UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 13, 2018
THE E.W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)
Ohio | 0-16914 | 31-1223339 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification Number) | ||
312 Walnut Street Cincinnati, Ohio | 45202 | |||
(Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: (513) 977-3000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR § 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR § 240.12b-2).
Emerging growth 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
THE E.W. SCRIPPS COMPANY
INDEX TO CURRENT REPORT ON FORM 8-K
Item No. | Page | |
7.01 | Regulation FD Disclosure | 3 |
9.01 | Financial Statements and Exhibits | 3 |
2
Item 7.01 Regulation FD Disclosure
Beginning on November 13, 2018, The E.W. Scripps Company (the "Company") intends to meet with and make presentations to prospective lenders in connection with a proposed senior credit facility financing, the proceeds of which are expected to be used to pay for the pending acquisition of certain subsidiaries of Cordillera Communications, LLC, which is expected to close in the first quarter of 2019. These presentations are expected to include certain strategic business and financial information relating to the Company's historical and expected results of operations and financial condition (after giving effect to various completed and pending acquisitions and divestitures).
A copy of the slides to be used in connection with such meetings and presentations is furnished as Exhibit 99.1 hereto and incorporated herein by this reference.
The information set forth under this Item 7.01 is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
Exhibit Number | Description of Item | |
Prospective lender meeting slides | ||
3
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 hereunto duly authorized.
THE E.W. SCRIPPS COMPANY | ||
BY: | /s/ Douglas F. Lyons | |
Douglas F. Lyons | ||
Senior Vice President, Controller and Treasurer | ||
(Principal Accounting Officer) | ||
Dated: November 13, 2018
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THE E.W. SCRIPPS COMPANY LENDER PRESENTATION NOVEMBER 13, 2018
THE E.W. SCRIPPS COMPANY DISCLAIMER Forward-Looking Statements Certain statements in this communication may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature and which may be identified by the use of words like “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions, are forward-looking statements. These forward-looking statements are based on management's current expectations, and are subject to certain risks, trends and uncertainties, including changes in advertising demand and other economic conditions that could cause actual results to differ materially from the expectations expressed in such forward-looking statements. Such forward-looking statements are made as of the date of this communication and should be evaluated with the understanding of their inherent uncertainty. 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 company’s Form 10-K on file with the SEC in the section titled “Risk Factors.” The company undertakes no obligation to publicly update any forward-looking statements to reflect events or circumstances after the date the statement is made. 2
TRANSACTION OVERVIEW
TRANSACTION OVERVIEW Transaction Overview o On October 29, 2018, The E.W. Scripps Company (“Scripps” or the “Company”) announced that it is acquiring 15 television stations in 10 markets from Cordillera Communications (“Cordillera”) for $521 million o Transaction excludes Cordillera’s Tucson, AZ station, which is an overlap market o Scripps expects the transaction to close during the first quarter of 2019, subject to customary closing conditions and required regulatory approvals o The company anticipates total leverage ratio of ~4.8x at closing, including estimated synergies o Scripps intends to finance the acquisition through the issuance of a $525 million 7-year Incremental Senior Secured Term Loan B (“Incremental TLB”) and cash on hand o The Company is able to meet all relevant incremental and acquisition ratios in the existing credit agreement at Closing but is seeking an amendment to ensure funds certain for the transaction th th o The Company requests consents by November 16 , with closing of the amendment expected on November 20 4
