10-Q 1 ssp-2015930x10q.htm 10-Q 10-Q
 
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 September 30, 2015     
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 September 30, 2015, there were 71,937,143 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 Quarterly Report
on Form 10-Q for the Quarter Ended September 30, 2015

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.

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 on our Quarterly Report on Form 10-Q for the quarter ended March 31, 2015.


3


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

There were no sales of unregistered equity securities during the quarter ended September 30, 2015.

The following table provides information about Company purchases of Class A Common shares during the quarter ended September 30, 2015 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
 
 
 
 
 
 
 
 
 
7/1/15-7/31/15
 
93,500

 
$
22.23

 
$
2,078,300

 
$
95,239,275

8/1/15-8/31/15
 
71,200

 
19.78

 
1,408,036

 
$
93,831,239

9/1/15-9/30/15
 
280,500

 
16.87

 
4,732,648

 
$
89,098,591

Total
 
445,200

 
$
18.46

 
$
8,218,984

 
 
In May 2014, our Board of Directors authorized a repurchase program of up to $100 million of our Class A Common shares through December 2016.

Item 3. Defaults Upon Senior Securities
There were no defaults upon senior securities during the quarter ended September 30, 2015.

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: November 6, 2015
By:
/s/ Douglas F. Lyons 
 
 
Douglas F. Lyons
 
 
Vice President, Controller and Treasurer
 
 
(Principal Accounting Officer)



5


The E.W. Scripps Company
Index to Financial Information (Unaudited)



F-1


The E.W. Scripps Company
Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)
 
As of 
 September 30, 
 2015
 
As of 
 December 31, 
 2014
 
 
 
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
81,342

 
$
158,459

Restricted cash
 
6,560

 
6,810

Accounts and notes receivable (less allowances — $1,657 and $1,390)
 
164,972

 
99,609

Transition services agreement receivable, net
 
2,473

 

Deferred income taxes
 
28,553

 
10,754

Income taxes receivable
 
1,622

 

Miscellaneous
 
8,751

 
6,521

Assets of discontinued operations — current
 

 
46,507

Total current assets
 
294,273

 
328,660

Investments
 
14,876

 
9,454

Property, plant and equipment
 
269,792

 
157,841

Goodwill
 
586,342

 
106,261

Other intangible assets
 
478,006

 
187,259

Deferred income taxes
 

 
54,612

Miscellaneous
 
23,921

 
15,743

Assets held for sale
 
14,500

 

Assets of discontinued operations — noncurrent
 

 
172,901

Total Assets
 
$
1,681,710

 
$
1,032,731

 
 
 
 
 
Liabilities and Equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
21,994

 
$
13,987

Customer deposits and unearned revenue
 
10,999

 
8,812

Current portion of long-term debt
 
6,792

 
2,000

Accrued liabilities:
 
 
 
 
Employee compensation and benefits
 
29,762

 
20,901

Miscellaneous
 
30,241

 
31,890

Other current liabilities
 
11,716

 
9,306

Liabilities of discontinued operations — current
 

 
47,642

Total current liabilities
 
111,504

 
134,538

Long-term debt (less current portion)
 
396,812

 
196,000

Deferred income taxes
 
3,201

 

Other liabilities (less current portion)
 
277,739

 
169,171

Liabilities of discontinued operations — noncurrent
 

 
13,089

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: 71,937,143 and 45,062,522 shares
 
719

 
451

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

 
119

Total
 
838

 
570

Additional paid-in capital
 
1,164,637

 
525,456

Retained earnings (accumulated deficit)
 
(147,969
)
 
118,693

Accumulated other comprehensive loss, net of income taxes
 
(125,052
)
 
(126,443
)
The E.W. Scripps Company total shareholders’ equity
 
892,454

 
518,276

Noncontrolling interest — discontinued operations
 

 
1,657

Total equity
 
892,454

 
519,933

Total Liabilities and Equity
 
$
1,681,710

 
$
1,032,731

See notes to condensed consolidated financial statements.

F-2


The E.W. Scripps Company
Condensed Consolidated Statements of Operations (Unaudited)

 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in thousands, except per share data)
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
Advertising
 
$
144,983

 
$
103,700

 
$
389,088

 
$
292,472

Retransmission
 
36,287

 
15,235

 
100,700

 
40,409

Other
 
8,421

 
4,191

 
21,060

 
15,245

Total operating revenues
 
189,691

 
123,126

 
510,848

 
348,126

Costs and Expenses:
 
 
 
 
 
 
 
 
Employee compensation and benefits
 
88,296

 
64,713

 
247,776

 
189,294

Programs and program licenses
 
36,791

 
16,181

 
88,837

 
42,951

Other expenses
 
41,693

 
26,431

 
115,037

 
84,670

Defined benefit pension plan expense
 
2,976

 
1,613

 
9,782

 
4,253

Acquisition and related integration costs
 
4,206

 
2,783

 
36,953

 
6,984

Total costs and expenses
 
173,962

 
111,721

 
498,385

 
328,152

Depreciation, Amortization, and Losses (Gains):
 
 
 
 
 
 
 
 
Depreciation
 
11,092

 
6,528

 
25,883

 
17,846

Amortization of intangible assets
 
5,181

 
2,178

 
12,051

 
5,785

Impairment of goodwill and intangibles
 
24,613

 

 
24,613

 

Losses (gains), net on disposal of property, plant and equipment
 
200

 
(2,979
)
 
579

 
(2,931
)
Net depreciation, amortization, and losses (gains)
 
41,086

 
5,727

 
63,126

 
20,700

Operating (loss) income
 
(25,357
)
 
5,678

 
(50,663
)
 
(726
)
Interest expense
 
(4,246
)
 
