10-Q 1 ssp-2016630x10q.htm 10-Q Document

 
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, 2016     
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 þ
 
Accelerated filer o 
 
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, 2016, there were 71,603,869 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 June 30, 2016

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 in our Annual Report on Form 10-K for the year ended December 31, 2015.

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, 2016.

The following table provides information about Company purchases of Class A Common shares during the quarter ended June 30, 2016 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
 
 
 
 
 
 
 
 
 
4/1/16 - 4/30/16
 
188,000

 
$
15.40

 
$
2,895,764

 
$
70,751,284

5/1/16 - 5/31/16
 
186,000

 
15.44

 
2,872,735

 
$
67,878,549

6/1/16 - 6/30/16
 
164,000

 
16.99

 
2,786,387

 
$
65,092,162

Total
 
538,000

 
$
15.90

 
$
8,554,886

 
 

3


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. At June 30, 2016, $65.1 million remained under the authorization.

Item 3. Defaults Upon Senior Securities
There were no defaults upon senior securities during the quarter ended June 30, 2016.

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 5, 2016
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 
 June 30, 
 2016
 
As of 
 December 31, 
 2015
 
 
 
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
66,479

 
$
108,061

Restricted cash
 
5,460

 
6,560

Accounts and notes receivable (less allowances — $1,570 and $1,610)
 
191,243

 
171,901

Income taxes receivable
 
1,160

 
4,626

Miscellaneous
 
13,241

 
11,482

Total current assets
 
277,583

 
302,630

Investments
 
14,840

 
13,856

Property and equipment
 
263,696

 
271,047

Goodwill
 
617,080

 
585,787

Other intangible assets
 
479,773

 
479,187

Deferred income taxes
 
20,698

 
13,640

Miscellaneous
 
13,619

 
14,713

Total Assets
 
$
1,687,289

 
$
1,680,860

 
 
 
 
 
Liabilities and Equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
29,024

 
$
31,606

Customer deposits and unearned revenue
 
7,297

 
8,508

Current portion of long-term debt
 
6,656

 
6,656

Accrued liabilities:
 
 
 
 
Employee compensation and benefits
 
26,425

 
33,669

Miscellaneous
 
22,482

 
25,392

Other current liabilities
 
12,975

 
13,992

Total current liabilities
 
104,859

 
119,823

Long-term debt (less current portion)
 
390,825

 
392,487

Other liabilities (less current portion)
 
267,204

 
267,567

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: 71,603,869 and 71,886,969 shares
 
716

 
719

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

 
119

Total
 
835

 
838

Additional paid-in capital
 
1,156,231

 
1,163,985

Accumulated deficit
 
(144,249
)
 
(174,038
)
Accumulated other comprehensive loss, net of income taxes
 
(88,416
)
 
(89,802
)
Total equity
 
924,401

 
900,983

Total Liabilities and Equity
 
$
1,687,289

 
$
1,680,860

See notes to condensed consolidated financial statements.

F-2


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

 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in thousands, except per share data)
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
Advertising
 
$
163,444

 
$
154,372

 
$
309,763

 
$
244,105

Retransmission
 
53,433

 
36,495

 
107,047

 
64,413

Other
 
10,940

 
7,267

 
20,505

 
12,639

Total operating revenues
 
227,817

 
198,134

 
437,315

 
321,157

Costs and Expenses:
 
 
 
 
 
 
 
 
Employee compensation and benefits
 
92,463

 
91,118

 
188,348

 
159,480

Programs and program licenses
 
43,503

 
31,387

 
84,071

 
52,519

Other expenses
 
50,284

 
43,611

 
96,031

 
72,871

Defined benefit pension plan expense
 
3,449

 
4,120

 
6,899

 
6,806

Acquisition and related integration costs
 

 
29,973

 
578

 
32,747

Total costs and expenses
 
189,699

 
200,209

 
375,927

 
324,423

Depreciation, Amortization, and (Gains) Losses:
 
 
 
 
 
 
 
