Journal Broadcast Merger and Newspaper Spin-off (Discontinued Operations) (Notes)

12 Months Ended

Dec. 31, 2015

Business Acquisition [Line Items]

Journal Broadcast Merger and Newspaper Spin-off (Discontinued Operations)

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. The purchase price was $50 million in cash, plus a $10 million earnout payable over three years. We estimated the fair value of the earnout to be $7 million at the acquisition date.

The following table summarizes the final fair values of the assets acquired and the liabilities assumed:

(in thousands)
Assets:
Cash	$	635
Accounts receivable	2,925
Other assets	482
Intangible assets	10,700
Goodwill	45,586
Total assets acquired	60,328
Current liabilities	3,365
Net purchase price	$	56,963

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 $46 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.

From the acquisition date of July 22, 2015 through December 31, 2015, revenues from the acquired Midroll operations were $4.6 million.

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 21. 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 on April 1, 2015, the acquisition date.

The following table summarizes the final fair values of the assets acquired and the liabilities assumed:

(in thousands)
Assets:
Cash	$	2,529
Accounts receivable	47,978
Other current assets	2,236
Property, plant and equipment	123,264
Intangible assets	294,800
Goodwill	456,440
Other long-term assets	6,350
Assets held for sale	14,500
Total assets acquired	948,097
Accounts payable and accrued liabilities	38,107
Employee benefit obligations	85,261
Deferred tax liability	57,112
Long-term debt	126,873
Other long-term liabilities	4,744
Net purchase price	$	636,000

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 $456 million arising from the transaction consists largely of synergies and economies of scale and other benefits of a larger broadcast footprint. The goodwill was allocated to our television ($395 million), radio ($41 million) and digital ($20 million) segments. 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.

From the acquisition date of April 1, 2015 through December 31, 2015, revenues from the acquired Journal operations were $200 million.

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

The following table summarizes the final fair values of the assets acquired and the liabilities assumed:

(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 have determined to have an indefinite life and, therefore, will not be 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 this purchase 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, an over-the-top video news provider, for $35 million in cash, plus a working capital adjustment of $0.2 million.

The following table summarizes the final fair values of the assets acquired and the liabilities assumed:

(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 tax 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 resulting in no step-up in the basis of the assets acquired. The goodwill is not deductible for income tax purposes.

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. We are not presenting any pro forma results of operations since the impact of the acquisition is not material to prior periods results of operations.

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.

	For the years ended   December 31,
(in thousands, except per share data) (unaudited)	2015			2014
Operating revenues	$	778,118		$	792,718
(Loss) income from continuing operations attributable to the shareholders of The E. W. Scripps Company	(37,452		)	12,079
(Loss) income per share from operations attributable to the shareholders of The E. W. Scripps Company:
Basic	$	(0.45	)	$	0.14
Diluted	(0.45		)	0.14

Newspaper Business

Business Acquisition [Line Items]

Journal Broadcast Merger and Newspaper Spin-off (Discontinued Operations)

Journal Broadcast Merger and Newspaper Spin-off (Discontinued Operations)

On July 30, 2014, Scripps and Journal Communications, Inc. ("Journal") agreed to merge their broadcast operations and spin-off their newspaper businesses and combine them into a separate publicly traded company. On April 1, 2015, Scripps and Journal separated their respective newspaper businesses and merged them, resulting in each becoming a wholly owned subsidiary of Journal Media Group, Inc. Journal Media Group is headquartered in Milwaukee and combines the 13 Scripps newspapers with Journal's Milwaukee Journal Sentinel.

Immediately following the spin-off and merger of the newspaper businesses, the Journal broadcast operations, and its related digital businesses, were merged into Scripps. The merged broadcast and digital media company, based in Cincinnati, retains The E. W. Scripps Company name. The company’s television operations reach approximately 18% of all U.S. television households, and the Company has approximately 3,800 employees across its television, radio and digital media operations.

