10-Q 1 ssp-2017930x10q.htm 10-Q Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017     
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 
 
For the transition period from                      to                     
Commission File Number 0-16914
THE E.W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)
Ohio
(State or other jurisdiction of
incorporation or organization)
 
31-1223339
(IRS Employer
Identification Number)
 
 
 
312 Walnut Street
Cincinnati, Ohio
(Address of principal executive offices)
 
45202
(Zip Code)
Registrant's telephone number, including area code: (513) 977-3000
Not applicable
(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company “in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
 
Accelerated filer o 
 
Emerging growth company o 
Non-accelerated filer o 
(Do not check if a smaller reporting company)
 
Smaller reporting company o
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of September 30, 2017, there were 69,967,489 of the registrant’s Class A Common shares, $0.01 par value per share, outstanding and 11,932,722 of the registrant’s Common Voting shares,$0.01 par value per share, outstanding.
 



Index to The E.W. Scripps Company Quarterly Report
on Form 10-Q for the Quarter Ended September 30, 2017

2


PART I

As used in this Quarterly Report on Form 10-Q, the terms “Scripps,” “Company,” “we,” “our,” or “us” may, depending on the context, refer to The E.W. Scripps Company, to one or more of its consolidated subsidiary companies, or to all of them taken as a whole.

Item 1. Financial Statements

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

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

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

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

PART II

Item 1. Legal Proceedings

We are involved in litigation arising in the ordinary course of business, such as defamation actions, and governmental proceedings primarily relating to renewal of broadcast licenses, none of which is expected to result in material loss.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed in Item 1A. Risk Factors in our 2016 Annual Report on Form 10-K, as updated in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017.

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

There were no sales of unregistered equity securities during the quarter ended September 30, 2017.

The following table provides information about Company purchases of Class A Common shares during the quarter ended September 30, 2017, and the remaining amount that may still be purchased under the program.
Period
 
Total number of shares purchased
 
Average price paid per share
 
Total market value of shares purchased
 
Maximum value that may yet be purchased under the plans or programs
 
 
 
 
 
 
 
 
 
7/1/17-7/31/17
 
91,832

 
$
18.40

 
$
1,689,808

 
$
92,545,901

8/1/17-8/31/17
 
101,700

 
18.50

 
1,881,365

 
$
90,664,536

9/1/17-9/30/17
 
105,028

 
17.87

 
1,876,693

 
$
88,787,843

Total
 
298,560

 
$
18.25

 
$
5,447,866

 
 


3


In November 2016, our Board of Directors authorized a repurchase program of up to $100 million of our Class A Common shares through December 2018. At September 30, 2017, $88.8 million remained under the authorization.

Item 3. Defaults Upon Senior Securities
There were no defaults upon senior securities during the quarter ended September 30, 2017.

Item 4. Mine Safety Disclosures
None.

Item 5. Other Information
None.

Item 6. Exhibits
Exhibit Number
 
Exhibit Description
10.02
 
10.10
 
10.14
 
10.15
 
10.16
 
31(a)
 
31(b)
 
32(a)
 
32(b)
 
101.INS
 
XBRL Instance Document (furnished herewith)
101.SCH
 
XBRL Taxonomy Extension Schema Document (furnished herewith)
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document (furnished herewith)
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document (furnished herewith)
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document (furnished herewith)
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document (furnished herewith)



4


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

 
THE E.W. SCRIPPS COMPANY
 
 
 
Dated: November 3, 2017
By:
/s/ Douglas F. Lyons 
 
 
Douglas F. Lyons
 
 
Vice President, Controller and Treasurer
 
 
(Principal Accounting Officer)



5


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



F-1


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

(in thousands, except share data)
 
As of 
 September 30, 
 2017
 
As of 
 December 31, 
 2016
 
 
 
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
126,535

 
$
134,352

Accounts and notes receivable (less allowances—$2,035 and $1,632)
 
197,152

 
192,531

Miscellaneous
 
31,245

 
19,012

Total current assets
 
354,932

 
345,895

Investments
 
14,137

 
14,221

Property and equipment
 
247,156

 
260,731

Goodwill
 
587,377

 
616,780

Other intangible assets
 
456,398

 
467,896

Deferred income taxes
 
10,488

 
9,075

Miscellaneous
 
16,122

 
13,775

Total Assets
 
$
1,686,610

 
$
1,728,373

 
 
 
 
 
Liabilities and Equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
28,708

 
$
26,670

Customer deposits and unearned revenue
 
7,088

 
7,122

Current portion of long-term debt
 
2,656

 
6,571

Accrued liabilities:
 
 
 
 
Employee compensation and benefits
 
30,533

 
32,636

Accrued interest
 
8,656

 

Miscellaneous
 
21,595

 
18,986

Other current liabilities
 
9,442

 
12,146

Total current liabilities
 
108,678

 
104,131

Long-term debt (less current portion)
 
393,179

 
386,614

Deferred income taxes
 
3,889

 
17,740

Other liabilities (less current portion)
 
251,890

 
273,953

Equity:
 
 
 
 
Preferred stock, $.01 par — authorized: 25,000,000 shares; none outstanding
 

 

Common stock, $.01 par:
 
 
 
 
Class A — authorized: 240,000,000 shares; issued and outstanding: 69,967,489 and 70,042,300 shares
 
700

 
700

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

 
119

Total
 
819

 
819

Additional paid-in capital
 
1,133,484

 
1,132,540

Accumulated deficit
 
(116,202
)
 
(94,077
)
Accumulated other comprehensive loss, net of income taxes
 
(91,270
)
 
(93,347
)
Total The E.W. Scripps Company shareholders' equity
 
926,831

 
945,935

Noncontrolling interest
 
2,143

 

Total equity
 
928,974

 
945,935

Total Liabilities and Equity
 
$
1,686,610

 
$
1,728,373

See notes to condensed consolidated financial statements.