 
Depreciation
 
8,928

 
8,604

 
17,584

 
14,791

Amortization of intangible assets
 
5,858

 
4,762

 
11,613

 
6,870

Losses, net on disposal of property and equipment
 
22

 
215

 
18

 
379

Net depreciation, amortization, and (gains) losses
 
14,808

 
13,581

 
29,215

 
22,040

Operating income (loss)
 
23,310

 
(15,656
)
 
32,173

 
(25,306
)
Interest expense
 
(4,432
)
 
(4,225
)
 
(9,011
)
 
(6,277
)
Miscellaneous, net
 
(458
)
 
387

 
(649
)
 
(1,049
)
Income (loss) from continuing operations before income taxes
 
18,420

 
(19,494
)
 
22,513

 
(32,632
)
Provision (benefit) for income taxes
 
6,932

 
(6,539
)
 
6,137

 
(11,562
)
Income (loss) from continuing operations
 
11,488

 
(12,955
)
 
16,376

 
(21,070
)
Loss from discontinued operations, net of tax
 

 
(18,448
)
 

 
(15,432
)
Net income (loss)
 
$
11,488

 
$
(31,403
)
 
$
16,376

 
$
(36,502
)
 
 
 
 
 
 
 
 
 
Net income (loss) per basic share of common stock:
 
 
 
 
 
 
 
 
  Income (loss) from continuing operations
 
$
0.14

 
$
(0.15
)
 
$
0.19

 
$
(0.30
)
  Loss from discontinued operations
 

 
(0.22
)
 

 
(0.22
)
Net income (loss) per basic share of common stock
 
$
0.14

 
$
(0.37
)
 
$
0.19

 
$
(0.52
)
 
 
 
 
 
 
 
 
 
Net income (loss) per diluted share of common stock:
 
 
 
 
 
 
 
 
  Income (loss) from continuing operations
 
$
0.13

 
$
(0.15
)
 
$
0.19

 
$
(0.30
)
  Loss from discontinued operations
 

 
(0.22
)
 

 
(0.22
)
Net income (loss) per diluted share of common stock
 
$
0.13

 
$
(0.37
)
 
$
0.19

 
$
(0.52
)
See notes to condensed consolidated financial statements.


F-3


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

 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in thousands)
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
11,488

 
$
(31,403
)
 
$
16,376

 
$
(36,502
)
Changes in fair value of derivative, net of tax of $37, $37, $74 and $73
 
59

 
59

 
118

 
119

Changes in defined benefit pension plans, net of tax of $401, $(1,669), $801 and $(1,211)
 
640

 
(2,716
)
 
1,282

 
(1,959
)
Other
 
(7
)
 
84

 
(14
)
 
84

Total comprehensive income (loss)
 
$
12,180

 
$
(33,976
)
 
$
17,762

 
$
(38,258
)
See notes to condensed consolidated financial statements.

F-4


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


 
Six Months Ended 
 June 30,
(in thousands)
 
2016

2015
 
 
 
 
 
Cash Flows from Operating Activities:
 



Net income (loss)
 
$
16,376

 
$
(36,502
)
Loss from discontinued operations
 

 
15,432

Income (loss) from continuing operations
 
16,376

 
(21,070
)
Adjustments to reconcile income (loss) from continuing operations to net cash flows from operating activities:
 



Depreciation and amortization
 
29,197

 
21,661

Deferred income taxes
 
6,825


(9,786
)
Stock and deferred compensation plans
 
8,861


7,886

Pension expense, net of payments
 
5,099


6,756

Other changes in certain working capital accounts, net
 
(29,893
)

(81,873
)
Miscellaneous, net
 
896


6,810

Net cash provided by (used in) continuing operating activities
 
37,361


(69,616
)
Net cash provided by discontinued operating activities
 

 
6,646

Net operating activities
 
37,361

 
(62,970
)
Cash Flows from Investing Activities:
 



Acquisitions, net of cash acquired

(43,500
)

2,530

Additions to property and equipment
 
(13,382
)

