertainment media for consumers' discretionary time.

7

Scripps Networks

Operations - Programming is telecast on cable and satellite television systems under long-term network distribution contracts.

HGTV features programming focusing on home repair and remodeling, gardening, decorating and other activities associated with the home. Food Network features programming focusing on food and entertaining. DIY features step-by-step instructions, in-depth demonstrations and tips on various topics associated with home improvement, gardening and crafts. Fine Living, which began telecasting in March 2002, targets an upper demographic audience and advertisers in the luxury consumer goods and services markets.

The Company acquired the following operations in the five years ended December 31, 2001:

2001 -
Acquired an additional 4% interest in Food Network.
1999 -
Acquired an additional 7% interest in Food Network.
1998 -
Acquired an additional 1% interest in Food Network.
1997 -
Acquired a 56% interest in Food Network.

The Company owned 68% of Food Network at December 31, 2001. Food Network began telecasting in December 1993 and HGTV in December 1994. DIY began telecasting in the fourth quarter of 1999.

According to the Nielsen Homevideo Index ("Nielsen"), HGTV was telecast to 76.4 million homes in December 2001, 67.1 million homes in December 2000 and 59.0 million homes in December 1999. Food Network was telecast to 71.5 million homes in December 2001, 54.4 million homes in December 2000 and 44.2 million homes in December 1999. DIY is not yet rated by Nielsen, however based upon Company records DIY was telecast to approximately 9.5 million homes in December 2001.

Each of the Company's networks operates an Internet site featuring content from its programs and additional information and products of interest to the network's viewers. The Internet sites also permit users to post comments in response to programs and features, and provide applications to enable users to communicate with each other and receive updates in subject areas of their choosing.

Revenues - Operating revenues for the five years ended December 31, 2001, were as follows:
                               

( in thousands )                              
    2001     2000     1999     1998     1997  

Advertising
$
272,299
$
249,619
$
169,959
$
96,271
$
37,473
Affiliate fees
59,175
40,312
34,149
22,366
10,274
Other
5,721
5,750
8,814
14,307
9,617

Total operating revenues
$
337,195
$
295,681
$
212,922
$
132,944
$
57,364

Advertising on Scripps Networks is primarily from nationally recognized consumer products and brands. Advertising time on the networks is sold in both the up-front and scatter markets. Advertising contracts generally have terms of one year or less. The ability to sell time for commercial announcements and the rates received are dependent primarily on the size and demographics of the audience, as well as overall demand for advertising time.

On-line advertising primarily includes banner ads and other advertisements. Advertising opportunities on the Internet sites range from simple static banners that appear at the top and bottom of a Web page to more complex advertisements that use animation and allow users to interact with the advertisements. The Internet sites also provide advertisers with sponsorship opportunities, promotions, direct response campaigns and links to commercial sites. The networks generally receive fees for these links and advertisements. On-line advertising revenues were $3,900,000 in 2001, $5,100,000 in 2000, $3,400,000 in 1999 and $700,000 in 1998.

8

Affiliate fees represent monthly payments received from cable and satellite television systems pursuant to the terms of the network distribution contracts. Affiliate fees are reported net of amortization of incentive payments (referred to as "launch incentives") that are given to cable and satellite television systems in exchange for long-term distribution contracts. Such contracts may provide for an initial period wherein affiliate fees are waived (referred to as a "free period"). In markets where the Company has broadcast television stations, distribution of the networks may be obtained in exchange for granting cable or satellite television systems the right to carry the local television stations' signals.

In 2001 the Company renewed and extended its distribution contracts with AT&T and AOL Time Warner. The contracts expanded distribution of the networks and provided for distribution of DIY and Fine Living to an additional five million homes. In addition, the contracts provide for the payment of affiliate fees to Food Network beginning in 2004. Food Network's distribution contracts generally provided the network to cable television systems without charge through 2003.

Popularity of the programming with subscribers is a primary factor in obtaining and retaining distribution by cable and satellite television systems. While no assurance can be given regarding renewal of the Company's distribution contracts, the Company has successfully renewed expiring distribution agreements for HGTV and Food Network.

Programming - The cost of programming is a significant portion of cable television network operating expenses. The Company both produces and purchases programming for Scripps Networks. The Company has continually improved the quality and variety of programming and expanded the hours of original programming presented on its networks. The expense recognized for purchased and produced programs for the networks totaled $92,000,000 in 2001, $72,000,000 in 2000, $46,000,000 in 1999 and $31,000,000 in 1998. The Company owns substantially all of the programming presented on its networks.

Competition - In addition to competing with other networks for distribution on cable and satellite television systems, Scripps Networks competes for advertising revenues with other local and national media, including other cable television networks, television stations, radio stations, newspapers, Internet sites and direct mail. Competition for advertising revenues is based upon audience size and demographics, price and effectiveness. Scripps Networks compete for consumers' discretionary time with all other information and entertainment media.

9

Broadcast Television

Operations - The Company acquired television station KMCI in Lawrence, Kansas, in 2000. The Company had operated the station under a Local Marketing Agreement ("LMA") since 1996. Revenues from KMCI were included in the Company's results of operations while the station was operated under the LMA.

Broadcast television includes nine network-affiliated television stations. The stations rely on local sales operations for local advertising and national advertising agencies for obtaining national advertising.

Revenues - Operating revenues for the five years ended December 31, 2001, were as follows:


( in thousands )                              
    2001     2000     1999     1998     1997  

Local advertising
$
162,761
$
173,878
$
171,353
$
166,115
$
171,211
National advertising
96,866
119,428
120,638
125,432
139,322
Political advertising
2,400
34,762
2,478
20,084
2,106
Network compensation
9,279
9,951
13,121
16,040
15,601
Other
6,295
5,106
4,772
3,043
2,976

Total operating revenues
$
277,601
$
343,125
$
312,362
$
330,714
$
331,216

Revenues are derived primarily from the sale of time to businesses for commercial messages that appear during entertainment and news programming. Local and national advertising refer to time purchased by local, regional and national businesses; political refers to time purchased by campaigns for elective office and campaigns for political issues. Automobile advertising accounts for approximately one-fourth of the Company's local and national advertising revenues.

Advertising rates are dependent primarily on the size and demographics of the audience as well as overall demand for advertising time.

The first and third quarters of each year generally have lower advertising revenues than the second and fourth quarters. The magnitude of political advertising in even-numbered years, when congressional and presidential elections occur, makes it difficult to achieve year-over-year increases in operating results in odd-numbered years.

10

Information concerning the Company's stations and the markets in which they operate is as follows:

 
Network
Affiliation
FCC
 
Affiliation/
Expires in/
License
Rank
Stations
 
DTV
DTV Service
Expires
of
in
      Station and Market
Channel
Commenced
in
Mkt (1)
Mkt (3)
2001
2000
1999
1998
1997

WXYZ-TV, Detroit, Ch. 7
ABC
 
2004
 
2005
 
10
 
8
                     
   Digital Service Status
41
 
1998
 
 
 
 
 
   Average Audience Share (2)
 
 
 
 
 
15
15
16
17
18
 
   Station Rank in Market (4)
 
 
 
 
 
1
2
1
2
2
 

WFTS-TV, Tampa, Ch. 28
ABC
 
2005
 
2005
 
14
 
12
 
 
   Digital Service Status
29
 
1999
 
 
 
 
 
   Average Audience Share (2)
 
 
 
 
 
7
8
8
9
9
 
   Station Rank in Market (4)
 
 
 
 
 
4
4
4
4
4
 

WEWS-TV, Cleveland, Ch. 5
ABC
 
2004
 
2005
 
17
 
12
 
 
   Digital Service Status
15
 
1999
 
 
 
 
 
   Average Audience Share (2)
 
 
 
 
13
14
14
14
17
 
   Station Rank in Market (4)
 
 
 
 
 
1
1
1
1
2
 

KNXV-TV, Phoenix, Ch. 15
ABC
 
2005
 
2006
 
16
11
 
 
   Digital Service Status
56
 
2000
 
 
 
 
 
   Average Audience Share (2)
 
 
 
 
 
6
7
9
9
10
 
   Station Rank in Market (4)
 
 
 
 
 
5
5
6
5
4
 

WMAR-TV, Baltimore, Ch. 2
ABC
 
2005
 
2004
 
24
 
6
 
 
   Digital Service Status
52
 
1999
 
 
 
 
 
   Average Audience Share (2)
 
 
 
 
 
7
8
9
10
11
 
   Station Rank in Market (4)
 
 
 
 
 
3
3
3
3
3
 

KSHB-TV, Kansas City, Ch. 41
NBC
 
2009
 
2006
 
31
 
8
 
 
   Digital Service Status
42
 
(6)
 
 
 
 
 
   Average Audience Share (2)
 
 
 
 
 
7
8
7
7
10
 
   Station Rank in Market (4)
 
 
 
 
 
4
4
4
4
4
 

KMCI-TV, Lawrence, Ch. 38
Ind.
 
 
2006
 
31
 
8
 
 
   Digital Service Status
36
 
(6)
 
 
 
 
 
   Average Audience Share (2)
 
 
 
 
 
2
1
2
2
2
 
   Station Rank in Market (4)
 
 
 
 
 
7
8
8
8
8
 

WCPO-TV, Cincinnati, Ch. 9
ABC (5)
 
2006
 
2005
 
32
 
6
 
 
   Digital Service Status
10
 
1998
 
 
 
 
 
   Average Audience Share (2)
 
 
 
 
 
12
14
14
15
17
 
   Station Rank in Market (4)
 
 
 
 
 
2
2
2
2
1
 

WPTV-TV, W. Palm Beach, Ch. 5
NBC
 
2009
 
2005
 
40
 
9
 
 
   Digital Service Status
55
 
(6)
 
 
 
 
 
   Average Audience Share (2)
 
 
 
 
 
16
15
15
16
19
 
   Station Rank in Market (4)
 
 
 
 
 
1
1
1
1
1
 

KJRH-TV, Tulsa, Ch. 2
NBC
 
2009
 
2006
 
59
 
10
 
 
   Digital Service Status
56
 
(6)
 
 
 
 
 
   Average Audience Share (2)
 
 
 
 
 
11
11
12
12
14
 
   Station Rank in Market (4)
 
 
 
 
 
3
3
3
3
3
 

 
All market and audience data is based on the November A.C. Nielsen Company survey.
   
(1) Rank of Market represents the relative size of the television market in the United States.
(2) Represents the number of television households tuned to a specific station from 6 a.m. to 2 a.m. each day, as a percentage of total viewing households in Area of Dominant Influence.
(3) Stations in Market does not include public broadcasting stations, satellite stations, or translators which rebroadcast signals from distant stations.
(4) Station Rank in Market is based on Average Audience Share as described in (2).
(5) Prior to June 1996, WCPO was a CBS affiliate.
(6) Barring technical difficulties, stations are expected to commence DTV service by May 2, 2002. Due to new tower construction requirements, the Company expects to seek and receive an extension for KSHB-TV, KMCI-TV and WPTV-TV.

11

Network Affiliation and Programming - Nine of the Company's ten television stations are affiliated with national television networks. The networks offer a variety of programs to affiliated stations, which have the right of first refusal before such programming may be offered to other television stations in the same market. Networks sell most of the advertising within the programs and compensate affiliated stations for carrying network programming.

In 2001 the Company renegotiated and extended its affiliation agreements with NBC, which were originally scheduled to expire in 2004. Under the new agreements, which extend though 2009, network compensation will be substantially reduced. Network compensation revenue at the Company's three NBC affiliates is expected to be approximately $300,000 in 2002. These stations recognized network compensation revenue totaling $1,400,000 in 2001 and $2,400,000 in 2000. The Company's six ABC network affiliation agreements expire from 2004 through 2006.

In addition to network programs, the Company's television stations broadcast locally produced programs, syndicated programs, sports events, movies, public service programs and "niche" programs focusing on topics of interest in the stations' local markets. The costs of locally produced and syndicated programming are a significant portion of broadcast television operating expenses. The price of syndicated programming is based primarily upon demand for the programming from other television stations within the market.

News is the focus of the Company's locally produced programming. Advertising during local news programs on the Company's stations account for approximately 30% of revenues.

Competition - The Company's television stations compete for advertising revenues primarily with other local media, including other television stations, radio stations, cable television networks, newspapers, other Internet sites and direct mail. Competition for advertising revenue is based upon audience size and demographics, price and effectiveness. Television stations compete for consumers' discretionary time with all other information and entertainment media.

The Company's television stations have experienced declines in their average audience share in recent years due to the creation of new networks and increased audience share of alternative service providers such as traditional cable, "wireless" cable and direct broadcast satellite television. Continuing technological advances will improve the capability of alternative service providers to offer video services in competition with terrestrial broadcasting. The degree of competition from such service providers is expected to increase. The Company intends to undertake upgrades in its services, including development of digital television broadcasting, to maintain its competitive posture as well as to comply with government requirements. Technological advances in interactive media services will further increase these competitive pressures.

The Company's stations have emphasized locally produced news and entertainment programming in recent years to distinguish the stations from the competition and to control programming costs.

Federal Regulation of Broadcasting - Television broadcasting is subject to the jurisdiction of the Federal Communications Commission ("FCC") pursuant to the Communications Act of 1934, as amended ("Communications Act"). The Communications Act prohibits the operation of television broadcasting stations except in accordance with a license issued by the FCC and empowers the FCC to revoke, modify and renew broadcasting licenses, approve the transfer of control of any corporation holding such licenses, determine the location of stations, regulate the equipment used by stations and adopt and enforce necessary regulations. The FCC also adopts and enforces regulations concerning station programming, including children's and political programming.

The Telecommunications Act of 1996 (the "1996 Act") significantly relaxed the regulatory environment applicable to broadcasters. Under the 1996 Act, television broadcast licenses may be granted for a term of eight years, rather than five, and they remain renewable upon request. While there can be no assurance regarding the renewal of the Company's television broadcast licenses, the Company has never had a license revoked, has never been denied a renewal and all previous renewals have been for the maximum term.

12

FCC regulations govern the multiple ownership of television stations and other media. Under the multiple ownership rule, a license for a television station will generally not be granted or renewed if the grant of the license would result in (i) the applicant owning more than one, or in some markets under certain conditions, two television stations in the same market, or (ii) the grant of the license would result in the applicant's owning, operating, controlling, or having an interest in television stations whose total national audience reach exceeds 35% of all television households. The FCC rules also generally prohibit "cross-ownership" of a television station and daily newspaper or cable television system in the same service area. The Company's television station and daily newspaper in Cincinnati were owned by the Company at the time the cross-ownership rules were enacted and enjoy "grandfathered" status. These properties would become subject to the cross-ownership rules upon their sale. The 1996 Act directed the FCC to periodically review all its ownership rules, and a review of the newspaper/broadcast television cross-ownership is now underway. Also, the D.C. Circuit Court of Appeals has recently directed the FCC to repeal its restriction on a cable television system owning a television station in the same market and has directed the FCC to reconsider its decision not to rescind the limit on television station owners' national audience reach.

The FCC has adopted a series of orders to implement a transition from the current analog system of broadcast television to a digital transmission system. It has granted each television station a second channel on which to begin offering digital service and it currently plans for the transition to be completed by 2006, at which time each station should have returned one of its two channels. The FCC can extend this deadline, and most observers expect that the deadline will be extended.

A substantial number of technical, regulatory and market-related issues remain unresolved regarding digital television, including the timing of the transition, programming and other rules the FCC may adopt, the willingness of cable systems to carry the broadcasters' digital offerings and the level of consumer demand for the new service. The Company cannot predict the effect of these uncertainties on the Company's offering of digital service or the Company's business.

Under the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Act"), each television broadcast station gained "must-carry" rights on any cable system defined as "local" with respect to that station. Stations may waive their must-carry rights and instead negotiate retransmission consent agreements with local cable companies. The Company's stations have generally elected to negotiate retransmission consent agreements with cable companies. While the FCC has recently announced that a station's primary video transmission will enjoy must-carry rights after the transition to digital broadcasting, the FCC has so far declined to require carriage of a digital signal in addition to the station's analog signal.

13

Licensing and Other Media

Operations - Licensing and other media aggregates the Company's operating segments that are too small to warrant separate reporting, including syndication and licensing of news features and comics, and the divested television program production and independent telephone directories.

The Company acquired or divested the following operations in the five years ended December 31, 2001:

2000 - Divested independent telephone directories in Memphis, Tennessee; Kansas City, Missouri; North Palm Beach, Florida; and
New Orleans, Louisiana.
1998 - Acquired the independent telephone directories. Divested Scripps Howard Productions, the Company's television program
  production operation based in Los Angeles.
   
Revenues - Operating revenues for the five years ended December 31, 2001, were as follows:

( in thousands )                              
    2001     2000     1999     1998     1997  

Licensing
$
65,877
$
68,549
$
63,755
$
62,260
$
56,813
Newspaper feature distribution
21,517
23,590
23,382
22,650
20,920
Other
1,391
4,756
5,433
3,913
2,430

Total licensing and other media revenues
88,785
96,895
92,570
88,823
80,163
Divested other media
9,614
19,236
7,379
12,763

Total operating revenues
$
88,785
$
106,509
$
111,806
$
96,202
$
92,926

The Company, under the trade name United Media, is a leading distributor of news columns, comics and other features for the newspaper industry. Included among these features is "Peanuts," one of the most successful strips in the history of comic art.

United Media owns and licenses worldwide copyrights relating to "Peanuts," "Dilbert" and other character properties for use on numerous products, including plush toys, greeting cards and apparel, for promotional purposes and for exhibit on television and other media. Charles Schulz, the creator of "Peanuts," died in February 2000. The Company continues syndication of previously published "Peanuts" strips, and retains the rights to license the characters. "Peanuts" provides approximately 85% of the Company's licensing revenues. Approximately 60% of licensing revenues are earned in international markets, with the Japanese market providing approximately two-thirds of international revenue.