F-2


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

 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in thousands, except per share data)
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
Advertising
 
$
142,741

 
$
170,169

 
$
432,094

 
$
479,932

Retransmission
 
63,733

 
53,134

 
196,003

 
160,181

Other
 
9,976

 
9,737

 
31,174

 
30,242

Total operating revenues
 
216,450

 
233,040

 
659,271

 
670,355

Costs and Expenses:
 
 
 
 
 
 
 
 
Employee compensation and benefits
 
96,290

 
91,568

 
294,394

 
279,916

Programs and program licenses
 
52,543

 
45,833

 
146,755

 
129,904

Other expenses
 
51,654

 
49,791

 
150,093

 
145,822

Acquisition and related integration costs
 

 

 

 
578

Restructuring costs
 
2,407

 

 
2,407

 

Total costs and expenses
 
202,894

 
187,192

 
593,649


556,220

Depreciation, Amortization, and (Gains) Losses:
 
 
 
 
 
 
 
 
Depreciation
 
9,162

 
8,407

 
27,304

 
25,991

Amortization of intangible assets
 
5,493

 
6,485

 
16,724

 
18,098

Impairment of goodwill and intangibles
 
35,732

 

 
35,732

 

Losses (gains), net on disposal of property and equipment
 
124

 
26

 
435

 
44

Net depreciation, amortization, and (gains) losses
 
50,511

 
14,918

 
80,195


44,133

Operating income (loss)
 
(36,955
)
 
30,930

 
(14,573
)
 
70,002

Interest expense
 
(5,720
)
 
(4,592
)
 
(18,163
)
 
(13,603
)
Defined benefit pension plan expense
 
(3,551
)
 
(3,605
)
 
(10,485
)
 
(10,504
)
Miscellaneous, net
 
1,187

 
(596
)
 
5,411

 
(1,245
)
Income (loss) from operations before income taxes
 
(45,039
)
 
22,137

 
(37,810
)
 
44,650

Provision (benefit) for income taxes
 
(18,355
)
 
9,615

 
(17,732
)
 
15,752

Net income (loss)
 
(26,684
)
 
12,522

 
(20,078
)
 
28,898

Net income (loss) attributable to noncontrolling interests
 

 

 

 

Net income (loss) attributable to the shareholders of The E.W. Scripps Company
 
$
(26,684
)
 
$
12,522

 
$
(20,078
)
 
$
28,898

Net income (loss) per share of common stock attributable to the shareholders of The E.W. Scripps Company
 
$
(0.32
)
 
$
0.15

 
$
(0.24
)
 
$
0.34

Net income (loss) per diluted share of common stock attributable to the shareholders of The E.W. Scripps Company
 
$
(0.32
)
 
$
0.15

 
$
(0.24
)
 
$
0.34

See notes to condensed consolidated financial statements.


F-3


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

 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in thousands)
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
(26,684
)
 
$
12,522

 
$
(20,078
)
 
$
28,898

Changes in fair value of derivative, net of tax of $37 and $111
 

 
59

 

 
177

Changes in defined benefit pension plans, net of tax of $459, $440, $1,325 and $1,241
 
734

 
706

 
2,124

 
1,988

Other
 
(15
)
 
(7
)
 
(47
)
 
(21
)
Total comprehensive income (loss)
 
(25,965
)
 
13,280


(18,001
)
 
31,042

Less comprehensive net income (loss) attributable to noncontrolling interest
 

 

 

 

Total comprehensive income (loss) attributable to the shareholders of The E.W. Scripps Company
 
$
(25,965
)
 
$
13,280

 
$
(18,001
)
 
$
31,042

See notes to condensed consolidated financial statements.

F-4


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


 
Nine Months Ended 
 September 30,
(in thousands)
 
2017

2016
 
 
 
 
 
Cash Flows from Operating Activities:
 



Net income (loss)
 
$
(20,078
)
 
$
28,898

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



Depreciation and amortization
 
44,028

 
44,089

Impairment of goodwill and intangibles
 
35,732

 

Deferred income taxes
 
(16,559
)

16,517

Stock and deferred compensation plans
 
14,717


9,120

Pension expense, net of contributions
 
(8,875
)

2,046

Other changes in certain working capital accounts, net
 
(10,616
)

(21,612
)
Miscellaneous, net
 
(5,515
)

1,930

Net cash provided by operating activities
 
32,834

 
80,988

Cash Flows from Investing Activities:
 



Acquisitions, net of cash acquired



(43,500
)
Acquisition of intangibles
 
(11,554
)
 

Additions to property and equipment
 
(14,056
)

(21,590
)
Purchase of investments
 
(1,533
)

(1,728
)
Miscellaneous, net
 
3,657

 
216

Net cash used in investing activities
 
(23,486
)
 
(66,602
)
Cash Flows from Financing Activities:
 



Proceeds from issuance of long-term debt
 
400,000

 

Payments on long-term debt
 
(392,198
)

(3,000
)
Payments of financing costs
 
(7,558
)
 

Repurchase of Class A Common shares
 
(11,704
)

(29,673
)
Proceeds from exercise of stock options
 
1,461


4,641

Tax payments related to shares withheld for RSU vesting
 
(3,371
)

(2,652
)
Miscellaneous, net
 
(3,795
)

(4,485
)
Net cash used in financing activities
 
(17,165
)

(35,169
)
Decrease in cash, cash equivalents and restricted cash
 
(7,817
)

(20,783
)
Cash, cash equivalents and restricted cash:
 



Beginning of year
 
134,352


114,621

End of period
 
$
126,535


$
93,838

 
 
 
 
 
Supplemental Cash Flow Disclosures
 
 
 
 
Interest paid
 
$
4,917


$
12,092

Income taxes paid
 
$
1,068

 
$
393

See notes to condensed consolidated financial statements.

