2 0 1 8 A N N U A L R E P O R T
Objective | Impactful | Authentic
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F I N A N C I A L H I G H L I G H T S
Operating Revenues
CONTINUING OPERATIONS (Dollars in millions)
Operating Revenues By Segment
CONTINUING OPERATIONS
$1250
$1000
$750
$500
$250
$0
$1,208
$874
$877
2016
2017
2018
National
Media
24%
Local Media
76%
Operating Results – Continuing Operations
(Dollars in millions)
2016
2017
2018
Consolidated
Operating revenues
Operating income (loss)
Income (loss) from continuing operations, net of tax
Local Media
Segment operating revenues
Segment profit
National Media
Segment operating revenues
Segment profit (loss)
Other
Segment operating revenues
Segment loss
$874
$877
$1,208
128
60
835
243
34
(10)
4.7
(2.5)
(1.9)
(12)
778
157
93
(9.3)
5.5
(2.4)
130
56
917
251
286
14
4.8
(3.7)
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L E T T E R T O S H A R E H O L D E R S
To our shareholders:
It was nearly 100 years ago when The E.W. Scripps Company adopted its motto, “Give light and the people will find their own way.”
This was a call to action for our journalists and the teams who supported them – inspiring us to provide important information to
equip our audiences with the tools they need to improve their lives and their communities. We care deeply about our communities;
after all, we live in them too. Our viewers, readers and users are also our neighbors, family and friends.
Our motto, with its focus on the people we serve, has served us well as we moved over the decades beyond newspapers into radio,
television, cable systems, cable networks and most recently onto digital media, digital audio and over-the-top television platforms.
For Scripps, sustainability means evolving our business to meet the changing needs of our advertisers and audiences and finding the
opportunity to create shareholder value out of the disruption in our industry.
The media business is changing more rapidly today than it ever has. Our company is working to build a sturdy, high-quality
television station portfolio that can provide a strong foundation for launching innovative new journalism and media-related business
models – businesses we believe will bolster our value for many generations into the future.
We are working hard for something worth believing in: the instrumental role the free press plays in democracy.
Corporate Highlights
During 2018, the company made tremendous strides in its plan to improve short-term operating performance while positioning itself
strategically for long-term growth.
Last year, we completed the reorganization of our company into consumer-focused Local and National Media divisions, we reduced
our corporate and division costs by more than $30 million, we sold our 34 radio stations, and we beat our financial results guidance
across the board each quarter.
Among our financial highlights was our record-setting midterm election advertising revenue of $140 million. Scripps’ markets saw
a large number of tightly contested races that stayed competitive throughout the election season. Of the 21 top-spending U.S. Senate
and governors’ races across the country, Scripps stations benefited from 12. We also played host to 10 highly competitive U.S. House
races and three large ballot initiatives. And we were pleased to see the local broadcast industry in general grow its significantly large
share of total political spending dollars. We are looking ahead with optimism to the 2020 presidential election year.
Also in Local Media, we announced plans to acquire 18 television stations from Cordillera and Raycom, giving us durability and
depth in key states and growing our reach to 21 percent across the United States. Upon the closing of the Cordillera transaction, we
will own No.1 stations in a third of our local media markets.
Looking ahead, we are focused on continuing to acquire television stations to improve the durability and reach of our portfolio. We
also continue to grow our retransmission revenue, including significant growth when our Comcast contract resets on Dec. 31, 2019.
In our National Media division, we own a portfolio of businesses focused on seizing the opportunities created with changing
consumer media behaviors. Our fast-growing media brands cross many platforms, engage and serve broad audiences, and capture
lucrative national advertising dollars.
At the end of 2018, we closed on our acquisition of Triton, the leader in digital audio audience measurement and infrastructure
services. Triton is capitalizing on the changing way media consumers listen to music and spoken-word programming. Unlike the
other national businesses, Triton has recurring revenue streams tied to long-term contracts with audio publishers. This business will
contribute significantly to the profitability of our National Media segment and brings strong operating margins.
The four Katz over-the-air networks – Bounce, Grit, Escape and Laff – today reach well over 90 percent of U.S. TV households with
their audience-targeted programming and grew their share of general market advertising during 2018. In May, Katz will bring back
the iconic brand Court TV as its fifth network, returning gavel-to-gavel live court coverage to television.
SCR0063-AnnualReport2018-FINAL.indd 3
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At Stitcher, we underwent a rebranding of the business in 2018. The name Stitcher is now the umbrella brand for our podcast
business, formerly called Midroll. Stitcher represents our ownership of every link in the podcast ecosystem, including content
networks, an advertising rep firm, a premium subscription business and the listener-focused podcast app.
Stitcher continues to grow its portfolio of hit shows, including with key content partners such as Oprah Winfrey and Marvel Comics.
The business also continues to significantly grow its advertising revenue. More than half of our podcast ad sales now come from
large national general market advertisers. Stitcher is helping major brands understand the effectiveness of podcast advertising as the
industry experiences tremendous listener growth.
At our next-generation national news network Newsy, we made progress on a number of fronts during the last year. We have nearly
40 million cable households. We continued to grow our over-the-top revenue as younger viewers sought out news on platforms such
as Roku and Amazon Fire. The ability to target ads to specific consumers on these platforms is one of the drivers of our significant
growth in over-the-top. Newsy also distinguished itself with objective, thorough coverage of the midterm elections in November.
It aired 19 hours of live coverage on all its platforms on Election Day, including live updates from reporters at a number of Scripps
local TV stations.
At the corporate level, we maintained our balanced approach to allocating capital through the television station and Triton acquisitions
combined with the initiation of a dividend in February 2018 and the launch of an accelerated share repurchase program. Our
management team continues to prioritize near-term operating performance while maintaining our approach to long-term value creation.
Corporate Social Responsibility
At Scripps, we consider our mission of quality journalism and community service to be consistent with the kind of work most public
companies seek to include in Corporate Social Responsibility – more commonly referred to from the investment side as ESG – an
environmental, social responsibility and good governance investment focus.
Scripps employees take pride in giving back to their communities through social service projects, shining light on important local
issues such as domestic violence, homelessness and urban planning and growth, and sponsoring or volunteer-hosting important events.
The philanthropic arm of our company, the Scripps Howard Foundation, supports journalism education that strives to produce fair-
minded, thoughtful reporters and editors; literacy that promotes a more educated populace; and social-service organizations in the
communities where we do business. The Foundation runs an annual literacy campaign, “If You Give A Child A Book …,” providing
books to underprivileged children in our markets. Scripps’ employees made significant contributions to this campaign in 2018.
Scripps hosts three marquee national events that speak, respectively, to our commitment to diversity and inclusion; education; and
journalism excellence: The Bounce Trumpet Awards; The Scripps National Spelling Bee; and The Scripps Howard Awards.
From a human capital perspective, we pay deliberate attention to diversity, equity and inclusion (DEI) in our workplaces. The
appointment of a chief diversity officer last year was the first step toward a more comprehensive companywide plan for DEI that
includes hiring and retaining a diverse workforce and seeking out a diverse supplier base.
We also consider employee safety and well-being to be part of our social responsibility. And we consider cybersecurity an important
component of our company’s focus on good corporate governance as well as an issue our board of directors monitors closely.
Scripps believes CSR is not just good for business and increasingly of interest to investors but the right thing to do as a mission-
driven, employee-focused, community-serving media company.
Sincerely,
Adam P. Symson
President and Chief Executive Officer
March 2019
SCR0063-AnnualReport2018-FINAL.indd 4
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UNITED STATES
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, 2018
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number 0-16914
THE E.W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)
Ohio
(State or other jurisdiction of
incorporation or organization)
312 Walnut Street
Cincinnati, Ohio
(Address of principal executive offices)
31-1223339
(IRS Employer
Identification Number)
45202
(Zip Code)
Registrant’s telephone number, including area code: (513) 977-3000
Title of each class
Securities registered pursuant to Section 12(b) of the Act:
Class A Common shares, $.01 par value
Securities registered pursuant to Section 12(g) of the Act:
Not applicable
Name of each exchange on which registered
NASDAQ Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
No
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
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
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.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of “large accelerated filer”, “accelerated filer” , “smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting
company
Emerging growth
company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
The aggregate market value of Class A Common shares of the registrant held by non-affiliates of the registrant, based on the $13.39 per share closing price for
such stock on June 30, 2018, was approximately $760,000,000. All Class A Common shares beneficially held by executives and directors of the registrant and
descendants of Edward W. Scripps have been deemed, solely for the purpose of the foregoing calculation, to be held by affiliates of the registrant. There is no
active market for our Common Voting shares.
As of January 31, 2019, there were 68,731,963 of the registrant’s Class A Common shares, $.01 par value per share, outstanding and 11,932,722 of the
registrant’s Common Voting shares, $.01 par value per share, outstanding.
Certain information required for Part III of this report is incorporated herein by reference to the proxy statement for the 2019 annual meeting of shareholders.
DOCUMENTS INCORPORATED BY REFERENCE
Index to The E.W. Scripps Company Annual Report
on Form 10-K for the Year Ended December 31, 2018
Page
Item No.
Additional Information
Forward-Looking Statements
PART I
1. Business
1A. Risk Factors
1B. Unresolved Staff Comments
2. Properties
3. Legal Proceedings
4. Mine Safety Disclosures
Executive Officers of the Company
PART II
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
6. Selected Financial Data
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
7A. Quantitative and Qualitative Disclosures About Market Risk
8. Financial Statements and Supplementary Data
9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
9A. Controls and Procedures
9B. Other Information
PART III
10. Directors, Executive Officers and Corporate Governance
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
13. Certain Relationships and Related Transactions, and Director Independence
14. Principal Accounting Fees and Services
PART IV
15. Exhibits and Financial Statement Schedules
16. Form 10-K Summary
3
3
4
13
20
20
20
20
21
22
24
24
24
24
24
24
24
25
25
25
25
25
26
26
2
As used in this Annual Report on Form 10-K, the terms “Scripps,” “Company,” “we,” “our” or “us” may, depending on
the context, refer to The E.W. Scripps Company, to one or more of its consolidated subsidiary companies, or to all of them
taken as a whole.
Additional Information
Our Company website is http://www.scripps.com. Copies of all of our SEC filings filed or furnished pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge on this website as soon as reasonably
practicable after we electronically file the material with, or furnish it to, the SEC. Our website also includes copies of the
charters for our Compensation, Nominating & Governance and Audit Committees, our Corporate Governance Principles, our
Insider Trading Policy, our Ethics Policy and our Code of Ethics for the CEO and Senior Financial Officers. All of these
documents are also available to shareholders in print upon request or by request via e-mail to secretary@scripps.com.
Forward-Looking Statements
Our Annual Report on Form 10-K contains certain forward-looking statements related to the Company's businesses that
are based on management’s current expectations. Forward-looking statements are subject to certain risks, trends and
uncertainties, including changes in advertising demand and other economic conditions that could cause actual results to differ
materially from the expectations expressed in forward-looking statements. Such forward-looking statements are made as of the
date of this document and should be evaluated with the understanding of their inherent uncertainty. A detailed discussion of
principal risks and uncertainties that may cause actual results and events to differ materially from such forward-looking
statements is included in the section titled “Risk Factors.” The Company undertakes no obligation to publicly update any
forward-looking statements to reflect events or circumstances after the date the statement is made.
3
PART I
Item 1.
Business
We are an 140-year-old media enterprise with interests in local and national media brands. Founded in 1878, our motto is
"Give light and the people will find their own way." Our mission is to do well by doing good — creating value for customers,
employees and owners by informing, engaging and empowering those we serve. We serve audiences and businesses in our
Local Media division through a portfolio of local television stations and their associated digital media products. Our Local
Media division is one of the nation’s largest independent TV station ownership groups. Following the completion of the
Raycom Media acquisition in January 2019 and the anticipated closing of the Cordillera Communications, LLC acquisition in
the second quarter of 2019, we will have 51 television stations in 36 markets and a reach of more than one in five U.S.
television households. We have affiliations with all of the “Big Four” television networks. In our National Media division, we
operate national media brands including podcast industry-leader, Stitcher, and its advertising network Midroll Media; next-
generation national news network, Newsy; four national broadcast networks, the Katz networks; and the global leader in digital
audio technology and measurement services, Triton. We also operate an award-winning investigative reporting newsroom in
Washington, D.C., and serve as the longtime steward of one of the nation's largest, most successful and longest-running
educational programs, the Scripps National Spelling Bee. For a full listing of our outlets, visit http://www.scripps.com.
In 2018, management announced a comprehensive growth strategy for the Company to improve short-term performance
and position itself for long-term growth in the form of a five-point plan.
The strategy began at the end of 2017 with a reorganization of our Company into Local Media and National Media
divisions to better reflect how audiences and advertisers view our businesses.
We performed an analysis of our operating divisions and corporate cost structure in order to reduce expenses and improve
both operating performance and company cash flow. We have incurred restructuring charges totaling $13.3 million since the
third quarter of 2017 and have completed our plan to achieve $30 million in annualized cost reductions.
We executed on further optimizing our portfolio through the sale of our radio business. By the end of 2018, all 34 radio
stations had been sold through multiple transactions for total consideration of $83.5 million.
We continue to pursue a television station acquisition strategy that allows us to assemble the best-performing portfolio
possible. On January 1, 2019, we acquired ABC-affiliated stations in Waco, Texas and Tallahassee, Florida for $55 million in
cash. Additionally, we have entered into a definitive agreement to acquire 15 top ranked and high performing television
stations, serving 10 markets, for $521 million. Completion of the acquisition, which is anticipated to close in the second quarter
of 2019, is subject to regulatory approvals and customary closing conditions. These acquisitions allow us to move into new
markets that enhance our portfolio and will diversify our network affiliate mix.
We also are committed to the continued investment in our national media businesses for long-term growth. On
November 30, 2018, we acquired Triton Digital Canada, Inc., a leading global digital audio infrastructure and audience
measurement services company, for $150 million, net of cash acquired. We have increased our Newsy cable subscribers,
Stitcher podcast listeners and Katz U.S. household reach through our investment in and creation of quality content.
Additionally, during 2018, we delivered value to shareholders through our share repurchase program and initiation of a
quarterly dividend of 5 cents per share.
Financial information for each of our business segments can be found under “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and the Notes to Consolidated Financial Statements of this Form 10-K.
4
LOCAL MEDIA
Our Local Media segment is comprised of our local broadcast television stations and their related digital operations. We
have operated broadcast television stations since 1947, when we launched Ohio’s first television station, WEWS, in Cleveland.
Today, our television station group reaches approximately one in five of the nation’s television households and includes fifteen
ABC affiliates, five NBC affiliates, two FOX affiliates and two CBS affiliates. We also have two MyTV affiliates, one CW
affiliate, two independent stations and four Azteca America Spanish-language affiliates.
We produce high-quality news, information and entertainment content that informs and engages our local communities.
We distribute our content on four platforms — broadcast, Internet, smartphones and tablets. It is our objective to develop
content and applications designed to enhance the user experience on each of those platforms. Our ability to cover our
communities across multiple digital platforms allows us to expand our audiences beyond our traditional broadcast television
boundaries.
We believe the most critical component of our product mix is compelling news content, which is an important link to the
community and aids our stations' efforts to retain and expand viewership. We have trained employees in our news departments
to be multi-media journalists, allowing us to pursue a “hyper-local” strategy by having more reporters covering local news for
our over-the-air and digital platforms.
In addition to news programming, our television stations run network programming, syndicated programming and
original programming. Our strategy is to rely less on expensive syndicated programming and to replace it with original
programming that we control. We believe this strategy improves our Local Media division's financial performance. Original
shows we produce ourselves or in partnership with others include:
• The List, an Emmy award winning infotainment show, is available in 37 markets reaching viewers in approximately 28
percent of the country.
• The Now is a news show designed to take the audience into a deeper dive of the day's events and is available in more than
15 of our markets.
• RightThisMinute is a daily news and entertainment program featuring viral videos. RightThisMinute reaches nearly 97
percent of the nation's television households.
5
Information concerning our full-power television stations, their network affiliations and the markets in which they operate
is as follows:
Network
Affiliation/
DTV
Channel
Affiliation
Agreement
Expires in
FCC
License
Expires
in
Market
Rank
(1)
Stations
in
Market
(2)
Station
Rank in
Market
(3)
Percentage
of U.S.
Television
Households
in Mkt (4)
Average
Audience
Share (5)
Station
Market
WFTS-TV
KNXV-TV
Tampa, Ch. 28
Phoenix, Ch. 15
WMYD-TV
Detroit, Ch. 20
WXYZ-TV
KMGH-TV
WEWS-TV
Detroit, Ch. 7
Denver, Ch. 7
Cleveland, Ch. 5
WMAR-TV
Baltimore, Ch. 2
WTVF-TV
WRTV-TV
KGTV-TV
KMCI-TV
KSHB-TV
WCPO-TV
WTMJ-TV
WPTV-TV
Nashville, Ch. 5
Indianapolis, Ch. 6
San Diego, Ch. 10
Kansas City, Ch. 38
Kansas City, Ch. 41
Cincinnati, Ch. 9
Milwaukee, Ch. 4
W. Palm Beach, Ch. 5
KTNV-TV (6)
Las Vegas, Ch. 13
WKBW-TV
Buffalo, Ch. 7
WFTX-TV
KJRH-TV
Fort Myers/Naples, Ch. 4
Tulsa, Ch. 2
ABC/29
ABC/15
MY/21
ABC/41
ABC/7
ABC/15
ABC/38
CBS/25
ABC/25
ABC/10
Ind./41
NBC/42
ABC/22
NBC/28
NBC/12
ABC/13
ABC/38
FOX/35
NBC/8
WGBA-TV
Green Bay/Appleton, Ch. 26
NBC/41
WACY-TV (6)
Green Bay/Appleton, Ch. 32
MY/27
KMTV-TV
KWBA-TV
Omaha, Ch. 3
Tucson, Ch. 58
KGUN-TV (6)
Tucson, Ch. 9
KIVI-TV (6)
Boise, Ch. 6
WSYM-TV
KERO-TV
Lansing, Ch. 47
Bakersfield, Ch. 23
CBS/45
CW/44
ABC/9
ABC/24
FOX/38
ABC/10
2022
2022
2020
2022
2022
2022
2022
2021
2022
2022
N/A
2021
2022
2021
2021
2022
2022
2019
2021
2021
2020
2020
2021
2022
2022
2019
2022
2021
2022
2021
2021
2022
2021
2020
2021
2021
2022
2022
2022
2021
2021
2021
2022
2023
2021
2022
2021
2021
2022
2022
2022
2022
2021
2022
11
12
14
14
17
19
26
27
28
29
32
32
35
36
37
39
52
55
61
67
67
69
73
73
100
110
122
13
14
10
10
14
11
11
10
10
12
12
12
9
14
10
14
9
14
12
9
9
9
13
13
11
7
11
4
3
6
2
3
1
4
1
4
3
7
4
3
4
1
3
3
5
4
4
8
3
9
3
3
4
3
1.7%
1.7%
1.6%
1.6%
1.4%
1.3%
1.0%
0.9%
0.9%
0.9%
0.8%
0.8%
0.8%
0.8%
0.8%
0.7%
0.5%
0.5%
0.5%
0.4%
0.4%
0.4%
0.4%
0.4%
0.2%
0.2%
0.2%
4
5
2
7
4
8
3
13
5
5
1
6
7
6
8
5
6
3
5
5
1
9
1
5
8
4
6
All market and audience data is based on the November 2018 Nielsen survey, live viewing plus 7 days of viewing on DVR.
(1) Market rank represents the relative size of the television market in the United States.
(2) Stations in Market represents stations within the Designated Market Area per the Nielsen survey excluding public
broadcasting stations, satellite stations, and low-power stations.
(3) Station Rank in Market is based on Average Share as described in (5).
(4) Percentage of U.S. Television Households in Market represents the number of U.S. television households in Designated
Market Area as a percentage of total U.S. television households.
(5) Average Audience Share represents the number of television households tuned to a specific station from 6 a.m. to 2 a.m.
Monday-Sunday, as a percentage of total viewing households in the Designated Market Area.
(6) Affiliation agreements expired and were extended or are being negotiated at this writing.
Historically, we have been successful in renewing our FCC licenses.
We operate four low-power stations affiliated with the Azteca America network, a Hispanic network producing Spanish-
language programming. The stations are clustered around our Bakersfield and Denver stations. We also operate a low-power
station affiliated with ABC in Twin Falls, ID and a low-power independent station in San Diego.
6
Revenue cycles and sources
Core Advertising
Our core advertising is comprised of sales to local and national customers. The advertising includes a combination of
broadcast air spots, as well as digital advertising. Our core advertising revenues accounted for 51% of our Local Media
segment’s revenues in 2018. Pricing of broadcast spot advertising is based on audience size and share, the demographics of our
audiences and the demand for our limited inventory of commercial time. Our stations compete for advertising revenues with
other sources of local media, including competitors’ television stations in the same markets, radio stations, cable television
systems, newspapers, digital platforms and direct mail.
Local advertising time is sold by each station’s local sales staff who call upon advertising agencies and local businesses,
which typically include advertisers such as car dealerships, health-care facilities and other service providers. We seek to attract
new advertisers to our television stations and to increase the amount of advertising sold to existing local advertisers by relying
on experienced local sales forces with strong community ties, producing news and other programming with local advertising
appeal and sponsoring or promoting local events and activities.
National advertising time is generally sold through national sales representative firms that call upon advertising agencies,
whose clients typically include automobile manufacturers and dealer groups, telecommunications companies and insurance
providers.
Digital revenues are primarily generated from the sale of advertising to local and national customers on our local
television websites, smartphone apps, tablet apps and other platforms.
Cyclical factors influence revenues from our core advertising categories. Some of the cycles are periodic and known well
in advance, such as election campaign seasons and special programming events (e.g. the Olympics or the Super Bowl). For
example, our NBC affiliates benefit from incremental advertising demand from the coverage of the Olympics. Economic cycles
are less predictable and beyond our control.
Due to increased demand in the spring and holiday seasons, the second and fourth quarters normally have higher
advertising revenues than the first and third quarters.
Political Advertising
Political advertising is generally sold through our Washington D.C. sales office. Advertising is sold to presidential,
gubernatorial, Senate and House of Representative candidates, as well as for state and local issues. It is also sold to political
action groups (PACs) or other advocacy groups. Political advertising revenues were 15% of our Local Media segment's
revenues in 2018.
Political advertising revenues increase significantly during even-numbered years when local, state and federal elections
occur. In addition, every four years, political spending is typically elevated further due to the advertising for the presidential
election. Because of the cyclical nature of the political election cycle, there has been a significant difference in our operating
results when comparing the performance in even-numbered years to that in odd-numbered years. Additionally, our operating
results are impacted by the number, importance and competitiveness of individual political races and issues discussed in our
local markets.
Retransmission Revenues
We earn revenues from retransmission consent agreements with multi-channel video programming distributors
("MVPDs") in our markets. Retransmission revenues were 33% of our Local Media segment's revenues in 2018. The MVPDs
are cable operators, telecommunication companies and satellite carriers who pay us to offer our programming to their
customers. The fees we receive are typically based on the number of subscribers the MVPD has in our local market and the
contracted rate per subscriber.
We also receive fees from over-the-top (virtual MVPDs) such as YouTubeTV, DirectTV Now and Sony Vue. The fees we
receive are typically based on the number of subscribers in our local market and the contracted rate per subscriber.
7
Expenses
Employee costs accounted for 44% of our Local Media segment's costs and expenses in 2018.
We centralize certain functions, such as master control, traffic, graphics and political advertising, at company-owned
hubs that do not require a presence in the local markets. This approach enables each of our stations to focus local resources on
the creation of content and revenue-producing activities. We expect to continue to look for opportunities to centralize functions
that do not require a local market presence.
Programming costs, which include network affiliation fees, syndicated programming and shows produced for us or in
partnership with others, were 33% of our Local Media segment's costs and expenses in 2018.
Our network-affiliated stations broadcast programming that is supplied to us by the networks in various dayparts. Under
each affiliation agreement, the station broadcasts all of the programs transmitted by the network. In exchange, we pay
affiliation fees to the network and the network sells a substantial majority of the advertising time during these broadcasts. We
expect our network affiliation agreements to be renewed upon expiration.
Federal Regulation of Broadcasting — Broadcast television is subject to the jurisdiction of the FCC pursuant to the
Communications Act of 1934, as amended (“Communications Act”). The Communications Act prohibits the operation of
broadcast stations except in accordance with a license issued by the FCC and empowers the FCC to revoke, modify and renew
broadcast licenses, approve the transfer of control of any entity holding such a license, determine the location of stations,
regulate the equipment used by stations and adopt and enforce necessary regulations. As part of its obligation to ensure that
broadcast licensees serve the public interest, the FCC exercises limited authority over broadcast programming by, among other
things, requiring certain children's television programming and limiting commercial content therein, requiring the identification
of program sponsors, regulating the sale of political advertising and the distribution of emergency information, and restricting
indecent programming. The FCC also requires television broadcasters to close caption their programming for the benefit of
persons with hearing impairment and to ensure that any of their programming that is later transmitted via the Internet is
captioned. Network-affiliated television broadcasters in larger markets must also offer audio narration of certain programming
for the benefit of persons with visual impairments. Reference should be made to the Communications Act, the FCC’s rules and
regulations, and the FCC’s public notices and published decisions for a fuller description of the FCC’s extensive regulation of
broadcasting.
Broadcast licenses are granted for a term of up to eight years and are renewable upon request, subject to FCC review of
the licensee's performance. All the Company’s applications for license renewal during the current renewal cycle have been
granted for full terms. While there can be no assurance regarding the renewal of our broadcast licenses, we have never had a
license revoked, have never been denied a renewal, and all previous renewals have been for the maximum term.
FCC regulations govern the ownership of television stations, and the agency is required by statute to periodically review
these rules. In November 2017, the FCC adopted significant changes to its local television ownership rules. In particular, the
FCC voted to relax the television “duopoly rule” that generally restricted an applicant from owning or controlling more than
one television station (or in some markets under certain conditions, more than two television stations) in the same market. The
FCC eliminated that rule’s requirement that eight independent local television station “voices” should remain after any merger,
and it relaxed the prohibition against common ownership of two of the four most-viewed stations in a market, stating that
proposed mergers of such “top-four” stations will instead be evaluated on a case-by-case basis. The order further reversed an
earlier FCC decision to treat those stations participating in joint advertising sales agreements as if they were under common
ownership. Station WSYM-TV, Lansing, Michigan, is a party to such a joint advertising agreement with a local station, but it
enjoyed a permitted “grandfathered” status while the rule was in effect. These rule changes remain subject to pending appeals
and further judicial review.
This 2017 FCC order left in place the long-standing requirement that any television station that provides more than 15%
of another in-market television station’s weekly programming is deemed to have an attributable interest in that station that
subjects the stations to the FCC’s ownership limits. It also directed that any local stations that share facilities or services such as
program production on a continuing basis must start disclosing these agreements in their public files. Stations WPTV-TV, West
Palm Beach, Florida, and KIVI-TV, Nampa (Boise), Idaho, are parties to such shared services programming agreements.
With respect to national television ownership, the FCC voted in December 2017 to consider whether and how it might
revisit its rule preventing applicants from obtaining an ownership interest in television stations whose total national audience
reach would exceed 39% of all television households. Earlier in the year, the FCC reinstated the 50% discount applied to the
number of households deemed covered by UHF television stations, and the new notice expressly addresses whether to retain
this distinction for UHF. This proceeding remains open.
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In December 2018, the FCC began another of its statutorily-required reviews of its multiple ownership rule, including a
broad review of whether all the current local radio and television rules continue to serve the public interest.
We cannot predict the outcome of the pending court review of the FCC's television ownership rule changes or the effect
of further FCC rule revisions on our stations' operations or our business.
The restrictions imposed by the FCC’s ownership rules may apply to a corporate licensee due to the ownership interests
of its officers, directors or significant shareholders. If such parties meet the FCC’s criteria for holding an attributable interest in
the licensee, they are likewise expected to comply with the ownership limits, as well as other licensee requirements such as
compliance with certain criminal, antitrust, and antidiscrimination laws.
