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) August 5, 2022
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) | ||||||||||||
| (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):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act.
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
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 ☐
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. ☐
THE E.W. SCRIPPS COMPANY
INDEX TO CURRENT REPORT ON FORM 8-K
| Item No. | Page | |||||||
| 2.02 | Results of Operations and Financial Condition | 3 | ||||||
| 9.01 | Financial Statements and Exhibits | 3 | ||||||
2
Item 2.02 Results of Operations and Financial Condition
On August 5, 2022, we released information regarding results of operations for the quarter ended June 30, 2022. A copy of the press release is attached hereto as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits
| Exhibit Number | Description of Item | |||||||
| Press release dated August 5, 2022 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
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/ Daniel W. Perschke | |||||||
| Daniel W. Perschke | ||||||||
| Vice President, Controller | ||||||||
| (Principal Accounting Officer) | ||||||||
Dated: August 5, 2022
4
Exhibit 99.1
  | |||||||||||
Scripps’ Q2 revenue grows, benefiting from political advertising and distribution gains
Political ad revenue was the highest-ever for second quarter; company is on track for record full-year political results
| Aug. 5, 2022 | ||||||||
CINCINNATI – The E.W. Scripps Company (NASDAQ: SSP) delivered $594 million in revenue and $132 million in segment profit for the second quarter of 2022, driven by higher Local Media political advertising and retransmission revenues.
The company is on track to deliver at least $270 million of Local Media political advertising revenue for the full year, outpacing its 2020 adjusted-combined presidential election year political revenue, after record-setting second-quarter results.
Highlights:
•During the second quarter, Scripps benefitted from strong political advertising revenues in the Local Media division. Higher retransmission revenues also contributed to its 10% total revenue growth, and the company saw continued moderation in the decline of pay TV households. Local core advertising was down just slightly, despite the macroeconomic climate.
•The Scripps Networks division revenue performed better than the national cable and broadcast networks marketplace, and the division delivered a 31% segment profit margin, despite a challenging national advertising climate.
•The Networks division increased connected TV revenue by 35% in Q2 and continues its aggressive expansion onto CTV platforms, with six networks either launched or launching before October on services including Roku, FreeVee, Samsung TV Plus, TCL, Tubi, Vizio Watchfree and Xumo.
•The company is carefully managing expenses in the face of the current economic environment, without negatively impacting its long-term commitment to its local media and national networks strategies.
•Free cash flow for the full year is now targeted at about $400 million.
“For the second quarter, Scripps met or exceeded overall expectations. Foreshadowing the record performance we expect in the back half of the year, political advertising during the first two quarters nearly equaled the level of revenue we saw for the same period of the presidential election year 2020, when Michael Bloomberg spent early and heavily in our markets to promote his presidential campaign. We also experienced smaller declines in our pay TV subscriber household counts year over year,” said Adam Symson, Scripps president and CEO.
“While Scripps Networks revenue was short of guidance – a reflection of the weakness in the national ad market – it still equaled last year’s extraordinary performance and delivered results better than peers as well as a margin of more than 30%.”
“The Networks benefited from growth in connected TV revenue, with continued momentum expected in the back half of the year. By the end of the third quarter, most of our Scripps networks will be nearly fully distributed across connected TV platforms, and our previous CTV launches this year are garnering significant viewing, driving the increases in CTV revenue. Our networks also are available on cable and satellite and to nearly every U.S. television household through over-the-air broadcast.
1
“The Scripps strategy is to deliver quality programs to media consumers on their preferred TV viewing platforms – an all-of-the-above distribution approach that is paying dividends as Scripps establishes itself as a leader in free, ad-supported television.”
Operating results
Total second-quarter company revenue was $594 million, an increase of 5.2% or $29.4 million from the prior-year quarter due to higher political and retransmission revenue in our Local Media division.
Costs and expenses for segments, shared services and corporate were $463 million, up from $413 million in the year-ago quarter.