F-5


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

(in thousands)
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
Total
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2015, as originally reported
 
$
838

 
$
1,163,985

 
$
(174,038
)
 
$
(89,802
)
 
$

 
$
900,983

Adoption of new accounting guidance
 

 
(58
)
 
14,808

 

 

 
14,750

As of January 1, 2016, as adjusted
 
838

 
1,163,927

 
(159,230
)
 
(89,802
)
 

 
915,733

Net income
 

 

 
28,898

 

 

 
28,898

Changes in defined benefit pension plans
 

 

 

 
1,988

 

 
1,988

Changes in fair value of derivative
 

 

 

 
177

 

 
177

Repurchase of 1,769,824 Class A Common shares
 
(18
)
 
(27,601
)
 
(2,054
)
 

 

 
(29,673
)
Compensation plans: 848,313 net shares issued *
 
9

 
9,362

 

 

 

 
9,371

Other
 

 

 

 
(21
)
 

 
(21
)
As of September 30, 2016
 
$
829

 
$
1,145,688

 
$
(132,386
)
 
$
(87,658
)
 
$

 
$
926,473

 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2016
 
$
819

 
$
1,132,540

 
$
(94,077
)
 
$
(93,347
)
 
$

 
$
945,935

Net loss
 

 

 
(20,078
)
 

 

 
(20,078
)
Changes in defined benefit pension plans
 

 

 

 
2,124

 

 
2,124

Repurchase of 620,451 Class A Common shares
 
(6
)
 
(9,652
)
 
(2,047
)
 

 

 
(11,705
)
Compensation plans: 545,640 net shares issued *
 
6

 
10,596

 

 

 

 
10,602

Minority interest contribution to venture
 

 

 

 

 
2,143

 
2,143

Other
 

 

 

 
(47
)
 

 
(47
)
As of September 30, 2017
 
$
819

 
$
1,133,484

 
$
(116,202
)
 
$
(91,270
)
 
$
2,143

 
$
928,974

* Net of tax payments related to shares withheld for vested RSUs of $3,371 in 2017 and $2,652 in 2016.
See notes to condensed consolidated financial statements.


F-6


The E.W. Scripps Company
Condensed Notes to Consolidated Financial Statements (Unaudited)

1. Summary of Significant Accounting Policies
As used in the Condensed Notes to Consolidated Financial Statements, the terms “Scripps,” “Company,” “we,” “our,” or “us” may, depending on the context, refer to The E.W. Scripps Company, to one or more of its consolidated subsidiary companies or to all of them taken as a whole.
Basis of Presentation — The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto included in our 2016 Annual Report on Form 10-K. In management's opinion, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the interim periods have been made.
Results of operations are not necessarily indicative of the results that may be expected for future interim periods or for the full year.
Nature of Operations — We are a media enterprise with a portfolio of television, radio and national media brands. All of our media businesses provide content and advertising services via digital platforms, including the Internet, smartphones and tablets. Our media businesses are organized into the following reportable business segments: television, radio, digital, and other. Additional information for our business segments is presented in the Condensed Notes to Consolidated Financial Statements.

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

Our financial statements include estimates and assumptions used in accounting for our defined benefit pension plans; the periods over which long-lived assets are depreciated or amortized; the fair value of long-lived assets, goodwill and indefinite lived assets; the liability for uncertain tax positions and valuation allowances against deferred income tax assets; the fair value of assets acquired and liabilities assumed in business combinations; and self-insured risks.
While we re-evaluate our estimates and assumptions on an ongoing basis, actual results could differ from those estimated at the time of preparation of the financial statements.
Revenue Recognition — We recognize revenue when persuasive evidence of a sales arrangement exists, delivery occurs or services are rendered, the sales price is fixed or determinable and collectability is reasonably assured. When a sales arrangement contains multiple elements, such as the sale of advertising and other services, we allocate revenue to each element based upon its relative fair value. We report revenue net of sales and other taxes collected from our customers.
Our primary sources of revenue are from the sale of broadcast and digital advertising, as well as retransmission fees received from cable operators, telecommunications companies and satellite carriers.
The revenue recognition policies for each source of revenue are described in our 2016 Annual Report on Form 10-K.
Share-Based Compensation — We have a Long-Term Incentive Plan (the “Plan”) which is described more fully in our 2016 Annual Report on Form 10-K. The Plan provides for the award of incentive and nonqualified stock options, stock appreciation rights, restricted stock units (RSUs), restricted and unrestricted Class A Common shares and performance units to key employees and non-employee directors.
Share-based compensation costs totaled $2.6 million and $(0.5) million for the third quarter of 2017 and 2016, respectively. Year-to-date share-based compensation costs totaled $11.7 million and $6.7 million in 2017 and 2016, respectively. The credit balance for the third quarter of 2016 is due to an adjustment of our performance based share expense due to changes in our estimate of the number of shares that will vest.

F-7


Earnings Per Share (“EPS”) — Unvested awards of share-based payments with rights to receive dividends or dividend equivalents, such as our RSUs, are considered participating securities for purposes of calculating EPS. Under the two-class method, we allocate a portion of net income to these participating securities and, therefore, exclude that income from the calculation of EPS for common stock. We do not allocate losses to the participating securities.
The following table presents information about basic and diluted weighted-average shares outstanding:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in thousands)
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Numerator (for basic and diluted earnings per share)
 
 
 
 
 
 
 
 
Net income (loss)
 
$
(26,684
)
 
$
12,522

 
$
(20,078
)
 
$
28,898

Less income allocated to RSUs
 


(174
)
 


(373
)
Numerator for basic and diluted earnings per share
 
$
(26,684
)
 
$
12,348

 
$
(20,078
)
 
$
28,525

Denominator
 
 
 
 
 
 
 
 
Basic weighted-average shares outstanding
 
82,039


83,230


82,140


83,654

Effect of dilutive securities:
 



 



Stock options held by directors
 


288

 


306

Diluted weighted-average shares outstanding
 
82,039

 
83,518

 
82,140

 
83,960

 
 
 
 
 
 
 
 
 
Anti-dilutive securities (1)
 
1,373

 

 
1,373

 

(1) 
Amount outstanding at Balance Sheet date, before application of the treasury stock method and not weighted for period outstanding.
For the three and nine month periods ended September 30, 2017, we incurred a net loss and the inclusion of RSUs and
stock options would have been anti-dilutive, and accordingly the diluted EPS calculation for the period excludes those common share equivalents.