(8,771
)
Purchase of investments
 
(1,728
)

(6,450
)
Change in restricted cash
 
1,100

 
250

Proceeds from sale of property and equipment
 
22

 
7

Net cash used in continuing investing activities
 
(57,488
)

(12,434
)
Net cash used in discontinued investing activities
 

 
(1,561
)
Net investing activities
 
(57,488
)
 
(13,995
)
Cash Flows from Financing Activities:
 



Proceeds from issuance of long-term debt
 

 
200,000

Payments on long-term debt
 
(2,000
)

(117,750
)
Payments of financing costs
 

 
(2,592
)
Dividends paid
 

 
(59,523
)
Repurchase of Class A Common shares
 
(18,686
)

(2,683
)
Proceeds from exercise of employee stock options
 
4,641


5,539

Tax payments related to shares withheld for RSU vesting
 
(2,603
)

(5,037
)
Miscellaneous, net
 
(2,807
)

1,972

Net cash (used in) provided by continuing financing activities
 
(21,455
)

19,926

Decrease in cash and cash equivalents
 
(41,582
)

(57,039
)
Cash and cash equivalents:
 



Beginning of year
 
108,061


158,459

End of period
 
$
66,479


$
101,420

 
 
 
 
 
Supplemental Cash Flow Disclosures
 
 
 
 
Interest paid
 
$
8,143

 
$
5,319

Income taxes paid
 
$
355

 
$
13,970

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 Deficit)
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
Total
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2014
 
$
570

 
$
525,456

 
$
118,693

 
$
(126,443
)
 
$
1,657

 
$
519,933

Net loss
 

 

 
(36,502
)
 

 

 
(36,502
)
Changes in defined benefit pension plans
 

 

 

 
(1,959
)
 

 
(1,959
)
Changes in fair value of derivative
 

 

 

 
119

 

 
119

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
 

 

 
(138,828
)
 
2,326

 
(1,657
)
 
(138,159
)
Repurchase 115,819 Class A Common shares
 
(1
)
 
(1,226
)
 
(1,456
)
 

 

 
(2,683
)
Compensation plans: 1,015,549 net shares issued *
 
10

 
7,570

 

 

 

 
7,580

Other
 

 

 

 
84

 

 
84

As of June 30, 2015
 
$
842

 
$
1,167,537

 
$
(117,616
)
 
$
(125,873
)
 
$

 
$
924,890

 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2015, as originally reported
 
$
838

 
$
1,163,985

 
$
(174,038
)
 
$
(89,802
)
 
$

 
$
900,983

Adoption of new accounting standard
 

 
(58
)
 
14,808

 

 

 
14,750

As of January 1, 2016, as adjusted
 
838

 
1,163,927

 
(159,230
)
 
(89,802
)
 

 
915,733

Net income
 

 

 
16,376

 

 

 
16,376

Changes in defined benefit pension plans
 

 

 

 
1,282

 

 
1,282

Changes in fair value of derivative
 

 

 

 
118

 

 
118

Repurchase 1,108,000 Class A Common shares
 
(11
)
 
(17,280
)
 
(1,395
)
 

 

 
(18,686
)
Compensation plans: 824,900 net shares issued *
 
8

 
9,584

 

 

 

 
9,592

Other
 

 

 

 
(14
)
 

 
(14
)
As of June 30, 2016
 
$
835

 
$
1,156,231

 
$
(144,249
)
 
$
(88,416
)
 
$

 
$
924,401

* Net of tax payments related to shares withheld for vested stock and RSUs of $2,603 in 2016 and $5,037 in 2015.
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 2015 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.
Certain amounts in prior periods have been reclassified to conform to the current period's presentation.
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 Internet, 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 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, as well as retransmission fees received from cable operators and satellite carriers.
The revenue recognition policies for each source of revenue are described in our 2015 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, 2015. 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.

