(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
(Address of principal executive offices) | (Zip Code) |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Item No. | Page | |
2.01 | Completion of Acquisition or Disposition of Assets | 3 |
9.01 | Financial Statements and Exhibits | 4 |
Exhibit Number | Description of Item | |
Asset Purchase Agreement by and among Nexstar Media Group, Inc., Scripps Media, Inc. and Scripps Broadcasting Holdings, LLC dated as of March 20, 2019 (1) | ||
Third Amended and Restated Credit Agreement dated as of April 28, 2017 (as amended by the First Amendment, dated as of October 2, 2017, the Second Amendment, dated as of April 3, 2018, the Third Amendment, dated as of November 20, 2018 and the Fourth Amendment, dated as of May 1, 2019) (2) | ||
Indenture dated as of July 26, 2019 (3) | ||
Consent of Independent Auditors | ||
Consent of Independent Auditors | ||
Press release dated September 19, 2019 | ||
Audited financial statements of KASW (A Carve-out of Nexstar Media Group, Inc.) as of and for each of the years then ended December 31, 2018 and 2017, including the notes thereto | ||
Audited combined financial statements of Tribune Media Company Carve-out stations as of and for each of the years then ended December 31, 2018 and 2017, including the notes thereto | ||
Unaudited financial statements of KASW (A Carve-out of Nexstar Media Group, Inc.) for the six months ended June 30, 2019 and 2018, including the notes thereto | ||
Unaudited combined financial statements of Tribune Media Company Carve-out stations as of June 30, 2019 and December 31, 2018 and for the six months ended June 30, 2019 and 2018, including the notes thereto | ||
Unaudited pro forma combined balance sheet as of June 30, 2019 and unaudited pro forma combined results of operations for the year ended December 30, 2018 and the six months ended June 30, 2019 |
THE E.W. SCRIPPS COMPANY | ||
BY: | /s/ Douglas F. Lyons | |
Douglas F. Lyons | ||
Senior Vice President, Controller and Treasurer | ||
(Principal Accounting Officer) |
September 19, 2019 |
• | WPIX, the CW affiliate in New York City. (Scripps has granted Nexstar the option to buy back WPIX in New York City. The option is exercisable from March 31, 2020, through the end of 2021.) |
• | KASW, the CW affiliate in Phoenix (which joins the Scripps ABC affiliate there) |
• | WSFL, the CW affiliate in Miami-Fort Lauderdale (adjacent to the Scripps NBC affiliate in West Palm Beach, Florida) |
• | KSTU, the Fox affiliate in Salt Lake City |
• | WTKR, the CBS affiliate, and WGNT, the CW affiliate, in Norfolk, Virginia |
• | WTVR, the CBS affiliate in Richmond, Virginia |
• | WXMI, the Fox affiliate in Grand Rapids, Michigan |
2019 | 2018 | |||||||||||||||||||||||||||
(in thousands) | Q1 | Q2 | Q1 | Q2 | Q3 | Q4 | Total | |||||||||||||||||||||
Segment operating revenues: | ||||||||||||||||||||||||||||
Core advertising | $ | 174,720 | $ | 192,570 | $ | 178,794 | $ | 193,660 | $ | 178,444 | $ | 189,602 | $ | 740,500 | ||||||||||||||
Political | 1,188 | 2,452 | 3,380 | 22,038 | 56,694 | 114,323 | 196,435 | |||||||||||||||||||||
Retransmission | 113,700 | 112,374 | 100,322 | 103,525 | 107,990 | 107,808 | 419,645 | |||||||||||||||||||||
Other revenue | 5,641 | 5,278 | 4,907 | 5,885 | 5,267 | 5,222 | 21,281 | |||||||||||||||||||||
Total operating revenues | 295,249 | 312,674 | 287,403 | 325,108 | 348,395 | 416,955 | 1,377,861 | |||||||||||||||||||||
Segment costs and expenses: | ||||||||||||||||||||||||||||
Employee compensation and benefits | 109,587 | 107,305 | 109,560 | 106,507 | 107,214 | 111,893 | 435,174 | |||||||||||||||||||||
Programming | 85,561 | 92,879 | 76,638 | 87,880 | 93,887 | 80,565 | 338,970 | |||||||||||||||||||||
Impairment of programming assets | — | — | — | — | — | 8,920 | 8,920 | |||||||||||||||||||||
Other expenses | 51,051 | 51,980 | 51,669 | 55,067 | 55,300 | 63,551 | 225,587 | |||||||||||||||||||||
Total costs and expenses | 246,199 | 252,164 | 237,867 | 249,454 | 256,401 | 264,929 | 1,008,651 | |||||||||||||||||||||
Segment profit | $ | 49,050 | $ | 60,510 | $ | 49,536 | $ | 75,654 | $ | 91,994 | $ | 152,026 | $ | 369,210 |
2019 | 2018 | |||||||||||||||||||||||||||
(in thousands) | Q1 | Q2 | Q1 | Q2 | Q3 | Q4 | Total | |||||||||||||||||||||
Local Media operating revenues, as reported | $ | 203,387 | $ | 236,715 | $ | 192,059 | $ | 213,248 | $ | 230,734 | $ | 281,439 | $ | 917,480 | ||||||||||||||
Waco/Tallahassee TV stations acquisition | — | — | 6,068 | 6,174 | 6,190 | 6,805 | 25,237 | |||||||||||||||||||||
Cordillera TV stations acquisition | 35,540 | 12,412 | 35,271 | 41,692 | 47,700 | 59,416 | 184,079 | |||||||||||||||||||||
Nexstar-Tribune stations acquisition | 64,679 | 71,349 | 58,296 | 68,297 | 68,079 | 73,607 | 268,279 | |||||||||||||||||||||
Other revenue adjustments (1) | (8,357 | ) | (7,802 | ) | (4,291 | ) | (4,303 | ) | (4,308 | ) | (4,312 | ) | (17,214 | ) | ||||||||||||||
Local Media adjusted combined operating revenues | $ | 295,249 | $ | 312,674 | $ | 287,403 | $ | 325,108 | $ | 348,395 | $ | 416,955 | $ | 1,377,861 |
2019 | 2018 | |||||||||||||||||||||||||||
(in thousands) | Q1 | Q2 | Q1 | Q2 | Q3 | Q4 | Total | |||||||||||||||||||||
Local Media segment profit, as reported | $ | 34,173 | $ | 54,329 | $ | 31,619 | $ | 53,368 | $ | 67,416 | $ | 98,716 | $ | 251,119 | ||||||||||||||
Waco/Tallahassee TV stations acquisition | — | — | 1,770 | 1,905 | 1,893 | 2,265 | 7,833 | |||||||||||||||||||||
Cordillera TV stations acquisition | 7,925 | 2,828 | 8,632 | 14,287 | 19,212 | 30,338 | 72,469 | |||||||||||||||||||||
Nexstar-Tribune stations acquisition | 15,309 | 11,155 | 11,806 | 10,397 | 7,781 | 25,019 | 55,003 | |||||||||||||||||||||
Other revenue adjustments (1) | (8,357 | ) | (7,802 | ) | (4,291 | ) | (4,303 | ) | (4,308 | ) | (4,312 | ) | (17,214 | ) | ||||||||||||||
Local Media adjusted combined segment profit | $ | 49,050 | $ | 60,510 | $ | 49,536 | $ | 75,654 | $ | 91,994 | $ | 152,026 | $ | 369,210 |
KASW | |
(A Carve-out of Nexstar Media Group, Inc.) | |
INDEX TO FINANCIAL STATEMENTS | |
2 | |
3 | |
4 | |
5 | |
6 | |
7 |
KASW | |||||||
(A Carve-out of Nexstar Media Group, Inc.) | |||||||
BALANCE SHEETS | |||||||
(in thousands) | |||||||
December 31, | |||||||
2018 | 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Accounts receivable, net of allowance for doubtful accounts of $53 and $127, respectively | $ | 3,819 | $ | 3,995 | |||
Current broadcast rights | 1,744 | 2,134 | |||||
Prepaid expenses | 17 | 11 | |||||
Total current assets | 5,580 | 6,140 | |||||
Property and equipment, net | 2,807 | 1,656 | |||||
Noncurrent broadcast rights | 2,749 | 4,490 | |||||
Goodwill | 32,203 | 32,203 | |||||
FCC license | 35,566 | 35,566 | |||||
Other intangible assets, net of accumulated amortization of $631 and $581, respectively | 82 | 132 | |||||
Total assets | $ | 78,987 | $ | 80,187 | |||
LIABILITIES AND INVESTED EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 336 | $ | 121 | |||
Current broadcast rights payable | 1,775 | 2,587 | |||||
Accrued expenses and other current liabilities | 546 | 250 | |||||
Total current liabilities | 2,657 | 2,958 | |||||
Noncurrent broadcast rights payable | 2,853 | 4,586 | |||||
Deferred tax liabilities | 4,302 | 3,022 | |||||
Other noncurrent liabilities | 490 | 394 | |||||
Total liabilities | 10,302 | 10,960 | |||||