2. Recently Adopted and Issued Accounting Standards

Recently Adopted Accounting Standards — In March 2017, the Financial Accounting Standards Board (FASB) issued new guidance on the presentation of net periodic benefit cost in the statement of operations. It requires entities to disaggregate the current service cost component from the other components of net benefit cost. The total for service cost is to be presented with other current compensation costs in the statement of operations, while the total of the other components is to be presented outside of income from operations. We elected to early adopt this guidance as of January 1, 2017. We do not have a service cost associated with our net benefit cost, as such, the impact of adopting this new guidance was to reclassify our defined benefit pension plan expense out of operating costs and expenses and to classify it as a non-operating expense below operating income.

In January 2017, the FASB issued new guidance to simplify the measurement of goodwill impairments by eliminating Step 2 from the impairment test, which requires a hypothetical purchase price allocation to measure the impairment loss. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to the reporting unit. We have elected to early adopt this guidance as of January 1, 2017.

In November 2016, the FASB issued new guidance to clarify the classification and presentation of restricted cash in the statement of cash flows. Under the new guidance, restricted cash and restricted cash equivalents are included in the cash and cash equivalent balances in the statement of cash flows. Additionally, changes in restricted cash and restricted cash equivalents are no longer presented as an investing cash flow within the statement of cash flows. We elected to early adopt this guidance as of December 31, 2016, and retrospectively applied the guidance to prior periods. The impact of adopting the new guidance was to increase cash and cash equivalents by $5.5 million and $6.6 million at September 30, 2016, and December 31, 2015, respectively, the amount reclassified from restricted cash.

In March 2016, the FASB issued new guidance which simplifies the accounting for share-based compensation arrangements, including the related income tax consequences and classification in the statement of cash flows. We elected to early adopt this guidance effective January 1, 2016. The adoption used the modified retrospective transition method which had no impact on prior years. The impact of adopting this guidance was to record $14.7 million of previously unrecognized tax

F-8


benefits, increasing deferred tax assets and retained earnings as of December 31, 2015. Additionally, we elected to adopt a policy of recording actual forfeitures, the impact of which was not material to current or prior periods.

In January 2017, the FASB issued new guidance to clarify the definition of a business for acquisitions, with the intent to make application of the guidance more consistent and cost-efficient. We elected to early adopt this guidance as of June 30, 2017, for acquisitions subsequent to our adoption date. We do not expect the adoption of this guidance to affect the treatment of future acquisitions or dispositions.

Recently Issued Accounting StandardsIn August 2016, the FASB issued new guidance related to classification of certain cash receipts and payments in the statement of cash flows. This new guidance was issued with the objective of reducing diversity in practice around eight specific types of cash flows. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. We are currently evaluating the impact of this guidance on our consolidated statements of cash flows.

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

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

In January 2016, the FASB issued new guidance on the recognition and measurement of financial instruments. This guidance primarily affects the accounting for equity method investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. We are currently evaluating the impact of this guidance on our consolidated financial statements.

In May 2014, the FASB issued new guidance on revenue recognition. Under this new standard, an entity shall recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard creates a five-step process that requires entities to exercise judgment when considering the terms of the contract(s) and all relevant facts and circumstances. This standard permits the use of either the retrospective or cumulative effect transition method and will be effective for us beginning in 2018. We are currently assessing the impact this new guidance will have on our consolidated financial statements. We are progressing in our process of adopting the new guidance and are working to identify all performance obligations and changes, if any, that the new guidance will have on the timing and amounts of revenue recorded. To date we are evaluating the impact, if any, that the new guidance might have on the revenue recognition for our retransmission consent agreements as well as our broadcast advertising arrangements. We are also evaluating the impact the new guidance has on our programming barter arrangements. We expect that we will apply the new guidance using the modified retrospective approach. We expect that the adoption of the new standard will not change the amount and timing of our revenue recognition. We expect that the adoption of the new standard will require expanded footnote disclosure.

3. Acquisitions

Stitcher

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


F-9


Cracked

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

The fair values of the assets acquired were $9.6 million of intangibles and $29.4 million of goodwill. Of the $9.6 million allocated to intangible assets, $7.6 million was for trade names with an estimated amortization period of 20 years. The remaining balance of $2.0 million was allocated to content library with an estimated amortization period of 3 years.

The goodwill of $29 million arising from the transaction consists largely of the benefit we derive from being able to expand our presence and digital brands on the web, in over-the-top video and audio and on other emerging platforms. We allocated the goodwill to our digital segment. We treated the transaction as an asset acquisition for income tax purposes, with a step-up in the assets acquired. The goodwill is deductible for income tax purposes.

Pro forma results of operations

Individually or in the aggregate, the impact of the Cracked and Stitcher acquisitions is not material to prior year results of operations and, therefore, no pro forma information has been provided.

4. Asset Write-Downs and Other Charges and Credits

Income from operations includes the following:

2017 — In the second quarter, we sold our newspaper syndication business, resulting in a gain of $3.0 million.

Restructuring includes $1.9 million of severance associated with a change in senior management as well as outside consulting fees associated with changes in our management and operating structure.

There was $0.8 million and $3.3 million, in the three months and nine months ended September 30, 2017, respectively, for a reduction to the Midroll earn out accrual.

2016 — Acquisition costs of $0.6 million include costs associated with acquisitions, such as legal and accounting fees, as well as costs to integrate acquired operations.

5. Income Taxes

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

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

Small changes in our estimated pretax income for the 2017 year significantly impacts our estimated effective tax rate for the year. Differences between pretax book and taxable earnings, such as non-deductible expenses and state income taxes, causes the effective income tax rate to vary significantly. Accordingly, for the nine months ended September 30, 2017, we do not believe we can reasonably estimate with sufficient precision our full year effective income tax rate, and as permitted by US GAAP, we have determined our tax benefit for 2017 based upon year-to-date pretax loss and the effect of differences between book and taxable loss.

The effective income tax rate for the nine months ended September 30, 2017 and 2016, was 47% and 35%, respectively. The primary reasons for the difference between these rates and the U.S. federal statutory rate of 35% are the impact of state

F-10


taxes, non-deductible expenses, release of reserves for uncertain tax positions ($1.1 million in 2017) and excess tax benefits on share-based compensation ($2.4 million and $1.9 million in 2017 and 2016, respectively).