F-7


Share-based compensation costs totaled $2.2 million and $5.2 million for the second quarter of 2016 and 2015, respectively. Year-to-date share-based compensation costs totaled $7.2 million and $7.1 million in 2016 and 2015, respectively, of which $1.1 million for 2015 is included in discontinued operations.
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)
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
Numerator (for basic and diluted earnings per share)
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
11,488

 
$
(12,955
)
 
$
16,376

 
$
(21,070
)
Less income allocated to RSUs
 
(159
)


 
(203
)


Numerator for basic and diluted earnings per share from continuing operations
 
$
11,329

 
$
(12,955
)
 
$
16,173

 
$
(21,070
)
Denominator
 
 
 
 
 
 
 
 
Basic weighted-average shares outstanding
 
83,773


83,903


83,869


70,692

Effect of dilutive securities:
 



 



Stock options held by employees and directors
 
278



 
315



Diluted weighted-average shares outstanding
 
84,051

 
83,903

 
84,184

 
70,692

Anti-dilutive securities (1)
 

 
2,230

 

 
2,230

(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 month period ended June 30, 2015, we incurred a 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 must be 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 and reclassified into earnings in the same period or periods during which the hedged transactions affected 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 Adopted Accounting Standards — In March 2016, the Financial Accounting Standards Board (FASB) issued new guidance which simplifies the accounting for share-based compensation arrangements, including the income tax consequences and classification on the statement of cash flows. Under the new guidance, excess tax benefits and tax deficiencies are recognized as a discrete component of the income tax provision in the period they occur and not as an adjustment to additional paid-in capital. Also, a company's payments for tax withholdings should be classified in the statement of cash flows as a

F-8


financing activity. It also requires excess tax benefits to be recorded on the exercise or vesting of share-based awards at the time they are deductible for income taxes and not when they reduce cash taxes. In addition, a company can now elect to record forfeitures of share-based awards as they occur or record estimated forfeitures with a true-up at the end of the vesting period. We have elected to early adopt this guidance effective January 1, 2016. The adoption was on a modified retrospective transition method basis and therefore had no impact on prior years. The impact of adopting this guidance was to record $14.7 million of previously unrecognized tax benefits, increasing deferred tax assets and opening retained earnings. We have elected to adopt a policy of recording actual forfeitures, the impact of which is immaterial to current or prior periods.

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 was effective for us January 1, 2016. The adoption of this standard did not have a material impact on our consolidated financial statements.

Recently Issued Accounting StandardsIn February 2016, the FASB issued new guidance on the accounting for leases. Under this guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements.

In January 2016, the FASB issued new guidance on the recognition and measurement of financial instruments. This guidance primarily affects the accounting for equity method investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. We are currently evaluating the impact of this guidance 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 evaluating the impact this guidance will have on our consolidated financial statements and have not yet determined a transition method.

In 2016, the FASB issued new guidance that changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred loss” model and generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized as an allowance. The guidance is effective in 2020 with early adoption permitted in 2019. We are currently evaluating the impact of this guidance on our financial statements and the timing of adoption.

3. Acquisitions

Stitcher

On June 6, 2016, we completed the acquisition of Stitcher for a cash purchase price of $4.5 million. Stitcher is a popular podcast listening service which facilitates discovery and streaming for more than 65,000 podcasts. Stitcher will operate as part of Midroll Media, which will significantly broaden Midroll's consumer base and technological capabilities. Of the $4.5 million purchase price, $2.9 million was allocated to intangible assets, the majority of which was technological software with an estimated amortization period of 3 years. The remainder of the purchase price was allocated to goodwill.

Cracked

On April 12, 2016, we acquired the multi-platform humor and satire brand Cracked, which informs and entertains millennial audiences with a website, original digital video, social media and a popular podcast. The purchase price was $39 million in cash.


F-9


Pending the finalization of third-party valuations and other items, the preliminary fair values of the assets acquired were $9 million of intangibles and $30 million of goodwill. Of the $9 million allocated to intangible assets, $7 million was for trade names with an estimated amortization period of 20 years. The remaining balance of $2 million was allocated to content library with an estimated amortization period of 3 years.