In order to provide additional spectrum for mobile broadband and other services, the FCC in 2017 conducted an
incentive spectrum auction in which some television broadcasters agreed to voluntarily give up spectrum in return for a share of
the auction proceeds. No Scripps station will be going off-air or relinquishing a current UHF-band allocation for a VHF-band
allocation as a result of the auction, but 17 full-power Scripps stations and many of Scripps' low-power and translator stations
are relocating to new channels in the reduced broadcast spectrum band. Broadcasters are concerned that the FCC’s approach to
the post-auction “repacking” of the remaining television stations into this reduced broadcast spectrum may not adequately
protect stations’ over-the-air services. Broadcasters also are particularly concerned that the FCC’s post-auction plans will not
provide sufficient time to complete the repacking before the sold spectrum will be authorized for wireless use. Implementing
the post-auction changes will be complicated and costly, and stations located near the Canadian and Mexican borders may be at
particular risk of service loss due to the need to coordinate international frequency use. Despite warnings about difficulties,
such as weather delays and a lack of available qualified tower and equipment installation crews, the FCC has expressed
confidence that adequate time will be available to complete the repacking, and it has imposed a “hard” deadline that could
require a station to cease broadcasting on its existing frequency even though an alternative facility is not yet ready to provide its
over-the-air service.
Broadcasters are currently testing a new voluntary digital television standard, ATSC 3.0. This Internet-protocol based
transmission system will permit television stations to offer enhanced and innovative services coupled with much improved
broadcast signal reception, particularly by mobile devices. The new standard, however, is incompatible with both existing
television receivers and with a station’s ability to continue offering its service via the current ATSC 1.0 digital standard. To
avoid loss of service to those viewers who lack a new receiver, stations switching to ATSC 3.0 will be required to arrange for a
local station that continues to use the current 1.0 standard to air (on a subchannel) programming “substantially similar” to that
offered by the switching station on its 3.0 channel. In return, the 3.0 station could host the 3.0 signal of its 1.0 “host” station.
This “simulcasting” requirement will sunset in July 2023, unless extended by the FCC. Scripps Station KNXV-TV is
participating in a market test of the new transmission system in Phoenix, AZ.
The FCC remains committed to permitting non-broadcast spectrum use in the “white spaces” between television stations'
protected service areas despite broadcasters’ concerns about the possibility of harmful interference to their existing service and
to the potential for innovative uses of their broadcast spectrum in the future. In connection with the auction process, the FCC
may further reduce the spectrum available for television broadcasting by reserving a 6 MHz channel in each market for non-
broadcast, unlicensed services (including wireless microphones). The repacking of television broadcast spectrum and the
reservation of spectrum in the “broadcast” band for interference-protected non-broadcast services could have a particularly
adverse effect on the ability of low-power and translator television stations to offer service since these stations may not be able
to find space to operate in the reduced band and they enjoy only “secondary” status that offers no protection from interference
caused by a full-power station. We cannot predict the effect of these proceedings on our offering of digital television service or
our business.
Full-power broadcast television stations generally enjoy “must-carry” rights on any cable television system defined as
“local” with respect to the station. Stations may waive their must-carry rights and instead negotiate retransmission consent
agreements with local cable companies. Similarly, satellite carriers, upon request, are required to carry the signal of those
television stations that request carriage and that are located in markets in which the satellite carrier chooses to retransmit at
least one local station, and satellite carriers cannot carry a broadcast station without its consent. The Company has elected to
negotiate retransmission consent agreements with cable operators and satellite carriers for both our network-affiliated stations
and our independent stations.
While the Commission is not actively proceeding with its rulemaking to reexamine the retransmission consent
negotiation process and particularly the standards that may trigger the agency’s intervention to enforce the obligation of the
parties to negotiate these agreements in “good faith,” the docket remains open. A related agency proceeding also remains open
that looks toward the possible elimination of the “network nonduplication” and “syndicated exclusivity” rules that permit
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broadcasters to enforce certain contractual programming exclusivity rights through the FCC's processes rather than by judicial
proceedings. We cannot predict the outcome of these proceedings or their possible impact on the Company.
Other proceedings before the FCC and the courts have reexamined the policies that protect television stations' rights to
control the distribution of their programming within their local service areas. For example, the FCC in 2014 has initiated a
rulemaking proceeding on the degree to which an entity relying upon the Internet to deliver video programming should be
subject to the regulations that apply to multi-channel video programming distributors (“MVPDs”), such as cable operators and
satellite systems. That proceeding raised a variety of issues, including whether some Internet-based distributors might be able
to take advantage of MVPDs' statutory copyright licensing rights. We cannot predict the outcome of such proceedings that
address the use of new technologies to challenge traditional means of redistributing television broadcast programming or their
possible impact on the Company.
The FCC may impose substantial penalties for violations of its rules and policies. For example, settlement of an
investigation involving a single radio station’s failure to broadcast proper sponsorship identification announcements in a series
of ads required the licensee to make a payment of over $500,000. Uncertainty continues regarding the scope of the FCC's
authority to regulate indecent programming, but the agency has increased its enforcement efforts regarding other programming
issues such as sponsorship identification, broadcasting proper emergency alerts, and extending service to persons with
disabilities. We cannot predict the effect of the FCC’s expanded enforcement efforts on the Company.
NATIONAL MEDIA
Our National Media segment represents our collection of national and international businesses including Katz, Stitcher,
Triton and Newsy. These businesses compete on emerging platforms and marketplaces where there is significant growth in both
audience and revenue, such as over-the-top (OTT) and over-the-air (OTA) video and digital video. OTT refers to the delivery of
content over the internet which can be assessed through apps on internet-connected devices such as set-top boxes (such as Roku
or Apple TV), smartphones, smart TVs and tablets. OTA content can be viewed using antennas or through a cable subscription.
Digital audio is on-demand, streaming music or spoken-word programming that can be subscription based or advertising
supported. Our digital audio businesses serve consumers, publishers and advertisers by providing a suite of services including
content production and distribution, technology, sales, and measurement.
Katz
Katz operates four over-the-air networks — Bounce, Escape, Grit and Laff. The networks are primarily broadcast over-
the-air on local broadcasters' digital sub-channels. They are also carried on some cable and satellite services. Each of the
networks is a fast-growing, audience-targeted national broadcast network. Bounce is aimed at African-Americans; Grit airs
western movies and series targeted to men; Escape runs scripted dramas and true crime docuseries targeting women; and Laff
airs classic, well-loved comedies. Each of these Nielson rated networks reaches about 90 percent of all U.S. households as
reported by Nielsen.
Katz has recently announced the relaunch of a fifth over-the-air network, Court TV. This network is devoted to live,
gavel-to-gavel coverage, in-depth legal reporting and expert analysis of the nation’s most important and compelling trials. The
network will launch in May 2019 and will be available for cable, satellite and over-the-air and over-the-top carriage.
The primary source of revenue for Katz is through the sale of advertising to national customers. The advertising revenue
generated depends on viewership ratings and the rate paid by customers for certain viewer demographics. Katz sells its
advertising in the upfront and scatter markets. In the upfront market, advertisers buy advertising time for upcoming seasons
and, by committing to purchase in advance, lock in the advertising rates they will pay for the upcoming year. In the scatter
market, advertisers buy their spots closer to the time when the spots will run. The mix of upfront and scatter market advertising
time sold is based upon the economic conditions at the time the upfront sales take place, impacting the sell-out levels
management is willing or able to obtain. The demand in the scatter market then impacts the pricing achieved for our remaining
advertising inventory. Scatter market pricing can vary from upfront pricing and can be volatile. In some cases, advertising sales
are subject to ratings guarantees that require us to provide additional advertising time if the guaranteed audience levels are not
achieved.
Due to increased demand in the spring and holiday seasons, the second and fourth quarters normally have higher
advertising revenues than the first and third quarters.
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Katz has carriage agreements with local television broadcasters and cable and satellite providers to carry one or more of
the Katz networks. These carriage agreements are generally for a five-year term. Under these agreements, Katz pays a fixed fee
for the carriage rights.
For programming, Katz enters into agreements to license existing programming and movies, as well as to produce several
original shows.
Stitcher
Stitcher creates original podcasts, operates the Stitcher and Earwolf networks, and provides podcast agency services that
generate revenue for more than 300 shows. A podcast is a digital audio recording in spoken-word format, usually part of a
themed series, which is downloaded or streamed most often to mobile devices. In 2018, it’s estimated that 73 million
Americans listened to a podcast at least monthly. Stitcher also provides a mobile app listening platform where consumers can
stream the latest in news, sports, talk, and entertainment on demand. We expect to make continued investments in our Stitcher
app, with the objective of creating a best-in-class user experience for the podcast listener and advertiser.
Stitcher earns revenue from the sale of advertising on its original podcasts, which it creates and distributes through
platforms such as its Stitcher app and the iPhone podcast app.
Other revenue sources include podcast agency services. Stitcher, through its Midroll Media advertising network, earns
revenue by acting as a sales and marketing representative to connect advertisers and specific podcasts based on the advertiser's
desired target audience.
Stitcher earns subscription revenue from the Stitcher Premium subscription service for which users pay a standard
monthly or annual fee for access to premium content and ad-free archived podcast episodes.
Triton
Operating in more than 40 countries, Triton is the global leader in digital audio technology and measurement services,
serving the growing digital audio marketplace. Triton provides innovative technology that enables broadcasters, podcasters and
online music services to build their audience, maximize their revenue and streamline their operations. Triton’s technology is
trusted by many of the biggest names in digital audio, including Pandora, Spotify, iHeart, Entercom, Cumulus, Prisa (Spain),
Mediacorp (Singapore) and Karnaval (Turkey).
Triton’s software-as-a-service (SaaS) business-to-business model has two main lines of business - measurement and
infrastructure. Their primary source of revenue is the licensing of digital audio technology and services to a wide range of
global audio publishers. Triton’s measurement technology platform is the standard in the digital audio marketplace, and its
national and local metrics are the currency through which agencies and brands buy digital audio advertising from streaming
audio companies across various geographies and devices. The national audience measurement product is offered for a fixed
monthly fee with additional fees based on total audience listening hours. The local audience measurement product is offered on
a fixed license fee for each market on which data is reported, along with annual fee escalations. Triton’s hosting and advertising
infrastructure enables publishers around the world to deliver high-quality, digital audio streams with data-powered dynamic ad
insertion to their listening audience. The hosting product is offered to users via a monthly license fee for access to the platform
with additional fees for excess data delivery usage. For its advertising technology platform, Triton charges a fixed license fee
with additional fees based on the number of impressions delivered. Through the advent of the world’s first programmatic audio
advertising exchange, Triton provides the infrastructure in which publishers and advertisers can seamlessly transact audio
inventory programmatically.
Newsy
Newsy is our national news network focused on bringing perspective and analysis to reporting on world and national
news, including politics, entertainment, science and technology. It is targeted toward a younger audience. In 2017, we expanded
Newsy's distribution to include cable, and by the end of 2018, we reached agreements with cable and satellite operators to carry
Newsy into approximately 36 million households. We expect continued investment in Newsy as we look to increase
distribution and enhance our products.
Newsy is also distributed widely on platforms providing over-the-top (OTT) television service, including Hulu, Roku,
Amazon Fire TV, Apple TV, Sling TV and Chromecast.
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Newsy earns revenue from the sale of advertising on the platforms on which it is distributed. It also receives carriage fees
from cable providers who pay us to offer our programming to their customers. The revenue we receive is based on the number
of subscribers who receive the programming.
Newsy's programming strategy is to provide in-depth coverage of U.S. and world news targeted at 25-34 year-olds.
Newsy's cable programming lineup includes fourteen hours of daily live news coverage consisting of shows such as the
evening newsmagazine “The Why,” the morning show “The Day Ahead,” and the newsmaker spotlight program “30 Minutes
With.” Newsy also produces investigative reports and documentaries.
Employees
As of December 31, 2018, we had approximately 3,950 full-time equivalent employees, of whom approximately 3,100
were with Local Media and 600 with National Media. Various labor unions represent approximately 400 employees, the
majority of which are in Local Media. We have not experienced any work stoppages at our current operations since 1985. We
consider our relationships with our employees to be satisfactory.
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Item 1A. Risk Factors
For an enterprise as large and complex as ours, a wide range of factors could materially affect future developments and
performance. The most significant factors affecting our operations include the following:
Risks Related to Our Businesses
We expect to derive the majority of our revenues from advertising spending, which is affected by numerous factors. Declines
in advertising revenues will adversely affect the profitability of our business.
The demand for advertising is sensitive to a number of factors, both locally and nationally, including the following:
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The advertising and marketing spending by customers can be subject to seasonal and cyclical variations and is
likely to be adversely affected during economic downturns.
Programming and content offered by our businesses may not achieve desired ratings or may decline in popularity
with its audience.
Audiences continue to fragment in recent years as the broad distribution of cable and satellite television and the
growth in over-the-top streaming services have greatly increased the options available to the public for accessing
audio and video programming, including live sports. Continued fragmentation of audiences, and the growth of
internet programming and streaming services, could adversely impact advertising rates, which will reflect the size
and demographics of the audience reached by advertisers through our media businesses.
Television advertising revenues in even-numbered years benefit from political advertising, which is affected by
campaign finance laws, as well as the competitiveness of specific political races in the markets where our
television stations operate.
Continued consolidation and contraction of local advertisers in our local markets could adversely impact our
operating results, given that we expect the majority of our advertising to be sold to local businesses in our
markets.
Television stations have significant exposure to advertising in the automotive, retail and services industries.
Advertising within these industries may decline and we may not be able to secure replacement advertisers.
Several national advertising agencies are employing an automated process known as “programmatic buying” to
gain efficiencies and reduce costs related to buying advertising. Growth in advertising revenues will rely in part
on the ability to maintain and expand relationships with existing and future advertisers. The implementation of a
programmatic model or other similar solution, where automation replaces existing pricing and allocation
methods, could turn advertising inventory into a price-driven commodity. These automated solutions could reduce
the value of relationships with advertisers as well as result in downward pricing pressure.
If we are unable to respond to any or all of these factors, our advertising revenues could decline and affect our
profitability.
We have made significant investments in our National Media businesses and expect to continue to make significant
investments in those businesses in the coming years. Investments we make in our National Media businesses may not
perform as expected.
In recent years, we have acquired Triton, Katz, Stitcher and Newsy for an aggregate purchase price of almost $550
million. Our National Media businesses are not mature businesses and will require additional capital to gain distribution and
build audiences, or, in the case of Triton, build customer base. The markets for these businesses may not develop as we expect,
we may face greater competition than we anticipate, and our competition may have greater financial resources. The success of
these investments depends on a number of factors, including timely development and market acceptance of the products and
services that these businesses offer.
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The growth of direct content-to-consumer delivery channels may fragment our television audiences. This fragmentation
could adversely impact advertising rates as well as cause a reduction in the revenues we receive from retransmission
consent agreements, resulting in a loss of revenue that could materially adversely affect our broadcast operations.
We deliver our television programming to our audiences primarily over-the-air and through cable and satellite service
providers. Our television audience is being fragmented by the digital delivery of content directly to the consumer
audience. Content providers, such as the "Big 4" broadcast networks, cable networks such as HBO and Showtime, and new
content developers, distributors and syndicators such as Amazon, Hulu and Netflix, are now able to deliver their programming
directly to consumers, over-the-top (“OTT”) via the internet. The delivery of content directly to consumers allows them to
bypass the programming we deliver, which may impact our audience size. Fragmentation of our audiences could impact the
rates we receive from our advertisers. In addition, reduction in the number of subscribers to cable and satellite service providers
could impact the revenue we receive under retransmission consent agreements. Widespread adoption of OTT by our audiences
could result in a reduction of our advertising and retransmission revenues and affect our profitability.
The loss of affiliation agreements or the costs of renewals could adversely affect our Local Media operating results.
Fifteen of our stations have affiliations with the ABC television network, five with the NBC television network, two with
each of the FOX, CBS and MyNetwork television networks and one with The CW television network. These television
networks produce and distribute programming which our stations commit to air at specified times. Networks sell commercial
advertising time during their programming, and the "Big 4" networks, ABC, NBC, CBS and FOX, also require stations to pay
fees for the right to carry their programming. These fees may be a percentage of retransmission revenues that the stations
receive (see below) or may be fixed amounts based on the number of households or subscribers in a market. These fees have
been increasing from renewal to renewal over the past several years. There is no assurance that we will be able to reach
agreements in the future with networks about the amount of these fees.
The non-renewal or termination of our network affiliation agreements would prevent us from being able to carry
programming of the respective network. Loss of a network affiliation would require us to obtain replacement programming,
which may not be as attractive to target audiences and could result in lower advertising revenues. In addition, loss of any of the
"Big 4" network affiliations would result in materially lower retransmission revenue.
Our retransmission consent revenue may be adversely affected by renewals of retransmission consent agreements, by new
technologies for the distribution of video programming, or by revised government regulations.
As our retransmission consent agreements expire, there can be no assurance that we will be able to renew them at
comparable or better rates. As a result, retransmission revenues could decrease and retransmission revenue growth could
decline over time.
The use of new technologies to redistribute broadcast programming, such as those that rely upon the Internet to deliver
video programming or those that receive and record broadcast signals over the air via an antenna and then retransmit that
information digitally to customers’ television sets, specialty set-top boxes, or computer or mobile devices, could adversely
affect our retransmission revenue if such technologies are not found to be subject to copyright or other legal restrictions or to
regulations that apply to multichannel video programming distributors ("MVPDs") such as cable operators or satellite carriers.
Changes in the Communications Act of 1934, as amended (the “Communications Act”) or the FCC’s rules with respect to
the negotiation of retransmission consent agreements between broadcasters and MVPDs could also adversely impact our ability
to negotiate acceptable retransmission consent agreements. In addition, continued consolidation among cable television
operators could adversely impact our ability to negotiate acceptable retransmission consent agreements.
There are proceedings before the FCC and legislation has been proposed in Congress reexamining policies that now
protect television stations' rights to control the distribution of their programming within their local service areas. For example,
the FCC has considered the degree to which an entity relying upon the Internet to deliver video programming should be subject
to the regulations that apply to MVPDs. Should the FCC determine that Internet-based distributors may avoid its MVPD rules,
broadcasters' ability to rely on the protection of the MVPD retransmission consent requirements and other regulations could be
jeopardized. We cannot predict the outcome of these and other proceedings that address the use of new technologies to
challenge traditional means of redistributing broadcast programming or their possible impact on our operations.
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We make investments in television programming and podcast content rights (collectively "content") in advance of knowing
whether that particular content will be popular enough for us to recoup our costs. Additionally, if costs to acquire this
content increase, our operating results may be adversely affected.
We incur significant costs for the purchase of television programming and podcast content rights. We may have to
purchase content several years in advance or enter into multi-year agreements, resulting in the commitment of significant costs
in advance of knowing whether the content will be popular with its audience. If this acquired content is not sufficiently popular
among audiences in relation to the cost we invest in the content, or if we need to replace content that is performing poorly, we
may not be able to produce enough revenue to recover our costs. Additionally, increased competition from entrants into the
market for content could increase our content costs. Any of these factors could reduce our revenues, result in the incurrence of
impairment charges or otherwise cause our costs to escalate relative to revenues.
Our television stations will continue to be subject to government regulations which, if revised, could adversely affect our
operating results.
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Pursuant to FCC rules, local television stations must elect every three years to either (1) require cable operators
and/or direct broadcast satellite carriers to carry the stations’ over-the-air signals or (2) enter into retransmission
consent negotiations for carriage. At present, all of our stations have retransmission consent agreements with
cable operators and satellite carriers. If our retransmission consent agreements are terminated or not renewed, or if
our broadcast signals are distributed on less-favorable terms, our ability to compete effectively may be adversely
affected.
If we cannot renew our FCC broadcast licenses, our broadcast operations will be impaired. Our business depends
upon maintaining our broadcast licenses from the FCC, which has the authority to revoke licenses, not renew
them, or renew them only with significant qualifications, including renewals for less than a full term. We cannot
assure that future renewal applications will be approved, or that the renewals will not include conditions or
qualifications that could adversely affect operations. If the FCC fails to renew any of these licenses, it could
prevent us from operating the affected stations. If the FCC renews a license with substantial conditions or
modifications (including renewing the license for a term of fewer than eight years), it could have a material
adverse effect on the affected station’s revenue potential.
• As discussed under Federal Regulation of Broadcasting, the FCC in 2017 completed an auction in which some
television licensees voluntarily auctioned away their spectrum rights and 84 MHz of broadcast spectrum was
reallocated to other uses. As a result, many television stations, including 17 Company-owned full-power stations,
must change their operating frequencies, and the FCC is setting tight deadlines for the completion of these facility
changes in order to make the reallocated spectrum promptly available to the wireless service buyers. Depending
on factors such as the availability of specialized technical assistance and custom-made equipment, weather issues,
and, for stations near international borders, the cooperation of foreign governments, some stations could confront
substantial costs and difficulty in completing these relocations within the allotted time, adversely affecting these
stations’ over-the-air service. Scripps has timely applied for and received construction permits to complete the
required changes for its stations and is expeditiously pursuing the steps necessary to complete this process, but we
cannot predict whether unforeseen circumstances might delay implementation and have a material adverse effect
on one or more stations' revenue potential.
• As also discussed under Federal Regulation of Broadcasting, the FCC has adopted broadcasters’ proposal to
permit the voluntary use of a new digital television transmission standard, ATSC 3.0, that is incompatible with the
existing standard. Much uncertainty exists concerning the costs, benefits, and public acceptance of the services
expected to become possible under this new standard, and television stations could be adversely affected by
moving either too quickly or too slowly towards its adoption.
• The FCC and other government agencies are continually considering proposals intended to promote consumer
interests. New government regulations affecting the television industry could raise programming costs, restrict
broadcasters’ operating flexibility, reduce advertising revenues, raise the costs of delivering broadcast signals, or
otherwise affect operating results. We cannot predict the nature or scope of future government regulation or its
impact on our operations.
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We intend to continue to evaluate strategic acquisitions, and there are various risks associated with an acquisition strategy.
We have pursued and intend to selectively continue to pursue strategic acquisitions, subject to market conditions, our
liquidity, and the availability of attractive acquisition candidates, with the goal of improving our business. We may not be able
to identify other attractive acquisition targets or some of our competitors may have greater financial or managerial resources
with which to pursue acquisition targets we may pursue. Therefore, even if we are successful in identifying attractive
acquisition targets, we may face considerable competition and be unsuccessful in implementing our acquisition strategy.
Acquisitions involve inherent risks, such as increasing leverage and debt service requirements and combining company
cultures and facilities, which could have a material adverse effect on our results of operations. Additionally, our revenues and
profitability could be adversely affected if we are unable to implement effective cost controls, achieve expected synergies, or
increase revenues as a result of an acquisition. In addition, future acquisitions may result in our assumption of unexpected
liabilities and may result in the diversion of management’s attention from the operation of our core business.
Acquisitions of television stations are subject to the approval of the FCC and the Antitrust Division of the Department of
Justice. Current or future policies of these regulatory authorities could restrict our ability to pursue or consummate future
transactions and could require us to divest certain television stations if an acquisition under contract would result in excessive
concentration in a market or fail to comply with FCC ownership limitations. There can be no assurance that pending
acquisitions will be approved by these regulatory authorities, or that a requirement to divest existing stations will not have an
adverse effect on the transaction or our business.
We will continue to face cybersecurity and similar risks, which could result in the disclosure of confidential information,
disruption of operations, damage to our brands and reputation, legal exposure and financial losses.
Security breaches, malware or other “cyber attacks” could harm our business by disrupting delivery of services,
jeopardizing our confidential information and that of our vendors and clients, and damaging our reputation. Our operations are
routinely involved in receiving, storing, processing and transmitting sensitive information. Although we monitor security
measures regularly, any unauthorized intrusion, malicious software infiltration, theft of data, network disruption, denial of
service, or similar act by any party could disrupt the integrity, continuity, and security of our systems or the systems of our
clients or vendors. These events, or our failure to employ new technologies, revise processes and invest in people to sustain our
ability to defend against cyber threats, could create financial liability, regulatory sanction, or a loss of confidence in our ability
to protect information, and adversely affect our revenue by causing the loss of current or potential clients.
Risks Related to the Ownership of Scripps Class A Common Shares
Certain descendants of Edward W. Scripps own approximately 93% of Scripps' Common Voting shares and are signatories
to the Scripps Family Agreement, which governs the transfer and voting of Common Voting shares held by them.
As a result of the foregoing, these descendants have the ability to elect two-thirds of the Board of Directors and to direct
the outcome of any matter on which the Ohio Revised Code (“ORC”) does not require a vote of our Class A Common shares.
Under our articles of incorporation, holders of Class A Common shares vote only for the election of one-third of the Board of
Directors and are not entitled to vote on any matter other than a limited number of matters expressly set forth in the ORC as
requiring a separate vote of both classes of stock. Because this concentrated control could discourage others from initiating any
potential merger, takeover or other change of control transaction, the market price of our Class A Common shares could be
adversely affected.
We have the ability to issue preferred stock, which could affect the rights of holders of our Class A Common shares.
Our articles of incorporation allow the Board of Directors to issue and set the terms of 25 million shares of preferred
stock. The terms of any such preferred stock, if issued, may adversely affect the dividend, liquidation and other rights of
holders of our Class A Common shares.
The public price and trading volume of our Class A Common shares may be volatile.
The price and trading volume of our Class A Common shares may be volatile and subject to fluctuation. Some of the
factors that could cause fluctuation in the stock price or trading volume of Class A Common shares include:
•
general market and economic conditions and market trends, including in the television broadcast industry, the
national media marketplace and the financial markets generally;
16
•
•
•
•
•
•
•
•
•
•
•
•
the political, economic and social situation in the United States;
variations in quarterly operating results;
inability to meet revenue forecasts;
announcements by us or competitors of significant acquisitions, strategic partnerships, joint ventures, capital
commitments or other business developments;
adoption of new accounting standards affecting the media industry;
operations of competitors and the performance of competitors’ common stock;
litigation and governmental action involving or affecting us or our subsidiaries;
changes in financial estimates and recommendations by securities analysts;
recruitment of key personnel;
purchases or sales of blocks of our Class A Common shares;
operating and stock performance of companies that investors may consider to be comparable to us; and
changes in the regulatory environment, including rulemaking or other actions by the FCC.
There can be no assurance that the price of our Class A Common shares will not fluctuate or decline significantly. The
stock market in recent years has experienced considerable price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of individual companies and that could adversely affect the price of our Class A
Common shares, regardless of the Company’s operating performance. Stock price volatility might be higher if the trading
volume of our Class A Common shares is low. Furthermore, shareholders may initiate securities class action lawsuits if the
market price of our Class A Common shares declines significantly, which may cause us to incur substantial costs and divert the
time and attention of our management.
Risks Related to Our Indebtedness
We have substantial debt and have the ability to incur significant additional debt. The principal and interest payment
obligations on such debt may restrict our future operations and impair our ability to meet our long-term obligations.
As of December 31, 2018, we and the guarantors had approximately $696 million in aggregate principal amount of
outstanding indebtedness (excluding intercompany debt), approximately $400 million of which constituted senior debt
(including the Senior Notes), and none of which was secured. We have the ability to incur up to $125 million of indebtedness
under our Credit Agreement all of which is secured indebtedness, effectively ranking senior to the Senior Notes to the extent of
the value of the assets securing such indebtedness. Our Credit Agreement matures in April 2022.
Our outstanding debt may have important consequences to you. For instance, it could:
•
•
•
require us to dedicate a substantial portion of any cash flow from operations to the payment of interest and
principal due under our debt, which would reduce funds available for other business purposes, including capital
expenditures and acquisitions;
place us at a competitive disadvantage compared to some of our competitors that may have less debt and better
access to capital resources;
limit our ability to obtain additional financing required to fund acquisitions, working capital and capital
expenditures and for other general corporate purposes; and
• make it more difficult for us to satisfy our financial obligations, including those relating to the Senior Notes.
17
Our ability to service our significant financial obligations depends on our ability to generate significant cash flow. This is
partially subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our
control. We cannot assure you that our business will generate cash flow from operations, that future borrowings will be
available to us under our Credit Agreement or any other credit facilities, or that we will be able to complete any necessary
financings, in amounts sufficient to enable us to fund our operations or pay our debts and other obligations, or to fund other
liquidity needs. If we are not able to generate sufficient cash flow to service our obligations, we may need to refinance or
restructure our debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. Additional debt or equity
financing may not be available in sufficient amounts, at times or on terms acceptable to us, or at all. Specifically, volatility in
the capital markets may also impact our ability to obtain additional financing, or to refinance our existing debt, on terms or at
times favorable to us. If we are unable to implement one or more of these alternatives, we may not be able to service our debt
or other obligations, which could result in us being in default thereon, in which circumstances our lenders could cease making
loans to us, and lenders or other holders of our debt could accelerate and declare due all outstanding obligations under the
respective agreements, which would likely have a material adverse effect on us.