(2,050
)
 
(10,523
)
 
(6,345
)
Miscellaneous, net
 
1,061

 
170

 
12

 
(210
)
(Loss) income from continuing operations before income taxes
 
(28,542
)
 
3,798

 
(61,174
)
 
(7,281
)
(Benefit) provision for income taxes
 
(4,099
)
 
2,755

 
(15,661
)
 
(1,308
)
Net (loss) income from continuing operations
 
(24,443
)
 
1,043

 
(45,513
)
 
(5,973
)
Net (loss) income from discontinued operations, net of tax
 

 
(2,384
)
 
(15,432
)
 
785

Net loss
 
$
(24,443
)
 
$
(1,341
)
 
$
(60,945
)
 
$
(5,188
)
 
 
 
 
 
 
 
 
 
Net (loss) income per basic share of common stock:
 
 
 
 
 
 
 
 
  (Loss) income from continuing operations
 
$
(0.29
)
 
$
0.02

 
$
(0.61
)
 
$
(0.10
)
  (Loss) income from discontinued operations
 

 
(0.04
)
 
(0.21
)
 
0.01

Net loss per basic share of common stock
 
$
(0.29
)
 
$
(0.02
)
 
$
(0.82
)
 
$
(0.09
)
 
 
 
 
 
 
 
 
 
Net (loss) income per diluted share of common stock:
 
 
 
 
 
 
 
 
  (Loss) income from continuing operations
 
$
(0.29
)
 
$
0.02

 
$
(0.61
)
 
$
(0.10
)
  (Loss) income from discontinued operations
 

 
(0.04
)
 
(0.21
)
 
0.01

Net loss per diluted share of common stock
 
$
(0.29
)
 
$
(0.02
)
 
$
(0.82
)
 
$
(0.09
)
See notes to condensed consolidated financial statements.


F-3


The E.W. Scripps Company
Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in thousands)
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Net loss
 
$
(24,443
)
 
$
(1,341
)
 
$
(60,945
)
 
$
(5,188
)
Changes in fair value of derivative, net of tax of $37, $37, $110 and $111
 
59

 
59

 
178

 
177

Changes in defined benefit pension plans, net of tax of $471, $364, $(740) and $924
 
762

 
441

 
(1,113
)
 
1,329

Total comprehensive loss
 
$
(23,622
)
 
$
(841
)
 
$
(61,880
)
 
$
(3,682
)
See notes to condensed consolidated financial statements.

F-4


The E.W. Scripps Company
Condensed Consolidated Statements of Cash Flows (Unaudited)


 
Nine Months Ended 
 September 30,
(in thousands)
 
2015

2014
 
 
 
 
 
Cash Flows from Operating Activities:
 



Net loss
 
$
(60,945
)
 
$
(5,188
)
Loss (income) from discontinued operations
 
15,432

 
(785
)
Loss from continuing operations
 
(45,513
)
 
(5,973
)
Adjustments to reconcile net loss from continuing operations to net cash flows from operating activities:
 



Depreciation and amortization
 
37,934

 
23,631

Impairment of goodwill and intangibles
 
24,613

 

Losses (gains) on sale of property, plant and equipment
 
579

 
(2,931
)
Deferred income taxes
 
(14,410
)

4,824

Stock and deferred compensation plans
 
8,393


3,376

Pension expense, net of payments
 
10,065


3,759

Other changes in certain working capital accounts, net
 
(46,091
)

15,748

Miscellaneous, net
 
2,788


(1,384
)
Net cash (used in) provided by continuing operating activities
 
(21,642
)

41,050

Net cash provided by discontinued operating activities
 
6,861

 
29,984

Net operating activities
 
(14,781
)
 
71,034

Cash Flows from Investing Activities:
 



Acquisitions, net of cash acquired

(46,838
)
 
(149,334
)
Proceeds from sale of property, plant and equipment
 
15

 
6,318

Additions to property, plant and equipment
 
(15,244
)

(11,908
)
Purchase of investments
 
(7,087
)

(2,003
)
Change in restricted cash
 
250

 
1,400

Miscellaneous, net
 

 
389

Net cash used in continuing investing activities
 
(68,904
)

(155,138
)
Net cash used in discontinued investing activities
 
(1,561
)
 
(1,330
)
Net investing activities
 
(70,465
)
 
(156,468
)
Cash Flows from Financing Activities:
 



Proceeds from issuance of long-term debt
 
200,000

 

Payments on long-term debt
 
(121,269
)

(1,500
)
Payments of financing costs
 
(2,592
)
 
(483
)
Dividends paid
 
(59,523
)
 

Repurchase of Class A Common shares
 
(10,901
)

(21,237
)
Proceeds from employee stock options
 
6,041


13,175

Tax payments related to shares withheld for RSU vesting
 
(5,126
)

(4,035
)
Miscellaneous, net
 
1,499


2,628

Net cash provided by (used in) continuing financing activities
 
8,129


(11,452
)
Net cash provided by (used in) discontinued financing activities
 

 

Net financing activities
 
8,129

 
(11,452
)
Decrease in cash and cash equivalents
 
(77,117
)

(96,886
)
Cash and cash equivalents:
 



Beginning of year
 
158,459


221,255

End of period
 
$
81,342


$
124,369

 
 
 
 
 
Supplemental Cash Flow Disclosures
 
 
 
 
Interest paid
 
$
9,353

 
$
5,511

Income taxes paid
 
$
14,709

 
$
397

See notes to condensed consolidated financial statements.