Commitments and contingencies (Note 8) | |||||||
Invested equity | 68,685 | 69,227 | |||||
Total liabilities and invested equity | $ | 78,987 | $ | 80,187 |
KASW | |||||||
(A Carve-out of Nexstar Media Group, Inc.) | |||||||
STATEMENTS OF OPERATIONS | |||||||
(in thousands) | |||||||
Years Ended December 31, | |||||||
2018 | 2017 | ||||||
Net revenue | $ | 19,320 | $ | 20,565 | |||
Operating expenses (income): | |||||||
Direct operating expenses, excluding depreciation and amortization | 2,253 | 2,204 | |||||
Selling, general, and administrative expenses, excluding depreciation and amortization | 4,522 | 4,250 | |||||
Amortization of broadcast rights | 2,375 | 4,809 | |||||
Amortization of intangible assets | 50 | 113 | |||||
Depreciation | 807 | 337 | |||||
Reimbursement from the FCC related to station repack | (1,262 | ) | — | ||||
Total operating expenses | 8,745 | 11,713 | |||||
Income from operations | 10,575 | 8,852 | |||||
Income tax expense | (2,641 | ) | (1,771 | ) | |||
Net income | $ | 7,934 | $ | 7,081 |
KASW | |||
(A Carve-out of Nexstar Media Group, Inc.) | |||
STATEMENTS OF INVESTED EQUITY | |||
(in thousands) | |||
Balances as of December 31, 2016 | $ | 68,361 | |
Net fund transfers to Nexstar | (6,215 | ) | |
Net income | 7,081 | ||
Balances as of December 31, 2017 | 69,227 | ||
Net fund transfers to Nexstar | (8,476 | ) | |
Net income | 7,934 | ||
Balances as of December 31, 2018 | $ | 68,685 |
KASW | |||||||
(A Carve-out of Nexstar Media Group, Inc.) | |||||||
STATEMENTS OF CASH FLOW | |||||||
(in thousands) | |||||||
Years Ended December 31, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 7,934 | $ | 7,081 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation of property and equipment | 807 | 337 | |||||
Amortization of intangible assets | 50 | 113 | |||||
Amortization of broadcast rights | 2,375 | 2,633 | |||||
Spectrum repack reimbursements | (1,262 | ) | — | ||||
Deferred income taxes | 1,280 | (21 | ) | ||||
Payments for broadcast rights | (2,789 | ) | (3,434 | ) | |||
Changes in operating assets and liabilities | |||||||
Accounts receivable, net | 176 | (153 | ) | ||||
Prepaid expenses | (6 | ) | — | ||||
Accounts payable | 215 | (371 | ) | ||||
Accrued expenses and other current liabilities | 206 | 30 | |||||
Other noncurrent liabilities | 96 | 175 | |||||
Net cash provided by operating activities | 9,082 | 6,390 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (1,868 | ) | (175 | ) | |||
Spectrum repack reimbursements | 1,262 | — | |||||
Net cash used in investing activities | (606 | ) | (175 | ) | |||
Cash flows from financing activities: | |||||||
Net fund transfers to Nexstar | (8,476 | ) | (6,215 | ) | |||
Net cash used in financing activities | (8,476 | ) | (6,215 | ) | |||
Net increase (decrease) in cash and cash equivalents | — | — | |||||
Cash and cash equivalents at beginning of period | — | — | |||||
Cash and cash equivalents at end of period | $ | — | $ | — | |||
Supplemental disclosure about non-cash investing activities: | |||||||
Accrued purchases of property and equipment | $ | 90 | $ | — |
1. | Background and Business Operations |
2. | Summary of Significant Accounting Policies |
Years Ended December 31, | |||||||
2018 | 2017 | ||||||
Local | $ | 5,881 | $ | 4,920 | |||
National | 3,054 | 3,772 | |||||
Political | 383 | 17 | |||||
Retransmission compensation | 9,211 | 8,965 | |||||
Digital | 304 | 218 | |||||
Other | 269 | 226 | |||||
Trade and barter revenue | 218 | 2,447 | |||||
Net revenue | $ | 19,320 | $ | 20,565 |
3. | Property and Equipment, Net |
December 31, | ||||||||||
Estimated useful life, in years | 2018 | 2017 | ||||||||
Building and leasehold improvements | term of lease | $ | 446 | $ | 443 | |||||
Studio and transmission equipment | 5-15 | 1,017 | 1,531 | |||||||
Computer equipment | 3-5 | 92 | 92 | |||||||
Furnitures & fixtures | 7 | 97 | 97 | |||||||
Vehicles | 5 | 97 | 73 | |||||||
Construction in progress | N/A | 1,824 | 37 | |||||||
3,573 | 2,273 | |||||||||
Less: accumulated depreciation | (766 | ) | (617 | ) | ||||||
$ | 2,807 | $ | 1,656 |
4. | Intangible Assets, Net and Goodwill |
2019 | $ | 49 | |
2020 | 33 | ||
$ | 82 |
5. | Income Taxes |
Years Ended December 31, | ||||||||
2018 | 2017 | |||||||
Current tax expense: | ||||||||
Federal | $ | 1,093 | $ | 1,562 | ||||
State | 268 | 230 | ||||||
1,361 | 1,792 | |||||||
Deferred tax expense (benefit): | ||||||||
Federal | 1,081 | (237 | ) | |||||
State | 199 | 216 | ||||||
1,280 | (21 | ) | ||||||
Income tax expense | $ | 2,641 | $ | 1,771 |
Years Ended December 31, | |||||||
2018 | 2017 | ||||||
Income tax expense at statutory federal rate | $ | 2,221 | $ | 3,098 | |||
State and local taxes, net of federal benefit | 411 | 283 | |||||
Impact of federal tax reduction on deferred taxes | — | (1,618 | ) | ||||
Other | 9 | 8 | |||||
Income tax expense | $ | 2,641 | $ | 1,771 |
Years Ended December 31, | |||||||
2018 | 2017 | ||||||
Deferred tax assets: | |||||||
Deferred rent | $ | 139 | $ | 98 | |||
Other intangible assets | 111 | 110 | |||||
Property and equipment | 97 | — | |||||
Other | 66 | 66 | |||||
Total deferred tax assets | 413 | 274 | |||||
Deferred tax liabilities: | |||||||
Goodwill | (2,091 | ) | (1,557 | ) | |||
FCC licenses | (2,310 | ) | (1,720 | ) | |||
Deferred revenue | (314 | ) | — | ||||
Other | — | (19 | ) | ||||
Total deferred tax liabilities | (4,715 | ) | (3,296 | ) | |||
Net deferred tax liabilities | $ | (4,302 | ) | $ | (3,022 | ) |
6. | Related Party Transactions |
Years Ended December 31, | |||||||
2018 | 2017 | ||||||
Direct operating expenses (excluding depreciation and amortization) | $ | 138 | $ | 169 | |||
Selling, general, and administrative expenses (excluding depreciation and amortization) | 1,033 | 981 | |||||
Depreciation | 112 | 80 |
7. | FCC Regulatory Matters |
8. | Commitments and Contingencies |
2019 | $ | 307 | |
2020 | 314 | ||
2021 | 320 | ||
2022 | 328 | ||
2023 | 313 | ||
Thereafter | 954 | ||
$ | 2,536 |
9. | Subsequent Events |
TRIBUNE MEDIA COMPANY CARVE-OUT STATIONS | |
INDEX TO FINANCIAL STATEMENTS | |
PAGE | |
Audited Annual Combined Financial Statements | |
Report of Independent Auditors | 2 |
Combined Statements of Comprehensive Income for each of the two years in the period ended December 31, 2018 | 3 |
Combined Balance Sheets at December 31, 2018 and December 31, 2017 | 4 |
Combined Statements of Net Parent Investment for each of the two years in the period ended December 31, 2018 | 5 |
Combined Statements of Cash Flows for each of the two years in the period ended December 31, 2018 | 6 |
Notes to the Combined Financial Statements | 7 |
Year Ended | |||||||
December 31, 2018 | December 31, 2017 | ||||||
Operating Revenues | |||||||
Advertising | $ | 168,863 | $ | 168,284 | |||
Retransmission revenue | 72,075 | 61,077 | |||||
Other | 8,653 | 11,972 | |||||
Total operating revenues | 249,591 | 241,333 | |||||
Operating Expenses | |||||||
Programming | 82,422 | 81,507 | |||||
Direct operating expenses | 60,471 | 60,653 | |||||
Selling, general and administrative | 73,824 | 77,491 | |||||
Depreciation | 8,499 | 8,924 | |||||
Amortization | 19,927 | 19,927 | |||||
Total operating expenses | 245,143 | 248,502 | |||||
Income (Loss) Before Income Taxes | 4,448 | (7,169 | ) | ||||
Income tax expense (benefit) | 1,471 | (10,392 | ) | ||||