The agreements governing our various debt obligations impose restrictions on our operations and limit our ability to
undertake certain corporate actions.
The agreements governing our various debt obligations, including the indenture that governs the Senior Notes and the
agreements governing our Credit Agreement, include covenants imposing significant restrictions on our operations. These
restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business
opportunities as they arise. These covenants place restrictions, subject to certain limitations, on our ability to, among other
things:
•
•
incur additional debt;
declare or pay dividends, redeem stock or make other distributions to stockholders;
• make investments or acquisitions;
•
•
create liens or use assets as security in other transactions;
issue guarantees;
• merge or consolidate, or sell, transfer, lease or dispose of substantially all of our assets;
•
•
engage in transactions with affiliates; and
purchase, sell or transfer certain assets.
Any of these restrictions and limitations could make it more difficult for us to execute our business strategy.
Our Credit Agreement requires us to comply with certain financial ratios and covenants; our failure to do so will result in a
default thereunder, which would have a material adverse effect on us.
We are required to comply with certain financial covenants under our Credit Agreement. Our ability to comply with these
requirements may be affected by events affecting our business, but beyond our control, including prevailing general economic,
financial and industry conditions. These covenants could have an adverse effect on us by limiting our ability to take advantage
of financing, merger and acquisition or other corporate opportunities. The breach of any of these covenants or restrictions could
result in a default under the applicable senior credit facility. Upon a default under any of our debt agreements, the lenders or
debt holders thereunder could have the right to declare all amounts outstanding, together with accrued and unpaid interest, to be
immediately due and payable, which could, in turn, trigger defaults under other debt obligations and could result in the
termination of commitments of the lenders to make further extensions of credit under such senior credit facility. If we were
unable to repay our secured debt to our lenders, or were otherwise in default under any provision governing our outstanding
secured debt obligations, our secured lenders could proceed against us and the subsidiary guarantors and against the collateral
securing that debt. Any default resulting in an acceleration of outstanding indebtedness, a termination of commitments under
our financing arrangements or lenders proceeding against the collateral securing such indebtedness would likely result in a
material adverse effect on our business, financial condition and results of operations.
18
Our variable rate indebtedness subjects us to interest rate risk, which could cause our annual debt service obligations to
increase significantly.
Borrowings under our Credit Agreement are at variable rates of interest and expose us to interest rate risk. If the London
Interbank Offered Rate were to increase, our debt service obligations on our variable rate indebtedness would increase even
though the amount borrowed remained the same, and our net income and cash available to service our obligations, including
making payments on the notes, would decrease.
19
Item 1B. Unresolved Staff Comments
None.
Item 2.
Properties
We lease our principal executive offices in a building located at 312 Walnut Street, Cincinnati, OH 45202.
We own substantially all of the facilities and equipment used by our television stations. We own, or co-own with other
broadcast television stations, the towers used to transmit our television signals.
Our national businesses lease their facilities. This includes facilities for executive offices, sales offices, studio space and
data centers.
All of our owned and leased properties are in good condition, and suitable for the conduct of our present business. We
believe that suitable additional or alternative space, including those under lease options, will be available at commercially
reasonable terms for future expansion.
Item 3.
Legal Proceedings
We are involved in litigation arising in the ordinary course of business, such as defamation actions and governmental
proceedings primarily relating to renewal of broadcast licenses, none of which is expected to result in material loss.
Item 4. Mine Safety Disclosures
None.
20
Executive Officers of the Company — Executive officers serve at the pleasure of the Board of Directors.
Name
Adam P. Symson
Age
44
Lisa A. Knutson
William Appleton
Brian G. Lawlor
Douglas F. Lyons
Laura M. Tomlin
53
70
52
62
43
Position
President and Chief Executive Officer (since August 2017); Chief Operating Officer
(November 2016 to August 2017); Senior Vice President, Digital (February 2013 to
November 2016); Chief Digital Officer (2011 to February 2013); Vice President
Interactive Media, Television (2007 to 2011)
Executive Vice President, Chief Financial Officer (since October 2017); Executive Vice
President, Chief Strategy Officer (August 2017 to October 2017); Senior Vice President,
Chief Administrative Officer (2011 to 2017); Senior Vice President, Human Resources
(2008 to 2011)
Executive Vice President, General Counsel (since August 2017); Senior Vice President,
General Counsel (July 2008 to August 2017); Managing Partner Cincinnati office,
Baker & Hostetler, LLP (2003 to 2008)
President, Local Media (since August 2017); Senior Vice President, Broadcast
(January 2009 to August 2017); Vice President/General Manager of WPTV (2004 to
2008)
Senior Vice President, Controller and Treasurer (since December 2017), Vice President,
Controller and Treasurer (May 2015 to December 2017), Vice President, Controller
(2008 to May 2015), Vice President, Finance and Administration (2006 to 2008)
Senior Vice President, National Media (since August 2017); Vice President, Digital
Operations (2014 to 2017)
21
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Our Class A Common shares are traded on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “SSP.”
As of December 31, 2018, there were approximately 11,000 owners of our Class A Common shares, based on security position
listings, and approximately 50 owners of our Common Voting shares (which do not have a public market).
There were no sales of unregistered equity securities during the quarter for which this report is filed.
In November 2016, our Board of Directors authorized a repurchase program of up to $100 million of our Class A
Common shares. The authorization currently expires on March 1, 2020. Shares can be repurchased under the authorization via
open market purchases or privately negotiated transactions, including accelerated stock repurchase transactions, block trades, or
pursuant to trades intending to comply with Rule 10b5-1 of the Securities Exchange Act of 1934. At December 31, 2018, $50.3
million remained under the authorization.
The following table provides information about Company purchases of Class A Common shares during the quarter ended
December 31, 2018 and the remaining amount that may still be purchased under the program.
Period
10/1/2018 — 10/31/2018
11/1/2018 — 11/30/2018
12/1/2018 — 12/31/2018
Total
Total number
of shares
purchased
Average price
paid per share
Total market
value of
shares
purchased
Maximum
value that may
yet be
purchased
under the
plans or
programs
45,813
$
16.56
$
758,647
$ 51,577,433
39,000
37,700
17.27
16.48
673,405
$ 50,904,028
621,371
$ 50,282,657
122,513
$
16.76
$
2,053,423
As part of the share repurchase program, the Company entered into an Accelerated Share Repurchase ("ASR") agreement
with JP Morgan to repurchase $25 million of the Company's common stock and received an initial delivery of 1,349,528 shares
during third quarter of 2018, which represents 80% of the total shares the Company expects to receive based on the market
price at the time of initial delivery. Upon final settlement of the ASR agreement in February 2019, the Company received
additional deliveries totaling 147,164 shares of its common stock based on a weighted average cost per share of $16.70 over the
term of the ASR agreement.
22
Performance Graph — Set forth below is a line graph comparing the cumulative return on the Company’s Class A Common
shares, assuming an initial investment of $100 as of December 31, 2013, and based on the market prices at the end of each year
and assuming dividend reinvestment, with the cumulative return of the Standard & Poor’s Composite-500 Stock Index and an
Index based on a peer group of media companies. The spin-off of our newspaper business at April 1, 2015 is treated as a
reinvestment of a special dividend pursuant to SEC rules.
We regularly evaluate and revise our Peer Group Index as necessary so that it is reflective of our Company’s portfolio of
businesses. The companies that comprise our Peer Group Index are Nexstar Media Group, TEGNA, Sinclair Broadcast Group,
Tribune Media and Gray Television. The Peer Group Index is weighted based on market capitalization.
Our peer group was revised in 2018 to exclude Saga Communications and Beasley Broadcast Group following the sale of
our radio business.
12/31/2013
12/31/2014
12/31/2015
12/31/2016
12/31/2017
12/31/2018
The E.W. Scripps Company
$
100.00
$
102.90
$
99.12
$
100.84
$
81.54
$
S&P 500 Index
Current Peer Group Index
Previous Peer Group Index
100.00
100.00
100.00
113.69
92.03
91.69
115.26
86.88
86.39
129.05
83.17
83.60
157.22
103.21
104.06
83.17
150.33
93.55
92.71
23
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 7A. Quantitative and Qualitative Disclosures About Market Risk
The market risk information required by this item is filed as part of this Form 10-K. See Index to Consolidated Financial
Statement Information at page F-1 of this Form 10-K.
Item 8.
Financial Statements and Supplementary Data
The Financial Statements and Supplementary Data required by this item are 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
None.
Item 9A. Controls and Procedures
The Controls and Procedures required by this item are 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 9B. Other Information
None.
24
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information regarding executive officers is included in Part I of this Form 10-K as permitted by General Instruction G(3).
Information required by Item 10 of Form 10-K relating to directors is incorporated by reference to the material captioned
“Election of Directors” in our definitive proxy statement for the Annual Meeting of Shareholders (“Proxy Statement”).
Information regarding Section 16(a) compliance is incorporated by reference to the material captioned “Report on Section
16(a) Beneficial Ownership Compliance” in the Proxy Statement.
We have adopted a code of conduct that applies to all employees, officers and directors of Scripps. We also have a code
of ethics for the CEO and Senior Financial Officers that meets the requirements of Item 406 of Regulation S-K and the
NASDAQ listing standards. Copies of our codes of ethics are posted on our website at http://www.scripps.com.
Information regarding our audit committee financial expert is incorporated by reference to the material captioned
“Corporate Governance” in the Proxy Statement.
The Proxy Statement will be filed with the Securities and Exchange Commission in connection with our 2019 Annual
Meeting of Shareholders.
Item 11. Executive Compensation
The information required by Item 11 of Form 10-K is incorporated by reference to the material captioned “Compensation
Discussion and Analysis” and “Compensation Tables” in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 12 of Form 10-K is incorporated by reference to the material captioned “Report on the
Security Ownership of Certain Beneficial Owners,” “Report on the Security Ownership of Management,” and “Equity
Compensation Plan Information” in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by Item 13 of Form 10-K is incorporated by reference to the materials captioned “Corporate
Governance” and “Report on Related Party Transactions” in the Proxy Statement.
Item 14. Principal Accounting Fees and Services
The information required by Item 14 of Form 10-K is incorporated by reference to the material captioned “Report of the
Audit Committee of the Board of Directors” in the Proxy Statement.
25
PART IV
Item 15.
Exhibits and Financial Statement Schedules
Documents filed as part of this report:
(a) The consolidated financial statements of The E.W. Scripps Company are filed as part of this Form 10-K. See Index to
Consolidated Financial Statement Information at page F-1.
The reports of Deloitte & Touche LLP, an Independent Registered Public Accounting Firm, dated March 1, 2019, are
filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page F-1.
(b) There are no supplemental schedules that are required to be filed as part of this Form 10-K.
(c) An exhibit index required by this item appears below.
Item 16. Form 10-K Summary
None.
26
2.01
2.02
3.01
3.02
3.03
10.01
10.02
10.03
10.04
10.05
10.06
10.07
10.08
10.09
10.10
10.11
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
The E.W. Scripps Company
Index to Consolidated Financial Statement Schedules
Exhibit
Number
Exhibit Description
Master Transaction Agreement, dated as of July 30, 2014, by and among The E. W.
Scripps Company, Scripps Media, Inc., Desk Spinco, Inc., Scripps NP Operating,
LLC (f/k/a Desk NP Operating, LLC), Desk NP Merger Co., Desk BC Merger, LLC,
Journal Communications, Inc., Boat Spinco, Inc., Boat NP Merger Co., and Journal
Media Group, Inc. (f/k/a Boat NP Newco, Inc.)
Purchase agreement dated as of October 27, 2018, among Cordillera
Communications, LLC and Scripps Media, Inc. with respect to the acquisition of
certain subsidiaries of Cordillera Communications, LLC
Amended Articles of Incorporation of The E.W. Scripps Company
Amended and Restated Code of Regulations of The E.W. Scripps Company
Amendment to Amended Articles of Incorporation of The E. W. Scripps Company
Form
File Number
Exhibit
Report Date
S-4
333-200388
2.1
11/20/2014
8-K
8-K
8-K
8-K
001-10701
2.1
10/27/2018
000-16914
000-16914
000-16914
99.03
10.02
3.1
2/17/2009
5/10/2007
3/11/2015
The E.W. Scripps Company 2010 Long-Term Incentive Plan (Amended and Restated
as of February 24, 2015)
DEF 14A
000-16914
Appendix
5/4/2015
Amendment No. 1 to The E.W. Scripps Company 2010 Long-Term Incentive Plan
Amended and Restated 1997 Long-Term Incentive Plan
10-Q
000-16914
10.02
9/30/2017
DEF 14A
000-16914
Appendix
6/13/2008
Form of Independent Director Nonqualified Stock Option Agreement
The E.W. Scripps Company Executive Annual Incentive Plan
The E.W. Scripps Company Executive Severance Plan Amended and Restated as of
February 23, 2015
The E.W. Scripps Company Employee Stock Purchase Plan
8-K
10-K
8-K
S-8
Amended and Restated Scripps Family Agreement dated May 19, 2015
SC 13D
005-43473
Amendment No. 1 to Amended and Restated Scripps Family Agreement
1997 Deferred Compensation and Stock Plan for Directors, as amended
Scripps Supplemental Executive Retirement Plan as Amended and Restated effective
February 23, 2015
10.12
Employment Agreement between the Company and Richard A. Boehne
10.13
Amendment to Employment Agreement between the Company and Richard A.
Boehne
10.14
Employment Agreement between the Company and Adam P. Symson
10-Q
8-K
10-Q
8-K
8-K
8-K
Scripps Senior Executive Change in Control Plan, Amended and Restated effective
February 23, 2015
10-K
000-16914
10.13
12/31/2016
000-16914
10.03B
2/9/2005
000-16914
10.07
12/31/2015
000-16914
10.1
2/23/2015
333-151963
000-16914
000-16914
99
2
10.01
10.61
6/26/2008
6/5/2015
3/31/2017
5/8/2008
000-16914
10.10
9/30/2017
000-16914
10.66
2/15/2011
000-16914
000-16914
10.1
10.1
11/4/2014
7/10/2017
10-Q
000-16914
10.14
9/30/2017
000-16914
10.15
9/30/2017
000-16914
10.16
000-16914
000-16914
000-16914
000-16914
10.1
10.1
10.2
99.1
9/30/2017
4/20/2017
4/28/2017
4/28/2017
10/2/2017
000-16914
10.10
3/31/2018
000-16914
14
12/31/2004
10-Q
10-Q
8-K
8-K
8-K
8-K
10-Q
10-K
*
*
*
*
*
*
Scripps Executive Deferred Compensation Plan, Amended and Restated as of
February 23, 2015
The E.W. Scripps Company Restricted Share Unit Agreement (Non-Employee
Directors)
Employee Restricted Share Unit Agreement
5.125% Senior Notes due 2025 Purchase Agreement dated April 20, 2017 Indenture
dated as of April 28, 2017
Third Amended and Restated Credit Agreement dated as of April 28, 2017
First Amendment to Third Amended and Restated Credit Agreement (Incremental
Facility)
10.23
Second Amendment to Third Amended and Restated Credit Agreement
14
21
23
31(a)
31(b)
32(a)
32(b)
Code of Ethics for CEO and Senior Financial Officers
Subsidiaries of the Company
Consent of Independent Registered Public Accounting Firm
Section 302 Certifications
Section 302 Certifications
Section 906 Certifications
Section 906 Certifications
* - As filed herewith
27
The E.W. Scripps Company
Index to Consolidated Financial Statement Schedules (cont.)
Exhibit
Number
Exhibit Description
Form
File Number
Exhibit
Report Date
101.INS
XBRL Instance Document (furnished herewith)
101.SCH
XBRL Taxonomy Extension Schema Document (furnished herewith)
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document (furnished herewith)
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document (furnished herewith)
101.LAB
XBRL Taxonomy Extension Label Linkbase Document (furnished herewith)
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document (furnished herewith)
*
*
*
*
*
*
* - As filed herewith
28
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 1, 2019
THE E. W. SCRIPPS COMPANY
By:
/s/ Adam P. Symson
Adam P. Symson
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 1, 2019.
Signature
/s/ Adam P. Symson
Adam P. Symson
/s/ Lisa A. Knutson
Lisa A. Knutson
/s/ Douglas F. Lyons
Douglas F. Lyons
/s/ Charles Barmonde
Charles Barmonde
/s/ Richard A. Boehne
Richard A. Boehne
/s/ Kelly P. Conlin
Kelly P. Conlin
/s/ John W. Hayden
John W. Hayden
/s/ Anne M. La Dow
Anne M. La Dow
/s/ Roger L. Ogden
Roger L. Ogden
/s/ R. Michael Scagliotti
R. Michael Scagliotti
/s/ Lauren R. Fine
Lauren R. Fine
/s/ Kim Williams
Kim Williams
Title
President and Chief Executive Officer
(Principal Executive Officer)
Executive Vice President and Chief Financial Officer
Senior Vice President, Controller and Treasurer
(Principal Accounting Officer)
Director
Chairman of the Board of Directors
Director
Director
Director
Director
Director
Director
Director
29
[THIS PAGE INTENTIONALLY LEFT BLANK]
The E.W. Scripps Company
Index to Consolidated Financial Statement Information
Item No.
1. Selected Financial Data
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
3. Quantitative and Qualitative Disclosures About Market Risk
4. Controls and Procedures (Including Management’s Report on Internal Control Over Financial Reporting)
5. Reports of Independent Registered Public Accounting Firm
6. Consolidated Balance Sheets
7. Consolidated Statements of Operations
8. Consolidated Statements of Comprehensive Income (Loss)
9. Consolidated Statements of Cash Flows
10. Consolidated Statements of Equity
11. Notes to Consolidated Financial Statements
Page
F-2
F-3
F-19
F-20
F-22
F-24
F-25
F-26
F-27
F-28
F-29
F-1
Selected Financial Data
Five-Year Financial Highlights
(in millions, except per share data)
Summary of Operations (2)
Total operating revenues (3)
Income (loss) from continuing operations before income
taxes
Income (loss) from continuing operations, net of tax
Depreciation and amortization of intangible assets
Per Share Data
Income (loss) from continuing operations — diluted
Cash dividends
Market Value of Common Shares at December 31
Per share
Total
Balance Sheet Data
Total assets
Long-term debt (including current portion)
Equity
Notes to Selected Financial Data
2018 (1)
For the years ended December 31,
2015 (1)
2016 (1)
2017 (1)
2014 (1)
$
1,208
$
877
$
874
$
654
$
499
74
56
(64)
(32)
(12)
(56)
93
60
(55)
(112)
(74)
(50)
9
9
(32)
$
$
$
$
0.68
0.20
15.73
1,269
(0.13) $
—
0.71
$
—
(0.95) $
1.03
0.16
—
$
15.63
1,276
$
19.33
1,585
$
19.00
1,591
22.35
1,274
$
2,130
$
2,130
$
1,736
$
1,706
$
1,031
696
926
702
937
396
946
399
901
196
520
As used herein and in Management’s Discussion and Analysis of Financial Condition and Results of Operations, the terms
“Scripps,” “Company,” “we,” “our,” or “us” may, depending on the context, refer to The E. W. Scripps Company, to one or
more of its consolidated subsidiary companies, or to all of them taken as a whole.
The statement of operations and cash flow data for the five years ended December 31, 2018, and the balance sheet data as
of the same dates have been derived from our audited consolidated financial statements. All per-share amounts are presented on
a diluted basis.
(1)
2018 — On November 30, 2018, we acquired Triton Digital Canada, Inc. Operating results are included for periods after
the acquisition.
2017 — On October 2, 2017, we acquired the Katz networks. Operating results are included for periods after the
acquisition.
2016 — On April 12, 2016, we acquired Cracked. On June 6, 2016, we acquired Stitcher. Operating results for each are
included for periods after the acquisitions.
2015 — On April 1, 2015, we acquired the broadcast group owned by Journal Communications, Inc. On July 22, 2015,
we acquired Midroll Media. Operating results for each are included for periods after the acquisitions.
2014 — On January 1, 2014, we acquired Media Convergence Group, Inc., which operates as Newsy. On June 16, 2014,
we acquired two television stations owned by Granite Broadcasting Corporation. Operating results for each are included
for periods after the acquisitions.
(2) The five-year summary of operations excludes the operating results of the following entities and the gains (losses) on
their divestiture as they are accounted for as discontinued operations:
- During the fourth quarter of 2018, we completed the sale of our radio station group.
- On April 1, 2015, we completed the spin-off of our newspaper business.
(3) Only the years ended December 31, 2018, 2017 and 2016 have been retroactively-adjusted for the adoption of the new
revenue standard on January 1, 2018.
F-2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The consolidated financial statements and notes to consolidated financial statements are the basis for our discussion and
analysis of financial condition and results of operations. You should read this discussion in conjunction with those financial
statements.
Forward-Looking Statements
Our Annual Report on Form 10-K contains certain forward-looking statements related to the Company's businesses that
are based on management’s current expectations. Forward-looking statements are subject to certain risks, trends and
uncertainties, including changes in advertising demand and other economic conditions that could cause actual results to differ
materially from the expectations expressed in forward-looking statements. Such forward-looking statements are made as of the
date of this document and should be evaluated with the understanding of their inherent uncertainty. A detailed discussion of
principal risks and uncertainties that may cause actual results and events to differ materially from such forward-looking
statements is included in the section titled “Risk Factors.” The Company undertakes no obligation to publicly update any
forward-looking statements to reflect events or circumstances after the date the statement is made.
Executive Overview
The E.W. Scripps Company (“Scripps”) is a diverse media enterprise, serving audiences and businesses through a
portfolio of local and national media brands. Our Local Media division is one of the nation’s largest independent TV station
ownership groups. Following the completion of the Raycom Media acquisition in January 2019 and the anticipated closing of
the Cordillera Communications, LLC acquisition in the second quarter of 2019, we will have 51 television stations in 36
markets and a reach of more than one in five U.S. television households. We have affiliations with all of the “Big Four”
television networks. In our National Media division, we operate national media brands including podcast industry-leader,
Stitcher, and its advertising network Midroll Media; next-generation national news network, Newsy; four national broadcast
networks, the Katz networks; and the global leader in digital audio technology and measurement services, Triton. We also
operate an award-winning investigative reporting newsroom in Washington, D.C., and serve as the longtime steward of one of
the nation's largest, most successful and longest-running educational programs, the Scripps National Spelling Bee.
In 2018, management announced a comprehensive growth strategy for the Company to improve short-term performance
and position itself for long-term growth in the form of a five-point plan.
The strategy began at the end of 2017 with a reorganization of our Company into Local Media and National Media
divisions to better reflect how audiences and advertisers view our businesses.
We performed an analysis of our operating divisions and corporate cost structure in order to reduce expenses and improve
both operating performance and company cash flow. We have incurred restructuring charges totaling $13.3 million since the
third quarter of 2017 and have completed our plan to achieve $30 million in annualized cost reductions.
We executed on further optimizing our portfolio through the sale of our radio business. By the end of 2018, all 34 radio
stations had been sold through multiple transactions for total consideration of $83.5 million.
We continue to pursue a television station acquisition strategy that allows us to assemble the best-performing portfolio
possible. On January 1, 2019, we acquired ABC-affiliated stations in Waco, Texas and Tallahassee, Florida for $55 million in
cash. Additionally, we have entered into a definitive agreement to acquire 15 top ranked and high performing television
stations, serving 10 markets, for $521 million. Completion of the acquisition, which is anticipated to close in the second quarter
of 2019, is subject to regulatory approvals and customary closing conditions. These acquisitions allow us to move into new
markets that enhance our portfolio and will diversify our network affiliate mix.
We also are committed to the continued investment in our national media businesses for long-term growth. On
November 30, 2018, we acquired Triton Digital Canada, Inc., a leading global digital audio infrastructure and audience
measurement services company, for $150 million, net of cash acquired. We have increased our Newsy cable subscribers,
Stitcher podcast listeners and Katz U.S. household reach through our investment in and creation of quality content.
Additionally, during 2018, we delivered value to shareholders through our share repurchase program and initiation of a
quarterly dividend of 5 cents per share.
F-3
Results of Operations
The trends and underlying economic conditions affecting operating performance and future prospects differ for each of
our business segments. Accordingly, you should read the following discussion of our consolidated results of operations in
conjunction with the discussion of the operating performance of our individual business segments that follows.
Consolidated Results of Operations
Consolidated results of operations were as follows:
(in thousands)
Operating revenues
Employee compensation and benefits
Programming
Impairment of programming assets
Other expenses
Acquisition and related integration costs
Restructuring costs
Depreciation and amortization of intangible assets
Impairment of goodwill and intangible assets
Gains (losses), net on disposal of property and equipment
Operating income (loss)
Interest expense
Defined benefit pension plan expense
Miscellaneous, net
Income (loss) from continuing operations before income
taxes
(Provision) benefit for income taxes
Income (loss) from continuing operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income (loss)
Loss attributable to noncontrolling interest
Net income (loss) attributable to the shareholders of The
E.W. Scripps Company
2018
$ 1,208,425
(394,029)
(350,753)
(8,920)
(246,487)
(4,124)
(8,911)
(63,987)
—
(1,255)
129,959
(36,184)
(19,752)
152
74,175
(18,098)
56,077
(36,328)
19,749
(632)
For the years ended December 31,
Change
2017
Change
0.3% $
7.0%
32.4%
6.9%
37.8% $
7.2%
53.4%
32.6%
876,972
(367,735)
(228,605)
—
(185,869)
—
(4,422)
(56,343)
(35,732)
(169)
(1,903)
(26,697)
(14,112)
10,636
(32,076)
20,054
(12,022)
(2,595)
(14,617)
(1,511)
2016
874,451
(343,570)
(172,617)
—
(173,797)
(578)
—
(55,204)
—
(480)
128,205
(18,039)
(14,332)
(2,646)
93,188
(33,266)
59,922
7,313
67,235
—
$
20,381
$
(13,106)
$
67,235
Triton, Katz and Cracked were acquired on November 30, 2018, October 2, 2017, and April 12, 2016, respectively, and
the inclusion of operating results from these businesses for the periods subsequent to their acquisitions impacts the
comparability of our consolidated and segment operating results.
2018 compared with 2017
Operating revenues increased 37.8% in 2018. Higher retransmission and political revenues in our Local Media group and
the inclusion of a full year of Katz revenues within our National Media group were the main contributors to the year-over-year
revenue increases. Revenues from Katz were $186 million in 2018 compared to $41.0 million in 2017. Revenues from Triton
for December 2018 were $3.3 million.
Employee compensation and benefits increased 7.2% in 2018, primarily driven by the expansion of our National Media
group, including a full year of Katz expenses and one month of Triton expenses. This increase was partially offset by employee
cost savings attributed to restructuring activities initiated in the fourth quarter of 2017.
Programming expense increased 53.4% in 2018, primarily due to higher network affiliation fees reflecting contractual rate
increases, as well as a full year of programming costs for Katz.
F-4
In the fourth quarter of 2018, we incurred a non-cash impairment charge of $8.9 million related to our original
programming show, Pickler & Ben, which will not be renewed for a third season.
Other expenses increased 32.6% in 2018 compared to the prior year, most of which was driven by a full year of expenses
for Katz. Increases in marketing and promotion costs for our national brands, mainly Newsy and Stitcher, also contributed to
the increase in other expenses in 2018.
Acquisition and related integration costs of $4.1 million in 2018 reflect professional service costs incurred to integrate
Triton and the former Raycom stations, as well as costs incurred for the pending Cordillera acquisition.
Restructuring costs of $8.9 million in 2018 and $4.4 million in 2017 reflect severance, outside consulting fees and other
costs associated with our previously announced changes in management and operating structure.
Depreciation and amortization expense increased from $56 million in 2017 to $64 million in 2018 mainly due to the
acquisition of Katz in the fourth quarter of 2017.
The slower development of our original revenue model for Cracked created indications of impairment of goodwill as of
September 30, 2017. We concluded that the fair value of Cracked did not exceed its carrying value as of September 30, 2017.
We recorded a $29.4 million non-cash impairment charge in the three months ended September 30, 2017 to reduce the carrying
value of goodwill and $6.3 million to reduce the carrying value of intangible assets.
