10-K 1 ssp-20161231x10k.htm 10-K Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

þ
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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
Title of each class
Securities registered pursuant to Section 12(b) of the Act:
 
Name of each exchange on which registered
New York Stock Exchange
Class A Common shares, $.01 par value
 
 
 
 
 
Securities registered pursuant to Section 12(g) of the Act:
 
 
Not applicable
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes o No þ
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
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
The aggregate market value of Class A Common shares of the registrant held by non-affiliates of the registrant, based on the $15.84 per share closing price for such stock on June 30, 2016, was approximately $912,954,000. All Class A Common shares beneficially held by executives and directors of the registrant and descendants of Edward W. Scripps have been deemed, solely for the purpose of the foregoing calculation, to be held by affiliates of the registrant. There is no active market for our Common Voting shares.
As of January 31, 2017, there were 70,021,010 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.
Certain information required for Part III of this report is incorporated herein by reference to the proxy statement for the 2017 annual meeting of shareholders.
 



Index to The E. W. Scripps Company Annual Report
on Form 10-K for the Year Ended December 31, 2016
Item No.
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2


As used in this Annual Report on Form 10-K, 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.
Additional Information
Our Company website is http://www.scripps.com. Copies of all of our SEC filings filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge on this website as soon as reasonably practicable after we electronically file the material with, or furnish it to, the SEC. Our website also includes copies of the charters for our Compensation, Nominating & Governance and Audit Committees, our Corporate Governance Principles, our Insider Trading Policy, our Ethics Policy and our Code of Ethics for the CEO and Senior Financial Officers. All of these documents are also available to shareholders in print upon request or by request via e-mail to secretary@scripps.com.
Forward-Looking Statements
Our Annual Report on Form 10-K contains certain forward-looking statements related to our businesses. We base our forward-looking statements on our current expectations. Forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from the expectations expressed in the forward-looking statements. A detailed discussion of principal risks and uncertainties which may cause actual results and events to differ materially from such forward-looking statements is included in the section titled “Risk Factors”. The words “believe,” “expect,” “anticipate,” “estimate,” “intend” and similar expressions identify forward-looking statements. You should evaluate our forward-looking statements, which are as of the date of this filing, with the understanding of their inherent uncertainty. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of the statement.

3


PART I
Item 1.
Business
We are an 138-year-old media enterprise with interests in television and radio broadcasting, as well as local and national digital media brands. Founded in 1878, our motto is "Give light and the people will find their own way." Our mission is to do well by doing good — providing value to customers, employees and owners by informing, engaging and empowering those we serve. We serve audiences and businesses through a portfolio of television, radio and digital media brands. Scripps is one of the nation’s largest independent TV station ownership groups, with 33 television stations in 24 markets and a reach of nearly one in five U.S. television households. We have affiliations with all of the "Big 4" television networks. We also own 34 radio stations in eight markets. We operate an expanding collection of local and national digital journalism and information businesses including our podcast business, Midroll, the multi-platform humor and satire brand, Cracked, and over-the-top ("OTT") video news service, Newsy. We also produce television programming, run an award-winning investigative reporting newsroom in Washington, D.C., and serve as the longtime steward of one of the nation's largest, most successful and longest-running educational program, the Scripps National Spelling Bee. For a full listing of our media companies and their associated websites, visit http://www.scripps.com.

On April 1, 2015, Scripps and Journal Communications, Inc. ("Journal") closed the merger of their broadcast operations and spin-off of their newspaper businesses into a separate publicly traded company. Upon completion of the transactions, Scripps shareholders received 0.25 shares of common stock of Journal Media Group for each share of Scripps stock. A $60 million special cash dividend, which was approximately $1.00 per share, was also paid to the Scripps shareholders. Journal shareholders received 0.195 shares of common stock of Journal Media Group and 0.5176 class A common shares of Scripps for each share of Journal stock.

We have a commitment to developing our digital media business and have combined all of our digital initiatives into a single organization. Under the direction of our digital leadership, this focus allows us to find new and efficient platforms for bringing together advertisers and audiences.

We continued the expansion of our digital business through two acquisitions in 2016. 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. This acquisition provides an opportunity to expand our OTT footprint for both video and audio. The purchase price was $39 million in cash. On June 6, 2016 we acquired Stitcher, a popular podcast listening service which facilitates discovery and streaming for more than 65,000 podcasts for a $4.5 million cash purchase price.

On July 22, 2015, we acquired Midroll Media, a company that creates original podcasts and operates a network that sells advertising for more than 200 shows, including “WTF with Marc Maron" and "Comedy Bang! Bang!” The purchase price was $50 million in cash, plus a $10 million earnout provision.

On June 16, 2014, we acquired two television stations owned by Granite Broadcasting Corporation for $110 million in cash. The acquisition included an ABC-affiliated station in Buffalo and a MyNetworkTV affiliate in Detroit that is now operated as a duopoly with our ABC affiliate.

On January 1, 2014, we acquired Media Convergence Group, which operates as Newsy, a video news provider, for $35 million in cash. Newsy adds a new dimension to our video news strategy with a storytelling approach, specifically geared toward OTT audiences.
Financial information for each of our business segments can be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Notes to Consolidated Financial Statements of this Form 10-K.

4


TELEVISION
Scripps has operated broadcast television stations since 1947, when it launched Ohio’s first television station, WEWS, in Cleveland. Today, our television station group reaches approximately 18% of the nation’s television households and 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. In five of our markets, we operate both television and radio stations. Multiple properties in the same market help us to better serve advertisers, viewers and listeners and help improve our operating efficiencies.
We produce high-quality news, information and entertainment content that informs and engages local and national communities. We distribute our content on four platforms broadcast, Internet, smartphones and tablets. It is our objective to develop content and applications designed to enhance the user experience on each of those platforms. Our ability to cover our communities across multiple digital platforms allows us to expand our audiences beyond our traditional broadcast television boundaries.
We believe the most critical component of our product mix is compelling news content, which is an important link to the community and aids our stations' efforts to retain and expand viewership. We have trained employees in our news departments to be multi-media journalists, allowing us to pursue a “hyper-local” strategy by having more reporters covering local news for our over-the-air and digital platforms.
In addition to news programming, our television stations run network programming, syndicated programming and internally produced programming. We have implemented a strategy to rely less on expensive syndicated programming and to replace it with internally developed programming. We believe this strategy has the potential to improve our television division's financial performance for years to come. We currently air three original shows, The List, The Now, and RightThisMinute. The List is an Emmy award winning infotainment show. The Now is a news show designed to take the audience into a deeper dive of the day's events. RightThisMinute is a daily news and entertainment program featuring viral videos. We wholly own The List and The Now and are a partner in RightThisMinute. These three shows have replaced expensive syndicated content in the markets in which they air. For the 2016-2017 season, The List was available in 45 markets reaching viewers in approximately 28 percent of the country, The Now was available in more than 10 of our markets and RightThisMinute reached 94% of the nation's television households.

5


Information concerning our full-power television stations, their network affiliations and the markets in which they operate is as follows:
Station
 
Market
 
Network
Affiliation/
DTV
Channel
 
Affiliation Agreement
Expires in
 
FCC
License
Expires
in
 
Market Rank (1)
 
Stations
in
Market (2)
 
Percentage
of U.S.
Television
Households
in Mkt (3)
 
Average
Audience
Share (4)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
WFTS-TV
 
Tampa, Ch. 28
 
ABC/29
 
2019
 
2021
 
11
 
12
 
1.7%
 
5
KNXV-TV
 
Phoenix, Ch. 15
 
ABC/15
 
2019
 
2022
 
12
 
13
 
1.7%
 
5
WXYZ-TV
 
Detroit, Ch. 7
 
ABC/41
 
2019
 
2021
 
13
 
8
 
1.6%
 
8
WMYD-TV
 
Detroit, Ch. 20
 
MY/21
 
2018
 
2021
 
13
 
8
 
1.6%
 
2
KMGH-TV
 
Denver, Ch. 7
 
ABC/7
 
2019
 
2022
 
17
 
11
 
1.4%
 
5
WEWS-TV
 
Cleveland, Ch. 5
 
ABC/15
 
2019
 
2021
 
19
 
8
 
1.3%
 
7
WMAR-TV
 
Baltimore, Ch. 2
 
ABC/38
 
2019
 
2020
 
26
 
6
 
1.0%
 
4
WRTV-TV
 
Indianapolis, Ch. 6
 
ABC/25
 
2019
 
2021
 
27
 
9
 
1.0%
 
6
KGTV-TV
 
San Diego, Ch. 10
 
ABC/10
 
2019
 
2022
 
28
 
11
 
0.9%
 
5
WTVF-TV
 
Nashville, Ch. 5
 
CBS/25
 
2018
 
2021
 
29
 
11
 
0.9%
 
14
KSHB-TV
 
Kansas City, Ch. 41
 
NBC/42
 
2018
 
2022
 
33
 
8
 
0.8%
 
6
KMCI-TV
 
Lawrence, Ch. 38
 
Ind./41
 
N/A
 
2022
 
33
 
8
 
0.8%
 
2
WTMJ-TV
 
Milwaukee, Ch. 4
 
NBC/28
 
2018
 
2021
 
35
 
16
 
0.8%
 
8
WCPO-TV
 
Cincinnati, Ch. 9
 
ABC/22
 
2019
 
2021
 
36
 
6
 
0.8%
 
7
WPTV-TV
 
W. Palm Beach, Ch. 5
 
NBC/12
 
2018
 
2021
 
38
 
7
 
0.7%
 
10
KTNV-TV
 
Las Vegas, Ch. 13
 
ABC/13
 
2017
 
2022
 
40
 
18
 
0.7%
 
5
WKBW-TV
 
Buffalo, Ch. 7
 
ABC/38
 
2018
 
2023
 
53
 
8
 
0.5%
 
6
KJRH-TV
 
Tulsa, Ch. 2
 
NBC/8
 
2018
 
2022
 
58
 
10
 
0.5%
 
6
WFTX-TV
 
Fort Myers/Naples, Ch. 4
 
FOX/35
 
2019
 
2021
 
61
 
10
 
0.5%
 
5
WGBA-TV
 
Green Bay/Appleton, Ch. 26
 
NBC/41
 
2018
 
2021
 
68
 
8
 
0.4%
 
7
WACY-TV
 
Green Bay/Appleton, Ch. 32
 
MY/27
 
2017
 
2021
 
68
 
8
 
0.4%
 
1
KGUN-TV
 
Tucson, Ch. 9
 
ABC/9
 
2017
 
2022
 
71
 
15
 
0.4%
 
6
KWBA-TV
 
Tucson, Ch. 58
 
CW/44
 
2021
 
2022
 
71
 
15
 
0.4%
 
1
KMTV-TV
 
Omaha, Ch. 3
 
CBS/45
 
2020
 
2022
 
74
 
11
 
0.4%
 
8
KIVI-TV
 
Boise, Ch. 6
 
ABC/24
 
2017
 
2022
 
106
 
13
 
0.2%
 
6
WSYM-TV
 
Lansing, Ch. 47
 
FOX/38
 
2019
 
2021
 
113
 
7
 
0.2%
 
7
KERO-TV
 
Bakersfield, Ch. 23
 
ABC/10
 
2019
 
2022
 
126
 
4
 
0.2%
 
5
All market and audience data is based on the November 2016 Nielsen survey, live viewing plus 7 days of viewing on DVR.

(1)
Market rank represents the relative size of the television market in the United States.
(2)
Stations in Market represents stations within the Designated Market Area per the Nielsen survey excluding public broadcasting stations, satellite stations, and low-power stations.
(3)
Percentage of U.S. Television Households in Market represents the number of U.S. television households in Designated Market Area as a percentage of total U.S. television households.
(4)
Average Audience Share represents the number of television households tuned to a specific station from 6 a.m. to 2 a.m. Monday-Sunday, as a percentage of total viewing households in the Designated Market Area.