Net Income | $ | 2,977 | $ | 3,223 | |||
Comprehensive Income | $ | 2,977 | $ | 3,223 |
December 31, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash | $ | 174 | $ | 201 | |||
Accounts receivable ( net of allowances of $623 and $686) | 53,527 | 51,644 | |||||
Broadcast rights | 11,018 | 15,417 | |||||
Prepaid expenses and other | 787 | 765 | |||||
Total current assets | 65,506 | 68,027 | |||||
Properties | |||||||
Machinery, equipment and furniture | 44,991 | 41,665 | |||||
Buildings and leasehold improvements | 32,162 | 31,700 | |||||
77,153 | 73,365 | ||||||
Accumulated depreciation | (48,096 | ) | (40,256 | ) | |||
29,057 | 33,109 | ||||||
Land | 5,076 | 5,076 | |||||
Construction in progress | 3,325 | 1,487 | |||||
Net properties | 37,458 | 39,672 | |||||
Other Assets | |||||||
Broadcast rights | 12,460 | 21,480 | |||||
Other intangible assets, net | 298,191 | 319,135 | |||||
Other | 16,354 | 13,029 | |||||
Total other assets | 327,005 | 353,644 | |||||
Total Assets (a) | $ | 429,969 | $ | 461,343 | |||
Liabilities and Net Parent Investment | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 3,101 | $ | 2,838 | |||
Employee compensation and benefits | 5,139 | 4,213 | |||||
Contracts payable for broadcast rights | 24,633 | 26,919 | |||||
Deferred revenue | 1,552 | 1,423 | |||||
Other | 617 | 571 | |||||
Total current liabilities | 35,042 | 35,964 | |||||
Non-Current Liabilities | |||||||
Deferred income taxes | 18,369 | 16,898 | |||||
Contracts payable for broadcast rights | 22,729 | 37,626 | |||||
Other obligations | 860 | 845 | |||||
Total non-current liabilities | 41,958 | 55,369 | |||||
Total Liabilities (a) | 77,000 | 91,333 | |||||
Commitments and Contingent Liabilities (Note 5) | |||||||
Net Parent Investment | 352,969 | 370,010 | |||||
Total Liabilities and Net Parent Investment | $ | 429,969 | $ | 461,343 |
(a) | The Company’s consolidated total assets as of December 31, 2018 and December 31, 2017 include total assets of variable interest entities (“VIEs”) of $38.9 million and $43.5 million, respectively, which can only be used to settle the obligations of the VIEs. The Company’s consolidated total liabilities as of December 31, 2018 and December 31, 2017 include total liabilities of the VIEs of $2.5 million and $2.3 million, respectively, for which the creditors of the VIEs have no recourse to the Company (see Note 1). |
Balance at December 31, 2016 | $ | 374,522 | |
Transactions with Tribune Media Company and Tribune Media Company Affiliates, net | (7,735 | ) | |
Comprehensive income: | |||
Net Income | 3,223 | ||
Balance at December 31, 2017 | $ | 370,010 | |
Transactions with Tribune Media Company and Tribune Media Company Affiliates, net | (20,018 | ) | |
Comprehensive income: | |||
Net Income | 2,977 | ||
Balance at December 31, 2018 | $ | 352,969 |
Year Ended | |||||||
December 31, 2018 | December 31, 2017 | ||||||
Operating Activities | |||||||
Net income | $ | 2,977 | $ | 3,223 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Stock-based compensation | 999 | 984 | |||||
Depreciation | 8,499 | 8,924 | |||||
Amortization of other intangible assets | 19,927 | 19,927 | |||||
Spectrum repack reimbursements | (1,018 | ) | — | ||||
Changes in working capital items: | |||||||
Accounts receivable, net | (1,883 | ) | (223 | ) | |||
Prepaid expenses and other current assets | (22 | ) | 439 | ||||
Accounts payable | 561 | (323 | ) | ||||
Employee compensation and benefits and other current liabilities | 995 | (1,815 | ) | ||||
Deferred revenue | 129 | 108 | |||||
Change in broadcast rights, net of liabilities | (3,628 | ) | (6,008 | ) | |||
Deferred income taxes | 1,471 | (10,392 | ) | ||||
Other, net | (2,802 | ) | (2,104 | ) | |||
Net cash provided by operating activities | 26,205 | 12,740 | |||||
Investing Activities | |||||||
Capital expenditures | (7,270 | ) | (5,000 | ) | |||
Spectrum repack reimbursements | 1,018 | — | |||||
Other | 38 | 40 | |||||
Net cash used in investing activities | (6,214 | ) | (4,960 | ) | |||
Financing Activities | |||||||
Transactions with Tribune Media Company and Tribune Media Company Affiliates, net | (20,018 | ) | (7,735 | ) | |||
Net cash used in financing activities | (20,018 | ) | (7,735 | ) | |||
Net (Decrease) Increase in Cash | (27 | ) | 45 | ||||
Cash, beginning of year | 201 | 156 | |||||
Cash, end of year | $ | 174 | $ | 201 |
December 31, 2018 | December 31, 2017 | ||||||
Broadcast rights | $ | 1,548 | $ | 1,388 | |||
Other intangible assets, net | 36,246 | 41,986 | |||||
Other assets | 1,106 | 92 | |||||
Total Assets | $ | 38,900 | $ | 43,466 | |||
Contracts payable for broadcast rights | 2,476 | 2,342 | |||||
Total Liabilities | $ | 2,476 | $ | 2,342 |
2018 | 2017(1) | ||||||
Advertising | $ | 168,863 | $ | 168,284 | |||
Retransmission revenues | 72,075 | 61,077 | |||||
Barter/trade (2) | 2,004 | 7,111 | |||||
Other | 6,649 | 4,861 | |||||
Total operating revenues | $ | 249,591 | $ | 241,333 |
(1) | Prior period amounts have not been adjusted under the modified retrospective method. |
(2) | For the year ended December 31, 2017, barter revenue totaled $5.5 million. |
Accounts receivable allowance balance at December 31, 2016 | $ | 926 | |
2017 additions charged to revenues, costs and expenses | 445 | ||
2017 deductions | (685 | ) | |
Accounts receivable allowance balance at December 31, 2017 | $ | 686 | |
2018 additions charged to revenues, costs and expenses | 721 | ||
2018 deductions | (784 | ) | |
Accounts receivable allowance balance at December 31, 2018 | $ | 623 |
• | Level 1 – Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market. |
• | Level 2 – Assets and liabilities whose values are based on inputs other than those included in Level 1, including quoted market prices in markets that are not active; quoted prices of assets or liabilities with similar attributes in active markets; or valuation models whose inputs are observable or unobservable but corroborated by market data. |
• | Level 3 – Assets and liabilities whose values are based on valuation models or pricing techniques that utilize unobservable inputs that are significant to the overall fair value measurement. |
2018 | 2017 | ||||||
Corporate management fee | $ | 6,452 | $ | 7,646 | |||
Broadcasting corporate management fee | 6,706 | 6,585 | |||||
Station operations support management fee | 3,481 | 3,831 | |||||
Technology service center support costs | 3,942 | 4,869 | |||||
Shared service center support costs | 464 | 565 | |||||
Total | $ | 21,045 | $ | 23,496 |
December 31, 2018 | December 31, 2017 | |||||||||||||||||||||||
Gross Amount | Accumulated Amortization | Net Amount | Gross Amount | Accumulated Amortization | Net Amount | |||||||||||||||||||
Intangible assets subject to amortization | ||||||||||||||||||||||||
Network affiliation agreements (useful life 16 years) | $ | 25,300 | $ | (8,332 | ) | $ | 16,968 | $ | 36,300 | $ | (15,556 | ) | $ | 20,744 | ||||||||||
Retransmission consent agreements (useful life of 7 to 11 years) | 159,900 | (83,174 | ) | 76,726 | 159,900 | (67,023 | ) | 92,877 | ||||||||||||||||
Other (useful life of 8 years) | 7,185 | (5,288 | ) | 1,897 | 7,320 | (4,406 | ) | 2,914 | ||||||||||||||||
Total | $ | 192,385 | $ | (96,794 | ) | 95,591 | $ | 203,520 | $ | (86,985 | ) | 116,535 | ||||||||||||
Intangible assets not subject to amortization | ||||||||||||||||||||||||