Merchandise, literary and exhibition licensing revenues are generally a negotiated percentage of the licensee's sales. The Company generally negotiates a fixed fee for the use of its copyrighted characters for promotional and advertising purposes. The Company generally pays a percentage of gross syndication and licensing royalties to the creators of these properties.

Competition - The Company's newspaper feature distribution operations compete for a limited amount of newspaper space with other distributors of news columns, comics and other features. Competition is primarily based on price and popularity of the features. Popularity of licensed characters is a primary factor in obtaining and renewing merchandise and promotional licenses.

Venture Capital and Other Investments

Through its Scripps Ventures Funds and other entities the Company invests in businesses focusing on new media technology. The Company recognized gains (losses), net of fund management expenses, totaling $5,100,000 in 2001, ($24,800,000) in 2000, $500,000 in 1999 and ($2,700,000) in 1997. Included in 2001 net investment results are net gains of $36,900,000 related to the Company's investment in AOL Time Warner.

See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk" and Note 7 to the Consolidated Financial Statements.

14

Employees

As of December 31, 2001, the Company had approximately 7,400 full-time employees, of whom approximately 5,000 were with newspapers, 800 with Scripps Networks, 1,300 with broadcast television and 100 with licensing and other media. Various labor unions represent approximately 1,100 employees, primarily in newspapers. The present operations of the Company have not experienced any work stoppages since 1985. The Company considers its relationship with employees to be generally satisfactory.

ITEM 2.    PROPERTIES

Newspapers require business and editorial offices and printing plants.

Scripps Networks requires offices and studios and other real and personal property to produce programs and to transmit the network programming via satellite. Scripps Networks operates from a production facility in Knoxville and leased facilities in New York.

Broadcast Television requires offices and studios and other real property for towers upon which broadcasting transmitters and antenna equipment are located.

The Company owns substantially all of the properties used by its operations. Management believes the Company's facilities are generally well maintained and are sufficient to serve its present needs.

ITEM 3.    LEGAL PROCEEDINGS

The Company is involved in litigation arising in the ordinary course of business, such as defamation actions and various governmental and administrative proceedings primarily relating to renewal of broadcast licenses, none of which is expected to result in material loss.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of 2001.

15

PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Class A Common shares are traded on the New York Stock Exchange ("NYSE") under the symbol "SSP." There are approximately 11,500 owners of the Company's Class A Common shares, based on security position listings, and 18 owners of the Company's Common Voting shares (which do not have a public market). The Company has declared cash dividends in every year since its incorporation in 1922. Future dividends are, however, subject to the Company's earnings, financial condition and capital requirements.

The range of market prices of the Company's Class A Common shares, which represents the high and low sales prices for each full quarterly period, and quarterly cash dividends are as follows:


 
1st
2nd
3rd
4th
 
 
Quarter
Quarter
Quarter
Quarter
Total

                     2001                          
Market price of common stock:
   High
$
66.600
$
69.000
$
71.700
$
68.050
   Low
54.700
56.400
56.100
58.000

Cash dividends per share of common stock
$
.15
$
.15
$
.15
$
.15
$
.60

                     2000
Market price of common stock:
   High
$
49.500
$
51.625
$
54.188
$
63.250
   Low
42.375
43.625
47.438
50.750

Cash dividends per share of common stock
$
.14
$
.14
$
.14
$
.14
$
.56

ITEM 6.    SELECTED FINANCIAL DATA

The Selected Financial Data required by this item is filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page F-1 of this Form 10-K.

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of Operations required by this item is filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page F-1 of this Form 10-K.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements and Supplementary Data required by this item is filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page F-1 of this Form 10-K.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

16

PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Executive Officers

Executive officers serve at the pleasure of the Board of Directors. Certain information about such officers appears in the table below.

   Name   Age   Position
         
Kenneth W. Lowe   51   President, Chief Executive Officer and Director (since 2000); Chairman and Chief Executive Officer, Scripps Networks (1993 to 2000)
         
Richard A. Boehne   45   Executive Vice President (since 1999); Vice President/Communications and Investor Relations (1995 to 1999)
         
Daniel J. Castellini   62   Senior Vice President and Chief Financial Officer (since 1986)
         
Frank Gardner   59   Senior Vice President (since 2000); Senior Vice President/Television (1993 to 2000)
         
Alan M. Horton   58   Senior Vice President/Newspapers (since 1994)
         
John F. Lansing   44   Vice President/Television (since July 2001); Vice President/Station Operations (1999 to 2001); General Manager, Television Station WEWS (1997 to 1999)
         
B. Jeff Craig   43   Vice President and Chief Technology Officer (since February 2001); Senior Vice President, Interactive Technology and New Media Development, Discovery Communications, Inc. (1998 to 2000); Managing Partner and founder, AAJ Interactive Technologies (1997 to 1998); Vice President, System Design and Engineering, TELE-TV (1995 to 1997)
         
Gregory L. Ebel   46   Vice President/Human Resources (since 1994)
         
M. Denise Kuprionis   45   Vice President, Corporate Secretary and Director of Legal Affairs (since 1987)
         
J. Robert Routt   47   Vice President and Controller (since 1985)
         
Timothy E. Stautberg   39   Vice President/Investor Relations and Communications (since 1999); General Manager, Redding Record Searchlight (1997 to 1999); Assistant to the Publisher, Denver Rocky Mountain News (1992 to 1997)
         
Stephen W. Sullivan   55   Vice President/Newspaper Operations (since 2000); Vice President/Newspapers (1997 to 2000); President, Harte-Hanks Newspapers and Senior Vice President, Harte-Hanks Communications (1991 to 1997)
         
E. John Wolfzorn   56   Treasurer (since 1979)

17

Directors

The information required by Item 10 of Form 10-K relating to directors of the Company is incorporated by reference to the material captioned "Election of Directors" in the Company's definitive proxy statement for the Annual Meeting of Shareholders ("Proxy Statement"). The Proxy Statement will be filed with the Securities and Exchange Commission on or before April 28, 2002.

ITEM 11.    EXECUTIVE COMPENSATION

The information required by Item 11 of Form 10-K is incorporated by reference to the material captioned "Executive Compensation" in the Proxy Statement.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by Item 12 of Form 10-K is incorporated by reference to the material captioned "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by Item 13 of Form 10-K is incorporated by reference to the material captioned "Certain Transactions" in the Proxy Statement.

PART IV

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

Financial Statements and Supplemental Schedules

   
(a)    The consolidated financial statements of the Company are filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page F-1.
   
  The report of Deloitte & Touche LLP, Independent Auditors, dated January 23, 2002, is filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page F-1.
   
(b)    The consolidated supplemental schedules of the Company are filed as part of this Form 10-K. See Index to Consolidated Financial Statement Schedules at page S-1.

Exhibits

The information required by this item appears at page E-1 of this Form 10-K.

Reports on Form 8-K

No Current Reports on Form 8-K were filed in the fourth quarter of 2001.

18

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934 the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 28, 2002.

  THE E. W. SCRIPPS COMPANY
       
 
By
 
/s/ Kenneth W. Lowe
     
      Kenneth W. Lowe
      President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities indicated, on March 28, 2002.

           Signature  
                        Title
     
/s/ Kenneth W. Lowe   President and Chief Executive Officer

  (Principal Executive Officer)
Kenneth W. Lowe    
     
/s/ Daniel J. Castellini   Senior Vice President and Chief Financial Officer

   
Daniel J. Castellini    
     
/s/ William R. Burleigh   Chairman of the Board of Directors

   
William R. Burleigh    
     
/s/ Charles E. Scripps   Chairman of the Executive Committee

  of the Board of Directors
Charles E. Scripps    
     
/s/ Paul K. Scripps   Director

   
Paul K. Scripps    
     
/s/ Edward Scripps, Jr.   Director

   
Edward Scripps, Jr.    
     
/s/ John H. Burlingame   Director

   
John H. Burlingame    
     
/s/ Daniel J. Meyer   Director

   
Daniel J. Meyer    
     
/s/ Nicholas B. Paumgarten   Director

   
Nicholas B. Paumgarten    
     
/s/ Ronald W. Tysoe   Director

   
Ronald W. Tysoe    
     
/s/ Julie A. Wrigley   Director

   
Julie A. Wrigley    
     
/s/ Nackey E. Scagliotti   Director

   
Nackey E. Scagliotti    

19

THE E. W. SCRIPPS COMPANY

INDEX TO CONSOLIDATED FINANCIAL STATEMENT INFORMATION

Item No.                   Page

       
             
1.   Selected Financial Data   F-2
2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations    
      Accounting Policies   F-5
      Forward Looking Statements   F-5
      Results of Operations   F-5
      Newspapers   F-8
      Scripps Networks   F-10
      Broadcast Television   F-12
      Liquidity and Capital Resources   F-14
      Market Risk   F-15
3.   Consolidated Balance Sheets   F-16
4.   Consolidated Statements of Income   F-18
5.   Consolidated Statements of Cash Flows   F-19
6.   Consolidated Statements of Comprehensive Income and Stockholders’ Equity   F-20
7.   Notes to Consolidated Financial Statements   F-21
8.   Independent Auditors’ Report   F-44

F - 1

ELEVEN-YEAR FINANCIAL HIGHLIGHTS
                                                         

( in millions, except per share data )                                                                    
   
2001(1)
2000(1)
1999(1)
1998(1)
1997(1)
1996(1)
1995(1)
1994(1)
1993(1)
1992(1)
1991(1)
 

Summary of Operations                                                                    
     Operating Revenues:                                                              
   
          Other newspapers   $ 720   $ 735   $ 705   $ 671   $ 530   $ 454   $ 426   $ 402   $ 369   $ 353   $ 339  
          Denver Rocky Mountain News (10)     19     221     210     200     197     183     184     170     154     146  
140  

          Newspapers     739     956     914     872     727     637     610     572     523     499  
479  
          Scripps Networks     337     296     213     133     57     30     19     5              
   
          Broadcast television     278     343     312     331     331     323     295     288     255     247  
216  
          Licensing and other media     89     97     93     89     80     75     68     68     85     87  
92  

          Total     1,443     1,692     1,532     1,424     1,196     1,065     992     933     863     833  
787  
          Divested operating units (2)           10     23     25     46     65     49     43     93     195  
298  
          Unusual items (3)     (6 )                                                      
   

               Total operating revenues   $ 1,437   $ 1,702   $ 1,555   $ 1,449   $ 1,242   $ 1,130   $ 1,041   $ 976   $ 956   $ 1,028  
$
1,085  

     Operating Income (Loss):                                                              
   
          Other newspapers   $ 202   $ 230   $ 231   $ 204   $ 171   $ 133   $ 126   $ 118   $ 93   $ 96  
$
81  
          Denver Rocky Mountain News (10)     (16 )   (24 )   (16 )   (8 )   2     (4 )   (2 )   (2 )   (20 )   (12 )
(15 )

          Newspapers     186     206     215     196     173     129     124     116     73     84  
66  
          Scripps Networks     59     54     22     (7 )   (14 )   (17 )   (19 )   (9 )   (1 )      
   
          Broadcast television     51     100     68     93     104     100     87     95     69     62  
50  
          Licensing and other media     14     15     11     11     10     9     7     5     5     8  
10  
          Corporate     (20 )   (21 )   (19 )   (17 )   (17 )   (18 )   (17 )   (15 )   (14 )   (15 )
(13 )

          Total     291     355     297     276     256     203     182     192     132     139  
113  
          Divested operating units (2)                             (3 )   3     2     1     10     22  
36  
          Unusual items (3)     (16 )   (10 )   (2 )               (4 )         (8 )   (1 )   (33 )
   

               Total operating income     274     345     295     276     252     202     185     185     142     128  
149  
     Interest expense     (39 )   (52 )   (45 )   (47 )   (19 )   (10 )   (11 )   (16 )   (26 )   (34 )
(38 )
     Gains (losses) on divested operations (1)         6                 48                       92     78  
   
     Gain on sale of Garfield copyrights (4)                                               32              
   
     Investment results, net of expenses (5)     5     (25 )   1           (3 )   37                          
   
     Other unusual credits (charges) (6)                                   (15 )         (17 )   3     (4 )
   
     Miscellaneous, net     1     1     4           3     2     2     (1 )   (2 )   (4 )
   
     Income taxes (7)     (100 )   (108 )   (104 )   (93 )   (118 )   (84 )   (76 )   (81 )   (86 )   (65 )
(48 )
     Minority interests     (4 )   (4 )   (4 )   (5 )   (5 )   (3 )   (3 )   (8 )   (16 )   (9 )
(7 )

     Income from continuing operations   $ 138   $ 163   $ 146   $ 131   $ 158   $ 127  
$
96   $ 93   $ 105   $ 91  
$
55  

                                                               
   
Per Share Data                                                              
   
     Income from continuing operations   $ 1.73   $ 2.06   $ 1.85   $ 1.62   $ 1.94   $ 1.58  
$
1.19   $ 1.22   $ 1.40   $ 1.22  
$
.74  

     Adjusted income from continuing operations                                                          
   
          (excluding unusual items and net     1.80     2.20     1.86     1.62     1.64     1.38     1.19     1.26     .72     .80  
.74  
          gains)                                                              
   

     Cash dividends     .60     .56     .56     .54     .52     .52     .50     .44     .44     .40  
.40  
     Market value of proceeds from Cable Transaction (8)
                            19.83                          
   

                                                               
   
Market Value of Common Shares at December 31
                                                       
   
     Per share   $ 65.59   $ 62.88   $ 44.81   $ 49.75   $ 48.44   $ 35.00   $ 39.38   $ 30.25   $ 27.50   $ 24.75  
$
24.13  
     Total     5,194     4,951     3,502     3,908     3,906     2,827     3,153     2,415     2,056     1,847  
1,798  

                                                               
   
EBITDA (excluding divested operating                                                            
   
     units and unusual items):                                                              
   
          Other newspapers   $ 251   $ 279   $ 279   $ 254   $ 201   $ 156   $ 147   $ 139   $ 116   $ 117  
$
101  
          Denver Rocky Mountain News (10)     (13 )   (10 )   (3 )   6     16     10     11     11     (7 )   1  
(6 )

          Newspapers     238     269     276     260     217     166     158     150     109     118  
95  
          Scripps Networks     76     69     34     6     (9 )   (14 )   (17 )   (8 )   (1 )      
   
          Broadcast television     80     129     96     118     128     126     113     116     89    
82
 
66
 
          Licensing and other media     15     16     13     12     10     10     8     6     6    
9
 
11
 
          Corporate     (19 )   (20 )   (18 )   (16 )   (16 )   (17 )   (16 )   (15 )   (13 )  
(13
)
(12
)

          Total   $ 389   $ 464   $ 400   $ 379   $ 331   $ 269   $ 247   $ 249   $ 190   $
196
 
$
161
 

                                                               
   
Scripps Cable Financial Data (8)                                                              
   
     Operating revenues                                
$
270   $ 280   $ 255   $ 252   $
238
 
$
218
 
     Operating income excluding unusual items                                   61     65     43     46    
44
 
36
 
     Net income                                   40     40     30     24    
15
 
11
 
     Net income per share of common stock                                   .49     .50     .39     .32    
.20
 
.14
 
     EBITDA - excluding unusual items                                   109     119     101     106    
102
 
92
 
     Capital expenditures                                   (58 )   (48 )   (42 )   (67 )  
(58
)
(37
)

 

Note: Certain amounts may not foot as each is rounded independently.

F-2

ELEVEN-YEAR FINANCIAL HIGHLIGHTS
                                                                           

( in millions, except per share data )                                                                                        
  2001(1) 2000(1) 1999(1) 1998(1) 1997(1) 1996(1) 1995(1) 1994(1) 1993(1) 1992(1) 1991
(1)

Cash Flow Statement Data                                                                                        
Net cash provided by continuing operations     $   206       $   256       $   194       $   239       $   193       $   176       $   114       $   170       $   142       $   127       $   136  
Depreciation and amortization of intangible     99       109       104       104       78       69       67       59       61       64       56  
assets                                                                                        
Investing activity:                                                                                        
     Capital expenditures     (68 )     (75 )     (80 )     (67 )     (57 )     (53 )     (57 )     (54 )     (37 )     (87 )     (114 )
     Business acquisitions and investments     (102 )     (139 )     (70 )     (29 )     (745 )     (128 )     (12 )     (32 )     (42 )     (17 )     (131 )
     Other (investing)/divesting activity, net     16       62       33       10       31       35       (19 )     51       147       38       3  
Financing activity:                                                                                        
     Increase (decrease) in long-term debt     9       (54 )     (1 )     (4 )     651       41       (30 )     (138 )     (194 )     (50 )     124  
     Dividends paid     (51 )     (47 )     (47 )     (47 )     (46 )     (45 )     (43 )     (37 )     (37 )     (34 )     (35 )
     Common stock issued (retired)     (22 )     (5 )     (35 )     (108 )     (26 )                                                
     Other financing activity     16       6       1       6       4       9       6       1       2       (1 )        
Balance Sheet Data                                                                                        
Total assets     2,644   2,590       2,538   2,378       2,307       1,479   1,362       1,302   1,260       1,291   1,301  
Long-term debt (including current portion)(9)     724       715       769       771       773       122       81       110       248       442       492  
Stockholders' equity (9)     1,352   1,278       1,164   1,070       1,050       945   1,194       1,084       860       733       677  

Note: Certain amounts may not foot as each is rounded independently.

 

Notes to Selected Financial Data

The income statement and cash flow data for the eleven years ended December 31, 2001, and the balance sheet data as of the same dates have been derived from the audited consolidated financial statements of the Company. The data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto included elsewhere herein. All per share amounts are presented on a diluted basis. EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. See page F-7.