Historically, we have been successful in renewing our FCC licenses.
We operate five low-power stations affiliated with the Azteca America network, a Hispanic network producing Spanish-language programming. The stations are clustered around our California and Denver stations. We also operate a low-power station affiliated with ABC in Twin Falls, ID.


6


Revenue cycles and sources

Advertising

We sell advertising to local, national and political customers. The sale of local, national and political commercial spots accounted for 71% of our television segment’s revenues in 2016. Pricing of advertising is based on audience size and share, the demographics of our audiences and the demand for our limited inventory of commercial time. Our television stations compete for advertising revenues with other sources of local media, including competitors’ television stations in the same markets, radio stations, cable television systems, newspapers, digital platforms and direct mail.

Local advertising time is sold by each station’s local sales staff who call upon advertising agencies and local businesses, which typically include advertisers such as car dealerships, retail stores and restaurants. We seek to attract new advertisers to our television stations and to increase the amount of advertising time sold to existing local advertisers by relying on experienced local sales forces with strong community ties, producing news and other programming with local advertising appeal and sponsoring or promoting local events and activities.

National advertising time is generally sold through national sales representative firms which call upon advertising agencies, whose clients typically include automobile manufacturers and dealer groups, telecommunications companies and national retailers.

Political advertising is generally sold through our Washington D.C. sales office. Advertising is sold to presidential, gubernatorial, senate and house of representative candidates, as well as for state and local issues. It is also sold to Political Action Groups or other advocacy groups.

Cyclical factors influence revenues from our core advertising categories. Some of the cycles are periodic and known well in advance, such as election campaign seasons and special programming events (e.g. the Olympics or the Super Bowl). For example, our NBC affiliates benefit from incremental advertising demand from the coverage of the Olympics. Economic cycles are less predictable and beyond our control.

Advertising revenues increase significantly during even-numbered years when local, state and federal elections occur. In addition, every four years, political spending is typically elevated further due to the advertising preceding the presidential election. Because of the political election cyclicality, there has been a significant difference in our operating results when comparing the performance of even-numbered years to odd numbered years. Additionally, our operating results are impacted by the number and importance of individual political races and issues discussed.

Due to increased demand in the spring and holiday seasons, the second and fourth quarters normally have higher advertising revenues than the first and third quarters.

Retransmission Revenues

We earn revenues from retransmission consent agreements with multi-channel video programming distributors ("MVPDs") in our markets. Retransmission revenues were 28% of our television segment's revenues in 2016. The MVPDs are cable operators and satellite carriers who pay us to offer our programming to their customers. The revenue we receive is typically based on the number of subscribers the MVPD has in our local market.

Prior to the 2008 spin-off of Scripps Networks Interactive (SNI), we granted retransmission rights to MVPDs in exchange for carriage of cable networks. Pursuant to an agreement entered into as part of the spin-off, SNI currently pays us an annual fee for carriage of our broadcast signals by Comcast, limited to the television stations owned prior to the 2008 spin-off. The fees paid by SNI are substantially less than current retransmission fees that would be paid by MVPDs. This agreement with SNI expires at the end of 2019, when we expect to renew our retransmission agreement with Comcast for all of our current markets.
 
There are approximately 17 million subscribers to MVPD services in our markets. Our current subscriber count is based on information received this year upon renewals with certain MVPD providers who previously were not required to provide such information while the retransmission rights were tied to carriage of SNI programming. We do not believe there has been a meaningful year-over-year change in the number of subscribers in our markets.

Our retransmission consent agreements with MVPD providers expire at various dates through 2020. The approximate number of subscribers to those services by year of expiration is as follows: 1 million in 2017, 6 million in 2018, 7 million in

7


2019 and 3 million in 2020. We expect our retransmission consent agreements with MVPD providers to be renewed upon expiration.

Other

FCC rules allow broadcasters to transmit additional digital channels within the spectrum allocated to each FCC license holder. This provides viewers with additional programming alternatives at no additional cost to them. With these additional channels we broadcast our own programs or programming of other providers such as Grit, Laff, Escape and Bounce. We may consider other alternative programming formats that we could air using our spectrum with the goal of achieving higher profits and community service.

In addition to selling commercials during our programming, we also offer marketing opportunities for our business customers, including sponsorships and community events.
Expenses
Employee costs accounted for 46% of segment costs and expenses in 2016.
We have been centralizing certain functions, such as master control, traffic, graphics and political advertising, at company-owned hubs that do not require a presence in the local markets. This approach enables each of our stations to focus local resources on the creation of content and revenue-producing activities.

Programming costs, which include network affiliation fees, syndicated programming and shows produced for us or in partnership with others, were 29% of total segment costs and expenses in 2016.

Our network-affiliated stations pay the networks for the programming that is supplied to us in various dayparts. Each affiliation agreement provides the affiliated station with the right to broadcast all programs transmitted by the network. In exchange, the network receives affiliation fees and has the right to sell a substantial majority of the advertising time during these broadcasts. We expect our network affiliation agreements to be renewed upon expiration.

RADIO
We own 34 radio stations in eight markets. We operate 28 FM stations and six AM stations.
We employ a variety of sales-related and programming strategies to maximize our share of the advertising spending. We have aligned our radio stations in clusters within a market, building each cluster around a lead station. We seek to create unique and differentiated brand positions at each station within a cluster so that we can offer distinct solutions for a variety of advertisers in each of our markets. This approach has allowed us to target our stations' formats and sales efforts to better serve advertisers and listeners, as well as leverage operating expenses to maximize the performance of each station and the cluster.
Our radio stations focus on providing targeted and relevant local programming that is responsive to the interest of the communities in which we serve, strengthening our brand identity and allowing us to provide effective marketing solutions for advertisers by reaching their targeted audiences.
Our Milwaukee radio station, WTMJ-AM, currently maintains exclusive radio broadcast rights for the Green Bay Packers and Milwaukee Brewers and operates a network broadcast for their games.



8


Information concerning our radio stations, their formats and the markets in which they operate is as follows:
Market and Station
 
Format
 
Station Rank in Market (1)
 
Stations in Market (2)
 
FCC License Class (3)
 
FCC License Expires in
 
 
 
 
 
 
 
 
 
 
 
 
Milwaukee, WI
 
 
 
 
 
 
 
 
 
 
 
  WTMJ-AM (4)
 
News/Talk/Sports
 
3t
 
28
 
B
 
2020
 
  WKTI-FM (4)
 
Country
 
13
 
28
 
B
 
2020
Omaha, NE
 
 
 
 
 
 
 
 
 
 
 
  KEZO-FM (4)
 
Rock
 
5t
 
19
 
C0
 
2021
 
  KKCD-FM (4)
 
Classic Rock
 
8t
 
19
 
C2
 
2021
 
  KSRZ-FM (4)
 
Adult Contemporary
 
5t
 
19
 
C
 
2021
 
  KXSP-AM
 
Sports
 
17t
 
19
 
B
 
2021
 
  KQCH-FM (4)
 
Contemporary Hits
 
4
 
19
 
C
 
2021
Tucson, AZ
 
 
 
 
 
 
 
 
 
 
 
  KFFN-AM
 
Sports (Simulcast)
 
20t
 
30
 
C
 
2021
 
  KMXZ-FM (4)
 
Adult Contemporary
 
3
 
30
 
C
 
2021
 
  KQTH-FM (4)
 
News/Talk
 
20t
 
30
 
A
 
2021
 
  KTGV-FM
 
Rhythmic AC
 
12t
 
30
 
C2
 
2021
Knoxville, TN
 
 
 
 
 
 
 
 
 
 
 
  WCYQ-FM
 
Country
 
8
 
24
 
A
 
2020
 
  WWST-FM (4)
 
Contemporary Hits
 
4
 
24
 
C1
 
2020
 
  WKHT-FM (4)
 
Contemporary Hits/Rhythmic
 
5
 
24
 
A
 
2020
 
  WNOX-FM (4)
 
Classic Hits
 
9t
 
24
 
C
 
2020
Boise, ID
 
 
 
 
 
 
 
 
 
 
 
  KJOT-FM
 
Variety Rock
 
11t
 
23
 
C
 
2021
 
  KQXR-FM
 
Active Rock
 
6t
 
23
 
C1
 
2021
 
  KTHI-FM
 
Classic Hits
 
11t
 
23
 
C
 
2021
 
  KRVB-FM
 
Adult Alternative
 
17t
 
23
 
C
 
2021
Wichita, KS
 
 
 
 
 
 
 
 
 
 
 
  KFDI-FM (4)
 
Country
 
1
 
20
 
C
 
2021
 
  KICT-FM (4)
 
Rock
 
3t
 
20
 
C1
 
2021
 
  KFXJ-FM (4)
 
Classic Rock
 
7t
 
20
 
C2
 
2021
 
  KFTI-AM
 
Classic Country
 
17t
 
20
 
B
 
2021
 
  KYQQ-FM
 
Regional Mexican
 
12t
 
20
 
C0
 
2021
Springfield, MO
 
 
 
 
 
 
 
 
 
 
 
  KSGF-AM & FM
 
News/Talk (Simulcast)
 
8t
 
18
 
B/C3
 
2021
 
  KTTS-FM
 
Country
 
1
 
18
 
C
 
2021
 
  KSPW-FM
 
Contemporary Hits
 
3t
 
18
 
C2
 
2021
 
  KRVI-FM
 
Adult Hits
 
3t
 
18
 
C3
 
2021
Tulsa, OK
 
 
 
 
 
 
 
 
 
 
 
  KFAQ-AM (4)
 
News/Talk
 
15t
 
27
 
A
 
2021
 
  KVOO-FM (4)
 
Country
 
8t
 
27
 
C
 
2021
 
  KXBL-FM (4)
 
Classic Country
 
5t
 
27
 
C1
 
2021
 
  KHTT-FM
 
Contemporary Hits
 
8t
 
27
 
C0
 
2021
 
  KBEZ-FM
 
Classic Hits
 
8t
 
27
 
C0
 
2021
(1)
Station Market Rank equals the ranking of each station in its market, according to the Fall 2016 Nielsen audio survey. The diary ranking is determined based on the estimated share of persons 12 years and older and the Portable People Meter ("PPM") ranking is based on the estimated share of persons six years and older listening during an average 15-minute increment (also known as "average quarterly hour," or "AQH," share) occurring Monday-Sunday between 6:00 a.m. and midnight. When the rank is followed by the letter "t" it means tied.
(2)
Includes stations qualified to be reported in the Fall 2016 Arbitron ratings book and that reported at least a 0.1 average rating.
(3)
The FCC license class is a designation for the type of license based upon the radio broadcast service area according to radio broadcast rules compiled in the Code of Federal Regulations.
(4)
Stations that are broadcasting in digital.

9


Revenue sources
Advertising
The primary source of revenue for our radio stations is from the sale of advertising to local advertisers. We also sell non-traditional advertising, which includes initiatives to attract new local advertisers, such as the creation of new content and programs that combine television or radio with digital, national and political advertising. Although it is not as significant as in the television segment, our radio stations may benefit from political advertising in even numbered years. 
We strive to maximize revenue dollars through the broadcast of commercials without diminishing listening levels. While the number of advertisements broadcast during a given time period may vary, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year, unless there has been a format change.
Other
Other revenue includes the sports affiliation fees we receive at WTMJ-AM for the network broadcast of the Green Bay Packers and Milwaukee Brewers. We also offer marketing opportunities for our customers, including sponsorships and community events.
Expenses

Employee costs accounted for 50% of segment costs and expenses in 2016.