F-5


The E.W. Scripps Company
Condensed Consolidated Statements of Equity (Unaudited)

(in thousands, except share data)
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings (Accumulated Loss)
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
Total
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2013
 
$
560

 
$
509,243

 
$
116,893

 
$
(80,923
)
 
$
1,964

 
$
547,737

Net loss
 

 

 
(5,188
)
 

 
(302
)
 
(5,490
)
Changes in defined benefit pension plans
 

 

 

 
1,329

 

 
1,329

Changes in fair value of derivative
 

 

 

 
177

 

 
177

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

 

 
(21,237
)
Compensation plans: 1,779,404 net shares issued *
 
18

 
14,317

 

 

 

 
14,335

As of September 30, 2014
 
$
566

 
$
511,064

 
$
102,976

 
$
(79,417
)
 
$
1,662

 
$
536,851

 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2014
 
$
570

 
$
525,456

 
$
118,693

 
$
(126,443
)
 
$
1,657

 
$
519,933

Net loss
 

 

 
(60,945
)
 

 

 
(60,945
)
Changes in defined benefit pension plans
 

 

 

 
(1,113
)
 

 
(1,113
)
Changes in fair value of derivative
 

 

 

 
178

 

 
178

Cash dividends: declared and
paid — $1.03 per share
 

 

 
(59,523
)
 

 

 
(59,523
)
Shares issued for acquisition: 26,350,993 shares issued
 
263

 
635,737

 

 

 

 
636,000

Spin-off of Newspapers
 

 

 
(141,231
)
 
2,326

 
(1,657
)
 
(140,562
)
Repurchase 561,019 Class A Common shares
 
(6
)
 
(5,932
)
 
(4,963
)
 

 

 
(10,901
)
Compensation plans: 1,084,647 net shares issued *
 
11

 
9,376

 

 

 

 
9,387

As of September 30, 2015
 
$
838

 
$
1,164,637

 
$
(147,969
)
 
$
(125,052
)
 
$

 
$
892,454

* Net of tax payments related to shares withheld for vested stock and RSUs of $5,126 in 2015 and $4,035 in 2014.
See notes to condensed consolidated financial statements.


F-6


The E.W. Scripps Company
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 2014 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, radio and digital media brands. All of our media businesses provide content and advertising services via digital platforms, including the web, smartphones and tablets. Our media businesses are organized into the following reportable business segments: television, radio, digital, and syndication and other. Additional information for our business segments is presented in the Condensed Notes to Consolidated Financial Statements.

On April 1, 2015, we distributed our newspaper business to our shareholders in a tax-free spin-off. See Note 17 for additional information on the spin-off.

Use of Estimates — Preparing financial statements in accordance with accounting principles generally accepted in the United States of America requires us to make a variety of decisions that affect the reported amounts and the related disclosures. Such decisions include the selection of accounting principles that reflect the economic substance of the underlying transactions and the assumptions on which to base accounting estimates. In reaching such decisions, we apply judgment based on our understanding and analysis of the relevant circumstances, including our historical experience, actuarial studies and other assumptions.

Our financial statements include estimates and assumptions used in accounting for our defined benefit pension plans; the periods over which long-lived assets are depreciated or amortized; the fair value of long-lived assets, goodwill and indefinite lived assets; the liability for uncertain tax positions and valuation allowances against deferred income tax assets; the fair value of assets acquired and liabilities assumed in business combinations; and self-insured risks.
While we re-evaluate our estimates and assumptions on an ongoing basis, actual results could differ from those estimated at the time of preparation of the financial statements.
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 broadcast and digital advertising and retransmission fees received from cable operators and satellite carriers.
The revenue recognition policies for each source of revenue are described in our 2014 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, 2014. 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 $0.3 million for the third quarter of 2015 and 2014, respectively, of which $0.1 million of third quarter 2014 is included in discontinued operations. Year-to-date share-based compensation costs

F-7


totaled $8.5 million and $4.9 million in 2015 and 2014, respectively. Year-to-date costs included in discontinued operations were $1.1 million and $1.2 million in 2015 and 2014, respectively.
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 
 September 30,
 
Nine Months Ended 
 September 30,
(in thousands)
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Numerator (for basic and diluted earnings per share)
 
 
 
 
 
 
 
 
Net (loss) income from continuing operations
 
$
(24,443
)
 
$
1,043

 
$
(45,513
)
 
$
(5,973
)
Less income allocated to RSUs
 



 



Numerator for basic and diluted earnings per share from continuing operations
 
$
(24,443
)
 
$
1,043

 
$
(45,513
)
 
$
(5,973
)
Denominator
 
 
 
 
 
 
 
 
Basic weighted-average shares outstanding
 
84,107


56,469


75,213


56,200

Effect of dilutive securities:
 



 



Stock options held by employees and directors
 



 



Diluted weighted-average shares outstanding
 
84,107

 
56,469

 
75,213

 
56,200

Anti-dilutive securities (1)
 
2,148

 
3,313

 
2,148

 
3,313

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

For the quarter ended September 30, 2015 and nine month periods ended September 30, 2015 and 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. For the quarter ended September 30, 2014 there was net income from continuing operations. Prior to recasting the historical financial statements for discontinued operations, we incurred a net loss for the quarter ended September 30, 2014, and therefore we did not apply the two-class method. We have not changed our application of the two-class method due to the recasting of our historical financial statements, which changed income from continuing operations from a loss to income.

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, the underlying hedged transaction is no longer likely to occur, 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 April 2015, the Financial Accounting Standards Board (FASB) issued new guidance for the presentation of debt issuance costs in the financial statements. Under this new guidance, debt issuance costs

F-8


(except for lines of credit) are classified in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Additionally, amortization of these costs must be classified as interest expense. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. Adoption of this standard will result in us netting deferred loan costs, which as of September 30, 2015 totaled $3.5 million, against long-term debt. Reported interest expense will not be affected.