Interest expense increased in 2018 due to the new debt issued to finance the Katz acquisition, the higher interest rate on
the senior secured notes that were issued in April 2017 and from increases throughout the year in London Interbank Offering
Rates ("LIBOR"), which is the benchmark upon which interest on our term loan B is based. Interest expense in 2017 includes a
$2.4 million write-off of loan fees associated with the refinancing of our term loan B in the second quarter 2017.
Defined benefit pension plan expense in 2018 includes a $1.8 million non-cash settlement charge related to lump-sum
distributions from our Supplemental Executive Retirement Plans and an $11.7 million non-cash settlement charge in connection
with the merger of our Scripps Pension Plan into the Journal Communications, Inc. Plan and related transactions.
Miscellaneous, net in 2017 includes a $5.4 million gain on the change in control when we acquired Katz, a $3.0 million
gain from the sale of our newspaper syndication business and other income of $3.2 million resulting from an adjustment to the
Midroll Media acquisition purchase price earn out.
The effective income tax rate was 24.4% and 62.5% for 2018 and 2017, respectively. State taxes, non-deductible
expenses, excess tax benefits or expense on share-based compensation, tax settlements and changes in our reserves for
uncertain tax positions impacted our effective rate. Our 2018 provision includes $0.6 million of excess tax benefits from the
exercise and vesting of share-based compensation awards. In 2017, we had a provisional estimated benefit of $4.2 million from
the change in federal income tax rates for the enactment of the Tax Cuts and Jobs Act which reduced the corporate income tax
rate from 35% to 21%.
2017 compared with 2016
Operating revenues were comparable year-over-year. We had higher retransmission and carriage revenues of $39 million
and revenues in our National Media group increased more than $58 million. The increase in our National Media group revenues
includes $41 million of revenues from Katz. These increases were offset by $92 million of lower political revenues from our
Local Media group in a non-political year.
Employee compensation and benefits increased 7.0% in 2017, primarily driven by the expansion of our National Media
group, including almost $5 million related to Katz.
Programming expense increased 32.4% in 2017, primarily due to $22 million of higher network affiliation fees and
additional programming costs from Katz. Network affiliation fees increased due to contractual rate increases.
Other expenses increased approximately 6.9% in 2017, most of which was driven by Katz.
Acquisition and related integration costs of $0.6 million in 2016 includes costs for spinning off our newspaper operations
and costs associated with acquisitions, such as investment banking, legal and accounting fees, as well as costs to integrate the
acquired businesses.
F-5
Depreciation and amortization expense increased slightly from $55 million in 2016 to $56 million in 2017 due to the
acquisition of Katz.
Restructuring of $4.4 million in 2017 includes $3.5 million for severance associated with a change in senior management
and other employee groups, as well as outside consulting fees associated with the realignment of the Local and National Media
businesses.
Impairment of goodwill and intangible assets in 2017 reflects the non-cash impairment charge to reduce the carrying
value of goodwill and intangible assets for our Cracked business.
Interest expense increased in 2017 due to a $2.4 million write-off of loan fees associated with our old term loan B which
was refinanced in the second quarter of 2017, the higher interest rate on our new senior secured notes and additional interest on
new debt issued to finance the Katz acquisition.
Miscellaneous, net increased in 2017 due to a $5.4 million gain on the change in control when we acquired Katz, a $3.0
million gain from the sale of our newspaper syndication business and other income of $3.2 million resulting from an
adjustment to the Midroll Media acquisition purchase price earn out.
The effective income tax rate was 62.5% and 35.7% for 2017 and 2016, respectively. State taxes and non-deductible
expenses impacted our effective rate. In 2017, we had a provisional estimated benefit of $4.2 million from the change in federal
income tax rates for the enactment of the Tax Cuts and Jobs Act which reduced the corporate income tax rate from 35% to 21%.
Our effective income tax rates for 2017 and 2016 were impacted by tax settlements and changes in our reserve for uncertain tax
positions. Our 2016 provision includes $1.7 million of excess tax benefits from the exercise and vesting of share-based
compensation awards.
Discontinued Operations
Discontinued operations reflect the historical results of our radio operations. We closed on the sale of our Tulsa radio
stations on October 1, 2018, closed on the sales of our Milwaukee, Knoxville, Omaha, Springfield and Wichita radio stations
on November 1, 2018 and closed on the sales of our Boise and Tucson radio stations on December 12, 2018.
In 2018 and 2017, results of discontinued operations included $25.9 million and $8 million, respectively, of non-cash
impairment charges to write-down the goodwill of our radio business to fair value.
F-6
Business Segment Results — As discussed in the Notes to Consolidated Financial Statements, our chief operating decision
maker evaluates the operating performance of our business segments using a measure called segment profit. Segment profit
excludes interest, defined benefit pension plan expense, income taxes, depreciation and amortization, impairment charges,
divested operating units, restructuring activities, investment results and certain other items that are included in net income
(loss) determined in accordance with accounting principles generally accepted in the United States of America.
Items excluded from segment profit generally result from decisions made in prior periods or from decisions made by
corporate executives rather than the managers of the business segments. Depreciation and amortization charges are the result of
decisions made in prior periods regarding the allocation of resources and are therefore excluded from the measure. Generally,
our corporate executives make financing, tax structure and divestiture decisions. Excluding these items from measurement of
our business segment performance enables us to evaluate business segment operating performance based upon current
economic conditions and decisions made by the managers of those business segments in the current period.
We allocate a portion of certain corporate costs and expenses, including information technology, certain employee
benefits and shared services, to our business segments. The allocations are generally amounts agreed upon by management,
which may differ from an arms-length amount.
Information regarding the operating performance of our business segments and a reconciliation of such information to the
consolidated financial statements is as follows:
(in thousands)
Segment operating revenues:
Local Media
National Media
Other
Total operating revenues
Segment profit (loss):
Local Media
National Media
Other
Shared services and corporate
Acquisition and related integration costs
Restructuring costs
Depreciation and amortization of intangible assets
Impairment of goodwill and intangible assets
Gains (losses), net on disposal of property and equipment
Interest expense
Defined benefit pension plan expense
Miscellaneous, net
2018
For the years ended December 31,
Change
2017
Change
2016
$
917,480
17.9 % $
778,376
(6.8)% $
835,290
286,170
4,775
(12.5)%
93,141
5,455
15.2 %
34,424
4,737
$ 1,208,425
37.8 % $
876,972
0.3 % $
874,451
$
251,119
60.1 % $
55.9 %
5.2 %
13,920
(3,680)
(53,123)
(4,124)
(8,911)
(63,987)
—
(1,255)
(36,184)
(19,752)
152
156,890
(9,260)
(2,361)
(50,506)
—
(4,422)
(56,343)
(35,732)
(169)
(26,697)
(14,112)
10,636
(35.5)% $
(8.8)%
(6.0)%
9.4 %
243,298
(10,156)
(2,513)
(46,162)
(578)
—
(55,204)
—
(480)
(18,039)
(14,332)
(2,646)
Income (loss) from continuing operations before income
taxes
$
74,175
$
(32,076)
$
93,188
F-7
Local Media — Our Local Media segment includes our local broadcast stations and their related digital properties. It is
comprised of fifteen ABC affiliates, five NBC affiliates, two FOX affiliates and two CBS affiliates. We also have two MyTV
affiliates, one CW affiliate, two independent stations and four Azteca America Spanish-language affiliates. Our Local Media
segment earns revenue primarily from the sale of advertising to local, national and political advertisers and retransmission fees
received from cable operators, telecommunication companies and satellite carriers. We also receive retransmission fees from
over-the-top virtual MVPDs such as YouTubeTV, DirectTV Now and Sony Vue.
National television networks offer affiliates a variety of programs and sell the majority of advertising within those
programs. In addition to network programs, we broadcast local and national internally produced programs, syndicated
programs, sporting events and other programs of interest in each station's market. News is the primary focus of our locally-
produced programming.
The operating performance of our Local Media group is most affected by local and national economic conditions,
particularly conditions within the automotive and services categories, and by the volume of advertising purchased by
campaigns for elective office and political issues. The demand for political advertising is significantly higher in the third and
fourth quarters of even-numbered years.
Operating results for our Local Media segment were as follows:
(in thousands)
Segment operating revenues:
Core advertising
Political
Retransmission
Other
Total operating revenues
Segment costs and expenses:
Employee compensation and benefits
Programming
Impairment of programming assets
Other expenses
Total costs and expenses
Segment profit
2018 compared with 2017
Revenues
2018
For the years ended December 31,
Change
2017
Change
2016
$
465,275
(5.6)% $
492,633
(1.3)% $
499,227
139,600
301,411
16.2 %
11,194
(36.4)%
917,480
17.9 %
292,079
219,690
8,920
145,672
666,361
1.5 %
18.0 %
(1.3)%
7.2 %
8,651
259,499
17,593
778,376
287,758
186,116
—
147,612
621,486
17.6 %
20.7 %
(6.8)%
2.1 %
14.9 %
(0.3)%
5.0 %
100,761
220,723
14,579
835,290
281,956
161,957
—
148,079
591,992
$
251,119
60.1 % $
156,890
(35.5)% $
243,298
Total Local Media revenues increased 17.9% in 2018. Higher retransmission revenues and higher political advertising
revenues from an even-year election cycle contributed to the increase in revenues. The increase in retransmission revenues was
due to rate step-ups for approximately 5 million of our subscribers, as well as regular annual contractual rate increases. Political
advertising revenues were $139.6 million, leading to displacement of core advertising revenues, which declined 5.6%.
Following the acquisition of Katz on October 2, 2017, we no longer receive carriage fees from the Katz networks, which
primarily represents the decrease in other revenues in 2018.
Costs and expenses
Employee compensation and benefits were relatively flat in 2018 compared to 2017.
Programming expense increased 18.0% in 2018 due to higher network affiliation fees as well as the costs of producing
our original programming show, Pickler & Ben. Network affiliation fees increased $26.8 million in 2018 compared with 2017.
Network affiliation fees have been increasing industry-wide due to higher rates on renewals, as well as year-over-year
contractual rate increases. We expect that the rates on renewals may continue to increase over the next several years.
F-8
In the fourth quarter of 2018, we incurred a non-cash impairment charge of $8.9 million related to our original
programming show, Pickler & Ben, which will not be renewed for a third season.
Lower marketing and promotion costs contributed to the decrease in other expenses in 2018 compared with 2017.
2017 compared with 2016
Revenues
Total Local Media revenues decreased 6.8% in 2017. Core advertising, which includes local and national spot revenues,
as well as revenues from our digital sites, decreased by $6.6 million in 2017. The decrease was from weakness in our retail,
food stores, media and auto categories, offset by improvement in communications, home improvement and services. Political
revenues decreased by $92 million year-over-year in a non-presidential election year.
Retransmission revenues increased by almost $39 million as a result of contractual rate increases, more than offsetting a
slight decline in subscribers. Retransmission contracts with cable and satellite television systems with 3 million subscribers
were renewed in the fourth quarter of 2016. While we had not previously seen any significant declines in subscribers reported
to us by cable and satellite television operators, we began to see declines as second quarter subscriber counts were reported to
us in the third quarter.
Other revenues increased from an additional $3 million of fees we receive for a news production and services agreement.
Upon the acquisition of Katz, we no longer receive carriage fees from the Katz networks which accounted for $8 million of
other revenue in 2017.
Costs and expenses
Employee compensation and benefits increased 2.1% in 2017. The increase was primarily from merit increases and higher
benefit costs.
Programming expense, which includes our network affiliation fees and other programming costs, increased nearly 15% in
2017 primarily due to $22 million of higher network affiliation license fees and the cost of producing our original programming
show, Pickler & Ben, which aired for the first time in September 2017. Network affiliation fees have been increasing industry-
wide due to higher rates on renewals, as well as contractual rate increases, and we expect that they may continue to increase
over the next several years.
F-9
National Media — Our National Media segment is comprised of the operations of our national media businesses including
four national broadcast networks, the Katz networks; podcast industry-leader, Stitcher, and its advertising network Midroll
Media; next-generation national news network, Newsy; the global leader in digital audio technology and measurement services,
Triton; and other national brands. Our National Media group earns revenue primarily through the sale of advertising.
Operating results for our National Media segment were as follows:
(in thousands)
Segment operating revenues:
Katz
Stitcher
Newsy
Triton
Other
Total operating revenues
Segment costs and expenses:
Employee compensation and benefits
Programming
Other expenses
Total costs and expenses
Segment profit (loss)
2018
For the years ended December 31,
Change
2017
Change
2016
$
185,852
$
63.7%
96.5%
86.5%
51,063
24,588
3,292
21,375
286,170
58,033
131,063
83,154
272,250
$
13,920
40,975
31,199
10,089
—
10,878
93,141
31,121
42,489
28,791
$
51.5%
20.5%
49.9%
—
20,588
4,806
—
9,030
34,424
20,767
10,660
13,153
102,401
(9,260)
$
44,580
(10,156)
$
Our National Media businesses, Triton, Katz and Cracked, were acquired on November 30, 2018, October 2, 2017, and
April 12, 2016, respectively. The inclusion of operating results from these businesses for the periods subsequent to the
acquisitions impacts the comparability of our National Media segment operating results.
2018 compared with 2017
Revenues
National Media revenues increased $193 million in 2018. The results of Katz and Triton accounted for $148.2 million of
the increase in 2018. The remainder of the increase is primarily driven by increased revenues from Stitcher and Newsy.
Increases in Stitcher's revenues reflect advertising growth from existing podcasts, as well as the addition of new titles to its
portfolio of podcasts. Newsy's revenues increased primarily from the growth of advertising on over-the-top platforms, as well
as revenues from its expansion into cable in the fourth quarter of 2017.
Cost and Expenses
Employee compensation and benefits increased 86.5% or $26.9 million in 2018. Katz and Triton accounted for
approximately $18 million of the increase. The remainder of the increase was attributable to the hiring of personnel to support
the growth of our national brands, as well as higher bonus and commission expenses tied to revenue performance.
Programming expense includes the amortization of programming for Katz, podcast production costs and other
programming costs. The increase in 2018 is primarily due to the inclusion of a full year of programming costs for Katz and
additional programming costs for our podcast business. Programming costs for Katz were $92.7 million in 2018 compared to
$22.9 million in 2017.
Other expenses increased $54.4 million in 2018. Katz and Triton accounted for $26.5 million of the increase. The
remaining increase in other expenses for the year is primarily attributed to marketing, promotion and occupancy costs incurred
to support the growth of our national brands.
F-10
2017 compared with 2016
Revenues
National Media revenues increased $58.7 million in 2017. The revenues from Katz reflect the revenue earned during the
three months of 2017 that we owned the business. Excluding the results of Katz, revenues increased over 50% year-over-year,
driven by Stitcher and Newsy. Stitcher's revenues increased from advertising growth from existing podcasts, as well as adding
new titles to its portfolio. Newsy's revenues increased primarily from the growth of advertising of over-the-top platforms, as
well as the new revenues from expansion into cable in the fourth quarter of 2017. The increase in other revenue is primarily
from growth in our lifestyle brands.
Cost and Expenses
Costs and expenses increased $57.8 million in 2017, primarily due to the impact of Katz. Excluding the results of Katz,
expenses increased approximately 50% for the year.
Employee compensation and benefits increased due to the impact of the Katz acquisition, as well as hiring people for our
other National Media businesses.
Programming expense includes the amortization of programming for Katz, podcast production costs and other
programming costs. The increase is primarily due to Katz's programming costs since its acquisition and additional
programming costs for our podcast business.
Shared services and corporate
We centrally provide certain services to our business segments. Such services include accounting, tax, cash management,
procurement, human resources, employee benefits and information technology. The business segments are allocated costs for
such services at amounts agreed upon by management. Such allocated costs may differ from amounts that might be negotiated
at arms-length. Costs for such services that are not allocated to the business segments are included in shared services and
corporate costs. Shared services and corporate also includes unallocated corporate costs, such as costs associated with being a
public company.
2018 compared with 2017
Shared services and corporate expenses were up year-over-year with $53.1 million in 2018 and $50.5 million in 2017.
The increase is attributed to $3.4 million in costs incurred related to our 2018 proxy contest and incremental compensation
accruals due to 2018 operating performance, partially offset by cost savings attributed to restructuring activities initiated in the
fourth quarter of 2017.
2017 compared with 2016
Shared services and corporate expenses were up year-over-year with $50.5 million in 2017 and $46.2 million in 2016.
F-11
Liquidity and Capital Resources
Our primary source of liquidity is our available cash and borrowing capacity under our revolving credit facility.
Operating activities
Cash provided by operating activities for the years ended December 31 is as follows:
(in thousands)
Cash Flows from Operating Activities:
Net income (loss)
Income (loss) from discontinued operations, net of tax
Income (loss) from continuing operations, net of tax
Adjustments to reconcile net income (loss) from continuing operations to
net cash flows from operating activities:
Depreciation and amortization
Impairment of goodwill and intangible assets
Impairment of programming assets
Loss (gain) on disposition of investments
(Gains) losses on sale of property and equipment
Programming assets and liabilities
Deferred income taxes
Stock and deferred compensation plans
Pension expense, net of contributions
Other changes in certain working capital accounts, net
Miscellaneous, net
Net cash provided by operating activities from continuing operations
Net cash provided by operating activities from discontinued operations
Net operating activities
$
2018 to 2017
For the years ended December 31,
2017
2016
2018
$
$
19,749
(36,328)
56,077
(14,617) $
(2,595)
(12,022)
67,235
7,313
59,922
63,987
—
8,920
251
1,255
(12,788)
19,354
10,741
(4,052)
(16,159)
2,645
130,231
10,680
140,911
$
56,343
35,732
—
(6,106)
169
(9,172)
(16,084)
15,872
(6,738)
(22,190)
(5,619)
30,185
10,667
40,852
$
55,204
—
—
—
480
(2,327)
38,794
10,857
4,936
(33,646)
1,677
135,897
10,596
146,493
The $100 million increase in cash provided by continuing operating activities was primarily attributable to a $113.5
million year-over-year increase in segment profit and changes in working capital in 2018 compared to 2017. These items were
partially offset by the year-over-year net cash impact from increased programming investment of $3.6 million, $5.3 million of
additional cash outlay related to our previously discussed restructuring initiatives and $14.7 million of higher interest
payments. Additionally, in 2018 we made $3.5 million in payments to cable companies for agreeing to carry the Newsy
network compared to the $6 million we paid in 2017.
2017 to 2016
The $106 million decrease in cash provided by continuing operating activities was primarily attributable to a $90 million
year-over-year decrease in segment profit and changes in working capital in 2017 compared to 2016. Additionally, in 2017 and
2016, we contributed $21 million and $10 million, respectively, to our pension plans. In 2017, we made $6 million in payments
to cable companies for agreeing to carry the Newsy network.
F-12
Investing activities
Cash used in investing activities for the years ended December 31 is as follows:
(in thousands)
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired
Additions to property and equipment
Acquisition of intangible assets
Purchase of investments
Proceeds from FCC repack
Miscellaneous, net
Net cash used in investing activities from continuing operations
Net cash provided by (used in) investing activities from discontinued operations
Net investing activities
For the years ended December 31,
2016
2017
2018
$ (149,469) $ (280,940) $
(53,253)
(7,229)
(558)
1,530
2,307
(206,672)
79,188
(17,932)
(9,745)
(836)
—
12,886
(296,567)
(2,500)
$ (127,484) $ (299,067) $
(43,500)
(25,911)
—
(2,128)
—
147
(71,392)
(2,036)
(73,428)
In 2018, 2017 and 2016 we used $207 million, $297 million and $71 million, respectively, in cash for investing activities
from continuing operations. The primary factors affecting our cash flows from investing activities for the years presented are
described below.
•
•
•
•
•
In 2018, we acquired Triton for $150 million, net of cash acquired.
In 2018, capital expenditures increased $35 million. A significant portion of the increase was attributed to $17.9
million of capital expenditures incurred in 2018 related to the FCC repacking process. Additionally, National
Media's capital expenditures increased $14.4 million year-over-year mainly as a result of one-time expenses
incurred related to the expansion and renovation of office and studio space in our leased facilities that was needed
to accommodate current and future growth of our national brands.
In 2018 and 2017, we recognized other intangible assets of $5.8 million and $9.7 million, respectively, related to
the acquisition of cable and satellite carriage rights for the launch of our Newsy cable network. Additionally, in
2018, we acquired the CourtTV trademark for $1.5 million.
In 2017, we acquired Katz for $281 million, net of cash acquired.
In 2016, we acquired Cracked for $39 million and Stitcher for $4.5 million.
Congress authorized the FCC to conduct so-called “incentive auctions” to auction and re-purpose broadcast television
spectrum for mobile broadband use. In the repacking process associated with the auction, the FCC has reassigned some stations
to new post-auction channels. We do not expect reassignment to new channels to have a material impact on our stations'
broadcast signals as viewed in their markets. We received letters from the FCC in February 2017, notifying us that 17 of our
stations have been assigned to new channels. The legislation authorizing the incentive auction and repack provides the FCC
with up to a $2.75 billion fund to reimburse reasonable costs incurred by stations that are reassigned to new channels in the
repack. We expect the FCC fund will be sufficient to cover the costs we would expect to incur for the repack and that our only
potential funding risks would be limited to any disagreements with the FCC over reimbursement of expenditures incurred.
Reimbursements provided by the FCC are recognized as the cash is received.
We expect to spend approximately $55 million through the end of 2020, of which, $20.8 million has been spent to date.
We have submitted a total of $8.5 million in claims to the FCC for reimbursement, of which, $1.5 million has been received as
of December 31, 2018.
F-13
Financing activities
Cash used in or provided by financing activities for the years ended December 31 is as follows:
(in thousands)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt
Payments on long-term debt
Deferred financing costs
Dividends paid
Repurchase of Class A Common shares
Proceeds from exercise of stock options
Tax payments related to shares withheld for vested stock and RSUs
Miscellaneous, net
Net cash provided by (used in) financing activities from continuing operations
For the years ended December 31,
2018
2017
2016
$
— $
(5,656)
—
(16,395)
(32,323)
1,857
(3,796)
1,316
(54,997) $
$
700,000
(393,927)
(9,671)
—
(17,885)
1,461
(4,576)
(2,840)
272,562
$
$
—
(6,635)
—
—
(44,401)
4,641
(2,681)
(4,258)
(53,334)
For continuing financing activities, cash used in financing activities was $55 million and $53 million in 2018 and 2016,
respectively, while cash provided by financing activities was $273 million in 2017. The primary factors affecting our cash
flows from financing activities are described below.
On April 28, 2017, we issued $400 million of senior unsecured notes ("the Senior Notes"), which bear interest at a rate
of 5.125% per annum and mature on May 15, 2025. The proceeds of the Senior Notes were used to repay our old term loan B,
for payment of the related issuance costs and for general corporate purposes.
On April 28, 2017, we also amended and restated our $100 million revolving credit facility ("Revolving Credit
Facility"), increasing its capacity to $125 million and extending the maturity to April 2022. Interest is payable on the Revolving
Credit Facility at rates based on LIBOR plus a margin based on our leverage ratio ranging from 1.75% to 2.50%. There were no
borrowings under the revolving credit agreement in any of the periods presented. The revolving credit agreement includes
certain financial covenants, which we were in compliance with at December 31, 2018 and 2017.
On October 2, 2017, we issued a $300 million term loan B, which matures in October 2024. We amended the term loan B
on April 4, 2018, reducing the interest rate by 25 basis points. Following the amendment, interest is payable on the term loan B
at a rate based on LIBOR, plus a fixed margin of 2.00%. Interest will reduce to a rate of LIBOR plus a fixed margin of 1.75% if
the Company’s total net leverage, as defined by the amended agreement, is below 2.75. The term loan B requires annual principal
payments of $3 million.
Our financing agreement includes the maintenance of a net leverage ratio if we borrow more than 20% on the Revolving
Credit Facility. The term loan B requires that if we borrow additional amounts or make a permitted acquisition that we cannot
exceed a stipulated net leverage ratio on a pro forma basis at the date of the transaction. We were in compliance with all
financial covenants in the financing agreement at December 31, 2018 and 2017.
Our financing agreement also includes a provision that in certain circumstances we must use a portion of excess cash
flow, as defined, to repay debt. As of December 31, 2018, we were not required to make additional principal payments for
excess cash flow.
Our $55 million acquisition of Waco, Texas and Tallahassee, Florida television stations, which closed in the first quarter
of 2019, was financed through cash on hand at time of the closing. Our $521 million acquisition of Cordillera Communications,
LLC is expected to close in the second quarter of 2019. We have obtained underwriting for financing the acquisition with
incremental term loan B borrowings. Our existing term loan B and senior unsecured notes will remain in place.
We paid dividends of 5 cents per share for each of the four quarters of 2018. Total dividend payments to shareholders of
our common stock in 2018 were $16.4 million. We currently expect that quarterly cash dividends will continue to be paid in the
future. However, future dividends will be declared at the discretion of the Board and will depend on several factors including
our results of operations, financial position, cash flow and other factors that the Board of Directors may deem relevant.
F-14
Our current share repurchase program allows the purchase of up to $100 million of our Class A Common shares through
March 1, 2020. Shares can be repurchased under the authorization via open market purchases or privately negotiated
transactions, including accelerated stock repurchase transactions, block trades, or pursuant to trades intending to comply with
Rule 10b5-1 of the Securities Exchange Act of 1934. From March 15, 2018 through August 20, 2018, we were in a black out
period for repurchasing shares while we negotiated the sales of our radio stations. On August 21, 2018, we entered into an
Accelerated Share Repurchase ("ASR") agreement with JP Morgan to repurchase the Company’s common stock. We
repurchased $32.3 million of shares during 2018, of which, $25 million was under the ASR agreement. We repurchased $17.9
million of shares at prices ranging from $14.05 and $23.01 per share and $44.4 million of shares at prices ranging from $12.84
to $19.51 per share in 2017 and 2016, respectively. As of December 31, 2018, we have $50.3 million outstanding under the
current authorization.
In 2018, 2017 and 2016, we received $2 million, $1 million and $5 million, respectively, of proceeds from the exercise
of employee stock options. We have not issued any stock options since 2008.
Other
We have met our funding requirements for our defined benefit pension plans under the provisions of the Pension Funding
Equity Act of 2004 and the Pension Protection Act of 2006. In 2019, we expect to contribute approximately $20 million in total
to our defined benefit pension plans and our SERPs.
We expect that our cash and cash flows from operating activities will be sufficient to meet our operating and capital needs
over the next 12 months.
Off-Balance Sheet Arrangements and Contractual Obligations
Off-Balance Sheet Arrangements
Off-balance sheet arrangements include the following four categories: obligations under certain guarantees or contracts;
retained or contingent interests in assets transferred to an unconsolidated entity or similar arrangements; obligations under
certain derivative arrangements; and obligations under material variable interests.
F-15
Contractual Obligations
A summary of our contractual cash commitments as of December 31, 2018 is as follows:
(in thousands)
Long-term debt:
Principal amounts
Interest on debt
Programming:
Program licenses, network affiliations and other
programming commitments
Employee compensation and benefits:
Deferred compensation and other post-employment
benefits
Employment and talent contracts
Operating leases:
Noncancelable
Cancelable
Pension obligations:
Minimum pension funding
Other commitments:
Less than
1 Year
Years
2 & 3
Years
4 & 5
Over
5 Years
Total
$
3,000
$
6,000
$
6,000
$ 681,250
$ 696,250
33,292
66,194
65,673
39,856
205,015
296,650
658,632
142,261
425
1,097,968
1,277
47,115
11,197
224
2,656
39,042
15,740
263
2,560
1,646
17,764
161
13,860
202
15,311
214
20,353
88,005
60,012
862
19,804
67,346
65,560
46,965
199,675
Noncancelable purchase and service commitments
Other purchase and service commitments
31,857
71,435
2,609
125,191
65
—
73,563
13,218
34,531
283,407
Total contractual cash obligations
$ 515,851
$ 983,673
$ 375,253
$ 811,301
$2,686,078
Long-term debt — Long-term debt includes the $400 million of unsecured senior notes and $296 million outstanding balance
of our term loan B. The senior unsecured notes bear an interest rate of 5.125% per annum. Our term loan B bears interest at
rates based on LIBOR plus a fixed margin of 2.00%. Interest will reduce to a rate of LIBOR plus a fixed margin of 1.75% if the
Company's total net leverage, as defined by the amended agreement, is below 2.75. The rate on our term loan B was 4.34% at
December 31, 2018. Amounts included in the table may differ from amounts actually paid due to changes in LIBOR. A 1%
increase in LIBOR would result in an increase in annual interest payments of approximately $3 million.