Income attributable to the shareholders of Scripps was $29.2 million or 32 cents per share. In the prior-year quarter, the company had reported a loss from continuing operations attributable to its shareholders of $11.4 million or 14 cents per share. The prior-year quarter included a $13.8 million loss on extinguishment of debt from the redemption of our 2025 senior notes, a $31.9 million non-cash adjustment due to the increase in the fair value of the outstanding common stock warrant liability, acquisition and related integration costs of $6.7 million, and $514,000 of restructuring costs. These items decreased income from continuing operations by $47.6 million, net of taxes, or 58 cents per share.
Second-quarter 2022 results by segment compared to prior-period amounts:
Local Media
Revenue from Local Media was $356 million, up 9.5% from the prior-year quarter.
•Core advertising revenue decreased 2% to $158 million.
•Political revenue was $24 million, compared to $3.2 million in the prior-year quarter.
•Retransmission revenue increased 9.4% to $171 million.
Segment expenses increased 5.7% to $275 million, driven by network affiliation fees and the impact of Scripps employees returning to working in its station buildings, resuming more normal operating procedures.
Segment profit was $80.7 million, compared to $64.6 million in the year-ago quarter.
Scripps Networks
Revenue from Scripps Networks was $239 million, equal to the prior-year quarter. Incremental ad revenue earned from the July 2021 launch of Defy TV and TrueReal networks was offset by weakness in the national advertising market.
Segment expenses for Scripps Networks increased 26% to $166 million, consistent with the company’s strategic commitment to new national networks launches and continued programming improvements.
Segment profit was $73.3 million, compared to $107 million in the year-ago quarter.
Financial condition
On June 30, cash and cash equivalents totaled $58.2 million and total debt was $3.1 billion, including $60 million outstanding under our revolving credit facility.
During the first quarter of 2022, we redeemed a total of $123 million of the outstanding principal on our senior notes. In addition, we made mandatory principal payments of $9.3 million on our term loans during the first half of the year.
Preferred stock dividends paid in 2022 were $24 million. Under the terms of Berkshire Hathaway’s preferred equity investment in Scripps, we are prohibited from paying dividends on or repurchasing our common shares until all preferred shares are redeemed.
2
Year-to-date operating results
The following comparisons are to the period ending June 30, 2021:
In 2022, revenue was $1.2 billion, which compares to revenue of $1.1 billion in 2021. Political revenue was $30.8 million, compared to $4.5 million in the prior year.
Costs and expenses for segments, shared services and corporate were $913 million, up from $821 million in the year-ago period, reflecting costs attributed to our recent over-the-air network launches, continued investment in programming, higher affiliation fees and the impact of Scripps employees returning to working in its stations and offices.
Income from continuing operations attributable to the shareholders of Scripps was $39 million or 42 cents per share. Pre-tax costs for the 2022 period included $1.6 million of acquisition and related integration costs as well as a $1.2 million gain on extinguishment of debt from the redemption of senior notes. In the prior-year period, loss from continuing operations attributable to the shareholders of Scripps was $19.5 million or 24 cents per share. Pre-tax costs for the prior year included an $81.8 million gain from the sale of Triton, a $13.8 million loss on extinguishment of debt, a $99.1 million non-cash adjustment due to the increase in the fair value of the outstanding common stock warrant liability, acquisition and related integration costs of $35.3 million and $7.6 million of restructuring costs. These items decreased income from continuing operations by $76.9 million, net of taxes, or 94 cents per share.
Looking ahead
Comparisons for our segments are to the same period in 2021.
| Third-quarter 2022 | ||||||||
| Local Media revenue | Up low-to-mid 20% range | |||||||
| Local Media expense | Up mid-single-digit percent range | |||||||
| Scripps Networks revenue | Flat | |||||||
| Scripps Networks expense | Up mid-teens percent range | |||||||
| Shared services and corporate | About $20 million | |||||||
| Full-year 2022 | ||||||||
| Interest paid | About $150 million | |||||||
| Pension contribution | None required | |||||||
| Capital expenditures | Between $45-$55 million | |||||||
| Taxes paid | About $80 million | |||||||
| Depreciation and amortization | About $160 million | |||||||
Conference call
The senior management of The E.W. Scripps Company will discuss the company’s quarterly results during a telephone conference call at 9:30 a.m. Eastern today. To access the live webcast, visit http://ir.scripps.com and find the link under “upcoming events.”