In August 2014, the FASB issued new guidance related to the disclosures around consideration of going concern. The new standard provides guidance around management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

In May 2014, the FASB 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 2018. Early adoption is permitted in 2017. We are currently assessing the impact this new guidance will have on our consolidated financial statements and have not yet determined a transition method.

Recently Adopted Accounting StandardsIn April 2014, the FASB issued new guidance on reporting and disclosure requirements related to discontinued operations. With the new guidance, a disposal of a component or group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on an entity's operations and financial results. We adopted this guidance effective January 1, 2015.

3. Acquisitions

Midroll Media

On July 22, 2015, we acquired Midroll Media, a Los Angeles-based company that creates original podcasts and operates a network that generates advertising revenue for more than 200 shows, including “StartUp” and “Nerdist.” The purchase price was $50 million in cash, plus a $10 million earnout payable over three years. We have estimated the fair value of the earnout to be $5 million.

Pending the finalization of third-party valuations and other items, the following table summarizes the preliminary fair values of the assets acquired and the liabilities assumed:
(in thousands)
 
 
 
 
 
Assets:
 
 
Cash
 
$
632

Accounts receivable
 
2,925

Other assets
 
518

Intangible assets
 
10,700

Goodwill
 
43,176

Total assets acquired
 
57,951

Current liabilities
 
3,365

Net purchase price
 
$
54,586


Of the $11 million allocated to intangible assets, $7 million was allocated to advertiser relationships with an estimated amortization period of 5 years and the balance of $4 million was allocated to various other intangible assets.

The goodwill of $43 million arising from the transaction consists largely of the benefit we will derive from being able to enter the podcast market with an established business. We allocated the goodwill to our digital segment. We treated the transaction as an asset acquisition for income tax purposes with a step-up in the assets acquired. The goodwill is deductible for income tax purposes.


F-9


Journal Communications Broadcast Group

On April 1, 2015, we acquired the broadcast group owned by Journal Communications, Inc. ("Journal") as part of the transactions described in Note 17. The businesses acquired include 12 television stations and 34 radio stations. We issued 26.4 million Class A common shares to the Journal shareholders in exchange for their interest in Journal resulting in a purchase price of $636 million. The fair value of the shares issued was determined on the basis of the closing market price of our Class A common shares shares on April 1, 2015, the acquisition date.

Pending the finalization of third-party valuations and other items, the following table summarizes the preliminary fair values of the assets acquired and the liabilities assumed:
(in thousands)
 
 
 
 
 
Assets:
 
 
Cash
 
$
2,530

Accounts receivable
 
47,977

Other current assets
 
2,236

Property, plant and equipment
 
123,264

Intangible assets
 
295,000

Goodwill
 
459,405

Other long-term assets
 
6,351

Assets held for sale
 
14,500

Total assets acquired
 
951,263

Accounts payable and accrued liabilities
 
43,262

Employee benefit obligations
 
85,261

Deferred tax liability
 
55,054

Long-term debt
 
126,873

Other long-term liabilities
 
4,813

Net purchase price
 
$
636,000


During the third quarter of 2015, we recorded measurement period adjustments to the preliminary purchase price allocation, including an increase to the deferred tax liability of $12.2 million with a corresponding increase in goodwill.

Of the $295 million allocated to intangible assets, $112 million was for FCC licenses which we determined to have an indefinite life and, therefore, are not amortized. The remaining balance of $183 million was allocated to television network affiliation relationships and advertiser relationships with estimated amortization periods of 10 to 20 years.

The goodwill of $459 million arising from the transaction consists largely of synergies and economies of scale and other benefits of a larger broadcast footprint. The goodwill will be allocated to our television, radio and digital segments once the final allocation is completed. We treated the transaction as a stock acquisition for income tax purposes resulting in no step-up in the assets acquired. The goodwill is not deductible for income tax purposes.

Concurrent with the acquisition of the Journal television stations, due to FCC conflict ownership rules, Journal was required to dispose of KNIN, the Fox affiliate located in Boise, ID. The station was placed in a divestiture trust for our benefit and was sold to Raycom Media, Inc. on October 1, 2015 for $14.5 million. The sale did not result in a gain or loss. The assets of this station are classified as held for sale in our balance sheet at September 30, 2015.

Granite Broadcasting

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 created a duopoly with our Detroit ABC affiliate WXYZ-TV.


F-10


We finalized the determination of fair values of the assets acquired and the liabilities assumed in the fourth quarter of 2014. There were no material changes in the fair values of the assets acquired and the liabilities assumed from the preliminary amounts. The following table summarizes their final fair values.
(in thousands)
 
 
 
 
 
Assets:
 
 
Property, plant and equipment
 
$
12,025

Intangible assets
 
53,500

Goodwill
 
44,715

Total assets acquired
 
110,240

Current liabilities
 
240

Net purchase price
 
$
110,000


Of the $54 million allocated to intangible assets, $34 million was for FCC licenses which we determined to have an indefinite life and, therefore, are not amortized. The remaining balance of $19 million was allocated to television network affiliation relationships and advertiser relationships with estimated amortization periods of 10 to 20 years.

The goodwill of $45 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 allocated the goodwill to our television segment. We treated 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.

Media Convergence Group

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.

We finalized the determination of fair values of the assets acquired and the liabilities assumed in the fourth quarter of 2014. There were no material changes in the fair values of the assets acquired and the liabilities assumed from the preliminary amounts. The following table summarizes their final fair values.
(in thousands)
 
 
 
 
 
Assets:
 
 
Accounts receivable
 
$
640

Other assets
 
74

Equipment and software
 
631

Intangible assets
 
5,900

Goodwill
 
28,983

Total assets acquired
 
36,228

Current liabilities
 
116

Long-term deferred liability
 
890

Net purchase price
 
$
35,222


Of the $6 million allocated to intangible assets, $4 million was allocated to customer relationships with an estimated amortization period of 5 years and the balance of $2 million was allocated to various other intangible assets.