Programming costs, which are comprised primarily of music license fees and sports rights fees, were 20% of total segment costs and expenses in 2016. We pay music license fees to performing rights organizations which allows us to broadcast music. The sports rights fees include the costs for our exclusive rights to broadcast the Green Bay Packers and Milwaukee Brewers.

Federal Regulation of Broadcasting Broadcast television and radio are subject to the jurisdiction of the FCC pursuant to the Communications Act of 1934, as amended (“Communications Act”). The Communications Act prohibits the operation of broadcast stations except in accordance with a license issued by the FCC and empowers the FCC to revoke, modify and renew broadcast licenses, approve the transfer of control of any entity holding such a license, determine the location of stations, regulate the equipment used by stations and adopt and enforce necessary regulations. As part of its obligation to ensure that broadcast licensees serve the public interest, the FCC exercises limited authority over broadcast programming by, among other things, requiring certain children's television programming and limiting commercial content therein, regulating the sale of political advertising and the distribution of emergency information, and restricting indecent programming. The FCC also requires television broadcasters to close caption their programming for the benefit of persons with hearing impairment and to ensure that any of their programming that is later transmitted via the Internet is captioned. Network-affiliated television broadcasters in larger markets must also offer audio narration of certain programming for the benefit of persons with visual impairments. Reference should be made to the Communications Act, the FCC’s rules and regulations, and the FCC’s public notices and published decisions for a fuller description of the FCC’s extensive regulation of broadcasting.
Broadcast licenses are granted for a term of up to eight years and are renewable upon request, subject to FCC review of the licensee's performance. All the Company’s applications for license renewal during the current renewal cycle have been granted for full terms. While there can be no assurance regarding the renewal of our broadcast licenses, we have never had a license revoked, have never been denied a renewal, and all previous renewals have been for the maximum term.
FCC regulations govern the ownership of radio and television stations and other media. Under the FCC's current rules, a license for a television station will generally not be granted or renewed if the grant of the license would result in (i) the applicant owning or controlling more than one television station, or in some markets under certain conditions, more than two television stations in the same market (the “television duopoly rule”), or (ii) the applicant owning or controlling television stations whose total national audience reach exceeds 39% of all television households. The Company enjoys a waiver of this television duopoly rule in the Green Bay, Wisconsin market.
A television station that provides more than 15% of another in-market television station’s weekly programming will be deemed to have an attributable interest in that station that subjects the stations to the FCC’s ownership limits. The FCC in 2016 reaffirmed a 2014 decision to modify its ownership rules so as to impose this duopoly rule's restriction on separately-owned television stations within a market that engage in joint advertising sales. Station WSYM-TV, Lansing, Michigan, is a party to such a joint advertising agreement with a local station that would be subject to this requirement except that, in accord with a congressional directive, the FCC’s order grants such stations a “grandfathered” status that will permit continuation of these

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agreements without attribution through 2025. This order also imposed on local stations that share facilities or services such as program production an obligation to disclose these agreements in their public files. Each of stations WPTV-TV, West Palm Beach, Florida, and KIVI-TV, Nampa (Boise), Idaho, is a party to a shared services agreement with another local station pursuant to which it provides, among other services, less than 15% of the other station’s weekly programming. This disclosure requirement, however, is not yet in effect, and the entire 2016 ownership order is now subject to both reconsideration by the FCC and review by an appellate court.
The FCC’s local radio ownership rule limits the number of radio stations an entity may own in a given market depending on the size of that radio market. Specifically, in a radio market with 45 or more commercial and noncommercial radio stations, a party may own or control up to eight commercial radio stations, not more than five of which are in the same service (AM or FM). In a radio market with between 30 and 44 radio stations, a party may own or control up to seven commercial radio stations, not more than four of which are in the same service. In a radio market with between 15 and 29 radio stations, a party may own or control up to six commercial radio stations, not more than four of which are in the same service. In a radio market with 14 or fewer radio stations, a party may own or control up to five commercial radio stations, not more than three of which are in the same service, except that a party may not own or control more than 50% of the stations in the market, except for combinations of one AM and one FM station. The FCC relies on Nielsen to define the radio market in most areas of the country, but for stations outside a Nielsen-defined market this definition depends upon a technical analysis of the stations’ service areas. A radio station that provides more than 15% of another in-market station’s weekly programming or sells more than 15% of another in-market station’s weekly advertising will be deemed to have an attributable interest in that station that subjects the stations to the ownership rule limits.
The FCC’s radio-television cross-ownership rule separately limits broadcast ownership, generally allowing: common ownership of one or two television stations and up to six radio stations, or, in certain circumstances, one television station and seven radio stations in any market where at least 20 independent voices would remain after the combination; two television stations and up to four radio stations in a market where at least 10 independent voices would remain after the combination; and one television and one radio station notwithstanding the number of independent voices in the market. A “voice” under this rule generally includes independently owned and locally-received commercial and noncommercial broadcast television and radio stations, significant local newspapers, and one local cable system.
The restrictions imposed by the FCC’s ownership rules may apply to a corporate licensee due to the ownership interests of its officers, directors or significant shareholders. If such parties meet the FCC’s criteria for holding an attributable interest in the licensee, they are likewise expected to comply with the ownership limits, as well as other licensee requirements such as compliance with certain criminal, antitrust, and antidiscrimination laws.
The FCC routinely reviews its ownership rules, and its decisions are then subject to judicial review. We cannot predict the outcome of the ongoing review of the FCC’s most recent reconsideration of these ownership issues or the effect of any FCC revision of these ownership policies on our stations' operations or our business.
In order to provide additional spectrum for mobile broadband and other services, Congress granted the FCC authority to conduct an incentive spectrum auction in which some television broadcasters have agreed to voluntarily give up spectrum in return for a share of the auction proceeds. No Scripps station will be going off-air or relinquishing a current UHF-band allocation for a VHF-band allocation as a result of the auction. Broadcasters are concerned that the FCC’s approach to the post-auction “repacking” of the remaining television stations into the reduced broadcast spectrum may not adequately protect stations’ over-the-air service. Broadcasters also are concerned that the FCC’s post-auction plans do not provide sufficient time to complete the repacking before the sold spectrum will be authorized for wireless use and that there will not be adequate compensation for those stations that are required to change facilities due to repacking. Implementing the post-auction changes in stations' frequencies and tower site locations may be complicated and costly, and stations located near the Canadian and Mexican borders are at particular risk of service loss and difficulty in finding alternative transmitter sites due to the need to coordinate international frequency use. Despite warnings about potential difficulties, such as a lack of available qualified tower crews for the significant number of moves that may be required, the FCC has expressed confidence that adequate time will be available to complete the repacking, and it has imposed a “hard” deadline that could require a station to cease broadcasting on its existing frequency even though an alternative facility is not yet ready to provide its over-the-air service.
The FCC is considering a proposal that would allow broadcasters to voluntarily use a new digital television standard, ATSC 3.0. Broadcasters expect that adoption of this proposal would permit stations to offer enhanced and innovative services coupled with much improved broadcast signal reception--particularly by mobile devices. The new standard, however, is incompatible with existing television receivers and with a station’s ability to continue offering its service via the current digital standard. To avoid loss of service to those viewers who lack a new receiver, stations switching to ATSC 3.0 would be required to arrange for a local station that continues to use the current digital standard to simulcast (on a subchannel) one of the switching station’s free program streams.

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The FCC remains committed to permitting non-broadcast spectrum use in the “white spaces” between television stations' protected service areas despite broadcasters’ concerns about the possibility of harmful interference to their existing service and to the potential for innovative uses of their broadcast spectrum in the future. In connection with the auction process, the FCC has decided to further reduce the spectrum available for television broadcasting by reserving a 6 MHz channel in each market for non-broadcast, unlicensed services (including wireless microphones). The repacking of television broadcast spectrum and the reservation of spectrum in the “broadcast” band for interference-protected non-broadcast services could have a particularly adverse effect on the ability of low-power and translator television stations to offer service since these stations may not be able to find space to operate in the reduced band and they enjoy only “secondary” status that offers no protection from interference caused by a full-power station. We cannot predict the effect of these proceedings on our offering of digital television service or our business.
Broadcast television stations generally enjoy “must-carry” rights on any cable television system defined as “local” with respect to the station. Stations may waive their must-carry rights and instead negotiate retransmission consent agreements with local cable companies. Similarly, satellite carriers, upon request, are required to carry the signal of those television stations that request carriage and that are located in markets in which the satellite carrier chooses to retransmit at least one local station, and satellite carriers cannot carry a broadcast station without its consent. The Company has elected to negotiate retransmission consent agreements with cable operators and satellite carriers for both our network-affiliated stations and our independent stations.
Former FCC Chairman Wheeler announced in 2016 that the Commission would not actively proceed with its rulemaking to reexamine the retransmission consent negotiation process and particularly the standards that may trigger the agency’s intervention to enforce the obligation of the parties to negotiate these agreements in “good faith.” Nevertheless, a related agency proceeding remains open that looks toward the possible elimination of the “network nonduplication” and “syndicated exclusivity” rules that permit broadcasters to enforce certain contractual programming exclusivity rights through the FCC's processes rather than by judicial proceedings. We cannot predict the outcome of these proceedings or their possible impact on the Company.
Other proceedings before the FCC and the courts have reexamined the policies that protect television stations' rights to control the distribution of their programming within their local service areas. For example, the FCC has initiated a rulemaking proceeding on the degree to which an entity relying upon the Internet to deliver video programming should be subject to the regulations that apply to multi-channel video programming distributors (“MVPDs”), such as cable operators and satellite systems. This proceeding raises a variety of issues, including whether some Internet-based distributors might be able to take advantage of MVPDs' statutory copyright licensing rights. We cannot predict the outcome of such proceedings that address the use of new technologies to challenge traditional means of redistributing television broadcast programming or their possible impact on the Company.
Radio station revenues are subject to the regulatory decisions of the Copyright Royalty Board (“CRB”) which sets rates for broadcasters’ royalty payments to music copyright holders for the performance of their works. Whether radio stations should also pay royalties to music performers is a long-standing and controversial topic before Congress. We cannot predict the impact that future decisions of the CRB or Congress with respect to these matters might have upon our radio stations’ revenues or their possible impact on the Company.
During recent years, the FCC has significantly increased the penalties it imposes for violations of its rules and policies. For example, a recent settlement of an investigation involving a single radio station’s failure to broadcast proper sponsorship identification announcements in a series of ads required the licensee to make a payment of over $500,000. Uncertainty continues regarding the scope of the FCC's authority to regulate indecent programming, but the agency has increased its enforcement efforts regarding other programming issues such as broadcasting proper emergency alerts and extending service to persons with disabilities. We cannot predict the effect of the FCC’s expanded enforcement efforts on the Company.