FCC licenses | 202,600 | 202,600 | ||||||||||||||||||||||
Total intangible assets, net | $ | 298,191 | $ | 319,135 |
Intangible assets subject to amortization | |||
Balance as of December 31, 2016 | $ | 137,167 | |
Amortization (1) | (20,808 | ) | |
Balance sheet reclassifications (2) | 176 | ||
Balance as of December 31, 2017 | $ | 116,535 | |
Amortization (1) | (20,808 | ) | |
Balance sheet reclassifications (2) | (136 | ) | |
Balance as of December 31, 2018 | $ | 95,591 |
(1) | Amortization of intangible assets includes $0.9 million for both fiscal year 2018 and 2017 related to lease contract intangible assets and is recorded in SG&A expense in the Combined Statements of Comprehensive Income. |
(2) | Represents net reclassifications which are reflected as a decrease (increase) to broadcast rights assets in the Combined Balance Sheets at December 31, 2017 and December 31, 2018, respectively. |
2019 | $ | 24,633 | |
2020 | 12,263 | ||
2021 | 8,967 | ||
2022 | 1,499 | ||
2023 | — | ||
Total | $ | 47,362 |
2019 | $ | 7,575 | |
2020 | 6,537 | ||
2021 | 2,272 | ||
2022 | 2,110 | ||
2023 | 2,104 | ||
Thereafter | 16,903 | ||
Total | $ | 37,501 |
2018 | 2017 | ||||||
Income (loss) before income taxes | $ | 4,448 | $ | (7,169 | ) | ||
Federal income tax rate | 21% | 35% | |||||
Federal income taxes | 934 | (2,509 | ) | ||||
State and local income taxes, net of federal tax benefit | 355 | (331 | ) | ||||
Tax Reform | — | (7,895 | ) | ||||
Non-deductible meals and entertainment | 171 | 211 | |||||
Other, net | 11 | 132 | |||||
Income tax expense (benefit) | $ | 1,471 | $ | (10,392 | ) | ||
Effective tax rate | 33.1% | 145.0% |
2018 | 2017 | ||||||
Deferred: | |||||||
U.S. federal | $ | 1,021 | $ | (9,883 | ) | ||
State and local | 450 | (509 | ) | ||||
Sub-total | 1,471 | (10,392 | ) | ||||
Total income tax expense (benefit) | $ | 1,471 | $ | (10,392 | ) |
December 31, 2018 | December 31, 2017 | ||||||
Deferred tax assets: | |||||||
Broadcast rights | $ | 4,107 | $ | 5,215 | |||
Stock-based compensation and other employee benefits | 358 | 343 | |||||
Net properties | 875 | 1,036 | |||||
Other accrued liabilities | 453 | 507 | |||||
Net operating loss carryforwards | 3,128 | 3,576 | |||||
Accounts receivable | 171 | 189 | |||||
Total deferred tax assets | $ | 9,092 | $ | 10,866 | |||
Deferred tax liabilities: | |||||||
Net intangible assets | $ | 27,193 | $ | 27,426 | |||
Investments | 129 | 129 | |||||
Deferred gain on spectrum | 139 | 209 | |||||
Total deferred tax liabilities | 27,461 | 27,764 | |||||
Net deferred tax liabilities | $ | 18,369 | $ | 16,898 |
2017 | |
Risk-free interest rate | 2.17% |
Expected dividend yield | 3.13% |
Expected stock price volatility | 33.12% |
Expected life (in years) | 6.25 |
Shares | Weighted Avg. Exercise Price | Weighted Avg. Fair Value | Weighted Avg. Remaining Contractual Term (in years) | Aggregate Intrinsic Value (In thousands) | ||||||||||||
Outstanding, December 31, 2016 | 63 | $ | 35.01 | $ | 13.80 | 7.9 | $ | 178 | ||||||||
Granted | 50 | 31.98 | 7.92 | |||||||||||||
Cancelled | (6 | ) | 45.37 | 22.28 | ||||||||||||
Forfeited | (9 | ) | 31.98 | 7.92 | ||||||||||||
Outstanding, December 31, 2017 | 98 | $ | 33.17 | $ | 10.88 | 5.4 | $ | 1,085 | ||||||||
Exercised | (8 | ) | 27.22 | 6.80 | ||||||||||||
Cancelled | (5 | ) | 50.75 | 25.25 | ||||||||||||
Forfeited | (13 | ) | 30.09 | 8.02 | ||||||||||||
Outstanding, December 31, 2018 | 72 | 33.18 | 10.87 | 6.1 | $ | 973 | ||||||||||
Vested and exercisable, December 31, 2018 | 34 | $ | 36.69 | $ | 14.10 | 6.2 | $ | 389 |
Shares | Weighted Avg. Fair Value | Weighted Avg. Remaining Contractual Term (in years) | ||||||
Outstanding and nonvested, December 31, 2016 | 62 | $ | 33.18 | 1.4 | ||||
Granted | 34 | 31.98 | ||||||
Dividend equivalent units granted | 2 | 39.24 | ||||||
Vested | (18 | ) | 36.35 | |||||
Dividend equivalent units vested | (1 | ) | 32.28 | |||||
Forfeited | (10 | ) | 33.85 | |||||
Outstanding and nonvested, December 31, 2017 | 69 | $ | 31.83 | 1.3 | ||||
Granted | 31 | 41.67 | ||||||
Dividend equivalent units granted | 2 | 39.26 | ||||||
Vested | (22 | ) | 34.34 | |||||
Dividend equivalent units vested | (1 | ) | 35.98 | |||||
Forfeited | (11 | ) | 32.87 | |||||
Outstanding and nonvested, December 31, 2018 | 68 | $ | 35.47 | 1.2 |
Unrecognized Compensation Cost | Weighted Avg. Remaining Recognition Period (in years) | ||||
Nonvested awards | $ | 1,756 | 2.2 |
KASW | |
(A Carve-out of Nexstar Media Group, Inc.) | |
INDEX TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) | |
Page | |
Condensed Balance Sheets as of June 30, 2019 and December 31, 2018 | 2 |
Condensed Statements of Operations for the six months ended June 30, 2019 and 2018 | 3 |
Condensed Statements of Invested Equity for the six months ended June 30, 2019 and 2018 | 4 |
Condensed Statements of Cash Flows for the six months ended June 30, 2019 and 2018 | 5 |
Notes to Condensed Financial Statements | 6 |
KASW | |||||||
(A Carve-out of Nexstar Media Group, Inc.) | |||||||
CONDENSED BALANCE SHEETS | |||||||
(in thousands, unaudited) | |||||||
June 30, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Accounts receivable, net of allowance for doubtful accounts of $50 and $53, respectively | $ | 3,491 | $ | 3,819 | |||
Current broadcast rights | 1,351 | 1,744 | |||||
Prepaid expenses | 105 | 17 | |||||
Total current assets | 4,947 | 5,580 | |||||
Property and equipment, net | 3,263 | 2,807 | |||||
Noncurrent broadcast rights | 1,963 | 2,749 | |||||
Goodwill | 32,203 | 32,203 | |||||
FCC license | 35,566 | 35,566 | |||||
Other intangible assets, net of accumulated amortization of $655 and $631, respectively | 57 | 82 | |||||
Total assets | $ | 77,999 | $ | 78,987 | |||
LIABILITIES AND INVESTED EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 187 | $ | 336 | |||
Current broadcast rights payable | 1,425 | 1,775 | |||||
Accrued expenses and other current liabilities | 414 | 546 | |||||
Total current liabilities | 2,026 | 2,657 | |||||
Noncurrent broadcast rights payable | 2,062 | 2,853 | |||||
Deferred tax liabilities | 4,925 | 4,302 | |||||
Other noncurrent liabilities | 454 | 490 | |||||
Total liabilities | 9,467 | 10,302 | |||||
Commitments and contingencies (Note 7) | |||||||
Invested equity | 68,532 | 68,685 | |||||
Total liabilities and invested equity | $ | 77,999 | $ | 78,987 |
KASW | |||||||
(A Carve-out of Nexstar Media Group, Inc.) | |||||||
CONDENSED STATEMENTS OF OPERATIONS | |||||||
(in thousands, unaudited) | |||||||
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Net revenue | $ | 8,942 | $ | 9,568 | |||
Operating expenses (income): | |||||||
Direct operating expenses, excluding depreciation and amortization | 1,122 | 1,145 | |||||
Selling, general, and administrative expenses, excluding depreciation and amortization | 2,092 | 2,331 | |||||
Amortization of broadcast rights | 1,031 | 1,433 | |||||
Amortization of intangible assets | 25 | 25 | |||||
Depreciation | 245 | 182 | |||||
Reimbursement from the FCC related to station repack | (204 | ) | (388 | ) | |||
Total operating expenses | 4,311 | 4,728 | |||||
Income from operations | 4,631 | 4,840 | |||||
Income tax expense | (1,142 | ) | (1,209 | ) | |||
Net income | $ | 3,489 | $ | 3,631 |
KASW | |||
(A Carve-out of Nexstar Media Group, Inc.) | |||
CONDENSED STATEMENTS OF INVESTED EQUITY | |||