The goodwill of $30 million arising from the transaction consists largely of the benefit we will derive from being able to expand our presence and digital brands on the web, in over-the-top video and audio and on other emerging platforms. We allocated the goodwill to our 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 April 12, 2016 through June 30, 2016, revenues from the acquired Cracked operations were $1.2 million.

Midroll Media

On July 22, 2015, we acquired Midroll Media, a 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.

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 remaining 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.

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 for 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.


F-10


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.

Pro forma results of operations

Pro forma results of operations, assuming the Journal transaction had taken place at the beginning of 2014, are included in the following table. The pro forma results do not include Midroll, Cracked or Stitcher as the impact of these acquisitions are not material to prior year results of operations. The pro forma information includes the historical results of operations of Scripps and Journal and adjustments for additional depreciation and amortization of the assets acquired, additional interest expense related to the financing of the transaction and reflects 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.

F-11


 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in thousands, except per share data) (unaudited)
 
2015
 
2015
 
 
 
 
 
Operating revenues
 
$
198,134

 
$
383,619

Income from continuing operations attributable to the shareholders of The E.W. Scripps Company
 
9,308

 
6,578

Income per share from operations attributable to the shareholders of The E.W. Scripps Company:
 
 
 
 
          Basic
 
$
0.11

 
$
0.08

          Diluted
 
0.11

 
0.08


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, 2016 and 2015 was 27% and 35%, 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 in 2015), adjustments to reserves for uncertain tax positions (including interest) and excess tax benefits on share-based compensation ($1.9 million in 2016).

Deferred tax assets totaled $21 million at June 30, 2016. 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.

During the period ended June 30, 2015, deferred tax assets relating to employee share-based awards from the vesting of RSUs and the exercise of stock options were not recognized since we were in a net tax loss position for the period. The additional tax benefits were reflected as net operating loss carryforwards on our tax returns, but the additional tax benefits were not recorded under GAAP until the tax deductions reduced taxes payable. The amount of unrecognized tax deductions for the six months ended June 30, 2015, was approximately $25 million. Effective January 1, 2016, we adopted new accounting guidance that allows us to recognize the benefits when deductible for tax purposes.

5. Other Charges and Credits

Acquisition and related integration costs of $0.6 million and $32.7 million for the six months ended June 30, 2016 and 2015, respectively, and $30.0 million for the three months ended June 30, 2015, 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.


F-12


6. Restricted Cash

At June 30, 2016 and December 31, 2015, we had $5.5 million and $6.6 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)
 
Television
 
Radio
 
Digital
 
Total
 
 
 
 
 
 
 
 
 
Gross balance as of December 31, 2015
 
$
681,535

 
$
41,000

 
$
101,166

 
$
823,701

Accumulated impairment losses
 
(215,414
)
 

 
(22,500
)
 
(237,914
)
Net balance as of December 31, 2015
 
466,121

 
41,000

 
78,666

 
585,787

Cracked acquisition
 

 

 
29,703

 
29,703

Stitcher acquisition
 

 

 
1,590

 
1,590

Balance as of June 30, 2016
 
$
466,121

 
$
41,000

 
$
109,959

 
$
617,080

 
 
 
 
 
 
 
 
 
Gross balance as of June 30, 2016
 
$
681,535

 
$
41,000

 
$
132,459

 
$
854,994

Accumulated impairment losses
 
(215,414
)
 

 
(22,500
)
 
(237,914
)
Net balance as of June 30, 2016
 
$
466,121

 
$
41,000

 
$
109,959

 
$
617,080


Other intangible assets consisted of the following:
(in thousands)
 
As of 
 June 30, 
 2016
 
As of 
 December 31, 
 2015
 
 
 
 
 
Amortizable intangible assets:
 
 
 
 
Carrying amount:
 
 
 
 
Television network affiliation relationships
 
$
248,444

 
$
248,444

Customer lists and advertiser relationships
 
56,100

 
56,100

Other
 
26,623

 
14,423

Total carrying amount
 
331,167

 
318,967

Accumulated amortization:
 