Deferred tax assets relating to our state jurisdictions totaled $10.5 million at September 30, 2017, which includes the tax effect of state net operating loss carryforwards. We recognize state net operating loss carryforwards as deferred tax assets, subject to valuation allowances. At each balance sheet date, we estimate the amount of carryforwards that are not expected to be used prior to expiration of the carryforward period. The tax effect of the carryforwards that are not expected to be used prior to their expiration is included in the valuation allowance.

6. Restricted Cash

At September 30, 2017 and December 31, 2016, our cash and cash equivalents included $5.1 million and $5.5 million, respectively, held in a restricted cash account on deposit with our insurance carrier. This account serves as collateral, in place of an irrevocable stand-by letter of credit, to provide financial assurance that we will fulfill our obligations with respect to cash requirements associated with our workers' compensation self-insurance. This cash is to remain on deposit with the carrier until all claims have been paid or we provide a letter of credit in lieu of the cash deposit.

7. Goodwill and Other Intangible Assets
Goodwill consisted of the following:
(in thousands)
 
Television
 
Radio
 
Digital
 
Total
 
 
 
 
 
 
 
 
 
Gross balance as of December 31, 2016
 
$
681,535

 
$
41,000

 
$
132,159

 
$
854,694

Accumulated impairment losses
 
(215,414
)
 

 
(22,500
)
 
(237,914
)
Net balance as of December 31, 2016
 
$
466,121

 
$
41,000

 
$
109,659

 
$
616,780

 
 
 
 
 
 
 
 
 
Gross balance as of September 30, 2017
 
$
681,535

 
$
41,000

 
$
132,159

 
$
854,694

Accumulated impairment losses
 
(215,414
)
 

 
(51,903
)
 
(267,317
)
Net balance as of September 30, 2017
 
$
466,121

 
$
41,000

 
$
80,256

 
$
587,377


Other intangible assets consisted of the following:
(in thousands)
 
As of 
 September 30, 
 2017
 
As of 
 December 31, 
 2016
 
 
 
 
 
Amortizable intangible assets:
 
 
 
 
Carrying amount:
 
 
 
 
Television network affiliation relationships
 
$
248,444

 
$
248,444

Customer lists and advertiser relationships
 
56,100

 
56,100

Other
 
30,577

 
26,923

Total carrying amount
 
335,121

 
331,467

Accumulated amortization:
 
 
 
 
Television network affiliation relationships
 
(46,544
)
 
(37,019
)
Customer lists and advertiser relationships
 
(28,040
)
 
(24,380
)
Other
 
(7,954
)
 
(5,987
)
Total accumulated amortization
 
(82,538
)
 
(67,386
)
Net amortizable intangible assets
 
252,583

 
264,081

Indefinite-lived intangible assets — FCC licenses
 
203,815

 
203,815

Total other intangible assets
 
$
456,398

 
$
467,896


In 2017 we paid $11.6 million to acquire cable and satellite carriage rights for the launch of our Newsy cable network. These rights will be amortized over the life of the respective MVPD agreement. Additional amounts may be owed to the seller if certain conditions are met.

F-11



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

The slower development of our original revenue model and revised operating model which will result in a smaller business for Cracked, created indications of impairment of goodwill as of September 30, 2017.

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

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

We concluded that the fair value of Cracked did not exceed its carrying value as of September 30, 2017. Based upon our valuations, we recorded a $29 million non-cash charge in the three months ended September 30, 2017 to reduce the carrying value of goodwill and $6.3 million to reduce the value of intangible assets.

8. Long-Term Debt
Long-term debt consisted of the following:
(in thousands)
 
As of 
 September 30, 
 2017
 
As of 
 December 31, 
 2016
 
 
 
 
 
Variable rate credit facility
 
$

 
$

Senior unsecured notes
 
400,000

 

Term loan B
 

 
390,521

Unsecured subordinated notes
 
2,656

 
5,312

    Total outstanding principal
 
402,656

 
395,833

Less: Debt issuance costs
 
(6,821
)
 
(2,648
)
Less: Current portion
 
(2,656
)
 
(6,571
)
   Net carrying value of long-term debt
 
$
393,179

 
$
386,614

Fair value of long-term debt *
 
$
412,529

 
$
395,514


* Fair value of the Senior Notes and the term loan B were estimated based on quoted private market transactions and is classified as Level 1 in the fair value hierarchy. The fair value of the unsecured subordinated notes is determined based on a discounted cash flow analysis using current market interest rates of comparable instruments and is classified as Level 2 in the fair value hierarchy.

Senior Unsecured Notes

On April 28, 2017, we issued $400 million of senior unsecured notes ("the Senior Notes"), which bear interest at a rate of 5.125% per annum and mature on May 15, 2025. The proceeds of the Senior Notes were used to repay our term loan B, for the payment of the related issuance costs and for general corporate purposes. The Senior Notes were priced at 100% of par value and interest is payable semi-annually on May 15 and November 15. Prior to May 15, 2020, we may redeem the Senior Notes, in whole or in part, at any time, or from time to time, at a price equal to 100% of the principal amount of the Senior Notes, plus accrued and unpaid interest, if any, to the date of redemption, plus a “make-whole” premium, as set forth in the Senior Notes indenture. In addition, on or prior to May 15, 2020, we may redeem up to 40% of the Senior Notes, using proceeds of equity offerings. If we sell certain of our assets or have a change of control, the holders of the Senior Notes may require us to repurchase some or all of the notes. The Senior Notes are also guaranteed by us and the majority of our subsidiaries. The Senior Notes contain covenants with which we must comply that are typical for borrowing transactions of this nature. We incurred approximately $7.0 million of deferred financing costs in connection with the issuance of the Senior Notes, which will be amortized over the life of the Senior Notes.

In connection with the new financing we wrote off $2.4 million of deferred financing cost associated with the term loan B to interest expense.

Revolving Credit Facility

On April 28, 2017, we amended and restated our $100 million revolving credit facility ("Revolving Credit Facility"), increasing its capacity to $125 million and extending the maturity to April 2022. Interest is payable on the Revolving Credit Facility at rates based on LIBOR, plus a margin based on our leverage ratio, ranging from 1.75% to 2.50%.