As part of the transactions, Scripps' shareholders received a $60 million special cash dividend on April 1, 2015.

Certain agreements between Scripps and Journal Media Group, Inc. became effective in connection with the transactions, including Tax Matters Agreements and a Transition Services Agreement.

Under the Transition Services Agreement, Scripps and Journal Media Group provide certain services to each other for a period that generally does not extend beyond March 31, 2016. The fees for the services are at arms-length amounts. For the year ended December 31, 2015, we received $3.3 million for services provided to Journal Media Group and we paid Journal Media Group $1.2 million for services provided to us. In addition, during the initial transition period, each has paid various invoices for the other party. As of December 31, 2015, Journal Media Group owed Scripps approximately $2.0 million.

The Tax Matters Agreements set forth the allocations and responsibilities of Scripps and Journal Media Group with respect to liabilities for federal, state and local income taxes for periods before and after the spin-off, disputes with taxing authorities and indemnification of income taxes that would become due if the spin-off were taxable. Generally, Scripps is responsible for taxes prior to the separation and Journal Media Group will be responsible for taxes for periods after the separation of their respective businesses.

Until the completion of the spin-off of our newspaper business, generally accepted accounting principles (“GAAP”) required us to assess impairment of the newspaper business long-lived assets using the held-and-used model. Under this model, if the expected cash flows over the life of the primary asset of the reporting unit are in excess of the carrying amount there is no impairment. Under this model no impairment charges were recorded at March 31, 2015. At the date of the spin-off of our newspaper business, GAAP required us to assess impairment using the held-for-sale model. This model compares the fair value of the disposal unit to its carrying value and if the fair value is lower, an impairment loss is recorded. Our analysis determined that the carrying value of the newspaper business exceeds its fair value. Discontinued operations includes a $30 million non-cash impairment charge to reduce the carrying value to its estimated fair value. The inputs to the nonrecurring fair value determination of the disposal unit are classified as Level 2 fair value measurements under GAAP.

As a result of the spin-off, Scripps newspapers has been presented as discontinued operations in the financial statements for all periods.

Operating results of our discontinued operations were as follows:

	For the years ended December 31,
(in thousands)	2015			2014			2013
Operating revenues	$	91,478		$	370,316		$	384,514
Total costs and expenses	(79,869		)	(349,210		)	(353,563		)
Depreciation and amortization of intangibles	(3,608		)	(16,890		)	(17,240		)
Other, net	(3,298		)	(1,308		)	(291		)
Loss on disposal of Scripps Newspapers	(30,000		)	—			—
(Loss) income on discontinued operations before income taxes	(25,297		)	2,908			13,420
Benefit (provision) for income taxes	9,457			(2,143		)	(4,059		)
Net (loss) income from discontinued operations	(15,840		)	765			9,361
Noncontrolling interest	—			(307		)	(250		)
Net (loss) income from discontinued operations	$	(15,840	)	$	1,072		$	9,611

The Company incurred certain non-recurring costs directly related to the spin-off of our newspapers and acquisition of the Journal broadcast stations of $41 million for the year ended December 31, 2015. Accounting and other professional and consulting fees directly related to the newspaper spin-off of $3 million were allocated to discontinued operations in the Consolidated Statements of Operations. The remaining $38 million was recorded in earnings from continuing operations for the year ended December 31, 2015.

The following table presents a summary of the net assets distributed on April 1, 2015 and the amounts included in discontinued operations as of December 31, 2014.

(in thousands)	As of April 1, 2015		As of December 31, 2014
Assets:
Total current assets	$	43,322	$	44,425
Property, plant and equipment	155,047		185,548
Intangible assets	—		2,001
Other assets	3,829		2,018
Total assets included in the disposal group	202,198		233,992
Liabilities:
Total current liabilities	47,664		47,642
Deferred income taxes	1,966		14,584
Other liabilities	9,057		13,089
Total liabilities included in the disposal group	58,687		75,315
Net assets included in the disposal group	$	143,511	$	158,677