Acquisitions

9 Months Ended

Sep. 30, 2020

Television Stations Acquisitions

On September 19, 2019, we closed on the acquisition of eight television stations in seven markets from the Nexstar Media Group, Inc. ("Nexstar") transaction with Tribune Media Company ("Tribune"). Cash consideration for the transaction totaled $582 million. Seven of the stations were operated by Tribune, and its subsidiaries, and one was operated by Nexstar. Nexstar was required to divest these stations in order to complete its acquisition of Tribune.

On May 1, 2019, we acquired 15 television stations in 10 markets from Cordillera Communications, LLC ("Cordillera"), for $521 million in cash, plus a working capital adjustment of $23.9 million. In the second quarter of 2020, we received cash consideration and reduced the purchase price by $2.5 million related to an indemnification claim on certain acquired assets.

Effective January 1, 2019, we acquired three television stations owned by Raycom Media ("Raycom") — Waco, Texas ABC affiliate KXXV/KRHD and Tallahassee, Florida ABC affiliate WTXL — for $55 million in cash. These stations were divested as part of Gray Television's acquisition of Raycom.

The following table summarizes the final fair values of the Raycom, Cordillera and Nexstar-Tribune assets acquired and liabilities assumed at the closing dates.


(in thousands)	Raycom		Cordillera		Nexstar- Tribune		Total

Accounts receivable	$	—	$	26,770	$	—	$	26,770
Current portion of programming	—		—		11,997		11,997
Other current assets	—		986		3,541		4,527
Property and equipment	11,721		53,734		61,569		127,024
Operating lease right-of-use assets	296		4,667		82,447		87,410
Programming (less current portion)	—		—		9,830		9,830
Goodwill	18,349		251,681		168,196		438,226
Indefinite-lived intangible assets - FCC licenses	6,800		26,700		176,000		209,500
Amortizable intangible assets:
Television network affiliation relationships	17,400		169,400		181,000		367,800
Advertiser relationships	700		5,900		7,100		13,700
Other intangible assets	—		13,000		—		13,000
Accounts payable	—		(15)		—		(15)
Accrued expenses	—		(5,750)		(4,586)		(10,336)
Current portion of programming liabilities	—		—		(16,211)		(16,211)
Other current liabilities	—		(280)		(3,185)		(3,465)
Operating lease liabilities	(296)		(4,387)		(79,766)		(84,449)
Programming liabilities	—		—		(15,607)		(15,607)
Net purchase price	$	54,970	$	542,406	$	582,325	$	1,179,701

Of the value allocated to amortizable intangible assets, television network affiliation relationships have an estimated amortization period of 20 years, advertiser relationships have estimated amortization periods of 5-10 years and the value allocated to a shared services agreement has an estimated amortization period of 20 years.

The goodwill of $438 million arising from the transactions consists largely of synergies, economies of scale and other benefits of a larger broadcast footprint. We allocated the goodwill to our Local Media segment. We treated the transactions as asset acquisitions for income tax purposes resulting in a step-up in the assets acquired. The goodwill is deductible for income tax purposes.

Omny Studio

On June 10, 2019, we completed the acquisition of Omny Studio ("Omny") for a cash purchase price of $8.3 million. Omny is a Melbourne, Australia-based podcasting software-as-a-service company operating as a part of Triton in our National Media segment. Omny is an audio-on-demand platform built specifically for professional audio publishers. The platform enables audio publishers to seamlessly record, edit, distribute, monetize and analyze podcast content; replace static ads with dynamically inserted, highly targeted ads; and automates key aspects of campaign management, such as industry separation, frequency capping and volume normalization.

The final purchase price allocation assigned $5.3 million to goodwill, $3.8 million to a developed technology intangible asset and the remainder was allocated to various working capital and deferred tax liability accounts. The developed technology intangible asset has an estimated amortization period of 10 years. The goodwill arising from the transaction consists largely of

the fact that the addition of Omny's podcast and on-demand audio publishing platform to Triton's portfolio of streaming, advertising and measurement technologies provides audio publishers around the world with a full-stack enterprise solution to increase reach and revenue.

Pro forma results of operations

Pro forma results of operations, assuming the Cordillera and Nexstar-Tribune acquisitions had taken place at the beginning of 2019, are presented in the following table. The pro forma results do not include Raycom or Omny Studio, as the impact of these acquisitions, individually or in the aggregate, is not material to prior year results of operations. The pro forma information includes the historical results of operations of Scripps, Cordillera and Nexstar-Tribune, as well as adjustments for additional depreciation and amortization of the assets acquired, additional interest expense related to the financing of the transactions and other transactional adjustments. The pro forma results exclude the $19.9 million of transaction related costs that were expensed in conjunction with the acquisitions and do not include efficiencies, cost reductions or synergies expected to result from the acquisitions. The unaudited pro forma financial information is not necessarily indicative of the results that actually would have occurred had the acquisitions been completed at the beginning of the period.


(in thousands, except per share data) (unaudited)	Nine Months Ended September 30, 2019

Operating revenues	$	1,149,438
Loss from continuing operations attributable to the shareholders of The E.W. Scripps Company, net of tax	(29,894)
Net loss per share from continuing operations attributable to the shareholders of The E.W. Scripps Company:
Basic	$	(0.37)
Diluted	(0.37)

Pending acquisition

On September 23, 2020, we entered into an Agreement and Plan of Merger to buy national broadcast network ION Media for $2.65 billion. ION Media is a national network of broadcast stations and is the largest holder of U.S. broadcast television spectrum. The business distributes its programming through Federal Communications Commission-licensed television stations it owns as well as affiliated TV stations, reaching 96% of U.S. homes through its over-the-air broadcast and pay TV platforms. With the acquisition of ION Media, we will create a full-scale national television networks business by combining the ION network with the five Katz networks and national news network, Newsy.

The transaction will be financed with a combination of cash, debt financing and preferred equity financing, including Berkshire Hathaway's $600 million preferred equity investment in Scripps. Berkshire Hathaway also will receive a warrant to purchase up to 23.1 million Class A shares, at an exercise price of $13 per share.

To comply with ownership rules of the Federal Communications Commission, we will need to divest of up to 26 television stations, which will be purchased by INYO Broadcast Holdings, LLC upon completion of the merger. The number of stations we will sell to INYO depends on whether our application to sell WPIX, our television station in New York City, is approved by the FCC before the closing date of the ION Media transaction. These divested stations will become independent affiliates of ION Media pursuant to long-term affiliation agreements. The transaction will close upon satisfaction of normal customary closing conditions and regulatory approval.