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DIGITAL

Our digital segment includes a collection of local and national digital brands. The local brands consist of our local television and radio station websites, as well as the related smartphone and tablet apps, which earn revenues from advertising sales and related digital advertising products and marketing services. Our local digital sites offer comprehensive local news, information and user-generated content, as well as national content and other content sources. We continue to enhance our online and digital services using features such as long-form text articles in addition to streaming video and audio, to deliver news and information. Many of our journalists routinely produce videos for consumption through our digital platforms and use an array of social media sites, such as Facebook, YouTube and Twitter, to communicate with and build our audiences. We have embraced mobile technology by offering our products on apps available on the Apple, Android, Kindle Fire and Windows platforms. During the fourth quarter of 2016 our local markets served 262 million page views and had an average of 24.9 million unique users; we had approximately 960,000 monthly active users of our local, mobile and tablet apps; and combined, our local websites and mobile products delivered approximately 156 million video views.
The national digital brands compete on emerging platforms and marketplaces where audience and revenue growth are the fastest, such as over-the-top (OTT) audio and video. OTT refers to the delivery of audio, video and other media over the Internet through third parties such as Hulu, Netflix, HBO NOW and Sling TV. Consumers can access the OTT content through internet-connected devices such as computers, gaming consoles (such as PlayStation or Xbox), set-top boxes (such as Roku or Apple TV), smartphones, smart TVs and tablets. A podcast is a digital audio recording, usually part of a themed series, which can be downloaded from the Internet to a media player or computer. Both OTT video and audio-podcasting platforms enable us to expand our reach and number of viewers beyond that of our local audience and also enable us to attract a variety of different advertisers.
Our national digital brands include Cracked, Newsy and Midroll Media (Midroll). Cracked is a multi-platform humor and satire brand which informs and entertains millennial audiences with a website, original digital video, social media and a popular podcast. During 2016, there was an average of 11 million unique visitors per month to Cracked.com and since its acquisition in June of this year, there was an average of 18 million video views per month on YouTube. Additionally, as of the end of 2016, Cracked had 3.8 million Facebook fans. Newsy is an OTT video news service focused on the millennial generation that brings perspective and analysis to reporting on world and national news, including politics, entertainment, science and technology. Newsy's content is distributed on ten platforms providing OTT video services, including Hulu, Roku, Amazon Fire TV, Apple TV, Sling TV and Chromecast. During 2016, Newsy experienced 74% year-over-year video streaming growth and users had an average engagement time of 27 minutes. Another national digital brand, Midroll, is a podcast industry leader that creates original podcasts and operates a network that generates revenue for more than 200 shows, with on-air talent such as Marc Maron and Bill Simmons. Midroll is the parent company of the popular podcast listening platform, Stitcher, and the premium subscription service, Howl, which operates through a smartphone app that makes it easier to find and engage with podcasts. During the fourth quarter of 2016, Midroll's podcasts were downloaded an average of 91 million times per month.
Revenue sources
Digital advertising
Our local and national digital operations earn revenue primarily through the sale of advertising to local and national customers. Digital advertising includes fixed-duration campaigns whereby, for a fee, a video preroll, a banner, text or other advertisement appears for a specified period of time; impression-based campaigns where the fee is based on the number of times the advertisement appears in webpages viewed by a user; and click-through campaigns where the fee is based on the number of users who click on an advertisement and are directed to the advertisers’ websites. We use a variety of audience-extension programs to enhance the reach of our websites and garner a larger share of advertising dollars that are spent online.
Another source of advertising revenue comes from our national digital brand Midroll. Midroll earns revenue from the sale of advertisement spots on its original podcasts which it creates and distributes through its owned-and-operated network, Earwolf, as well as on platforms such as the Stitcher app and the Apple iTunes app.
Other
Other revenue sources primarily include digital marketing, podcast agency and subscription services.
We offer our local advertising customers additional marketing services, such as managing their search engine marketing campaigns. Additionally, Midroll acts as a sales and marketing representative by working with advertisers to connect them to a specific podcast based on the advertiser's desired target audience.

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The primary source of subscription revenue comes from Howl, which is a subscription service launched by Midroll in August 2015, where users pay a standard monthly or annual fee for access to premium content and ad-free archived podcast episodes. In December 2016, Midroll launched the Stitcher Premium subscription service, which includes Howl, on the Stitcher platform.
Expenses

Employee costs accounted for 60% of segment costs and expenses in 2016.

Other segment costs and expenses in 2016 were attributable to news coverage costs, network and digital hosting costs and other miscellaneous expenses.

Syndication and Other
Syndication and other primarily includes the syndication of news features and comics and other features for the newspaper industry.

Employees
As of December 31, 2016, we had approximately 4,100 full-time equivalent employees, of whom approximately 3,000 were with television, 400 with radio and 500 with our digital operations. Various labor unions represent approximately 450 employees, the majority of which are in television. We have not experienced any work stoppages at our current operations since 1985. We consider our relationships with our employees to be satisfactory.

Item 1A.
Risk Factors
For an enterprise as large and complex as ours, a wide range of factors could materially affect future developments and performance. The most significant factors affecting our operations include the following:

Risks Related to Our Businesses

We expect to derive the majority of our revenues from marketing and advertising spending, which is affected by numerous factors. Declines in advertising revenues will adversely affect the profitability of our business.
The demand for advertising on television and radio stations is sensitive to a number of factors, both locally and nationally, including the following:
The advertising and marketing spending by customers can be subject to seasonal and cyclical variations and are likely to be adversely affected during economic downturns.

Television and radio advertising revenues in even-numbered years benefit from political advertising, which is affected by campaign finance laws, as well as the competitiveness of specific political races in the markets where our television and radio stations operate.

Continued consolidation and contraction of local advertisers in our local markets could adversely impact our operating results, given that we expect the majority of our advertising to be sold to local businesses in our markets.

Television audiences continue to fragment in recent years as the broad distribution of cable and satellite television has greatly increased the options available to the public for viewing programming including live sports. Continued fragmentation of television audiences, and the growth of internet programming and streaming services, could adversely impact advertising rates, which will reflect the size and demographics of the audience reached by advertisers through our media businesses.

Television stations have significant exposure to advertising in the automotive, retail and services industries. If advertising within these industries declines and we are unable to secure replacement advertisers, advertising revenues could decline and affect our profitability.


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If we are unable to respond to any or all of these factors, our advertising revenues could decline and affect our profitability.
Programmatic advertising models that allow advertisers to buy audiences at scale or through automated processes may begin to play a more significant role in the local television and radio advertising marketplace, and may cause downward pricing pressure, resulting in a loss of revenue that could materially adversely affect broadcast television operations. 
Several national advertising agencies are employing an automated process known as “programmatic buying” to gain efficiencies and reduce costs related to buying local TV spot advertising. Growth in advertising revenues will rely in part on the ability to maintain and expand relationships with existing and future advertisers. The implementation of a programmatic model, where automation replaces existing pricing and allocation methods, could turn local advertising inventory into a price-driven commodity, reducing the value of these relationships and related revenues. We cannot predict the pace at which programmatic buying will be adopted or utilized in the broadcast industry. Widespread adoption causing downward pricing pressure could result in a loss of revenue and materially adversely affect future broadcast operations.
The growth of direct content-to-consumer delivery channels may fragment our television audiences. This fragmentation could adversely impact advertising rates as well as cause a reduction in the revenues we receive from retransmission consent agreements, resulting in a loss of revenue that could materially adversely affect our television broadcast operations.
We deliver our television programming to our audiences over air and through cable and satellite service providers. Our television audience is being fragmented by the digital delivery of content directly to the consumer audience. Content providers, such as the "Big 4" broadcast networks, cable networks such as HBO and Showtime, and new content developers, distributors and syndicators such as Amazon, Hulu and Netflix, are now able to deliver their programming directly to consumers, over-the-top (“OTT”). The delivery of content directly to a consumer allows them to bypass the programming we deliver, which may impact our audience size. Fragmentation of our audiences could impact the rates we receive from our advertisers. In addition, fewer subscribers of cable and satellite service providers would also impact the revenue we receive from retransmission consent agreements.

Widespread adoption of OTT by our audiences could result in a reduction of our advertising and retransmission revenues and affect our profitability.

Our radio broadcasting stations similarly confront audience fragmentation caused by a proliferation of alternative digital programming services, including mobile services, that could affect their advertising rates.

Our local media businesses operate in a changing and increasingly competitive environment. We will have to continually invest in new business initiatives and modify strategies to maintain our competitive position. Investment in new business strategies and initiatives could disrupt our ongoing business and present risks not originally contemplated.

The profile of television and radio audiences has shifted dramatically in recent years as viewers access news and other content online or through mobile devices and as they spend more discretionary time with social media. While slow and steady declines in audiences have been somewhat offset by growing viewership on digital platforms, digital advertising rates are typically much lower than broadcast advertising rates on a cost-per-thousand basis. This audience shift results in lower profit margins. To remain competitive, we believe we must adjust business strategies and invest in new business initiatives, particularly within digital media. Development of new products and services may require significant costs. The success of these initiatives depends on a number of factors, including timely development and market acceptance. Investments we make in new strategies and initiatives may not perform as expected.
The loss of affiliation agreements could adversely affect our television stations’ operating results.

Fifteen of our stations have affiliations with the ABC television network, five with the NBC television network, two with each of the FOX, CBS and MyNetwork television networks and one with The CW television network. These television networks produce and distribute programming which our stations commit to air at specified times. Networks sell commercial advertising time during their programming, and the "Big 4" networks, ABC, NBC, CBS and FOX, also require stations to pay fees for the right to carry their programming. These fees may be a percentage of retransmission revenues that the stations receive (see below) or may be fixed amounts. There is no assurance that we will be able to reach agreements in the future with networks about the amount of these fees.
The non-renewal or termination of our network affiliation agreements would prevent us from being able to carry programming of the respective network. Loss of network affiliation would require us to obtain replacement programming and

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may not be as attractive to target audiences, resulting in lower advertising revenues. In addition, loss of any of the "Big 4" network affiliations would result in materially lower retransmission revenue.
Our retransmission consent revenue may be adversely affected by renewals of retransmission consent agreements and network affiliation agreements, by consolidation of cable or satellite television systems, by new technologies for the distribution of broadcast programming, or by revised government regulations.

As our retransmission consent agreements expire, there can be no assurance that we will be able to renew them at comparable or better rates. As a result, retransmission revenues could decrease and retransmission revenue growth could decline over time. If a multichannel video programming distributor (an “MVPD”) in our markets acquires additional distribution systems, our retransmission revenue could be adversely affected if our retransmission agreement with the acquiring MVPD has lower rates or a longer term than our retransmission agreement with the MVPD whose systems are being sold.
The use of new technologies to redistribute broadcast programming, such as those that rely upon the Internet to deliver video programming or those that receive and record broadcast signals over the air via an antenna and then retransmit that information digitally to customers’ television sets, specialty set-top boxes, or computer or mobile devices, could adversely affect our retransmission revenue if such technologies are not found to be subject to copyright or other legal restrictions or to regulations that apply to MVPDs such as cable operators or satellite carriers.
Changes in the Communications Act of 1934, as amended (the “Communications Act”) or the FCC’s rules with respect to the negotiation of retransmission consent agreements between broadcasters and MVPDs could also adversely impact our ability to negotiate acceptable retransmission consent agreements. In addition, continued consolidation among cable television operators could adversely impact our ability to negotiate acceptable retransmission consent agreements.

There are proceedings before the FCC and legislation has been proposed in Congress reexamining policies that now protect television stations' rights to control the distribution of their programming within their local service areas. For example, the FCC is considering the degree to which an entity relying upon the Internet to deliver video programming should be subject to the regulations that apply to MVPDs. Should the FCC determine that Internet-based distributors may avoid its MVPD rules, broadcasters' ability to rely on the protection of the MVPD retransmission consent requirements and other regulations could be jeopardized. We cannot predict the outcome of these and other proceedings that address the use of new technologies to challenge traditional means of redistributing broadcast programming or their possible impact on our operations.