Our Financing Agreement also includes a provision that in certain circumstances we must use a portion of excess cash
flow to repay debt. Principal payments included in the contractual obligations table reflect only scheduled principal payments
and do not reflect any amounts that may be required to be paid under this provision. As of December 31, 2018, we were not
required to make any additional principal payments for excess cash flow.
Other Contractual Obligations — In the ordinary course of business, we enter into long-term contracts to license or produce
programming, to secure on-air talent, to lease office space and equipment and to purchase other goods and services.
Programming — Program licenses generally require payments over the terms of the licenses. Licensed programming includes
both programs that have been delivered and are available for telecast and programs that have not yet been produced. It also
includes payments for our network affiliation agreements. If the programs are not produced, our commitments would generally
expire without obligation. Fixed fee amounts payable under our network affiliation agreements are also included. Variable
amounts in excess of the contractual amounts payable to the networks are not included in the amounts above. Other
programming rights also include commitments for the purchase of podcast content rights.
Talent Contracts — We secure on-air talent for our television stations through multi-year talent agreements. Certain
agreements may be terminated under certain circumstances or at certain dates prior to expiration. We expect our employment
and talent contracts will be renewed or replaced with similar agreements upon their expiration. Amounts due under the
contracts, assuming the contracts are not terminated prior to their expiration, are included in the contractual obligations table.
Operating Leases — We obtain certain office space under multi-year lease agreements. Leases for office space are generally
not cancelable prior to their expiration.
F-16
Leases for operating and office equipment are generally cancelable by either party with 30 to 90 days notice. However,
we expect such contracts will remain in force throughout the terms of the leases. The amounts included in the table above
represent the amounts due under the agreements assuming the agreements are not canceled prior to their expiration.
We expect our operating leases will be renewed or replaced with similar agreements upon their expiration.
Pension Funding — We sponsor noncontributory defined benefit pension plans and non-qualified Supplemental Executive
Retirement Plans ("SERPs").
Contractual commitments summarized in the contractual obligations table include payments to meet minimum funding
requirements of our defined benefit pension plans and estimated benefit payments for our unfunded SERPs. Contractual
pension obligations reflect anticipated minimum statutory pension contributions as of December 31, 2018, based upon pension
funding regulations in effect at the time and our current pension assumptions regarding discount rates and returns on plan
assets. Actual funding requirements may differ from amounts presented due to changes in discount rates, returns on plan assets
or pension funding regulations that are in effect at the time.
Payments for the SERPs have been estimated over a ten-year period. Accordingly, the amounts in the “over 5 years”
column include estimated payments for the periods of 2024-2028. While benefit payments under these plans are expected to
continue beyond 2028, we do not believe it is practicable to estimate payments beyond this period.
Income Tax Obligations — The contractual obligations table does not include any reserves for income taxes recognized
because we are unable to reasonably predict the ultimate amount or timing of settlement of our reserves for income taxes. As of
December 31, 2018, our reserves for income taxes totaled $0.8 million, which is reflected as a long-term liability in our
Consolidated Balance Sheet.
Purchase Commitments — We obtain audience ratings, market research and certain other services under multi-year
agreements. These agreements are generally not cancelable prior to expiration of the service agreement. We expect such
agreements will be renewed or replaced with similar agreements upon their expiration.
Katz has carriage agreements with local television broadcasters to carry one or more of the Katz networks. These carriage
agreements are generally for a five-year term. Under these agreements, Katz either pays a fixed fee or a portion of revenues for
the carriage rights.
We may also enter into contracts with certain vendors and suppliers. These contracts typically do not require the purchase
of fixed or minimum quantities and generally may be terminated at any time without penalty. Included in the table of
contractual obligations are purchase orders placed as of December 31, 2018. Purchase orders placed with vendors, including
those with whom we maintain contractual relationships, are generally cancelable prior to shipment. While these vendor
agreements do not require us to purchase a minimum quantity of goods or services, and we may generally cancel orders prior to
shipment, we expect expenditures for goods and services in future periods will approximate those in prior years.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States
of America (“GAAP”) requires us to make a variety of decisions that affect reported amounts and related disclosures, including
the selection of appropriate accounting principles and the assumptions on which to base accounting estimates. In reaching such
decisions, we apply judgment based on our understanding and analysis of the relevant circumstances, including our historical
experience, actuarial studies and other assumptions. We are committed to incorporating accounting principles, assumptions and
estimates that promote the representational faithfulness, verifiability, neutrality and transparency of the accounting information
included in the financial statements.
Note 1 to our Consolidated Financial Statements describes the significant accounting policies we have selected for use in
the preparation of our financial statements and related disclosures. We believe the following to be the most critical accounting
policies, estimates and assumptions affecting our reported amounts and related disclosures.
F-17
Acquisitions — The accounting for a business combination requires tangible and intangible assets acquired and liabilities
assumed to be recorded at estimated fair value. With the assistance of third party appraisals, we generally determine fair values
using comparisons to market transactions and a discounted cash flow analysis. The use of a discounted cash flow analysis
requires significant judgment to estimate the future cash flows derived from the asset and the expected period of time over
which those cash flows will occur and to determine an appropriate discount rate. Changes in such estimates could affect the
amounts allocated to individual identifiable assets. While we believe our assumptions are reasonable, if different assumptions
were made, the amount allocated to intangible assets could differ substantially from the reported amounts.
Goodwill and Other Indefinite-Lived Intangible Assets — Goodwill for each reporting unit must be tested for impairment
on an annual basis or when events occur or circumstances change that would indicate the fair value of a reporting unit is below
its carrying value. At December 31, 2018, we had $834 million of goodwill. If the fair value of the reporting unit is less than its
carrying value, we may be required to record an impairment charge.
The following is goodwill by reporting unit as of December 31, 2018:
(in thousands)
Local Media group
Katz
Triton
Stitcher
Newsy
Total goodwill
$
491,219
203,760
83,876
47,176
7,982
$
834,013
For our annual goodwill impairment testing, we utilized the quantitative approach for performing our test. Under that
approach, we determine the fair value of our reporting unit generally using market data, appraised values and discounted cash
flow analyses. The use of a discounted cash flow analysis requires significant judgment to estimate the future cash flows
derived from the business and the period of time over which those cash flows will occur, as well as to determine an appropriate
discount rate. The determination of the discount rate is based on a cost of capital model, using a risk-free rate, adjusted by a
stock-beta adjusted risk premium and a size premium. While we believe the estimates and judgments used in determining the
fair values were appropriate, different assumptions with respect to future cash flows, long-term growth rates and discount rates,
could produce a different estimate of fair value. The estimate of fair value assumes certain growth of our businesses, which, if
not achieved, could impact the fair value and possibly result in an impairment of the goodwill. Our annual impairment testing
for goodwill indicated that the fair value of our Local Media reporting unit exceeded its carrying value by over 50% and our
other reporting units exceeded their carrying value by over 15%, except for Triton. The carrying value of Triton approximates
its fair value due to its recent acquisition.
We have determined that our FCC licenses are indefinite lived assets and not subject to amortization. At December 31,
2018, the carrying value of our television FCC licenses was $157 million, which are tested for impairment annually, or more
frequently if events or changes in circumstances indicate that they might be impaired. We compare the estimated fair value of
each individual FCC license to its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its
fair value, an impairment loss is recognized. Fair value is estimated using an income approach referred to as the “Greenfield
Approach,” which requires multiple assumptions relating to the future prospects of each individual FCC license. The fair value
of the FCC license is sensitive to each of the assumptions used in the Greenfield Approach and a change in any individual
assumption could result in the fair value being less than the carrying value of the asset and an impairment charge being
recorded. For example, a 50 basis point increase in the discount rate would reduce the aggregate fair value of the FCC licenses
by more than $25 million. Our annual impairment testing for our FCC licenses indicated that their fair value exceeded their
recorded value.
Pension Plans — We sponsor noncontributory defined benefit pension plans as well as non-qualified Supplemental Executive
Retirement Plans ("SERPs"). Both the defined benefit plans and the SERPs have frozen the accrual of future benefits.
The measurement of our pension obligation and related expense is dependent on a variety of estimates, including:
discount rates; expected long-term rate of return on plan assets; and employee turnover, mortality and retirement ages. We
review these assumptions on an annual basis and make modifications to the assumptions based on current rates and trends when
appropriate. In accordance with accounting principles, we record the effects of these modifications currently or amortize them
over future periods. We consider the most critical of our pension estimates to be our discount rate and the expected long-term
rate of return on plan assets.
F-18
The assumptions used in accounting for our defined benefit pension plans for 2018 and 2017 are as follows:
Discount rate for expense
Discount rate for obligations
Long-term rate of return on plan assets for expense
2018
2017
3.71% - 4.58%
4.38%
4.26%
3.70%
5.10% 4.20%-4.30%
The discount rate used to determine our future pension obligations is based upon a dedicated bond portfolio approach that
includes securities rated Aa or better with maturities matching our expected benefit payments from the plans. The rate is
determined each year at the plan measurement date and affects the succeeding year’s pension cost. Discount rates can change
from year to year based on economic conditions that impact corporate bond yields. A 50 basis point increase or decrease in the
discount rate would decrease or increase our pension obligations as of December 31, 2018, by approximately $32.8 million and
decrease or increase 2019 pension expense by less than $0.1 million.
Under our asset allocation strategy, approximately 45% of plan assets are invested in a portfolio of fixed income securities
with a duration approximately that of the projected payment of benefit obligations. The remaining 55% of plan assets are
invested in equity securities and other return-seeking assets. The expected long-term rate of return on plan assets is based
primarily upon the target asset allocation for plan assets and capital markets forecasts for each asset class employed. A decrease
in the expected rate of return on plan assets increases pension expense. A 50 basis point change in the 2019 expected long-term
rate of return on plan assets would increase or decrease our 2019 pension expense by approximately $1.8 million.
We had unrecognized accumulated other comprehensive loss for our pension plans and SERPs of $126 million at
December 31, 2018. Unrealized actuarial gains and losses result from deferred recognition of differences between our actuarial
assumptions and actual results. In 2018, we had an actuarial loss of $6.7 million. Based on our current assumptions, we
anticipate that 2019 pension expense will include $2.5 million in amortization of accumulated other comprehensive loss.
Recently Adopted Standards and Issued Accounting Standards
Refer to Note 2. Recently Adopted and Issued Accounting Standards of the Notes to Consolidated Financial
Statements for further discussion.
Quantitative and Qualitative Disclosures about Market Risk
Earnings and cash flow can be affected by, among other things, economic conditions and interest rate changes. We are
also exposed to changes in the market value of our investments.
Our objectives in managing interest rate risk are to limit the impact of interest rate changes on our earnings and cash
flows, and to reduce overall borrowing costs.
The following table presents additional information about market-risk-sensitive financial instruments:
(in thousands)
Financial instruments subject to interest rate risk:
Variable rate credit facility
Senior unsecured notes
Term loan B
Unsecured subordinated notes
Long-term debt, including current portion
Financial instruments subject to market value risk:
Investments held at cost
$
$
$
As of December 31, 2018
As of December 31, 2017
Cost
Basis
Fair
Value
Cost
Basis
Fair
Value
— $
— $
— $
400,000
296,250
—
374,000
288,844
—
400,000
299,250
2,656
—
400,000
300,935
2,637
696,250
$
662,844
$
701,906
$
703,572
4,114
(a)
$
4,603
(a)
(a)
Includes securities that do not trade in public markets, thus the securities do not have readily determinable fair values.
We estimate the fair value of these securities approximates their carrying value.
F-19
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e)
under the Securities Exchange Act of 1934) was evaluated as of the date of the financial statements. This evaluation was carried
out under the supervision of and with the participation of management, including the Chief Executive Officer and the Chief
Financial Officer. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the
design and operation of these disclosure controls and procedures are effective. There were no changes to the Company’s
internal controls over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the fourth quarter covered by this
report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial
reporting.
F-20
Management’s Report on Internal Control Over Financial Reporting
Scripps’ management is responsible for establishing and maintaining adequate internal controls designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The
Company’s internal control over financial reporting includes those policies and procedures that:
1. pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company;
2. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with GAAP and that receipts and expenditures of the Company are being made only in accordance with
authorizations of management and the directors of the Company; and
3. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
the Company’s assets that could have a material effect on the financial statements.
All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human
error, collusion and the improper overriding of controls by management. Accordingly, even effective internal control can only
provide reasonable, but not absolute assurance with respect to financial statement preparation. Further, because of changes in
conditions, the effectiveness of internal control may vary over time.
As required by Section 404 of the Sarbanes Oxley Act of 2002, management assessed the effectiveness of The E.W.
Scripps Company and subsidiaries' (the “Company”) internal control over financial reporting as of December 31, 2018.
Management’s assessment is based on the criteria established in the Internal Control – Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based upon our assessment, management believes
that the Company maintained effective internal control over financial reporting as of December 31, 2018.
We acquired Triton Digital Canada, Inc. on November 30, 2018. This business has total assets of approximately $180
million, or approximately 9%, of our total assets as of December 31, 2018 and revenues of $3.3 million, or less than 1%, of our
total revenues for the year ended December 31, 2018. We have excluded this business from management's reporting on internal
control over financial reporting, as permitted by SEC guidance, for the year ended December 31, 2018.
The Company’s independent registered public accounting firm has issued an attestation report on our internal control over
financial reporting as of December 31, 2018. This report appears on page F-23.
Date: March 1, 2019
BY:
/s/ Adam P. Symson
Adam P. Symson
President and Chief Executive Officer
/s/ Lisa A. Knutson
Lisa A. Knutson
Executive Vice President and Chief Financial Officer
F-21
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of The E.W. Scripps Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of The E.W. Scripps Company and subsidiaries (the
"Company") as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income
(loss), cash flows and equity, for each of the three years in the period ended December 31, 2018, and the related notes
(collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally
accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 1, 2019, expressed an unqualified opinion on the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Cincinnati, Ohio
March 1, 2019
We have served as the Company’s auditor since at least 1961; however, an earlier year could not be reliably determined.
F-22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of The E.W. Scripps Company
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of The E.W. Scripps Company and subsidiaries (the “Company”)
as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established
in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2018, of the Company and our
report dated March 1, 2019, expressed an unqualified opinion on those financial statements.
As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its
assessment the internal control over financial reporting at Triton Digital Canada, Inc., which was acquired on November 30,
2018 and whose financial statements constitute 9% of total assets and less than 1% of revenues of the consolidated financial
statement amounts as of and for the year ended December 31, 2018. Accordingly, our audit did not include the internal control
over financial reporting at Triton Digital Canada, Inc.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Cincinnati, Ohio
March 1, 2019
F-23
The E.W. Scripps Company
Consolidated Balance Sheets
(in thousands, except share data)
Assets
Current assets:
Cash and cash equivalents
Accounts and notes receivable (less allowances — $4,371 and $1,949)
Programming
FCC repack receivable
Miscellaneous
Assets held for sale
Total current assets
Investments
Property and equipment
Goodwill
Other intangible assets
Programming (less current portion)
Deferred income taxes
Miscellaneous
Total Assets
Liabilities and Equity
Current liabilities:
Accounts payable
Unearned revenue
Current portion of long-term debt
Accrued liabilities:
Employee compensation and benefits
Miscellaneous
Programming liability
Other current liabilities
Liabilities held for sale
Total current liabilities
Long-term debt (less current portion)
Deferred income taxes
Other liabilities (less current portion)
Commitments and contingencies (Note 16)
Equity:
Preferred stock, $.01 par — authorized: 25,000,000 shares; none outstanding
Common stock, $.01 par:
Class A — authorized: 240,000,000 shares; issued and outstanding:
2018 - 68,736,867 shares; 2017 - 69,699,105 shares
Voting — authorized: 60,000,000 shares; issued and outstanding:
2018 - 11,932,722 shares; 2017 - 11,932,722 shares
Total
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss, net of income taxes
Total The E.W. Scripps Company shareholders' equity
Noncontrolling interest
Total equity
Total Liabilities and Equity
See notes to consolidated financial statements.
F-24
As of December 31,
2017
2018
$
107,114
281,330
34,432
19,242
28,899
—
471,017
7,162
237,927
834,013
478,953
75,333
9,141
16,515
$ 2,130,061
$
148,699
245,365
53,468
—
21,998
136,004
605,534
7,699
209,995
755,949
425,975
85,269
20,076
19,051
$ 2,129,548
$
$
26,919
11,459
3,000
44,929
46,112
40,301
25,339
—
198,059
685,764
25,531
294,542
—
688
23,647
7,353
5,656
41,939
44,396
58,176
10,085
19,536
210,788
687,619
—
293,656
—
697
119
807
1,106,984
(86,229)
(95,397)
926,165
—
926,165
$ 2,130,061
119
816
1,129,020
(90,061)
(102,922)
936,853
632
937,485
$ 2,129,548
The E.W. Scripps Company
Consolidated Statements of Operations
(in thousands, except per share data)
Operating Revenues:
Advertising
Retransmission and carriage
Other
Total operating revenues
Costs and Expenses:
Employee compensation and benefits
Programming
Impairment of programming assets
Other expenses
Acquisition and related integration costs
Restructuring costs
Total costs and expenses
Depreciation, Amortization, and (Gains) Losses:
Depreciation
Amortization of intangible assets
Impairment of goodwill and intangible assets
(Gains) losses, net on disposal of property and equipment
Net depreciation, amortization, and (gains) losses
Operating income (loss)
Interest expense
Defined benefit pension plan expense
Miscellaneous, net
Income (loss) from continuing operations before income taxes
Provision (benefit) for income taxes
Income (loss) from continuing operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income (loss)
Loss attributable to noncontrolling interest
Net income (loss) attributable to the shareholders of The E.W. Scripps
Company
Net income (loss) per basic share of common stock attributable to the
shareholders of The E.W. Scripps Company:
Income (loss) from continuing operations
Income (loss) from discontinued operations
Net income (loss) per basic share of common stock attributable to the
shareholders of The E.W. Scripps Company
Net income (loss) per diluted share of common stock attributable to the
shareholders of The E.W. Scripps Company:
Income (loss) from continuing operations
Income (loss) from discontinued operations
Net income (loss) per diluted share of common stock attributable to the
shareholders of The E.W. Scripps Company
Weighted average shares outstanding:
Basic
Diluted
See notes to consolidated financial statements.
Net income per share amounts may not foot since each is calculated independently.
F-25
For the years ended December 31,
2016
2017
2018
$
$
836,049
304,402
67,974
1,208,425
394,029
350,753
8,920
246,487
4,124
8,911
1,013,224
34,641
29,346
—
1,255
65,242
129,959
(36,184)
(19,752)
152
74,175
18,098
56,077
(36,328)
19,749
(632)
$
563,879
259,712
53,381
876,972
367,735
228,605
—
185,869
—
4,422
786,631
34,049
22,294
35,732
169
92,244
(1,903)
(26,697)
(14,112)
10,636
(32,076)
(20,054)
(12,022)
(2,595)
(14,617)
(1,511)
608,748
220,723
44,980
874,451
343,570
172,617
—
173,797
578
—
690,562
32,474
22,730
—
480
55,684
128,205
(18,039)
(14,332)
(2,646)
93,188
33,266
59,922
7,313
67,235
—
$
$
$
$
$
20,381
$
(13,106) $
67,235
$
0.69
(0.44)
(0.13) $
(0.03)
0.25
$
(0.16) $
$
0.68
(0.44)
(0.13) $
(0.03)
0.24
$
(0.16) $
0.71
0.09
0.80
0.71
0.09
0.80
81,369
81,927
82,052
82,052
83,339
83,639
The E.W. Scripps Company
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
Net income (loss)
Changes in fair value of derivative, net of tax of $0, $0 and $142
Changes in defined benefit pension plans, net of tax of $2,557, $4,152, and
$(2,455)
Other, net of tax of $(22), $(136) and $102
Total comprehensive income (loss)
Less comprehensive income (loss) attributable to noncontrolling interest
Total comprehensive income (loss) attributable to the shareholders of The E.W.
Scripps Company
See notes to consolidated financial statements.
For the years ended December 31,
2016
2017
2018
$
19,749
$
—
7,590
(65)
27,274
(632)
(14,617) $
—
67,235
242
10,150
(355)
(4,822)
(1,511)
(3,936)
149
63,690
—
$
27,906
$
(3,311) $
63,690
F-26
The E.W. Scripps Company
Consolidated Statements of Cash Flows
(in thousands)
Cash Flows from Operating Activities:
Net income (loss)
Income (loss) from discontinued operations, net of tax
Income (loss) from continuing operations, net of tax
Adjustments to reconcile net income (loss) from continuing operations to net cash
flows from operating activities:
For the years ended December 31,
2016
2017
2018
$
$
19,749
(36,328)
56,077
(14,617) $
(2,595)
(12,022)
67,235
7,313
59,922
Depreciation and amortization
Impairment of goodwill and intangible assets
Impairment of programming assets
Loss (gain) on disposition of investments
(Gains) losses on sale of property and equipment
Programming assets and liabilities
Deferred income taxes
Stock and deferred compensation plans
Pension expense, net of contributions
Other changes in certain working capital accounts, net
Miscellaneous, net
Net cash provided by operating activities from continuing operations
Net cash provided by operating activities from discontinued operations
Net operating activities
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired
Additions to property and equipment
Acquisition of intangible assets
Purchase of investments
Proceeds from FCC repack
Miscellaneous, net
Net cash used in investing activities from continuing operations
Net cash provided by (used in) investing activities from discontinued operations
Net investing activities
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt
Payments on long-term debt
Deferred financing costs
Dividends paid
Repurchase of Class A Common shares
Proceeds from exercise of stock options
Tax payments related to shares withheld for vested stock and RSUs
Miscellaneous, net
Net cash provided by (used in) financing activities from continuing operations
Effect of foreign exchange rates on cash, cash equivalents and restricted cash
Increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash:
Beginning of year
End of year
Supplemental Cash Flow Disclosures
Interest paid
Income taxes paid
Non-cash investing information
Capital expenditures included in accounts payable
See notes to consolidated financial statements.
F-27
63,987
—
8,920
251
1,255
(12,788)
19,354
10,741
(4,052)
(16,159)
2,645
130,231
10,680
140,911
(149,469)
(53,253)
(7,229)
(558)
1,530
2,307
(206,672)
79,188
(127,484)
—
(5,656)
—
(16,395)
(32,323)
1,857
(3,796)
1,316
(54,997)
(15)
(41,585)
56,343
35,732
—
(6,106)
169
(9,172)
(16,084)
15,872
(6,738)
(22,190)
(5,619)
30,185
10,667
40,852
(280,940)
(17,932)
(9,745)
(836)
—
12,886
(296,567)
(2,500)
(299,067)
700,000
(393,927)
(9,671)
—
(17,885)
1,461
(4,576)
(2,840)
272,562
—
14,347
55,204
—
—
—
480
(2,327)
38,794
10,857
4,936
(33,646)
1,677
135,897
10,596
146,493
(43,500)
(25,911)
—
(2,128)
—
147
(71,392)
(2,036)
(73,428)
—
(6,635)
—
—
(44,401)
4,641
(2,681)
(4,258)
(53,334)
—
19,731
148,699
$ 107,114
134,352
$ 148,699
114,621
$ 134,352
$
$
$
33,673
3,729
693
$
$
$
18,956
1,756
286
$
$
$
15,620
1,100
102
The E.W. Scripps Company
Consolidated Statements of Equity
(in thousands, except share data)
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
Income (Loss)
("AOCI")
Noncontrolling
Interests
Total
Equity
As of December 31, 2015, as
originally reported
$
Adoption of new accounting guidance
As of January 1, 2016, as adjusted
Comprehensive income (loss)
Repurchase 2,711,865 Class A
Common Shares
Compensation plans: 867,196 net
shares issued*
As of December 31, 2016
Minority interest contribution to
subsidiary
Comprehensive income (loss)
Repurchase 1,004,451 Class A
Common Shares
Compensation plans: 661,256 net
shares issued *
Reclassification of disproportionate
tax effects from AOCI
As of December 31, 2017
Comprehensive income (loss)
Cash dividend: declared and paid -
$0.20 per share
Repurchase 1,813,249 Class A
Common Shares
Compensation plans: 851,011 net
shares issued *
As of December 31, 2018
838
—
838
—
$1,163,985
(58)
1,163,927
—
$ (174,038) $
14,808
(159,230)
67,235
(89,802) $
—
(89,802)
(3,545)
(27)
(42,292)
(2,082)
—
8
10,905
819
1,132,540
—
—
—
—
—
(94,077)
—
(13,106)
(10)
(15,627)
(2,248)
7
12,107
—
—
(93,347)
—
9,795
—
—
—
816
—
—
—
1,129,020
—
19,370
(90,061)
20,381
(19,370)
(102,922)
7,525
—
(16,395)
(18)
(32,151)
(154)
—
—
— $ 900,983
—
—
—
—
—
—
2,143
(1,511)
—
—
—
632
(632)
—
—
14,750
915,733
63,690
(44,401)
10,913
945,935
2,143
(4,822)
(17,885)
12,114
—
937,485
27,274
(16,395)
(32,323)
9
807
10,115
$1,106,984
$
—
(86,229) $
$
—
(95,397) $
—
10,124
— $ 926,165
* Net of tax payments related to shares withheld for vested stock and RSUs of $3,796 in 2018, $4,576 in 2017 and $2,681 in 2016.
See notes to consolidated financial statements.
F-28
THE E.W. SCRIPPS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
As used in the Notes to Consolidated Financial Statements, the terms “Scripps,” “Company,” “we,” “our,” or “us” may,
depending on the context, refer to The E.W. Scripps Company, to one or more of its consolidated subsidiary companies or to all
of them taken as a whole.
Nature of Operations — We are a diverse media enterprise, serving audiences and businesses through a portfolio of local and
national media brands. All of our media businesses provide content and advertising services via digital platforms, including the
Internet, smartphones and tablets. Our media businesses are organized into the following reportable business segments: Local
Media, National Media and Other.
Basis of Presentation — Certain amounts in prior periods have been reclassified to conform to the current period’s
presentation.
Concentration Risks — Our operations are geographically dispersed and we have a diverse customer base. We believe 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 our financial position, results of operations or cash flows.
We derive approximately 69% of our operating revenues from advertising. Changes in the demand for such services, both
nationally and in individual markets, can affect operating results.
Use of Estimates — Preparing financial statements in accordance with accounting principles generally accepted in the United
States of America requires us to make a variety of decisions that affect the reported amounts and the related disclosures. Such
decisions include the selection of accounting principles that reflect the economic substance of the underlying transactions and
the assumptions on which to base accounting estimates. In reaching such decisions, we apply judgment based on our
understanding and analysis of the relevant circumstances, including our historical experience, actuarial studies and other
assumptions.
Our financial statements include estimates and assumptions used in accounting for our defined benefit pension plans; the
periods over which long-lived assets are depreciated or amortized; the fair value of long-lived assets, goodwill and indefinite
lived assets; the liability for uncertain tax positions and valuation allowances against deferred income tax assets; the fair value
of assets acquired and liabilities assumed in business combinations; and self-insured risks.
While we re-evaluate our estimates and assumptions on an ongoing basis, actual results could differ from those estimated
at the time of preparation of the financial statements.
Consolidation — The consolidated financial statements include the accounts of The E.W. Scripps Company and its majority-
owned subsidiary companies. Investments in 20%-to-50%-owned companies where we exert significant influence and all 50%-
or-less-owned partnerships and limited liability companies are accounted for using the equity method. We do not hold any
interests in variable interest entities. All significant intercompany transactions have been eliminated.
Nature of Products and Services — The following is a description of principal activities from which we generate revenue.
Core Advertising — Core advertising is comprised of sales to local and national customers. The advertising includes a
combination of broadcast air time, as well as digital advertising. Pricing of advertising time is based on audience size and share,
the demographic of our audiences and the demand for our limited inventory of commercial time. Advertising time is sold
through a combination of local sales staff and national sales representative firms. Digital revenues are primarily generated from
the sale of advertising to local and national customers on our local television websites, smartphone apps, tablet apps and other
platforms.
Political Advertising — Political advertising is generally sold through our Washington D.C. sales office. Advertising is sold to
presidential, gubernatorial, Senate and House of Representative candidates, as well as for state and local issues. It is also sold to
political action groups (PACs) or other advocacy groups.
Retransmission Revenues — We earn revenue from retransmission consent agreements with multi-channel video programming
distributors (“MVPDs”) in our markets. The MVPDs are cable operators and satellite carriers who pay us to offer our
programming to their customers. We also receive fees from over-the-top virtual MVPDs such as YouTubeTV, DirectTV Now
F-29
and Sony Vue. The fees we receive are typically based on the number of subscribers in our local market and the contracted rate
per subscriber.