To access the conference call by telephone, dial (844) 867-6169 (U.S.) or (409) 207-6975 (international) and give the access code 1864935 approximately five minutes before the start of the call. Investors and analysts will need the name of the call (“Scripps earnings call”) to be granted access. The public is granted access to the conference call on a listen-only basis.
A replay line will be open from 1:30 p.m. Eastern time Aug. 5 until midnight Sept. 7. The domestic number to access the replay is (866) 207-1041 and the international number is (402) 970-0847. The access code for both numbers is 4808441.
A replay of the conference call will be archived and available online for an extended period of time following the call. To access the audio replay, visit http://ir.scripps.com/ approximately four hours after the call, and the link can be found on that page under “audio/video links.”
3
Forward-looking statements
This document contains certain forward-looking statements related to the company’s businesses that are based on management’s current expectations. Forward-looking statements 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 forward-looking statements. Such forward-looking statements are made as of the date of this document and should be evaluated with the understanding of their inherent uncertainty. A detailed discussion of principal risks and uncertainties, including those engendered by the COVID-19 pandemic, that 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 such statements are made.
Contact:
Carolyn Micheli, The E.W. Scripps Company, 513-977-3732, Carolyn.micheli@scripps.com
 | ||||||||||||||
The E.W. Scripps Company (NASDAQ: SSP) is a diversified media company focused on creating a better-informed world. As one of the nation’s largest local TV broadcasters, Scripps serves communities with quality, objective local journalism and operates a portfolio of 61 stations in 41 markets. The Scripps Networks reach nearly every American through the national news outlets Court TV and Newsy and popular entertainment brands ION, Bounce, Defy TV, Grit, ION Mystery, Laff and TrueReal. Scripps is the nation’s largest holder of broadcast spectrum. Scripps runs an award-winning investigative reporting newsroom in Washington, D.C., and is the longtime steward of the Scripps National Spelling Bee. Founded in 1878, Scripps has held for decades to the motto, “Give light and the people will find their own way.”
4
THE E.W. SCRIPPS COMPANY
RESULTS OF OPERATIONS
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands, except per share data) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Operating revenues | $ | 594,467 | $ | 565,077 | $ | 1,160,173 | $ | 1,105,998 | ||||||||||||||||||
| Segment, shared services and corporate expenses | (462,892) | (412,796) | (913,453) | (821,217) | ||||||||||||||||||||||
| Acquisition and related integration costs | — | (6,686) | (1,642) | (35,331) | ||||||||||||||||||||||
| Restructuring costs | — | (514) | — | (7,564) | ||||||||||||||||||||||
| Depreciation and amortization of intangible assets | (41,019) | (40,751) | (80,764) | (80,258) | ||||||||||||||||||||||
| Gains (losses), net on disposal of property and equipment | (1,577) | (75) | (4,058) | (155) | ||||||||||||||||||||||
| Operating expenses | (505,488) | (460,822) | (999,917) | (944,525) | ||||||||||||||||||||||
| Operating income | 88,979 | 104,255 | 160,256 | 161,473 | ||||||||||||||||||||||
| Interest expense | (36,011) | (42,010) | (72,510) | (85,892) | ||||||||||||||||||||||
| Gain (loss) on extinguishment of debt | — | (13,775) | 1,234 | (13,775) | ||||||||||||||||||||||
| Defined benefit pension plan income | 662 | 7 | 1,325 | 14 | ||||||||||||||||||||||
| Gain on sale of Triton business | — | — | — | 81,784 | ||||||||||||||||||||||
| Losses on stock warrant | — | (31,874) | — | (99,118) | ||||||||||||||||||||||