(in thousands, unaudited) | |||
Balance as of December 31, 2018 | $ | 68,685 | |
Net fund transfers to Nexstar | (3,642 | ) | |
Net income | 3,489 | ||
Balance as of June 30, 2019 | $ | 68,532 | |
Balance as of December 31, 2017 | $ | 69,227 | |
Net fund transfers to Nexstar | (4,266 | ) | |
Net income | 3,631 | ||
Balance as of June 30, 2018 | $ | 68,592 |
KASW | |||||||
(A Carve-out of Nexstar Media Group, Inc.) | |||||||
CONDENSED STATEMENTS OF CASH FLOW | |||||||
(in thousands, unaudited) | |||||||
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net Income | $ | 3,489 | $ | 3,631 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation of property and equipment | 245 | 182 | |||||
Provision for bad debt | 65 | (36 | ) | ||||
Amortization of intangible assets | 25 | 25 | |||||
Amortization of broadcast rights | 1,031 | 1,433 | |||||
Spectrum repack reimbursements | (204 | ) | (388 | ) | |||
Deferred income taxes | 623 | 654 | |||||
Payments for broadcast rights | (1,038 | ) | (1,651 | ) | |||
Changes in operating assets and liabilities | |||||||
Accounts receivable | 263 | (55 | ) | ||||
Prepaid expenses | (88 | ) | (16 | ) | |||
Broadcast rights | 45 | — | |||||
Accounts payable | (149 | ) | 223 | ||||
Accrued expenses and other current liabilities | (56 | ) | 18 | ||||
Other noncurrent liabilities | (36 | ) | 131 | ||||
Net cash provided by operating activities | 4,215 | 4,151 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (777 | ) | (273 | ) | |||
Spectrum repack reimbursements | 204 | 388 | |||||
Net cash (used in) provided by investing activities | (573 | ) | 115 | ||||
Cash flows from financing activities: | |||||||
Net fund transfers to Nexstar | (3,642 | ) | (4,266 | ) | |||
Net cash used in financing activities | (3,642 | ) | (4,266 | ) | |||
Net increase (decrease) in cash and cash equivalents | — | — | |||||
Cash and cash equivalents at beginning of period | — | — | |||||
Cash and cash equivalents at end of period | $ | — | $ | — | |||
Supplemental disclosure about non-cash investing activities: | |||||||
Accrued purchases of property and equipment | $ | 14 | $ | 479 |
1. | Background and Business Operations |
2. | Summary of Significant Accounting Policies |
3. | Intangible Assets and Goodwill |
Remainder of 2019 | $ | 24 | |
2020 | 33 | ||
$ | 57 |
4. | Income Taxes |
5. | Related Party Transactions |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Direct operating expenses (excluding depreciation and amortization) | $ | 78 | $ | 68 | |||
Selling, general, and administrative expenses (excluding depreciation and amortization) | 413 | 577 | |||||
Depreciation | 40 | 46 |
6. | FCC Regulatory Matters |
TRIBUNE MEDIA COMPANY CARVE-OUT STATIONS | |
INDEX TO FINANCIAL STATEMENTS | |
PAGE | |
Unaudited Interim Condensed Combined Financial Statements | |
Condensed Combined Statements of Comprehensive Income for the six months ended June 30, 2019 and June 30, 2018 | 2 |
Condensed Combined Balance Sheets at June 30, 2019 and December 31, 2018 | 3 |
Condensed Combined Statements of Net Parent Investment for the six months ended June 30, 2019 and June 30, 2018 | 4 |
Condensed Combined Statements of Cash Flows for the six months ended June 30, 2019 and June 30, 2018 | 5 |
Notes to the Condensed Combined Financial Statements | 6 |
Six Months Ended | |||||||
June 30, 2019 | June 30, 2018 | ||||||
Operating Revenues | |||||||
Advertising | $ | 79,007 | $ | 76,831 | |||
Retransmission revenue | 44,622 | 36,030 | |||||
Other | 3,575 | 4,468 | |||||
Total operating revenues | 127,204 | 117,329 | |||||
Operating Expenses | |||||||
Programming | 44,057 | 39,313 | |||||
Direct operating expenses | 30,263 | 29,851 | |||||
Selling, general and administrative | 37,071 | 35,745 | |||||
Depreciation | 4,171 | 4,187 | |||||
Amortization | 8,866 | 9,964 | |||||
Total operating expenses | 124,428 | 119,060 | |||||
Income (Loss) Before Income Taxes | 2,776 | (1,731 | ) | ||||
Income tax expense (benefit) | 1,009 | (645 | ) | ||||
Net Income (Loss) | $ | 1,767 | $ | (1,086 | ) | ||
Comprehensive Income (Loss) | $ | 1,767 | $ | (1,086 | ) |
June 30, 2019 | December 31, 2018 | ||||||
Assets | |||||||
Current Assets: | |||||||
Cash | $ | 497 | $ | 174 | |||
Accounts receivable (net of allowances of $404 and $623) | 60,424 | 53,527 | |||||
Broadcast rights | 8,478 | 11,018 | |||||
Prepaid expenses and other | 2,947 | 787 | |||||
Total current assets | 72,346 | 65,506 | |||||
Properties | |||||||
Property, plant and equipment | 87,957 | 85,554 | |||||
Accumulated depreciation | (51,784 | ) | (48,096 | ) | |||
Net properties | 36,173 | 37,458 | |||||
Other Assets | |||||||
Broadcast rights | 9,169 | 12,460 | |||||
Intangible assets, net | 288,885 | 298,191 | |||||
Other | 16,346 | 16,354 | |||||
Total other assets | 314,400 | 327,005 | |||||
Total Assets (a) | $ | 422,919 | $ | 429,969 | |||
Liabilities and Net Parent Investment | |||||||
Current Liabilities | |||||||
Accounts payable | 2,309 | 3,101 | |||||
Employee compensation and benefits | 4,191 | 5,139 | |||||
Contracts payable for broadcast rights | 23,807 | 24,633 | |||||
Deferred revenue | 1,822 | 1,552 | |||||
Other | 507 | 617 | |||||
Total current liabilities | $ | 32,636 | $ | 35,042 | |||
Non-Current Liabilities | |||||||
Deferred income taxes | 19,378 | 18,369 | |||||
Contracts payable for broadcast rights | 16,520 | 22,729 | |||||
Other obligations | 897 | 860 | |||||
Total non-current liabilities | 36,795 | 41,958 | |||||
Total Liabilities (a) | 69,431 | 77,000 | |||||
Commitments and Contingent Liabilities (Note 4) | |||||||
Net Parent Investment | 353,488 | 352,969 | |||||
Total Liabilities and Net Parent Investment | $ | 422,919 | $ | 429,969 |
(a) | The Company’s consolidated total assets as of June 30, 2019 and December 31, 2018 include total assets of variable interest entities (“VIEs”) of $35.8 million and $38.9 million, respectively, which can only be used to settle the obligations of the VIEs. The Company’s consolidated total liabilities as of June 30, 2019 and December 31, 2018 include total liabilities of the VIEs of $1.8 million and $2.5 million, respectively, for which the creditors of the VIEs have no recourse to the Company (see Note 1). |
Balance at December 31, 2018 | $ | 352,969 | |
Transactions with Tribune Media Company and Tribune Media Company Affiliates, net | (1,248 | ) | |
Comprehensive income: | |||
Net Income | 1,767 | ||
Balance at June 30, 2019 | $ | 353,488 | |
Balance at December 31, 2017 | $ | 370,010 | |
Transactions with Tribune Media Company and Tribune Media Company Affiliates, net | (5,535 | ) | |
Comprehensive loss: | |||
Net Loss | (1,086 | ) | |
Balance at June 30, 2018 | $ | 363,389 |
Six Months Ended | |||||||
June 30, 2019 | June 30, 2018 | ||||||
Operating Activities | |||||||
Net income (loss) | $ | 1,767 | $ | (1,086 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Stock-based compensation | 480 | 552 | |||||
Depreciation | 4,171 | 4,187 | |||||
Amortization of other intangible assets | 8,866 | 9,964 | |||||
Spectrum repack reimbursements | (406 | ) | (348 | ) | |||
Changes in working capital items: | |||||||
Accounts receivable, net | (6,897 | ) | (4,049 | ) | |||
Prepaid expenses and other current assets | (2,160 | ) | (1,793 | ) | |||
Accounts payable | (808 | ) | (492 | ) | |||