 
 
 
Television network affiliation relationships
 
(30,804
)
 
(24,590
)
Customer lists and advertiser relationships
 
(21,015
)
 
(17,092
)
Other
 
(3,390
)
 
(1,913
)
Total accumulated amortization
 
(55,209
)
 
(43,595
)
Net amortizable intangible assets
 
275,958

 
275,372

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

 
203,815

Total other intangible assets
 
$
479,773

 
$
479,187


Estimated amortization expense of intangible assets for each of the next five years is $12.0 million for the remainder of 2016, $21.8 million in 2017, $21.4 million in 2018, $19.7 million in 2019, $18.6 million in 2020, $16.3 million in 2021, and $166.2 million in later years.


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8. Long-Term Debt
Long-term debt consisted of the following:
(in thousands)
 
As of 
 June 30, 
 2016
 
As of 
 December 31, 
 2015
 
 
 
 
 
Variable rate credit facility
 
$

 
$

Term loan
 
392,500

 
394,500

Debt issuance costs on term loan
 
(2,987
)
 
(3,325
)
Net term loan
 
389,513

 
391,175

Unsecured subordinated notes payable
 
7,968

 
7,968

Long-term debt
 
397,481


399,143

Current portion of long-term debt
 
6,656

 
6,656

Long-term debt (less current portion)
 
$
390,825

 
$
392,487

Fair value of long-term debt *
 
$
399,241

 
$
396,576


* 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 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 $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 June 30, 2016, we were not required to make additional principal payments based on excess cash flow. 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 June 30, 2016 and December 31, 2015, the interest rate was 3.50% on the term loan B. The weighted-average interest rate on borrowings was 3.50% and 3.37% for the six months ended June 30, 2016 and 2015, respectively.

Scheduled principal payments on the term loan at June 30, 2016 are: $2.0 million for the remainder of 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 June 30, 2016 and December 31, 2015, we had outstanding letters of credit totaling $0.8 million.

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 June 30, 2016
 
As of December 31, 2015
 
 
Notional amount
 
Fair value
 
Notional amount
 
Fair value
(in thousands)
 
 
Asset
 
Liability (1)
 
 
Asset
 
Liability (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Undesignated derivatives:
 
 
 
 
 
 
 
 
 
 
 
 
   Interest rate swap
 
$
75,000

 
$

 
$
235

 
$
75,000

 
$

 
$
299


(1) Balance recorded as other liabilities in Condensed Consolidated Balance Sheets
    
Upon refinancing our term loan B 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.

 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in thousands)
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
Amounts reclassified from accumulated OCL, gain
 
$
96

 
$
96

 
$
192

 
$
192

Gain (loss) on derivative
 
77

 
64

 
64

 
(110
)

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.


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The following tables set forth our assets and liabilities that are measured at fair value on a recurring basis at June 30, 2016 and December 31, 2015:
 
 
As of June 30, 2016
(in thousands)
 
Total
 
Level 1
 
Level 2
 
Level 3
 
 
 
 
 
 
 
 
 
Assets/(Liabilities):
 
 
 
 
 
 
 
 
  Cash equivalents
 
$
5,000

 
$
5,000

 
$

 
$

  Interest rate swap
 
(235
)
 

 
(235
)
 


 
 
As of December 31, 2015
(in thousands)
 
Total
 
Level 1
 
Level 2
 
Level 3
 
 
 
 
 
 
 
 
 
Assets/(Liabilities):
 
 
 
 
 
 
 
 
  Cash equivalents
 
$
5,000

 
$
5,000

 
$

 
$

  Interest rate swap
 
(299
)
 

 
(299
)
 


11. Other Liabilities
Other liabilities consisted of the following:
(in thousands)
 
As of 
 June 30, 
 2016
 
As of 
 December 31, 
 2015
 
 
 
 
 