| Miscellaneous, net | 2,170 | (2,707) | 1,763 | (7,558) | ||||||||||||||||||||||
| Income from continuing operations before income taxes | 55,800 | 13,896 | 92,068 | 36,928 | ||||||||||||||||||||||
| Provision for income taxes | (14,060) | (12,683) | (27,963) | (32,212) | ||||||||||||||||||||||
| Income from continuing operations, net of tax | 41,740 | 1,213 | 64,105 | 4,716 | ||||||||||||||||||||||
| Income from discontinued operations, net of tax | — | 4,431 | — | 6,495 | ||||||||||||||||||||||
| Net income | 41,740 | 5,644 | 64,105 | 11,211 | ||||||||||||||||||||||
| Preferred stock dividends | (12,577) | (12,576) | (25,153) | (24,219) | ||||||||||||||||||||||
| Net income (loss) attributable to the shareholders of The E.W. Scripps Company | $ | 29,163 | $ | (6,932) | $ | 38,952 | $ | (13,008) | ||||||||||||||||||
| Net income (loss) per diluted share of common stock attributable to the shareholders of The E.W. Scripps Company: | ||||||||||||||||||||||||||
| Income (loss) from continuing operations | $ | 0.32 | $ | (0.14) | $ | 0.42 | $ | (0.24) | ||||||||||||||||||
| Income from discontinued operations | — | 0.05 | — | 0.08 | ||||||||||||||||||||||
| Net income (loss) per diluted share of common stock attributable to the shareholders of The E.W. Scripps Company: | $ | 0.32 | $ | (0.09) | $ | 0.42 | $ | (0.16) | ||||||||||||||||||
| Weighted average diluted shares outstanding | 87,820 | 82,381 | 90,048 | 82,143 | ||||||||||||||||||||||
See notes to results of operations.
The sum of net income (loss) per share from continuing and discontinued operations may not equal the reported total net income (loss) per share as each is calculated independently.
E-1
Notes to Results of Operations
1. SEGMENT INFORMATION
We determine our business segments based upon our management and internal reporting structures, as well as the basis on which our chief operating decision maker makes resource-allocation decisions.
Our Local Media segment includes our 61 local broadcast stations and their related digital operations. It is comprised of 18 ABC affiliates, 11 NBC affiliates, nine CBS affiliates and four FOX affiliates. We also have 12 CW affiliates - four on full power stations and eight on multicast; five independent stations and 10 additional low power stations. Our Local Media segment earns revenue primarily from the sale of advertising to local, national and political advertisers and retransmission fees received from cable operators, telecommunications companies, satellite carriers and over-the-top virtual MVPDs.
Our Scripps Networks segment is comprised of nine national television networks that reach nearly every U.S. television home through free over-the-air broadcast, cable/satellite, connected TV and digital distribution. These operations earn revenue primarily through the sale of advertising.
Our respective business segment results reflect the impact of intercompany carriage agreements between our local broadcast television stations and our national networks. We also allocate a portion of certain corporate costs and expenses, including accounting, procurement, human resources, employee benefit and information technology to our business segments. These intercompany agreements and allocations are generally amounts agreed upon by management, which may differ from an arms-length amount.
The other segment caption aggregates our operating segments that are too small to report separately. Costs for centrally provided services and certain corporate costs that are not allocated to the business segments are included in shared services and corporate costs. These unallocated corporate costs would also include the costs associated with being a public company. 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 amounts, 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.
