Company Quick10K Filing
Quick10K
EW Scripps
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2018-12-03 Other Events, Exhibits
8-K 2018-11-13 Regulation FD, Exhibits
8-K 2018-11-09 Earnings, Exhibits
8-K 2018-11-06 Other Events, Exhibits
8-K 2018-10-29 Other Events
8-K 2018-10-27 Enter Agreement, Exhibits
8-K 2018-09-24 Other Events, Exhibits
8-K 2018-08-03 Earnings, Exhibits
8-K 2018-05-22 Regulation FD, Exhibits
8-K 2018-05-10 Shareholder Vote
8-K 2018-02-15 Other Events, Exhibits
8-K 2018-01-31 Officers, Exhibits
8-K 2018-01-25 Other Events, Exhibits
CIM Chimera Investment 0
PSO Pearson 0
GRA WR Grace 0
STON Stonemor Partners 0
NR Newpark Resources 0
CQH Cheniere Energy Partners Holdings 0
ACAD Acadia Pharmaceuticals 0
DGX Quest Diagnostics 0
BBBY Bed Bath & Beyond 0
SLGL Sol-Gel Technologies 0
SSP 2018-12-31
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
EX-21 ssp-ex2120181231x10k.htm
EX-23 ssp-ex2320181231x10xk.htm
EX-31.A ssp-ex31a20181231x10k.htm
EX-31.B ssp-ex31b20181231x10k.htm
EX-32.A ssp-ex32a20181231x10k.htm
EX-32.B ssp-ex32b20181231x10k.htm

EW Scripps Earnings 2018-12-31

SSP 10K Annual Report

Balance SheetIncome StatementCash Flow

10-K 1 ssp-20181231x10k.htm 10-K Document


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

þ
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018     OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 0-16914
THE E.W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)
Ohio
(State or other jurisdiction of
incorporation or organization)
 
31-1223339
(IRS Employer
Identification Number)
 
 
 
312 Walnut Street
Cincinnati, Ohio
(Address of principal executive offices)
 
45202
(Zip Code)
Registrant’s telephone number, including area code: (513) 977-3000
Title of each class
Securities registered pursuant to Section 12(b) of the Act:
 
Name of each exchange on which registered
NASDAQ Global Select Market
Class A Common shares, $.01 par value
 
 
 
 
 
Securities registered pursuant to Section 12(g) of the Act:
 
 
Not applicable
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” , “smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
 
Accelerated filer o
 
Non-accelerated filer o 
 
Smaller reporting company o
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
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
The aggregate market value of Class A Common shares of the registrant held by non-affiliates of the registrant, based on the $13.39 per share closing price for such stock on June 30, 2018, was approximately $760,000,000. All Class A Common shares beneficially held by executives and directors of the registrant and descendants of Edward W. Scripps have been deemed, solely for the purpose of the foregoing calculation, to be held by affiliates of the registrant. There is no active market for our Common Voting shares.
As of January 31, 2019, there were 68,731,963 of the registrant’s Class A Common shares, $.01 par value per share, outstanding and 11,932,722 of the registrant’s Common Voting shares, $.01 par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required for Part III of this report is incorporated herein by reference to the proxy statement for the 2019 annual meeting of shareholders.
 



Index to The E.W. Scripps Company Annual Report
on Form 10-K for the Year Ended December 31, 2018
Item No.
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2



As used in this Annual Report on Form 10-K, the terms “Scripps,” “Company,” “we,” “our” or “us” may, depending on the context, refer to The E.W. Scripps Company, to one or more of its consolidated subsidiary companies, or to all of them taken as a whole.
Additional Information
Our Company website is http://www.scripps.com. Copies of all of our SEC filings filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge on this website as soon as reasonably practicable after we electronically file the material with, or furnish it to, the SEC. Our website also includes copies of the charters for our Compensation, Nominating & Governance and Audit Committees, our Corporate Governance Principles, our Insider Trading Policy, our Ethics Policy and our Code of Ethics for the CEO and Senior Financial Officers. All of these documents are also available to shareholders in print upon request or by request via e-mail to secretary@scripps.com.
Forward-Looking Statements
Our Annual Report on Form 10-K contains certain forward-looking statements related to 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 that may cause actual results and events to differ materially from such forward-looking statements is included 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.