The Revolving Credit Facility includes maintaining a net leverage ratio when we have outstanding borrowings on the facility, as well as other restrictions on payments (dividends and share repurchases). Additionally, we can make acquisitions as long as the pro forma net leverage ratio is less than 5.5 to 1.0.

We granted the lenders pledges of our equity interests in our subsidiaries and security interests in substantially all other personal property including cash, accounts receivables, and equipment.

Commitment fees of 0.30% to 0.50% per annum, based on our leverage ratio, of the total unused commitment are payable under the Revolving Credit Facility.

As of September 30, 2017 and December 31, 2016, we had $0.1 million and $0.8 million, respectively, of outstanding letters of credit.

Financing Agreement

Until April 28, 2017, we had a $500 million revolving credit and term loan agreement ("Financing Agreement"). Under the Financing Agreement, we had a $400 million term loan B that matured in November 2020 and a $100 million revolving credit facility that matured in November 2018. We repaid the term loan B with the proceeds of our Senior Notes. The Revolving Credit Facility was amended as described above.

Interest was payable on the term loan B at rates based on LIBOR, plus a fixed margin of 2.5%. Prior to December 2016, interest was payable at rates based on LIBOR, with a 0.75% floor, plus a fixed margin of 2.75%. As of December 31, 2016, the interest rate was 3.27% on the term loan B. The weighted-average interest rate on the term loan B was 3.50% for the nine months ended September 30, 2016.

Unsecured Subordinated Notes

The unsecured subordinated promissory notes bear interest at a rate of 7.25% per annum payable quarterly. The notes are payable in annual installments of $2.7 million through 2018, with no prepayment right.


F-12


9. Other Liabilities
Other liabilities consisted of the following:
(in thousands)
 
As of 
 September 30, 
 2017
 
As of 
 December 31, 
 2016
 
 
 
 
 
Employee compensation and benefits
 
$
19,010

 
$
18,356

Liability for pension benefits
 
217,390

 
232,788

Liabilities for uncertain tax positions
 
808

 
2,416

Other
 
14,682

 
20,393

Other liabilities (less current portion)
 
$
251,890

 
$
273,953


10. Supplemental Cash Flow Information
The following table presents additional information about the change in certain working capital accounts:
 
 
Nine Months Ended 
 September 30,
(in thousands)
 
2017
 
2016
 
 
 
 
 
Accounts and notes receivable
 
$
(4,621
)
 
$
(12,586
)
Income taxes receivable/payable, net
 
(626
)
 
3,437

Other current assets
 
(10,090
)
 
(1,218
)
Accounts payable
 
1,953

 
(768
)
Accrued employee compensation and benefits
 
(6,054
)
 
(10,918
)
Accrued interest
 
8,656

 

Other accrued liabilities
 
1,999

 
(4,475
)
Other, net
 
(1,833
)
 
4,916

Total
 
$
(10,616
)
 
$
(21,612
)

11. Employee Benefit Plans

We sponsor two noncontributory defined benefit pension plans as well as two non-qualified Supplemental Executive Retirement Plans ("SERPs"). Both of the defined benefit plans and the SERPs have frozen the accrual of future benefits.

We sponsor a defined contribution plan covering substantially all non-union and certain union employees. We match a portion of employees' voluntary contributions to this plan.

The components of the expense consisted of the following:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in thousands)
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Interest cost
 
$
6,504

 
$
6,839

 
$
19,475

 
$
20,379

Expected return on plan assets, net of expenses
 
(4,360
)
 
(4,616
)
 
(13,079
)
 
(13,812
)
Amortization of actuarial loss
 
1,150

 
1,102

 
3,318

 
3,097

Total for defined benefit plans
 
3,294

 
3,325


9,714


9,664

Multi-employer plans
 
58

 
42

 
191

 
127

SERPs
 
257

 
280

 
771

 
840

Defined contribution plan
 
2,300

 
2,073

 
7,161

 
6,347

Net periodic benefit cost
 
$
5,909

 
$
5,720

 
$
17,837

 
$
16,978



F-13


We contributed $1.3 million to fund current benefit payments for our SERPs and $18.0 million for our defined benefit pension plans during the nine months ended September 30, 2017. During the remainder of 2017, we anticipate contributing an additional $0.3 million to fund the SERPs' benefit payments and an additional $1.3 million to fund our qualified defined benefit pension plans.

12. Segment Information
We determine our business segments based upon our management and internal reporting structures. Our reportable segments are strategic businesses that offer different products and services.
Our television segment includes 15 ABC affiliates, five NBC affiliates, two FOX affiliates and two CBS affiliates. We also have three MyTV affiliates, one CW affiliate, one independent station and three Azteca America Spanish-language affiliates. Our television stations reach approximately 18% of the nation’s television households based on audience reach. Television stations earn revenue primarily from the sale of advertising time to local, national and political advertisers and retransmission fees received from cable operators, telecommunications companies and satellite carriers.
Our radio segment consists of 34 radio stations in eight markets. We operate 28 FM stations and six AM stations. Our radio stations earn revenue primarily from the sale of advertising to local advertisers.

Our digital segment includes the digital operations of our local television and radio businesses. It also includes the operations of our national digital businesses of Midroll, a podcast industry leader, Newsy, the national news network and Cracked, a multi-platform humor and satire brand. Our digital operations earn revenue primarily through the sale of advertising, marketing services and agency commissions.
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.