E-2
Information regarding the operating results of our business segments is as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||||||||||||||
| Segment operating revenues: | ||||||||||||||||||||||||||||||||||||||
| Local Media | $ | 355,819 | $ | 324,837 | 9.5 | % | $ | 682,480 | $ | 637,418 | 7.1 | % | ||||||||||||||||||||||||||
| Scripps Networks | 238,929 | 238,735 | 0.1 | % | 477,997 | 452,395 | 5.7 | % | ||||||||||||||||||||||||||||||
| Other | 3,893 | 5,050 | (22.9) | % | 8,044 | 23,171 | (65.3) | % | ||||||||||||||||||||||||||||||
| Intersegment eliminations | (4,174) | (3,545) | 17.7 | % | (8,348) | (6,986) | 19.5 | % | ||||||||||||||||||||||||||||||
| Total operating revenues | $ | 594,467 | $ | 565,077 | 5.2 | % | $ | 1,160,173 | $ | 1,105,998 | 4.9 | % | ||||||||||||||||||||||||||
| Segment profit (loss): | ||||||||||||||||||||||||||||||||||||||
| Local Media | $ | 80,742 | $ | 64,643 | 24.9 | % | $ | 135,135 | $ | 120,580 | 12.1 | % | ||||||||||||||||||||||||||
| Scripps Networks | 73,297 | 107,317 | (31.7) | % | 158,373 | 199,520 | (20.6) | % | ||||||||||||||||||||||||||||||
| Other | (4,349) | (541) | (5,462) | 2,740 | ||||||||||||||||||||||||||||||||||
| Shared services and corporate | (18,115) | (19,138) | (5.3) | % | (41,326) | (38,059) | 8.6 | % | ||||||||||||||||||||||||||||||
| Acquisition and related integration costs | — | (6,686) | (1,642) | (35,331) | ||||||||||||||||||||||||||||||||||
| Restructuring costs | — | (514) | — | (7,564) | ||||||||||||||||||||||||||||||||||
| Depreciation and amortization of intangible assets | (41,019) | (40,751) | (80,764) | (80,258) | ||||||||||||||||||||||||||||||||||
| Gains (losses), net on disposal of property and equipment | (1,577) | (75) | (4,058) | (155) | ||||||||||||||||||||||||||||||||||
| Interest expense | (36,011) | (42,010) | (72,510) | (85,892) | ||||||||||||||||||||||||||||||||||
| Gain (loss) on extinguishment of debt | — | (13,775) | 1,234 | (13,775) | ||||||||||||||||||||||||||||||||||
| Defined benefit pension plan income | 662 | 7 | 1,325 | 14 | ||||||||||||||||||||||||||||||||||
| Gain on sale of Triton business | — | — | — | 81,784 | ||||||||||||||||||||||||||||||||||
| Losses on stock warrant | — | (31,874) | — | (99,118) | ||||||||||||||||||||||||||||||||||
| Miscellaneous, net | 2,170 | (2,707) | 1,763 | (7,558) | ||||||||||||||||||||||||||||||||||
| Income from continuing operations before income taxes | $ | 55,800 | $ | 13,896 | $ | 92,068 | $ | 36,928 | ||||||||||||||||||||||||||||||
E-3
Operating results for our Local Media segment were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||||||||||||||
| Segment operating revenues: | ||||||||||||||||||||||||||||||||||||||
| Core advertising | $ | 157,671 | $ | 160,956 | (2.0) | % | $ | 315,008 | $ | 313,094 | 0.6 | % | ||||||||||||||||||||||||||
| Political | 24,009 | 3,193 | 29,777 | 4,504 | ||||||||||||||||||||||||||||||||||
| Retransmission and carriage fees | 171,126 | 156,361 | 9.4 | % | 330,708 | 312,020 | 6.0 | % | ||||||||||||||||||||||||||||||
| Other | 3,013 | 4,327 | (30.4) | % | 6,987 | 7,800 | (10.4) | % | ||||||||||||||||||||||||||||||
| Total operating revenues | 355,819 | 324,837 | 9.5 | % | 682,480 | 637,418 | 7.1 | % | ||||||||||||||||||||||||||||||
| Segment costs and expenses: | ||||||||||||||||||||||||||||||||||||||
| Employee compensation and benefits | 105,254 | 107,461 | (2.1) | % | 209,970 | 214,289 | (2.0) | % | ||||||||||||||||||||||||||||||
| Programming | 118,847 | 109,598 | 8.4 | % | 237,450 | 219,928 | 8.0 | % | ||||||||||||||||||||||||||||||
| Other expenses | 50,976 | 43,135 | 18.2 | % | 99,925 | 82,621 | 20.9 | % | ||||||||||||||||||||||||||||||
| Total costs and expenses | 275,077 | 260,194 | 5.7 | % | 547,345 | 516,838 | 5.9 | % | ||||||||||||||||||||||||||||||
| Segment profit | $ | 80,742 | $ | 64,643 | 24.9 | % | $ | 135,135 | $ | 120,580 | 12.1 | % | ||||||||||||||||||||||||||
Operating results for our Scripps Networks segment were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||||||||||||||
| Total operating revenues | $ | 238,929 | $ | 238,735 | 0.1 | % | $ | 477,997 | $ | 452,395 | 5.7 | % | ||||||||||||||||||||||||||
| Segment costs and expenses: | ||||||||||||||||||||||||||||||||||||||