3



PART I
Item 1.
Business
We are an 140-year-old media enterprise with interests in local and national media brands. Founded in 1878, our motto is "Give light and the people will find their own way." Our mission is to do well by doing good — creating value for customers, employees and owners by informing, engaging and empowering those we serve. We serve audiences and businesses in our Local Media division through a portfolio of local television stations and their associated digital media products. Our Local Media division is one of the nation’s largest independent TV station ownership groups. Following the completion of the Raycom Media acquisition in January 2019 and the anticipated closing of the Cordillera Communications, LLC acquisition in the second quarter of 2019, we will have 51 television stations in 36 markets and a reach of more than one in five U.S. television households. We have affiliations with all of the “Big Four” television networks. In our National Media division, we operate national media brands including podcast industry-leader, Stitcher, and its advertising network Midroll Media; next-generation national news network, Newsy; four national broadcast networks, the Katz networks; and the global leader in digital audio technology and measurement services, Triton. We also operate an award-winning investigative reporting newsroom in Washington, D.C., and serve as the longtime steward of one of the nation's largest, most successful and longest-running educational programs, the Scripps National Spelling Bee. For a full listing of our outlets, visit http://www.scripps.com.
In 2018, management announced a comprehensive growth strategy for the Company to improve short-term performance and position itself for long-term growth in the form of a five-point plan.
The strategy began at the end of 2017 with a reorganization of our Company into Local Media and National Media divisions to better reflect how audiences and advertisers view our businesses.
We performed an analysis of our operating divisions and corporate cost structure in order to reduce expenses and improve both operating performance and company cash flow. We have incurred restructuring charges totaling $13.3 million since the third quarter of 2017 and have completed our plan to achieve $30 million in annualized cost reductions.
We executed on further optimizing our portfolio through the sale of our radio business. By the end of 2018, all 34 radio stations had been sold through multiple transactions for total consideration of $83.5 million.
We continue to pursue a television station acquisition strategy that allows us to assemble the best-performing portfolio possible. On January 1, 2019, we acquired ABC-affiliated stations in Waco, Texas and Tallahassee, Florida for $55 million in cash. Additionally, we have entered into a definitive agreement to acquire 15 top ranked and high performing television stations, serving 10 markets, for $521 million. Completion of the acquisition, which is anticipated to close in the second quarter of 2019, is subject to regulatory approvals and customary closing conditions. These acquisitions allow us to move into new markets that enhance our portfolio and will diversify our network affiliate mix.
We also are committed to the continued investment in our national media businesses for long-term growth. On November 30, 2018, we acquired Triton Digital Canada, Inc., a leading global digital audio infrastructure and audience measurement services company, for $150 million, net of cash acquired. We have increased our Newsy cable subscribers, Stitcher podcast listeners and Katz U.S. household reach through our investment in and creation of quality content.
Additionally, during 2018, we delivered value to shareholders through our share repurchase program and initiation of a quarterly dividend of 5 cents per share.

Financial information for each of our business segments can be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Notes to Consolidated Financial Statements of this Form 10-K.

4



LOCAL MEDIA
Our Local Media segment is comprised of our local broadcast television stations and their related digital operations. We have operated broadcast television stations since 1947, when we launched Ohio’s first television station, WEWS, in Cleveland. Today, our television station group reaches approximately one in five of the nation’s television households and includes fifteen ABC affiliates, five NBC affiliates, two FOX affiliates and two CBS affiliates. We also have two MyTV affiliates, one CW affiliate, two independent stations and four Azteca America Spanish-language affiliates.
We produce high-quality news, information and entertainment content that informs and engages our local communities. We distribute our content on four platforms broadcast, Internet, smartphones and tablets. It is our objective to develop content and applications designed to enhance the user experience on each of those platforms. Our ability to cover our communities across multiple digital platforms allows us to expand our audiences beyond our traditional broadcast television boundaries.
We believe the most critical component of our product mix is compelling news content, which is an important link to the community and aids our stations' efforts to retain and expand viewership. We have trained employees in our news departments to be multi-media journalists, allowing us to pursue a “hyper-local” strategy by having more reporters covering local news for our over-the-air and digital platforms.
In addition to news programming, our television stations run network programming, syndicated programming and original programming. Our strategy is to rely less on expensive syndicated programming and to replace it with original programming that we control. We believe this strategy improves our Local Media division's financial performance. Original shows we produce ourselves or in partnership with others include:
The List, an Emmy award winning infotainment show, is available in 37 markets reaching viewers in approximately 28 percent of the country.
The Now is a news show designed to take the audience into a deeper dive of the day's events and is available in more than 15 of our markets.
RightThisMinute is a daily news and entertainment program featuring viral videos. RightThisMinute reaches nearly 97 percent of the nation's television households.

5



Information concerning our full-power television stations, their network affiliations and the markets in which they operate is as follows:
Station
 
Market
 
Network
Affiliation/
DTV
Channel
 
Affiliation Agreement
Expires in
 
FCC
License
Expires
in
 
Market Rank (1)
 
Stations
in
Market (2)
 
Station Rank in Market (3)
 
Percentage
of U.S.
Television
Households
in Mkt (4)
 
Average
Audience
Share (5)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
WFTS-TV
 