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


F-14


Information regarding our business segments is as follows:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in thousands)
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Segment operating revenues:
 
 
 
 
 
 
 
 
Television
 
$
179,920


$
197,283

 
$
553,022

 
$
568,932

Radio
 
17,870


19,301

 
49,112

 
52,087

Digital
 
17,846

 
15,754

 
52,552

 
43,287

Other
 
814


702

 
4,585

 
6,049

Total operating revenues
 
$
216,450

 
$
233,040

 
$
659,271

 
$
670,355

Segment profit (loss):
 
 
 
 
 
 
 
 
Television
 
$
32,083

 
$
58,305

 
$
116,583

 
$
153,290

Radio
 
1,510

 
2,528

 
6,027

 
8,574

Digital
 
(5,685
)
 
(5,633
)
 
(16,061
)
 
(13,481
)
Other
 
(897
)
 
(832
)
 
(2,342
)
 
(984
)
Shared services and corporate
 
(11,048
)
 
(8,520
)
 
(36,178
)
 
(32,686
)
Acquisition and related integration costs
 

 

 

 
(578
)
Restructuring costs
 
(2,407
)
 

 
(2,407
)
 

Depreciation and amortization of intangibles
 
(14,655
)
 
(14,892
)
 
(44,028
)
 
(44,089
)
Impairment of goodwill and intangibles
 
(35,732
)
 

 
(35,732
)
 

(Losses) gains, net on disposal of property and equipment
 
(124
)
 
(26
)
 
(435
)
 
(44
)
Interest expense
 
(5,720
)
 
(4,592
)
 
(18,163
)
 
(13,603
)
Defined benefit pension plan expense
 
(3,551
)
 
(3,605
)
 
(10,485
)
 
(10,504
)
Miscellaneous, net
 
1,187

 
(596
)
 
5,411

 
(1,245
)
Income (loss) from operations before income taxes
 
$
(45,039
)
 
$
22,137

 
$
(37,810
)
 
$
44,650

Depreciation:
 
 
 
 
 
 
 
 
Television
 
$
8,018

 
$
7,120

 
$
23,846

 
$
22,517

Radio
 
615

 
653

 
1,816

 
1,733

Digital
 
18

 
40

 
49

 
148

Other
 
43

 
67

 
169

 
196

Shared services and corporate
 
468

 
527

 
1,424

 
1,397

Total depreciation
 
$
9,162

 
$
8,407

 
$
27,304

 
$
25,991

Amortization of intangibles:
 
 
 
 
 
 
 
 
Television
 
$
3,633

 
$
4,239

 
$
11,138

 
$
12,718

Radio
 
265

 
265

 
795

 
795

Digital
 
1,257

 
1,643

 
3,776

 
3,570

Shared services and corporate
 
338

 
338

 
1,015

 
1,015

Total amortization of intangibles
 
$
5,493

 
$
6,485

 
$
16,724

 
$
18,098

Additions to property and equipment:
 
 
 
 
 
 
 
 
Television
 
$
3,610

 
$
6,618

 
$
12,412

 
$
16,248

Radio
 
581

 
628

 
1,135

 
944

Digital
 
122

 
34

 
319

 
51

Other
 

 
74

 

 
115

Shared services and corporate
 
155

 
643

 
276

 
967

Total additions to property and equipment
 
$
4,468

 
$
7,997

 
$
14,142

 
$
18,325



F-15



13. Capital Stock
Capital Stock — We have two classes of common shares, Common Voting shares and Class A Common shares. The Class A Common shares are only entitled to vote on the election of the greater of three or one-third of the directors and other matters as required by Ohio law.
Share Repurchase Plan — Shares may be repurchased from time to time at management's discretion, either in the open market, through pre-arranged trading plans or in privately negotiated block transactions. In May 2014, our Board of Directors authorized a repurchase program of up to $100 million of our Class A Common shares through December 2016. For the nine months ended September 30, 2016, we repurchased $29.7 million of shares at prices ranging from $14.71 to $19.51 per share under this authorization. Before this authorization expired at the end of 2016, $0.5 million of shares were repurchased but not settled until 2017. No additional shares may be repurchased under this program.
In November 2016, our Board of Directors authorized a repurchase program of up to $100 million of our Class A Common shares through December 2018. For the nine months ended September 30, 2017, we repurchased $11.2 million of shares at prices ranging from $16.82 to $23.01 per share under this authorization. At September 30, 2017, $88.8 million remained under this authorization.

14. Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) ("AOCL") by component, including items reclassified out of AOCL, were as follows:
 
 
Three Months Ended September 30, 2017
(in thousands)
 
Gains and Losses on Derivatives
 
Defined Benefit Pension Items
 
Other
 
Total
 
 
 
 
 
 
 
 
 
Beginning balance, June 30, 2017
 
$

 
$
(92,286
)
 
$
297

 
$
(91,989
)
  Other comprehensive income before reclassifications
 

 

 

 

  Amounts reclassified from accumulated other
  comprehensive loss:
 
 
 
 
 
 
 
 
     Actuarial gain (loss), net of tax of $449 (b)
 

 
734

 
(15
)
 
719

Net current-period other comprehensive income (loss)
 

 
734

 
(15
)
 
719

Ending balance, September 30, 2017
 
$

 
$
(91,552
)
 
$
282

 
$
(91,270
)

 
 
Three Months Ended September 30, 2016
(in thousands)
 
Gains and Losses on Derivatives
 
Defined Benefit Pension Items
 
Other
 
Total
 
 
 
 
 
 
 
 
 
Beginning balance, June 30, 2016
 
$
(124
)
 
$
(88,458
)
 
$
166

 
$
(88,416
)
  Other comprehensive income before reclassifications
 

 

 

 

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

 

 

 
59

     Actuarial gain (loss), net of tax of $436 (b)
 

 
706

 
(7
)
 
699

Net current-period other comprehensive income (loss)
 
59

 
706

 
(7
)
 
758

Ending balance, September 30, 2016
 
$
(65
)
 
$
(87,752
)
 
$
159

 
$
(87,658
)


F-16


 
 
Nine Months Ended September 30, 2017
(in thousands)
 
Gains and Losses on Derivatives
 
Defined Benefit Pension Items
 
Other
 
Total
 
 
 
 
 
 
 
 
 
Beginning balance, December 31, 2016
 
$

 
$
(93,676
)
 
$
329

 
$
(93,347
)
  Other comprehensive income before reclassifications
 

 

 

 

  Amounts reclassified from accumulated other
  comprehensive loss:
 
 
 
 
 
 
 
 
     Actuarial gain (loss), net of tax of $1,295 (b)
 

 
2,124

 
(47
)
 
2,077

Net current-period other comprehensive income (loss)
 

 
2,124

 
(47
)
 
2,077

Ending balance, September 30, 2017
 
$

 
$
(91,552
)
 
$
282

 
$
(91,270
)

 
 
Nine Months Ended September 30, 2016
(in thousands)
 
Gains and Losses on Derivatives
 
Defined Benefit Pension Items
 
Other
 
Total
 
 
 