SCRIPPS + CORDILLERA The Cordillera Portfolio Enhances Our “Smart Scale” Highlights o Cordillera operates high quality stations (9 out of the 10 acquired markets are #1 and one market is #2) o All stations are affiliated with Big 3 Networks – NBC, CBS and ABC (no FOX) in attractive mid-sized markets o Adds quality and scale to Scripps’ existing portfolio o The only significant overlapping market (Tucson, AZ) is not being acquired o Pro forma Scripps will have 51 stations in 36 markets and will reach 20.7 percent of households o Scripps will have the #1 rated TV station in 11 of its 36 markets (31%), enhancing the durability of our Local Media revenue E.W. Scripps Cordillera o Scripps will operate two stations in seven markets, including two high/low power Big Four affiliates, efficiently enhancing depth and durability Combined Portfolio of 51 Stations in 36 Markets 5 Source: BIA Investing in Television Market Report 2018, 2nd Edition Note: E.W. Scripps is acquiring Cordillera’s #1 ranked station in Colorado Springs, CO, where it overlaps with its existing #13 station
CORDILLERA COMMUNICATIONS Cordillera Operates High Quality Stations Overview Station Overview % of U.S. Ad Revenue o Cordillera, a wholly owned subsidiary of Evening Post Industries DMA TV HH Market Affiliate Rank # (“EPI”), is a leading independent, private owner of 16 high quality 63 0.4% Lexington, KY 1 TV stations in 11 geographically diverse mid-sized markets 65 0.4% Tucson, AZ 1 o 10 out of the 11 markets are being acquired 87 0.3% Colorado Springs, CO 1 o Cordillera was founded in 1986 to manage EPI’s broadcasting 121 0.2% Lafayette, LA 1 assets, and now serves over 2.3MM households 123 0.2% San Luis Obispo, CA 1 2 128 0.2% Corpus Christi, TX o Cordillera operates in geographically diverse medium to small- 3 1 sized markets, ranging from DMA 63 to 205 164 0.1% Missoula, MT 6 167 0.1% Billings, MT 1 o Stations are primarily affiliated with the “Big Three” networks ABC, 1 CBS, and NBC, and Cordillera has the #1 ranked station in 9 out of 185 0.1% Butte, MT 6 1 the 10 markets (#2 in the 10th market) being acquired 192 0.1% Great Falls, MT 6 1 205 0.0% Helena, MT o Attractive programming and superior local news resulting in leading 5 household revenue shares and top rankings Total 2.1% Markets: 11 Acquired 1.6% Markets: 10 o Strong operating margins Not being acquired by Scripps Source: BIA Investing in Television Market Report 2018, 2nd Edition and August 2018 Cordillera CIM 6 Note: Household reach percentages represent gross figures and do not take into account UHF discount
CORDILLERA COMMUNICATIONS Cordillera’s Highly Ranked Stations Take Scripps Into Montana, Kentucky and Louisiana Missoula, Billings, Butte-Bozeman, Great Falls, Helena, Montana DMA No. 164, 167, 185, 192, 205 KPAX/KAJJ, KTVQ, KXLF/KBZK, KRTV, KTGF, KTVH, KXLH Lexington, Kentucky DMA No. 63 WLEX Colorado Springs- Pueblo, Colorado DMA No. 87 KOAA Lafayette, Louisiana DMA No. 121 KATC Santa Barbara-San Luis Obispo, California DMA No. 123 Corpus Christi, Texas DMA No. 128 KSBY KRIS KAJA 37
TRITON ACQUISITION Overview of Triton Acquisition Transaction Highlights Overview o Purchase Price: $150 million o Global leader in digital audio measurement and infrastructure technology o Structure: 100% equity purchase o Founded in 2006 and currently owned by private equity firm o Financing: Cash on hand Vector Capital o Deal Multiples: ~3.7x Revenue and ~9x EBITDA o Operates a B2B revenue model and charges audio publishers fees to: o Financial Projections: Immediately accretive to margins o Convert content into digital stream o Insert digital ads into those streams o Management: Existing team will continue to lead Triton o Measure the listener base to help them sell advertising Select Customers Financials o 2018 revenue is projected to be ~$40 million with EBITDA projected in the mid-teens millions o 2019 revenue is projected to grow in the low to mid teens percent range over 2018 o EBITDA margins are expected to be in the 30-40% range, strongly contributing to the National Media division’s profitability and margin expansion o The National Media division, pro forma for Triton, is expected to generate at least $500 million in revenue in 2021 8