Tampa, Ch. 28
 
ABC/29
 
2022
 
2021
 
11
 
13
 
4
 
1.7%
 
4
KNXV-TV
 
Phoenix, Ch. 15
 
ABC/15
 
2022
 
2022
 
12
 
14
 
3
 
1.7%
 
5
WMYD-TV
 
Detroit, Ch. 20
 
MY/21
 
2020
 
2021
 
14
 
10
 
6
 
1.6%
 
2
WXYZ-TV
 
Detroit, Ch. 7
 
ABC/41
 
2022
 
2021
 
14
 
10
 
2
 
1.6%
 
7
KMGH-TV
 
Denver, Ch. 7
 
ABC/7
 
2022
 
2022
 
17
 
14
 
3
 
1.4%
 
4
WEWS-TV
 
Cleveland, Ch. 5
 
ABC/15
 
2022
 
2021
 
19
 
11
 
1
 
1.3%
 
8
WMAR-TV
 
Baltimore, Ch. 2
 
ABC/38
 
2022
 
2020
 
26
 
11
 
4
 
1.0%
 
3
WTVF-TV
 
Nashville, Ch. 5
 
CBS/25
 
2021
 
2021
 
27
 
10
 
1
 
0.9%
 
13
WRTV-TV
 
Indianapolis, Ch. 6
 
ABC/25
 
2022
 
2021
 
28
 
10
 
4
 
0.9%
 
5
KGTV-TV
 
San Diego, Ch. 10
 
ABC/10
 
2022
 
2022
 
29
 
12
 
3
 
0.9%
 
5
KMCI-TV
 
Kansas City, Ch. 38
 
Ind./41
 
N/A
 
2022
 
32
 
12
 
7
 
0.8%
 
1
KSHB-TV
 
Kansas City, Ch. 41
 
NBC/42
 
2021
 
2022
 
32
 
12
 
4
 
0.8%
 
6
WCPO-TV
 
Cincinnati, Ch. 9
 
ABC/22
 
2022
 
2021
 
35
 
9
 
3
 
0.8%
 
7
WTMJ-TV
 
Milwaukee, Ch. 4
 
NBC/28
 
2021
 
2021
 
36
 
14
 
4
 
0.8%
 
6
WPTV-TV
 
W. Palm Beach, Ch. 5
 
NBC/12
 
2021
 
2021
 
37
 
10
 
1
 
0.8%
 
8
KTNV-TV (6)
 
Las Vegas, Ch. 13
 
ABC/13
 
2022
 
2022
 
39
 
14
 
3
 
0.7%
 
5
WKBW-TV
 
Buffalo, Ch. 7
 
ABC/38
 
2022
 
2023
 
52
 
9
 
3
 
0.5%
 
6
WFTX-TV
 
Fort Myers/Naples, Ch. 4
 
FOX/35
 
2019
 
2021
 
55
 
14
 
5
 
0.5%
 
3
KJRH-TV
 
Tulsa, Ch. 2
 
NBC/8
 
2021
 
2022
 
61
 
12
 
4
 
0.5%
 
5
WGBA-TV
 
Green Bay/Appleton, Ch. 26
 
NBC/41
 
2021
 
2021
 
67
 
9
 
4
 
0.4%
 
5
WACY-TV (6)
 
Green Bay/Appleton, Ch. 32
 
MY/27
 
2020
 
2021
 
67
 
9
 
8
 
0.4%
 
1
KMTV-TV
 
Omaha, Ch. 3
 
CBS/45
 
2020
 
2022
 
69
 
9
 
3
 
0.4%
 
9
KWBA-TV
 
Tucson, Ch. 58
 
CW/44
 
2021
 
2022
 
73
 
13
 
9
 
0.4%
 
1
KGUN-TV (6)
 
Tucson, Ch. 9
 
ABC/9
 
2022
 
2022
 
73
 
13
 
3
 
0.4%
 
5
KIVI-TV (6)
 
Boise, Ch. 6
 
ABC/24
 
2022
 
2022
 
100
 
11
 
3
 
0.2%
 
8
WSYM-TV
 
Lansing, Ch. 47
 
FOX/38
 
2019
 
2021
 
110
 
7
 
4
 
0.2%
 
4
KERO-TV
 
Bakersfield, Ch. 23
 
ABC/10
 
2022
 
2022
 
122
 
11
 
3
 
0.2%
 
6
All market and audience data is based on the November 2018 Nielsen survey, live viewing plus 7 days of viewing on DVR.
(1)
Market rank represents the relative size of the television market in the United States.
(2)
Stations in Market represents stations within the Designated Market Area per the Nielsen survey excluding public broadcasting stations, satellite stations, and low-power stations.
(3)
Station Rank in Market is based on Average Share as described in (5).
(4)
Percentage of U.S. Television Households in Market represents the number of U.S. television households in Designated Market Area as a percentage of total U.S. television households.
(5)
Average Audience Share represents the number of television households tuned to a specific station from 6 a.m. to 2 a.m. Monday-Sunday, as a percentage of total viewing households in the Designated Market Area.
(6)
Affiliation agreements expired and were extended or are being negotiated at this writing.

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



6



Revenue cycles and sources

Core Advertising

Our core advertising is comprised of sales to local and national customers. The advertising includes a combination of broadcast air spots, as well as digital advertising. Our core advertising revenues accounted for 51% of our Local Media segment’s revenues in 2018. Pricing of broadcast spot advertising is based on audience size and share, the demographics of our audiences and the demand for our limited inventory of commercial time. Our stations compete for advertising revenues with other sources of local media, including competitors’ television stations in the same markets, radio stations, cable television systems, newspapers, digital platforms and direct mail.

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

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

Digital revenues are primarily generated from the sale of advertising to local and national customers on our local television websites, smartphone apps, tablet apps and other platforms.
Cyclical factors influence revenues from our core advertising categories. Some of the cycles are periodic and known well in advance, such as election campaign seasons and special programming events (e.g. the Olympics or the Super Bowl). For example, our NBC affiliates benefit from incremental advertising demand from the coverage of the Olympics. Economic cycles are less predictable and beyond our control.