(1)  In the periods presented the Company acquired and divested the following:

Acquisitions  
2001- Additional 4.0% interest in Food Network.
2000 -   Daily newspapers in Ft. Pierce, Florida (in exchange for the Company’s newspaper in Destin, Florida, and cash), and Henderson, Kentucky, weekly newspaper in Marco Island, Florida, and television station KMCI in Lawrence, Kansas.
1999 -   Additional 7.0% interest in Food Network.
1998 -   Independent telephone directories in Memphis, Tennessee; Kansas City, Missouri; North Palm Beach, Florida; and New Orleans, Louisiana. Additional 1.0% interest in Food Network.
1997 -   Daily newspapers in Abilene, Corpus Christi, Plano, San Angelo and Wichita Falls, Texas; community newspapers in the Dallas, Texas, market; daily newspapers in Anderson, South Carolina, and Boulder, Colorado (in exchange for the Company’s daily newspapers in Monterey and San Luis Obispo, California). Approximate 56% interest in Food Network.
1996 -   Vero Beach, Florida, daily newspaper.
1994 -   The remaining 13.9% minority interest in Scripps Howard Broadcasting Company (“SHB”) in exchange for 4,952,659 Class A Common Shares. Cinetel Productions (an independent producer of programs for cable television).
1993 -   The remaining 2.7% minority interest in the Knoxville News-Sentinel and 5.7% of the outstanding shares of SHB.
1992 -   Three daily newspapers in California (including The Monterey County Herald in connection with the sale of The Pittsburgh Press).
1991 -   Baltimore television station WMAR.
     
Divestitures  
2000 -   Destin, Florida, newspaper (in exchange for Ft. Pierce, Florida, newspaper), independent yellow page directories. The divestitures resulted in net pre-tax gains of $6.2 million, increasing income from continuing operations $4.0 million, $.05 per share.
1998 -   Dallas community newspapers, including the Plano daily, and Scripps Howard Productions, the Company’s television program production operation based in Los Angeles, California. No material gain or loss was realized as proceeds approximated the book value of net assets sold.
1997 -   Monterey and San Luis Obispo, California, daily newspapers (in exchange for Boulder, Colorado, daily newspaper). Terminated joint operating agency (“JOA”) and ceased operations of El Paso, Texas, daily newspaper. The JOA termination and trade resulted in pre-tax gains totaling $47.6 million, increasing income from continuing operations by $26.2 million, $.32 per share.
1995 -   Watsonville, California, daily newspaper. No material gain or loss was realized as proceeds approximated the book value of net assets sold.
1993 -   Book publishing operations; newspapers in Tulare, California, and San Juan; Memphis television station; radio stations. The divestitures resulted in net pre-tax gains of $91.9 million, increasing income from continuing operations by $46.8 million, $.63 per share.
1992 -   The Pittsburgh Press; TV Data; certain other investments. The divestitures resulted in net pre-tax gains of $78.0 million, increasing income from continuing operations $45.6 million, $.61 per share.
1991 -   George R. Hall Company (contracting firm specializing in the installation, relocation, and rebuilding of newspaper presses). No gain or loss was realized as proceeds equaled the book value of net assets sold.

 

(2)  Operating units other than cable television systems sold prior to December 31, 2001.

F-3

(3)        The following unusual items affected operating income:
         
    2001-     Costs associated with workforce reductions, including the Company’s share of such costs at the Denver JOA, totaled $16.1 million, reducing income from continuing operations $10.1 million, $.13 per share.
    2000 -   Expenses of $9.5 million associated with preparations for the Denver JOA reduced income from continuing operations $6.2 million, $.08 per share.
    1999 -   Severance payments of $1.2 million to certain television station employees and $0.8 million of costs incurred to move Food Network’s operations to a different location in Manhattan reduced operating income $2.0 million. Income from continuing operations was reduced $1.2 million, $.02 per share.
    1996 -   A $4.0 million charge for the Company’s share of certain costs associated with restructuring portions of the distribution system of the Cincinnati JOA. The charge reduced income from continuing operations by $2.6 million, $.03 per share.
    1994 -   A $7.9 million loss on program rights expected to be sold as a result of changes in television network affiliations. The loss reduced income from continuing operations by $4.9 million, $.07 per share.
    1993 -   A change in estimate of disputed music license fees increased operating income by $4.3 million; a gain on the sale of certain publishing equipment increased operating income by $1.1 million; a charge for workforce reductions at i) the Company’s Denver newspaper and ii) the newspaper feature and the licensing operations of United Media decreased operating income by $6.3 million. The planned workforce reductions were fully implemented in 1994. These items totaled $0.9 million and reduced income from continuing operations by $0.6 million, $.01 per share.
    1992 -   Operating losses of $32.7 million during the Pittsburgh Press strike reduced income from continuing operations $20.2 million, $.27 per share.
         
(4)    In 1994 the Company sold its worldwide GARFIELD and U.S. ACRES copyrights. The sale resulted in a pre-tax gain of $31.6 million, increasing income from continuing operations $17.4 million, $.23 per share.
         
(5)   Investment results include i) gains and losses from the sale or write-down of investments and ii) accrued incentive compensation and other expenses associated with the management of the Scripps Ventures investment portfolios. Investment results include the following:
         
    2001-   Net realized losses of $2.9 million. Accrued incentive compensation was decreased $11.5 million, to zero, in connection with the decline in value of the Scripps Ventures I investment portfolio. Net investment results increased income from continuing operations $3.8 million, $.05 per share.
    2000 -   Net realized losses of $17.5 million. Accrued incentive compensation was increased $4.5 million, to $11.5 million. Income from continuing operations was reduced $15.8 million, $.20 per share.
    1999 -   Net realized gains of $8.6 million. Accrued incentive compensation was increased $7.0 million, to $7.0 million. Income from continuing operations was increased $0.4 million, $.00 per share.
    1997 -   Write-down of investments totaling $2.7 million. Income from continuing operations was reduced $1.7 million, $.02 per share.
    1996 -   A $40.0 million gain on the Company’s investment in Turner Broadcasting Systems when Turner was merged into Time Warner and a $3.0 million write-off of an investment in Patient Education Media, Inc. Income from continuing operations was increased $24.3 million, $.30 per share.
         
(6)   Other unusual credits (charges) included the following:
         
    1996 -   $15.5 million contribution of appreciated Time Warner stock to a charitable foundation, decreasing income from continuing operations by $5.2 million, $.07 per share.
    1994 -   An estimated $2.8 million loss on real estate expected to be sold as a result of changes in television network affiliations; an $8.0 million contribution to a charitable foundation; and a $6.1 million accrual for lawsuits associated with a divested operating unit. These items totaled $16.9 million and reduced income from continuing operations by $9.8 million, $.13 per share.
    1993 -   A $2.5 million fee received in connection with the change in ownership of the Ogden, Utah, newspaper. Income from continuing operations was increased $1.6 million, $.02 per share.
    1992 -   Write-downs of real estate and investments totaling $3.5 million. Income from continuing operations was reduced $2.3 million, $.03 per share.
         
(7)   The provision for income taxes was affected by the following unusual items:
         
    2000 -   A change in estimated tax liability for prior years reduced the tax provision, increasing income from continuing operations by $7.2 million, $.09 per share.
    1994 -   A change in estimated tax liability for prior years increased the tax provision, reducing income from continuing operations by $5.3 million, $.07 per share.
    1993 -   A change in estimated tax liability for prior years decreased the tax provision, increasing income from continuing operations by $5.4 million, $.07 per share; the effect of the increase in the federal income tax rate to 35% from 34% on the beginning of the year deferred tax liabilities increased the tax provision, reducing income from continuing operations by $2.3 million, $.03 per share.
    1992 -   A change in estimated tax liability for prior years decreased the tax provision, increasing income from continuing operations $8.4 million, $.11 per share.
         
(8)   The Company’s cable television systems (“Scripps Cable”) were acquired by Comcast Corporation (“Comcast”) on November 13, 1996, (“Cable Transaction”) through a merger whereby the Company’s shareholders received, tax-free, a total of 93 million shares of Comcast’s Class A Special Common Stock. The aggregate market value of the Comcast shares was $1.593 billion and the net book value of Scripps Cable was $356 million, yielding an economic gain of $1.237 billion to the Company’s shareholders. This gain is not reflected in the Company’s financial statements as accounting rules required the Company to record the transaction at book value. Unless otherwise noted, the data excludes the cable television segment, which is reported as a discontinued business operation.
         
(9)      Includes effect of discontinued cable television operations prior to completion of the Cable Transaction.
         
(10)   A 50-year Joint Operating Agency (“JOA”) between the Company’s Denver Rocky Mountain News (“RMN”) and MediaNews Group Inc.’s Denver Post commenced operations on January 22, 2001. The Company’s 50% share of the operating profit (loss) of the Denver JOA is reported as “Share of Joint Agency Profits” in its financial statements. The editorial costs associated with the RMN are included in operating expenses. The Company’s financial statements do not include advertising and other revenue of the JOA, nor the costs to produce, distribute and market the newspapers, nor related depreciation. To enhance comparability of year-over-year operating results, the Company reports the RMN separately.

F-4

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company operates in three reportable segments: newspapers, cable television networks (referred to as "Scripps Networks"), and broadcast television. Each of the Company's businesses relies upon advertising as a primary source of revenue. Advertising comprises 75% to 80% of the Company's total revenues. Declines in advertising spending, particularly in recessionary periods, adversely affect the newspaper, cable television network and broadcast television business.

ACCOUNTING POLICIES

In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management must make a variety of decisions which affect the reported amounts and the related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In reaching such decisions, management applies judgment based on its understanding and analysis of the relevant circumstances. Note 1 to the Consolidated Financial Statements provides a summary of the significant accounting policies followed in the preparation of the financial statements; other footnotes describe various elements of the financial statements and the assumptions on which specific amounts were determined. While actual results could, in fact, differ from those estimated at the time of preparation of the financial statements, management is committed to preparing financial statements incorporating accounting principles, assumptions and estimates that promote the representational faithfulness, verifiability, neutrality and transparency of the accounting information included in the financial statements.

FORWARD-LOOKING STATEMENTS

This discussion and the information contained in the notes to the consolidated financial statements contain certain forward-looking statements that are based on management's current expectations. Forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from the expectations expressed in the forward-looking statements. Such risks, trends and uncertainties, which in most instances are beyond the Company's control, include changes in advertising demand and other economic conditions; consumers' taste; newsprint prices; program costs; labor relations; technological developments; competitive pressures; interest rates; regulatory rulings; and reliance on third-party vendors for various products and services. The words "believe," "expect," "anticipate," "estimate," "intend" and similar expressions identify forward-looking statements. All forward-looking statements, which are as of the date of this filing, should be evaluated with the understanding of their inherent uncertainty.

RESULTS OF OPERATIONS

Acquisitions and divestitures can affect the comparability of year-over-year reported results. The accompanying tables include the results of operations for acquired operations from the dates of acquisition. Divested operating units are removed from segment operating results and reported separately because management believes they impede analysis of the Company's on-going operations.

See Note 3 to the Consolidated Financial Statements on page F-27 regarding acquisitions and divestitures in the three years ending December 31, 2001.

The application for a 50-year Joint Operating Agency ("JOA") between the Company's Denver Rocky Mountain News ("RMN") and MediaNews Group Inc.'s ("MediaNews") Denver Post was approved in January 2001 by the U.S. Department of Justice. The JOA commenced operations on January 22, 2001. Denver Publishing Company, a wholly-owned subsidiary of the Company, received a 50% interest in the JOA in exchange for the contribution of most of its assets to the JOA and the payment of $60 million to MediaNews.

The Company's 50% share of the operating profit (loss) of the Denver JOA is reported as "Share of Joint Operating Agency Profits" in its financial statements. Editorial costs associated with the RMN are included in operating expenses. The Company's financial statements do not include advertising and other revenue of the JOA, nor the costs to produce, distribute and market the newspapers, nor related depreciation. To enhance comparability of year-over-year operating results, the Company reports the RMN separately in Management's Discussion and Analysis.

All per share disclosures are on a diluted basis. Consolidated results of operations are presented on the following page.

F - 5


( in thousands, except per share data )  
For the years ended December 31,
 
    2001  
Change
         2000
 
Change
  1999  

                               
Operating revenues:                              
   Newspapers $ 719,990   (2.0 )% $ 734,559   4.2 %
$
704,690  
   Scripps Networks   337,195   14.0 % 295,681   38.9 %   212,922  
   Broadcast television   277,601   (19.1 )% 343,125   9.8 %   312,362  
   Licensing and other media   88,785   (8.4 )% 96,895   4.7 %   92,570  

   Total   1,423,571   (3.2 )% 1,470,260   11.2 %   1,322,544  
   Denver Rocky Mountain News   19,441   (91.2 )% 220,998   5.4 %   209,713  
   Unusual item   (5,881 )                      
   Divested operating units             10,500         23,042  

Total operating revenues $ 1,437,131   (15.6 )% $ 1,701,758   9.4 %
$
1,555,299  

                               
Operating income (loss):                              
   Newspapers $ 201,941   (12.1 )% $ 229,717   (0.5 )%
 $
  230,810  
   Scripps Networks   59,387   9.0 % 54,471         21,670  
   Broadcast television   50,568   (49.6 )% 100,270   46.4 %   68,491  
   Licensing and other media   14,050   (8.3 )% 15,330   40.3 %   10,924  
   Corporate   (19,545 ) 6.0 % (20,797 ) (12.1 )%   (18,558 )

   Total   306,401   (19.2 )% 378,991   21.0 %   313,337  
   Denver Rocky Mountain News   (15,885 )     (24,104 )       (16,178 )
   Unusual items   (16,079 )     (9,523 )       (2,000 )
   Divested operating units             (275 )         195  

Total operating income   274,437   (20.5 )% 345,089   16.8 %   295,354  
Interest expense   (39,197 )     (51,934 )       (45,219 )
Investment results, net of expenses   5,063       (24,834 )         544  
Net gains on divested operations             6,196              
Miscellaneous, net   1,079       1,485         3,505  
Income taxes   (99,622 )     (108,090 )       (103,612 )
Minority interest   (3,797 )     (4,459 )       (4,450 )

                               
Net income $ 137,963   (15.6 )% $ 163,453   11.9 %
$
146,122  

                               
Per share of common stock:                              
   Net income     $1.73   (16.0 )%
$2.06   11.4
  $1.85  

   Weighted-average shares outstanding   79,970       79,161         78,951  

                               
Reconciliation to earnings from core operations:                              
   Reported net income $ 137,963   (15.6 )% $ 163,453   11.9 %
$
146,122  
   Net investment results   (3,754
)
    15,835           (355 )
   Workforce reductions   10,086                     746  
   Net gains on divested operations             (3,955 )            
   Denver JOA preparatory expenses             6,190              
   Income tax liability adjustments             (7,170 )            
   Food Network move                           498  

   Net income from core operations $ 144,295   (17.2 )% $ 174,353   18.6 %
$
147,011  

                               
   Per share of common stock:                              
   Reported net income $1.73   (16.0 )%
$2.06   11.4
$1.85  
   Net investment results     (.05 )       .20           (.00 )
   Workforce reductions     .13                     .01  
   Net gains on divested operations               (.05 )            
   Denver JOA preparatory expenses               .08              
   Income tax liability adjustments               (.09 )            
   Food Network move           .01  

    Net income from core operations
$1.80
(18.2
)%
$2.20
18.3
$1.86

                   
     
See Notes to Selected Financial Data on pages F-3 and F-4 regarding items excluded from core operations.          

F - 6


( In thousands )                                    
   
For the years ended December 31,
 
   
2001
Change
 
2000
Change
 
1999
 

                                     
Other Financial and Statistical Data - excluding                                    
   divested operating units and unusual items:                                    
                                     
Total advertising revenues $ 1,071,217   (5.5 )%         $ 1,133,474   14.4 %         $ 990,457  

Advertising revenues as a percentage of
total revenues
  75.2 %             77.1 %             74.9 %

                                     
EBITDA:                                    
   Newspapers $ 250,823   (10.1 )%   $ 279,050   0.1 %   $ 278,803  
   Scripps Networks   75,547   9.9 %     68,770   104.9 %     33,567  
   Broadcast television   79,651   (38.3 )%     129,018   34.5 %     95,955  
   Licensing and other media   14,881   (7.8 )%     16,144   27.7 %     12,640  
   Corporate   (18,596 ) 6.2 %     (19,825 ) (13.2 )%     (17,519 )

   Total   402,306   (15.0 )%     473,157   17.3 %     403,446  
   Denver Rocky Mountain News   (13,137 )         (9,641 )         (3,132 )

   Total EBITDA $ 389,169   (16.0 )%   $ 463,516   15.8 %   $ 400,314  

Effective income tax rate for core operations   41.3 %         41.2 %         40.8 %

                                     
Statement of Cash Flows Information:                                    
                                     
Net cash provided by operating activities $ 206,067   (19.4 )%   $ 255,743   32.2 %   $ 193,515  
Capital expenditures   (68,223 )         (74,577 )         (79,826 )
Business acquisitions and investments   (102,299 )         (139,056 )         (69,515 )
Increase (decrease) in long-term debt   9,202           (53,958 )         (1,256 )
Dividends paid, including to minority interests   (50,784 )         (47,202 )         (47,094 )
Purchase and retirement of common stock   (22,449 )         (4,571 )         (34,951 )

Earnings before interest, income taxes, depreciation and amortization ("EBITDA") is included in the discussion of results of operations because:

EBITDA should not, however, be construed as an alternative measure of the amount of the Company's income or cash flows from operating activities.

Interest expense decreased in 2001 primarily due to lower rates on variable rate credit facilities, and increased in 2000 primarily due to higher short-term interest rates. The weighted-average interest rate was 4.2% in 2001, 6.4% in 2000, and 5.3% in 1999. The Company is currently rolling over short-term debt at an effective 90-day yield of 1.8%. Average daily borrowings under short-term credit facilities were $504,000,000 in 2001, $527,000,000 in 2000 and $537,000,000 in 1999. The average balance of all interest bearing obligations was $741,000,000 in 2001, $767,000,000 in 2000 and $780,000,000 in 1999.