Other Products and Services — We derive revenue from sponsorships and community events through our Local Media
segment. Our National Media segment offers subscription services for access to premium content to its customers. Our Triton
business earns revenue from monthly fees charged to audio publishers for converting their content into digital audio streams
and inserting digital advertising into those audio streams and providing statistical measurement information about their
listening audience. Our podcast business acts as a sales and marketing representative and earns commission for its work.
Refer to Note 15. Segment Information for further information, including revenue by significant product and service offering.
Revenue Recognition — Revenue is measured based on the consideration we expect to be entitled to in exchange for promised
goods or services provided to customers, and excludes any amounts collected on behalf of third parties. Revenue is recognized
upon transfer of control of promised products or services to customers.
Advertising — Advertising revenue is recognized, net of agency commissions, over time primarily as ads are aired or
impressions are delivered and any contracted audience guarantees are met. We apply the practical expedient to recognize
revenue at the amount we have the right to invoice, which corresponds directly to the value a customer has received relative to
our performance. For advertising sold based on audience guarantees, audience deficiency may result in an obligation to deliver
additional advertisements to the customer. To the extent that we do not satisfy contracted audience ratings, we record deferred
revenue until such time that the audience guarantee has been satisfied.
Retransmission — Retransmission revenues are considered licenses of functional intellectual property and are recognized
at the point in time the content is transferred to the customer. MVPDs report their subscriber numbers to us generally on a 30-
to 90-day lag. Prior to receiving the MVPD reporting, we record revenue based on estimates of the number of subscribers,
utilizing historical levels and trends of subscribers for each MVPD.
Other — Revenues generated by our Triton business are recognized on a ratable basis over the contract term as the
monthly service is provided to the customer.
Refer to Note 2. Recently Adopted and Issued Accounting Standards for further information on the adoption of the new revenue
recognition standard.
Transaction Price Allocated to Remaining Performance Obligations — As of December 31, 2018, we had an aggregate
transaction price of $68.9 million allocated to unsatisfied performance obligations related to contracts within our Triton
business. We expect to recognize revenue on 92% of these remaining performance obligations over the next 24 months and the
remainder thereafter.
We did not disclose the value of unsatisfied performance obligations on any other contracts with customers because they
are either (i) contracts with an original expected term of one year or less, (ii) contracts for which the sales- or usage-based
royalty exception was applied, or (iii) contracts for which we recognize revenue at the amount to which we have the right to
invoice for services performed.
Cash Equivalents — Cash equivalents represent highly liquid investments with maturity of less than three months when
acquired.
Contract Balances — Timing of revenue recognition may differ from the timing of invoicing to customers. We record a
receivable when revenue is recognized prior to invoicing, or unearned revenue when revenue is recognized subsequent to
invoicing.
We extend credit to customers based upon our assessment of the customer’s financial condition. Collateral is generally not
required from customers. Payment terms may vary by contract type, although our terms generally include a requirement of
payment within 30 to 90 days. In instances where the timing of revenue recognition differs from the timing of invoicing, we
have determined our contracts do not include a significant financing component. The primary purpose of our invoicing terms is
to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing
from our customers.
F-30
The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable
balance. We determine the allowance based on known troubled accounts, historical experience and other currently available
evidence. A rollforward of the allowance for doubtful accounts is as follows:
(in thousands)
January 1, 2016
Charged to costs and expenses
Amounts charged off, net
Balance as of December 31, 2016
Charged to costs and expenses
Amounts charged off, net
Balance as of December 31, 2017
Charged to costs and expenses
Amounts charged off, net
Balance as of December 31, 2018
$
$
1,517
1,601
(1,628)
1,490
1,407
(948)
1,949
3,767
(1,345)
4,371
We record unearned revenue when cash payments are received in advance of our performance. We generally require
amounts payable under advertising contracts with political advertising customers to be paid in advance. Unearned revenue
totaled $11.5 million at December 31, 2018 and is expected to be recognized within revenue over the next 12 months. Unearned
revenue totaled $7.4 million at December 31, 2017.
Assets Recognized from the Costs to Obtain a Contract with a Customer— We recognize an asset for the incremental costs
of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We apply and use the
practical expedient in the revenue guidance to expense costs as incurred for costs to obtain a contract when the amortization
period is one year or less. This expedient applies to advertising sales commissions since advertising contracts are short-term in
nature. In addition, we also may provide inducement payments to secure carriage agreements with distributors of our content.
These inducement payments are capitalized and amortized to expense over the term of the distribution contract. Capitalized
costs to obtain a contract with a customer totaled $9.7 million at December 31, 2018 and $8.0 million at December 31, 2017
and are included within miscellaneous assets on our Consolidated Balance Sheets. Amortization of these costs totaled $1.0
million in 2018.
Investments — From time to time, we make investments in private companies. Investment securities can be impacted by
various market risks, including interest rate risk, credit risk 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. Such changes could materially affect the amounts reported in our financial statements.
We record investments in private companies not accounted for under the equity method at cost, net of impairment write-
downs, because no readily determinable market price is available.
We regularly review our investments to determine if there has been any other-than-temporary decline in value. These
reviews require management judgments that often include estimating the outcome of future events and determining whether
factors exist that indicate impairment has occurred. We evaluate, among other factors, the extent to which cost exceeds fair
value; the duration of the decline in fair value below cost; and the current cash position, earnings and cash forecasts and near-
term prospects of the investee. We reduce the cost basis when a decline in fair value below cost is determined to be other than
temporary, with the resulting adjustment charged against earnings.
Property and Equipment — Property and equipment is carried at cost less depreciation. We compute depreciation using the
straight-line method over estimated useful lives as follows:
Buildings and improvements
Leasehold improvements
Broadcast transmission towers and related equipment
Other broadcast and program production equipment
Computer hardware
Office and other equipment
F-31
15 to 45 years
Shorter of term of lease or useful life
15 to 35 years
3 to 15 years
3 to 5 years
3 to 10 years
Programming — Programming includes the cost of national television network programming, programming produced by us or
for us by independent production companies and programs licensed under agreements with independent producers.
Our network affiliation agreements require the payment of affiliation fees to the network. Network affiliation fees consist
of pre-determined fixed fees in all cases and variable payments based on a share of retransmission revenues above the fixed
fees for some of our agreements.
Program licenses principally consist of television series and films. Program licenses generally have fixed terms, limit the
number of times we can air the programs and require payments over the terms of the licenses. We record licensed program
assets and liabilities when the license period has commenced and the programs are available for broadcast. We do not discount
program licenses for imputed interest. We amortize program licenses based upon expected cash flows over the term of the
license agreement or on a straight-line basis. We classify the portion of the unamortized balance expected to be amortized
within one year as a current asset.
The costs of programming produced by us or for us by independent production companies is charged to expense over
estimated useful lives based upon expected future cash flows. Internal costs, including employee compensation and benefits, to
produce daily or live broadcast shows, such as news, sports or daily magazine shows, are expensed as incurred and are not
classified in our Consolidated Statements of Operations as program costs, but are classified based on the type of cost incurred.
Progress payments on programs not yet available for broadcast are recorded as deposits within programming assets.
We review the net realizable value of program assets for impairment using a day-part methodology if the programming is
for our local broadcast stations, whereby programs broadcast during a particular time period, such as prime time, are evaluated
on an aggregate basis. Programming for our over-the-air broadcast network is reviewed for impairment using the individual
network methodology.
For our program assets available for broadcast, estimated amortization for each of the next five years is $39.7 million in
2019, $30.6 million in 2020, $21.9 million in 2021, $8.7 million in 2022, $1.6 million in 2023 and $0.6 million thereafter.
Actual amortization in each of the next five years will exceed the amounts currently recorded as program assets available for
broadcast, as we will continue to produce and license additional programs.
Program rights liabilities payable within the next twelve months are included as current liabilities and noncurrent
program rights liabilities are included in other noncurrent liabilities.
FCC Repack — In April 2017, the Federal Communications Commission (the “FCC”) began a process of reallocating the
broadcast spectrum (the “repack”). Specifically, the FCC is requiring certain television stations to change channels and/or
modify their transmission facilities. The U.S. Congress passed legislation which provides the FCC with a fund to reimburse all
reasonable costs incurred by stations operating under a full power license and a portion of the costs incurred by stations
operating under a low power license that are reassigned to new channels.
We record an FCC repack receivable for the amount of reimbursable costs due from the FCC, which totaled $19.2 million
at December 31, 2018. The total amount of consideration currently due or that has been collected from the FCC is recorded as a
deferred liability and will be recognized against depreciation expense in the same manner that the underlying FCC repack fixed
assets are depreciated. Deferred FCC repack income totaled $20.6 million at December 31, 2018.
Goodwill and Other Indefinite-Lived Intangible Assets — Goodwill represents the cost of acquisitions in excess of the
acquired businesses’ tangible assets and identifiable intangible assets.
FCC licenses represent the value assigned to the broadcast licenses of acquired broadcast television stations. Broadcast
television stations are subject to the jurisdiction of the Federal Communications Commission (“FCC”) which prohibits the
operation of stations except in accordance with an FCC license. FCC licenses stipulate each station’s operating parameters as
defined by channels, effective radiated power and antenna height. FCC licenses are granted for a term of up to eight years, and
are renewable upon request. We have never had a renewal request denied and all previous renewals have been for the maximum
term.
We do not amortize goodwill or our FCC licenses, but we review them for impairment at least annually or any time
events occur or conditions change that would indicate it is more likely than not the fair value of a reporting unit is below its
carrying value. We perform our annual impairment review during the fourth quarter of each year in conjunction with our annual
planning cycle. We also assess, at least annually, whether our FCC licenses, classified as indefinite-lived intangible assets,
continue to have indefinite lives.
F-32
We review goodwill for impairment based upon our reporting units, which are defined as operating segments or
groupings of businesses one level below the operating segment level. Reporting units with similar economic characteristics are
aggregated into a single unit when testing goodwill for impairment. Our reporting units are our Local Media group, Katz,
Stitcher, Triton and Newsy.
Amortizable Intangible Assets — Television network affiliations represents the value assigned to an acquired broadcast
television station’s relationship with a national television network. Television stations affiliated with national television
networks typically have greater profit margins than independent television stations, primarily due to audience recognition of the
television station as a network affiliate. We amortize these network affiliation relationships on a straight-line basis over
estimated useful lives of 20 years.
We amortize customer lists and other intangible assets in relation to their expected future cash flows over estimated
useful lives of up to 20 years.
Impairment of Long-Lived Assets — We review long-lived assets (primarily property and equipment and amortizable
intangible assets) for impairment whenever events or circumstances indicate the carrying amounts of the assets may not be
recoverable. Recoverability is determined by comparing the aggregate forecasted undiscounted cash flows derived from the
operation of the assets to the carrying amount of the assets. If the aggregate undiscounted cash flow is less than the carrying
amount of the assets, then amortizable intangible assets are written down first, followed by other long-lived assets, to fair value.
We determine fair value based on discounted cash flows or appraisals. We report long-lived assets to be disposed of at the lower
of carrying amount or fair value less costs to sell.
Self-Insured Risks — We are self-insured, up to certain limits, for general and automobile liability, employee health, disability
and workers’ compensation claims and certain other risks. Estimated liabilities for unpaid claims totaled $9.8 million at
December 31, 2018 and 2017. We estimate liabilities for unpaid claims using actuarial methodologies and our historical claims
experience. While we re-evaluate our assumptions and review our claims experience on an ongoing basis, actual claims paid
could vary significantly from estimated claims, which would require adjustments to expense. Based on the terms of the Master
Transaction Agreement with Journal Media Group ("Journal"), Scripps remains the primary obligor for newspaper insurance
claims incurred prior to April 1, 2015. We recorded the liabilities related to these claims on our Consolidated Balance Sheets
with an offsetting receivable of $1.7 million, which will be paid by Journal.
Income Taxes — We recognize deferred income taxes 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. We establish a valuation allowance if we
believe that it is more likely than not that we will not realize some or all of the deferred tax assets.
We record a liability for unrecognized tax benefits resulting from uncertain tax positions taken or that we expect to take in
a tax return. Interest and penalties associated with such tax positions are included in the tax provision. The liability for
additional taxes and interest is included in other liabilities in the Consolidated Balance Sheets.
Risk Management Contracts — We do not hold derivative financial instruments for trading or speculative purposes and we
do not hold leveraged contracts. From time to time, we may use derivative financial instruments to limit the impact of interest
rate fluctuations on our earnings and cash flows.
Stock-Based Compensation — We have a Long-Term Incentive Plan (the “Plan”) which is described more fully in Note 17.
The Plan provides for the award of incentive and nonqualified stock options, stock appreciation rights, restricted stock units
(RSUs) and unrestricted Class A Common shares and performance units to key employees and non-employee directors.
We recognize compensation cost based on the grant-date fair value of the award. We determine the fair value of awards
that grant the employee the underlying shares by the fair value of a Class A Common share on the date of the award.
Certain awards of RSUs have performance conditions under which the number of shares granted is determined by the
extent to which such performance conditions are met (“Performance Shares”). Compensation costs for such awards are
measured by the grant-date fair value of a Class A Common share and the number of shares earned. In periods prior to
completion of the performance period, compensation costs are based upon estimates of the number of shares that will be
earned.
Compensation costs are recognized on a straight-line basis over the requisite service period of the award. The impact of
forfeitures is recognized as they occur. The requisite service period is generally the vesting period stated in the award. Grants to
retirement-eligible employees are expensed immediately and grants to employees who will become retirement eligible prior to
F-33
the end of the stated vesting period are expensed over such shorter period because stock compensation grants vest upon the
retirement of the employee.
Earnings Per Share (“EPS”) — Unvested awards of share-based payments with rights to receive dividends or dividend
equivalents, such as our RSUs, are considered participating securities for purposes of calculating EPS. Under the two-class
method, we allocate a portion of net income to these participating securities and therefore exclude that income from the
calculation of EPS for common stock. We do not allocate losses to the participating securities.
The following table presents information about basic and diluted weighted-average shares outstanding:
(in thousands)
Numerator (for basic and diluted earnings per share)
Income (loss) from continuing operations, net of tax
Loss attributable to noncontrolling interest
Less income allocated to RSUs
Numerator for basic and diluted earnings per share from continuing
operations attributable to the shareholders of The E.W. Scripps Company
Denominator
Basic weighted-average shares outstanding
Effect of dilutive securities:
Stock options and restricted stock units
Diluted weighted-average shares outstanding
Anti-dilutive securities(1)
For the years ended December 31,
2017
2016
2018
$
$
56,077
$
632
(908)
(12,022) $
1,511
—
59,922
—
(817)
55,801
$
(10,511) $
59,105
81,369
82,052
83,339
558
81,927
—
—
82,052
1,220
300
83,639
—
(1) Amount outstanding at balance sheet date, before application of the treasury stock method and not weighted for period
outstanding.
For the year ended December 31, 2017, we incurred a net loss and the inclusion of RSUs and stock options would have
been anti-dilutive, and accordingly the diluted EPS calculation for the period excludes those common share equivalents.
2. Recently Adopted and Issued Accounting Standards
Recently Adopted Accounting Standards — In August 2016, the Financial Accounting Standards Board ("FASB") issued
new guidance related to classification of certain cash receipts and payments in the statement of cash flows. This new
guidance was issued with the objective of reducing diversity in practice around eight specific types of cash flows. The new
guidance was effective for us January 1, 2018 and did not have an impact on our Consolidated Statements of Cash Flows.
In January 2016, the FASB issued new guidance on the recognition and measurement of financial instruments. This
guidance primarily affects the accounting for equity method investments, financial liabilities under the fair value option and the
presentation and disclosure requirements for financial instruments. The new standard was effective for us on January 1, 2018
and did not have an impact on our consolidated financial statements.
In May 2014, the FASB issued a new standard related to revenue recognition. Under this standard, revenue is recognized
when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to
be entitled to in exchange for those goods or services. The standard creates a five-step process that requires entities to exercise
judgment when considering the terms of the contract(s) and all relevant facts and circumstances. In addition, the standard
requires expanded footnote disclosure.
We adopted this standard on January 1, 2018, using the full retrospective method. Regarding our advertising contracts,
which comprised 69% of 2018 operating revenues, the contracts are short-term in nature with transaction price consideration
agreed upon in advance. Revenue on broadcast advertising spots continues to be recognized when commercials are aired.
Online advertising revenue earned through the display of digital advertisements across various digital platforms typically takes
the form of an impression-based contract, fixed fee time-based contract or transaction-based contract. Revenue continues to be
recognized evenly over the contract term for fixed fee contracts where a minimum number of impressions or click-throughs is
not guaranteed. Revenue is recognized as the service is delivered for impression and transaction-based contracts.
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Retransmission revenue, which comprised 25% of 2018 operating revenues, is recognized under the licensing of intellectual
property guidance in the standard, which did not result in a change to our previous revenue recognition.
The only identified impacts of the standard were to record certain revenue transactions on a gross basis that were
previously recorded on a net basis and to no longer recognize barter revenue and expense related to syndicated programming.
Adoption of this standard on January 1, 2018 using the full retrospective method required us to adjust certain previously
reported results. The following tables present the impact of adoption of the standard on our Consolidated Statements of
Operations:
(in thousands)
Operating Revenues:
Advertising
Retransmission and carriage
Other
Total operating revenues
Costs and Expenses:
Employee compensation and benefits
Programming
Other expenses
Restructuring costs
Total costs and expenses
(in thousands)
Operating Revenues:
Advertising
Retransmission and carriage
Other
Total operating revenues
Costs and Expenses:
Employee compensation and benefits
Programming
Other expenses
Acquisition and related integration costs
Total costs and expenses
Year Ended December 31, 2017
As
Previously
Reported
Adjustments
for Adoption of
New Revenue
Standard
As Adjusted
$
564,708
$
259,712
40,414
864,834
367,735
216,467
185,869
4,422
(829) $
—
12,967
12,138
—
12,138
—
—
563,879
259,712
53,381
876,972
367,735
228,605
185,869
4,422
$
774,493
$
12,138
$
786,631
Year Ended December 31, 2016
As
Previously
Reported
Adjustments
for Adoption of
New Revenue
Standard
As Adjusted
$
609,612
$
220,723
38,485
868,820
343,570
166,986
173,797
578
(864) $
—
6,495
5,631
—
5,631
—
—
608,748
220,723
44,980
874,451
343,570
172,617
173,797
578
$
684,931
$
5,631
$
690,562
Adoption of the new revenue recognition standard had no impact on our Consolidated Balance Sheets, Consolidated
Statements of Comprehensive Income (Loss), Consolidated Statements of Cash Flows or Consolidated Statements of Equity.
In March 2017, the FASB issued new guidance on the presentation of net periodic benefit cost in the statement of
operations. It requires entities to disaggregate the current service cost component from the other components of net benefit
cost. The service cost is presented with other current compensation costs in the statement of operations, while the other
components are presented outside of operating income. We elected to retrospectively adopt this guidance as of January 1,
2017. We do not have any service cost associated with our net periodic benefit cost, as such, the impact of adopting this new
F-35
guidance was to reclassify our defined benefit pension plan expense out of operating costs and expenses and to classify it as
a non-operating expense below operating income.
In March 2016, the FASB issued new guidance which simplifies the accounting for share-based compensation
arrangements, including the related income tax consequences and classification in the statement of cash flows. We elected to
adopt this guidance effective January 1, 2016. The adoption used the modified retrospective transition method which had no
impact on prior years. The impact of adopting this guidance was to record $14.7 million of previously unrecognized tax
benefits, increasing deferred tax assets and retained earnings as of December 31, 2015.
In February 2018, the FASB issued new guidance that permits companies to reclassify the disproportionate tax effect in
accumulated other comprehensive income ("AOCI") caused by the Tax Cuts and Jobs Act of 2017. We have adopted this
guidance as of December 31, 2017. The impact of the adoption was to reclassify $19.4 million of tax effects related to our
defined benefits plans from AOCI to retained earnings.
Recently Issued Accounting Standards — In August 2018, the FASB issued new guidance to address a customer's
accounting for implementation costs incurred in a cloud computing arrangement ("CCA") that is a service contract. The new
guidance aligns the accounting for costs incurred to implement a CCA that is a service arrangement with the guidance on
capitalizing costs associated with developing or obtaining internal-use software. The guidance is effective for fiscal years,
and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. We are currently
evaluating the impact of this guidance on our consolidated financial statements, as well as the timing of adoption.
In August 2018, the FASB issued new guidance to add, remove and clarify annual disclosure requirements related to
defined benefit pension and other postretirement plans. The guidance is effective for fiscal years ending after December 15,
2020 with early adoption permitted, and it should be applied on a retrospective basis. We believe the main impact of this
guidance will be to no longer disclose the amount in accumulated other comprehensive income that is expected to be
recognized as part of net periodic benefit cost over the next year. Additionally, we will have to add a narrative description for
any significant gains and losses affecting the benefit obligation for the period. We are currently evaluating the impact of this
guidance on our disclosures as well as the timing of adoption.
In June 2016, the FASB issued new guidance that changes the impairment model for most financial assets and certain
other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be
required to use a new forward-looking “expected loss” model that will replace today’s “incurred loss” model, which generally
will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses,
entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized as an
allowance. The guidance is effective in 2020 with early adoption permitted in 2019. We are currently evaluating the impact of
this guidance on our consolidated financial statements, as well as the timing of adoption.
In February 2016, the FASB issued new guidance on the accounting for leases. Under this guidance, lessees will be
required to recognize a lease liability and a right-of-use asset for all leases (with the exception of short-term leases) at the
commencement date. The new guidance is effective for fiscal years, and interim periods within those years, beginning after
December 15, 2018. In July 2018, the FASB approved amendments to create an optional transition method. The amendments
provide an option to implement the new leasing standard through a cumulative-effect adjustment in the period of adoption
without having to restate the comparative periods presented. We will adopt the standard in the first quarter of 2019 and elect
this transition method to apply the standard prospectively. We are finalizing procedures to validate the completeness of
arrangements that qualify as a lease and currently anticipate the implementation of the standard will result in the recognition of
right-of-use assets and lease liabilities for operating leases of approximately $50 million as of January 1, 2019.
F-36
3. Acquisitions
Triton
On November 30, 2018, we acquired Triton Digital Canada, Inc. ("Triton") for total cash consideration of $160 million.
Assets acquired in the transaction included approximately $10.5 million of cash. The transaction was funded with cash on hand
at time of closing. Triton is a leading global digital audio infrastructure and audience measurement services company. Triton’s
infrastructure and ad-serving solutions deliver live and on-demand audio streams and insert advertisements into those streams.
Triton’s data and measurement service is recognized as the currency by which publishers sell digital audio advertising.
From the acquisition date of November 30, 2018 through December 31, 2018, revenues from the Triton operations were
$3.3 million.
The following table summarizes the preliminary fair values of the Triton assets acquired and liabilities assumed at the
closing date.
(in thousands)
Cash
Accounts receivable
Other current assets
Property and equipment
Goodwill
Other intangible assets
Accounts payable
Accrued expenses
Other current liabilities
Deferred tax liability
Total purchase price
$
$
10,515
8,650
679
705
83,876
75,000
(1,881)
(2,964)
(19)
(14,577)
159,984
Of the $75 million allocated to intangible assets, $39 million was assigned to various developed technologies for audience
measurement, content delivery and advertising with lives ranging from 8-12 years, $31 million was assigned to customer
relationships with a life of 12 years and $5 million was assigned to trade names with a life of 10 years.
The goodwill of $84 million arises from being able to capitalize on the growth of the streaming audio industry and further
improve our position in the global digital audio marketplace. The goodwill is allocated to our National Media segment. The
transaction is accounted for as a stock acquisition which applies carryover tax basis to the assets and liabilities acquired. The
goodwill is not deductible for income tax purposes.
Katz
On October 2, 2017 we acquired the Katz networks for $292 million, which is net of a 5.33% non-controlling interest we
owned prior to the acquisition date. Katz owns and operates four national television networks — Bounce, Grit, Escape and
Laff. The acquisition was funded through the issuance of a new term loan B. Katz is included as part of our National Media
segment.
F-37
The following table summarizes the final fair values of the Katz assets acquired and liabilities assumed at the closing
date.
(in thousands)
Cash
Accounts receivable
Current portion of programming
Intangible assets
Goodwill
Programming (less current portion)
Other assets
Accounts payable and accrued liabilities
Current portion of programming liabilities
Programming liabilities
Net purchase price
$
$
21,372
44,306
36,218
32,300
203,760
52,908
11,356
(29,339)
(32,877)
(37,692)
302,312
The acquisition date fair value of goodwill was revised in 2018. Goodwill was decreased by $5.8 million. Adjustments to
increase the fair value of property and equipment by $9.9 million were partially offset by adjustments to decrease the fair value
of program assets by $4.1 million. Additionally, these changes to the acquired value of assets in 2018 resulted in an increase to
previously reported depreciation expense of $0.3 million and a decrease to previously reported programming costs of $0.3
million.
Of the $32 million allocated to intangible assets, $8 million was assigned to trade names with a life of 10 years and $24
million was assigned to advertiser relationships with a life of 5 years.
The goodwill of $204 million arises from being able to enter into the market for established over-the-air networks. The
goodwill was allocated to our National Media segment. We treated the transaction as an asset acquisition for income tax
purposes with a step-up in the assets acquired. The goodwill is deductible for income tax purposes.
Prior to the acquisition of Katz, we owned a 5.33% noncontrolling interest of the company. Upon obtaining a controlling
interest in Katz, we recorded a $5.4 million gain from the fair value remeasurement of our 5.33% interest. This gain is included
in Miscellaneous, net in our Consolidated Statements of Operations.
Stitcher
On June 6, 2016, we completed the acquisition of Stitcher for a cash purchase price of $4.5 million. Stitcher is a popular
podcast listening service which facilitates discovery and streaming for more than 65,000 podcasts. Stitcher now operates as part
of Midroll Media, which significantly broadens Midroll's consumer base and technological capabilities. Of the $4.5 million
purchase price, $2.9 million was allocated to intangible assets, the majority of which was technological software with an
estimated amortization period of 3 years. The remainder of the purchase price was allocated to goodwill.
Cracked
On April 12, 2016, we acquired the multi-platform humor and satire brand Cracked, which informs and entertains
millennial audiences with a website, social media and a popular podcast. The purchase price was $39 million in cash.
The final fair values of the assets acquired were $9.6 million of intangible assets and $29.4 million of goodwill. Of the
$9.6 million allocated to intangible assets, $7.6 million was for trade names with an estimated amortization period of 20 years.
The remaining balance of $2.0 million was allocated to content library with an estimated amortization period of 3 years.
The goodwill of $29 million arising from the transaction consists largely of the benefit we derive from being able to
expand our presence and digital brands on the web, in over-the-top video and audio and on other emerging platforms. We
allocated the goodwill to our National Media segment. We treated the transaction as an asset acquisition for income tax
purposes with a step-up in the assets acquired. The goodwill is deductible for income tax purposes.
F-38
Pro forma results of operations
Pro forma results of operations are presented in the following table. For 2017 and 2016, the results assume that the Katz
acquisition had taken place at the beginning of 2016. The pro forma results do not include Triton, Cracked or Stitcher as the
impact of these acquisitions, individually or in the aggregate, is not material to prior year results of operations. The pro forma
information includes the historical results of operations of Scripps and Katz, as well as adjustments for additional depreciation
and amortization of the assets acquired and additional interest expense related to the financing of the transaction. The pro forma
information does not include efficiencies, cost reductions or synergies expected to result from the acquisition. The unaudited
pro forma financial information is not necessarily indicative of the results that actually would have occurred had the acquisition
been completed at the beginning of the period.
(in thousands, except per share data) (unaudited)
Operating revenues
Income (loss) from continuing operations
Income (loss) per share from continuing operations attributable to the shareholders of
The E.W. Scripps Company
Basic
Diluted
Pending Acquisitions
For the years ended December 31,
2017
2016
$
$
986,373
(12,477)
$
998,916
55,506
(0.13) $
(0.13)
0.66
0.65
On August 20, 2018, we entered into a definitive agreement to acquire television stations owned by Raycom Media —
Waco, Texas ABC affiliate KXXV/KRHD and Tallahassee, Florida ABC affiliate WTXL — for $55 million. These stations
were being divested as part of Gray Television's acquisition of Raycom Media. The purchase was subject to regulatory
approvals and customary closing conditions and closed effective as of January 1, 2019. This transaction was funded with cash
on hand at time of closing.