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

Political Advertising

Political advertising is generally sold through our Washington D.C. sales office. Advertising is sold to presidential, gubernatorial, Senate and House of Representative candidates, as well as for state and local issues. It is also sold to political action groups (PACs) or other advocacy groups. Political advertising revenues were 15% of our Local Media segment's revenues in 2018.

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

Retransmission Revenues

We earn revenues from retransmission consent agreements with multi-channel video programming distributors ("MVPDs") in our markets. Retransmission revenues were 33% of our Local Media segment's revenues in 2018. The MVPDs are cable operators, telecommunication companies and satellite carriers who pay us to offer our programming to their customers. The fees we receive are typically based on the number of subscribers the MVPD has in our local market and the contracted rate per subscriber.

We also receive fees from over-the-top (virtual MVPDs) such as YouTubeTV, DirectTV Now and Sony Vue. The fees we receive are typically based on the number of subscribers in our local market and the contracted rate per subscriber.

7



Expenses
Employee costs accounted for 44% of our Local Media segment's costs and expenses in 2018.
We centralize certain functions, such as master control, traffic, graphics and political advertising, at company-owned hubs that do not require a presence in the local markets. This approach enables each of our stations to focus local resources on the creation of content and revenue-producing activities. We expect to continue to look for opportunities to centralize functions that do not require a local market presence.

Programming costs, which include network affiliation fees, syndicated programming and shows produced for us or in partnership with others, were 33% of our Local Media segment's costs and expenses in 2018.

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

Federal Regulation of Broadcasting Broadcast television is subject to the jurisdiction of the FCC pursuant to the Communications Act of 1934, as amended (“Communications Act”). The Communications Act prohibits the operation of broadcast stations except in accordance with a license issued by the FCC and empowers the FCC to revoke, modify and renew broadcast licenses, approve the transfer of control of any entity holding such a license, determine the location of stations, regulate the equipment used by stations and adopt and enforce necessary regulations. As part of its obligation to ensure that broadcast licensees serve the public interest, the FCC exercises limited authority over broadcast programming by, among other things, requiring certain children's television programming and limiting commercial content therein, requiring the identification of program sponsors, regulating the sale of political advertising and the distribution of emergency information, and restricting indecent programming. The FCC also requires television broadcasters to close caption their programming for the benefit of persons with hearing impairment and to ensure that any of their programming that is later transmitted via the Internet is captioned. Network-affiliated television broadcasters in larger markets must also offer audio narration of certain programming for the benefit of persons with visual impairments. Reference should be made to the Communications Act, the FCC’s rules and regulations, and the FCC’s public notices and published decisions for a fuller description of the FCC’s extensive regulation of broadcasting.
Broadcast licenses are granted for a term of up to eight years and are renewable upon request, subject to FCC review of the licensee's performance. All the Company’s applications for license renewal during the current renewal cycle have been granted for full terms. While there can be no assurance regarding the renewal of our broadcast licenses, we have never had a license revoked, have never been denied a renewal, and all previous renewals have been for the maximum term.
FCC regulations govern the ownership of television stations, and the agency is required by statute to periodically review these rules. In November 2017, the FCC adopted significant changes to its local television ownership rules. In particular, the FCC voted to relax the television “duopoly rule” that generally restricted an applicant from owning or controlling more than one television station (or in some markets under certain conditions, more than two television stations) in the same market. The FCC eliminated that rule’s requirement that eight independent local television station “voices” should remain after any merger, and it relaxed the prohibition against common ownership of two of the four most-viewed stations in a market, stating that proposed mergers of such “top-four” stations will instead be evaluated on a case-by-case basis. The order further reversed an earlier FCC decision to treat those stations participating in joint advertising sales agreements as if they were under common ownership. Station WSYM-TV, Lansing, Michigan, is a party to such a joint advertising agreement with a local station, but it enjoyed a permitted “grandfathered” status while the rule was in effect. These rule changes remain subject to pending appeals and further judicial review.
This 2017 FCC order left in place the long-standing requirement that any television station that provides more than 15% of another in-market television station’s weekly programming is deemed to have an attributable interest in that station that subjects the stations to the FCC’s ownership limits. It also directed that any local stations that share facilities or services such as program production on a continuing basis must start disclosing these agreements in their public files. Stations WPTV-TV, West Palm Beach, Florida, and KIVI-TV, Nampa (Boise), Idaho, are parties to such shared services programming agreements.
With respect to national television ownership, the FCC voted in December 2017 to consider whether and how it might revisit its rule preventing applicants from obtaining an ownership interest in television stations whose total national audience reach would exceed 39% of all television households. Earlier in the year, the FCC reinstated the 50% discount applied to the number of households deemed covered by UHF television stations, and the new notice expressly addresses whether to retain this distinction for UHF. This proceeding remains open.

