10-Q 1 ssp-20140630x10q.htm 10-Q SSP-2014.06.30-10Q
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014     
OR
o
 
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)
 
31-1223339
(IRS Employer
Identification Number)
 
 
 
312 Walnut Street
Cincinnati, Ohio
(Address of principal executive offices)
 
45202
(Zip Code)
Registrant's telephone number, including area code: (513) 977-3000
Not applicable
(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes þ No o
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” and “smaller reporting company “in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
 
Accelerated filer þ
 
Non-accelerated filer o 
(Do not check if a smaller reporting company)
 
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of June 30, 2014, there were 44,265,754 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.
 



Index to The E. W. Scripps Company Report
on Form 10-Q for the Quarter Ended June 30, 2014

2


PART I

As used in this Quarterly Report on Form 10-Q, 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.

Item 1. Financial Statements

The information required by this item is filed as part of this Form 10-Q. See Index to Financial Information at page F-1 of this Form 10-Q.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The information required by this item is filed as part of this Form 10-Q. See Index to Financial Information at page F-1 of this Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information required by this item is filed as part of this Form 10-Q. See Index to Financial Information at page F-1 of this Form 10-Q.

Item 4. Controls and Procedures

The information required by this item is filed as part of this Form 10-Q. See Index to Financial Information at page F-1 of this Form 10-Q.


3


PART II

Item 1. 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 1A. Risk Factors

There have been no material changes to the risk factors disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2013.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no sales of unregistered equity securities during the quarter ended June 30, 2014.

The following table provides information about Company purchases of Class A Common shares during the quarter ended June 30, 2014 and the remaining amount that may still be purchased under the program:
Period
 
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
 
 
 
 
 
 
 
 
 
4/1/14 - 4/30/14
 
192,570

 
$
17.70

 
$
3,408,811

 
$
4,564,224

5/1/14 - 5/31/14
 

 

 

 
$
104,564,224

6/1/14 - 6/30/14
 

 

 

 
$
104,564,224

Total
 
192,570

 
$
17.70

 
$
3,408,811

 
 
Our board of directors authorized a repurchase program in November 2012 of up to $100 million of our Class A Common shares. We have repurchased a total of $95 million of shares under this authorization. An additional $5 million of shares may be repurchased pursuant to this authorization which expires December 31, 2014.
In May 2014, our board of directors authorized a new repurchase program of up to $100 million of our Class A Common shares through December 2016. No shares have been repurchased under this program as of June 30, 2014. Based on the terms of our merger agreement with Journal Communications, we are precluded from repurchasing shares prior to closing the transaction.

Item 3. Defaults Upon Senior Securities
There were no defaults upon senior securities during the quarter ended June 30, 2014.

Item 4. Mine Safety Disclosures
None.

Item 5. Other Information
None.

Item 6. Exhibits
The information required by this item is filed as part of this Form 10-Q. See Index to Exhibits at page E-1 of this Form 10-Q.




4


Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
THE E. W. SCRIPPS COMPANY
 
 
 
Dated: August 8, 2014
By:
/s/ Douglas F. Lyons 
 
 
Douglas F. Lyons
 
 
Vice President and Controller
 
 
(Principal Accounting Officer)



5


The E. W. Scripps Company
Index to Financial Information



F-1


Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)
 
As of 
 June 30, 
 2014
 
As of 
 December 31, 
 2013
 
 
 
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
91,502

 
$
221,255

Restricted cash
 
6,810

 
8,210

Accounts and notes receivable (less allowances - $1,816 and $2,027)
 
128,932

 
139,703

Inventory
 
6,346

 
6,543

Deferred income taxes
 
17,861

 
17,861

Income taxes receivable
 
671

 
436

Miscellaneous
 
8,142

 
8,046

Total current assets
 
260,264

 
402,054

Investments
 
16,382

 
16,567

Property, plant and equipment
 
355,125

 
353,797

Goodwill
 
105,571

 
27,966

Other intangible assets
 
189,143

 
137,862

Deferred income taxes
 
9,743

 
8,733

Miscellaneous
 
18,629

 
19,151

Total Assets
 
$
954,857

 
$
966,130

Liabilities and Equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
15,556

 
$
16,529

Customer deposits and unearned revenue
 
27,391

 
28,633

Current portion of long-term debt
 
2,000

 
2,000

Accrued liabilities:
 
 
 
 
Employee compensation and benefits
 
27,602

 
26,986

Miscellaneous
 
31,863

 
28,930

Other current liabilities
 
9,965

 
10,043

Total current liabilities
 
114,377

 
113,121

Long-term debt (less current portion)
 
197,000

 
198,000

Other liabilities (less current portion)
 
110,077

 
107,272

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: 44,265,754 and 44,094,501 shares
 
443

 
441

Voting — authorized: 60,000,000 shares; issued and outstanding: 11,932,722 and 11,932,722 shares
 
119

 
119

Total
 
562

 
560

Additional paid-in capital
 
506,676

 
509,243

Retained earnings
 
104,317

 
116,893

Accumulated other comprehensive loss, net of income taxes:
 
 
 
 
Unrealized loss on derivatives
 
(600
)
 
(718
)
Pension liability adjustments
 
(79,317
)
 
(80,205
)
Total The E.W. Scripps Company shareholders’ equity
 
531,638

 
545,773

Noncontrolling interest
 
1,765

 
1,964

Total equity
 
533,403

 
547,737

Total Liabilities and Equity
 
$
954,857

 
$
966,130

See notes to condensed consolidated financial statements.