The goodwill of $29 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 allocated the goodwill to our digital segment. We treated the transaction as a purchase of stock for income tax purposes with no step-up in the assets acquired. The goodwill is not deductible for income tax purposes.


F-11


Geoterrestrial

On September 16, 2014, we completed our acquisition of Geoterrestrial, Inc. ("WeatherSphere") for $4 million. WeatherSphere is a provider of weather-related mobile apps. The stock purchase agreement includes an earnout provision, whereby up to an additional $2.5 million may be payable over a three year period. We estimated the fair value of the earnout to be $1.2 million.

Pro forma results of operations

Pro forma results of operations, assuming the Granite and Journal transactions (collectively the "Acquired Stations") had taken place at the beginning of 2013 and 2014, respectively, are included in the following table. The pro forma results do not include Midroll, Newsy or Weathersphere as the impact of these acquisitions, individually or in the aggregate, are not material to prior year results of operations. The pro forma information includes the historical results of operations of Scripps and the Acquired Stations and adjustments for additional depreciation and amortization of the assets acquired, additional interest expense related to the financing of the transaction and reflecting the transaction costs incurred in 2015 as if they were incurred in the first quarter of 2014. The weighted average shares utilized in calculating the earnings per share assumes that the shares issued to the Journal shareholders were issued on January 1, 2014. 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 
 September 30,
 
Nine Months Ended 
 September 30,
(in thousands, except per share data) (unaudited)
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Operating revenues
 
$
189,691

 
$
192,621

 
$
573,310

 
$
560,097

(Loss) income from continuing operations attributable to the shareholders of The E.W. Scripps Company
 
(23,606
)
 
6,093

 
(17,028
)
 
(18,586
)
(Loss) income per share from operations attributable to the shareholders of The E.W. Scripps Company:
 
 
 
 
 
 
 
 
          Basic
 
$
(0.27
)
 
0.07

 
$
(0.19
)
 
(0.23
)
          Diluted
 
(0.27
)
 
0.07

 
(0.19
)
 
(0.23
)

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 nine months ended September 30, 2015 and 2014 was 26% and 18%, 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 (including a portion of transaction expense related to the Journal transactions) and adjustments to reserves for uncertain tax positions (including interest). In addition, the non-cash goodwill impairment charge in 2015 is not deductible for income tax purposes.

Deferred tax assets totaled $25 million at September 30, 2015. 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.

F-12



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.

During the periods ended September 30, 2015 and 2014, 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 on our tax returns, but the additional tax benefits are not recorded under GAAP until the tax deduction reduces taxes payable. When the benefit is recognized, it will be recorded as additional paid-in capital. The amount of unrecognized tax deductions for the nine months ended September 30, 2015 and 2014 was approximately $26 million and $31 million, respectively.

5. Other Charges and Credits

Acquisition and related integration costs of $4.2 million and $37.0 million for the three and nine months ended September 30, 2015, respectively, include costs for spinning off our newspaper operations and costs associated with acquisitions, such as legal and accounting fees, as well as costs to integrate the acquired operations.

In the third quarter of 2015, we recorded a $24.6 million non-cash charge to reduce the carrying value of our goodwill and certain intangible assets of Newsy and a smaller business. See Note 7 for additional information.

6. Restricted Cash

At September 30, 2015 and December 31, 2014, we had $6.6 million and $6.8 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 was as follows:
(in thousands)
 
 
 
 
 
Balance as of December 31, 2014
 
$
106,261

Journal acquisition
 
459,405

Midroll acquisition
 
43,176

Goodwill impairment
 
(22,500
)
Balance as of September 30, 2015
 
$
586,342



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Other intangible assets consisted of the following:
(in thousands)
 
As of 
 September 30, 
 2015
 
As of 
 December 31, 
 2014
 
 
 
 
 
Amortizable intangible assets:
 
 
 
 
Carrying amount:
 
 
 
 
Television network affiliation relationships
 
$
248,444

 
$
93,944

Customer lists and advertiser relationships
 
56,300

 
20,000

Other
 
7,319

 
4,019

Total carrying amount
 
312,063

 
117,963

Accumulated amortization:
 
 
 
 
Television network affiliation relationships
 
(21,483
)
 
(14,092
)
Customer lists and advertiser relationships
 
(13,895
)
 
(7,765
)
Other
 
(2,494
)
 
(1,062
)
Total accumulated amortization
 
(37,872
)
 
(22,919
)
Net amortizable intangible assets
 
274,191

 
95,044

Other indefinite-lived intangible assets — FCC licenses
 
203,815

 
92,215

Total other intangible assets
 
$
478,006

 
$
187,259


Estimated amortization expense of intangible assets for each of the next five years is $5.6 million for the remainder of 2015, $21.8 million in 2016, $19.4 million in 2017, $19.0 million in 2018, $17.5 million in 2019, $16.9 million in 2020, and $176.9 million in later years.

Goodwill and other indefinite-lived assets are tested for impairment annually and any time events occur or conditions change that would indicate it is more likely than not the fair value of a reporting unit is below its carrying value. Such indicators of impairment include, but are not limited to, changes in business climate or other factors resulting in low cash flow related to such assets. The testing for impairment is a two-step process. The first step is the estimation of the fair value of each of the reporting units, which is then compared to their carrying values. If the fair value is less than the carrying value of the reporting unit then an impairment of goodwill may exist. Step two is then performed to determine the amount of impairment.