Our television stations will continue to be subject to government regulations which, if revised, could adversely affect our operating results.
Pursuant to FCC rules, local television stations must elect every three years to either (1) require cable operators and/or direct broadcast satellite carriers to carry the stations’ over the air signals or (2) enter into retransmission consent negotiations for carriage. At present, all of our stations have retransmission consent agreements with cable operators and satellite carriers. If our retransmission consent agreements are terminated or not renewed, or if our broadcast signals are distributed on less-favorable terms, our ability to compete effectively may be adversely affected.

If we cannot renew our FCC broadcast licenses, our broadcast operations will be impaired. Our business will depend upon maintaining our broadcast licenses from the FCC, which has the authority to revoke licenses, not renew them, or renew them only with significant qualifications, including renewals for less than a full term. We cannot assure that future renewal applications will be approved, or that the renewals will not include conditions or qualifications that could adversely affect operations. If the FCC fails to renew any of these licenses, it could prevent us from operating the affected stations. If the FCC renews a license with substantial conditions or modifications (including renewing the license for a term of fewer than eight years), it could have a material adverse effect on the affected station’s revenue potential.

As discussed under Federal Regulation of Broadcasting, the FCC is in the process of completing an auction in which some television licensees voluntarily auctioned away their spectrum rights. After this auction, an undetermined number of the remaining television stations will have their licenses modified to specify new operating frequencies and/or new transmitter locations, and the FCC is setting tight deadlines for the completion of these facility changes in order to make the reallocated spectrum promptly available to the wireless service buyers. Depending on the number of such relocations required and other factors such as the availability of specialized technical assistance and custom-made equipment, weather issues, and, for stations near international

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borders, the cooperation of foreign governments, some stations could confront substantial costs and difficulty in completing these relocations within the allotted time, adversely affecting these stations’ over-the-air service.

As also discussed under Federal Regulation of Broadcasting, the FCC is expected to promptly consider broadcasters’ proposal to permit the voluntary use of a new digital television transmission standard, ATSC 3.0, that is incompatible with the existing standard. Much uncertainty exists concerning the costs, benefits, and public acceptance of the services expected to become possible under this new standard, and television stations could be adversely affected by moving either too quickly or too slowly towards its adoption.

The FCC and other government agencies are continually considering proposals intended to promote consumer interests. New government regulations affecting the television industry could raise programming costs, restrict broadcasters’ operating flexibility, reduce advertising revenues, raise the costs of delivering broadcast signals, or otherwise affect operating results. We cannot predict the nature or scope of future government regulation or its impact on our operations.

Sustained increases in costs of employee health and welfare plans and funding requirements of our pension obligations may reduce the cash available for our business.
Employee compensation and benefits account for a significant portion of our total operating expenses. In recent years, we have experienced significant increases in employee benefit costs. Various factors may continue to put upward pressure on the cost of providing medical benefits. Although we actively seek to control increases in these costs, there can be no assurance that we will succeed in limiting cost increases, and continued upward pressure could reduce the profitability of our businesses.
At December 31, 2016, the projected benefit obligations of our defined benefit pension plans exceeded plan assets by $213 million. Accrual of service credits are frozen under both defined benefit pension plans, including those covered under supplemental executive retirement plans. These pension plans invest in a variety of equity and debt securities, many of which were affected by the disruption in the credit and capital markets in 2008 and 2009. Future volatility and disruption in the stock and bond markets could cause declines in the asset values of these plans. In addition, a decrease in the discount rate used to determine minimum funding requirements could result in increased future contributions. If either occurs, we may need to make additional pension contributions above what is currently estimated, which could reduce the cash available for our businesses.
We may be unable to effectively integrate any new business we acquire.
We may make future acquisitions and could face integration challenges and acquired businesses could significantly under-perform relative to our expectations. If acquisitions are not successfully integrated, our revenues and profitability could be adversely affected, and impairment charges may result if acquired businesses significantly under perform relative to our expectations.
We will continue to face cybersecurity and similar risks, which could result in the disclosure of confidential information, disruption of operations, damage to our brands and reputation, legal exposure and financial losses.

Security breaches, malware or other “cyber attacks” could harm our business by disrupting delivery of services, jeopardizing our confidential information and that of our vendors and clients, and damaging our reputation. Our operations are routinely involved in receiving, storing, processing and transmitting sensitive information. Although we monitor security measures regularly, any unauthorized intrusion, malicious software infiltration, theft of data, network disruption, denial of service, or similar act by any party could disrupt the integrity, continuity, and security of our systems or the systems of our clients or vendors. These events, or our failure to employ new technologies, revise processes and invest in people to sustain our ability to defend against cyber threats, could create financial liability, regulatory sanction, or a loss of confidence in our ability to protect information, and adversely affect our revenue by causing the loss of current or potential clients.


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We may be required to satisfy certain indemnification obligations to Journal Media Group or may not be able to collect on indemnification rights from Journal Media Group.

Under the terms of the master agreement governing the Scripps/Journal transaction, we (as successor to Journal) will indemnify Journal Media Group, and Journal Media Group will indemnify us (as successor to Journal), for all damages, liabilities and expenses resulting from a breach by the applicable party of the covenants contained in the master agreement that continued in effect after the April 1, 2015, closing. We (as successor to Journal) will indemnify Journal Media Group for all damages, liabilities and expenses incurred by it relating to the entities, assets and liabilities retained by Scripps or Journal, and Journal Media Group will indemnify us (as successor to Journal) for all damages, liabilities and expenses incurred by it relating to Journal Media Group’s entities, assets and liabilities.

In addition, we will indemnify Journal Media Group, and Journal Media Group will indemnify us, for all damages, liabilities and expenses resulting from a breach by the other of any of the representations, warranties or covenants contained in the tax matters agreements. Journal Media Group will also indemnify us for all damages, liabilities and expenses arising out of any tax imposed with respect to the Scripps newspaper spin-off if such tax is attributable to any act, any failure to act or any omission by Journal Media Group or any of its subsidiaries. We will indemnify Journal Media Group for all damages, liabilities and expenses relating to pre-closing taxes or taxes imposed on Journal Media Group or its subsidiaries because Scripps spin entity or Journal spin entity was part of the consolidated return of Scripps or Journal, and Journal Media Group will indemnify us for all damages, liabilities and expenses relating to post-closing taxes of Journal Media Group or its subsidiaries.

The indemnification obligations described above could be significant and we cannot presently determine the amount, if any, of indemnification obligations for which we will be liable or for which we will seek payment from Journal Media Group. Journal Media Group’s ability to satisfy these indemnities will depend upon future financial performance. Similarly, our ability to satisfy any such obligations to Journal Media Group will depend on our future financial performance. We cannot assure that we will have the ability to satisfy any substantial obligations to Journal Media Group or that Journal Media Group will have the ability to satisfy any substantial indemnity obligations to us.

Journal Media Group is a party to a merger agreement pursuant to which it became a wholly owned subsidiary of Gannett Co., Inc. in the first quarter of 2016. The completion of this merger did not change the indemnification obligations of Scripps or Journal Media Group described above nor did it result in Gannett Co., Inc. itself bearing any responsibility to fulfill Journal Media Group's obligations to us.

Risks Related to the Ownership of Scripps Class A Common Shares

Certain descendants of Edward W. Scripps own approximately 93% of Scripps Common Voting shares and are signatories to the Scripps Family Agreement, which governs the transfer and voting of Common Voting shares held by them.

As a result of the foregoing, these descendants have the ability to elect two-thirds of the Board of Directors and to direct the outcome of any matter on which the Ohio Revised Code (“ORC”) does not require a vote of our Class A Common shares. Under our articles of incorporation, holders of Class A Common shares vote only for the election of one-third of the Board of Directors and are not entitled to vote on any matter other than a limited number of matters expressly set forth in the ORC as requiring a separate vote of both classes of stock. Because this concentrated control could discourage others from initiating any potential merger, takeover or other change of control transaction, the market price of our Class A Common shares could be adversely affected.

We have the ability to issue preferred stock, which could affect the rights of holders of our Class A Common shares.

Our articles of incorporation allow the Board of Directors to issue and set the terms of 25 million shares of preferred stock. The terms of any such preferred stock, if issued, may adversely affect the dividend, liquidation and other rights of holders of our Class A Common shares.

The public price and trading volume of our Class A Common shares may be volatile.

The price and trading volume of our Class A Common shares may be volatile and subject to fluctuation. Some of the factors that could cause fluctuation in the stock price or trading volume of Class A Common shares include:

general market and economic conditions and market trends, including in the television and radio broadcast industries and the financial markets generally;


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the political, economic and social situation in the United States;

variations in quarterly operating results;

inability to meet revenue projections;

announcements by us or competitors of significant acquisitions, strategic partnerships, joint ventures, capital commitments or other business developments;

adoption of new accounting standards affecting the broadcast industry;

operations of competitors and the performance of competitors’ common stock;

litigation and governmental action involving or affecting us or our subsidiaries;

changes in financial estimates and recommendations by securities analysts;

recruitment of key personnel;

purchases or sales of blocks of our Class A Common shares;

operating and stock performance of companies that investors may consider to be comparable to us; and

changes in the regulatory environment, including rulemaking or other actions by the FCC.

There can be no assurance that the price of our Class A Common shares will not fluctuate or decline significantly. The stock market in recent years has experienced considerable price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of individual companies and that could adversely affect the price of our Class A Common shares, regardless of the company’s operating performance. Stock price volatility might be higher if the trading volume of our Class A Common shares is low. Furthermore, shareholders may initiate securities class action lawsuits if the market price of our Class A Common shares declines significantly, which may cause us to incur substantial costs and divert the time and attention of our management.

Item 1B.
Unresolved Staff Comments
None.

Item 2.
Properties
We own substantially all of the facilities and equipment used by our television and radio stations. We own, or co-own with other broadcast television stations, the towers used to transmit our television signals.

Item 3.
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 4.
Mine Safety Disclosures
None.


19


Executive Officers of the Company — Executive officers serve at the pleasure of the Board of Directors.

Name
 
Age
 
Position
 
 
 
 
 
Richard A. Boehne
 
60
 
President, Chief Executive Officer and Director (since July 2008); Executive Vice President (1999 to 2008) and Chief Operating Officer (2006 to 2008)
Adam Symson
 
42
 
Chief Operating Officer (since November 2016); Senior Vice President/Digital (February 2013 to November 2016); Chief Digital Officer (2011 to February 2013); Vice President Interactive Media/Television (2007 to 2011)
Timothy M. Wesolowski
 
58
 
Senior Vice President and Chief Financial Officer (since August 2011); Treasurer (2011 to 2015); Senior Vice President Finance - Call Center Division, Convergys Corporation (2010 to 2011); Senior Vice President Finance/Controller, Convergys Corporation (2006 to 2009)
William Appleton
 
68
 
Senior Vice President and General Counsel (since July 2008); Managing Partner Cincinnati office, Baker & Hostetler, LLP (2003 to 2008)
Lisa A. Knutson
 
51
 
Senior Vice President/Chief Administrative Officer (since September 2011); Senior Vice President/Human Resources (2008 to 2011)
Brian G. Lawlor
 
50
 
Senior Vice President/Television (since January 2009); Vice President/General Manager of WPTV (2004 to 2008)
Douglas F. Lyons
 
60
 
Vice President, Controller (since July 2008) and Treasurer (since May 2015); Vice President Finance/Administration (2006 to 2008), Director Financial Reporting (1997 to 2006)


20


PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our Class A Common shares are traded on the New York Stock Exchange (“NYSE”) under the symbol “SSP.” As of December 31, 2016, there were approximately 13,600 owners of our Class A Common shares, based on security position listings, and 50 owners of our Common Voting shares (which do not have a public market). On April 1, 2015, Scripps' shareholders received a $60 million special cash dividend as part of the Journal broadcast merger and newspaper spin-off transactions. We did not pay any cash dividends in 2016.