| Employee compensation and benefits | 29,827 | 23,162 | 28.8 | % | 59,442 | 46,799 | 27.0 | % | ||||||||||||||||||||||||||||||
| Programming | 87,779 | 64,651 | 35.8 | % | 169,778 | 126,278 | 34.4 | % | ||||||||||||||||||||||||||||||
| Other expenses | 48,026 | 43,605 | 10.1 | % | 90,404 | 79,798 | 13.3 | % | ||||||||||||||||||||||||||||||
| Total costs and expenses | 165,632 | 131,418 | 26.0 | % | 319,624 | 252,875 | 26.4 | % | ||||||||||||||||||||||||||||||
| Segment profit | $ | 73,297 | $ | 107,317 | (31.7) | % | $ | 158,373 | $ | 199,520 | (20.6) | % | ||||||||||||||||||||||||||
E-4
2. CONDENSED CONSOLIDATED BALANCE SHEETS
| (in thousands) | As of June 30, 2022 | As of December 31, 2021 | ||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 58,237 | $ | 66,223 | ||||||||||
| Restricted cash | — | 34,257 | ||||||||||||
| Other current assets | 637,170 | 601,801 | ||||||||||||
| Total current assets | 695,407 | 702,281 | ||||||||||||
| Investments | 25,677 | 21,632 | ||||||||||||
| Property and equipment | 445,654 | 456,945 | ||||||||||||
| Operating lease right-of-use assets | 115,543 | 124,821 | ||||||||||||
| Goodwill | 2,920,466 | 2,913,384 | ||||||||||||
| Other intangible assets | 1,870,194 | 1,910,311 | ||||||||||||
| Programming | 443,117 | 510,316 | ||||||||||||
| Miscellaneous | 19,612 | 18,624 | ||||||||||||
| TOTAL ASSETS | $ | 6,535,670 | $ | 6,658,314 | ||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 84,656 | $ | 83,931 | ||||||||||
| Unearned revenue | 23,767 | 20,000 | ||||||||||||
| Current portion of long-term debt | 18,612 | 18,612 | ||||||||||||
| Accrued expenses and other current liabilities | 343,945 | 389,337 | ||||||||||||
| Total current liabilities | 470,980 | 511,880 | ||||||||||||
| Long-term debt (less current portion) | 3,064,352 | 3,129,393 | ||||||||||||
| Other liabilities (less current portion) | 980,724 | 1,046,607 | ||||||||||||
| Total equity | 2,019,614 | 1,970,434 | ||||||||||||
| TOTAL LIABILITIES AND EQUITY | $ | 6,535,670 | $ | 6,658,314 | ||||||||||
E-5
3. EARNINGS PER SHARE (“EPS”)
Unvested awards of share-based payments with rights to receive dividends or dividend equivalents, such as our RSUs, are considered participating securities for purposes of calculating EPS. Under the two-class method, we allocate a portion of net income to these participating securities and, therefore, exclude that income from the calculation of EPS for common stock. We do not allocate losses to the participating securities.
The following table presents information about basic and diluted weighted-average shares outstanding:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
Numerator (for basic and diluted earnings per share) | ||||||||||||||||||||||||||
| Income from continuing operations, net of tax | $ | 41,740 | $ | 1,213 | $ | 64,105 | $ | 4,716 | ||||||||||||||||||
| Less income allocated to RSUs | (872) | — | (1,105) | — | ||||||||||||||||||||||
| Less preferred stock dividends | (12,577) | (12,576) | (25,153) | (24,219) | ||||||||||||||||||||||
| Numerator for basic and diluted earnings per share | $ | 28,291 | $ | (11,363) | $ | 37,847 | $ | (19,503) | ||||||||||||||||||
| Denominator | ||||||||||||||||||||||||||
| Basic weighted-average shares outstanding | 83,270 | 82,381 | 83,030 | 82,143 | ||||||||||||||||||||||
| Effect of dilutive securities: | ||||||||||||||||||||||||||
| Restricted stock units | 235 | — | 424 | — | ||||||||||||||||||||||
| Common stock warrant | 4,315 | — | 6,594 | — | ||||||||||||||||||||||
| Diluted weighted-average shares outstanding | 87,820 | 82,381 | 90,048 | 82,143 | ||||||||||||||||||||||
E-6
4. NON-GAAP INFORMATION
In addition to results prepared in accordance with GAAP, this earnings release discusses free cash flow, a non-GAAP performance measure that management and the company’s Board of Directors uses to evaluate the performance of the business. We also believe that the non-GAAP measure provides useful information to investors by allowing them to view our business through the eyes of management and is a measure that is frequently used by industry analysts, investors and lenders as a measure of valuation for broadcast companies.