8



In December 2018, the FCC began another of its statutorily-required reviews of its multiple ownership rule, including a broad review of whether all the current local radio and television rules continue to serve the public interest.
We cannot predict the outcome of the pending court review of the FCC's television ownership rule changes or the effect of further FCC rule revisions on our stations' operations or our business.
The restrictions imposed by the FCC’s ownership rules may apply to a corporate licensee due to the ownership interests of its officers, directors or significant shareholders. If such parties meet the FCC’s criteria for holding an attributable interest in the licensee, they are likewise expected to comply with the ownership limits, as well as other licensee requirements such as compliance with certain criminal, antitrust, and antidiscrimination laws.
In order to provide additional spectrum for mobile broadband and other services, the FCC in 2017 conducted an incentive spectrum auction in which some television broadcasters agreed to voluntarily give up spectrum in return for a share of the auction proceeds. No Scripps station will be going off-air or relinquishing a current UHF-band allocation for a VHF-band allocation as a result of the auction, but 17 full-power Scripps stations and many of Scripps' low-power and translator stations are relocating to new channels in the reduced broadcast spectrum band. Broadcasters are concerned that the FCC’s approach to the post-auction “repacking” of the remaining television stations into this reduced broadcast spectrum may not adequately protect stations’ over-the-air services. Broadcasters also are particularly concerned that the FCC’s post-auction plans will not provide sufficient time to complete the repacking before the sold spectrum will be authorized for wireless use. Implementing the post-auction changes will be complicated and costly, and stations located near the Canadian and Mexican borders may be at particular risk of service loss due to the need to coordinate international frequency use. Despite warnings about difficulties, such as weather delays and a lack of available qualified tower and equipment installation crews, the FCC has expressed confidence that adequate time will be available to complete the repacking, and it has imposed a “hard” deadline that could require a station to cease broadcasting on its existing frequency even though an alternative facility is not yet ready to provide its over-the-air service.
Broadcasters are currently testing a new voluntary digital television standard, ATSC 3.0. This Internet-protocol based transmission system will permit television stations to offer enhanced and innovative services coupled with much improved broadcast signal reception, particularly by mobile devices. The new standard, however, is incompatible with both existing television receivers and with a station’s ability to continue offering its service via the current ATSC 1.0 digital standard. To avoid loss of service to those viewers who lack a new receiver, stations switching to ATSC 3.0 will be required to arrange for a local station that continues to use the current 1.0 standard to air (on a subchannel) programming “substantially similar” to that offered by the switching station on its 3.0 channel. In return, the 3.0 station could host the 3.0 signal of its 1.0 “host” station. This “simulcasting” requirement will sunset in July 2023, unless extended by the FCC. Scripps Station KNXV-TV is participating in a market test of the new transmission system in Phoenix, AZ.
The FCC remains committed to permitting non-broadcast spectrum use in the “white spaces” between television stations' protected service areas despite broadcasters’ concerns about the possibility of harmful interference to their existing service and to the potential for innovative uses of their broadcast spectrum in the future. In connection with the auction process, the FCC may further reduce the spectrum available for television broadcasting by reserving a 6 MHz channel in each market for non-broadcast, unlicensed services (including wireless microphones). The repacking of television broadcast spectrum and the reservation of spectrum in the “broadcast” band for interference-protected non-broadcast services could have a particularly adverse effect on the ability of low-power and translator television stations to offer service since these stations may not be able to find space to operate in the reduced band and they enjoy only “secondary” status that offers no protection from interference caused by a full-power station. We cannot predict the effect of these proceedings on our offering of digital television service or our business.
Full-power broadcast television stations generally enjoy “must-carry” rights on any cable television system defined as “local” with respect to the station. Stations may waive their must-carry rights and instead negotiate retransmission consent agreements with local cable companies. Similarly, satellite carriers, upon request, are required to carry the signal of those television stations that request carriage and that are located in markets in which the satellite carrier chooses to retransmit at least one local station, and satellite carriers cannot carry a broadcast station without its consent. The Company has elected to negotiate retransmission consent agreements with cable operators and satellite carriers for both our network-affiliated stations and our independent stations.
While the Commission is not actively proceeding with its rulemaking to reexamine the retransmission consent negotiation process and particularly the standards that may trigger the agency’s intervention to enforce the obligation of the parties to negotiate these agreements in “good faith,” the docket remains open. A related agency proceeding also remains open that looks toward the possible elimination of the “network nonduplication” and “syndicated exclusivity” rules that permit

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broadcasters to enforce certain contractual programming exclusivity rights through the FCC's processes rather than by judicial proceedings. We cannot predict the outcome of these proceedings or their possible impact on the Company.
Other proceedings before the FCC and the courts have reexamined the policies that protect television stations' rights to control the distribution of their programming within their local service areas. For example, the FCC in 2014 has initiated a rulemaking proceeding on the degree to which an entity relying upon the Internet to deliver video programming should be subject to the regulations that apply to multi-channel video programming distributors (“MVPDs”), such as cable operators and satellite systems. That proceeding raised a variety of issues, including whether some Internet-based distributors might be able to take advantage of MVPDs' statutory copyright licensing rights. We cannot predict the outcome of such proceedings that address the use of new technologies to challenge traditional means of redistributing television broadcast programming or their possible impact on the Company.
The FCC may impose substantial penalties for violations of its rules and policies. For example, settlement of an investigation involving a single radio station’s failure to broadcast proper sponsorship identification announcements in a series of ads required the licensee to make a payment of over $500,000. Uncertainty continues regarding the scope of the FCC's authority to regulate indecent programming, but the agency has increased its enforcement efforts regarding other programming issues such as sponsorship identification, broadcasting proper emergency alerts, and extending service to persons with disabilities. We cannot predict the effect of the FCC’s expanded enforcement efforts on the Company.