 
 
 
 
 
 
Beginning balance, December 31, 2015
 
$
(242
)
 
$
(89,740
)
 
$
180

 
$
(89,802
)
  Other comprehensive income before reclassifications
 

 

 

 

  Amounts reclassified from accumulated other
  comprehensive loss:
 
 
 
 
 
 
 
 
     Interest rate swap, net of tax of $111 (a)
 
177

 

 

 
177

     Actuarial gain (loss), net of tax of $1,299 (b)
 

 
1,988

 
(21
)
 
1,967

Net current-period other comprehensive income (loss)
 
177

 
1,988

 
(21
)
 
2,144

Ending balance, September 30, 2016
 
$
(65
)
 
$
(87,752
)
 
$
159

 
$
(87,658
)

(a) Interest rate swap amortization is included in interest expense in the Condensed Consolidated Statements of Operations
(b) Actuarial gain (loss) is included in defined benefit pension plan expense in the Condensed Consolidated Statements of Operations


F-17


15. Noncontrolling Interest

A noncontrolling owner holds a 30% interest in our venture to develop, produce and air our lifestyle daytime talk show. In April 2017, on the formation of the venture, the noncontrolling owner made a $2.1 million non-cash contribution to the venture. The contribution included the rights to the show concept, contractual rights with the show's talent, as well as other pre-production items.

16. Subsequent Events

On October 2, 2017 we acquired the Katz Broadcasting networks for $292 million, which is net of a 5% minority interest we owned. Katz owns and operates four national television networks, Bounce, Grit, Escape and Laff. We financed the acquisition with a $300 million term loan B. The term loan B matures in 2024 with interest payable at rates based on LIBOR, plus a fixed margin of 2.25%. The term loan B also requires annual principal payments of $3 million.

Due to the limited time since we completed the acquisition, we have not yet completed the initial acquisition accounting for the transaction, including the determination of the fair values of the assets acquired and the liabilities assumed. We will complete the preliminary purchase price allocation in the fourth quarter and it will be reflected in our December 31, 2017 financial statements. The results of operations of the acquired business will be included in our results from October 2, 2017, the date of the closing of the acquisition.


F-18


Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion and analysis of financial condition and results of operations is based upon the Condensed Consolidated Financial Statements and the Condensed Notes to Consolidated Financial Statements. 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" in our 2016 Annual Report on Form 10-K and as may be described in subsequently filed quarterly reports on Form 10-Q. 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 media enterprise, serving audiences and businesses through a portfolio of television, radio and national 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 Four" television networks. We also own 34 radio stations in eight markets. We operate an expanding collection of local and national journalism and information businesses including our podcast business, Midroll, national news network, Newsy, and the multi-platform humor and satire brand, Cracked. We also produce television programming, run an award-winning investigative reporting newsroom in Washington, D.C., and serve as the longtime steward of the nation's largest, most successful and longest-running educational programs, the Scripps National Spelling Bee.

On October 2, 2017 we acquired the Katz Broadcasting networks for $292 million, which is net of a 5% minority interest we owned. Katz owns and operates four national television networks, Bounce, Grit, Escape and Laff. We financed the acquisition with $300 million in new debt.

Our national news network focused on millennial audiences, Newsy, launched a major expansion into the cable and satellite marketplace, kicked off by Scripps’ acquisition of carriage contracts from the Retirement Living Television cable network.

Scripps began restructuring work to realign its businesses around the new management team announced on August 23. The reorganization, effective Jan. 1, will include merging local television and digital operations into a new Local Media division and the national content brands into a National Media division. More changes are expected in the next several quarters. The company also appointed Chief Strategy Officer Lisa Knutson as interim chief financial officer. In the third quarter, we began a deep analysis of our operating division and corporate cost structure, our non-core assets and the opportunities for our national content brands. We are committed to improving operating performance in our core assets, supporting the growth ahead with our national businesses and serving our audiences with news and information across all media platforms.

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 business segments that follows.

F-19


Consolidated Results of Operations
Consolidated results of operations were as follows:
<
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in thousands)
 
2017
 
Change
 
2016
 
2017
 
Change
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating revenues
 
$
216,450

 
(7.1
)%
 
$
233,040

 
$
659,271

 
(1.7
)%
 
$
670,355

Employee compensation and benefits
 
(96,290
)
 
5.2
 %
 
(91,568
)
 
(294,394
)
 
5.2
 %
 
(279,916
)
Programs and program licenses
 
(52,543
)
 
14.6
 %
 
(45,833
)
 
(146,755
)
 
13.0
 %
 
(129,904
)
Other expenses
 
(51,654
)
 
3.7
 %
 
(49,791
)
 
(150,093
)
 
2.9
 %
 
(145,822
)
Acquisition and related integration costs
 

 
 
 

 

 
 
 
(578
)
Restructuring costs
 
(2,407
)
 
 
 

 
(2,407
)
 
 
 

Depreciation and amortization of intangibles
 
(14,655
)
 
 
 
(14,892
)
 
(44,028
)
 
 
 
(44,089
)
Impairment of goodwill and intangibles
 
(35,732
)
 
 
 

 
(35,732
)
 
 
 

(Losses) gains, net on disposal of property and equipment
 
(124
)
 
 
 
(26
)
 
(435
)
 
 
 
(44
)
Operating income (loss)
 
(36,955
)
 
 
 
30,930

 
(14,573
)
 
 
 
70,002

Interest expense
 
(5,720
)
 
 
 
(4,592
)
 
(18,163
)
 
 
 
(13,603
)
Defined benefit pension plan expense
 
(3,551
)
 
 
 
(3,605
)
 
(10,485
)
 
 
 
(10,504
)
Miscellaneous, net
 
1,187

 
 
 
(596
)
 
5,411

 
 
 
(1,245
)
Income (loss) from operations before income taxes
 
(45,039
)
 
 
 
22,137

 
(37,810
)
 
 
 
44,650

Provision (benefit) for income taxes
 
18,355

 
 
 
(9,615
)
 
17,732

 
 
 
(15,752
)
Net income (loss)
 
(26,684
)
 
 
 
12,522