The range of market prices of our Class A Common shares, which represents the high and low sales prices for each full quarterly period, are as follows:
 
 
Quarter
 
 
1st
 
2nd
 
3rd
 
4th
 
 
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
 
 
Market price of common stock:
 
 
 
 
 
 
 
 
High
 
$
19.25

 
$
17.69

 
$
17.80

 
$
19.41

Low
 
15.59

 
14.66

 
14.93

 
12.62

Cash dividends per share of common stock
 
$

 
$

 
$

 
$

2015
 
 
 
 
 
 
 
 
Market price of common stock:
 
 
 
 
 
 
 
 
High
 
$
28.44

 
$
25.41

 
$
23.10

 
$
22.56

Low
 
19.73

 
21.73

 
16.01

 
17.27

Cash dividends per share of common stock
 
$

 
$
1.03

 
$

 
$

There were no sales of unregistered equity securities during the quarter for which this report is filed.

The following table provides information about Company purchases of Class A Common shares during the quarter ended December 31, 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(a)
 
 
 
 
 
 
 
 
 
10/1/16-10/31/16
 
347,600

 
$
15.05

 
$
5,231,475

 
$
48,873,594

11/1/16-11/30/16
 
364,900

 
14.66

 
5,349,228

 
$
43,524,366

12/1/16-12/31/16
 
229,541

 
18.07

 
4,147,433

 
$

Total
 
942,041

 
$
15.63

 
$
14,728,136

 
 
(a) The May 2014 repurchase program expired on December 31, 2016. No additional shares may be purchased under the program.
In May 2014, our Board of Directors authorized a repurchase program of up to $100 million of our Class A Common shares. We repurchased a total of $60.6 million shares under this authorization through December 31, 2016. Before this authorization expired at the end of December 2016, an additional $0.5 million of shares were repurchased but not settled until 2017.

In November 2016, our Board of Directors authorized a new repurchase program of up to $100 million of our Class A Common shares through December 31, 2018. No shares had been repurchased under this program as of December 31, 2016.

21


Performance Graph — Set forth below is a line graph comparing the cumulative return on the Company’s Class A Common shares, assuming an initial investment of $100 as of December 31, 2011, and based on the market prices at the end of each year and assuming dividend reinvestment, with the cumulative return of the Standard & Poor’s Composite-500 Stock Index and an Index based on a peer group of media companies. The spin-off of our newspaper business at April 1, 2015 is treated as a reinvestment of a special dividend pursuant to SEC rules.
We regularly evaluate and revise our Peer Group Index as necessary so that it is reflective of our Company’s portfolio of businesses. The companies that comprise our Current Peer Group Index are Nexstar Broadcasting Group, TEGNA, Media General, Sinclair Broadcast Group, Tribune Media, Gray Television, Saga Communications and Beasley Broadcast Group. The Peer Group Index is weighted based on market capitalization.

performancegrapha02.jpg
 
 
12/31/2011
 
12/31/2012
 
12/31/2013
 
12/31/2014
 
12/31/2015
 
12/31/2016
 
 
 
 
 
 
 
 
 
 
 
 
 
The E. W. Scripps Company
 
$
100.00

 
$
134.96

 
$
271.16

 
$
279.03

 
$
268.78

 
$
273.45

S&P 500 Index
 
100.00

 
116.00

 
153.57

 
174.60

 
177.01

 
198.18

Current Peer Group Index
 
100.00

 
137.50

 
302.82

 
276.05

 
260.79

 
258.59




22


Item 6.
Selected Financial Data
The Selected Financial Data required by this item is filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page F-1 of this Form 10-K.

Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations required by this item is filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page F-1 of this Form 10-K.

Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
The market risk information required by this item is filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page F-1 of this Form 10-K.

Item 8.
Financial Statements and Supplementary Data
The Financial Statements and Supplementary Data required by this item are filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page F-1 of this Form 10-K.

Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.

Item 9A.
Controls and Procedures
The Controls and Procedures required by this item are filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page F-1 of this Form 10-K.

Item 9B.
Other Information
None.


23


PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Information regarding executive officers is included in Part I of this Form 10-K as permitted by General Instruction G(3).

Information required by Item 10 of Form 10-K relating to directors is incorporated by reference to the material captioned “Election of Directors” in our definitive proxy statement for the Annual Meeting of Shareholders (“Proxy Statement”). Information regarding Section 16(a) compliance is incorporated by reference to the material captioned “Report on Section
16(a) Beneficial Ownership Compliance” in the Proxy Statement.
We have adopted a code of conduct that applies to all employees, officers and directors of Scripps. We also have a code of ethics for the CEO and Senior Financial Officers that meets the requirements of Item 406 of Regulation S-K and the NYSE listing standards. Copies of our codes of ethics are posted on our website at http://www.scripps.com.
Information regarding our audit committee financial expert is incorporated by reference to the material captioned “Corporate Governance” in the Proxy Statement.
The Proxy Statement will be filed with the Securities and Exchange Commission in connection with our 2017 Annual Meeting of Shareholders.

Item 11.
Executive Compensation
The information required by Item 11 of Form 10-K is incorporated by reference to the material captioned “Compensation Discussion and Analysis” and “Compensation Tables” in the Proxy Statement.

Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 12 of Form 10-K is incorporated by reference to the material captioned “Report on the Security Ownership of Certain Beneficial Owners,” “Report on the Security Ownership of Management,” and “Equity Compensation Plan Information” in the Proxy Statement.

Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by Item 13 of Form 10-K is incorporated by reference to the materials captioned “Corporate Governance” and “Report on Related Party Transactions” in the Proxy Statement.

Item 14.
Principal Accounting Fees and Services
The information required by Item 14 of Form 10-K is incorporated by reference to the material captioned “Report of the Audit Committee of the Board of Directors” in the Proxy Statement.


24


PART IV
Item 15.
 
Exhibits and Financial Statement Schedules
Documents filed as part of this report:

(a)
The consolidated financial statements of The E. W. Scripps Company are filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page F-1.

The reports of Deloitte & Touche LLP, an Independent Registered Public Accounting Firm, dated February 24, 2017, are filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page F-1.

(b)
There are no supplemental schedules that are required to be filed as part of this Form 10-K.

(c)
An exhibit index required by this item appears at page S-2 of this Form 10-K.

25


Signatures
Pursuant to the requirements of Section 13 or 15(d) 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: February 24, 2017
By:
/s/ Richard A. Boehne
 
 
 
Richard A. Boehne
 
 
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated, on February 24, 2017.

Signature
 
Title
 
 
 
/s/ Richard A. Boehne
 
 
Chairman of the Board of Directors, President, Chief Executive Officer
Richard A. Boehne
 
(Principal Executive Officer)
 
 
 
/s/ Timothy M. Wesolowski
 
 
Senior Vice President and Chief Financial Officer
Timothy M. Wesolowski
 
 
 
 
 
/s/ Douglas F. Lyons
 
Vice President, Controller and Treasurer 
Douglas F. Lyons
 
(Principal Accounting Officer)
 
 
 
/s/ Charles Barmonde
 
Director 
Charles Barmonde
 
 
 
 
 
/s/ Kelly P. Conlin 
 
Director
Kelly P. Conlin
 
 
 
 
 
/s/ John W. Hayden
 
 
Director 
John W. Hayden
 
 
 
 
 
/s/ Anne M. La Dow 
 
Director 
Anne M. La Dow
 
 
 
 
 
/s/ Roger L. Ogden
 
Director 
 
Roger L. Ogden
 
 
 
 
 
/s/ Mary Peirce
 
 
Director 
Mary Peirce
 
 
 
 
 
/s/ J. Marvin Quin
 
 
Director 
J. Marvin Quin
 
 
 
 
 
/s/ Kim Williams
 
 
Director 
Kim Williams
 
 


26


The E. W. Scripps Company
Index to Consolidated Financial Statement Information



F-1


Selected Financial Data
Five-Year Financial Highlights

 
 
For the years ended December 31,
(in millions, except per share data)
 
2016 (1)
 
2015 (1)
 
2014 (1)
 
2013 (1)
 
2012 (1)
 
 
 
 
 
 
 
 
 
 
 
Summary of Operations (2)
 
 
 
 
 
 
 
 
 
 
Total operating revenues
 
$
943

 
$
716

 
$
499

 
$
432

 
$
504

Income (loss) from continuing operations before income taxes
 
106

 
(99
)
 
9

 
(22
)
 
41

Income (loss) from continuing operations, net of tax
 
67

 
(67
)
 
9

 
(10
)
 
31

Depreciation and amortization of intangibles
 
(59
)
 
(52
)
 
(32
)
 
(31
)
 
(30
)
 
 
 
 
 
 
 
 
 
 
 
Per Share Data
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations — diluted
 
$
0.79

 
$
(0.86
)
 
$
0.16

 
$
(0.18
)
 
$
0.57

Cash dividends
 

 
1.03

 

 

 

 
 
 
 
 
 
 
 
 
 
 
Market Value of Common Shares at December 31
 
 
 
 
 
 
 
 
 
 
Per share
 
$
19.33

 
$
19.00

 
$
22.35

 
$
21.72

 
$
10.81

Total
 
1,585

 
1,591

 
1,274

 
1,217

 
600

 
 
 
 
 
 
 
 
 
 
 
Balance Sheet Data
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
1,728

 
$
1,681

 
$
1,031

 
$
966

 
$
1,031

Long-term debt (including current portion)
 
393

 
399

 
196

 
200

 
196

Equity
 
946

 
901

 
520

 
548

 
540

Notes to Selected Financial Data
As used herein and in Management’s Discussion and Analysis of Financial Condition and Results of Operations, 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.
The statement of operations and cash flow data for the five years ended December 31, 2016, and the balance sheet data as of the same dates have been derived from our audited consolidated financial statements. All per-share amounts are presented on a diluted basis. The five-year financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto included elsewhere herein.

(1)
 
2016 — On April 12, 2016, we acquired Cracked. On June 6, 2016, we acquired Stitcher. Operating results for each are included for periods after the acquisitions.
 
 
 
 
 
2015 — On April 1, 2015, we acquired the broadcast group owned by Journal Communications, Inc. On July 22, 2015, we acquired Midroll Media. Operating results for each are included for periods after the acquisitions.
 
 
 
 
 
2014 — On January 1, 2014, we acquired Media Convergence Group, Inc., which operates as Newsy. On June 16, 2014, we acquired two television stations owned by Granite Broadcasting Corporation. Operating results for each are included for periods after the acquisitions.
 
 
 
(2)
 
The five-year summary of operations excludes the operating results of the following entities and the gains (losses) on their divestiture as they are accounted for as discontinued operations:
 
 
 
 
 
2015 — On April 1, 2015, we completed the spin-off of our newspaper business.

F-2


Management’s Discussion and Analysis of Financial Condition and Results of Operations
The consolidated financial statements and notes to consolidated financial statements are the basis for our discussion and analysis of financial condition and results of operations. You should read this discussion in conjunction with those financial statements.