Employee compensation and benefits and other current liabilities | (1,050 | ) | (427 | ) | |||
Deferred revenue | 270 | 72 | |||||
Change in broadcast rights, net of liabilities | (1,204 | ) | 2,569 | ||||
Deferred income taxes | 1,009 | (645 | ) | ||||
Other, net | 441 | (1,109 | ) | ||||
Net cash provided by operating activities | 4,479 | 7,395 | |||||
Investing Activities | |||||||
Capital expenditures | (3,314 | ) | (2,279 | ) | |||
Spectrum repack reimbursements | 406 | 348 | |||||
Other | — | 27 | |||||
Net cash used in investing activities | (2,908 | ) | (1,904 | ) | |||
Financing Activities | |||||||
Transactions with Tribune Media Company and Tribune Media Company Affiliates, net | (1,248 | ) | (5,535 | ) | |||
Net cash used in financing activities | (1,248 | ) | (5,535 | ) | |||
Net Increase (Decrease) in Cash | 323 | (44 | ) | ||||
Cash, beginning of period | 174 | 201 | |||||
Cash, end of period | $ | 497 | $ | 157 |
June 30, 2019 | December 31, 2018 | ||||||
Broadcast rights | $ | 841 | $ | 1,548 | |||
Other intangible assets, net | 33,376 | 36,246 | |||||
Other assets | 1,632 | 1,106 | |||||
Total Assets | $ | 35,849 | $ | 38,900 | |||
Contracts payable for broadcast rights | 1,819 | 2,476 | |||||
Total Liabilities | $ | 1,819 | $ | 2,476 |
Six Months Ended | |||||||
June 30, 2019 | June 30, 2018 | ||||||
Advertising | $ | 79,007 | $ | 76,831 | |||
Retransmission revenues | 44,622 | 36,030 | |||||
Other | 3,575 | 4,468 | |||||
Total operating revenues | $ | 127,204 | $ | 117,329 |
Six Months Ended | |||||||
June 30, 2019 | June 30, 2018 | ||||||
Corporate management fee | $ | 3,003 | $ | 2,780 | |||
Broadcasting corporate management fee | 3,242 | 3,226 | |||||
Station operations support management fee | 1,969 | 1,725 | |||||
Technology service center support costs | 1,986 | 2,084 | |||||
Shared service center support costs | 209 | 219 | |||||
Total | $ | 10,409 | $ | 10,034 |
June 30, 2019 | December 31, 2018 | |||||||||||||||||||||||
Gross Amount | Accumulated Amortization | Net Amount | Gross Amount | Accumulated Amortization | Net Amount | |||||||||||||||||||
Intangible assets subject to amortization | ||||||||||||||||||||||||
Network affiliation agreements (useful life 16 years) | $ | 25,300 | $ | (9,122 | ) | $ | 16,178 | $ | 25,300 | $ | (8,332 | ) | $ | 16,968 | ||||||||||
Retransmission consent agreements (useful life of 7 to 11 years) | 159,900 | (91,250 | ) | 68,650 | 159,900 | (83,174 | ) | 76,726 | ||||||||||||||||
Other (useful life of 8 years) | 7,185 | (5,728 | ) | 1,457 | 7,185 | (5,288 | ) | 1,897 | ||||||||||||||||
Total | $ | 192,385 | $ | (106,100 | ) | 86,285 | $ | 192,385 | $ | (96,794 | ) | 95,591 | ||||||||||||
Intangible assets not subject to amortization | ||||||||||||||||||||||||
FCC licenses | 202,600 | 202,600 | ||||||||||||||||||||||
Total intangible assets, net | $ | 288,885 | $ | 298,191 |
Intangible assets subject to amortization | |||
Balance as of December 31, 2018 | $ | 95,591 | |
Amortization (1) | (9,306 | ) | |
Balance as of June 30, 2019 | $ | 86,285 |
Six Months Ended June 30, 2019 | ||||||
Shares | Weighted Avg. Exercise Price | |||||
Outstanding, beginning of period | 72 | $ | 33.18 | |||
Exercised | (5 | ) | 31.98 | |||
Forfeited | (5 | ) | 31.98 | |||
Outstanding, end of period | 62 | $ | 33.38 | |||
Vested and exercisable, end of period | 45 | $ | 35.00 |
Six Months Ended June 30, 2019 | ||||||
Shares | Weighted Avg. Fair Value | |||||
Outstanding, beginning of period | 68 | $ | 35.47 | |||
Granted | 27 | 46.10 | ||||
Vested | (23 | ) | 34.49 | |||
Dividend equivalent units vested | (1 | ) | 37.56 | |||
Forfeited | (8 | ) | 38.85 | |||
Outstanding and nonvested, end of period | 63 | $ | 40.11 |
Unrecognized Compensation Cost | Weighted Avg. Remaining Recognition Period (in years) | ||||
Nonvested awards | $ | 2,198 | 2.6 |
(In thousands, except per share data) | Scripps Historical (Note 1) | Nexstar Historical (Note 1) | Tribune Historical (Note 1) | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||||||
Assets | ||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||
Cash and cash equivalents | $ | 56,514 | $ | — | $ | 497 | $ | 62,753 | 4(a) | $ | 119,764 | |||||||||||
Cash restricted for pending acquisition | 240,000 | — | — | (240,000 | ) | 4(a) | — | |||||||||||||||
Accounts and notes receivable, less allowances | 323,575 | 3,491 | 60,424 | (63,915 | ) | 4(b) | 323,575 | |||||||||||||||
Programming | 49,942 | 1,351 | 8,478 | — | 59,771 | |||||||||||||||||
FCC repack receivable | 28,130 | — | — | — | 28,130 | |||||||||||||||||
Miscellaneous | 22,963 | 105 | 2,947 | — | 26,015 | |||||||||||||||||
Total current assets | 721,124 | 4,947 | 72,346 | (241,162 | ) | 557,255 | ||||||||||||||||
Investments | 7,688 | — | — | — | 7,688 | |||||||||||||||||
Property and equipment | 315,288 | 3,263 | 36,173 | — | 354,724 | |||||||||||||||||
Operating lease right-of-use asset | 46,580 | — | — | 70,721 | 4(c) | 117,301 | ||||||||||||||||
Goodwill | 1,111,247 | 32,203 | — | 213,090 | 4(b) | 1,356,540 | ||||||||||||||||
Other intangible assets | 724,792 | 35,623 | 288,885 | (22,508 | ) | 4(b) | 1,026,792 | |||||||||||||||
Programming (less current portion) | 93,902 | 1,963 | 9,169 | — | 105,034 | |||||||||||||||||
Deferred income taxes | 8,557 | — | — | — | 8,557 | |||||||||||||||||
Miscellaneous | 18,547 | — | 16,346 | — | 34,893 | |||||||||||||||||
Total Assets | $ | 3,047,725 | $ | 77,999 | $ | 422,919 | $ | 20,141 | $ | 3,568,784 | ||||||||||||
Liabilities and Equity | ||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||
Accounts Payable | $ | 43,648 | $ | 187 | $ | 2,309 | $ | (2,496 | ) | 4(b) | $ | 43,648 | ||||||||||
Unearned revenue | 6,522 | 23 | 1,822 | (1,845 | ) | 4(b) | 6,522 | |||||||||||||||
Current portion of long-term debt | 10,650 | — | — | — | 10,650 | |||||||||||||||||
Accrued liabilities: | ||||||||||||||||||||||
Employee compensation and benefits | 34,266 | 134 | 4,191 | (2,744 | ) | 4(b) | 35,847 | |||||||||||||||
Programming liability | 61,503 | 1,425 | 23,807 | — | 86,735 | |||||||||||||||||
Miscellaneous | 43,762 | 257 | 507 | (422 | ) | 4(b) | 44,104 | |||||||||||||||
Other current liabilities | 18,247 | — | — | 2,006 | 4(c) | 20,253 | ||||||||||||||||
Total current liabilities | 218,598 | 2,026 | 32,636 | (5,501 | ) | 247,759 | ||||||||||||||||
Long-term debt (less current portion) | 1,537,849 | — | — | 419,250 | 4(d) | 1,957,099 | ||||||||||||||||
Deferred income taxes | 25,185 | 4,925 | 19,378 | (24,303 | ) | 4(b) | 25,185 | |||||||||||||||
Operating lease liabilities | 41,234 | — | — | 69,169 | 4(c) | 110,403 | ||||||||||||||||
Other liabilities (less current portion) | 308,206 | 2,516 | 17,417 | (454 | ) | 4(c) | 327,685 | |||||||||||||||
Total Liabilities | 2,131,072 | 9,467 | 69,431 | 458,161 | 2,668,131 | |||||||||||||||||
Equity: | ||||||||||||||||||||||
Preferred stock | — | — | — | — | — | |||||||||||||||||
Common stock: | — | |||||||||||||||||||||
Class A | 690 | — | — | — | 690 | |||||||||||||||||
Voting | 119 | — | — | — | 119 | |||||||||||||||||
Total common stock | 809 | — | — | — | 809 | |||||||||||||||||
Additional paid-in capital | 1,111,849 | 1,111,849 | ||||||||||||||||||||
Accumulated deficit | (101,529 | ) | (16,000 | ) | 4(e) | (117,529 | ) | |||||||||||||||
Accumulated other comprehensive loss, net | (94,476 | ) | (94,476 | ) | ||||||||||||||||||