F-2


Condensed Consolidated Statements of Operations (Unaudited)

 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in thousands, except per share data)
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
Advertising
 
$
157,255

 
$
158,105

 
$
304,025

 
$
305,252

Subscriptions
 
29,699

 
28,096

 
61,998

 
58,567

Retransmission
 
12,700

 
10,500

 
25,174

 
20,942

Other
 
12,292

 
11,152

 
24,543

 
21,745

Total operating revenues
 
211,946

 
207,853

 
415,740

 
406,506

Costs and Expenses:
 
 
 
 
 
 
 
 
Employee compensation and benefits
 
103,068

 
96,129

 
204,817

 
196,828

Programs and program licenses
 
13,802

 
13,218

 
26,770

 
26,014

Newsprint, press supplies and other printing costs
 
11,046

 
11,407

 
23,084

 
24,351

Newspaper distribution
 
11,638

 
11,941

 
23,554

 
24,214

Other expenses
 
54,219

 
51,246

 
103,967

 
100,127

Defined benefit pension plan expense
 
5,477

 
2,569

 
6,855

 
4,538

Acquisition and related integration costs
 
4,097

 

 
4,359

 

Separation and restructuring costs
 

 
1,425

 

 
2,401

Total costs and expenses
 
203,347

 
187,935

 
393,406

 
378,473

Depreciation, Amortization, and Losses (Gains):
 
 
 
 
 
 
 
 
Depreciation
 
9,698

 
10,035

 
19,506

 
20,137

Amortization of intangible assets
 
1,897

 
1,739

 
3,818

 
3,451

Losses (gains), net on disposal of property, plant and equipment
 
22

 
(42
)
 
90

 
(37
)
Net depreciation, amortization, and losses (gains)
 
11,617

 
11,732

 
23,414

 
23,551

Operating (loss) income
 
(3,018
)
 
8,186

 
(1,080
)
 
4,482

Interest expense
 
(2,043
)
 
(2,656
)
 
(4,297
)
 
(5,269
)
Miscellaneous, net
 
(400
)
 
(1,634
)
 
(845
)
 
(2,938
)
(Loss) income from operations before income taxes
 
(5,461
)
 
3,896

 
(6,222
)
 
(3,725
)
(Benefit) provision for income taxes
 
(2,027
)
 
711

 
(2,176
)
 
(4,239
)
Net (loss) income
 
(3,434
)
 
3,185

 
(4,046
)
 
514

Net loss attributable to noncontrolling interests
 
(199
)
 

 
(199
)
 

Net (loss) income attributable to the shareholders of The E.W. Scripps Company
 
$
(3,235
)
 
$
3,185

 
$
(3,847
)
 
$
514

Net (loss) income per basic share of common stock attributable to the shareholders of The E.W. Scripps Company:
 
$
(0.06
)
 
$
0.05

 
$
(0.07
)
 
$
0.01

Net (loss) income per diluted share of common stock attributable to the shareholders of The E.W. Scripps Company:
 
$
(0.06
)
 
$
0.05

 
$
(0.07
)
 
$
0.01

See notes to condensed consolidated financial statements.


F-3


Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in thousands)
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(3,434
)
 
$
3,185

 
$
(4,046
)
 
$
514

Changes in fair value of derivative, net of tax of $37, $371, $74 and $406
 
59

 
612

 
118

 
671

Changes in defined benefit pension plans, net of tax of $280, $1,001, $560 and $1,299
 
444

 
1,105

 
888

 
1,956

Total comprehensive (loss) income
 
(2,931
)
 
4,902

 
(3,040
)
 
3,141

Less comprehensive loss attributable to noncontrolling interest
 
(199
)
 

 
(199
)
 

Total comprehensive (loss) income attributable to the shareholders of The E.W. Scripps Company
 
$
(2,732
)
 
$
4,902

 
$
(2,841
)
 
$
3,141

See notes to condensed consolidated financial statements.

F-4


Condensed Consolidated Statements of Cash Flows (Unaudited)


 
Six Months Ended 
 June 30,
(in thousands)
 
2014

2013
 
 
 
 
 
Cash Flows from Operating Activities:
 



Net (loss) income
 
$
(4,046
)
 
$
514

Adjustments to reconcile net (loss) income to net cash flows from operating activities:
 



Depreciation and amortization
 
23,324

 
23,588

Deferred income taxes
 
(2,489
)

2,041

Stock and deferred compensation plans
 
4,711


4,757

Pension expense, net of payments
 
2,182


3,113

Liability for withdrawal from GCIU employer retirement fund
 
4,100

 

Other changes in certain working capital accounts, net
 
11,411


(31,044
)
Miscellaneous, net
 
1,122


1,923

Net cash provided by operating activities
 
40,315


4,892

Cash Flows from Investing Activities:
 



Acquisitions

(145,222
)
 

Additions to property, plant and equipment
 
(8,209
)

(12,169
)
Purchase of investments
 
(1,203
)

(1,375
)
Change in restricted cash
 
1,400

 
1,800

Miscellaneous, net
 
598

 
320

Net cash used in investing activities
 
(152,636
)

(11,424
)
Cash Flows from Financing Activities:
 



Payments on long-term debt
 
(1,000
)

(7,950
)
Repurchase of Class A Common shares
 
(21,237
)

(34,910
)
Proceeds from employee stock options
 
8,876


33,675

Tax payments related to shares withheld for RSUs
 
(3,837
)

(5,970
)
Miscellaneous, net
 
(234
)

(2,854
)
Net cash used in financing activities
 
(17,432
)

(18,009
)
Decrease in cash and cash equivalents
 
(129,753
)

(24,541
)
Cash and cash equivalents:
 



Beginning of year
 
221,255


242,642

End of period
 
$
91,502


$
218,101

 
 
 
 
 
Supplemental Cash Flow Disclosures
 
 
 
 
Interest paid
 
$
3,738

 
$
3,917

Income taxes paid
 
$
380

 
$
111

See notes to condensed consolidated financial statements.