NATIONAL MEDIA

Our National Media segment represents our collection of national and international businesses including Katz, Stitcher, Triton and Newsy. These businesses compete on emerging platforms and marketplaces where there is significant growth in both audience and revenue, such as over-the-top (OTT) and over-the-air (OTA) video and digital video. OTT refers to the delivery of content over the internet which can be assessed through apps on internet-connected devices such as set-top boxes (such as Roku or Apple TV), smartphones, smart TVs and tablets. OTA content can be viewed using antennas or through a cable subscription. Digital audio is on-demand, streaming music or spoken-word programming that can be subscription based or advertising supported. Our digital audio businesses serve consumers, publishers and advertisers by providing a suite of services including content production and distribution, technology, sales, and measurement.
 
Katz

Katz operates four over-the-air networks — Bounce, Escape, Grit and Laff. The networks are primarily broadcast over-the-air on local broadcasters' digital sub-channels. They are also carried on some cable and satellite services. Each of the networks is a fast-growing, audience-targeted national broadcast network. Bounce is aimed at African-Americans; Grit airs western movies and series targeted to men; Escape runs scripted dramas and true crime docuseries targeting women; and Laff airs classic, well-loved comedies. Each of these Nielson rated networks reaches about 90 percent of all U.S. households as reported by Nielsen.

Katz has recently announced the relaunch of a fifth over-the-air network, Court TV. This network is devoted to live, gavel-to-gavel coverage, in-depth legal reporting and expert analysis of the nation’s most important and compelling trials. The network will launch in May 2019 and will be available for cable, satellite and over-the-air and over-the-top carriage.
    
The primary source of revenue for Katz is through the sale of advertising to national customers. The advertising revenue generated depends on viewership ratings and the rate paid by customers for certain viewer demographics. Katz sells its advertising in the upfront and scatter markets. In the upfront market, advertisers buy advertising time for upcoming seasons and, by committing to purchase in advance, lock in the advertising rates they will pay for the upcoming year. In the scatter market, advertisers buy their spots closer to the time when the spots will run. The mix of upfront and scatter market advertising time sold is based upon the economic conditions at the time the upfront sales take place, impacting the sell-out levels management is willing or able to obtain. The demand in the scatter market then impacts the pricing achieved for our remaining advertising inventory. Scatter market pricing can vary from upfront pricing and can be volatile. In some cases, advertising sales are subject to ratings guarantees that require us to provide additional advertising time if the guaranteed audience levels are not achieved.

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


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Katz has carriage agreements with local television broadcasters and cable and satellite providers to carry one or more of the Katz networks. These carriage agreements are generally for a five-year term. Under these agreements, Katz pays a fixed fee for the carriage rights.

For programming, Katz enters into agreements to license existing programming and movies, as well as to produce several original shows.

Stitcher

Stitcher creates original podcasts, operates the Stitcher and Earwolf networks, and provides podcast agency services that generate revenue for more than 300 shows. A podcast is a digital audio recording in spoken-word format, usually part of a themed series, which is downloaded or streamed most often to mobile devices. In 2018, it’s estimated that 73 million Americans listened to a podcast at least monthly. Stitcher also provides a mobile app listening platform where consumers can stream the latest in news, sports, talk, and entertainment on demand. We expect to make continued investments in our Stitcher app, with the objective of creating a best-in-class user experience for the podcast listener and advertiser.

Stitcher earns revenue from the sale of advertising on its original podcasts, which it creates and distributes through platforms such as its Stitcher app and the iPhone podcast app.

Other revenue sources include podcast agency services. Stitcher, through its Midroll Media advertising network, earns revenue by acting as a sales and marketing representative to connect advertisers and specific podcasts based on the advertiser's desired target audience.

Stitcher earns subscription revenue from the Stitcher Premium subscription service for which users pay a standard monthly or annual fee for access to premium content and ad-free archived podcast episodes.

Triton

Operating in more than 40 countries, Triton is the global leader in digital audio technology and measurement services, serving the growing digital audio marketplace. Triton provides innovative technology that enables broadcasters, podcasters and online music services to build their audience, maximize their revenue and streamline their operations. Triton’s technology is trusted by many of the biggest names in digital audio, including Pandora, Spotify, iHeart, Entercom, Cumulus, Prisa (Spain), Mediacorp (Singapore) and Karnaval (Turkey).