KEY CREDIT HIGHLIGHTS Scripps Credit Highlights 1 Portfolio of local and national television / digital media brands provides diversified revenue streams 2 Leading television stations in large, NFL-sized markets (leverage with networks and cable / satellite operators) 3 Growth of retransmission revenue providing additional opportunities to improve margins 4 One of the strongest TV footprints for political advertising 5 National media brands are rapidly gaining scale and attracting large audiences 6 Seasoned management team with extensive industry experience 7 Prudently managed balance sheet and strong free cash flow generation over a two-year cycle 9
SUMMARY FINANCIALS Financial Update & Recent Events Financial Update Recent Events o Q3 2018 Results Compared to Prior Year o Triton Digital Acquisition Local Media Revenue: Up 23% o o On October 17, announced the acquisition of Triton o Retransmission Revenue: Up 24% o Surging Political Revenue o National Media Revenue: ~$72mm o On November 9, reported 2018 political revenue totaled Share $140mm (86% higher than 2014) o Q4 2018 Outlook repurchase 24%Gray Asset Acquisitions o Local Media Revenue: Up mid to high 30% range o o Retransmission Revenue: Consistent with Q3 2018 o Agreed to acquire two ABC affiliates in Florida and Texas for o National Media Revenue: Low to mid $70mm range $55mm National media o Radio Divestitures acquisitions 20% o In August, reached an agreement to sell the last group of 19 radio stations in 4 markets to Summit Media for $47mm 10
AMENDMENT OVERVIEW
AMENDMENT OVERVIEW Pro Forma Capitalization ($ in Millions) E.W. Scripps Cordillera Acquisition Standalone At Signing (9/30/18) 3 As of Pro Forma 9/30/18 xEBITDA 1 9/30/18 xEBITDA 1 2 Cash and Equivalents $272 $70 $125MM Revolver due Apr-22 – 0.0x – 0.0x $300MM Term Loan B due Oct-24 297 1.8x 297 1.3x Incremental Term Loan B – 1.8x 525 3.5x Capital Lease Obligations & LOC 4 1.8x 4 3.5x Total Senior Secured Debt $301 1.8x $826 3.5x Net Sr. Secured Debt $29 0.2x $756 3.2x $400MM 5.125% Senior Unsecured Notes due May-25 400 4.2x 400 5.2x Total Debt $701 4.2x $1,226 5.2x Net Total Debt $429 2.6x $1,156 4.9x (1) Based on Covenant 9/30/18 L8QA Adj. EBITDA of: $165 $237 (2) Reflects cash balance as of 11/6/18 (3) Pro Forma for radio sale and Waco/Tallahassee, Triton, and Cordillera acquisitions 12
AMENDMENT OVERVIEW Summary of Key Terms Amendment of Existing Senior Secured Credit Facilities Borrower: The E.W. Scripps Company (the “Company” or the “Borrower”) Guarantors: All existing and future direct and indirect material domestic subsidiaries of the Borrower Security: First priority security interest in and lien on all material personal property and assets of the Loan Party (to include Target assets acquired) $422 million existing Senior Secured Credit Facilities consisting of: Facility: . Term Loan B: $297 million . Revolver: $125 million Revolver vote only: . Financial Covenant: Increase Secured Net Leverage to 4.50x (with step-down 18 months from closing to 4.25x) and remove Total Net Leverage Ratio Revolver and Term Loan B vote: “Required Lender” . Waiver to permit incurrence of the Incremental Term Loan B on customary Limited Condition Acquisition (LCA) terms Amendments/Waivers: . Waiver to permit acquisition (current net secured and total net leverage ratio tests of 3.50x and 5.25x) . Amend Consolidated EBITDA definition to increase synergies cap to 15% achieved over 12 months . Add customary LCA provisions, customary Permitted Escrow Debt terms and changes in the LSTA model provisions . Term Loan B: October 2, 2024 Maturity: . Revolver: April 27, 2022 TLB Amortization: 1.00% per annum, paid quarterly Ratings: CFR: Ba3/BB-; Facility: Baa3/BB+ (1 Recovery Rating) on watch for downgrade 13
AMENDMENT OVERVIEW Anticipated Transaction Timeline November 2018 Sun Mon Tue Wed Thu Fri Sat 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Holiday Key Date Key Dates: Event: November 13th Lender Call November 16th Amendment Consents Due November 20th Close Amendment 14