Forward-Looking Statements
Certain forward-looking statements related to our businesses are included in this discussion. Those forward-looking statements reflect our current expectations. Forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from the expectations expressed in the forward-looking statements. A detailed discussion of principal risks and uncertainties which may cause actual results and events to differ materially from such forward-looking statements is included in the section titled “Risk Factors”. The words “believe,” “expect,” “anticipate,” “estimate,” “intend” and similar expressions identify forward-looking statements. You should evaluate our forward-looking statements, which are as of the date of this filing, with the understanding of their inherent uncertainty. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date the statement is made.

Executive Overview
The E.W. Scripps Company (“Scripps”) is a diverse media enterprise, serving audiences and businesses through a portfolio of television, radio and digital media brands. Scripps is one of the nation’s largest independent TV station ownership groups, with 33 television stations in 24 markets and a reach of nearly one in five U.S. television households. We have affiliations with all of the "Big 4" television networks. We also own 34 radio stations in eight markets. We operate an expanding collection of local and national digital journalism and information businesses including our podcast business, Midroll, the multi-platform humor and satire brand, Cracked, and over-the-top ("OTT") video news service, Newsy. We also produce television programming, run an award-winning investigative reporting newsroom in Washington, D.C., and serve as the longtime steward of one of the nation's largest, most successful and longest-running educational program, the Scripps National Spelling Bee.

On April 1, 2015, Scripps and Journal Communications, Inc. ("Journal") closed their transactions to merge their broadcast operations and spin-off their newspaper businesses into a separate publicly traded company.

We continued the expansion of our digital business through two acquisitions during 2016. 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. This acquisition provides an opportunity to expand our OTT footprint for both video and audio. The purchase price was $39 million in cash. On June 6, 2016 we acquired Stitcher, a popular podcast listening service which facilitates discovery and streaming for more than 65,000 podcasts for a $4.5 million cash purchase price.

On July 22, 2015, we acquired Midroll Media, a company that creates original podcasts and operates a network that sells advertising for more than 200 shows, including “WTF with Marc Maron" and "Comedy Bang! Bang!” The purchase price was $50 million in cash, plus a $10 million earnout provision.


F-3


Results of Operations
The trends and underlying economic conditions affecting the operating performance and future prospects differ for each of our business segments. Accordingly, you should read the following discussion of our consolidated results of operations in conjunction with the discussion of the operating performance of our individual business segments that follows.
Consolidated Results of Operations
Consolidated results of operations were as follows:
 
 
For the years ended December 31,
(in thousands)
 
2016
 
Change
 
2015
 
Change
 
2014
 
 
 
 
 
 
 
 
 
 
 
Operating revenues
 
$
943,047

 
31.8
 %
 
$
715,656

 
43.5
%
 
$
498,752

Employee compensation and benefits
 
(373,552
)
 
9.9
 %
 
(340,042
)
 
31.9
%
 
(257,870
)
Programs and program licenses
 
(174,584
)
 
43.7
 %
 
(121,479
)
 
118.9
%
 
(55,487
)
Other expenses
 
(194,227
)
 
18.9
 %
 
(163,297
)
 
41.8
%
 
(115,175
)
Defined benefit pension plan expense
 
(14,332
)
 
(75.6
)%
 
(58,674
)
 


 
(5,671
)
Acquisition and related integration costs
 
(578
)
 
 
 
(37,988
)
 
 
 
(9,708
)
Depreciation and amortization of intangibles
 
(58,581
)
 
 
 
(51,952
)
 
 
 
(32,180
)
Impairment of goodwill and intangibles
 

 
 
 
(24,613
)
 
 
 

(Losses) gains, net on disposal of property and equipment
 
(543
)
 
 
 
(483
)
 
 
 
2,872

Operating income (loss)
 
126,650

 
 
 
(82,872
)
 
 
 
25,533

Interest expense
 
(18,039
)
 
 
 
(15,099
)
 
 
 
(8,494
)
Miscellaneous, net
 
(2,646
)
 
 
 
(1,421
)
 
 
 
(7,693
)
Income (loss) from continuing operations before income taxes
 
105,965

 
 
 
(99,392
)
 
 
 
9,346

(Provision) benefit for income taxes
 
(38,730
)
 
 
 
32,755

 
 
 
111

Income (loss) from continuing operations, net of tax
 
67,235

 
 
 
(66,637
)
 
 
 
9,457

(Loss) income from discontinued operations, net of tax
 

 
 
 
(15,840
)
 
 
 
1,072

Net income (loss)
 
$
67,235

 
 
 
$
(82,477
)
 
 
 
$
10,529

2016 compared with 2015

Midroll and Cracked were acquired on July 22, 2015 and April 12, 2016, respectively, and are collectively referred to as the "acquired digital operations." The Company completed its acquisition of the Journal television and radio stations on April 1, 2015, which are referred to as the "acquired stations." The inclusion of operating results from these businesses for the periods subsequent to their acquisitions impacts the comparability of our consolidated and segment operating results.

Operating revenues increased 31.8% in 2016 due to an increase of almost $92 million in television political advertising revenues, higher retransmission revenues, higher digital revenues from our local digital operations, as well as the acquisition of the acquired stations and acquired digital operations. The comparability of year-over-year revenues was impacted by $65 million of revenues from the acquired stations and $18 million of revenues from the acquired digital operations. Retransmission revenues, excluding the impact of the acquired stations, increased almost $70 million due to the renewal of retransmission agreements with higher rates and contractual rate increases. Rate increases from the renewal of contracts covering 3 million households were effective from the beginning of 2016 and contracts covering an additional 3 million households were effective in the fourth quarter of 2016.

Employee compensation and benefits increased 9.9% in 2016, primarily driven by the impact of the acquired stations and acquired digital operations.

Programs and program licenses expense increased 43.7% in 2016, primarily due to the acquired stations and higher network affiliation fees. Programming costs of the acquired stations was $10 million of the increase year-over-year. The

F-4


remainder of the increase for the year was from higher network affiliation license fees of $47 million, which was partially offset by lower syndicated programming expense.

Other expenses are comprised of the following:
 
 
For the years ended December 31,
(in thousands)
 
2016
 
Change
 
2015
 
 
 
 
 
 
 
Facilities rent and maintenance
 
$
38,255

 
12.7
%
 
$
33,937

Ratings and consumer research services
 
21,593

 
17.3
%
 
18,405

Purchased news and content
 
12,461

 
40.2
%
 
8,888

Marketing and promotion
 
13,631

 
12.7
%
 
12,097

Miscellaneous costs
 
108,287

 
20.4
%
 
89,970

Total other expenses
 
$
194,227

 
18.9
%
 
$
163,297


Other expenses increased in 2016 compared to prior year, most of which was driven by the acquired stations and the acquired digital operations.

Acquisition and related integration costs of $0.6 million in 2016 and $38.0 million in 2015 include costs for spinning off our newspaper operations and costs associated with acquisitions, such as investment banking, legal and accounting fees, as well as costs to integrate the acquired businesses.

Depreciation and amortization expense increased from $52 million in 2015 to $59 million in 2016 due to a full year of expense from the acquired stations and as well as the impact of the acquired digital operations.

In 2015, we recorded a $25 million non-cash charge to reduce the carrying value of goodwill and certain intangible assets associated with Newsy and a smaller business.

Defined benefit plan expense decreased by $44.3 million year-over-year. The prior year included a $45.7 million non-cash settlement charge for the lump-sum pension benefit payments made to certain pension participants and a $1.1 million curtailment charge resulting from the spin-off of our newspaper business. The current year included a full year of expense from the pension plans acquired in the Journal transactions.

Interest expense increased year-over-year due to the increased debt related to the Journal acquisition.

The effective income tax rate was 36.5% and 33.0% for 2016 and 2015, respectively. State taxes and non-deductible expenses impacted our effective rate. Certain portions of the transaction costs we incurred in connection with the Journal transactions in 2015 are not deductible and the 2015 write-down in the carrying value of Newsy goodwill is not deductible for income taxes. In addition, our effective income tax rates for 2016 and 2015 were impacted by tax settlements and changes in our reserve for uncertain tax positions. In 2016 and 2015, we recognized $0.9 million and $2.5 million, respectively, of previously unrecognized tax benefits upon settlement of tax audits or upon the lapse of the statutes of limitations in certain jurisdictions. In addition, our 2016 provision includes $1.7 million of excess tax benefits from the exercise and vesting of share-based compensation awards.
2015 compared with 2014

The Company completed its acquisition of the Journal television and radio stations on April 1, 2015 and the acquisition of two Granite television stations on June 16, 2014, collectively referred to as the "acquired stations." Midroll was acquired on July 22, 2015. The inclusion of operating results from these businesses for the periods subsequent to the acquisitions impacts the comparability of our consolidated and division operating results.

Operating revenues increased 43% in 2015 compared to 2014. The acquired operations accounted for $217 million of the increase. For stations owned for the entire year, a $52 million decline in political advertising revenue was offset by a $49 million increase in retransmission revenue. In 2014, we completed negotiations with satellite and cable television systems covering approximately 5.6 million subscribers in certain of our markets and our 2015 results reflect the renewal of those agreements.


F-5


Employee compensation and benefits increased 32% in 2015 compared to 2014, primarily driven by the impact of the acquired stations.

Programs and program licenses expense more than doubled in 2015 primarily due to the acquired stations and higher network fees. The acquired stations accounted for $39 million of the increase while higher network license fees, offset by lower syndicated programming expense, accounted for the rest. We completed new agreements for 10 of our ABC stations at the beginning of 2015 and one of our CBS stations in July 2015.

Other expenses are comprised of the following:
 
 
For the years ended December 31,
(in thousands)
 
2015
 
Change
 
2014
 
 
 
 
 
 
 
Facilities rent and maintenance
 
$
33,937

 
29.9
%
 
$
26,117

Ratings and consumer research services
 
18,405

 
34.5
%
 
13,680

Purchased news and content
 
8,888

 
76.2
%
 
5,044

Marketing and promotion
 
12,097

 
72.9
%
 
6,997

Miscellaneous costs
 
89,970

 
42.0
%
 
63,337

Total other expenses
 
$
163,297

 
41.8
%
 
$
115,175


Other expenses increased in 2015 compared to prior year, most of which was driven by the acquired stations.

Acquisition and related integration costs of $38 million in 2015 and $9.7 million in 2014 include costs associated with the Journal transactions and other acquisitions, such as investment banking, legal and accounting fees, as well as costs to integrate the acquired operations.

Depreciation and amortization expense increased from $32 million in 2014 to $52 million in 2015 due to the acquired stations.

The evolution of the OTT market created new distribution platforms for Newsy as well as provided significant opportunities to expand the Newsy audience. The development of OTT services has required additional investment in Newsy. The additional investment, combined with other market changes that resulted in the slower development of our original revenue model, created indications of impairment of goodwill as of September 30, 2015. In the third quarter of 2015, we recorded a $21 million non-cash charge to reduce the carrying value of goodwill and $2.9 million to reduce the value of certain intangible assets.

Defined benefit plan expense increased year-over-year due to a $45.7 million non-cash settlement charge for the lump-sum pension benefit payments made to certain pension participants, a $1.1 million curtailment charge resulting from the spin-off of our newspaper business and the additional expense related to the pension obligations assumed in the Journal acquisition.

In 2014, a $3 million gain on the sale of excess land is included in gains on disposal of property and equipment.

Interest expense increased year-over-year due to the increased debt related to the Journal acquisition.

Miscellaneous expense of $7.7 million in 2014 included a $5.9 million non-cash charge to reduce the carrying value of investments.