Amortization of intangible assets reduced earnings per share approximately $.39 in 2001, $.37 in 2000 and $.35 in 1999.

The Company adopted Financial Accounting Standard ("FAS") No. 142 – Goodwill and Other Intangible Assets effective January 1, 2002. See Note 2 to the Consolidated Financial Statements. If FAS No. 142's provisions regarding not amortizing goodwill and other intangible assets had been effective in 2001, amortization of goodwill and other intangible assets would have been $38,000,000 less, increasing earnings per share by $.35. The effective income tax rate on core operations would have been 39.4% under the same pro forma assumptions. The effective income tax rate in 2002 is expected to be approximately 39%.

Capital expenditures in 2002 are estimated to be approximately $78,000,000.

F - 7

NEWSPAPERS - RMN operating results are presented separately as a single line item to enhance comparability of year-over-year results. Excluding Divested Operating Units and unusual items, operating results were as follows:


 
( in thousands )                          
   
For the years ended December 31,
 
   
2001  
Change
2000  
Change
1999  
 

 
Operating revenues:                          
      Local
$
203,610   (3.8
)%
$ 211,568   2.8 %
$
205,767  
      Classified   196,842   (6.2 )%   209,942   7.2 %   195,809  
      National   32,947   6.4 %   30,977   10.9 %   27,937  
      Preprint and other   92,204   1.8 %   90,536   13.3 %   79,902  

 
      Total advertising   525,603   (3.2 )%   543,023   6.6 %   509,415  
      Circulation   139,358   4.0 %   133,948   (0.8 )%   135,029  
      Share of joint operating agency profits   43,285   (8.7 )%   47,412   (6.1 )%   50,511  
      Other   11,744   15.4 %   10,176   4.5 %   9,735  

 
Total operating revenues   719,990   (2.0 )%   734,559   4.2 %   704,690  

 
Operating expenses, excluding depreciation and amortization:                          
      Editorial and newspaper content   87,748   2.5 %   85,637   0.6 %   85,158  
      Newsprint and ink   82,272   1.8 %   80,830   10.7 %   73,022  
      Other press and production   69,131   3.6 %   66,721   5.1 %   63,507  
      Circulation and distribution   65,126   5.5 %   61,738   11.1 %   55,566  
      Other advertising products, internet and printing   29,786   17.9 %   25,259   21.5 %   20,794  
      Advertising sales and marketing   64,241   2.1 %   62,914   6.7 %   58,945  
      General and administrative   67,224   (3.7 )%   69,793   2.3 %   68,196  

 
Total   465,528   2.8 %   452,892   6.5 %   425,188  

 
EBITDA before equity-method investments   254,462   (9.7 )%   281,667   0.8 %   279,502  
Share of pre-tax earnings of equity-method investments   (3,639 )       (2,617 )       (699 )

 
EBITDA   250,823   (10.1 )%   279,050   0.1 %   278,803  
Depreciation and amortization   48,882   (0.9 )%   49,333   2.8 %   47,993  

 
Operating income before RMN   201,941   (12.1 )%   229,717   (0.5 )%   230,810  
Denver Rocky Mountain News ("RMN")   (15,885 )       (24,104 )       (16,178 )

 
Operating income
$
186,056   (9.5 )%
$
205,613   (4.2
)%
$
214,632  

 
Other Financial and Statistical Data:                          
   
Percent of operating revenues:                          
   EBITDA  
34.8
%      
38.0
%      
39.6
%
   Operating income  
28.0
%      
31.3
%      
32.8
%

 
Cash received greater (less) than share of profits of JOAs  
       
       
 
      and equity-method investments
$
20,949
      $
2,617
   
$
699
 
   
       
       
 
Capital expenditures  
34,363
       
29,834
       
30,693
 
   
       
       
 
Business acquisitions and investments  
63,199
       
74,878
       
4,005
 

 

F - 8

The demand for advertising was weak in most of the Company's markets in 2001, particularly local retail and help-wanted classified advertising. On a pro forma basis, assuming all acquisitions had been completed as of January 1, 1999, local advertising decreased 5.6% in 2001 and increased 1.9% in 2000; classified advertising decreased 7.3% in 2001 and increased 5.8% in 2000; circulation revenue increased 2.6% in 2001 and decreased 1.2% in 2000.

The average price of newsprint increased 6% in 2001 and 7% in 2000, after declining 15% in 1999. The average price of newsprint was $573 per metric ton in 2001, and $514 per metric ton in the fourth quarter.

Circulation and distribution costs increased primarily due to efforts to gain circulation at the Company's larger newspapers.

Operating losses in Denver were $15,900,000 in 2001 and $24,100,000 in 2000. In the fourth quarter, operating losses narrowed to $1,700,000 in 2001 from $3,100,000 in 2000. The Company's operating results in Denver have improved due to advertising and circulation rate increases and cost-cutting measures implemented by the JOA, including publication of combined weekend editions and a single classified advertising section distributed in both newspapers. However, in addition to the soft demand for advertising in general, major metropolitan markets in the U.S., including Denver, have experienced sharp decreases in help-wanted advertising. The weak demand for advertising has reduced the immediate improvement in operating results that was expected at the outset of the JOA.

Capital expenditures in 2002 are estimated to be approximately $39,000,000. Expected capital expenditures in 2002 include construction of a new production facility for the Knoxville newspaper. Depreciation is expected to be approximately $25,000,000. Amortization is expected to be approximately $700,000.

F - 9

SCRIPPS NETWORKS - Operating results, excluding unusual items, were as follows:


 
( in thousands )                      
       
For the years ended December 31,
 
    2001  
Change
 
2000
  Change  
1999
 











 
                       
Operating revenues:                      
   Advertising $ 272,299   9.1 %       $ 249,619   46.9 %       $ 169,959  
   Affiliate fees   59,175   46.8 % 40,312   18.0 % 34,149  
   Other   5,721   (0.5 )% 5,750   (34.8 )% 8,814  











 
Total operating revenues   337,195   14.0 % 295,681   38.9 % 212,922  











 
                       
Operating expenses, excluding depreciation and amortization:                      
   Programming and production   103,892   16.4 % 89,274   31.7 % 67,804  
   Operations and distribution   33,947   9.1 % 31,127   10.5 % 28,169  
   Sales and marketing   72,391   4.2 % 69,442   29.7 % 53,530  
   General and administrative   56,072   33.5 % 41,992   26.3 % 33,254  











 
                       
Total   266,302   14.9 % 231,835   26.9 % 182,757  











 
                       
EBITDA - before equity-method investments   70,893   11.0 % 63,846       30,165  
Share of pretax earnings of equity-method investments   4,654   (5.5 )% 4,924       3,402  











 
EBITDA   75,547   9.9 % 68,770       33,567  
Depreciation and amortization   16,160   13.0 % 14,299       11,897  











 
                       
Operating income $ 59,387   9.0 %       $ 54,471    
$
21,670  











 
                       
Other Financial and Statistical Data:                      
                       
Percent of operating revenues:                      
   EBITDA   22.4 %     23.3 %     15.8 %
   Operating income   17.6 %     18.4 %     10.2 %











 
                       
Payments for programming less (greater) than amounts                      
   recognized as expense $ (42,290 )  
$
(45,509 )  
$
(52,839 )
                       
Cash received for affiliate fees, net of launch incentive                      
   payments, greater (less) than amounts recognized as                      
   affiliate fee revenue   (49,316 )     13,005       (3,245 )
                       
Dividends greater (less) than share of earnings of                      
   equity-method investments   1,406       (2,524 )     (762 )
                       
Capital expenditures   14,114       12,236       21,557  
                       
Business acquisitions and investments   20,934       1,587       18,206  
                       
Other information:                      
   Program assets capitalized during the year   138,773       126,471       121,289  
                       
   Launch incentives capitalized during the year   82,329       13,448       21,693  











 

F - 10

According to the Nielsen Homevideo Index, HGTV was telecast to 76.4 million homes in December 2001, 67.1 million homes in December 2000, 59.0 million homes in December 1999, and 48.4 million homes in December 1998. Food Network was telecast to 71.5 million homes in December 2001, 54.4 million homes in December 2000, 44.2 million homes in December 1999, and 37.1 million homes in December 1998.

The advertising recession in 2001 contributed to Scripps Networks' reduced growth in advertising revenue.

The Company recognizes affiliate fees received from cable and satellite television systems pursuant to network distribution contracts over the terms of the contracts, including any initial free period. Launch incentives are amortized based upon the percentage of the current period's total revenues earned on the contract to the estimated total of such revenues over the duration of the contract. See Note 1 to the Consolidated Financial Statements.

In 2001 Food Network renewed and extended its network distribution contracts with AT&T and AOL Time Warner. The agreements expand distribution of Food Network and provide for payment of affiliate fees to Food Network beginning in 2004. Food Network's network distribution contracts generally provided the network to cable television systems without charge through 2003. In exchange for the agreement to pay affiliate fees and expanded distribution, Food Network agreed to make additional launch incentive payments.

Affiliate fee revenue for HGTV and Food Network is expected to increase approximately 9% in 2002.

Programming and production expense has increased as the Company improves the quality and variety of programming and expands the hours of original programming presented on its networks. The Company owns the rights to substantially all of the programming it produces and expects to telecast the programs over several years. Programming and production expense in 2002 is expected to increase approximately 13% for HGTV and approximately 27% for Food Network, and approximately 18% for the two networks combined.

The Company launched DIY, its third network, in the fourth quarter of 1999, and launched a fourth network, Fine Living, in the first quarter of 2002. Start-up costs associated with DIY and Fine Living reduced EBITDA by $22,100,000 in 2001, $10,900,000 in 2000, and $3,700,000 in 1999. Operating losses for DIY and Fine Living are expected to reduce EBITDA by approximately $28,000,000 to $33,000,000 in 2002. The cash required by DIY and Fine Living will substantially exceed the reported operating losses in 2002 because of investments in programming and launch incentive payments to cable television systems.

Excluding losses associated with the launch of new networks, EBITDA increased 23% in 2001 and more than doubled in 2000.

Capital expenditures in 1999 included expansion of the studio and office facilities for HGTV and DIY. Capital expenditures in 2002 are expected to be approximately $14,000,000. Depreciation is expected to be approximately $10,000,000. Amortization is expected to be approximately $3,000,000.

F - 11

BROADCAST TELEVISION - Operating results, excluding unusual items, were as follows:


( in thousands )                          
   
For the years ended December 31,
 
    2001   Change    
2000
  Change    
1999
 

Operating revenues:                          
      Local  162,761   (6.4 )%
$
  173,878   1.5 %
$
  171,353  
      National   96,866   (18.9 )%   119,428   (1.0 )%   120,638  
      Political   2,400         34,762         2,478  
      Network compensation   9,279   (6.8 )%   9,951   (24.2 )%   13,121  
      Other   6,295   23.3 %   5,106   7.0 %   4,772  

Total operating revenues   277,601   (19.1 )%   343,125   9.8 %   312,362  

Operating expenses, excluding depreciation and amortization:                          
      Programming and station operations   138,132   (5.8 )%   146,630   (2.5 )%   150,444  
      Sales and marketing   34,918   (14.4 )%   40,807   4.3 %   39,110  
      General and administrative   24,900   (6.6 )%   26,670   (0.7 )%   26,853  

Total   197,950   (7.5 )%   214,107   (1.1 )%   216,407  

EBITDA   79,651   (38.3 )%   129,018   34.5 %   95,955  
Depreciation and amortization   29,083   1.2 %   28,748   4.7 %   27,464  

Operating income $    50,568   (49.6 )%
$
  100,270   46.4 %
$
    68,491  

                           
Other Financial and Statistical Data:                          
                           
Percent of operating revenues:                          
   EBITDA   28.7 %       37.6 %       30.7 %
   Operating income   18.2 %       29.2 %       21.9 %

Payments for programming less than                          
   amounts recognized as expense $      2,464      
    1,460      
$
     1,029  
                           
Capital expenditures   18,785         31,280         25,749  
                           
Business acquisitions and investments   27         14,710         130  
                           
Program assets capitalized during the year   37,358         42,671         51,540  

F - 12

Average audience shares for broadcast television stations have declined in recent years due to competition from new broadcast television networks and increases in the audience share of cable television networks. Technological advancement in interactive media services is expected to further increase these competitive pressures. In addition, the Company continues to be adversely affected by its relatively high exposure to the ABC television network, for which audience levels have generally declined in recent years. Six of the Company's 10 television stations are ABC affiliates. Those six stations provide more than 75% of the Company's total broadcast television revenues.

Year-over-year revenue comparisons are difficult because of the political advertising revenue in even-numbered years. Demand for advertising was weak in the Company's television markets in 2001. The return of political advertising and the Olympics are expected to boost EBITDA in 2002.

In 2001 the Company renegotiated and extended its affiliation agreements with NBC. Originally scheduled to expire in 2004, network compensation will be sharply reduced under the new agreements, which extend through 2009. The Company's three NBC affiliates recognized $2,400,000 in network compensation in 2000 and $1,400,000 in 2001. Network compensation at the Company's NBC affiliates is expected to be approximately $300,000 in 2002. The Company's ABC affiliation agreements expire in 2004 through 2006.

Operating expenses, excluding depreciation and amortization, are expected to increase approximately 2% in 2002.

Capital expenditures include the construction of a new building for the West Palm Beach station in 2000. Capital spending was also higher in 2000 and 1999 as five of the Company's stations were equipped to broadcast a digital signal. The Company is required to begin digital broadcasting in all of its markets by May 2002. Capital expenditures in 2002 are expected to be approximately $23,000,000. Depreciation in 2002 is expected to be approximately $21,000,000. Amortization is expected to be approximately $100,000.

F - 13

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary source of liquidity is cash flow from operating activities. Advertising provides 75% to 80% of the Company's total revenues, so the Company's cash flow from operating activities is adversely affected during recessionary periods. The Company's cash flow from operating activities was $206,000,000 in 2001 and $256,000,000 in 2000. Lower advertising revenues, investments in Scripps Network's programming and increased launch incentive payments for Scripps Networks were the primary causes of the decrease. The Company expects to continue to make similar investments in programming and to continue to increase the distribution of Scripps Networks.

Despite the advertising recession in 2001, cash flow from operating activities exceeded capital expenditures and cash dividends by $87,100,000, and is expected to substantially exceed capital expenditures and cash dividends in 2002, as it has since 1992.

The excess cash flow from existing businesses and the Company's substantial borrowing capacity have been used primarily to fund acquisitions, investments, and to develop new businesses. There are essentially no legal or other restrictions on the transfer of funds among the Company's business segments.

A summary of the Company's contractual cash commitments as of December 31, 2001, is as follows:


( in thousands )                              
   
Less than
    1 to 3     4 to 5     Over        
   
1 Year
    Years     Years     5 Years     Total  

                               
On balance sheet amounts:                              
Long-term debt $ 613,878   $ 91   $ 111   $ 109,764   $ 723,844  
Other long-term obligations:                              
   Network distribution contracts   61,624     3,123     1,796           66,543  
   Programming   40,932     1,302                 42,234  
   Employee compensation and benefits   4,221     9,494     8,243     76,121     98,079  
   Other long-term obligations         41     62     15,387     15,490  
                               
Commitments and off-balance sheet obligations:                              
   Network distribution contracts   44,500                       44,500  
   Programming   64,400     85,500     8,200           158,100  
   Operating leases   13,800     20,100     15,900     16,800     66,600  
   Purchase commitments   18,600     31,000     10,200     1,900     61,700  

                               
Total contractual cash obligations $ 861,955   $ 150,651   $ 44,512   $ 219,972   $ 1,277,090  

Repurchase of a total of 6,000,000 Class A Common shares was authorized by the Board of Directors in 1998. The balance remaining on this authorization is 1,730,000 shares.

Net debt (borrowings less cash equivalent and other short-term investments) increased $8,000,000 in 2001, to $722,000,000 at December 31, 2001. Net debt includes commercial paper borrowings totaling $514,000,000, with average maturities of 90 days or less. Commercial paper borrowings are supported by bank credit facilities which permit maximum borrowings of $675,000,000 and expire in September 2002. This facility is expected to be replaced with a similar facility prior to expiration. The Company's access to commercial paper markets can be affected by macroeconomic factors outside of its control. In addition to macroeconomic factors, the Company's access to commercial paper markets and its borrowing costs are affected by short and long-term debt ratings assigned by independent rating agencies.

F - 14

MARKET RISK

The Company's earnings and cash flow can be affected by, among other things, economic conditions, interest rate changes, foreign currency fluctuations (primarily in the exchange rate for the Japanese yen) and changes in the price of newsprint. See "Business - Newspapers - Raw Materials and Labor Costs." The Company is also exposed to changes in the market value of its investments.

The Company may use foreign currency forward and option contracts to hedge its cash flow exposures that are denominated in Japanese yen and forward contracts to reduce the risk of changes in the price of newsprint on anticipated newsprint purchases. The Company held no foreign currency or newsprint derivative financial instruments at December 31, 2001, or during the year then ended.