Triton’s software-as-a-service (SaaS) business-to-business model has two main lines of business - measurement and infrastructure. Their primary source of revenue is the licensing of digital audio technology and services to a wide range of global audio publishers. Triton’s measurement technology platform is the standard in the digital audio marketplace, and its national and local metrics are the currency through which agencies and brands buy digital audio advertising from streaming audio companies across various geographies and devices. The national audience measurement product is offered for a fixed monthly fee with additional fees based on total audience listening hours. The local audience measurement product is offered on a fixed license fee for each market on which data is reported, along with annual fee escalations. Triton’s hosting and advertising infrastructure enables publishers around the world to deliver high-quality, digital audio streams with data-powered dynamic ad insertion to their listening audience. The hosting product is offered to users via a monthly license fee for access to the platform with additional fees for excess data delivery usage. For its advertising technology platform, Triton charges a fixed license fee with additional fees based on the number of impressions delivered. Through the advent of the world’s first programmatic audio advertising exchange, Triton provides the infrastructure in which publishers and advertisers can seamlessly transact audio inventory programmatically.

Newsy

Newsy is our national news network focused on bringing perspective and analysis to reporting on world and national news, including politics, entertainment, science and technology. It is targeted toward a younger audience. In 2017, we expanded Newsy's distribution to include cable, and by the end of 2018, we reached agreements with cable and satellite operators to carry Newsy into approximately 36 million households. We expect continued investment in Newsy as we look to increase distribution and enhance our products.

Newsy is also distributed widely on platforms providing over-the-top (OTT) television service, including Hulu, Roku, Amazon Fire TV, Apple TV, Sling TV and Chromecast.


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Newsy earns revenue from the sale of advertising on the platforms on which it is distributed. It also receives carriage fees from cable providers who pay us to offer our programming to their customers. The revenue we receive is based on the number of subscribers who receive the programming.

Newsy's programming strategy is to provide in-depth coverage of U.S. and world news targeted at 25-34 year-olds. Newsy's cable programming lineup includes fourteen hours of daily live news coverage consisting of shows such as the evening newsmagazine “The Why,” the morning show “The Day Ahead,” and the newsmaker spotlight program “30 Minutes With.” Newsy also produces investigative reports and documentaries.

Employees

As of December 31, 2018, we had approximately 3,950 full-time equivalent employees, of whom approximately 3,100 were with Local Media and 600 with National Media. Various labor unions represent approximately 400 employees, the majority of which are in Local Media. We have not experienced any work stoppages at our current operations since 1985. We consider our relationships with our employees to be satisfactory.


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

Risks Related to Our Businesses

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

Programming and content offered by our businesses may not achieve desired ratings or may decline in popularity with its audience.

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

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

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

Television stations have significant exposure to advertising in the automotive, retail and services industries. Advertising within these industries may decline and we may not be able to secure replacement advertisers.

Several national advertising agencies are employing an automated process known as “programmatic buying” to gain efficiencies and reduce costs related to buying advertising. Growth in advertising revenues will rely in part on the ability to maintain and expand relationships with existing and future advertisers. The implementation of a programmatic model or other similar solution, where automation replaces existing pricing and allocation methods, could turn advertising inventory into a price-driven commodity. These automated solutions could reduce the value of relationships with advertisers as well as result in downward pricing pressure.

If we are unable to respond to any or all of these factors, our advertising revenues could decline and affect our profitability.
We have made significant investments in our National Media businesses and expect to continue to make significant investments in those businesses in the coming years. Investments we make in our National Media businesses may not perform as expected.

In recent years, we have acquired Triton, Katz, Stitcher and Newsy for an aggregate purchase price of almost $550 million. Our National Media businesses are not mature businesses and will require additional capital to gain distribution and build audiences, or, in the case of Triton, build customer base. The markets for these businesses may not develop as we expect, we may face greater competition than we anticipate, and our competition may have greater financial resources. The success of these investments depends on a number of factors, including timely development and market acceptance of the products and services that these businesses offer.

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The growth of direct content-to-consumer delivery channels may fragment our television audiences. This fragmentation could adversely impact advertising rates as well as cause a reduction in the revenues we receive from retransmission consent agreements, resulting in a loss of revenue that could materially adversely affect our broadcast operations.
We deliver our television programming to our audiences primarily over-the-air and through cable and satellite service providers. Our television audience is being fragmented by the digital delivery of content directly to the consumer audience. Content providers, such as the "Big 4" broadcast networks, cable networks such as HBO and Showtime, and new content developers, distributors and syndicators such as Amazon, Hulu and Netflix, are now able to deliver their programming directly to consumers, over-the-top (“OTT”) via the internet. The delivery of content directly to consumers allows them to bypass the programming we deliver, which may impact our audience size. Fragmentation of our audiences could impact the rates we receive from our advertisers. In addition, reduction in the number of subscribers to cable and satellite service providers could impact the revenue we receive under retransmission consent agreements. Widespread adoption of OTT by our audiences could result in a reduction of our advertising and retransmission revenues and affect our profitability.

The loss of affiliation agreements or the costs of renewals could adversely affect our Local Media operating results.

Fifteen of our stations have affiliations with the ABC television network, five with the NBC television network, two with each of the FOX, CBS and MyNetwork television networks and one with The CW television network. These television networks produce and distribute programming which our stations commit to air at specified times. Networks sell commercial advertising time during their programming, and the "Big 4" networks, ABC, NBC, CBS and FOX, also require stations to pay fees for the right to carry their programming. These fees may be a percentage of retransmission revenues that the stations receive (see below) or may be fixed amounts based on the number of households or subscribers in a market. These fees have been increasing from renewal to renewal over the past several years. There is no assurance that we will be able to reach agreements in the future with networks about the amount of these fees.
The non-renewal or termination of our network affiliation agreements would prevent us from being able to carry programming of the respective network. Loss of a network affiliation would require us to obtain replacement programming, which may not be as attractive to target audiences and could result in lower advertising revenues. In addition, loss of any of the "Big 4" network affiliations would result in materially lower retransmission revenue.
Our retransmission consent revenue may be adversely affected by renewals of retransmission consent agreements, by new technologies for the distribution of video programming, or by revised government regulations.