Changes in the market for the distribution of video programming services, including the development of over-the-top distribution platforms such as Apple TV, Comcast Watchable, PlutoTV, Xumo, Roku and Sling, has resulted in the need for additional investment in our digital news service, Newsy. The additional investment, combined with the slower development of our original revenue model, created indications of impairment of goodwill as of September 30, 2015.

Under the two-step process required by GAAP, we estimated the fair value of Newsy. Fair values were determined using a combination of an income approach, which estimated fair value based upon future revenues, expenses and cash flows discounted to their present value, and a market approach, which estimated fair value using market multiples of various financial measures compared to a set of comparable public companies. The discounted cash flow approach utilized unobservable factors, such as projected revenues and expenses and a discount rate applied to the estimated cash flows. The determination of the discount rate was based on a cost of capital model, using a risk-free rate, adjusted by a stock-beta adjusted risk premium and a size premium. The inputs to the nonrecurring fair value determination of our reporting units are classified as Level 3 fair value measurements under GAAP.

The valuation methodology and underlying financial information used to determine fair value requires significant judgments to be made by management. These judgments include, but are not limited to, long-term projections of future financial performance and the selection of appropriate discount rates used to determine the present value of future cash flows. Changes in such estimates or the application of alternative assumptions could produce significantly different results.

We concluded that the fair value of Newsy did not exceed its carrying value as of September 30, 2015. Because of the timing and complexity of the calculations required under step two of the process, we have not yet completed the valuation of goodwill process as of the issuance of our September 30, 2015 financial statements. However, based upon our preliminary valuations, we recorded a $21 million non-cash charge in the three months ended September 30, 2015 to reduce the carrying

F-14


value of goodwill and $2.9 million to reduce the value of intangible assets. We expect to complete step two of the goodwill impairment analysis in the fourth quarter of 2015 and any difference between the preliminary estimated impairment charge and the final amount will be recorded at that time.

We also recorded a $1.5 million goodwill impairment charge on a second small business.

8. Long-Term Debt
Long-term debt consisted of the following:
(in thousands)
 
As of 
 September 30, 
 2015
 
As of 
 December 31, 
 2014
 
 
 
 
 
Variable rate credit facility
 
$

 
$

Term loan
 
395,500

 
198,000

Unsecured subordinated notes payable
 
8,104

 

Long-term debt
 
403,604


198,000

Current portion of long-term debt
 
6,792

 
2,000

Long-term debt (less current portion)
 
$
396,812

 
$
196,000

Fair value of long-term debt *
 
$
400,800

 
$
194,000


* 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. The fair value of the unsecured promissory notes is determined based on a discounted cash flow analysis using current market interest rates of comparable instruments and is classified as a Level 2 in the fair value hierarchy.

Financing Agreement

On April 1, 2015, we entered into a $500 million second amended revolving credit and term loan agreement ("Second Amended Financing Agreement") to amend the terms of our existing revolving credit and term loan agreement ("Amended Financing Agreement"), to add an incremental $200 million term loan B borrowing and to increase the line of credit by $25 million. The proceeds from the incremental term loan B borrowing were used to pay off the $116 million Journal term loan assumed in connection with the Journal acquisition, fund the $60 million special dividend paid to the Scripps shareholders and for the payment of transaction expenses. The $400 million term loan B matures in November 2020 and the $100 million revolving credit facility matures in November 2018.

The Second Amended 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.

The Second Amended Financing Agreement allows us to make restricted payments (dividends and share repurchases) up to $70 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 of assets.

The Second Amended Financing Agreement in certain circumstances requires that we must use a portion of excess cash flow, and the proceeds from the sale, to repay debt. As of September 30, 2015, we were not required to make additional principal payments based on excess cash flow. Under an amendment completed in the third quarter of 2015, any proceeds, up to a stipulated amount, that we receive from the upcoming FCC spectrum auction, should we choose to participate and our bid is accepted, will not be required to be used to pay down the term loan.

Under the terms of the Second Amended 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, and equipment.

Interest is payable on the term loan B at rates based on LIBOR with a 0.75% floor, plus a fixed margin of 2.75%. 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 September 30, 2015 and December 31, 2014, the interest rate was 3.50% and 3.25%, respectively, on the term loan B. The weighted-average interest rate on borrowings was 3.42% and 3.25% for the nine months ended September 30, 2015 and 2014, respectively.

Scheduled principal payments on the term loan at September 30, 2015 are: $1.0 million for the remainder of 2015, $4.0 million in 2016, $4.0 million in 2017, $4.0 million in 2018, $4.0 million in 2019 and $378.5 million in 2020.

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 September 30, 2015 and December 31, 2014, we had outstanding letters of credit totaling $0.8 million and $0.2 million, respectively.

Unsecured Subordinated Notes Payable

The unsecured subordinated promissory notes bear interest at a rate of 7.25% per annum payable quarterly. The notes are payable in equal annual installments of $2.7 million on September 30 of 2016, 2017 and 2018, with no prepayment right.

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. Under the terms of the swap, we pay a fixed interest rate of 1.08% and receive interest at a variable rate equal to 30 day LIBOR. We did not provide or receive any collateral for this contract.

Fair Value of Derivative Instruments

The notional amounts and fair values of derivative instruments are shown in the table below:
 
 
As of September 30, 2015
 
As of December 31, 2014
 
 
Notional amount
 
Fair value
 
Notional amount
 
Fair value
(in thousands)
 
 
Asset
 
Liability (1)
 
 
Asset
 
Liability (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Undesignated derivatives:
 
 
 
 
 
 
 
 
 
 
 
 
   Interest rate swap
 
$
75,000

 
$

 
$
596

 
$
75,000

 
$

 
$
471


(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 period ended September 30, 2015, approximately $0.3 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 
 September 30,
 
Nine Months Ended 
 September 30,
(in thousands)
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Amounts reclassified from accumulated OCL, gain/(loss)
 
96

 
96

 
288

 
288

Gain/(loss) on derivative
 
(15
)
 
362

 
(125
)
 
300



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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 values of these financial assets and liabilities were determined based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value. These levels of input are as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs, other than quoted market prices in active markets, that are observable either directly or indirectly.
Level 3 — Unobservable inputs based on our own assumptions.