The following table presents additional information about the Company's market-risk-sensitive financial instruments:





 
( in thousands )
As of December 31, 2001
 
As of December 31, 2000
 
   
Cost
   
Fair
   
Cost
   
Fair
 
   
Basis
   
Value
   
Basis
   
Value
 












 
Financial instruments subject to interest rate risk:                        
   Variable rate credit facilities, including commercial paper $ 513,855   $ 513,855   $ 512,788   $ 512,788  
   $100 million, 6.625% note, due in 2007   99,916     104,376     99,901     97,900  
   $100 million, 6.375% note, due in 2002   99,983     102,685     99,964     99,800  
   Other notes   10,090     9,084     1,956     812  












 
                         
   Total long-term debt including current portion $ 723,844   $ 730,000   $ 714,609   $ 711,300  












 
Financial instruments subject to market value risk:                        
   AOL Time Warner common stock (2,017,000 shares) $ 64,740   $ 64,740              
   Time Warner common stock (1,344,000 shares)             $ 27,816   $ 70,239  
   Centra Software (700,500 and 1,792,500 common shares)   1,427     5,604     3,652     6,946  
   Other available-for-sale securities   597     4,213     639     3,969  












 
   Total investments in publicly-traded companies   66,764     74,557     32,107     81,154  
   Other equity investments   51,714       (a)     87,266    
  (a)
 












 
   
(a) Included in other equity investments are securities that do not trade in public markets, so they do not have readily determinable fair values. Many of the investees have had no rounds of equity financing in the past two years. There can be no assurance as to the amounts the Company would receive if these securities were sold.
     
The Company manages interest rate risk primarily by maintaining a mix of fixed-rate and variable-rate debt. The Company currently does not use interest rate swaps, forwards or other derivative financial instruments to manage its interest rate risk. The weighted-average interest rate on borrowings under the Variable Rate Credit Facilities at December 31 was 2.0% in 2001, 6.6% in 2000, and 6.0% in 1999.

F - 15

CONSOLIDATED BALANCE SHEETS            

 
( in thousands )            
 
As of December 31,
 
 
2001
 
2000
 

 
             
ASSETS            
Current Assets:            
   Cash and cash equivalents $
17,419
  $
14,112
 
   Accounts and notes receivable (less allowances - 2001, $13,964; 2000, $13,891)  
236,311
   
289,583
 
   Program rights and production costs  
120,715
   
115,513
 
   Inventories  
7,345
   
17,802
 
   Deferred income taxes  
30,850
   
30,421
 
   Miscellaneous  
38,018
   
35,449
 

 
   Total current assets  
450,658
   
502,880
 

 
   
   
 
Investments  
331,542
   
177,922
 

 
   
   
 
Property, Plant and Equipment  
394,677
   
502,041
 

 
   
   
 
Goodwill and Other Intangible Assets  
1,203,191
   
1,226,306
 

 
   
   
 
Other Assets:  
   
 
   Program rights and production costs (less current portion)  
122,620
   
96,881
 
   Network distribution contracts  
124,639
   
63,966
 
   Miscellaneous  
16,433
   
20,044
 

 
   Total other assets  
263,692
   
180,891
 

 
TOTAL ASSETS $
2,643,760
  $
2,590,040
 

 
   
   
 
See notes to consolidated financial statements.  
   
 

F - 16

CONSOLIDATED BALANCE SHEETS              

( in thousands, except share data )                
       
As of December 31,
 
        2001    
2000
 

LIABILITIES AND STOCKHOLDERS' EQUITY            
Current Liabilities:                
   Current portion of long-term debt     $ 613,878   $ 212,828  
   Accounts payable       81,690     114,275  
    Customer deposits and unearned revenue     29,381     37,214  
   Accrued liabilities:                
      Employee compensation and benefits       44,792     49,089  
      Network distribution contracts       61,624     48,257  
      Miscellaneous       74,146     71,313  

   Total current liabilities       905,511     532,976  

Deferred Income Taxes       146,989     147,106  

Long-Term Debt (less current portion)       109,966     501,781  

Other Long-Term Obligations and Minority Interests (less current portion)   129,394     130,367  

Commitments and Contingencies (Note 14)              

Stockholders' Equity:                
   Preferred stock, $.01 par - authorized: 25,000,000 shares; none outstanding              
   Common stock, $.01 par:                
      Class A - authorized: 120,000,000 shares; issued and                
            outstanding: 2001 - 60,103,746 shares; 2000 - 59,641,828 shares   601     596  
      Voting - authorized: 30,000,000 shares; issued and                
            outstanding: 2001 - 19,096,913 shares; 2000 - 19,096,913 shares       191     191  

   Total       792     787  
   Additional paid-in capital       174,485     157,394  
   Retained earnings       1,183,595     1,093,138  
    Unrealized gains on securities available for sale   5,067     31,877  
    Foreign currency translation adjustment     (554 )   361  
    Unvested restricted stock awards     (11,485 )   (5,747 )

   Total stockholders' equity       1,351,900     1,277,810  

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,643,760   $ 2,590,040  

                 
See notes to consolidated financial statements.                

F - 17

CONSOLIDATED STATEMENTS OF INCOME                        

 
( in thousands, except per share data )                        
 
For the years ended December 31,
 
 
2001
 
2000
 
1999
 

 
                         
Operating Revenues:
     
     
     
   Advertising
$
1,081,996  
$
1,346,477  
$
1,198,306  
   Circulation
140,138  
147,848  
153,742  
   Licensing
65,877  
68,549  
63,755  
   Affiliate fees
59,175  
40,312  
34,149  
   Share of joint operating agency profits
45,175  
47,412  
50,511  
   Other
44,770  
51,160  
54,836  

 
   Total operating revenues
1,437,131  
1,701,758  
1,555,299  

 
 
     
     
     
Operating Expenses:
     
     
     
   Employee compensation and benefits
470,538  
516,707  
492,162  
   Newsprint and ink
88,120  
156,369  
143,183  
   Amortization of program rights and production costs
135,489  
121,044  
98,810  
   Other operating expenses
369,420  
453,384  
421,939  
   Depreciation
55,721  
69,057  
65,300  
   Amortization of intangible assets
43,406  
40,108  
38,551  

 
   Total operating expenses
1,162,694  
1,356,669  
1,259,945  

 
 
     
     
     
Operating Income
274,437  
345,089  
295,354  

 
 
     
     
     
Other Credits (Charges):
     
     
     
   Interest expense
(39,197 )
(51,934 )
(45,219 )
   Investment results, net of expenses
5,063  
(24,834 )
  544  
   Net gains on divested operations
     
6,196  
     
   Miscellaneous, net
1,079  
1,485  
3,505  

 
   Net other credits (charges)
(33,055 )
(69,087 )
(41,170 )

 
 
     
     
     
Income Before Taxes and Minority Interests
241,382  
276,002  
254,184  
Provision for Income Taxes
99,622  
108,090  
103,612  

 
 
     
     
     
Income Before Minority Interests
141,760  
167,912  
150,572  
Minority Interests
3,797  
4,459  
4,450  

 
 
     
     
     
Net Income
$
137,963  
$
163,453  
$
146,122  

 
 
     
     
     

 
 
     
     
     
Net Income per Share of Common Stock:
     
     
     
   Basic
$
  1.75  
$
  2.09  
$
  1.87  
   Diluted
$
  1.73  
$
  2.06  
$
  1.85  

 
 
     
     
     
See notes to consolidated financial statements.
     
     
     

F - 18

CONSOLIDATED STATEMENTS OF CASH FLOWS                    

 
( in thousands )                    
    For the years ended December 31,  
    2001  2000  1999 

 
                     
Cash Flows from Operating Activities:                    
Net income      $ 137,963      $ 163,453      $ 146,122  
Adjustments to reconcile net income                    
      to net cash flows from operating activities:                    
      Depreciation and amortization     99,127     109,165     103,851  
      Cash received greater than share of profits                    
         of JOAs and equity method investments     22,413     1,214     1,119  
      Deferred income taxes     14,068     (3,119 )   14,333  
      Tax benefits of stock compensation plans     10,478     4,959     3,959  
      Stock and deferred compensation plans     9,940     11,116     9,960  
      Minority interests in income of subsidiary companies     3,797     4,459     4,450  
      Cash received for affiliate fees, net of launch incentive payments,                    
         greater (less) than affiliate fees revenue     (49,316 )   13,005     (3,245 )
      Program cost amortization greater (less) than payments     (39,826 )   (44,049 )   (51,810 )
      Net investment results and loss (gain) on divestitures     (6,658 )   17,732     (1,554 )
      Other changes in certain working capital accounts, net     4,069     (18,773 )   (29,130 )
      Miscellaneous, net     12     (3,419 )   (4,540 )

 
Net operating activities     206,067     255,743     193,515  

 
                     
Cash Flows from Investing Activities:                    
Additions to property, plant and equipment     (68,223 )   (74,577 )   (79,826 )
Investments in Denver JOA     (61,420 )            
Purchase of subsidiary companies and long-term investments     (40,879 )   (139,056 )   (69,515 )
Change in short-term investments, net                 20,551  
Sale of subsidiary companies and long-term investments     14,550     50,940     9,344  
Miscellaneous, net     1,575     10,789     2,602  

 
Net investing activities     (154,397 )   (151,904 )   (116,844 )

 
                     
Cash Flows from Financing Activities:                    
Increase in long-term debt     9,271     737     4,340  
Payments on long-term debt     (69 )   (54,695 )   (5,596 )
Dividends paid     (47,506 )   (43,924 )   (43,816 )
Repurchase Class A Common shares     (22,449 )   (4,571 )   (34,951 )
Dividends paid to minority interests     (3,278 )   (3,278 )   (3,278 )
Miscellaneous, net (primarily employee stock options)     15,668     5,548     1,667  

 
Net financing activities     (48,363 )   (100,183 )   (81,634 )

 
                     
Increase (Decrease) in Cash and Cash Equivalents     3,307     3,656     (4,963 )
                     
Cash and Cash Equivalents:                    
Beginning of year     14,112     10,456     15,419  

 
End of year   $ 17,419   $ 14,112   $ 10,456  

 
                                
Supplemental Cash Flow Disclosures:                    
   Interest paid, excluding amounts capitalized   $ 38,538   $ 51,434   $ 45,162  
   Income taxes paid     63,008     110,065     89,117  
   Denver newspaper assets contributed to JOA     156,830              
   Destin newspaper traded for Fort Pierce newspaper (see Note 3)           3,857        

 
                     
See notes to consolidated financial statements.                    

F - 19

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND STOCKHOLDERS' EQUITY


( in thousands, except share data )     Common
Stock 
    Additional
Paid-in
Capital 
    Retained
Earnings 
     Accumulated
Other
Comprehensive
Income 
    Unvested
Restricted
Stock
Awards  
     Total
Stockholders'
Equity 


                                                   
As of December 31, 1998   $ 785     $ 161,878     $ 871,303     $ 39,485     $ (3,731 )   $ 1,069,720  
Comprehensive income                                                
  Net income                     146,122                       146,122  


  Unrealized gains, net of tax of ($9,393)                             17,358               17,358  
  Reclassification adjustment for losses (gains) in income, net of tax of ($558)                             1,036               1,036  


  Increase in unrealized gains                             18,394               18,394  
  Currency translation, net of tax of $176                             392               392  


  Total                     146,122       18,786               164,908  
Dividends: declared and paid - $.56 per share                     (43,816 )                     (43,816 )
Convert 2,000 Voting Shares to Class A shares                                                
Repurchase 784,793 Class A Common shares     (8 )     (34,943 )                             (34,951 )
Compensation plans, net: 430,896 shares issued; 200 shares forfeited; 47,421 shares repurchased     4       5,984                       (1,209 )     4,779  
Tax benefits of compensation plans             3,812                               3,812  


As of December 31, 1999     781       136,731       973,609       58,271       (4,940 )     1,164,452  
Comprehensive income:                                                
  Net income                     163,453                       163,453  


  Unrealized gains (losses), net of tax of $17,973                             (32,819 )             (32,819 )
  Reclassification adjustment for losses (gains) in income, net of tax of ($4,233)                             7,398               7,398  


  Increase (decrease) in unrealized gains                             (25,421 )             (25,421 )
  Currency translation                             (612 )             (612 )


  Total                     163,453       (26,033 )             137,420  
Dividends: declared and paid - $.56 per share                     (43,924 )                     (43,924 )
Convert 120,000 Voting Shares to Class A shares                                                
Repurchase 80,500 Class A Common shares     (1 )     (4,570 )                             (4,571 )
Compensation plans, net: 742,915 shares issued; 15,445 shares forfeited; 50,591 shares repurchased     7       20,275                       (807 )     19,475  
Tax benefits of compensation plans             4,958                               4,958  


As of December 31, 2000     787       157,394       1,093,138       32,238       (5,747 )     1,277,810  
Comprehensive income:                                                
  Net income                     137,963                       137,963  


  Unrealized gains, net of tax of ($2,687)                             4,990               4,990  
  Reclassification adjustment for losses (gains) in income, net of tax of $17,124                             (31,800 )             (31,800 )


  Increase (decrease) in unrealized gains                             (26,810 )             (26,810 )
  Currency translation, net of tax of $180                             (915 )             (915 )


  Total                     137,963       (27,725 )             110,238  
Dividends: declared and paid - $.60 per share                     (47,506 )                     (47,506 )
Repurchase 382,200 Class A Common shares     (4 )     (22,445 )                             (22,449 )
Compensation plans, net: 966,084 shares issued; 2,500 shares forfeited; 119,466 shares repurchased     9       29,058                       (5,738 )     23,329  
Tax benefits of compensation plans             10,478                               10,478  


                                                                       
As of December 31, 2001   $ 792     $ 174,485     $ 1,183,595     $ 4,513     $ (11,485 )   $ 1,351,900  


See notes to consolidated financial statements.

F - 20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations - The E. W. Scripps Company ("Company") operates in three reportable segments: newspapers, cable television networks (referred to as "Scripps Networks") and broadcast television.

Newspapers include 21 daily newspapers in the U.S., and derive revenue primarily from the sale of advertising space to local and national advertisers and from the sale of the newspapers to readers.

Scripps Networks includes three national television networks that are distributed by cable and satellite television systems: Home & Garden Television ("HGTV"), Food Network and Do It Yourself ("DIY"), and the Company's 12% interest in FOX SportsSouth, a regional television network. The Company owned 68.0% of Food Network on December 31, 2001. The Company will launch Fine Living, its fourth national network, in March 2002. The Company owns 94% of Fine Living. Revenues are derived primarily from the sale of advertising time and from affiliate fees paid by distributors.

Broadcast television includes ten stations, nine of which are affiliated with national broadcast networks. Broadcast television derives revenue from the sale of advertising time to local and national advertisers and from affiliated networks for broadcasting their programs.

The relative importance of each line of business is indicated in the segment information presented in Note 13. Licensing and other media aggregates the Company's operating segments that are too small to report separately, and primarily includes syndication and licensing of news features and comics.

The Company's operations are geographically dispersed and its customer base is diverse. However, more than 75% of the Company's operating revenues are derived from advertising. Operating results can be affected by changes in the demand for advertising both nationally and in individual markets.

The Company grants credit to substantially all of its customers. Management believes bad debt losses resulting from default by a single customer, or defaults by customers in any depressed region or business sector, would not have a material effect on the Company's financial position.

Use of Estimates - Preparation of the financial statements requires the use of estimates. The Company's financial statements include estimates for such items as income taxes payable and self-insured risks. The Company self-insures for employees' medical and disability income benefits, workers' compensation and general liability. The recorded liability for self-insured risks is calculated using actuarial methods and is not discounted. The recorded liability for self-insured risks totaled $22,700,000 at December 31, 2001. Management does not believe it is likely that its estimates for such items will change materially in the near term.

Consolidation - The consolidated financial statements include the accounts of the Company and its majority-owned subsidiary companies.

 

F-21

Revenue Recognition - Significant revenue recognition policies are as follows:

Program Rights and Production Costs - Program rights are recorded when licensed programs become available for broadcast. Amortization is computed using the straight-line method based on the license period or based on usage, whichever yields the greater accumulated amortization for each program. The liability for program rights is not discounted for imputed interest.

Production costs are primarily costs incurred in the production of internally developed programming. These costs are amortized on a straight-line basis over the estimated useful lives of the programs, generally three years. Program and production costs are stated at the lower of unamortized cost or fair value. The portion of the unamortized balance expected to be amortized within one year is classified as a current asset.

Program rights liabilities payable within the next twelve months are included in accounts payable. Noncurrent program rights liabilities are included in other long-term obligations.

Long-Lived Assets - Long-lived assets used in business operations are recorded at unamortized cost. Management reviews long-lived assets, including related goodwill and other intangible assets, for impairment whenever events or changes in circumstances indicate the carrying amounts of the assets may not be recoverable. Recoverability is determined by comparing the forecasted undiscounted cash flows of the operation to which the assets relate to the carrying amount of the assets. If the operation is determined to be unable to recover the carrying amount of its assets, then goodwill and other intangible assets are written down first, followed by other long-lived assets of the operation, to fair value. Fair value is determined based on discounted cash flows. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

 

F-22

Goodwill and Other Intangible Assets - Goodwill represents the cost of acquisitions in excess of the acquired businesses' tangible assets and identifiable intangible assets. Audience and newspaper subscriber base represents the cost of acquisitions assigned to the potential to deliver advertising to the viewers and readers of the acquired business' programming and publications. Amortization is calculated on a straight-line basis over 40 years. Upon adoption of Financial Accounting Standard ("FAS") No. 142 – Goodwill and Other Intangible Assets these assets will be subsumed into goodwill (see Note 2).

Broadcast television network affiliation represents the cost of acquisitions assigned to audience recognition of the acquired television station as a network affiliate. Broadcast television network affiliation and FCC licenses are amortized on a straight-line basis over 40 years. Upon adoption of FAS No. 142 amortization of these intangible assets will cease.

Cable network affiliation represents the cost of acquisitions assigned to the potential of the cable television network to deliver advertising to cable and satellite television subscribers during the terms of existing network distribution contracts. Amortization is calculated on a straight-line basis over the greater of five years or the remaining duration of the network distribution contracts. Customer lists and other intangible assets are amortized on a straight-line basis over periods of up to 20 years.