F-5


Condensed Consolidated Statements of Equity (Unaudited)

(in thousands, except share data)
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
Total
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2012
 
$
555

 
$
517,688

 
$
136,293

 
$
(116,840
)
 
$
2,214

 
$
539,910

Net income
 

 

 
514

 

 

 
514

Changes in defined benefit pension plans
 

 

 

 
1,956

 

 
1,956

Changes in fair value of derivative
 

 

 

 
671

 

 
671

Repurchase 2,684,876 Class A Common shares
 
(27
)
 
(29,251
)
 
(5,632
)
 

 

 
(34,910
)
Compensation plans: 4,248,638 net shares issued *
 
43

 
31,759

 

 

 

 
31,802

As of June 30, 2013
 
$
571

 
$
520,196

 
$
131,175

 
$
(114,213
)
 
$
2,214

 
$
539,943

 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2013
 
$
560

 
$
509,243

 
$
116,893

 
$
(80,923
)
 
$
1,964

 
$
547,737

Net loss
 

 

 
(3,847
)
 

 
(199
)
 
(4,046
)
Changes in defined benefit pension plans
 

 

 

 
888

 

 
888

Changes in fair value of derivative
 

 

 

 
118

 

 
118

Repurchase 1,181,560 Class A Common shares
 
(12
)
 
(12,496
)
 
(8,729
)
 

 

 
(21,237
)
Compensation plans: 1,352,813 net shares issued *
 
14

 
9,929

 

 

 

 
9,943

As of June 30, 2014
 
$
562

 
$
506,676

 
$
104,317

 
$
(79,917
)
 
$
1,765

 
$
533,403

* Net of tax payments related to shares withheld for vested stock and RSUs of $3,837 in 2014 and $5,970 in 2013.
See notes to condensed consolidated financial statements.


F-6


Condensed Notes to Consolidated Financial Statements (Unaudited)

1. Summary of Significant Accounting Policies
As used in the Condensed 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.
Basis of Presentation — The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto included in our 2013 Annual Report on Form 10-K. In management's opinion, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the interim periods have been made.
Results of operations are not necessarily indicative of the results that may be expected for future interim periods or for the full year.
Nature of Operations — We are a diverse media enterprise with a portfolio of television, print and digital 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: television, newspapers and syndication and other. Additional information for our business segments is presented in the Condensed Notes to Consolidated Financial Statements.
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; 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.
Revenue Recognition — We recognize revenue when persuasive evidence of a sales arrangement exists, delivery occurs or services are rendered, the sales price is fixed or determinable and collectability is reasonably assured. When a sales arrangement contains multiple elements, such as the sale of advertising and other services, we allocate revenue to each element based upon its relative fair value. We report revenue net of sales and other taxes collected from our customers.
Our primary sources of revenue are from the sale of print, broadcast and digital advertising, retransmission fees received from cable operators and satellite carriers and newspaper subscription fees.
The revenue recognition policies for each source of revenue are described in our 2013 Annual Report on Form 10-K.
Share-Based Compensation — We have a Long-Term Incentive Plan (the “Plan”) which is described more fully in our Annual Report on Form 10-K for the year ended December 31, 2013. The Plan provides for the award of incentive and nonqualified stock options, stock appreciation rights, restricted stock units (RSUs), unrestricted Class A Common shares and performance units to key employees and non-employee directors.
Share-based compensation costs totaled $1.4 million and $0.5 million for the second quarter of 2014 and 2013, respectively. Year-to-date share-based compensation costs totaled $4.7 million and $3.9 million in 2014 and 2013, respectively.

F-7


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:
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in thousands)
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Numerator (for basic and diluted earnings per share)
 
 
 
 
 
 
 
 
Net (loss) income attributable to the shareholders of The E.W. Scripps Company
 
$
(3,235
)
 
$
3,185

 
$
(3,847
)
 
$
514

Less income allocated to RSUs
 


(89
)
 


(16
)
Numerator for basic and diluted earnings per share
 
$
(3,235
)
 
$
3,096

 
$
(3,847
)
 
$
498

Denominator
 
 
 
 
 
 
 
 
Basic weighted-average shares outstanding
 
56,043


57,448


56,063


56,894

Effect of dilutive securities:
 



 



Stock options held by employees and directors
 


1,299

 


1,172

Diluted weighted-average shares outstanding
 
56,043

 
58,747

 
56,063

 
58,066

Anti-dilutive securities (1)
 
3,746

 

 
3,746

 

(1) Amount outstanding at balance sheet date, before application of the treasury stock method and not weighted for period outstanding.

For the quarter and six months ended ended June 30, 2014, we incurred a net loss and the inclusion of RSUs and stock options held by employees and directors would have been anti-dilutive, and accordingly the diluted EPS calculation for the period excludes those common share equivalents.

Derivative Financial Instruments — It is our policy that derivative transactions are executed only to manage exposures arising in the normal course of business and not for the purpose of creating speculative positions or trading. Derivative financial instruments are utilized to manage interest rate risks. We do not hold derivative financial instruments for trading purposes. All derivatives are recorded on the balance sheet at fair value. Each derivative is designated as a cash flow hedge or remains undesignated. Changes in the fair value of derivatives that are designated and effective as cash flow hedges are recorded in other comprehensive income (loss) and reclassified to earnings when the effects of the item being hedged are recognized in earnings. These changes are offset in earnings to the extent the hedge was effective by fair value changes related to the risk being hedged on the hedged item. Changes in the fair value of undesignated hedges are recognized currently in earnings. All ineffective changes in derivative fair values are recognized currently in earnings.

All designated hedges are formally documented as to the relationship with the hedged item as well as the risk-management strategy. Both at inception and on an ongoing basis, the hedging instrument is assessed as to its effectiveness, when applicable. If and when a derivative is determined not to be highly effective as a hedge, or the underlying hedged transaction is no longer likely to occur, or the hedge designation is removed, or the derivative is terminated, the hedge accounting discussed above is discontinued.