The following tables set forth our assets and liabilities that are measured at fair value on a recurring basis at September 30, 2015 and December 31, 2014:
 
 
As of September 30, 2015
(in thousands)
 
Total
 
Level 1
 
Level 2
 
Level 3
 
 
 
 
 
 
 
 
 
Assets/(Liabilities):
 
 
 
 
 
 
 
 
  Cash equivalents
 
$
5,043

 
$
5,043

 
$

 
$

  Interest rate swap
 
(596
)
 

 
(596
)
 


 
 
As of December 31, 2014
(in thousands)
 
Total
 
Level 1
 
Level 2
 
Level 3
 
 
 
 
 
 
 
 
 
Assets/(Liabilities):
 
 
 
 
 
 
 
 
  Cash equivalents
 
$
10,000

 
$
10,000

 
$

 
$

  Interest rate swap
 
(471
)
 

 
(471
)
 


11. Other Liabilities
Other liabilities consisted of the following:
(in thousands)
 
As of 
 September 30, 
 2015
 
As of 
 December 31, 
 2014
 
 
 
 
 
Employee compensation and benefits
 
$
16,844

 
$
15,914

Liability for pension benefits
 
230,967

 
136,429

Liabilities for uncertain tax positions
 
7,667

 
6,741

Other
 
22,261

 
10,087

Other liabilities (less current portion)
 
$
277,739

 
$
169,171



F-16


12. Supplemental Cash Flow Information
The following table presents additional information about the change in certain working capital accounts:
 
 
Nine Months Ended 
 September 30,
(in thousands)
 
2015
 
2014
 
 
 
 
 
Other changes in certain working capital accounts, net
 
 
 
 
Accounts and notes receivable
 
$
(14,461
)
 
$
3,197

Transition services receivable, net
 
(2,473
)
 

Income taxes receivable/payable, net
 
(14,450
)
 
(5,764
)
Accounts payable
 
(11,303
)
 
1,522

Accrued employee compensation and benefits
 
2,059

 
7,611

Other accrued liabilities
 
(1,649
)
 
4,550

Other, net
 
(3,814
)
 
4,632

Total
 
$
(46,091
)
 
$
15,748


13. 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 (referred to as transition credits) to certain employees' defined contribution retirement accounts in 2011. These transition credits, which will be made through the end of 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 
 September 30,
 
Nine Months Ended 
 September 30,
(in thousands)
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Service cost
 
$

 
$
21

 
$

 
$
64

Interest cost
 
8,169

 
6,600

 
22,797

 
19,155

Expected return on plan assets, net of expenses
 
(6,625
)
 
(5,893
)
 
(18,334
)
 
(17,611
)
Amortization of actuarial loss
 
1,179

 
862

 
3,515

 
2,145

Curtailment
 

 

 
1,080

 

Total for defined benefit plans
 
2,723

 
1,590


9,058


3,753

Multi-employer plans
 
43

 
100

 
140

 
324

Withdrawal from GCIU multi-employer plan
 

 

 

 
4,100

SERP
 
253

 
80

 
800

 
672

Defined contribution plans
 
2,094

 
2,419

 
7,805

 
8,635

Net periodic benefit cost
 
5,113

 
4,189

 
17,803

 
17,484

Allocated to discontinued operations
 

 
(1,178
)
 
(1,096
)
 
(7,819
)
Net periodic benefit cost — continuing operations
 
$
5,113


$
3,011


$
16,707


$
9,665



F-17


We contributed $0.3 million to fund current benefit payments for our SERP during the nine months ended September 30, 2015. We anticipate contributing an additional $0.5 million to fund the SERP’s benefit payments during the remainder of 2015. No contributions were made to our defined benefit pension plans during the first nine months of 2015. A one-time curtailment charge of $1.1 million was recorded in the second quarter of 2015 related to our defined benefit pension plan as a result of the impact of the spin-off of our Newspaper business. We also remeasured the pension liabilities as a result of the newspaper spin-off on April 1, 2015.

On August 24, 2015, we offered eligible former employees with vested, deferred pension plan benefits the option of receiving their benefits either as a lump-sum distribution or an immediate annuity payment. Approximately 4,300 former Scripps employees were eligible for this offer; former Journal Communications employees were not affected. Company funds will not be used to make the lump-sum distributions. All distributions will be made from existing pension plan assets. The company expects the funded status of the plan to remain materially unchanged as a result of this offer. Eligible participants had until October 13, 2015 to make an election. The lump-sum payments are expected to be made in November 2015. After distribution of the lump-sum amounts, we will record a non-cash pension settlement charge in the fourth quarter of approximately $45 million, based on the estimated rate of acceptance.

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 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 in 2014 for the present value withdrawal liability. Once we reach a final agreement with the GCIU, we either will pay the liability in a lump sum or make equal monthly installments over 20 years.

14. Segment Information
We determine our business segments based upon our management and internal reporting structures. Our reportable segments are strategic businesses that offer different products and services.
Our television segment includes 15 ABC affiliates, five NBC affiliates, two FOX affiliates, two CBS affiliates and four non big-four affiliated stations. We also own five Azteca America affiliates. Our television stations reach approximately 18% of the nation’s television households. Our 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 radio segment consists of 34 radio stations in eight markets. We operate 28 FM stations and six AM stations. Our radio stations earn revenue primarily from the sale of advertising to local advertisers.