Total Equity | (16,000 | ) | 4(e) | |||||||||||||||||||
916,653 | 68,532 | 353,488 | (422,020 | ) | 4(b) | 900,653 | ||||||||||||||||
Total Liabilities and Equity | $ | 3,047,725 | $ | 77,999 | $ | 422,919 | $ | 20,141 | $ | 3,568,784 |
(in thousands, except per share data) | Scripps Historical (Note 1) | EPI Preferred Historical (Note 1) | Excluded EPI Tucson Station | Nexstar Historical (Note 1) | Tribune Historical (Note 1) | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||||||||||||
Operating Revenues: | ||||||||||||||||||||||||||||||
Advertising | $ | 836,049 | $ | 133,271 | $ | (15,543 | ) | $ | 9,622 | $ | 168,863 | $ | — | $ | 1,132,262 | |||||||||||||||
Retransmission and carriage | 304,402 | 46,256 | (7,227 | ) | 9,211 | 72,075 | (16,600 | ) | 3(a) | 408,117 | ||||||||||||||||||||
Other | 67,974 | 2,033 | (103 | ) | 487 | 8,653 | — | 79,044 | ||||||||||||||||||||||
Total operating revenues | 1,208,425 | 181,560 | (22,873 | ) | 19,320 | 249,591 | (16,600 | ) | 1,619,423 | |||||||||||||||||||||
Costs and Expenses: | ||||||||||||||||||||||||||||||
Employee compensation and benefits | 394,029 | 69,042 | (7,886 | ) | 3,024 | 74,533 | — | 532,742 | ||||||||||||||||||||||
Programming | 350,753 | 30,908 | (4,431 | ) | 3,250 | 82,422 | — | 462,902 | ||||||||||||||||||||||
Impairment of programming assets | 8,920 | — | — | — | — | — | 8,920 | |||||||||||||||||||||||
Other expenses | 246,487 | 29,262 | (3,257 | ) | 1,614 | 59,762 | — | 333,868 | ||||||||||||||||||||||
Acquisition and related integration costs | 4,124 | — | — | — | — | (1,277 | ) | 3(b) | 2,847 | |||||||||||||||||||||
Restructuring costs | 8,911 | — | — | — | — | — | 8,911 | |||||||||||||||||||||||
Total costs and expenses | 1,013,224 | 129,212 | (15,574 | ) | 7,888 | 216,717 | (1,277 | ) | 1,350,190 | |||||||||||||||||||||
Depreciation, Amortization, and (Gains) Losses: | ||||||||||||||||||||||||||||||
Depreciation | 34,641 | 5,978 | (534 | ) | 807 | 8,499 | 2,365 | 3(c) | 51,756 | |||||||||||||||||||||
Amortization of intangible assets | 29,346 | 155 | (10 | ) | 50 | 19,927 | (2,412 | ) | 3(d) | 47,056 | ||||||||||||||||||||
Losses (gains), net on disposal of property, plant and equipment | 1,255 | — | — | — | — | — | 1,255 | |||||||||||||||||||||||
Net depreciation, amortization, and losses (gains) | 65,242 | 6,133 | (544 | ) | 857 | 28,426 | (47 | ) | 100,067 | |||||||||||||||||||||
Operating income | 129,959 | 46,215 | (6,755 | ) | 10,575 | 4,448 | (15,276 | ) | 169,166 | |||||||||||||||||||||
Interest expense | (36,184 | ) | (1,850 | ) | — | — | — | (69,250 | ) | 3(e) | (107,284 | ) | ||||||||||||||||||
Defined benefit plan expense | (19,752 | ) | — | — | — | — | — | (19,752 | ) | |||||||||||||||||||||
Miscellaneous, net | 152 | (378 | ) | — | — | — | (1,157 | ) | 3(f) | (1,383 | ) | |||||||||||||||||||
Income from operations before income taxes | 74,175 | 43,987 | (6,755 | ) | 10,575 | 4,448 | (85,683 | ) | 40,747 | |||||||||||||||||||||
Provision (benefit) for income taxes | 18,098 | (7,443 | ) | (1,723 | ) | 2,641 | 1,471 | (3,100 | ) | 3(g) | 9,944 | |||||||||||||||||||
Income from continuing operations, net of tax | 56,077 | 51,430 | (5,032 | ) | 7,934 | 2,977 | (82,583 | ) | 30,803 | |||||||||||||||||||||
Net loss from discontinued operations, net of tax | (36,328 | ) | — | — | — | — | — | (36,328 | ) | |||||||||||||||||||||
Net income (loss) attributable to noncontrolling interest | (632 | ) | 40,541 | (4,000 | ) | — | — | (36,541 | ) | (632 | ) | |||||||||||||||||||
Net income attributable to Scripps shareholders | $ | 20,381 | $ | 10,889 | $ | (1,032 | ) | $ | 7,934 | $ | 2,977 | $ | (46,042 | ) | $ | (4,893 | ) | |||||||||||||
Income from continuing operations per share of common stock: | ||||||||||||||||||||||||||||||
Basic | $ | 0.69 | $ | 0.39 | ||||||||||||||||||||||||||
Diluted | $ | 0.68 | $ | 0.38 | ||||||||||||||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||||||||
Basic | 81,369 | 81,369 | ||||||||||||||||||||||||||||
Diluted | 81,927 | 81,927 |
(in thousands, except per share data) | Scripps Historical (Note 1) | EPI Preferred Historical (Note 1) | Excluded EPI Tucson Station | Nexstar Historical (Note 1) | Tribune Historical (Note 1) | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||||||||||||
Operating Revenues: | ||||||||||||||||||||||||||||||
Advertising | $ | 386,843 | $ | 36,041 | $ | (4,083 | ) | $ | 3,613 | $ | 79,007 | $ | — | $ | 501,421 | |||||||||||||||
Retransmission and carriage | 180,608 | 18,025 | (2,735 | ) | 5,117 | 44,622 | (15,900 | ) | 3(a) | 229,737 | ||||||||||||||||||||
Other | 62,207 | 666 | (37 | ) | 212 | 3,575 | — | 66,623 | ||||||||||||||||||||||
Total operating revenues | 629,658 | 54,732 | (6,855 | ) | 8,942 | 127,204 | (15,900 | ) | 797,781 | |||||||||||||||||||||
Costs and Expenses: | ||||||||||||||||||||||||||||||
Employee compensation and benefits | 225,805 | 22,284 | (2,619 | ) | 1,343 | 38,004 | — | 284,817 | ||||||||||||||||||||||
Programming | 200,865 | 12,360 | (1,757 | ) | 1,479 | 44,057 | — | 257,004 | ||||||||||||||||||||||
Other expenses | 134,167 | 9,439 | (927 | ) | 1,219 | 29,330 | — | 173,228 | ||||||||||||||||||||||
Acquisition and related integration costs | 6,268 | — | — | — | — | (3,199 | ) | 3(b) | 3,069 | |||||||||||||||||||||
Restructuring costs | 1,895 | — | — | — | — | — | 1,895 | |||||||||||||||||||||||
Total costs and expenses | 569,000 | 44,083 | (5,303 | ) | 4,041 | 111,391 | (3,199 | ) | 720,013 | |||||||||||||||||||||
Depreciation, Amortization, and (Gains) Losses: | ||||||||||||||||||||||||||||||
Depreciation | 18,970 | 2,205 | (176 | ) | 245 | 4,171 | 788 | 3(c) | 26,203 | |||||||||||||||||||||
Amortization of intangible assets | 19,059 | 23 | (1 | ) | 25 | 8,866 | (1,667 | ) | 3(d) | 26,305 | ||||||||||||||||||||
Losses (gains), net on disposal of property, plant and equipment | 317 | — | — | — | — | — | 317 | |||||||||||||||||||||||
Net depreciation, amortization, and losses (gains) | 38,346 | 2,228 | (177 | ) | 270 | 13,037 | (879 | ) | 52,825 | |||||||||||||||||||||
Operating income | 22,312 | 8,421 | (1,375 | ) | 4,631 | 2,776 | (11,822 | ) | 24,943 | |||||||||||||||||||||
Interest expense | (26,939 | ) | (1,149 | ) | — | — | — | (28,151 | ) | 3(e) | (56,239 | ) | ||||||||||||||||||
Defined benefit plan expense | (3,136 | ) | — | — | — | — | — | (3,136 | ) | |||||||||||||||||||||
Miscellaneous, net | (431 | ) | (565 | ) | 2 | — | — | — | (994 | ) | ||||||||||||||||||||
Loss from operations before income taxes | (8,194 | ) | 6,707 | (1,373 | ) | 4,631 | 2,776 | (39,973 | ) | (35,426 | ) | |||||||||||||||||||
Provision (benefit) for income taxes | (1,014 | ) | 187 | (350 | ) | 1,142 | 1,009 | (8,800 | ) | 3(g) | (7,826 | ) | ||||||||||||||||||
Loss from continuing operations, net of tax | (7,180 | ) | 6,520 | (1,023 | ) | 3,489 | 1,767 | (31,173 | ) | (27,600 | ) | |||||||||||||||||||
Net loss from discontinued operations, net of tax | — | — | — | — | — | — | — | |||||||||||||||||||||||
Net income (loss) attributable to noncontrolling interest | — | 5,766 | (951 | ) | — | — | (4,815 | ) | — | |||||||||||||||||||||
Net loss attributable to Scripps shareholders | $ | (7,180 | ) | $ | 754 | $ | (72 | ) | $ | 3,489 | $ | 1,767 | $ | (26,358 | ) | $ | (27,600 | ) | ||||||||||||
Loss from continuing operations per share of common stock: | ||||||||||||||||||||||||||||||