On October 27, 2018, we entered into a definitive agreement with Cordillera Communications, LLC to acquire 15
television stations, serving 10 markets, for $521 million in cash. The transaction has been cleared by the U.S. Department of
Justice and is expected to close early in the second quarter of 2019, pending FCC consent. We have obtained underwriting for
financing the acquisition with incremental term loan B borrowings.
4. Asset Write-Downs and Other Charges and Credits
Income (loss) from continuing operations before income taxes was affected by the following:
2018 - Costs associated with our previously announced restructuring totaled $8.9 million.
Acquisition and related integration costs of $4.1 million reflect professional service costs incurred to integrate Triton and
the former Raycom stations, as well as costs incurred for the pending Cordillera acquisition.
In the fourth quarter of 2018, we incurred a non-cash impairment charge of $8.9 million related to our original
programming show, Pickler & Ben, which will not be renewed for a third season.
2017 — In the second quarter, we sold our newspaper syndication business, resulting in a gain of $3.0 million.
Restructuring includes $3.5 million of severance associated with a change in senior management and employees, as well
as outside consulting fees associated with changes in our management and operating structure.
Reductions to the earn out provision associated with the acquisition of Midroll Media resulted in increases to other
income of $3.2 million.
In the third quarter of 2017, we recorded a $29.4 million non-cash charge to reduce the carrying value of goodwill and
$6.3 million to reduce the value of intangible assets related to Cracked. For more information around the impairment of
goodwill and intangible assets, see Note 9.
F-39
We recognized a $5.4 million gain on our investment in Katz when we completed the acquisition in the fourth quarter.
2016 — Acquisition and related integration costs of $0.6 million include costs for spinning off our newspaper operations and
costs associated with acquisitions, such as legal and accounting fees, as well as costs to integrate acquired operations.
5. Income Taxes
We file a consolidated federal income tax return, consolidated unitary returns in certain states, other separate state income
tax returns for certain of our subsidiary companies, and applicable foreign returns.
The provision for income taxes from continuing operations consisted of the following:
(in thousands)
Current:
Federal
State and local
Foreign
Total current income tax provision (benefit)
Deferred:
Federal
State and local
Foreign
Total deferred income tax provision (benefit)
Provision (benefit) for income taxes
For the years ended December 31,
2017
2016
2018
$
(719) $
1,119
1
401
16,513
1,188
(4)
17,697
$
18,098
$
$
215
(963)
—
(748)
(16,602)
(2,704)
—
(19,306)
(20,054) $
904
(1,628)
—
(724)
31,029
2,961
—
33,990
33,266
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,
2017
2016
2018
Statutory rate
Effect of:
State and local income taxes, net of federal tax benefit
Excess tax benefits from stock-based compensation
Nondeductible expenses
Reserve for uncertain tax positions
U.S. federal statutory rate change
Other
Effective income tax rate
21.0%
35.0%
35.0%
3.0
0.9
1.5
(0.2)
—
(1.8)
24.4%
2.2
7.1
(4.6)
3.6
13.2
6.0
62.5%
3.0
(1.8)
1.4
(0.8)
—
(1.1)
35.7%
F-40
The approximate effect of the temporary differences giving rise to deferred income tax assets (liabilities) were as follows:
(in thousands)
Temporary differences:
Property and equipment
Goodwill and other intangible assets
Investments, primarily gains and losses not yet recognized for tax purposes
Accrued expenses not deductible until paid
Deferred compensation and retiree benefits not deductible until paid
Other temporary differences, net
Total temporary differences
Federal and state net operating loss carryforwards
Valuation allowance for state deferred tax assets
Net deferred tax asset (liability)
As of December 31,
2017
2018
$
$
(14,545) $
(81,721)
3,067
8,792
56,902
3,416
(24,089)
12,800
(5,101)
(16,390) $
(14,493)
(52,532)
2,792
7,136
61,070
3,267
7,240
15,455
(2,619)
20,076
Total federal operating loss carryforwards were $1 million and state operating loss carryforwards were $255 million at
December 31, 2018. Our state tax loss carryforwards expire through 2038. Because we file separate state income tax returns for
certain of our subsidiary companies, we are not able to use state tax losses of a subsidiary company to offset state taxable
income of another subsidiary company.
Deferred tax assets related to our state jurisdictions totaled $9 million at December 31, 2018. We recognize state net
operating loss carryforwards as deferred tax assets, subject to valuation allowances. At each balance sheet date, we estimate the
amount of carryforwards that are not expected to be used prior to expiration of the carryforward period. The tax effect of the
carryforwards that are not expected to be used prior to their expiration is included in the valuation allowance.
The Company has not provided for income taxes, including withholding tax, US state taxes, or tax on foreign exchange
rate changes, associated with the undistributed earnings of our non-US subsidiaries because we plan to indefinitely reinvest the
unremitted earnings in these entities.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation referred to as the Tax Cuts and Jobs
Act (the “Tax Act”). The Tax Act significantly revised the future ongoing U.S. corporate income tax by, among other things,
lowering U.S. corporate income tax rates.
The reduction of the U.S. corporate tax rate caused the Company to adjust its federal deferred tax assets and liabilities to
the lower base rate of 21%. The change in the rate resulted in a provisional estimated benefit of $4.2 million for the year ended
December 31, 2017. This amount includes the benefit related to the rate change on the deferred tax liabilities included in the
radio net assets that are classified as held for sale (see Note 21) as such benefit is required by GAAP to be included in income
taxes from continuing operations.
The SEC provided guidance in SAB 118 that would allow for a measurement period of up to one year after the enactment
date of the Tax Act to finalize the recording of the related income tax impacts. In accordance with that guidance, the income tax
effects recorded in 2017 were provisional, including those related to our revaluation of federal deferred tax assets and
liabilities. The accounting for the income tax effects could have been adjusted during 2018 as a result of continuing analysis of
the Tax Act; additional implementation guidance from the Internal Revenue Service (IRS), state tax authorities, the SEC, the
FASB, or the Joint Committee on Taxation. We had no material adjustments to our accounting for the Tax Act during 2018.
F-41
A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as
follows:
(in thousands)
For the years ended December 31,
2017
2016
2018
Gross unrecognized tax benefits at beginning of year
$
1,088
$
2,665
$
Increases in tax positions for prior years
Decreases in tax positions for prior years
Increases in tax positions for current years
Decreases in tax positions for current years
Decreases from lapse in statute of limitations
Gross unrecognized tax benefits at end of year
130
(33)
182
—
(255)
1,112
$
16
(390)
—
(54)
(1,149)
1,088
$
$
5,011
22
(1,684)
336
—
(1,020)
2,665
The total amount of net unrecognized tax benefits that, if recognized, would affect the effective tax rate was $0.3 million
at December 31, 2018. We accrue interest and penalties related to unrecognized tax benefits in our provision for income taxes.
At December 31, 2018 and 2017, we had accrued interest related to unrecognized tax benefits of less than $0.1 million.
We file income tax returns in the U.S. and in various state and local jurisdictions. We are routinely examined by tax
authorities in these jurisdictions. At December 31, 2018, we are no longer subject to federal income tax examinations for years
prior to 2015. For state and local jurisdictions, we are generally no longer subject to income tax examinations for years prior to
2014.
Due to the potential for resolution of federal and state examinations, and the expiration of various statutes of limitation, it
is reasonably possible that our gross unrecognized tax benefits balance may change within the next twelve months by as much
as $0.1 million.
6. Restricted Cash
At December 31, 2018 and 2017, our cash and cash equivalents included $5.1 million held in a restricted cash account on
deposit with our insurance carrier. This account serves as collateral, in place of an irrevocable stand-by letter of credit, to
provide financial assurance that we will fulfill our obligations with respect to cash requirements associated with our workers'
compensation self-insurance. This cash is to remain on deposit with the carrier until all claims have been paid or we provide a
letter of credit in lieu of the cash deposit.
7. Investments
Investments consisted of the following:
(in thousands)
Investments held at cost
Equity method investments
Total investments
As of December 31,
2017
2018
$
$
4,114
3,048
7,162
$
$
4,603
3,096
7,699
Our investments do not trade in public markets, thus they do not have readily determinable fair values. We estimate the
fair values of the investments to approximate their carrying values at December 31, 2018 and 2017.
F-42
8. Property and Equipment
Property and equipment consisted of the following:
(in thousands)
Land and improvements
Buildings and improvements
Equipment
Computer software
Total
Accumulated depreciation
Net property and equipment
9. Goodwill and Other Intangible Assets
Goodwill by business segment was as follows:
(in thousands)
Gross balance as of December 31, 2015
Accumulated impairment losses
Net balance as of December 31, 2015
Cracked acquisition
Stitcher acquisition
Balance as of December 31, 2016
Gross balance as of December 31, 2016
Accumulated impairment losses
Net balance as of December 31, 2016
Cracked impairment charge
Katz acquisition
Balance as of December 31, 2017
Gross balance as of December 31, 2017
Accumulated impairment losses
Net balance as of December 31, 2017
Katz acquisition adjustments
Triton acquisition
Balance as of December 31, 2018
Gross balance as of December 31, 2018
Accumulated impairment losses
Net balance as of December 31, 2018
F-43
As of December 31,
2017
2018
$
47,054
$
149,159
346,850
17,492
560,555
322,628
$
237,927
$
47,405
139,685
308,873
14,658
510,621
300,626
209,995
Local Media
National
Media
Total
$
$
$
$
$
$
$
$
708,133
(216,914)
491,219
—
—
491,219
708,133
(216,914)
491,219
—
—
491,219
708,133
(216,914)
491,219
—
—
491,219
708,133
(216,914)
491,219
$
$
$
$
$
$
$
$
74,568
(21,000)
53,568
29,403
1,590
84,561
105,561
(21,000)
84,561
(29,403)
209,572
264,730
315,133
(50,403)
264,730
(5,812)
83,876
342,794
393,197
(50,403)
342,794
$
$
$
$
$
$
$
$
782,701
(237,914)
544,787
29,403
1,590
575,780
813,694
(237,914)
575,780
(29,403)
209,572
755,949
1,023,266
(267,317)
755,949
(5,812)
83,876
834,013
1,101,330
(267,317)
834,013
Other intangible assets consisted of the following:
(in thousands)
Amortizable intangible assets:
Carrying amount:
Television network affiliation relationships
Customer lists and advertiser relationships
Other
Total carrying amount
Accumulated amortization:
Television network affiliation relationships
Customer lists and advertiser relationships
Other
Total accumulated amortization
Net amortizable intangible assets
Indefinite-lived intangible assets — FCC licenses
Total other intangible assets
As of December 31,
2017
2018
$
248,444
$
248,444
100,500
88,393
437,337
(62,020)
(36,380)
(17,199)
(115,599)
321,738
157,215
478,953
$
$
69,500
37,069
355,013
(49,639)
(26,345)
(10,269)
(86,253)
268,760
157,215
425,975
In 2018 and 2017, we recognized other intangible assets of $5.8 million and $9.7 million, respectively, related to the
acquisition of cable and satellite carriage rights for the launch of our Newsy cable network. These rights are amortized over the
life of the respective carriage agreement.
Estimated amortization expense of intangible assets for each of the next five years is $34.3 million in 2019, $33.1 million
in 2020, $30.7 million in 2021, $27.6 million in 2022, $22.6 million in 2023 and $173.4 million in later years.
Goodwill and indefinite-lived intangible assets are tested for impairment annually and any time events occur or conditions
change that would indicate it is more likely than not the fair value of a reporting unit is below its carrying value. Such
indicators of impairment include, but are not limited to, changes in business climate or other factors resulting in low cash flow
related to such assets. If the fair value is less than the carrying value of the reporting unit then an impairment of goodwill exists
and an impairment charge is recorded for the difference between the carrying value of the reporting unit and its estimated fair
value, not to exceed the carrying value of the goodwill.
The slower development of our original operating model created indications of impairment of goodwill as of September
30, 2017 for Cracked.
Under the process required by GAAP, we estimated the fair value of Cracked. The fair value was determined using a
combination of discounted cash flow approach, which estimated fair value based upon future revenues, expenses and cash
flows discounted to their present value, and a market approach, which estimated fair value using market multiples of various
financial measures compared to a set of comparable public companies. The discounted cash flow approach utilized
unobservable factors, such as projected revenues and expenses and a discount rate applied to the estimated cash flows. The
determination of the discount rate was based on a cost of capital model, using a risk-free rate, adjusted by a stock-beta adjusted
risk premium and a size premium. The inputs to the nonrecurring fair value determination of our reporting units are classified
as Level 3 fair value measurements under GAAP.
The valuation methodology and underlying financial information used to determine fair value requires significant
judgments to be made by management. These judgments include, but are not limited to, long-term projections of future
financial performance and the selection of appropriate discount rates used to determine the present value of future cash flows.
Changes in such estimates or the application of alternative assumptions could produce significantly different results.
We concluded that the fair value of Cracked did not exceed its carrying value as of September 30, 2017. Based upon our
valuations, we recorded a $29.4 million non-cash impairment charge in 2017 to reduce the carrying value of goodwill and $6.3
million to reduce the value of intangible assets.
F-44
10. Long-Term Debt
Long-term debt consisted of the following:
(in thousands)
Variable rate credit facility
Senior unsecured notes
Term loan B
Unsecured subordinated notes
Total outstanding principal
Less: Debt issuance costs
Less: Current portion
Net carrying value of long-term debt
Fair value of long-term debt *
As of December 31,
2017
2018
$
— $
—
400,000
296,250
—
696,250
(7,486)
(3,000)
685,764
400,000
299,250
2,656
701,906
(8,631)
(5,656)
687,619
$
662,844
$
703,572
* Fair value of the Senior Notes and the term loan B were estimated based on quoted private market transactions and are
classified as Level 1 in the fair value hierarchy. The fair value of the unsecured subordinated notes is determined based on a
discounted cash flow analysis using current market interest rates of comparable instruments and is classified as Level 2 in the
fair value hierarchy.
Senior Unsecured Notes
On April 28, 2017, we issued $400 million of senior unsecured notes (the "Senior Notes"), which bear interest at a rate of
5.125% per annum and mature on May 15, 2025. The proceeds of the Senior Notes were used to repay our old term loan B, for
the payment of the related issuance costs and for general corporate purposes. The Senior Notes were priced at 100% of par value
and interest is payable semi-annually on May 15 and November 15. Prior to May 15, 2020, we may redeem the Senior Notes, in
whole or in part, at any time, or from time to time, at a price equal to 100% of the principal amount of the Senior Notes, plus
accrued and unpaid interest, if any, to the date of redemption, plus a “make-whole” premium, as set forth in the Senior
Notes indenture. In addition, on or prior to May 15, 2020, we may redeem up to 40% of the Senior Notes, using proceeds of equity
offerings. If we sell certain of our assets or have a change of control, the holders of the Senior Notes may require us to repurchase
some or all of the notes. The Senior Notes are also guaranteed by us and the majority our subsidiaries. The Senior Notes contain
covenants with which we must comply that are typical for borrowing transactions of this nature.
We incurred approximately $7.0 million of deferred financing costs in connection with the issuance of the Senior Notes,
which are being amortized over the life of the Senior Notes. Additionally, we wrote off $2.4 million of deferred financing costs
associated with our old term loan B to interest expense in the second quarter of 2017.
Term Loan B
On October 2, 2017, we issued a $300 million term loan B which matures in October 2024. We amended term loan B on
April 4, 2018, reducing the interest rate by 25 basis points. Following the amendment, interest is payable on the term loan B at a
rate based on LIBOR, plus a fixed margin of 2.00%. Interest will reduce to a rate of LIBOR plus a fixed margin of 1.75% if the
Company's total net leverage, as defined by the amended agreement, is below 2.75. Term loan B requires annual principal payments
of $3 million.
Our Financing Agreement also includes a provision that in certain circumstances we must use a portion of excess cash
flow to repay debt. Principal payments included in the contractual obligations table reflect only scheduled principal payments
and do not reflect any amounts that may be required to be paid under this provision. As of December 31, 2018, we were not
required to make any additional principal payments for excess cash flow.
Under a previous financing agreement, we had a $400 million term loan B that matured in November 2020. We repaid the
term loan B in 2017 with the proceeds of our Senior Notes.
As of December 31, 2018 and 2017, the interest rate was 4.34% and 3.82%, respectively on the term loan B. The
weighted-average interest rate was 4.30% and 3.42% in 2018 and 2017, respectively.
F-45
Revolving Credit Facility
On April 28, 2017, we amended and restated our $100 million revolving credit facility ("Revolving Credit Facility"),
increasing its capacity to $125 million and extending the maturity to April 2022. Interest is payable on the Revolving Credit
Facility at rates based on LIBOR, plus a margin based on our leverage ratio, ranging from 1.75% to 2.50%.
The Revolving Credit Facility includes the maintenance of a net leverage ratio when we have outstanding borrowings on
the facility, as well as other restrictions on payments (dividends and share repurchases). Additionally, we can make acquisitions
as long as the pro forma net leverage ratio is less than 5.5 to 1.0.
We granted the lenders pledges of our equity interests in our subsidiaries and security interests in substantially all other
personal property including cash, accounts receivables and equipment.
Commitment fees of 0.30% to 0.50% per annum, based on our leverage ratio, of the total unused commitment are payable
under the Revolving Credit Facility.
Unsecured Subordinated Notes
The unsecured subordinated promissory notes bore interest at a rate of 7.25% per annum, payable quarterly. The last
principal payment of $2.7 million was paid in the third quarter of 2018.
11. Fair Value Measurement
We measure certain financial assets and liabilities at fair value on a recurring basis, such as cash equivalents. The fair
values of these financial assets were determined based on three levels of inputs, of which the first two are considered
observable and the last unobservable, that may be used to measure fair value. These levels of input are as follows:
• Level 1 — Quoted prices in active markets for identical assets or liabilities.
• Level 2 — Inputs, other than quoted market prices in active markets, that are observable either directly or
indirectly.
• Level 3 — Unobservable inputs based on our own assumptions.
The following tables set forth our assets that are measured at fair value on a recurring basis at December 31, 2018 and
2017:
(in thousands)
Cash equivalents
(in thousands)
Cash equivalents
December 31, 2018
Total
Level 1
Level 2
Level 3
$
1,007
$
1,007
$
— $
—
December 31, 2017
Total
Level 1
Level 2
Level 3
$
69,480
$
69,480
$
— $
—
F-46
12. Other Liabilities
Other liabilities consisted of the following:
(in thousands)
Employee compensation and benefits
Deferred FCC repack income
Programming liability
Liability for pension benefits
Liabilities for uncertain tax positions
Other
Other liabilities (less current portion)
As of December 31,
2017
2018
$
19,775
$
18,520
20,620
43,825
198,444
811
11,067
—
54,641
207,406
644
12,445
$
294,542
$
293,656
13. Supplemental Cash Flow Information
The following table presents additional information about the change in certain working capital accounts:
(in thousands)
Accounts receivable
Other current assets
Accounts payable
Accrued employee compensation and benefits
Other accrued liabilities
Unearned revenue
Other, net
Total
For the years ended December 31,
2017
2016
2018
$
$
(22,130) $
(6,207)
965
9,218
(1,525)
2,915
605
(16,159) $
(22,522) $
(6,150)
(7,259)
3,175
12,645
943
(3,022)
(22,190) $
(20,511)
(3,130)
460
(1,056)
(6,100)
(1,353)
(1,956)
(33,646)
F-47
14. Employee Benefit Plans
We sponsor noncontributory defined benefit pension plans and non-qualified Supplemental Executive Retirement Plans
("SERPs"). Both the defined benefit plans and the SERPs have frozen the accrual of future benefits.
We sponsor a defined contribution plan covering substantially all non-union and certain union employees. We match a
portion of employees' voluntary contributions to this plan.
Other union-represented employees are covered by defined benefit pension plans jointly sponsored by us and the union,
or by union-sponsored multi-employer plans.
We use a December 31 measurement date for our retirement plans. Retirement plans expense is based on valuations as of
the beginning of each year.
The components of the expense consisted of the following:
(in thousands)
Interest cost
Expected return on plan assets, net of expenses
Amortization of actuarial loss
Settlement losses
Total for defined benefit plans
Multi-employer plans
SERPs
Defined contribution plan
Net periodic benefit cost
Allocated to discontinued operations
Net periodic benefit cost - continuing operations
For the years ended December 31,
2017
2016
2018
$
$
23,836
(22,232)
3,527
11,713
16,844
190
2,908
8,619
28,561
(543)
28,018
$
$
25,966
(17,439)
4,424
—
12,951
253
1,161
9,183
23,548
(687)
22,861
$
$
27,359
(18,466)
4,406
—
13,299
168
1,033
8,265
22,765
(652)
22,113
In 2018, we recognized a $1.8 million non-cash settlement charge related to lump-sum distributions from our SERP.
Settlement charges are recorded when total lump-sum distributions for a plan's year exceed the total projected service cost and
interest cost for that plan year.
In November of 2018, we merged $306 million of pension assets and $419 million of pension obligations from our
Scripps Pension Plan ("SPP”) into the Journal Communications, Inc. Plan (“JCI Plan”) that we also sponsor. The SPP retained
pension assets and pension obligations totaling $9 million. Following the merger, we terminated the SPP and purchased a single
premium group annuity contract from an insurance company in the amount of $53.5 million for the terminating SPP
participants and certain participants in the newly merged JCI Plan. Upon issuance of the group annuity contract, the insurance
company assumed all investment risk associated with the assets that were delivered as the annuity contract premium and
assumed the obligation to make future annuity payments to approximately 600 remaining retirees receiving pension benefits in
the SPP and approximately 1,500 remaining retirees receiving pension benefits in the newly merged JCI Plan. There was no
change to the pension benefits for any plan participants as a result of these transactions and the purchase of the group annuity
contract was funded directly by assets of the SPP and JCI Plan. In the fourth quarter of 2018, we recognized a one-time non-
cash settlement charge of $11.7 million in connection with these transactions.
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) were as follows:
(in thousands)
Actuarial gain/(loss)
Amortization of actuarial loss
Prior service cost
Reclassification of actuarial loss related to settlement
Total
F-48
For the years ended December 31,
2017
2016
2018
$
$
(7,765) $
3,527
(424)
11,713
12,205
$
4,424
—
—
7,051
$
16,629
$
(9,379)
4,406
—
—
(4,973)
In addition to the amounts summarized above, amortization of actuarial losses related to our SERPs recognized through
other comprehensive income was $0.3 million in 2018 and $0.2 million in both 2017 and 2016, and settlement losses in 2018
totaled $1.8 million. We recognized an actuarial gain for our SERPs of $1.0 million in 2018 and losses of $2.5 million and $1.6
million in 2017 and 2016, respectively.
Assumptions used in determining the annual retirement plans expense were as follows:
Discount rate
2018 (1)
2017 (2)
2016 (2)
3.71% - 4.58%
4.26%
4.55%
5.10% 4.20%-4.30% 4.50%-4.65%
Long-term rate of return on plan assets
(1) Range presented for 2018 discount rate represents the rates used for various remeasurement periods during the year as well
as differing rates used for Scripps Pension Plan and Journal Communications, Inc. Plan.
(2) Ranges presented for long-term rate of return on plan assets for 2017 and 2016 represent the rates used for Scripps Pension
Plan and Journal Communications, Inc. Plan.
The discount rate used to determine our future pension obligations is based on a dedicated bond portfolio approach that
includes securities rated Aa or better with maturities matching our expected benefit payments from the plans.
The expected long-term rate of return on plan assets is based upon the weighted-average expected rate of return and
capital market forecasts for each asset class employed.
Changes in other key actuarial assumptions affect the determination of the benefit obligations as of the measurement date
and the calculation of net periodic benefit costs in subsequent periods.
F-49
Obligations and Funded Status — The defined benefit pension plan obligations and funded status are actuarially valued as of
the end of each year. The following table presents information about our employee benefit plan assets and obligations:
(in thousands)
Change in projected benefit obligation:
Defined Benefit Plans
SERPs
For the years ended December 31,
2018
2017
2018
2017
Projected benefit obligation at beginning of year
$
654,536
$
625,535
$
23,691
$
21,260
Interest cost
Benefits paid
Actuarial (gains)/losses
Plan Amendments
Settlements
Projected benefit obligation at end of year
Plan assets:
Fair value at beginning of year
Actual return on plan assets
Company contributions
Benefits paid
Settlements
Fair value at end of year
Funded status
Amounts recognized in Consolidated Balance Sheets:
Current liabilities
Noncurrent liabilities
Total
Amounts recognized in accumulated other
comprehensive loss consist of:
Net actuarial loss
Prior service cost
23,836
(33,872)
(46,800)
424
(53,543)
544,581
464,441
(32,334)
17,199
(33,872)
(53,543)
361,891
(182,690) $
25,966
(34,997)
38,032
—
—
654,536
412,459
67,676
19,303
(34,997)
—
464,441
(190,095) $
746
(1,021)
(1,034)
—
(5,397)
16,985
—
—
6,418
(1,021)
(5,397)
—
(16,985) $
— $
— $
(182,690)
(182,690) $
(190,095)
(190,095) $
(1,231) $
(15,754)
(16,985) $
869
(948)
2,510
—
—
23,691
—
—
948
(948)
—
—
(23,691)
(6,380)
(17,311)
(23,691)
120,191
$
127,666
$
5,571
$
424
—
—
8,667
—
$
$
$
$
In 2019, we expect to recognize amortization of accumulated other comprehensive loss into net periodic benefit costs of
$2.5 million (including $0.2 million for our SERPs).
Information for pension plans with an accumulated benefit obligation and projected benefit obligation in excess of plan
assets was as follows:
(in thousands)
Accumulated benefit obligation
Projected benefit obligation
Fair value of plan assets
Defined Benefit Plans
SERPs
2018
As of December 31,
2018
2017
$
544,581
$
654,536
$
16,985
$
544,581
361,891
654,536
464,441
16,985
—
2017
23,691
23,691
—
Assumptions used to determine the defined benefit pension plans benefit obligations were as follows:
Weighted average discount rate
2018
2017
2016
4.38%
3.70%
4.26%
F-50
In 2019, we expect to contribute $1.2 million to fund SERP benefits and $18.6 million to fund our qualified defined
benefit pension plans.
Estimated future benefit payments expected to be paid from the plans for the next ten years are $31.0 million in 2019,
$31.7 million in 2020, $32.6 million in 2021, $33.2 million in 2022, $33.9 million in 2023 and a total of $176.6 million for the
five years ending 2028.
Plan Assets and Investment Strategy
Our long-term investment strategy for pension assets is to earn a rate of return over time that minimizes future
contributions to the plan while reducing the volatility of pension assets relative to pension liabilities. The strategy reflects the
fact that we have frozen the accrual of service credits under our plans which cover the majority of employees. We evaluate our
asset allocation target ranges for equity, fixed income and other investments annually. We monitor actual asset allocations
monthly and adjust as necessary. We control risk through diversification among multiple asset classes, managers and styles.
Risk is further monitored at the manager and asset class level by evaluating performance against appropriate benchmarks.
Information related to our pension plan asset allocations by asset category were as follows:
US equity securities
Non-US equity securities
Fixed-income securities
Other
Total
Target
allocation
2019
Percentage of plan assets
as of December 31,
2018
2017
20%
30%
45%
5%
100%
19%
28%
46%
7%
100%
21%
29%
44%
6%
100%
U.S. equity securities include common stocks of large, medium and small capitalization companies, which are
predominantly U.S. based. Non-U.S. equity securities include companies domiciled outside of the U.S. and American
depository receipts. Fixed-income securities include securities issued or guaranteed by the U.S. government, mortgage backed
securities and corporate debt obligations. Other investments include real estate funds.
Under our asset allocation strategy, approximately 45% of plan assets are invested in a portfolio of fixed income
securities with a duration approximately that of the projected payment of benefit obligations. The remaining 55% of plan assets
are invested in equity securities and other return-seeking assets. The expected long-term rate of return on plan assets is based
primarily upon the target asset allocation for plan assets and capital markets forecasts for each asset class employed.
The following table presents our plan assets as of December 31, 2018 and 2017:
(in thousands)
Equity securities
Common/collective trust funds
Fixed income
Common/collective trust funds
Real estate fund
Cash equivalents
Fair value of plan assets
As of December 31,
2018
2017
$
168,547
$
234,061
166,079
24,798
2,467
204,453
23,102
2,825
$
361,891
$
464,441
Our investments are valued using net asset value as a practical expedient as allowed under U.S. GAAP and therefore are
not valued using the fair value hierarchy.