2. Recently Adopted Standards and Issued Accounting Standards

Recently Issued Accounting StandardsIn May 2014, the Financial Accounting Standards Board issued new guidance on revenue recognition. Under this new standard, an entity shall recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled 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. This standard permits the use of either the retrospective or cumulative effect transition method and will be effective for us beginning in 2017. Early adoption is not permitted. We are currently assessing the impact this new guidance will have on our consolidated financial statements and have not yet determined a transition method.


F-8


3. Acquisitions

On June 16, 2014, we closed our acquisition of two television stations owned by Granite Broadcasting Corporation — the Detroit MyNetworkTV affiliate WMYD-TV and the Buffalo, N.Y. ABC affiliate WKBW-TV ("Acquired Granite Stations") — for $110 million in cash. The acquisition of WMYD-TV creates a duopoly with our largest station, Detroit ABC affiliate WXYZ-TV.

Pending the finalization of third-party valuations and other items, the following table summarizes the preliminary fair value of the assets acquired as of June 16, 2014:
(in thousands)
 
 
 
 
 
Assets:
 
 
Property, plant and equipment
 
$
12,133

Intangible assets
 
49,200

Goodwill
 
48,667

Net purchase price
 
$
110,000


Of the $49 million allocated to intangible assets, $21 million was for FCC licenses which we have determined to have an indefinite life and therefore will not be amortized. The remaining balance of $28 million will be allocated to retransmission agreements, television network affiliation relationships and advertiser relationships with estimated amortization periods of 10 to 20 years.

The goodwill of $48.7 million arising from the transaction consists largely of synergies and economies of scale and other benefits of a larger broadcast footprint, as well as synergies from being able to create a duopoly in our Detroit market. We have allocated the goodwill to our television segment. We will treat the transaction as an asset acquisition for income tax purposes resulting in a step-up in the assets acquired. The goodwill is deductible for income tax purposes.

Pro forma results of operations, assuming the transaction had taken place at the beginning of 2013, are included in the following table. The pro forma information includes the historical results of operations of Scripps and the Acquired Granite Stations and adjustments for additional depreciation and amortization of the assets acquired. 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.

 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in thousands, except per share data) (unaudited)
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Operating revenues
 
$
218,821

 
$
216,031

 
$
429,979

 
$
422,061

(Loss) income from operations attributable to the shareholders of The E.W. Scripps Company
 
(2,703
)
 
4,436

 
(2,614
)
 
2,545

(Loss) income per share from operations attributable to the shareholders of The E.W. Scripps Company:
 
 
 
 
 
 
 
 
          Basic
 
(0.05
)
 
0.08

 
(0.05
)
 
0.04

          Diluted
 
(0.05
)
 
0.07

 
(0.05
)
 
0.04


F-9


On January 1, 2014 we completed our acquisition of Media Convergence Group, Inc., which operates as Newsy, a digital video news provider, for $35 million in cash, plus a working capital adjustment of $0.2 million.

Pending the finalization of third-party valuations and other items, the following table summarizes the preliminary fair value of the assets acquired and the liabilities assumed as of January 1, 2014:
(in thousands)
 
 
 
 
 
Assets:
 
 
Accounts receivable
 
$
640

Other assets
 
74

Equipment and software
 
631

Intangible assets
 
5,900

Goodwill
 
28,938

Total assets acquired
 
36,183

Current liabilities
 
116

Long-term deferred liability
 
845

Net purchase price
 
$
35,222


Of the $5.9 million allocated to intangible assets, $4.1 million was allocated to customer relationships with an estimated amortization period of 5 years and the balance of $1.8 million was allocated to various other intangible assets.

The goodwill of $28.9 million arising from the transaction consists largely of the benefit we will derive from being able to enter the digital video market with an established business. We have allocated the goodwill to our syndication and other segment. We will treat the transaction as a purchase of stock for income tax purposes with no step-up in the assets acquired. The goodwill will not be deductible for income tax purposes. We are not presenting any pro forma results of operations since the impact of the acquisition is not material to prior year results of operations.

4. Income Taxes

We file a consolidated federal income tax return, consolidated unitary tax returns in certain states and other separate state income tax returns for our subsidiary companies.

The income tax provision for interim periods is generally determined based upon the expected effective income tax rate for the full year and the tax rate applicable to certain discrete transactions in the interim period. To determine the annual effective income tax rate, we must estimate both the total income (loss) before income tax for the full year and the jurisdictions in which that income (loss) is subject to tax. The actual effective income tax rate for the full year may differ from these estimates if income (loss) before income tax is greater than or less than what was estimated or if the allocation of income (loss) to jurisdictions in which it is taxed is different from the estimated allocations. We review and adjust our estimated effective income tax rate for the full year each quarter based upon our most recent estimates of income (loss) before income tax for the full year and the jurisdictions in which we expect that income will be taxed.

The effective income tax rate for the six months ended June 30, 2014 and 2013 was 35% and 114%, respectively. The primary reason for the difference between these rates and the U.S. federal statutory rate of 35% is the impact of state taxes, non-deductible expenses and adjustments to reserves for uncertain tax positions (including interest). We recognized $2.4 million of previously unrecognized tax benefits in the first six months of 2013 upon settlement of audits or when the statute of limitations lapsed in certain tax jurisdictions.

Deferred tax assets totaled $27.6 million at June 30, 2014. Management believes that it is more likely than not that we will realize the benefits of our federal deferred tax assets and therefore has not recorded a valuation allowance for our federal deferred tax assets. If economic conditions worsen, future estimates of taxable income could be lower than our current estimates which may require valuation allowances to be recorded in future reporting periods.
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.

F-10


During the periods ended June 30, 2014 and 2013, deferred tax assets relating to employee share-based compensation from the vesting of RSU's and the exercise of stock options have not been recognized since we are in a net tax loss position for both periods. The additional tax benefits will be reflected as net operating loss carryforwards when we file our tax returns, but the additional tax benefits are not recorded under GAAP until the tax deduction reduces taxes payable. The amount of unrecognized tax deductions for the six months ended June 30, 2014 and 2013 was approximately $25 million and $26 million, respectively.