Employee compensation and benefits
 
$
18,138

 
$
16,808

Liability for pension benefits
 
225,297

 
221,965

Liabilities for uncertain tax positions
 
3,437

 
3,492

Other
 
20,332

 
25,302

Other liabilities (less current portion)
 
$
267,204

 
$
267,567


12. 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)
 
2016
 
2015
 
 
 
 
 
Other changes in certain working capital accounts, net
 
 
 
 
Accounts and notes receivable
 
$
(19,342
)
 
$
(24,368
)
Transition services receivable, net
 

 
(17,889
)
Income taxes receivable/payable, net
 
3,466

 
(14,193
)
Accounts payable
 
472

 
(14,124
)
Accrued employee compensation and benefits
 
(7,244
)
 
260

Other accrued liabilities
 
(2,910
)
 
(7,684
)
Other, net
 
(4,335
)
 
(3,875
)
Total
 
$
(29,893
)
 
$
(81,873
)

13. Employee Benefit Plans

We sponsor two noncontributory defined benefit pension plans covering certain Scripps employees that began employment prior to June 30, 2008, as well as certain former Journal Communications, Inc. ("Journal") employees. We also have two non-qualified Supplemental Executive Retirement Plans ("SERPs") covering Scripps employees and certain former Journal employees. Both of the defined benefit plans and the SERPs have frozen the accrual of future benefits.

F-15



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 were determined based upon the employee’s age, compensation and years of service, ended in 2015.

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)
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
Interest cost
 
$
6,770

 
$
8,179

 
$
13,540

 
$
14,628

Expected return on plan assets, net of expenses
 
(4,599
)
 
(6,624
)
 
(9,196
)
 
(11,709
)
Amortization of actuarial loss
 
997

 
1,204

 
1,995

 
2,336

Curtailment
 

 
1,080

 

 
1,080

Total for defined benefit plans
 
3,168

 
3,839


6,339


6,335

Multi-employer plans
 
42

 
38

 
85

 
97

SERP
 
281

 
281

 
560

 
547

Defined contribution plans
 
2,086

 
2,360

 
4,274

 
5,711

Net periodic benefit cost
 
5,577

 
6,518

 
11,258

 
12,690

Allocated to discontinued operations
 

 

 

 
(1,096
)
Net periodic benefit cost — continuing operations
 
$
5,577


$
6,518


$
11,258


$
11,594


We contributed $0.5 million to fund current benefit payments for our SERPs and $1.2 million to our defined benefit pension plans during the six months ended June 30, 2016. We anticipate contributing an additional $0.6 million to fund the SERP’s benefit payments during the remainder of 2016. Additionally, we expect to contribute $5 million to $10 million for our qualified defined benefit pension plans in 2016.

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 Spanish-language affiliates. Our television stations reach approximately 18% of the nation’s television households. Television stations earn revenue primarily from the sale of advertising time to local, national and political 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, an over-the-top ("OTT") video news service, Cracked, the multi-platform humor and satire brand, 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 shared services, to our business segments. The allocations are generally amounts agreed upon by management,

F-16


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.


F-17


Information regarding our business segments is as follows:
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in thousands)
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
Segment operating revenues:
 
 
 
 
 
 
 
 
Television
 
$
191,745


$
167,394

 
$
371,649

 
$
281,612

Radio
 
18,183


19,413

 
32,786

 
19,413

Digital
 
15,207

 
8,602

 
27,533

 
14,837

Syndication and other
 
2,682


2,725

 
5,347

 
5,295

Total operating revenues
 
$
227,817

 
$
198,134

 
$
437,315

 
$
321,157

Segment profit (loss):
 
 
 
 
 
 
 
 
Television
 
$
53,298

 
$
44,596

 
$
94,985

 
$
66,650

Radio
 
3,903

 
4,908

 
6,046

 
4,908

Digital
 
(4,715
)
 
(4,917
)
 
(7,848
)
 
(9,571
)
Syndication and other
 
(1,045
)
 
(1,062
)
 
(152
)
 