Property, Plant and Equipment - Depreciation is computed using the straight-line method over maximum estimated useful lives as follows:

  Buildings and improvements 35 years
  Printing presses 30 years
  Other newspaper production equipment 5 to 10 years
  Television transmission towers and related equipment 15 years
  Other television and program production equipment 5 to 15 years
  Office and other equipment 3 to 10 years

Income Taxes - Deferred income taxes are provided for temporary differences between the tax basis and reported amounts of assets and liabilities that will result in taxable or deductible amounts in future years. The Company's temporary differences primarily result from accelerated depreciation and amortization for tax purposes, investment gains and losses not yet recognized for tax purposes and accrued expenses not deductible for tax purposes until paid.

Investments - The Company has invested in various securities, including public and private companies. Investment securities, in general, are exposed to various risks, such as interest rate, credit and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the Consolidated Statements of Income.

The Company records its investments at fair value, except for securities accounted for under the equity method or that do not trade in a public market. All investments recorded at fair value have been classified as available for sale. The fair value of available-for-sale investments is determined by quoted market prices. The cost basis of available-for-sale securities is adjusted when a decline in market value is determined to be other than temporary, with the resulting adjustment charged against net income. The difference between adjusted cost basis and fair value, net of related tax effects, is recorded in the accumulated other comprehensive income component of stockholders' equity. Investments in private companies are recorded at cost, net of impairment write-downs, because no readily determinable market price is available.

Investments in 20%- to 50%-controlled companies and in all joint ventures are accounted for using the equity method.

The cost of securities sold is determined by specific identification.

F - 23

Newspaper Joint Operating Agencies - A JOA combines all but the editorial operations of two competing newspapers in a market in order to reduce aggregate expenses and take advantage of economies of scale, thereby allowing the continuing operation of both newspapers in that market. The Newspaper Preservation Act of 1970 provides a limited exemption from anti-trust laws, generally permitting the continuance of JOAs in existence prior to its enactment and the formation, under certain circumstances, of new JOAs between newspapers.

The Company is a partner in JOAs in four markets. The JOA between the Company's Denver Rocky Mountain News and MediaNews Group Inc.'s Denver Post was approved by the U.S. Attorney General in January 2001. The 50-year agreement created a new entity called the Denver Newspaper Agency L.L.C., which is 50%-owned by each partner. Both partners contributed certain assets used in the operations of their newspapers to the new entity. In addition, the Company paid $60,000,000 to MediaNews Group Inc. The JOA commenced operations on January 22, 2001.

The Company receives a 50% share of the operating profits of the Denver JOA, and between 20% and 40% of the operating profits in the other three markets. The Company includes its portion of JOA operating profits in operating revenues, and includes its residual interest in the net assets of the Denver and Albuquerque JOAs in Investments in the Consolidated Balance Sheets. The Company does not include any assets or liabilities related to its other JOAs in its Consolidated Balance Sheets because the Company has no residual interest in the net assets of those JOAs.

Inventories - Inventories are stated at the lower of cost or market. The cost of inventories is computed using the first in, first out ("FIFO") method.

Stock-Based Compensation - The Company's incentive plans provide for awards of options to purchase Class A Common shares and awards of Class A Common shares. Stock options are awarded to purchase Class A Common shares at not less than 100% of the fair market value on the date of the award. Stock options and awards of Class A Common shares vest over an incentive period conditioned upon the individual's employment through that period. The Company measures compensation expense using the intrinsic-value-based method (see Note 15).

Cash Equivalent and Short-term Investments - Cash equivalents represent debt instruments with an original maturity of less than three months. Short-term investments represent excess cash invested in securities not meeting the criteria to be classified as cash equivalents. Cash equivalent and short-term investments are carried at cost plus accrued income, which approximates fair value.

Risk Management Contracts - The Company does not hold derivative financial instruments for trading or speculative purposes, and does not hold leveraged contracts. The impact of risk management activities on the Company's financial position, its results of operations, and its cash flows is immaterial. The Company held no derivative financial instruments in the three years ended December 31, 2001.

Net Income Per Share - The following table presents additional information about basic and diluted weighted-average shares outstanding:


 
( in thousands )            
 
For the years ended December 31,
 
  2001   2000   1999  






 
Basic weighted-average shares outstanding
78,825
  78,170   77,936  
 
         
Effect of dilutive securities:
         
   Unvested restricted stock held by employees
169
  165   179  
   Stock options held by employees
976
  826   836  






 
Diluted weighted-average shares outstanding
79,970
  79,161   78,951  






 

Reclassifications - For comparative purposes, certain 2000 and 1999 amounts have been reclassified to conform to 2001 classifications.

 

F-24

2. ACCOUNTING CHANGES AND RECENTLY ISSUED ACCOUNTING STANDARDS

Accounting Changes - The Company adopted FAS No. 133 – Accounting for Derivative Financial Instruments and Hedging Activities effective January 1, 2001. Adoption of this standard had no effect on the Company's financial statements.

The Company adopted FAS No. 144 – Accounting for the Impairment or Disposal of Long-Lived Assets in 2001. Adoption of this standard had no effect on the Company's financial statements.

In 2001 the Company adopted the accounting method prescribed in Emerging Issues Task Force Issue ("EITF") 00-25 – Vendor Income Statement Classification of Consideration Paid to a Reseller of the Vendor's Products. EITF 00-25 requires consideration paid to customers to be deducted from revenue. Prior to adoption of this accounting method, the Company had classified amortization of launch incentives paid to cable and satellite television systems as an operating expense in its Consolidated Statements of Income. Previously issued financial statements have been reclassified. The reclassification had no effect on the Company's reported net income or financial position.

Recently Issued Accounting Standards - FAS No. 141 - Business Combinations and FAS No. 142 - Goodwill and Other Intangible Assets were issued in August 2001. FAS No. 141 requires business combinations initiated after June 30, 2001, to be accounted for using the purchase method of accounting. FAS No. 141 also specifies the types of acquired intangible assets that are required to be recognized and reported separately from goodwill. Intangible assets acquired that are obtained through contractual or legal right, or are capable of being separately sold, transferred, licensed, rented or exchanged are recognized as an asset apart from goodwill. Intangible assets that do not meet the requirements for recognition apart from goodwill are subsumed into goodwill.

The Company adopted FAS No. 142 effective January 1, 2002. Recorded goodwill and intangible assets with indefinite lives are no longer amortized, but instead are tested for impairment at least annually. Other intangible assets are reviewed for impairment in accordance with FAS No. 144. The Company must complete a transitional evaluation of whether goodwill is impaired prior to June 30, 2002. To complete the transitional impairment evaluation, the Company must (i) identify reporting units, (ii) determine the carrying value of each reporting unit by assigning the assets and liabilities, including existing goodwill and other intangible assets, to those reporting units, and (iii) determine whether the carrying value of the reporting unit exceeds its fair value. If the carrying value of any reporting unit exceeds its fair value, then detailed fair values for each of the assigned assets and liabilities (excluding goodwill) and liabilities will be determined to calculate the amount of goodwill impairment, if any. This second step is required to be completed as soon as possible, but no later than December 31, 2002. Any transitional impairment loss will be recorded as the cumulative effect of a change in accounting principle.

If the non-amortization provisions of FAS No. 142 had been effective for all periods presented, reported results of operations would have been as follows:


( in thousands, except per share data )                                                      
                     
For the Years Ended
                   
   
December 31, 2001
   
December 31, 2000
   
December 31, 1999
 
   
Net
Basic
Diluted
Net
Basic
Diluted
Net
Basic
Diluted
 
 
Income
EPS
EPS
Income
EPS
EPS
Income
EPS
EPS
 

As reported
$137,963     $1.75    
$1.73
    $163,453     $2.09    
$2.06
    $146,122     $1.87    
$1.85
 
               
               
               
 
Add back amortization of:              
               
               
 
   Goodwill   27,163     .34    
.34
    25,798     .33    
.33
    25,029     .32    
.32
 
   FCC licenses   470     .01    
.01
    470     .01    
.01
    470     .01    
.01
 
   Network affiliation and other   233     .00    
.00
    226     .00    
.00
    226     .00    
.00
 

As adjusted
$165,829     $2.10    
$2.07
    $189,947     $2.43    
$2.40
    $171,847     $2.20    
$2.18
 

                                                     
F - 25

 

Information regarding the Company's goodwill and other intangible assets as of the date of adoption of FAS No. 142 is as follows:


( in thousands )                                      
Scripps
Broadcast
Licensing
Net Book
Carrying
Accumulated
Newspapers
Networks
Television
and Other
Value
Amount
Amortization

Goodwill:                                      
   Goodwill
$
724,106
$
138,115
$
153,882
$
18
$    1,016,121
   Audience and subscriber base
55,004
56,644
111,648
   Work force
1,622
8,841
10,463

   Total
780,732
138,115
219,367
18
1,138,232

 
Unamortized intangible assets:
   FCC licenses
25,622
25,622
   Network affiliation
26,748
26,748
   Other
1,153
432
1,585

   Total
1,153
432
52,370
53,955

 
Amortized intangible assets:
   Cable network affiliation
5,456
5,456
$
20,669
$
15,213
   Customer lists
3,003
3,003
4,219
1,216
   Other
1,181
1,015
349
2,545
6,607
4,062


   Total
4,184
6,471
349
11,004
31,495
20,491


 
Total goodwill and intangible assets
786,069
145,018
272,086
18
1,203,191

 
Program rights
214,419
28,916
243,335
539,746
296,411

Network distribution contracts
124,639
124,639
209,536
84,897

Amortization for assets recorded as of December 31, 2001, for each of the five succeeding years is presented below. Amortization will be greater than the reported amounts because additional assets will be acquired.


( in thousands )                          
 
Scripps
Broadcast
Licensing
   
 
Newspapers
Networks
Television
and Other
Total
   

                           
Intangible assets
$
400
$
3,100
$
100
$
3,600
 
Program rights
94,100
26,600
120,700
 
Network distribution contracts
19,200
19,200
 

 
Total 2002
$
400
$
116,400
$
26,700
$
143,500
 

 
 
 
Intangible assets
$
400
$
2,200
$
100
$
2,700
 
Program rights
70,800
1,400
72,200
 
Network distribution contracts
18,200
18,200
 

 
Total 2003
$
400
$
91,200
$
1,500
$
93,100
 

 
 
 
Intangible assets
$
400
$
600
$
100
$
1,100
 
Program rights
35,400
700
36,100
 
Network distribution contracts
17,200
17,200
 

 
Total 2004
$
400
$
53,200
$
800
$
54,400
 

 
                           
Intangible assets
400
 $ 
100
$
500
   
Program rights
10,900
$
100
11,000
 
Network distribution contracts
18,000
18,000
 

 
Total 2005
400
29,000
$
100
$
29,500
   

 
                           
Intangible assets
400
100
$
500
 
Program rights
2,500
2,500
 
Network distribution contracts
16,400
16,400
 

 
Total 2006
400
19,000
$
19,400
 

F-26

3. ACQUISITIONS AND DIVESTITURES

Acquisitions

2001
-

The Company acquired an additional 4.0% interest in Food Network.

 
 
2000
-

The Company acquired the daily newspaper in Fort Pierce, Florida, in exchange for its newspaper in Destin, Florida, and cash; the daily newspaper in Henderson, Kentucky; the weekly newspaper in Marco Island, Florida; and television station KMCI in Lawrence, Kansas.

 
 
1999
-

The Company acquired an additional 6.9% interest in Food Network.

The following table presents additional information about the acquisitions:


( in thousands )                  
   
For the years ended December 31,
 
    2001     2000     1999  

Goodwill and other intangible assets acquired $
19,435
  $ 73,305   $ 18,243  
Other assets acquired (primarily property and equipment)         14,495        

Total  
19,435
    87,800     18,243  
Fair value of Destin newspaper         (3,857 )      
Liabilities assumed         (1,876 )   (592 )

Cash paid $
19,435
  $ 82,067   $ 17,651  

The acquisitions have been accounted for as purchases. The allocations of the purchase prices in 2001 are based upon preliminary appraised values of the assets acquired and liabilities assumed, and are therefore subject to change. Operating results are included in the Consolidated Statements of Income from the dates of acquisitions, with the exception of KMCI whose results were included while the Company operated the station under a contract with the previous owner. Pro forma results are not presented because the combined results of operations would not be significantly different than the reported amounts.

Divestitures

2000
-

The Company sold its independent telephone directories and traded its Destin, Florida, newspaper and cash for the daily newspaper in Fort Pierce, Florida. The sales and trade resulted in net gains of $6,196,000, $4,000,000 after-tax ($.05 per share).

Included in the consolidated financial statements were the following results of divested operating units (excluding gains on sales):


( in thousands )          
   
For the years ended
December 31,
 
    2000  
1999
 

Operating revenues
$   10,500  
$   23,042  
Operating income (loss)   (275 )   195  

F - 27

 

4.   UNUSUAL CREDITS AND CHARGES
2001 - The Company’s reported results of operations were affected by the following items:
   
 
  •   
  • Included in net investment results are i) recognized net investment gains and ii) adjustments to accrued incentive compensation related to changes in the net gains (realized and estimated unrealized) on the Scripps Ventures I portfolio. Included in recognized net investment gains are i) realized net gains totaling $77,300,000, including $65,900,000 on the exchange of the Company’s investment in Time Warner for America Online (“AOL”), which acquired Time Warner in the first quarter, and an $11,700,000 gain on the sale of a portion of the Company’s investment in Centra Software, ii) $80,200,000 in write-downs for several investments, including a $29,000,000 write-down of the investment in AOL in the fourth quarter, and iii) an $11,500,000 reduction in accrued incentive compensation, to zero at December 31, 2001. Net investment results increased net income $3,800,000 ($.05 per share).
       
     
  • Costs associated with workforce reductions, including the Company’s share of such costs at the Denver JOA, reduced operating income $16,100,000. Net income was reduced $10,100,000 ($.13 per share).
       
    The combined effect of the above items was to reduce 2001 net income $6,300,000 ($.08 per share).
       
    2000 - In addition to the gains on divested operations described in Note 3, the Company’s reported results of operations were affected by the following items:
       
     
  •   
  • Included in net investment results are i) realized gains of $12,400,000, ii) $29,900,000 in write-downs for several investments, and iii) a $4,500,000 increase in accrued incentive compensation, to $11,500,000 at December 31, 2000. Net investment results reduced net income $15,800,000 ($.20 per share).
       
     
  •   
  • $9,500,000 of expenses associated with preparations for the joint newspaper operations in Denver. Net income was reduced $6,200,000 ($.08 per share).
       
     
  • Reduction of the estimated liability for prior year income taxes and a reduction in the estimate of unrealizable state net operating loss carryforwards (see Note 5). Net income was increased $7,200,000 ($.09 per share).
       
    The combined effect of the above items was to reduce 2000 net income $10,900,000 ($.14 per share).
       
    1999 - The Company’s reported results of operations were affected by the following items:
       
     
  •   
  • Included in net investment results are i) realized gains of $11,200,000, ii) $2,600,000 in write-downs for several investments, and iii) a $7,000,000 increase in accrued incentive compensation, to $7,000,000 at December 31, 1999. Net investment results increased net income $400,000 ($.00 per share).
       
     
  •   
  • Costs incurred to move the Food Network’s operations to a different location in Manhattan totaled $800,000. Net income was reduced $500,000 ($.01 per share).
       
     
  • Severance payments totaling $1,200,000 to certain television station employees, reducing net income $700,000 ($.01 per share).
       
    The combined effect of the above items was to reduce 1999 net income $900,000 ($.01 per share).

    F-28

     

    5. INCOME TAXES

    The Company's 1992 through 1995 consolidated federal income tax returns are currently under examination by the IRS. In 2000 the Company reduced its liability for prior year income taxes by $4,200,000. Management believes that adequate provision for income taxes has been made for all open years.

    The approximate effects of the temporary differences giving rise to the Company's deferred income tax liabilities (assets) were as follows:


     
    ( in thousands )          
       
    As of December 31,
     
        2001    
    2000
     






     
    Accelerated depreciation and amortization $ 150,929   $ 163,469  
    Investments, primarily gains and losses not yet recognized for tax   22,795     12,266  
    Accrued expenses not deductible until paid   (10,219 )   (10,575 )
    Deferred compensation and retiree benefits not deductible until paid   (29,673 )   (31,682 )
    Other temporary differences, net   (10,499 )   (11,217 )






     
    Total   123,333     122,261  
    State net operating loss carryforwards   (13,587 )   (12,128 )
    Valuation allowance for state deferred tax assets   6,393     6,552  






     
    Net deferred tax liability $ 116,139   $ 116,685  






     

    The Company's state net operating loss carryforwards expire from 2003 through 2016. At each balance sheet date management estimates the amount of state net operating loss carryforwards that are not expected to be used prior to expiration of the carryforward period. The tax effect of these unused state net operating loss carryforwards is included in the valuation allowance. Based upon expected taxable income of subsidiary companies with state net operating loss carryforwards during the carryforward periods, the Company reduced its valuation allowance by $3,000,000 in 2000.