Free cash flow is calculated as non-GAAP Adjusted EBITDA (as defined below), plus reimbursements received from the FCC for repack expenditures, less capital expenditures, preferred stock dividends, interest payments, income taxes paid (refunded) and contributions to defined retirement plans.
Adjusted EBITDA is calculated as income (loss) from continuing operations, net of tax, plus income tax expense (benefit), interest expense, losses (gains) on extinguishment of debt, defined benefit pension plan expense (income), share-based compensation costs, depreciation, amortization of intangible assets, loss (gain) on business and asset disposals, mark-to-market losses (gains), acquisition and integration costs, restructuring charges and certain other miscellaneous items.
A reconciliation of these non-GAAP measures to the comparable financial measure in accordance with GAAP is as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Income from continuing operations, net of tax | $ | 41,740 | $ | 1,213 | $ | 64,105 | $ | 4,716 | ||||||||||||||||||
| Provision for income taxes | 14,060 | 12,683 | 27,963 | 32,212 | ||||||||||||||||||||||
| Interest expense | 36,011 | 42,010 | 72,510 | 85,892 | ||||||||||||||||||||||
| Loss (gain) on extinguishment of debt | — | 13,775 | (1,234) | 13,775 | ||||||||||||||||||||||
| Defined benefit pension plan income | (662) | (7) | (1,325) | (14) | ||||||||||||||||||||||
| Share-based compensation costs | 4,557 | 6,403 | 13,883 | 14,701 | ||||||||||||||||||||||
| Depreciation | 15,812 | 14,245 | 31,182 | 28,370 | ||||||||||||||||||||||
| Amortization of intangible assets | 25,207 | 26,506 | 49,582 | 51,888 | ||||||||||||||||||||||
| Losses (gains), net on disposal of property and equipment | 1,577 | 75 | 4,058 | 155 | ||||||||||||||||||||||
| Acquisition and related integration costs | — | 6,686 | 1,642 | 35,331 | ||||||||||||||||||||||
| Restructuring costs | — | 514 | — | 7,564 | ||||||||||||||||||||||
| Gain on sale of Triton business | — | — | — | (81,784) | ||||||||||||||||||||||
| Losses on stock warrant | — | 31,874 | — | 99,118 | ||||||||||||||||||||||
| Miscellaneous, net | (2,170) | 2,707 | (1,763) | 7,558 | ||||||||||||||||||||||
| Adjusted EBITDA | 136,132 | 158,684 | 260,603 | 299,482 | ||||||||||||||||||||||
| Capital expenditures | (12,368) | (22,659) | (24,955) | (30,051) | ||||||||||||||||||||||
| Proceeds from FCC Repack | 541 | 8,845 | 1,742 | 14,190 | ||||||||||||||||||||||
| Preferred stock dividends | (12,000) | (12,000) | (24,000) | (21,067) | ||||||||||||||||||||||
| Interest paid | (15,509) | (25,574) | (68,177) | (54,928) | ||||||||||||||||||||||
| Income taxes paid, net of tax indemnification reimbursements | (47,209) | (54,762) | (46,778) | (54,215) | ||||||||||||||||||||||
| Contributions for defined retirement plans | (253) | (6,590) | (506) | (12,555) | ||||||||||||||||||||||
| Free cash flow | $ | 49,334 | $ | 45,944 | $ | 97,929 | $ | 140,856 | ||||||||||||||||||
E-7
ADJUSTED COMBINED SUPPLEMENTAL INFORMATION
Due to the effect that the ION acquisition has on our segment operating results, and to provide meaningful period over period comparisons, we are presenting supplemental non-GAAP (Generally Accepted Accounting Principles) information for certain financial results on an adjusted combined basis. The adjusted combined financial results have been compiled by adding, as of the earliest period presented, the impact from the acquired ION television stations' historical revenue, employee compensation and benefits, programming and other expenses to Scripps’ historical revenue, employee compensation and benefits, programming and other expenses captions reported within the Scripps Networks segment. These historical results are adjusted for certain intercompany adjustments and other impacts that would result from the companies operating under the ownership of Scripps as of the earliest period presented.