Equity securities-common/collective trust funds and fixed income-common/collective trust funds are comprised of shares
or units in commingled funds that are not publicly traded. The underlying assets in these funds (equity securities and fixed
income securities) are publicly traded on exchanges and price quotes for the assets held by these funds are readily available.
F-51
Common/collective trust funds are typically valued at their net asset values that are calculated by the investment manager or
sponsor of the fund and have daily or monthly liquidity.
Real estate fund pertains to an investment in a real estate fund which invests in limited partnerships, limited liability
corporations, real estate investment trusts, other funds and insurance company group annuity contracts. The valuations for these
holdings are based on property appraisals using cash flow analysis and market transactions. The fund provides for quarterly
redemptions with 110 days written notice.
15. Segment Information
We determine our business segments based upon our management and internal reporting structure, as well as the basis that
our chief operating decision maker makes resource allocation decisions. We report our financial performance based on the
following segments: Local Media, National Media, Other.
Our Local Media segment includes our local broadcast stations and their related digital operations. It is comprised of
fifteen ABC affiliates, five NBC affiliates, two FOX affiliates and two CBS affiliates. We also have two MyTV affiliates, one
CW affiliate, two independent stations and four Azteca America Spanish-language affiliates. Our Local Media segment earns
revenue primarily from the sale of advertising to local, national and political advertisers and retransmission fees received from
cable operators, telecommunication companies and satellite carriers. We also receive retransmission fees from over-the-top
virtual MVPDs such as YouTubeTV, DirectTV Now and Sony Vue.
Our National Media segment includes our collection of national brands. Our national media brands include Katz, Stitcher
and its advertising network Midroll Media (Midroll), Newsy, Triton and other national brands. These operations earn revenue
primarily through the sale of advertising.
We allocate a portion of certain corporate costs and expenses, including information technology, certain employee benefits
and shared services, to our business segments. The allocations are generally amounts agreed upon by management, which may
differ from an arms-length amount.
Our chief operating decision maker evaluates the operating performance of our business segments and makes decisions
about the allocation of resources to our business segments using a measure called segment profit. Segment profit excludes
interest, defined benefit pension plan expense, income taxes, depreciation and amortization, impairment charges, divested
operating units, restructuring activities, investment results and certain other items that are included in net income
(loss) determined in accordance with accounting principles generally accepted in the United States of America.
F-52
Information regarding our business segments is as follows:
(in thousands)
Segment operating revenues:
Local Media
National Media
Other
Total operating revenues
Segment profit (loss):
Local Media
National Media
Other
Shared services and corporate
Acquisition and related integration costs
Restructuring costs
Depreciation and amortization of intangible assets
Impairment of goodwill and intangible assets
Gains (losses), net on disposal of property and equipment
Interest expense
Defined benefit pension plan expense
Miscellaneous, net
Income (loss) from continuing operations before income taxes
Depreciation:
Local Media
National Media
Other
Shared services and corporate
Total depreciation
Amortization of intangible assets:
Local Media
National Media
Shared services and corporate
Total amortization of intangible assets
For the years ended December 31,
2017
2018
2016
$
$
$
$
$
$
$
$
917,480
$
778,376
$
835,290
286,170
4,775
1,208,425
251,119
13,920
(3,680)
(53,123)
(4,124)
(8,911)
(63,987)
—
(1,255)
(36,184)
(19,752)
152
74,175
30,467
2,592
150
1,432
34,641
14,821
13,172
1,353
$
$
$
$
$
$
93,141
5,455
34,424
4,737
876,972
$
874,451
$
156,890
(9,260)
(2,361)
(50,506)
—
(4,422)
(56,343)
(35,732)
(169)
(26,697)
(14,112)
10,636
(32,076) $
243,298
(10,156)
(2,513)
(46,162)
(578)
—
(55,204)
—
(480)
(18,039)
(14,332)
(2,646)
93,188
31,870
$
30,184
88
208
1,883
34,049
15,084
5,856
1,354
$
$
164
263
1,863
32,474
16,958
4,419
1,353
29,346
$
22,294
$
22,730
A disaggregation of the principal activities from which we generate revenue is as follows:
(in thousands)
Operating revenues:
Core advertising
Political
Retransmission and carriage
Other
Total operating revenues
For the years ended December 31,
2017
2018
2016
$
696,449
$
555,228
$
139,600
304,402
67,974
8,651
259,712
53,381
507,987
100,761
220,723
44,980
$
1,208,425
$
876,972
$
874,451
F-53
The following table presents additions to property and equipment by segment:
(in thousands)
Additions to property and equipment:
Local Media
National Media
Other
Shared services and corporate
Total additions to property and equipment
For the years ended December 31,
2017
2018
2016
$
$
37,773
$
16,946
$
21,064
15,164
—
723
792
—
367
53,660
$
18,105
$
54
124
1,283
22,525
Total assets by segment for the years ended December 31 were as follows:
(in thousands)
Assets:
Local Media
National Media
Other
Shared services and corporate
Total assets of continuing operations
Discontinued operations
Total assets
16. Commitments and Contingencies
As of December 31,
2017
2018
2016
$
1,261,526
$
1,273,735
$
1,280,885
737,987
865
129,683
2,130,061
—
528,479
2,128
189,202
1,993,544
136,004
117,725
7,146
184,109
1,589,865
146,041
$
2,130,061
$
2,129,548
$
1,735,906
Minimum payments on noncancelable leases at December 31, 2018 were: $11.2 million in 2019, $9.2 million in 2020,
$6.5 million in 2021, $6.4 million in 2022, $11.4 million in 2023 and $15.3 million in later years. We expect our operating
leases will be replaced with leases for similar facilities upon their expiration. Rental expense for cancelable and noncancelable
leases was $15.5 million in 2018, $13.1 million in 2017 and $11.1 million in 2016.
In the ordinary course of business, we enter into contractual commitments for network affiliation agreements, the
acquisition of programming and for other purchase and service agreements. Minimum payments on such contractual
commitments at December 31, 2018 were: $399.9 million in 2019, $400.5 million in 2020, $385.9 million in 2021, $182.3
million in 2022, $33.6 million in 2023, and $13.7 million in later years. We expect these contracts will be replaced with similar
contracts upon their expiration.
We are involved in litigation arising in the ordinary course of business, such as defamation actions and governmental
proceedings primarily relating to renewal of broadcast licenses, none of which is expected to result in material loss.
17. Capital Stock and Share-Based Compensation Plans
Capital Stock — We have two classes of common shares, Common Voting shares and Class A Common shares. The Class A
Common shares are only entitled to vote on the election of the greater of three or one-third of the directors and other matters as
required by Ohio law.
Share Repurchase Plan — Shares may be repurchased from time to time at management's discretion. In November 2016, our
Board of Directors authorized a share repurchase program of up to $100 million of our Class A Common shares. The
authorization currently expires on March 1, 2020. Shares can be repurchased under the authorization via open market purchases
or privately negotiated transactions, including accelerated stock repurchase transactions, block trades, or pursuant to trades
intending to comply with Rule 10b5-1 of the Securities Exchange Act of 1934.
As part of the share repurchase plan, the Company entered into an Accelerated Share Repurchase ("ASR") agreement
with JP Morgan to repurchase $25 million of the Company's common stock. Under the ASR agreement, the Company paid $25
F-54
million to JP Morgan and received an initial delivery of 1.3 million shares in the third quarter of 2018, which represents 80% of
the total shares the Company expects to receive based on the market price at the time of the initial delivery. The transaction was
accounted for as an equity transaction. The par value of shares received was recorded as a reduction to common stock with the
remainder recorded as a reduction to additional paid-in capital or retained earnings. Upon initial receipt of the shares, there was
an immediate reduction in the weighted average common shares calculation for basic and diluted earnings per share. Upon final
settlement of the ASR agreement in February 2019, the Company received additional deliveries totaling 147,164 shares of its
common stock based on a weighted average cost per share of $16.70 over the term of the ASR agreement.
Excluding the shares repurchased under the ASR agreement, during 2018 we repurchased $7.3 million of shares at prices
ranging from $13.29 to $17.86 per share. During 2017 and 2016, we repurchased $17.9 million of shares at prices ranging from
$14.05 to $23.01 per share and $44.4 million of shares at prices ranging from $12.84 to $19.51 per share, respectively. As of
December 31, 2018, we have $50.3 million outstanding under the current authorization.
Incentive Plans — We have adopted The E.W. Scripps Company 2010 Long-Term Incentive Plan (the “Plan”) which
terminates on February 15, 2020. The Plan permits the granting of incentive and nonqualified stock options, stock appreciation
rights, restricted stock units (RSUs), restricted and unrestricted Class A Common shares and performance units to key
employees and non-employee directors.
We satisfy stock option exercises and vested stock awards with newly issued shares. As of December 31, 2018,
approximately 3.0 million shares were available for future stock compensation awards.
Stock Options — Stock options grant the recipient the right to purchase Class A Common shares at not less than 100% of the
fair market value on the date the option is granted. We have not issued any new stock options since 2008.
The following table summarizes our stock option activity:
Outstanding at December 31, 2015
Exercised
Outstanding at December 31, 2016
Exercised
Outstanding at December 31, 2017
Exercised
Outstanding at December 31, 2018
Number
of Shares
Weighted-
Average
Exercise
Price
Range of
Exercise
Prices
$
996,879
(509,965)
486,914
(235,407)
251,507
(251,507)
—
$
7.45
8.07
6.81
6.20
7.38
7.38
—
6-9
8-9
6-9
6-8
6-9
6-9
—
The following table summarizes additional information about exercises of stock options:
(in thousands)
Cash received upon exercise
Intrinsic value (market value on date of exercise less exercise price)
Tax benefits realized
For the years ended December 31,
2016
2017
2018
$
1,857
$
1,461
$
1,266
315
3,919
1,497
4,641
4,888
1,877
Restricted Stock Units — Awards of restricted stock units (RSUs) generally require no payment by the employee. RSUs are
converted into an equal number of Class A Common shares when vested. These awards generally vest over a three or four year
period, conditioned upon the individual’s continued employment through that period. Awards vest immediately upon the
retirement, death or disability of the employee or upon a change in control of Scripps or in the business in which the individual
is employed. Unvested awards may be forfeited if employment is terminated for other reasons. Awards are nontransferable
during the vesting period, but the awards are entitled to all the rights of an outstanding share, including receiving stock
dividend equivalents. There are no post-vesting restrictions on awards granted to employees and non-employee directors.
Long-term incentive compensation includes performance share awards. Performance share awards represent the right to
receive an award of RSUs if certain performance measures are met. Each award specifies a target number of shares to be issued
F-55
and the specific performance criteria that must be met. The number of shares that an employee receives may be less or more
than the target number of shares depending on the extent to which the specified performance measures are met or exceeded.
The following table summarizes our RSU activity:
Unvested at December 31, 2015
Awarded
Vested
Forfeited
Unvested at December 31, 2016
Awarded
Vested
Forfeited
Unvested at December 31, 2017
Awarded
Vested
Forfeited
Unvested at December 31, 2018
The following table summarizes additional information about RSU vesting:
Fair Value
Number
of Shares
Weighted
Average
Range of
Prices
910,041
$
18.22
$ 10-24
996,839
(444,267)
(37,436)
1,425,177
653,522
(581,920)
(308,856)
1,187,923
816,771
(771,904)
(57,348)
1,175,442
15.76
17.78
16.82
17.05
22.51
20.78
17.20
19.99
13.28
14.16
16.68
15.86
13-18
13-19
12-24
12-24
17-24
14-24
14-24
14-24
11-17
11-18
13-23
11-24
(in thousands)
Fair value of RSUs vested
Tax benefits realized on vesting
Share-based Compensation Costs
Share-based compensation costs were as follows:
(in thousands)
Total share-based compensation
Included in discontinued operations
Included in continuing operations
Share-based compensation, net of tax
For the years ended December 31,
2017
2016
2018
$
10,930
$
12,090
$
1,758
4,630
7,898
3,033
For the years ended December 31,
2017
2016
2018
$
$
$
11,008
(227)
10,781
8,100
$
$
$
12,960
(465)
12,495
7,717
$
$
$
8,093
(270)
7,823
4,835
As of December 31, 2018, $10.1 million of total unrecognized compensation costs related to RSUs and performance
shares is expected to be recognized over a weighted-average period of 1.5 years.
F-56
18. Accumulated Other Comprehensive Income (Loss)
Changes in the accumulated other comprehensive income (loss) ("AOCI") balance by component consisted of the
following for the respective years:
(in thousands)
As of December 31, 2016
Defined
Benefit
Pension Items
Other
Total
$
(93,676) $
329
$
(93,347)
Other comprehensive income (loss) before reclassifications, net of tax of
$2,814 and ($136)
Amounts reclassified from AOCI, net of tax of $1,338
Net current-period other comprehensive income (loss)
Reclassification of disproportionate tax effects from AOCI
As of December 31, 2017
Other comprehensive income (loss) before reclassifications, net of tax of
$(1,803) and ($22)
Amounts reclassified from AOCI, net of tax of $4,360
Net current-period other comprehensive income (loss)
As of December 31, 2018
6,880
3,270
10,150
(19,429)
(102,955)
(5,351)
12,941
7,590
(95,365) $
$
(355)
—
(355)
59
33
(65)
—
(65)
(32) $
6,525
3,270
9,795
(19,370)
(102,922)
(5,416)
12,941
7,525
(95,397)
Amounts reclassified to net earnings for defined benefit pension items relate to the amortization of actuarial gains (losses)
and settlement charges. These amounts are included within the defined benefit pension plan expense caption on our
Consolidated Statements of Operations. See Note 14. Employee Benefit Plans for additional information.
F-57
19. Summarized Quarterly Financial Information (Unaudited)
Summarized quarterly financial information is as follows:
2018
1st
2nd
3rd
4th
(in thousands, except per share data)
Quarter
Quarter
Quarter
Quarter
Total
Operating revenues
Costs and expenses
Depreciation and amortization of intangible assets
Gains (losses), net on disposal of property and
equipment
Interest expense
Defined benefit pension plan expense
Miscellaneous, net
Income (loss) from continuing operations before
income taxes
Provision (benefit) for income taxes
Income (loss) from continuing operations, net of tax
Income (loss) from discontinued operations, net of
tax
Net income (loss)
Loss attributable to noncontrolling interest
Net income (loss) attributable to the shareholders of
The E.W. Scripps Company
Net income (loss) from continuing operations per
basic share of common stock
Net income (loss) from discontinued operations per
basic share of common stock
Net income (loss) from continuing operations per
diluted share of common stock
Net income (loss) from discontinued operations per
diluted share of common stock
Weighted average shares outstanding:
$
254,191
(238,682)
(15,420)
$
283,395
(245,610)
(15,382)
$
302,726
(247,304)
(15,598)
$
368,113
(281,628)
(17,587)
$ 1,208,425
(1,013,224)
(63,987)
(717)
(8,759)
(1,388)
167
(10,608)
(2,031)
(8,577)
(18,504)
(27,081)
(632)
66
(9,279)
(1,389)
(156)
11,645
2,983
8,662
(2,942)
5,720
—
(26,449) $
5,720
(0.10) $
0.10
$
$
501
(9,003)
(3,529)
(546)
27,247
7,208
20,039
(908)
19,131
—
19,131
0.24
(1,105)
(9,143)
(13,446)
687
45,891
9,938
35,953
(13,974)
21,979
—
(1,255)
(36,184)
(19,752)
152
74,175
18,098
56,077
(36,328)
19,749
(632)
$
$
21,979
0.44
$
$
20,381
0.69
(0.23) $
(0.04) $
(0.01) $
(0.17) $
(0.44)
(0.10) $
0.10
$
0.24
$
0.44
$
0.68
(0.23) $
(0.04) $
(0.01) $
(0.17) $
(0.44)
$
$
$
$
$
Basic
Diluted
81,554
81,554
81,824
81,852
81,452
82,084
80,669
81,348
Cash dividends per share of common stock
$
0.05
$
0.05
$
0.05
$
0.05
$
81,369
81,927
0.20
The sum of the quarterly net income (loss) per share amounts may not equal the reported annual amount because each
amount is computed independently based upon the weighted-average number of shares outstanding for the period.
F-58
2017
(in thousands, except per share data)
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Operating revenues
Costs and expenses
Depreciation and amortization of intangible assets
Impairment of goodwill and intangible assets
Gains (losses), net on disposal of property and
equipment
Interest expense
Defined benefit pension plan expense
Miscellaneous, net
Income (loss) from continuing operations before
income taxes
Provision (benefit) for income taxes
Income (loss) from continuing operations, net of tax
Income (loss) from discontinued operations, net of
tax
Net income (loss)
Loss attributable to noncontrolling interest
Net income (loss) attributable to the shareholders of
The E.W. Scripps Company
Net income (loss) from continuing operations per
basic share of common stock
Net income (loss) from discontinued operations per
basic share of common stock
Net income (loss) from continuing operations per
diluted share of common stock
Net income (loss) from discontinued operations per
diluted share of common stock
Weighted average shares outstanding:
Basic
Diluted
Cash dividends per share of common stock
$
$
$
$
$
$
$
$
198,475
(184,414)
(13,861)
—
$
216,242
(184,095)
(13,781)
—
$
200,509
(189,184)
(13,775)
(35,732)
$
261,746
(228,938)
(14,926)
—
$
Total
876,972
(786,631)
(56,343)
(35,732)
(169)
(26,697)
(14,112)
10,636
(32,076)
(20,054)
(12,022)
(2,595)
(14,617)
(1,511)
(13,106)
(0.13)
(114)
(5,720)
(3,551)
1,187
(46,380)
(18,776)
(27,604)
920
(26,684) $
—
7
(8,534)
(3,627)
5,225
10,953
(507)
11,460
(5,999)
5,461
(1,511)
(26,684) $
6,972
(0.34) $
0.16
$
$
$
(47)
(4,195)
(3,467)
(879)
(8,388)
(5,655)
(2,733)
794
(1,939) $
—
(15)
(8,248)
(3,467)
5,103
11,739
4,884
6,855
1,690
8,545
—
(1,939) $
8,545
(0.03) $
0.08
0.01
$
0.02
(0.03) $
0.08
0.01
$
0.02
$
$
$
$
$
$
0.01
$
(0.07) $
(0.03)
(0.34) $
0.16
$
(0.13)
0.01
$
(0.07) $
(0.03)
82,079
82,079
82,302
82,465
82,039
82,039
81,792
81,792
— $
— $
— $
— $
82,052
82,052
—
In the third quarter of 2017, we recorded a $29.4 million non-cash impairment charge to reduce the carrying value of
goodwill and $6.3 million to reduce the value of intangible assets related to Cracked. For more information around the
impairment of goodwill and intangible assets, see Note 9.
The sum of the quarterly net income (loss) per share amounts may not equal the reported annual amount because each
amount is computed independently based upon the weighted-average number of shares outstanding for the period.
20. Noncontrolling Interest
A noncontrolling owner holds a 30% interest in our venture to develop, produce and air our lifestyle daytime talk show. In
April 2017, on the formation of the venture, the noncontrolling owner made a $2.1 million non-cash contribution to the venture.
The contribution included the rights to the show concept, contractual rights with the show's talent, as well as other pre-
production items.
F-59
21. Assets Held for Sale and Discontinued Operations
Radio Divestiture
In the fourth quarter of 2017, we began the process to divest our radio business. Our radio business consisted of 34 radio
stations in eight markets. During the second and third quarters of 2018, we entered into definitive agreements to sell our radio
stations. We closed on the sale of our Tulsa radio stations on October 1, 2018, closed on the sales of our Milwaukee, Knoxville,
Omaha, Springfield and Wichita radio stations on November 1, 2018 and closed on the sales of our Boise and Tucson radio
stations on December 12, 2018. We have reported its results as discontinued operations for all periods presented.
Operating results of our radio operations included in discontinued operations were as follows:
(in thousands)
Operating revenues
Total costs and expenses
Depreciation and amortization of intangible assets
Impairment of goodwill and intangible assets
Other, net
Income (loss) from operations of discontinued operations
Pretax loss on disposal of discontinued operations
Income (loss) from discontinued operations before income taxes
Income tax benefit (provision)
Income (loss) from discontinued operations, net of tax
For the years ended December 31,
2018
2017
2016
$
$
$
49,243
(42,694)
—
(25,900)
(179)
(19,530)
(18,558)
(38,088)
1,760
(36,328) $
$
68,630
(57,061)
(2,910)
(8,000)
(258)
401
—
401
(2,996)
(2,595) $
73,069
(56,852)
(3,377)
—
(63)
12,777
—
12,777
(5,464)
7,313
Results of discontinued operations in 2018 and 2017 included $25.9 million and $8.0 million, respectively, of non-cash
impairment charges to write-down the goodwill of our radio business to fair value. The income tax provision for discontinued
operations was impacted by non-deductible charges of $30.9 million in 2018 and $8.0 million in 2017.
We also entered into separate Local Marketing Agreements (“LMA”) with the acquirer of the Tulsa radio stations and the
acquirer of the Wichita, Springfield, Omaha, and Knoxville radio stations. Under the terms of these agreements, the acquiring
entities paid us a monthly LMA fee and also reimbursed us for certain station expenses, as defined in the agreements, in
exchange for the right to program and sell advertising from the stations' inventory of broadcast time. The LMA with the
acquirer of the Tulsa radio stations was effective from July 30, 2018 until the closing of the transaction. The other LMA was
effective from September 1, 2018 until closing of the transactions. Discontinued operating revenues included LMA fees totaling
$2.5 million for the year ended December 31, 2018.
The following table presents a summary of the radio assets held for sale included in our Consolidated Balance Sheet as of
December 31, 2017:
(in thousands)
Assets:
Total current assets
Property and equipment
Goodwill and intangible assets
Other assets
Total assets included in the disposal group
Liabilities:
Total current liabilities
Deferred income taxes
Other liabilities
Total liabilities included in the disposal group
Net assets included in the disposal group
F-60
$
12,891
35,470
87,462
181
136,004
3,248
16,288
—
19,536
$
116,468
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[THIS PAGE INTENTIONALLY LEFT BLANK]
Mission Statement:
We do well by doing good—
creating value for customers,
employees and owners
by informing, engaging and
empowering those we serve.
SCR0063-AnnualReport2018-FINAL.indd 5
2/25/19 12:38 PM
S H A R E H O L D E R I N F O R M A T I O N
Market Prices
2018
High
Low
First Quarter
$ 16.83
$ 11.89
Second Quarter
Third Quarter
Fourth Quarter
14.31
16.55
17.74
14.31
12.60
15.00
2017
High
Low
First Quarter
$ 23.59
$ 18.20
Second Quarter
Third Quarter
Fourth Quarter
23.58
20.05
19.18
16.88
17.11
14.02
Stock and Trading
The company’s class A common shares are traded on
Nasdaq under the symbol “SSP.” There are approximately
11,000 owners of the company’s class A common shares
and approximately 50 owners of the company’s voting shares,
which do not have a public market.
Transfer Agent
(Shareholder correspondence should be mailed to)
Computershare
P.O. Box 43006
Providence, RI 02940-3006
(Registered or overnight correspondence should be mailed to)
Computershare
250 Royall Street
Canton, MA 02021
Telephone: 866.293.4224
TDD for hearing impaired: 800.231.5469
International shareholders: 201.680.6578
TDD international shareholders: 201.680.6610
Shareholder Website
www.computershare.com/investor
Shareholder online inquiries
https://www-us.computershare.com/investor/contact
Annual Meeting
The annual meeting of shareholders will be held at Scripps
Center, 10th floor, 312 Walnut Street, Cincinnati, Ohio, on
Monday, May 6, 2019, at 4 p.m. Eastern.
Committee charters, corporate governance guidelines and
the company’s code of conduct are on the company website
and are available upon request in printed format.
For additional information, send e-mail to
secretary@scripps.com.
Form 10-K
The E.W. Scripps Company’s annual report on Form 10-K,
filed with the Securities and Exchange Commission, is
available at no charge upon written request to the company’s
office of investor relations.
For Additional Information
Investor Relations
The E.W. Scripps Company
312 Walnut Street, 28th Floor
P.O. Box 5380
Cincinnati, Ohio 45201
T 513.977.3000
F 513.977.3024
For company information online, visit http://www.scripps.com
or send e-mail to ir@scripps.com.
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B O A R D O F D I R E C T O R S / C O R P O R A T E O F F I C E R S
Board of Directors
Richard A. Boehne (63) Chairman of the board since 2013.
Retired in August 2017 as president and chief executive
officer, a role he had since July 2008. Executive vice
president and chief operating officer from April 2006 to June
2008, and executive vice president from February 1999 until
June 2008.
Charles Barmonde (43) Private investor, educator and
founder of Arch Contemporary Ceramics. Director since
2015.
Kelly Conlin (59) Chairman and chief executive officer of
Zinio. Previous CEO of three other complex publishing/
media/online companies: IDG, Primedia and NameMedia.
Director since 2013.
Lauren Rich Fine (59) Partner at investment/wealth
management firm Gries Financial since 2016. Executive
Search Consultant at Howard & O’Brien from 2010-2015.
Faculty member at Kent State University’s School of
Journalism and Mass Communication from 2007-2011.
Managing Director in Equity Research at Merrill Lynch from
1986-2007. Director since 2018.
John W. Hayden (61) President and chief executive officer
of CJH Consulting. President and CEO of The Midland
Company from 1988 to 2010. Director since 2008.
Anne M. La Dow (60) Private investor and former human
resources director of the Ventura County Star. Director since
2012.
Roger Ogden (74) Owner and president of Krystal
Broadcasting Inc. Senior vice president of Design, Innovation
and Strategy for Gannett Co., Inc. from June 2006 until
July 2007. President and chief executive officer of Gannett
Broadcasting from July 2005 until July 2007. President and
general manager of KUSA Denver from August 1997 until
July 2005. Director since 2008.
Kim Williams (63) Retired since 2006. Senior vice president,
partner and associate director of global industry research
at Wellington Management Company, LLP from 1995 until
2001. Senior vice president, partner and global industry
analyst from 1986 until 1995. Director since 2008. Lead
director as of February 1, 2018.
R. Michael Scagliotti (47) Private investor and a member
of the board of trustees of the Scripps Howard Foundation.
Director since 2017.
As of May 1, 2019
Adam Symson (44) President and chief executive officer
of The E.W. Scripps Company since August 2017. Chief
operating officer from November 2016 until August 2017. Chief
digital officer from September 2011 until October 2016. Adam
came to corporate in 2003 to be the director of investigative
reports and special projects in the TV division. He advanced to
become director of news strategy and operations, director of
content and marketing in the Scripps Interactive Media division
and vice president of interactive for the Scripps TV division. He
joined Scripps in 2002 as an investigative producer at KNXV.
Director since 2017.
Corporate Officers
Adam Symson (44) President and chief executive officer.
Lisa A. Knutson (53) Chief financial officer since November
2017 and executive vice president since August 2017.
Senior vice president and chief administrative officer from
December 2011 until 2017. Served as vice president of
human resources from 2008 to 2011. Came to Scripps from
Fifth Third Bank, where she was responsible for oversight of
HR operations.
Brian G. Lawlor (52) President of Local Media division since
August 2017. Senior vice president of the Scripps broadcast
division since January 2009. Served as vice president of sales
for the Television division from January 2008 until January
2009, and vice president and general manager of WPTV
from January 2004 to January 2008. He joined Scripps as an
account executive at WPTV in 1991 and advanced to hold
positions as national and local sales manager at WPTV and
general sales manager at WCPO.
William Appleton (70) Executive vice president since August
2017. Senior vice president and general counsel since 2008.
He came to Scripps from Baker & Hostetler LLP, where he was
managing partner of the Cincinnati office.
Laura Tomlin (43) Senior vice president of the National
Media division since August 2017. Vice president of digital
business operations from March 2014 until August 2017.
Senior director of human resources for the Digital division
from May 2012 to March 2014. She joined Scripps in 2010 to
launch internal recruiting.
Robert A. Carson (63) Vice president and chief information
officer.
Julie L. McGehee (57) Corporate secretary, vice president
of human resources operations.
Douglas F. Lyons (62) Senior vice president, controller and
treasurer.
Mark L. Koors (55) Vice president, audit and compliance.
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P.O. BOX 5380
CINCINNATI, OHIO 45201
WWW.SCRIPPS.COM
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