Basic | $ | (0.09 | ) | $ | (0.34 | ) | ||||||||||||||||||||||||
Diluted | $ | (0.09 | ) | $ | (0.34 | ) | ||||||||||||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||||||||
Basic | 80,748 | 80,748 | ||||||||||||||||||||||||||||
Diluted | 80,748 | 80,748 |
Cordillera Stations | Nexstar/ Tribune Stations | Total | ||||||||||
Accounts receivable | $ | 26,264 | $ | — | $ | 26,264 | ||||||
Other current assets | 986 | 12,881 | 13,867 | |||||||||
Property and equipment | 53,671 | 39,436 | 93,107 | |||||||||
Operating lease right-of-use assets | 4,667 | 70,721 | 75,388 | |||||||||
Other assets | — | 27,478 | 27,478 | |||||||||
Fair value of acquired intangible assets | 214,100 | 302,000 | 516,100 | |||||||||
Residual goodwill from the transactions | 253,735 | 245,293 | 499,028 | |||||||||
Accounts payable | (15 | ) | — | (15 | ) | |||||||
Accrued expenses | (3,835 | ) | (27,155 | ) | (30,990 | ) | ||||||
Other current liabilities | (280 | ) | (2,006 | ) | (2,286 | ) | ||||||
Operating lease liabilities | (4,387 | ) | (69,169 | ) | (73,556 | ) | ||||||
Other long-term liabilities | — | (19,479 | ) | (19,479 | ) | |||||||
Net purchase price | $ | 544,906 | $ | 580,000 | $ | 1,124,906 |
(a) | Reflects the adjustments to reduce retransmission revenue, primarily from CW affiliates, under Scripps' retransmission agreements in effect during each period. |
(b) | Reflects the adjustments to reverse incurred and non-recurring transaction costs, which were recorded in Scripps’ acquisition and related integration costs. These transaction costs totaled $1.3 million for the twelve months ended 2018 and $3.2 million for the six months ended June 30, 2019. |
(c) | Reflects the depreciation expense adjustment resulting from the fair value adjustments to Cordillera’s, Nexstar's and Tribune's property and equipment: |
Year-Ended | Six Months Ended | ||||||
Dec. 31, 2018 | June 30, 2019 | ||||||
Depreciation expense for fair value adjustment to property and equipment | $ | 2,365 | $ | 788 |
(d) | Reflects the incremental increase in intangible asset amortization expense resulting from the fair value adjustments to Cordillera’s, Nexstar's and Tribune's intangible assets: |
Year-Ended | Six Months Ended | ||||||
Dec. 31, 2018 | June 30, 2019 | ||||||
Reversal of EPI's historical intangible asset amortization | $ | (145 | ) | $ | (22 | ) | |
Reversal of Nexstar's historical intangible asset amortization | (50 | ) | (25 | ) | |||
Reversal of Tribune's historical intangible asset amortization | (19,927 | ) | (8,866 | ) | |||
Amortization of purchased identifiable intangible assets | 17,710 | 7,246 | |||||
Total intangible assets amortization expense adjustment | $ | (2,412 | ) | $ | (1,667 | ) |
(e) | Reflects the adjustments to reverse interest expense associated with the EPI’s debt not assumed and the recognition of interest expense associated with Scripps’ new debt financing: |
Year-Ended | Six Months Ended | ||||||
Dec. 31, 2018 | June 30, 2019 | ||||||
Reversal of EPI's historical interest expense | $ | (1,850 | ) | $ | (1,149 | ) | |
Interest expense on new debt financing | 71,100 | 29,300 | |||||
Total interest expense adjustment | $ | 69,250 | $ | 28,151 |
(f) | Reflects the adjustments to reverse the gains and losses recognized from interest rate swaps that were in place on EPI’s outstanding debt. EPI’s statement of operations included a gain on derivative instruments of $1.2 million for the twelve months ended 2018. |
(g) | Reflects the income tax effect of applying the estimated blended federal and state statutory rate of 25.2% for the year ended December 31, 2018 and the six months ended June 30, 2019 to EPI's pre-tax income and to the pro forma adjustments. |
(a) | Represents adjustments to the combined company cash balance. Estimated transaction and other closing/financing costs associated with the transaction are not included in the pro forma results of operations as they are non-recurring in nature. |
(in thousands) | ||||
Cash consideration for the acquisition of Nexstar/Tribune stations | $ | (580,000 | ) | |
Cash outlay to pay down borrowings under revolving credit facility | (70,000 | ) | ||
Issuance of new unsecured notes | 500,000 | |||
Cash withheld for debt issuance costs | (10,750 | ) | ||
Cash not acquired from Nexstar and Tribune | (497 | ) | ||
Transactions costs paid | (16,000 | ) | ||
Total cash adjustments | (177,247 | ) | ||
Plus: utilization of restricted cash for the Nexstar transaction | 240,000 | |||
Total cash and cash equivalents adjustments | $ | 62,753 |
(b) | Reflects the acquisition method of accounting based on the estimated fair value of assets acquired and liabilities assumed at the closing date. |
(in thousands) | ||||
Cash not acquired | $ | (497 | ) | |
Accounts receivable not acquired | (63,915 | ) | ||
Adjustment of identifiable intangible assets to fair value | (22,508 | ) | ||
Residual goodwill created from acquisition | 213,090 | |||
Accounts payable amounts not assumed | 2,496 | |||
Unearned revenue not assumed | 1,845 | |||
Accrued employee compensation and benefits not assumed | 2,744 | |||
Other accrued expenses not assumed | 422 | |||
Deferred tax impact of purchase accounting treatment | 24,303 | |||
Elimination of Nexstar and Tribune historical equity balances | 422,020 | |||
Total Nexstar/Tribune transaction value | $ | 580,000 |
(c) | Represents the impact of adopting the new lease standard that requires the recognition of right-of-use assets and lease liabilities on the balance sheet. |
(in thousands) | ||||
Operating lease right-of-use assets | $ | 70,721 | ||
Other current liabilities | 2,006 | |||
Operating lease liabilities | 69,169 | |||
Other liabilities (less current portion) | (454 | ) |
(d) | To record the issuance of Scripps’ long-term debt and related debt issuance costs. |
(in thousands) | ||||
Additional long-term debt from issuance of unsecured notes | $ | 500,000 | ||
Pay down borrowings under revolving credit facility | (70,000 | ) | ||
Debt issuance costs on long-term debt | (10,750 | ) | ||
Total long-term debt adjustment | $ | 419,250 |
(e) | Represents the impact of estimated transaction costs associated with the transaction. These costs have not been included in the pro forma results of operations as they are non-recurring in nature. |
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Cover Page |
Sep. 19, 2019 |
---|---|
Cover page. | |
Document Type | 8-K |
Document Period End Date | Sep. 19, 2019 |
Entity Registrant Name | THE E.W. SCRIPPS COMPANY |
Entity Incorporation, State or Country Code | OH |
Entity File Number | 0-16914 |
Entity Tax Identification Number | 31-1223339 |
Entity Address, Address Line One | 312 Walnut Street |
Entity Address, City or Town | Cincinnati, |
Entity Address, State or Province | OH |
Entity Address, Postal Zip Code | 45202 |
City Area Code | 513 |
Local Phone Number | 977-3000 |
Written Communications | false |
Soliciting Material | false |
Pre-commencement Tender Offer | false |
Pre-commencement Issuer Tender Offer | false |
Title of 12(b) Security | Class A Common Stock, par value $0.01 per share |
Trading Symbol | SSP |
Security Exchange Name | NASDAQ |
Entity Emerging Growth Company | false |
Amendment Flag | false |
Entity Central Index Key | 0000832428 |
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