5. Other Charges and Credits

Income (loss) from operations was affected by the following:

Acquisition and related integration costs of $4.4 million for the six months ended June 30, 2014 include costs associated with the acquisition of two television stations from Granite Broadcasting and costs related to the merger with Journal Communications broadcast operations and the spin-off of our newspaper business.

Restructuring costs, primarily at our newspaper operations, totaled $1.4 million for the second quarter of 2013 and $2.4 million for the first six months of 2013. Restructuring costs primarily include costs associated with efforts to simplify and standardize advertising and circulation systems and other processes in our newspaper division. In 2014, we are in the final stages of these system implementations and any remaining costs are now included in segment operating results.

6. Restricted Cash

At June 30, 2014 and December 31, 2013, we had $6.8 million and $8.2 million, respectively, 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. Goodwill and Other Intangible Assets
Goodwill by business segment was as follows:
(in thousands)
 
Television
 
Newspapers
 
Syndication and other
 
Total
 
 
 
 
 
 
 
 
 
Gross balance as of December 31, 2013
 
$
243,380

 
$
778,900

 
$

 
$
1,022,280

Accumulated impairment losses
 
(215,414
)
 
(778,900
)
 

 
(994,314
)
Net balance as of December 31, 2013
 
27,966

 

 

 
27,966

2014 Newsy acquisition
 

 

 
28,938

 
28,938

2014 Acquired Granite Stations
 
48,667

 

 

 
48,667

Balance as of June 30, 2014
 
$
76,633

 
$

 
$
28,938

 
$
105,571

 
 
 
 
 
 
 
 
 
Gross balance as of June 30, 2014
 
$
292,047

 
$
778,900

 
$
28,938

 
$
1,099,885

Accumulated impairment losses
 
(215,414
)
 
(778,900
)
 

 
(994,314
)
Net balance as of June 30, 2014
 
$
76,633

 
$

 
$
28,938

 
$
105,571


F-11


Other intangible assets consisted of the following:
(in thousands)
 
As of 
 June 30, 
 2014
 
As of 
 December 31, 
 2013
 
 
 
 
 
Amortizable intangible assets:
 
 
 
 
Carrying amount:
 
 
 
 
Television network affiliation relationships
 
$
87,944

 
$
78,844

Customer lists and advertiser relationships
 
30,404

 
22,304

Retransmission agreements
 
14,700

 

Other
 
5,361

 
3,561

Total carrying amount
 
138,409

 
104,709

Accumulated amortization:
 
 
 
 
Television network affiliation relationships
 
(11,666
)
 
(9,691
)
Customer lists and advertiser relationships
 
(14,770
)
 
(13,138
)
Retransmission agreements
 

 

Other
 
(2,045
)
 
(1,833
)
Total accumulated amortization
 
(28,481
)
 
(24,662
)
Net amortizable intangible assets
 
109,928

 
80,047

Other indefinite-lived intangible assets — FCC licenses
 
79,215

 
57,815

Total other intangible assets
 
$
189,143

 
$
137,862


Estimated amortization expense of intangible assets for each of the next five years is $5.2 million for the remainder of 2014, $10.1 million in 2015, $10.1 million in 2016, $7.6 million in 2017, $7.6 million in 2018, $6.6 million in 2019, and $62.7 million in later years.

8. Long-Term Debt
Long-term debt consisted of the following:
(in thousands)
 
As of 
 June 30, 
 2014
 
As of 
 December 31, 
 2013
 
 
 
 
 
Variable rate credit facility
 
$

 
$

Term loan
 
199,000

 
200,000

Long-term debt
 
199,000

 
200,000

Current portion of long-term debt
 
2,000

 
2,000

Long-term debt (less current portion)
 
$
197,000

 
$
198,000

Fair value of long-term debt *
 
$
199,000

 
$
200,000


* Fair value of the term loan was estimated based on quoted private market transactions and is classified as Level 1 in the fair value hierarchy.

We have a $275 million revolving credit and term loan agreement (“Financing Agreement”). The Financing Agreement includes a $200 million term loan B maturing in November 2020 and a $75 million revolving credit facility maturing in November 2018.

The 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 stated net leverage ratio on a pro forma basis at the date of the transaction.

Interest is payable on the term loan B at rates based on LIBOR with a 0.75% floor, plus a fixed margin of 2.50%. Interest is payable on the revolving credit facility at rates based on LIBOR plus a margin based on our leverage ratio ranging from 2.25% to 2.75%. As of June 30, 2014 and December 31, 2013, the interest rate was 3.25% on the term loan B. The Financing Agreement also includes a provision that in certain circumstances we must use a portion of excess cash flow to repay debt. As of June 30, 2014, we were not required to make additional principal payments based on excess cash flow. The weighted-average interest rate on borrowings was 3.25% and 3.70% for the six months ended June 30, 2014 and 2013, respectively.

Scheduled principal payments on long-term debt at June 30, 2014 are: $1.0 million for the remainder of 2014, $2.0 million in 2015, $2.0 million in 2016, $2.0 million in 2017, $2.0 million in 2018, $2.0 million in 2019 and $188 million thereafter.

Under the terms of the Financing Agreement, we granted the lenders mortgages on certain of our real property, pledges of our equity interests in our subsidiaries and security interests in substantially all other personal property including cash, accounts receivables, inventories and equipment.

The Financing Agreement allows us to make restricted payments (dividends and share repurchases) up to $50 million plus additional amounts based on our financial results and condition. We can also make additional stock repurchases equal to the amount of proceeds that we receive from the exercise of stock options held by our employees. Additionally, we can make acquisitions as long as the pro forma net leverage ratio is less than 4.5 to 1.0.

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.

As of June 30, 2014 and December 31, 2013, we had outstanding letters of credit totaling $0.2 million.