    F - 29

    The provision for income taxes consisted of the following:


    ( in thousands )                  
    For the years ended December 31,
    2001
    2000
    1999

    Current:                  
       Federal $ 55,758   $ 82,514   $ 67,247  
       State and local   15,531     18,361     13,588  
       Foreign   3,787     5,376     4,485  

                       
    Total current   75,076     106,251     85,320  

    Deferred:                  
       Federal   435     (13,340 )   22,111  
       Other   (981 )   (3,519 )   2,144  

    Total deferred   (546 )   (16,859 )   24,255  

    Total income taxes   74,530     89,392     109,575  
    Income taxes allocated to stockholders' equity   25,092     18,698     (5,963 )

    Provision for income taxes $ 99,622   $ 108,090   $ 103,612  

                       
    The difference between the statutory rate for federal income tax and the effective income tax rate was as follows:        
                       

       
    For the years ended December 31,
     
       
    2001
    2000
    1999
     

    Statutory rate   35.0 %   35.0 %   35.0 %
    Effect of:                  
       State and local income taxes   4.0     3.5     4.0  
       Adjustment of liability for prior year income taxes         (1.5 )      
       Amortization of nondeductible goodwill   1.6     1.4     1.4  
       Miscellaneous   0.7     0.8     0.4  

    Effective income tax rate   41.3 %   39.2 %   40.8 %

    F - 30

    6. LONG-TERM DEBT

    Long-term debt consisted of the following:


     
    ( in thousands )            
       
    As of December 31,
     
       
    2001
       
    2000
     






     
    Variable rate credit facilities, including commercial paper $
    513,855
      $
    512,788
     
    $100 million, 6.625% note, due in 2007  
    99,916
       
    99,901
     
    $100 million, 6.375% note, due in 2002  
    99,983
       
    99,964
     
    Other notes  
    10,090
       
    1,956
     






     
       
       
     
    Total long-term debt  
    723,844
       
    714,609
     
    Current portion of long-term debt  
    613,878
       
    212,828
     






     
       
       
     
    Long-term debt (less current portion) $
    109,966
      $
    501,781
     






     
       
       
     
    Fair value of long-term debt * $
    730,000
      $
    711,300
     






     
                 
    * Fair value was estimated based on current rates available to the Company for debt of the same remaining maturity.            

     

    The Company has a Competitive Advance and Revolving Credit Facility Agreement, which expires in September 2002 and permits aggregate borrowings up to $675,000,000 (the "Variable Rate Credit Facilities"). Borrowings are available on a committed revolving credit basis at the Company's choice of three short-term rates or through an auction procedure at the time of each borrowing. The Variable Rate Credit Facilities are also used by the Company in whole or in part, in lieu of direct borrowings, as credit support for its commercial paper. The weighted-average interest rates on the Variable Rate Credit Facilities at December 31 was 2.0% in 2001 and 6.6% in 2000.

    Certain long-term debt agreements contain maintenance requirements for net worth and coverage of interest expense and restrictions on incurrence of additional indebtedness. The Company is in compliance with all debt covenants.

    Current maturities of long-term debt are classified as long-term to the extent they can be refinanced under existing long-term credit commitments. The Variable Rate Credit Facilities are expected to be replaced with a similar facility prior to expiration.

    Interest costs capitalized were $700,000 in 2001, $200,000 in 2000, and $400,000 in 1999.

    F - 31

    7. INVESTMENTS

    Investments consisted of the following:


     
    ( in thousands, except share data )            
       
    As of December 31,
     
       
    2001
       
    2000
     






     
                 
    Securities available for sale (at market value):            
       AOL Time Warner common stock (2,017,000 shares) $
    64,740
       
     
       Time Warner common stock (1,344,000 shares)  
      $
    70,239
     
       Centra Software (700,500 and 1,792,500 common shares)  
    5,604
       
    6,946
     
       Other  
    4,213
       
    3,969
     






     
    Total available-for-sale securities  
    74,557
       
    81,154
     
    Denver newspaper JOA  
    198,527
       
     
    FOX SportSouth and other joint ventures  
    6,744
       
    9,502
     
    Other equity investments  
    51,714
       
    87,266
     






     
    Total investments $
    331,542
      $
    177,922
     






     
       
       
     
    Unrealized gains on securities available for sale $
    7,793
      $
    49,047
     






     

    Investments available for sale represent securities in publicly traded companies. Investments available for sale are recorded at fair value. Fair value is based upon the closing price of the security on the reporting date.

    The Company exchanged its investment in Time Warner for America Online, which acquired Time Warner, in the first quarter of 2001. The Company sold 1,092,000 shares of Centra Software in the second quarter of 2001.

    Other equity investments include securities that do not trade in public markets, so they do not have readily determinable fair values. Management estimates the fair value of these securities is approximately $60,000,000. However, many of the investees have had no rounds of equity financing in the past two years and there can be no assurance as to the amounts the Company would receive if the securities were sold.

    The Company's Scripps Ventures Funds I and II invest in new businesses focusing primarily on new media technology. Scripps Ventures I invested $54,000,000. The managers' compensation includes a share of that portfolio's cumulative net gain through December 2002 if a specified minimum return is achieved. The incentive compensation accrual was zero at December 31, 2001, and will be subject to change as the net gain changes through December 2002. Scripps Ventures II is authorized to invest up to $100,000,000, of which $44,000,000 was invested as of December 31, 2001. The managers have a minority equity interest in the return on Scripps Ventures II's investments if a specified minimum return is achieved.

    F - 32

    8. PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment consisted of the following:


    ( in thousands )            
       
    As of December 31,
     
        2001    
    2000
     

    Land and improvements
    $
    45,246
     
    $
    47,395
     
    Buildings and improvements  
    204,792
       
    255,320
     
    Equipment  
    549,660
       
    685,314
     

    Total  
    799,698
    988,029
     
    Accumulated depreciation  
    405,021
    485,988
     

    Net property, plant and equipment
    $
    394,677
     
    $
    502,041
     

    9. GOODWILL AND OTHER INTANGIBLE ASSETS

    Goodwill and other intangible assets arising from business acquisitions consisted of the following:


    ( in thousands )            
       
    As of December 31,
     
        2001    
    2000
     

                 
    Goodwill $
    1,225,437
      $
    1,207,828
     
    Audience and subscriber base  
    180,694
       
    180,694
     
    Work force  
    17,020
       
    17,020
     
    Broadcast television network affiliation  
    37,851
       
    37,851
     
    FCC licenses  
    30,644
       
    30,644
     
    Cable network affiliation  
    20,669
       
    20,669
     
    Customer lists  
    4,219
       
    4,219
     
    Other  
    8,940
       
    8,733
     

     
    Total  
    1,525,474
    1,507,658
     
    Accumulated amortization  
    322,283
    281,352
     

                 
    Net goodwill and other intangible assets $
    1,203,191
      $
    1,226,306
     

    F - 33

    10. OTHER LONG-TERM OBLIGATIONS AND MINORITY INTERESTS

    Other long-term obligations and minority interests consisted of the following:


     
    ( in thousands )            
       
    As of December 31,
     
       
    2001
       
    2000
     






     
    Program rights payable $
    42,234
      $
    50,928
     
    Employee compensation and benefits  
    98,079
       
    96,952
     
    Network distribution contracts  
    66,543
       
    55,235
     
    Minority interests  
    13,825
       
    13,274
     
    Other  
    15,490
       
    16,054
     






     
    Total other long-term obligations and minority interests  
    236,171
       
    232,443
     
    Current portion of other long-term obligations  
    106,777
       
    102,076
     






     
    Other long-term obligations and minority interests (less current portion) $
    129,394
      $
    130,367
     






     

    11. SUPPLEMENTAL CASH FLOW INFORMATION

    The following table presents additional information about the change in certain working capital accounts:


     
    ( in thousands )                  
       
    For the years ended December 31,
     
        2001     2000     1999  









     
    Other changes in certain working capital accounts, net:                  
       Accounts receivable $ 23,500   $ (24,238 ) $ (53,847 )
       Accounts payable   (24,464 )   (2,120 )   13,374  
       Accrued income taxes   11,868     586     503  
       Other accrued liabilities   (14,927 )   8,024     3,356  
       Other, net   8,092     (1,025 )   7,484  









     
       Total $ 4,069   $ (18,773 ) $ (29,130 )









     

    F - 34

    12. EMPLOYEE BENEFIT PLANS

    Retirement plans expense consisted of the following:


    ( in thousands )                  
       
    For the years ended December 31,
     
        2001     2000     1999  

    Service cost $ 13,022   $ 13,857   $ 14,078  
    Interest cost   20,970     19,198     17,012  
    Actual (return) loss on plan assets, net of expenses   22,589     799     (50,022 )
    Net amortization and deferral   (50,022 )   (29,654 )   27,120  

    Total for defined benefit plans   6,559     4,200     8,188  
    Multi-employer plans   747     1,248     1,162  
    Defined contribution plans   5,618     6,208     5,698  

    Total $ 12,924   $ 11,656   $ 15,048  

    The following table presents information about the Company's employee benefit plan assets and obligations:


    ( in thousands )                  
       
    For the years ended December 31,
     
        2001     2000     1999  

    Change in benefit obligation                  
    Benefit obligation at beginning of year $ 274,971   $ 268,810   $ 269,493  
    Service cost   13,022     13,857     14,078  
    Interest cost   20,970     19,198     17,012  
    Benefits paid   (17,920 )   (16,606 )   (16,224 )
    Reductions associated with dispositions   (15,940 )            
    Actuarial losses (gains)   (1,896 )   (10,288 )   (15,549 )

    Benefit obligation at end of year   273,207     274,971     268,810  

    Change in plan assets                  
    Fair value at beginning of year   286,338     302,934     268,386  
    Actual return (loss) on plan assets   (22,589 )   (799 )   50,022  
    Company contributions   1,477     809     750  
    Benefits paid   (17,920 )   (16,606 )   (16,224 )
    Transfers associated with dispositions   (17,846 )            

    Fair value at end of year   229,460     286,338     302,934  

    Plan assets greater than (less than) projected benefits   (43,747 )   11,367     34,124  
    Unrecognized net loss (gain)   10,169     (38,904 )   (57,774 )
    Unrecognized prior service cost   1,880     2,629     3,547  
    Unrecognized net asset at the date FAS No. 87 was                  
       adopted, net of amortization   (603 )   (2,012 )   (3,434 )

    Net pension asset (liability) recognized in the balance sheet $ (32,301 ) $ (26,920 ) $ (23,537 )

    F - 35

    Assumptions used in the accounting for the defined benefit plans were as follows:


      2001   2000   1999  

                 
    Discount rate for determining annual expense 8.0 % 7.5 % 6.5 %
    Discount rate for determining year-end obligation 7.5 % 8.0 % 7.5 %
    Assumed long-term rate of return on plan assets 10.0 % 9.5 % 8.5 %
    Assumed rate of increase in compensation levels 5.5 % 5.0 % 4.0 %

    Management believes the discount rate plus two percentage points is the best estimate of the long-term return on plan assets, and the discount rate minus two and one-half percentage points is the best estimate of the long-term increase in compensation levels. Therefore, when the discount rate changes, management's expectation for the future long-term rate of return on plan assets and increase in compensation levels changes in tandem. For 2002 the assumed return on plan assets is 9.5% and the assumed rate of increase in compensation levels is 5.0%.

    Plan assets consist of marketable equity and fixed-income securities.

    13. SEGMENT INFORMATION

    The Company's reportable segments are strategic businesses that offer different products and services. The Company evaluates the operating performance of its segments based primarily on earnings before interest, income taxes, depreciation and amortization ("EBITDA"), excluding divested operating units (see Note 3), unusual items (see Note 4) and all amounts classified as other credits (charges) in the Consolidated Statements of Income. No single customer provides more than 10% of the Company's revenue. International revenues are primarily derived from licensing comic characters and HGTV and Food Network programming in international markets. Licensing of comic characters in Japan provides more than 60% of the Company's international revenues, which are less than $50,000,000 annually.

    Information regarding the Company's business segments is presented on the following page.

    F - 36


     
    ( in thousands )                  
       
    For the years ended December 31,
     
       
    2001
       
    2000
        1999  









     
                       
    OPERATING REVENUES                  
    Newspapers $ 739,431   $ 955,557   $ 914,403  
    Scripps Networks   337,195     295,681     212,922  
    Broadcast television   277,601     343,125     312,362  
    Licensing and other media   88,785     96,895     92,570  









     
    Total   1,443,012     1,691,258     1,532,257  
    Unusual item   (5,881 )            
    Divested operating units         10,500     23,042  









     
    Per consolidated financial statements $ 1,437,131   $ 1,701,758   $ 1,555,299  









     
                       
    EBITDA                  
    Newspapers $ 237,686   $ 269,409   $ 275,671  
    Scripps Networks   75,547     68,770     33,567  
    Broadcast television   79,651     129,018     95,955  
    Licensing and other media   14,881     16,144     12,640  
    Corporate   (18,596 )   (19,825 )   (17,519 )









     
    Total   389,169     463,516     400,314  
    Unusual items   (15,605 )   (9,523 )   (2,000 )
    Divested operating units         261     891  









     
    Per consolidated financial statements $ 373,564   $ 454,254   $ 399,205  









     
                       
    DEPRECIATION                  
    Newspapers $ 25,869   $ 40,574   $ 38,925  
    Scripps Networks   8,357     7,063     5,533  
    Broadcast television   19,652     19,277     17,962  
    Licensing and other media   831     814     1,472  
    Corporate   949     972     1,039  









     
    Total   55,658     68,700     64,931  
    Unusual items   63              
    Divested operating units         357     369  









     
    Per consolidated financial statements $ 55,721   $ 69,057   $ 65,300  









     
                       
    AMORTIZATION OF INTANGIBLE ASSETS                  
    Newspapers $ 25,761   $ 23,222   $ 22,114  
    Scripps Networks   7,803     7,236     6,364  
    Broadcast television   9,431     9,471     9,502  
    Licensing and other media               244  









     
    Total   42,995     39,929     38,224  
    Unusual items   411              
    Divested operating units         179     327  









     
    Per consolidated financial statements $ 43,406   $ 40,108   $ 38,551  









     
                       
    OPERATING INCOME                  
    Newspapers $ 186,056   $ 205,613   $ 214,632  
    Scripps Networks   59,387     54,471     21,670  
    Broadcast television   50,568     100,270     68,491  
    Licensing and other media   14,050     15,330     10,924  
    Corporate   (19,545 )   (20,797 )   (18,558 )









     
    Total   290,516     354,887     297,159  
    Unusual items   (16,079 )   (9,523 )   (2,000 )
    Divested operating units         (275)     195  









     
    Per consolidated financial statements $ 274,437   $ 345,089   $ 295,354  









     

    F - 37


    ( in thousands )                  
       
    For the years ended December 31,
     
       
    2001
    2000
    1999
     

    ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT                  
    Newspapers
    $
    34,363  
    $
    29,834  
    $
    30,693  
    Scripps Networks   14,114     12,236     21,557  
    Broadcast television   18,785     31,280     25,749  
    Licensing and other media   338     586     491  
    Corporate   623     548     796  

    Total   68,223     74,484     79,286  
    Divested operating units         93     540  

    Per consolidated financial statements
    $
    68,223  
    $
    74,577  
    $
    79,826  

    BUSINESS ACQUISITIONS AND
       
       
       
       OTHER ADDITIONS TO LONG-LIVED ASSETS
       
       
       
    Newspapers
    $
    63,199  
    $
    74,878  
    $
    4,005  
    Scripps Networks
    103,263  
    15,035  
    39,899  
    Broadcast television
    27  
    14,710  
    130  
    Venture capital and other investments
    18,139  
    53,615  
    43,298  

    Total
    184,628  
    158,238  
    87,332  
    Divested operating units
       
       
    800  

    Total
    $
    184,628  
    $
    158,238  
    $
    88,132  

    ASSETS
       
       
       
    Newspapers
    $
    1,274,694  
    $
    1,276,264  
    $
    1,228,824  
    Scripps Networks
    640,785  
    523,694  
    462,287  
    Broadcast television
    496,911  
    524,696  
    515,167  
    Licensing and other media
    26,899  
    34,851  
    36,819  
    Venture capital and other investments
    127,924  
    170,156  
    198,984  
    Corporate
    76,547  
    60,379  
    63,515  

    Total
    2,643,760  
    2,590,040  
    2,505,596  
    Divested operating units
       
       
    31,959  

    Per consolidated financial statements
    $
    2,643,760  
    $
    2,590,040  
    $
    2,537,555  

    Other additions to long-lived assets include investments and launch incentives capitalized. Corporate assets are primarily cash, cash equivalent and other short-term investments, and refundable and deferred income taxes.

    F - 38

    14. COMMITMENTS AND CONTINGENCIES

    The Company is involved in litigation arising in the ordinary course of business, none of which is expected to result in material loss.

    The Company's cable television systems were acquired by Comcast Corporation ("Comcast") in 1996. Pursuant to the terms of its agreement with Comcast, the Company remains liable for any losses resulting from certain lawsuits, certain other expenses and tax liabilities of its cable television systems attributable to periods prior to the transactions.

    The Company purchased program rights totaling $167,000,000 in 2001, $189,000,000 in 2000 and $131,000,000 in 1999, the payments for which are generally made over the lives of the contracts. At December 31, 2001, the Company was committed to purchase approximately $158,000,000 of program rights that are not currently available for broadcast, substantially all of which is for programs not yet produced. If such programs are not produced, the Company's commitments would expire without obligation.

    The Company capitalized launch incentive payments totaling $82,000,000 in 2001, $13,000,000 in 2000 and $22,000,000 in 1999. At December 31, 2001, the Company was committed to make additional launch incentive payments totaling approximately $45,000,000 associated with the launch of the Company's networks on cable and satellite television systems.

    Minimum payments on noncancelable leases at December 31, 2001, were: 2002, $13,800,000; 2003, $10,400,000; 2004, $9,700,000; 2005, $9,300,000; 2006, $6,700,000 and later years, $16,800,000. Rental expense for cancelable and noncancelable leases was $16,800,000 in 2001, $19,300,000 in 2000 and $16,300,000 in 1999.

    F - 39

    15. CAPITAL STOCK AND INCENTIVE PLANS

    Capital Stock - The capital structure of the Company includes Common Voting Shares and Class A Common Shares. The articles provide that the holders of Class A Common Shares, who are not entitled to vote on any other matters except as required by Ohio law, are entitled to elect the greater of three or one-third of the directors. In 1997 and 1998 the Board of Directors authorized the purchase of a total of 6,000,000 of the Company's Class A Common Shares. The Company repurchased 4,270,600 shares through December 31, 2001.