Management uses the adjusted combined non-GAAP supplemental information for purposes of evaluating the Company’s segment results. The company therefore believes that the non-GAAP measure presented provides useful information to investors by allowing them to view the company’s businesses through the eyes of management, facilitating comparison of Scripps Networks results across historical periods and providing a focus on the underlying ongoing operating performance of our segments.
The company uses the adjusted combined non-GAAP supplemental information to supplement the financial information presented on a GAAP historical basis. This non-GAAP supplemental information is not to be considered in isolation from, or as a substitute for, the related GAAP measures, and should be read only in conjunction with financial information presented on a GAAP basis.
The adjusted combined financial results contained in the following supplemental information is for informational purposes only. These results do not necessarily reflect what the historical results of Scripps would have been if the acquisition of ION had occurred on January 1, 2021. Nor is this information necessarily indicative of the future results of operations of the combined entities.
The adjusted combined financial information is not pro forma information prepared in accordance with Article 11 of SEC regulation S-X, and the preparation of information in accordance with Article 11 would result in a significantly different presentation.
E-8
Scripps Networks adjusted combined segment profit
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||||||||||||||
| Total operating revenues | $ | 238,929 | $ | 238,735 | 0.1 | % | $ | 477,997 | $ | 459,117 | 4.1 | % | ||||||||||||||||||||||||||
| Segment costs and expenses: | ||||||||||||||||||||||||||||||||||||||
| Employee compensation and benefits | 29,827 | 23,162 | 28.8 | % | 59,442 | 47,947 | 24.0 | % | ||||||||||||||||||||||||||||||
| Programming | 87,779 | 64,651 | 35.8 | % | 169,778 | 128,313 | 32.3 | % | ||||||||||||||||||||||||||||||
| Other expenses | 48,026 | 43,605 | 10.1 | % | 90,404 | 80,354 | 12.5 | % | ||||||||||||||||||||||||||||||
| Total costs and expenses | 165,632 | 131,418 | 26.0 | % | 319,624 | 256,614 | 24.6 | % | ||||||||||||||||||||||||||||||
| Segment profit | $ | 73,297 | $ | 107,317 | (31.7) | % | $ | 158,373 | $ | 202,503 | (21.8) | % | ||||||||||||||||||||||||||
Non-GAAP reconciliation
Below is a reconciliation of Scripps historical reported revenue and segment profit for its Scripps Networks segment to the adjusted combined revenue and adjusted combined segment profit for the Scripps Networks segment following the acquisition of ION.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Scripps Networks operating revenues, as reported | $ | 238,929 | $ | 238,735 | $ | 477,997 | $ | 452,395 | ||||||||||||||||||
| ION acquisition | — | — | — | 6,722 | ||||||||||||||||||||||
| Scripps Networks adjusted combined operating revenues | $ | 238,929 | $ | 238,735 | $ | 477,997 | $ | 459,117 | ||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Scripps Networks segment profit, as reported | $ | 73,297 | $ | 107,317 | $ | 158,373 | $ | 199,520 | ||||||||||||||||||
| ION acquisition | — | — | — | 2,983 | ||||||||||||||||||||||
| Scripps Networks adjusted combined segment profit | $ | 73,297 | $ | 107,317 | $ | 158,373 | $ | 202,503 | ||||||||||||||||||
E-9