9. Financial Instruments

We are exposed to various market risks, including changes in interest rates. To manage risks associated with the volatility of changes in interest rates, we may enter into interest rate management instruments.

We may utilize interest rate swaps to manage our interest expense exposure by fixing our interest rate on portions of our floating rate term loan. We have entered into a $75 million notional value interest rate swap expiring in December 2016 which provides for a fixed interest rate of 1.08%. We did not provide or receive any collateral for this contract. The fair value of this financial derivative, which was designated as and qualified as a cash flow hedge through November 2013, is determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves and implied volatilities. In addition, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk.

Fair Value of Derivative Instruments

The notional amounts and fair values of derivative instruments are shown in the table below:
 
 
As of June 30, 2014
 
As of December 31, 2013
 
 
Notional
 
Fair value
 
Notional
 
Fair value
(in thousands)
 
amount
 
Asset
 
Liability (1)
 
amount
 
Asset
 
Liability (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Undesignated derivatives:
 
 
 
 
 
 
 
 
 
 
 
 
   Interest rate swap
 
$
75,000

 
$

 
$
785

 
$
75,000

 
$

 
$
723


(1) Balance recorded as other liabilities in Condensed Consolidated Balance Sheets
    
Through November 2013, the above derivative instrument was designated as and qualified as a cash flow hedge and the effective portion of the unrealized gains and losses on the derivative was reported as a component of accumulated other comprehensive loss and reclassified into earnings in the periods during which the hedged transactions affected earnings. Upon refinancing our term loan in November 2013, this hedge no longer qualified as a cash flow hedge and gains and losses on the derivative are recorded in current period earnings. The balance in accumulated other comprehensive loss at the date of discontinuance of hedge accounting is being amortized into earnings on a straight-line basis through December 2016. For the

F-12


period ended June 30, 2014, approximately $0.2 million was amortized into earnings from accumulated other comprehensive loss and is included in the table below as amounts reclassified from accumulated OCL, gain/(loss).

 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in thousands)
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Effective portion recognized in accumulated OCL,
gain/(loss)
 

 
817

 

 
745

Amounts reclassified from accumulated OCL, gain/(loss)
 
96

 
167

 
192

 
333

Gain/(loss) on derivative
 
(111
)
 

 
(62
)
 


10. Fair Value Measurement

We measure certain financial assets and liabilities at fair value on a recurring basis, such as cash equivalents and derivatives. The fair value of these financial assets and liabilities was determined based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value. 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 and liabilities that are measured at fair value on a recurring basis at June 30, 2014 and December 31, 2013:
 
 
As of June 30, 2014
(in thousands)
 
Total
 
Level 1
 
Level 2
 
Level 3
 
 
 
 
 
 
 
 
 
Assets/(Liabilities):
 
 
 
 
 
 
 
 
  Cash equivalents
 
$
10,000

 
$
10,000

 
$

 
$

  Interest rate swap
 
(785
)
 

 
(785
)
 


 
 
As of December 31, 2013
(in thousands)
 
Total
 
Level 1
 
Level 2
 
Level 3
 
 
 
 
 
 
 
 
 
Assets/(Liabilities):
 
 
 
 
 
 
 
 
  Cash equivalents
 
$
30,000

 
$
30,000

 
$

 
$

  Interest rate swap
 
(723
)
 

 
(723
)
 


11. Other Liabilities
Other liabilities consisted of the following:
(in thousands)
 
As of 
 June 30, 
 2014
 
As of 
 December 31, 
 2013
 
 
 
 
 
Employee compensation and benefits
 
$
19,257

 
$
19,756

Liability for pension benefits
 
62,836

 
62,020

Liabilities for uncertain tax positions
 
10,983

 
10,670

Other
 
17,001

 
14,826

Other liabilities (less current portion)
 
$
110,077

 
$
107,272



F-13


12. Noncontrolling Interests

Individuals and other entities own a 4% noncontrolling interest in the capital stock of the subsidiary company that publishes our Memphis newspaper and a 6% noncontrolling interest in the capital stock of the subsidiary company that publishes our Evansville newspaper. We are not required to redeem the noncontrolling interests in these subsidiary companies.

13. Supplemental Cash Flow Information
The following table presents additional information about the change in certain working capital accounts:
 
 
Six Months Ended 
 June 30,
(in thousands)
 
2014
 
2013
 
 
 
 
 
Other changes in certain working capital accounts, net
 
 
 
 
Accounts and notes receivable
 
$
11,411

 
$
(4,420
)
Income taxes receivable/payable, net
 
(235
)
 
(3,167
)
Accounts payable
 
(1,084
)
 
(6,538
)
Accrued employee compensation and benefits
 
611

 
(12,487
)
Other accrued liabilities
 
2,596

 
467

Other, net
 
(1,888
)
 
(4,899
)
Total
 
$
11,411

 
$
(31,044
)

14. Employee Benefit Plans
We sponsor various noncontributory defined benefit pension plans covering substantially all full-time employees that began employment prior to June 30, 2008. Benefits earned by employees are generally based upon employee compensation and years of service credits. We also have a non-qualified Supplemental Executive Retirement Plan ("SERP"). Effective June 30, 2009, we froze the accrual of benefits under our defined benefit pension plans and our SERP that cover the majority of our employees.
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. In connection with freezing the accrual of service credits under certain of our defined benefit pension plans, we began contributing additional amounts to certain employees' defined contribution retirement accounts in 2011. These transition credits, which will be made through 2015, are determined based upon the employee’s age, compensation and years of service.
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.