The effective income tax rate was 33.0% and 1.2% for 2015 and 2014, respectively. State and local taxes and non-deductible expenses impacted our effective rate. Portions of the acquisition and integration costs we incurred in connection with the Journal transactions are not deductible and the Newsy goodwill impairment is not deductible for income taxes. In addition, our effective income tax rates for 2015 and 2014 were impacted by tax settlements and changes in our reserve for uncertain tax positions. In 2015 and 2014, we recognized $2.5 million and $6.0 million, respectively, of previously unrecognized tax benefits upon settlement of tax audits or upon the lapse of the statutes of limitations in certain jurisdictions.


F-6


Discontinued Operations

Discontinued operations reflect the historical results of our newspaper operations, which were spun-off on April 1, 2015.

Upon 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-for-sale model. This model compares the fair value of the disposal unit to its carrying value, and if the fair value is lower, then an impairment loss is recorded. Our analysis indicated that, as of April 1, 2015, there was a non-cash impairment loss on the disposal of the newspaper business of $30 million, which is included as a component of discontinued operations.

F-7


Business Segment Results — As discussed in the Notes to Consolidated Financial Statements, our chief operating decision maker evaluates the operating performance of 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.
Items excluded from segment profit generally result from decisions made in prior periods or from decisions made by corporate executives rather than the managers of the business segments. Depreciation and amortization charges are the result of decisions made in prior periods regarding the allocation of resources and are therefore excluded from the measure. Generally, our corporate executives make financing, tax structure and divestiture decisions. Excluding these items from measurement of our business segment performance enables us to evaluate business segment operating performance based upon current economic conditions and decisions made by the managers of those business segments in the current period.

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, 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.
Information regarding the operating performance of our business segments and a reconciliation of such information to the consolidated financial statements is as follows:
 
 
For the years ended December 31,
(in thousands)
 
2016
 
Change
 
2015
 
Change
 
2014
 
 
 
 
 
 
 
 
 
 
 
Segment operating revenues:
 
 
 
 
 
 
 
 
 
 
  Television
 
$
802,134

 
31.6
 %
 
$
609,551

 
30.5
 %
 
$
466,965

  Radio
 
70,860

 
20.3
 %
 
58,881

 

 

  Digital
 
62,076

 
59.5
 %
 
38,928

 
70.1
 %
 
22,881

  Syndication and other
 
7,977

 
(3.8
)%
 
8,296

 
(6.8
)%
 
8,906

  Total operating revenues
 
$
943,047

 


 
$
715,656

 

 
$
498,752

Segment profit (loss):
 
 
 
 
 
 
 
 
 
 
  Television
 
$
249,268

 
78.3
 %
 
$
139,797

 
2.6
 %
 
$
136,319

  Radio
 
12,797

 
(0.3
)%
 
12,837

 

 

  Digital
 
(16,358
)
 
(4.4
)%
 
(17,103
)
 
(25.1
)%
 
(22,828
)
  Syndication and other
 
(801
)
 


 
(1,074
)
 


 
(1,499
)
  Shared services and corporate
 
(44,222
)
 
1.4
 %
 
(43,619
)
 
4.4
 %
 
(41,772
)
Defined benefit pension plan expense
 
(14,332
)
 
 
 
(58,674
)
 
 
 
(5,671
)
Acquisition and related integration costs
 
(578
)
 
 
 
(37,988
)
 
 
 
(9,708
)
Depreciation and amortization of intangibles
 
(58,581
)
 
 
 
(51,952
)
 

 
(32,180
)
Impairment of goodwill and intangibles
 

 
 
 
(24,613
)
 
 
 

(Losses) gains, net on disposal of property and equipment
 
(543
)
 
 
 
(483
)
 
 
 
2,872

Interest expense
 
(18,039
)
 
 
 
(15,099
)
 
 
 
(8,494
)
Miscellaneous, net
 
(2,646
)
 
 
 
(1,421
)
 
 
 
(7,693
)
Income (loss) from continuing operations before income taxes
 
$
105,965

 
 
 
$
(99,392
)
 
 
 
$
9,346


F-8


Television — 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. Our 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.
National television networks offer affiliates a variety of programs and sell the majority of advertising within those programs. In addition to network programs, we broadcast locally and nationally internally produced programs, syndicated programs, sporting events and other programs of interest in each station's market. News is the primary focus of our locally-produced programming.
The operating performance of our television group is most affected by local and national economic conditions, particularly conditions within the automotive, services and retail categories, and by the volume of advertising time purchased by campaigns for elective office and political issues. The demand for political advertising is significantly higher in the third and fourth quarters of even-numbered years.
Operating results for our television segment were as follows:
 
 
For the years ended December 31,
(in thousands)
 
2016
 
Change
 
2015
 
Change
 
2014
 
 
 
 
 
 
 
 
 
 
 
Segment operating revenues:
 
 

 
 
 
 
 
 
 
 
Local
 
$
326,929

 
3.8
%
 
$
315,054

 
33.1
%
 
$
236,772

National
 
139,664

 
1.3
%
 
137,935

 
26.0
%
 
109,448

Political
 
100,761

 


 
9,151

 


 
57,981

Retransmission
 
220,723

 
61.6
%
 
136,571

 
143.1
%
 
56,185

Other
 
14,057

 
29.7
%
 
10,840

 
64.8
%
 
6,579

Total operating revenues
 
802,134

 
31.6
%
 
609,551

 
30.5
%
 
466,965

Segment costs and expenses:
 
 
 


 
 
 
 
 
 
Employee compensation and benefits
 
256,571

 
5.9
%
 
242,303

 
28.0
%
 
189,261

Programs and program licenses
 
162,821

 
47.1
%
 
110,722

 
99.5
%
 
55,487

Other expenses
 
133,474

 
14.3
%
 
116,729

 
35.9
%
 
85,898

Total costs and expenses
 
552,866

 
17.7
%
 
469,754

 
42.1
%
 
330,646

Segment profit
 
$
249,268

 
78.3
%
 
$
139,797

 
2.6
%
 
$
136,319

2016 compared with 2015

The Company completed its acquisition of the Journal television stations on April 1, 2015. The inclusion of operating results from this transaction for the periods subsequent to the acquisition impacts the comparability of the television division operating results.
Revenues

Total television revenues increased 31.6% in 2016. The comparability of year-over-year revenues was impacted by $48.7 million of revenues from the acquired television stations. Increased retransmission revenues and higher political revenues in a presidential-election year drove most of the remaining year-over-year increase. Retransmission revenues, excluding the impact of the acquired television stations, increased almost $70 million due to the renewal of retransmission agreements with higher rates and contractual rate increases. Rate increases from the renewal of contracts covering 3 million households were effective from the beginning of 2016 and contracts covering an additional 3 million households were effective in the fourth quarter of 2016.
 

F-9


Costs and expenses

Employee compensation and benefits increased 5.9% in 2016. The increase was primarily from $15.9 million of incremental compensation and benefits from the acquired television stations for the first quarter of 2016.

Programs and program licenses expense increased 47.1% in 2016, primarily due to the acquired television stations and higher network fees. Programming costs of the acquired television stations accounted for $9.1 million of the year-over-year increase. The remainder of the increase was from higher network affiliation license fees of $47 million, partially offset by lower syndicated programming expense. Network affiliation fees have been increasing industry wide due to higher rates on renewals as well as contractual rate increases, and we expect that they may continue to increase over the next several years.

Other expenses increased 14.3% in 2016 primarily due to higher general operating expenses and the impact of the acquired television stations.
2015 compared with 2014

The Company completed its acquisition of the Journal television stations on April 1, 2015 and the acquisition of two Granite television stations on June 16, 2014, collectively referred to as the "acquired stations." The inclusion of operating results from these businesses for the periods subsequent to the acquisitions impacts the comparability of our television division operating results.
Revenues

Total television revenues increased 31% in 2015. The acquired stations accounted for slightly more than $147 million of the year-over-year increase. For stations owned for the entire year, a $52 million decline in political advertising revenue was offset by a $49 million increase in retransmission revenue. In 2014, we completed negotiations with satellite and cable television systems covering approximately 5.6 million subscribers in certain of our markets and our 2015 results reflect the renewal of those agreements.

Costs and expenses

Employee compensation and benefits increased 28% in 2015 primarily due to the acquired stations.

Programs and program licenses expense nearly doubled during the year compared to 2014, primarily due to the acquisitions and higher network affiliate fees. The acquired stations accounted for $28 million of the increase for the year while higher network license fees, offset by lower syndicated programming expense, accounted for the rest. We completed new agreements for 10 of our ABC stations at the beginning of 2015 and one of our CBS stations in July 2015.

Other expenses increased 36% in 2015 primarily due to the impact of the acquired stations.



F-10


Radio — Our radio segment consists of 34 radio stations in eight markets. We operate 28 FM stations and six AM stations.
Radio stations earn revenue primarily from the sale of advertising to local advertisers.
Our radio stations focus on providing targeted and relevant local programming that is responsive to the interest of the communities in which we serve, strengthening our brand identity and allowing us to provide effective marketing solutions for advertisers by reaching their targeted audiences.
Operating results for our radio segment were as follows:
 
 
For the years ended December 31,
(in thousands)
 
2016
 
Change
 
2015
 
Change
 
2014
 
 
 
 
 
 
 
 
 
 
 
Segment operating revenues:
 
 
 
 
 
 
 
 
 
 
Advertising
 
$
67,771

 
20.4
 %
 
$
56,288

 

 
$

Other
 
3,089

 
19.1
 %
 
2,593

 

 

Total operating revenues
 
70,860

 
20.3
 %
 
58,881

 

 

Segment costs and expenses:
 
 
 


 
 
 

 
 
Employee compensation and benefits
 
28,795

 
29.6
 %
 
22,218

 

 

Programs
 
11,763

 
9.4
 %
 
10,757

 

 

Other expenses
 
17,505

 
33.9
 %
 
13,069

 

 

Total costs and expenses
 
58,063

 
26.1
 %
 
46,044

 

 

Segment profit
 
$
12,797

 
(0.3
)%
 
$
12,837

 

 
$


The Company completed its acquisition of the Journal radio stations on April 1, 2015. The inclusion of operating results from this transaction for the periods subsequent to the acquisition impacts the comparability of the radio division operating results.

Revenues

Total radio revenues increased 20.3% in 2016. In 2016, there was a full year of operations for our radio stations compared to only nine months in 2015, which accounted for an additional $14.5 million of revenue. This increase was partially offset by weakness in our largest markets during 2016, including the impact of lower advertising for sports programming in our Milwaukee market.

Costs and expenses

Total costs and expenses increased 26.1% in 2016 primarily due to costs associated with flood cleanup at our Wichita operations and the $12.5 million of expenses from the acquired radio stations for the first quarter of 2016. Employee compensation and benefits were lower year-over-year after adjusting for the impact of the acquired stations.


F-11


Digital — Our digital segment includes the digital operations of our local television and radio businesses. It also includes the operations of our national digital businesses including Newsy, an over-the-top 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.
Operating results for our digital segment were as follows:
 
 
For the years ended December 31,
(in thousands)
 
2016
 
Change
 
2015
 
Change
 
2014
 
 
 
 
 
 
 
 
 
 
 
Total operating revenues
 
$
62,076

 
59.5
 %
 
$
38,928

 
70.1
 %
 
$
22,881

Segment costs and expenses:
 
 
 
 
 
 
 
 
 
 
Employee compensation and benefits
 
47,077

 
23.6
 %
 
38,077

 
5.6
 %
 
36,067

Other expenses
 
31,357

 
74.7
 %
 
17,954

 
86.2
 %
 
9,642

Total costs and expenses
 
78,434

 
40.0
 %
 
56,031