(657
)
Shared services and corporate
 
(9,874
)
 
(11,507
)
 
(24,166
)
 
(25,043
)
Defined benefit pension plan expense
 
(3,449
)
 
(4,120
)
 
(6,899
)
 
(6,806
)
Acquisition and related integration costs
 

 
(29,973
)
 
(578
)
 
(32,747
)
Depreciation and amortization of intangibles
 
(14,786
)
 
(13,366
)
 
(29,197
)
 
(21,661
)
Losses, net on disposal of property and equipment
 
(22
)
 
(215
)
 
(18
)
 
(379
)
Interest expense
 
(4,432
)
 
(4,225
)
 
(9,011
)
 
(6,277
)
Miscellaneous, net
 
(458
)
 
387

 
(649
)
 
(1,049
)
Income (loss) from continuing operations before income taxes
 
$
18,420

 
$
(19,494
)
 
$
22,513

 
$
(32,632
)
Depreciation:
 
 
 
 
 
 
 
 
Television
 
$
7,932

 
$
7,238

 
$
15,397

 
$
12,624

Radio
 
543

 
549

 
1,080

 
549

Digital
 
54

 
132

 
108

 
262

Syndication and other
 
65

 
66

 
129

 
129

Shared services and corporate
 
334

 
619

 
870

 
1,227

Total depreciation
 
$
8,928

 
$
8,604

 
$
17,584

 
$
14,791

Amortization of intangibles:
 
 
 
 
 
 
 
 
Television
 
$
4,240

 
$
4,262

 
$
8,479

 
$
6,150

Radio
 
265

 
280

 
530

 
280

Digital
 
1,014

 
220

 
1,927

 
440

Shared services and corporate
 
339

 

 
677

 

Total amortization of intangibles
 
$
5,858

 
$
4,762

 
$
11,613

 
$
6,870

Additions to property and equipment:
 
 
 
 
 
 
 
 
Television
 
$
6,519

 
$
5,802

 
$
9,630

 
$
7,743

Radio
 
83

 
16

 
316

 
16

Digital
 
13

 

 
17

 

Syndication and other
 
26

 
15

 
41

 
69

Shared services and corporate
 
266

 
633

 
324

 
943

Total additions to property and equipment
 
$
6,907

 
$
6,466

 
$
10,328

 
$
8,771


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


F-18


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 $18.7 million of shares at prices ranging from $14.71 to $19.51 per share during the first six months of 2016. For the six months ended June 30, 2015, we repurchased $2.7 million of shares at prices ranging from $21.60 to $24.94 per share. At June 30, 2016, $65.1 million remained 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 June 30, 2016
(in thousands)
 
Gains and Losses on Derivatives
 
Defined Benefit Pension Items
 
Other
 
Total
 
 
 
 
 
 
 
 
 
Beginning balance, March 31, 2016
 
$
(183
)
 
$
(89,098
)
 
$
173

 
$
(89,108
)
  Other comprehensive income before reclassifications
 

 

 

 

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

 

 

 
59

     Actuarial gain (loss), net of tax of $397 (b)
 

 
640

 
(7
)
 
633

Net current-period other comprehensive income (loss)
 
59

 
640

 
(7
)
 
692

Ending balance, June 30, 2016
 
$
(124
)
 
$
(88,458
)
 
$
166

 
$
(88,416
)

 
 
Three Months Ended June 30, 2015
(in thousands)
 
Gains and Losses on Derivatives
 
Defined Benefit Pension Items
 
Other
 
Total
 
 
 
 
 
 
 
 
 
Beginning balance, March 31, 2015
 
$
(419
)
 
$
(125,120
)
 
$
(87
)
 
$
(125,626
)
  Other comprehensive income before reclassifications
 

 

 

 

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

 

 

 
59

     Actuarial gain (loss), net of tax of $(1,669) (b)
 

 
(2,716
)
 
84

 
(2,632
)
Net current-period other comprehensive income (loss)
 
59

 
(2,716
)
 
84

 
(2,573
)