The components of the expense consisted of the following:
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in thousands)
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Service cost
 
$
22

 
$
17

 
$
43

 
$
34

Interest cost
 
6,277

 
5,975

 
12,555

 
11,951

Expected return on plan assets, net of expenses
 
(5,859
)
 
(5,371
)
 
(11,718
)
 
(10,742
)
Amortization of actuarial loss
 
641

 
1,061

 
1,283

 
2,122

Total for defined benefit plans
 
1,081

 
1,682

 
2,163

 
3,365

Multi-employer plans
 
105

 
111

 
224

 
231

Withdrawal from GCIU multi-employer plan
 
4,100

 

 
4,100

 

SERP
 
296

 
887

 
592

 
1,173

Defined contribution plans
 
3,056

 
2,907

 
6,216

 
6,286

Net periodic benefit cost
 
$
8,638

 
$
5,587

 
$
13,295

 
$
11,055



F-14


We contributed $0.4 million to fund current benefit payments for our SERP during the first six months ended June 30, 2014. We anticipate contributing an additional $0.4 million to fund the SERP’s benefit payments during the remainder of 2014. We contributed $0.1 million to our defined benefit pension plans during the first six months of 2014.

We participate in multi-employer pension plans that cover certain employees that are members of unions or trade associations that have a collective bargaining agreement with us. In the second quarter of 2014, unions ratified our plan to withdraw from the Graphics Communication International Union (GCIU) Employer Retirement Fund. Upon ratification of the agreement, we estimated the undiscounted liability to be approximately $6.5 million and recorded a liability of $4.1 million for the present value withdrawal liability. Once the final withdrawal liability is determined at the end of this year with the GCIU, we either will pay the liability in a lump sum or make equal monthly installments over 20 years beginning in 2015.

15. Segment Information
We determine our business segments based upon our management and internal reporting structure. Our reportable segments are strategic businesses that offer different products and services.
Our television segment includes 11 ABC affiliates, three NBC affiliates, and two independent stations that operate as duopolies with our Kansas City NBC affiliate and our Detroit ABC affiliate. We also own five Azteca America affiliates. Our television stations reach approximately 14% of the nation’s households. Television stations earn revenue primarily from the sale of advertising time to local and national advertisers and retransmission fees received from cable operators and satellite carriers.
Our newspaper segment includes daily and community newspapers in 13 markets across the United States. Newspapers earn revenue primarily from the sale of advertising space to local and national advertisers and newspaper subscription fees.
Syndication and other primarily includes certain digital operations outside of our television and newspaper markets and syndication of news features and comics and other features for the newspaper industry. Newsy, a digital video news service, is also included in syndication and other.
We allocate a portion of certain corporate costs and expenses, including information technology, certain employee benefits, digital operation services and other shared services, to our business segments. The allocations are generally amounts agreed upon by management, which may differ from an arms-length amount. Corporate assets are primarily cash and cash equivalents, restricted cash, property and equipment primarily used for corporate purposes, and deferred income taxes. A portion of our digital operations, which is not allocated to our television and newspaper segments, is included in shared services and corporate.
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 (other than current service cost), 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-15


Information regarding our business segments is as follows:
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in thousands)
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Segment operating revenues:
 
 
 
 
 
 
 
 
Television
 
$
115,794


$
111,393

 
$
217,936

 
$
208,259

Newspapers
 
92,250


93,452

 
190,740

 
192,940

Syndication and other
 
3,902


3,008

 
7,064

 
5,307

Total operating revenues
 
$
211,946

 
$
207,853

 
$
415,740

 
$
406,506

Segment profit (loss):
 
 
 
 
 
 
 
 
Television
 
$
27,806

 
$
30,532

 
$
48,778

 
$
47,024

Newspapers
 
5,443

 
5,882

 
13,992

 
11,819

Syndication and other
 
(725
)
 
(446
)
 
(513
)
 
32

Shared services and corporate
 
(14,351
)
 
(12,056
)
 
(28,709
)
 
(23,903
)
Defined benefit pension plan expense
 
(5,477
)
 
(2,569
)
 
(6,855
)
 
(4,538
)
Acquisition and related integration costs
 
(4,097
)
 

 
(4,359
)
 

Separation and restructuring costs
 

 
(1,425
)
 

 
(2,401
)
Depreciation and amortization of intangibles
 
(11,595
)
 
(11,774
)
 
(23,324
)
 
(23,588
)
(Losses) gains, net on disposal of property, plant and equipment
 
(22
)
 
42

 
(90
)
 
37

Interest expense
 
(2,043
)
 
(2,656
)
 
(4,297
)
 
(5,269
)
Miscellaneous, net
 
(400
)
 
(1,634
)
 
(845
)
 
(2,938
)
(Loss) income from operations before income taxes
 
$
(5,461
)
 
$
3,896

 
$
(6,222
)
 
$
(3,725
)
Depreciation:
 
 
 
 
 
 
 
 
Television
 
$
5,028

 
$
5,616

 
$
10,139

 
$
11,207

Newspapers
 
3,925

 
4,004

 
7,912

 
8,117

Syndication and other
 
102

 
19

 
200

 
38

Shared services and corporate
 
643

 
396

 
1,255

 
775

Total depreciation
 
$
9,698

 
$
10,035

 
$
19,506

 
$
20,137

Amortization of intangibles:
 
 
 
 
 
 
 
 
Television
 
$
1,600

 
$
1,602

 
$
3,199

 
$
3,179

Newspapers
 
93

 
137

 
211

 
272

Syndication and other
 
204

 

 
408

 

Total amortization of intangibles
 
$
1,897

 
$
1,739

 
$
3,818

 
$
3,451

Additions to property, plant and equipment:
 
 
 
 
 
 
 
 
Television
 
$
4,708

 
$
3,269

 
$
6,440

 
$
5,156

Newspapers
 
694

 
572

 
913

 
1,461

Syndication and other
 
102

 

 
130

 

Shared services and corporate
 
121

 
3,349

 
726

 
5,552

Total additions to property, plant and equipment
 
$
5,625

 
$
7,190

 
$
8,209

 
$
12,169

No single customer provides more than 10% of our revenue.