Our digital segment includes the digital operations of our local television and radio businesses. It also includes the operations of national digital businesses such as Newsy, a digital video news service, and Midroll, a podcast industry leader. Our digital operations earn revenue primarily through the sale of advertising and marketing services.
Syndication and other primarily includes the syndication of news features and comics and other features for the newspaper industry.
We allocate a portion of certain corporate costs and expenses, including information technology, certain employee benefits 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.

Our chief operating decision maker evaluates the operating performance of our business segments and makes decisions about the allocation of resources to our business segments using a measure called segment profit. Segment profit excludes interest, defined benefit pension plan expense, income taxes, depreciation and amortization, impairment charges, divested operating units, restructuring activities, investment results and certain other items that are included in net income (loss) determined in accordance with accounting principles generally accepted in the United States of America.

Effective April 1, 2015, we began reporting our digital operations as a segment. We have recast the operating results for television, syndication and other, and shared services and corporate in prior periods to reflect this change.

F-18


Information regarding our business segments is as follows:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in thousands)
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Segment operating revenues:
 
 
 
 
 
 
 
 
Television
 
$
157,437


$
116,425

 
$
439,049

 
$
325,511

Radio
 
20,421



 
39,834

 

Digital
 
10,861

 
5,355

 
25,698

 
16,036

Syndication and other
 
972


1,346

 
6,267

 
6,579

Total operating revenues
 
$
189,691

 
$
123,126

 
$
510,848

 
$
348,126

Segment profit (loss):
 
 
 
 
 
 
 
 
Television
 
$
31,707

 
$
30,508

 
$
98,357

 
$
80,344

Radio
 
4,073

 

 
8,981

 

Digital
 
(3,639
)
 
(6,206
)
 
(13,210
)
 
(17,477
)
Syndication and other
 
(572
)
 
(674
)
 
(1,229
)
 
(1,230
)
Shared services and corporate
 
(8,658
)
 
(7,827
)
 
(33,701
)
 
(30,426
)
Defined benefit pension plan expense
 
(2,976
)
 
(1,613
)
 
(9,782
)
 
(4,253
)
Acquisition and related integration costs
 
(4,206
)
 
(2,783
)
 
(36,953
)
 
(6,984
)
Depreciation and amortization of intangibles
 
(16,273
)
 
(8,706
)
 
(37,934
)
 
(23,631
)
Impairment of goodwill and intangibles
 
(24,613
)
 

 
(24,613
)
 

(Losses) gains, net on disposal of property, plant and equipment
 
(200
)
 
2,979

 
(579
)
 
2,931

Interest expense
 
(4,246
)
 
(2,050
)
 
(10,523
)
 
(6,345
)
Miscellaneous, net
 
1,061

 
170

 
12

 
(210
)
(Loss) income from continuing operations before income taxes
 
$
(28,542
)
 
$
3,798

 
$
(61,174
)
 
$
(7,281
)
Depreciation:
 
 
 
 
 
 
 
 
Television
 
$
9,765

 
$
5,894

 
$
22,389

 
$
16,033

Radio
 
554

 

 
1,103

 

Digital
 
132

 
96

 
394

 
275

Syndication and other
 
66

 
40

 
195

 
80

Shared services and corporate
 
575

 
498

 
1,802

 
1,458

Total depreciation
 
$
11,092

 
$
6,528

 
$
25,883

 
$
17,846

Amortization of intangibles:
 
 
 
 
 
 
 
 
Television
 
$
4,262

 
$
1,909

 
$
10,412

 
$
5,108

Radio
 
280

 

 
560

 

Digital
 
639

 
269

 
1,079

 
677

Total amortization of intangibles
 
$
5,181

 
$
2,178

 
$
12,051

 
$
5,785

Additions to property, plant and equipment:
 
 
 
 
 
 
 
 
Television
 
$
5,607

 
$
4,100

 
$
13,350

 
$
10,540

Radio
 
623

 

 
639

 

Digital
 
46

 
46

 
46

 
108

Syndication and other
 
7

 
256

 
76

 
324

Shared services and corporate
 
190

 
253

 
1,133

 
979

Total additions to property, plant and equipment
 
$
6,473

 
$
4,655

 
$
15,244

 
$
11,951

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

F-19


15. 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 May 2014, our Board of Directors authorized a repurchase program of up to $100 million of our Class A Common shares through December 2016. Shares may be repurchased from time to time at management's discretion, either in the open market, through pre-arranged trading plans or in privately negotiated block transactions. Under the authorization, we repurchased $10.9 million of shares at prices ranging from $15.90 to $24.08 per share during the first nine months of 2015. As of September 30, 2015, we have $89.1 million remaining for share repurchases under this authorization.

16. 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 September 30, 2015
(in thousands)
 
Gains and Losses on Derivatives
 
Defined Benefit Pension Items
 
Other
 
Total
 
 
 
 
 
 
 
 
 
Beginning balance, June 30, 2015
 
$
(360
)
 
$
(125,524
)
 
$
11

 
$
(125,873
)
  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 $471 (b)
 

 
762

 

 
762

Net current-period other comprehensive loss
 
59

 
762

 

 
821

Ending balance, September 30, 2015
 
$
(301
)
 
$
(124,762
)
 
$
11

 
$
(125,052
)

 
 
Three Months Ended September 30, 2014
(in thousands)
 
Gains and Losses on Derivatives
 
Defined Benefit Pension Items
 
Other
 
Total
 
 
 
 
 
 
 
 
 
Beginning balance, June 30, 2014
 
$
(600
)
 
$
(79,489
)
 
$
172

 
$
(79,917
)