    Incentive Plans - The Company's Long-Term Incentive Plans (the "Plans") provide for the award of incentive and nonqualified stock options with 10-year terms, stock appreciation rights, performance units and restricted and unrestricted Class A Common Shares to key employees and non-employee directors. The Plans expire in 2007, except for options then outstanding. The number of shares authorized for issuance under the plans at December 31, 2001, was 10,913,000, of which approximately 2,065,000 had not been issued.

    Stock Options - Stock options may be awarded to purchase Class A Common Shares at not less than 100% of the fair market value on the date the option is granted. Stock options will vest over an incentive period, conditioned upon the individual's employment through that period. The following table presents information about stock options:


        Number
    of Shares
     
    Weighted-
    Average
    Exercise Price
        Range of
    Exercise
    Prices

    Outstanding at December 31, 1998   3,154,420   $ 26.58   $
    11 - 56
    Granted in 1999   792,200     47.19    
    41 - 52
    Exercised in 1999   (295,104 )   16.80    
    11 - 47
    Forfeited in 1999   (24,749 )   45.76    
    35 - 54

    Outstanding at December 31, 1999   3,626,767     31.75    
    11 - 56
    Granted in 2000   1,025,550     49.27    
    43 - 60
    Exercised in 2000   (401,380 )   21.38    
    11 - 50
    Forfeited in 2000   (1,500 )   49.00    
    49       

    Outstanding at December 31, 2000   4,249,437     36.98    
    11 - 60
    Granted in 2001   1,102,200     64.17    
    58 - 70
    Exercised in 2001   (743,227 )   27.38    
    11 - 56
    Forfeited in 2001   (76,872 )   49.75    
    20 - 64

    Outstanding at December 31, 2001 (by year granted):                
       1992   49,800     15.28    
    15 - 17
       1993   327,100     17.65    
    16 - 21
       1994   413,700     18.85    
    18 - 21
       1995   9,800     20.01    
    20       
       1996   124,400     27.27    
    24 - 29
       1997   421,650     35.18    
    35 - 42
       1998   503,350     47.35    
    39 - 56
       1999   645,200     47.17    
    42 - 52
       2000   948,063     49.31    
    43 - 60
       2001   1,088,475     64.22    
    58 - 70

       Total options outstanding   4,531,538   $ 44.95   $
    15 - 70

    Exercisable at December 31:                
       1999   2,323,844   $ 23.85   $
    11 - 56
       2000   2,601,809     29.66    
    11 - 56
       2001   2,655,716     35.88    
    15 - 60

    Substantially all options granted prior to 1999 are exercisable. Options issued in 1999 through 2001 generally become exercisable over a three-year period.

    F - 40

    The Company has adopted the "disclosure-only" provisions of FAS No. 123; therefore no compensation expense has been recognized for stock option grants. Had compensation expense been determined based upon the fair value (determined using the Black-Scholes option pricing model) at the grant date consistent with the provisions of FAS No. 123, the Company's income from continuing operations would have been reduced to the pro forma amounts as follows:


    ( in thousands, except per share data )                              
     
    For the years ended December 31,
                           
        2001     2000     1999  

                                   
    Pro forma net income $ 126,200   $ 155,200   $ 139,700  
    Pro forma net income per share of common stock:                              
       Basic       $1.60         $1.99         $1.79  
       Diluted       1.58         1.96         1.77  

    Information related to the fair value of stock option grants is presented below:                              

                                   
     
    For the years ended December 31,
       
    2001
       
    2000
       
    1999
     

                                   
    Weighted-average fair value of options granted   $ 18.92     $ 15.87     $ 13.23  
    Assumptions used to determine fair value:                              
       Dividend yield     1.5 %     1.5 %     1.5 %
       Expected volatility       23 %       24 %       23 %
       Risk-free rate of return     5.5 %     6.5 %     5.0 %
       Expected life of options  
    7 years
    7 years
    7 years

    Restricted Stock - Awards of Class A Common Shares vest over an incentive period conditioned upon the individual's employment throughout that period. During the vesting period shares issued are nontransferable, but the shares are entitled to all the rights of an outstanding share. Compensation expense is determined based upon the fair value of the shares at the grant date. Information related to awards of Class A Common Shares is presented below:


    ( in thousands, except share data )                          
       
    For the years ended December 31,
     
        2001         2000     1999  

     
                               
    Class A Common Shares:                          
       Shares awarded
    184,947
    296,903
    85,400
     
       Weighted-average price of shares awarded
    $63.51
    $49.31
    $46.70
     
       Shares forfeited
    2,500
    15,445
    200
     
       Compensation expense recognized
    $
    4,227
    $
    7,063
    $
    2,779
     

     

    F - 41

    16.    SUMMARIZED QUARTERLY FINANCIAL INFORMATION (Unaudited)

    Summarized financial information is as follows:


    ( in thousands, except per share data )                                          
    2001   1st
    Quarter
          2nd
    Quarter
        3rd
    Quarter
        4th
    Quarter
        Total  

    Operating revenues
    $
    362,080  
    $
      368,408  
    $
    336,052  
    $
    370,591  
    $
    1,437,131
     

    Operating expenses:
                                           
       Employee compensation and benefits
    118,755       118,087     114,588     119,108     470,538  
       Newsprint and ink
    26,241       22,383     20,035     19,461     88,120  
       Amortization of program rights and production costs
    32,095       33,694     33,971     35,729     135,489  
       Other operating expenses
    98,975       93,196     82,721     94,528     369,420  
       Depreciation and amortization
    24,765       24,717     23,982     25,663     99,127  

       Total operating expenses
    300,831       292,077     275,297     294,489     1,162,694  

    Operating income
    61,249       76,331     60,755     76,102     274,437  
    Interest expense
    (12,461 )     (10,859 )   (8,417 )   (7,460 )   (39,197 )
    Investment results, net of expense
    58,785       2,957     (10,917 )   (45,762 )   5,063  
    Miscellaneous, net
      353         480       240       6     1,079  
    Income taxes
    (40,642 )     (28,584 )   (18,023 )   (12,373 )   (99,622 )
    Minority interests
    (846 )     (975 )   (1,005 )   (971 )   (3,797 )

    Net income
    $
    66,438  
    $
      39,350  
    $
    22,633  
    $
    9,542  
    $
    137,963  

    Net income per share of common stock:
                                           
          Basic
      $.84  
        $.50  
      $.29       $.12       $1.75  
          Diluted
      $.83  
        $.49  
      $.28       $.12       $1.73  

    Basic weighted-average shares outstanding
    78,719       78,844     78,977     78,760     78,825  

                                           
    Diluted weighted-average shares outstanding
    79,864       80,002     80,167     79,849     79,970  

                                           
    Cash dividends per share of common stock
      $.15         $.15       $.15       $.15       $.60  

    The sum of the quarterly net income per share amounts may not equal the reported annual amount because each is computed independently based upon the weighted-average number of shares outstanding for the period.

    F - 42


    ( in thousands, except per share data )                                        
    2000   
    1st
    Quarter
      
    2nd
    Quarter
      
    3rd
    Quarter
      
    4th
    Quarter
      
    Total
     

    Operating revenues  
    $
    406,463
     
    $
    434,830
     
    $
    404,989
     
    $
    455,476
     
    $
    1,701,758
     

    Operating expenses:  
     
     
     
     
     
       Employee compensation and benefits  
    127,292
     
    129,314
     
    129,672
     
    130,429
     
    516,707
     
       Newsprint and ink  
    37,192
     
    38,646
     
    38,228
     
    42,303
     
    156,369
     
       Amortization of program rights and production costs  
    28,038
     
    29,332
     
    30,176
     
    33,498
     
    121,044
     
       Other operating expenses  
    112,876
     
    115,380
     
    105,274
     
    119,854
     
    453,384
     
       Depreciation and amortization  
    26,808
     
    27,256
     
    27,288
     
    27,813
     
    109,165
     

       Total operating expenses    
    332,206
     
    339,928
     
    330,638
     
    353,897
     
    1,356,669
     

    Operating income    
    74,257
     
    94,902
     
    74,351
     
    101,579
     
    345,089
     
    Interest expense    
    (12,636
    )
     
    (13,481
    )
     
    (13,393
    )
     
    (12,424
    )
     
    (51,934
    )
    Investment results, net of expenses    
    (9,062
    )
     
    (1,449
    )
     
    900
     
    (15,223
    )
     
    (24,834
    )
    Net gains (losses) on divested operations    
    6,269
     
     
    (73
    )
     
     
    6,196
     
    Miscellaneous, net    
    946
     
    45
     
    1,002
     
    (508
    )
     
    1,485
     
    Income taxes    
    (25,114
    )
     
    (32,833
    )
     
    (26,319
    )
     
    (23,824
    )
     
    (108,090
    )
    Minority interests    
    (1,056
    )
     
    (1,063
    )
     
    (1,040
    )
     
    (1,300
    )
     
    (4,459
    )

    Net income   $
    33,604
     
    $
    46,121
     
    $
    35,428
     
    $
    48,300
     
    $
    163,453
     

    Net income per share of common stock:    
     
     
     
     
     
          Basic    
    $.43
     
    $.59
     
    $.45
     
    $.62
     
    $2.09
     
          Diluted    
    $.43
     
    $.58
     
    $.45
     
    $.61
     
    $2.06
     

    Basic weighted-average shares outstanding    
    77,977
     
    78,115
     
    78,186
     
    78,336
     
    78,170
     

                                             
    Diluted weighted-average shares outstanding    
    78,824
     
    78,995
     
    79,173
     
    79,589
     
    79,161
     

                                             
    Cash dividends per share of common stock    
    $.14
     
    $.14
     
    $.14
     
    $.14
     
    $ .56
     

    The sum of the quarterly net income per share amounts may not equal the reported annual amount because each is computed independently based upon the weighted-average number of shares outstanding for the period.

    F - 43


    INDEPENDENT AUDITORS' REPORT

    To the Board of Directors and Stockholders,
    The E. W. Scripps Company:

    We have audited the accompanying consolidated balance sheets of The E. W. Scripps Company and subsidiary companies ("Company") as of December 31, 2001 and 2000, and the related consolidated statements of income, cash flows and comprehensive income and stockholders' equity for each of the three years in the period ended December 31, 2001. Our audits also included the financial statement schedule listed in the Index at Item S-1. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

    We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2001 and 2000, and the results of its operations and cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

     

     

    DELOITTE & TOUCHE LLP
    Cincinnati, Ohio
    January 23, 2002

    F - 44

    THE E. W. SCRIPPS COMPANY

    Index to Consolidated Financial Statement Schedules

    Valuation and Qualifying Accounts
    S-2
     

    S - 1

    VALUATION AND QUALIFYING ACCOUNTS
    FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
      SCHEDULE II
















    ( in thousands )                        
             COLUMN A   COLUMN B   COLUMN C   COLUMN D   COLUMN E   COLUMN F
                                   
                            INCREASE      
                ADDITIONS     DEDUCTIONS     (DECREASE)      
          BALANCE     CHARGED TO     AMOUNTS     RECORDED     BALANCE
          BEGINNING     COSTS AND     CHARGED     ACQUISITIONS     END OF
          CLASSIFICATION     OF PERIOD     EXPENSES     OFF-NET     (DIVESTITURES)     PERIOD














                                                                   
    YEAR ENDED DECEMBER 31, 2001:                              
    Allowance for doubtful
         accounts receivable
      $ 13,891   $ 11,026   $ 10,210   $ (743 ) $ 13,964
















                                   
    YEAR ENDED DECEMBER 31, 2000:                              
    Allowance for doubtful
         accounts receivable
      $ 11,266   $ 14,648   $ 11,345   $ (678 ) $ 13,891
















                                   
    YEAR ENDED DECEMBER 31, 1999:                              
    Allowance for doubtful
         accounts receivable
      $ 7,689   $ 10,754   $ 7,177         $ 11,266
















    S - 2

    THE E. W. SCRIPPS COMPANY

    Index to Exhibits

               
    Exhibit
    Number
     
    Description of Item
     
    Page
      Exhibit No.
    Incorporated
                   
        
    3.01
      Articles of Incorporation   (5 )            
    3.01
     
    3.02
      Code of Regulations   (5 )  
    3.02
     
    4.01
      Class A Common Share Certificate   (2 )  
    4
     
    4.02A
      Form of Indenture: 6.375% notes due in 2002   (3 )  
    4.1
     
    4.02B
      Form of Indenture: 6.625% notes due in 2007   (3 )  
    4.1
     
    4.03A
      Form of Debt Securities: 6.375% notes due in 2002   (3 )  
    4.2
     
    4.03B
      Form of Debt Securities: 6.625% notes due in 2007   (3 )  
    4.2
     
    10.01
      Amended and Restated Joint Operating Agreement, dated January 1, 1979, among        
     
           Journal Publishing Company, New Mexico State Tribune Company and        
     
           Albuquerque Publishing Company, as amended   (1 )  
    10.01
     
    10.02
      Amended and Restated Joint Operating Agreement, dated February 29, 1988, among        
     
           Birmingham News Company and Birmingham Post Company   (1 )  
    10.02
     
    10.03
      Joint Operating Agreement, dated September 23, 1977, between the        
     
           Cincinnati Enquirer, Inc. and the Company, as amended   (1 )  
    10.03
     
    10.04
      Joint Operating Agreement Among The Denver Post Corporation, Eastern        
     
           Colorado Production Facilities, Inc., Denver Post Production Facilities LLC        
     
           and The Denver Publishing Company dated as May 11, 2000, as amended   (9 )  
    10.04
     
    10.06
      Building Lease, dated April 25, 1984, among Albuquerque Publishing Company,        
     
           Number Seven and Jefferson Building Partnership   (1 )  
    10.08A
     
    10.06A
      Ground Lease, dated April 25, 1984, among Albuquerque Publishing Company,        
     
           New Mexico State Tribune Company, Number Seven and Jefferson Building        
     
           Partnership   (1 )  
    10.08B
     
    10.07
      Agreement, dated August 17, 1989, between United Feature Syndicate, Inc. and        
     
           Charles M. Schulz and the Trustees of the Schulz Family Renewal Copyright        
     
           Trust, as amended   (1 )  
    10.11
     
    10.40
      5-Year Competitive Advance and Revolving Credit Agreement, dated as of        
     
           September 26, 1997, among The E. W. Scripps Company, the Banks named        
     
           therein, The Chase Manhattan Bank, as Agent, and J. P. Morgan & Co., as        
     
           Documentation Agent   (3 )  
    10.1
     
    10.41
      364-Day Competitive Advance and Revolving Credit Agreement, dated as of        
     
           September 26, 1997, among The E. W. Scripps Company, the Banks named        
     
           therein, The Chase Manhattan Bank, as Agent, and J. P. Morgan & Co., as        
     
           Documentation Agent   (3 )  
    10.2
     
    10.53
      1987 Long-Term Incentive Plan   (1 )  
    10.36
     
    10.54
      Agreement, dated December 24, 1959, between the Company and Charles E. Scripps,        
     
           as amended   (1 )  
    10.39A
     
    10.54A
      Assignment, Assumption, and Release Agreement, dated December 31, 1987,        
     
           between the Company, Scripps Howard, Inc. and Charles E. Scripps   (1 )  
    10.39B
     
    10.54B
      Amendment, dated June 21, 1988, to December 24, 1959 Agreement between        
     
           the Company and Charles E. Scripps   (1 )  
    10.39C
     
    10.55
      Board Representation Agreement, dated March 14, 1986, between        
     
           The Edward W. Scripps Trust and John P. Scripps   (1 )  
    10.44
     
    10.56
      Shareholder Agreement, dated March 14, 1986, between the Company and the        
     
           Shareholders of John P. Scripps Newspapers   (1 )  
    10.45
     
    10.57
      Scripps Family Agreement dated October 15, 1992   (4 )  
    1
     
    10.58
      1997 Long-Term Incentive Plan   (6 )  
    4B
     
    10.59
      Non-Employee Directors' Stock Option Plan   (6 )  
    4A
     
    10.60
      1997 Deferred Compensation and Phantom Stock Plan for Senior Officers        
     
           and Selected Executives   (7 )  
    4A
     
    10.61
      1997 Deferred Compensation and Stock Plan for Directors   (8 )  
    10.61

    E - 1

                     
    Exhibit
    Number
     
    Description of Item

    Page
      Exhibit No.
    Incorporated
                     
       10.62   Employment Agreement, dated July 20, 1999, between the Company          
               and Kenneth W. Lowe (9 )     10.62
      12   Computation of Ratio of Earnings to Fixed Charges for the Three Years Ended          
               December 31, 2001 E-3        
      21   Subsidiaries of the Company E-4        
      23   Independent Auditors' Consent E-5        
                     
            (1 ) Incorporated by reference to Registration Statement of The E. W. Scripps Company on Form S-1 (File No. 33-21714).
           
      (2 ) Incorporated by reference to The E. W. Scripps Company Annual Report on Form 10-K for the year ended December 31, 1990.
           
      (3 ) Incorporated by reference to Registration Statement on Form S-3 (File No. 33-36641).
           
      (4 ) Incorporated by reference to The E. W. Scripps Company Current Report on Form 8-K dated October 15, 1992.
           
      (5 ) Incorporated by reference to Scripps Howard, Inc. Registration Statement on Form 10 (File No. 1-11969).
           
      (6 ) Incorporated by reference to Registration Statement of The E. W. Scripps Company on Form S-8 (File No. 333-27623).
           
      (7 ) Incorporated by reference to Registration Statement of The E. W. Scripps Company on Form S-8 (File No. 333-27621).
           
      (8 ) Incorporated by reference to The E. W. Scripps Company Annual Report on Form 10-K for the year ended December 31, 1998.
           
      (9 ) Incorporated by reference to The E. W. Scripps Company Annual Report on Form 10-K for the year ended December 31, 2000.

    E - 2