F-16


16. Spin-off of Scripps Networks Interactive, Inc.

On July 1, 2008, we distributed all of the shares of Scripps Networks Interactive, Inc. (“SNI”) to shareholders of record as of the close of business on June 16, 2008. SNI owned and operated our national lifestyle cable television networks and interactive media businesses.

In connection with the separation we entered into several agreements, including a Tax Allocation Agreement. This agreement sets forth the allocations between us and SNI with regards to liabilities for federal, state and local taxes for periods prior to the separation.

Under the terms of the Tax Allocation Agreement, we receive any tax deductions for share-based compensation awards held by our employees in SNI. Tax deductions for the six months ended June 30, 2014 and 2013 resulting from the exercise of those awards totaled approximately $6.6 million and $8.9 million, respectively. These benefits are recorded as additional paid-in capital at the time they are realized. At June 30, 2014, our employees held options on approximately 0.2 million SNI shares which expire through 2015.

17. Capital Stock
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 — In November 2012, our board of directors authorized a repurchase program of up to $100 million of our Class A Common shares through December 2014. Under the authorization, we repurchased $21.2 million of shares at prices ranging from $16.35 to $19.99 per share during the first half of 2014. For the six months ended June 30, 2013, we purchased $34.9 million of shares at prices ranging from $10.83 to $15.49 per share. As of June 30, 2014, we have $5 million remaining for share repurchases under this authorization.
In May 2014, our board of directors authorized a new repurchase program of up to $100 million of our Class A Common shares through December 2016. No shares have been repurchased under this program as of June 30, 2014. Based on the terms of our merger agreement with Journal Communications, we are precluded from repurchasing shares prior to closing the transaction.
Information about options outstanding and options exercisable by year of grant as of June 30, 2014 is as follows:
 
 
 
 
 
 
Options Outstanding and Exercisable
Year of Grant
 
Range of Exercise Prices
 
Average Remaining Term
(in years)
 
Options on Shares Outstanding
 
Weighted Average Exercise Price
 
Aggregate Intrinsic Value
(in millions)
 
 
 
 
 
 
 
 
 
 
 
2004 – expire in 2014
 
$10-11
 
0.37
 
9,185

 
$
10.05

 
$
0.1

2005 – expire in 2015
 
10-11
 
0.79
 
43,188

 
10.90

 
0.4

2006 – expire in 2016
 
10-11
 
1.93
 
49,966

 
10.05

 
0.6

2007 – expire in 2015
 
9-10
 
0.66
 
565,970

 
10.31

 
6.1

2008 – expire in 2016
 
7-10
 
1.74
 
1,787,186

 
8.76

 
22.2

Total
 
$7-11
 
1.47
 
2,455,495

 
$
9.19

 
$
29.4



F-17


18. Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss ("AOCL") by component, including items reclassified out of AOCL, were as follows:

 
 
Three Months Ended June 30, 2014
(in thousands)
 
Gains and Losses on Derivatives
 
Defined Benefit Pension Items
 
Other
 
Total
 
 
 
 
 
 
 
 
 
Beginning balance, March 31, 2014
 
$
(659
)
 
$
(79,933
)
 
$
172

 
$
(80,420
)
  Other comprehensive income before reclassifications
 

 

 

 

  Amounts reclassified from accumulated other
  comprehensive loss
 
 
 
 
 
 
 
 
     Interest rate swap, net of tax of $37 (a)
 
59

 

 

 
59

     Actuarial loss, net of tax of $280 (b)
 

 
444

 

 
444

Net current-period other comprehensive income
 
59

 
444

 

 
503

Ending balance, June 30, 2014
 
$
(600
)
 
$
(79,489
)
 
$
172

 
$
(79,917
)

 
 
Three months ended June 30, 2013
(in thousands)
 
Gains and Losses on Derivatives
 
Defined Benefit Pension Items
 
Other
 
Total
 
 
 
 
 
 
 
 
 
Beginning balance, March 31, 2013
 
$
(950
)
 
$
(115,337
)
 
$
357

 
$
(115,930
)
  Other comprehensive income before reclassifications
 
509

 

 

 
509

  Amounts reclassified from accumulated other
  comprehensive loss
 
 
 
 
 
 
 
 
     Interest rate swap, net of tax of $63 (a)
 
103

 

 

 
103

     Actuarial loss, net of tax of $1,001 (b)
 

 
1,105

 

 
1,105

Net current-period other comprehensive income
 
612

 
1,105

 

 
1,717

Ending balance, June 30, 2013
 
$
(338
)
 
$
(114,232
)
 
$
357

 
$
(114,213
)

 
 
Six Months Ended June 30, 2014
(in thousands)
 
Gains and Losses on Derivatives
 
Defined Benefit Pension Items
 
Other
 
Total
 
 
 
 
 
 
 
 
 
Beginning balance, December 31, 2013
 
$
(718
)
 
$
(80,377
)
 
$
172

 
$
(80,923
)
  Other comprehensive income before reclassifications
 

 

 

 

  Amounts reclassified from accumulated other
  comprehensive loss
 
 
 
 
 
 
 
 
     Interest rate swap, net of tax of $74 (a)
 
118

 

 

 
118

     Actuarial loss, net of tax of $560 (b)
 

 
888

 

 
888

Net current-period other comprehensive income
 
118

 
888

 

 
1,006

Ending balance, June 30, 2014
 
$
(600
)
 
$
(79,489
)
 
$
172

 
$
(79,917
)

F-18


 
 
Six Months Ended June 30, 2013
(in thousands)
 
Gains and Losses on Derivatives
 
Defined Benefit Pension Items
 
Other
 
Total
 
 
 
 
 
 
 
 
 
Beginning balance, December 31, 2012
 
$
(1,009
)
 
$
(116,188
)
 
$
357

 
$
(116,840
)
  Other comprehensive income before reclassifications
 
464