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

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





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We make investments in television programming and podcast content rights (collectively "content") in advance of knowing whether that particular content will be popular enough for us to recoup our costs. Additionally, if costs to acquire this content increase, our operating results may be adversely affected.
 
We incur significant costs for the purchase of television programming and podcast content rights. We may have to purchase content several years in advance or enter into multi-year agreements, resulting in the commitment of significant costs in advance of knowing whether the content will be popular with its audience. If this acquired content is not sufficiently popular among audiences in relation to the cost we invest in the content, or if we need to replace content that is performing poorly, we may not be able to produce enough revenue to recover our costs. Additionally, increased competition from entrants into the market for content could increase our content costs. Any of these factors could reduce our revenues, result in the incurrence of impairment charges or otherwise cause our costs to escalate relative to revenues.

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

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

As discussed under Federal Regulation of Broadcasting, the FCC in 2017 completed an auction in which some television licensees voluntarily auctioned away their spectrum rights and 84 MHz of broadcast spectrum was reallocated to other uses. As a result, many television stations, including 17 Company-owned full-power stations, must change their operating frequencies, and the FCC is setting tight deadlines for the completion of these facility changes in order to make the reallocated spectrum promptly available to the wireless service buyers. Depending on factors such as the availability of specialized technical assistance and custom-made equipment, weather issues, and, for stations near international borders, the cooperation of foreign governments, some stations could confront substantial costs and difficulty in completing these relocations within the allotted time, adversely affecting these stations’ over-the-air service. Scripps has timely applied for and received construction permits to complete the required changes for its stations and is expeditiously pursuing the steps necessary to complete this process, but we cannot predict whether unforeseen circumstances might delay implementation and have a material adverse effect on one or more stations' revenue potential.

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

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


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We intend to continue to evaluate strategic acquisitions, and there are various risks associated with an acquisition strategy.
We have pursued and intend to selectively continue to pursue strategic acquisitions, subject to market conditions, our liquidity, and the availability of attractive acquisition candidates, with the goal of improving our business. We may not be able to identify other attractive acquisition targets or some of our competitors may have greater financial or managerial resources with which to pursue acquisition targets we may pursue. Therefore, even if we are successful in identifying attractive acquisition targets, we may face considerable competition and be unsuccessful in implementing our acquisition strategy.
Acquisitions involve inherent risks, such as increasing leverage and debt service requirements and combining company cultures and facilities, which could have a material adverse effect on our results of operations. Additionally, our revenues and profitability could be adversely affected if we are unable to implement effective cost controls, achieve expected synergies, or increase revenues as a result of an acquisition. In addition, future acquisitions may result in our assumption of unexpected liabilities and may result in the diversion of management’s attention from the operation of our core business.
Acquisitions of television stations are subject to the approval of the FCC and the Antitrust Division of the Department of Justice. Current or future policies of these regulatory authorities could restrict our ability to pursue or consummate future transactions and could require us to divest certain television stations if an acquisition under contract would result in excessive concentration in a market or fail to comply with FCC ownership limitations. There can be no assurance that pending acquisitions will be approved by these regulatory authorities, or that a requirement to divest existing stations will not have an adverse effect on the transaction or our business.
We will continue to face cybersecurity and similar risks, which could result in the disclosure of confidential information, disruption of operations, damage to our brands and reputation, legal exposure and financial losses.

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

Risks Related to the Ownership of Scripps Class A Common Shares

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

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

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

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

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

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

general market and economic conditions and market trends, including in the television broadcast industry, the national media marketplace and the financial markets generally;

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

variations in quarterly operating results;

inability to meet revenue forecasts;

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

adoption of new accounting standards affecting the media industry;

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

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

changes in financial estimates and recommendations by securities analysts;

recruitment of key personnel;

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

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

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

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

Risks Related to Our Indebtedness

We have substantial debt and have the ability to incur significant additional debt. The principal and interest payment obligations on such debt may restrict our future operations and impair our ability to meet our long-term obligations.

As of December 31, 2018, we and the guarantors had approximately $696 million in aggregate principal amount of outstanding indebtedness (excluding intercompany debt), approximately $400 million of which constituted senior debt (including the Senior Notes), and none of which was secured. We have the ability to incur up to $125 million of indebtedness under our Credit Agreement all of which is secured indebtedness, effectively ranking senior to the Senior Notes to the extent of the value of the assets securing such indebtedness. Our Credit Agreement matures in April 2022.

Our outstanding debt may have important consequences to you. For instance, it could:

require us to dedicate a substantial portion of any cash flow from operations to the payment of interest and principal due under our debt, which would reduce funds available for other business purposes, including capital expenditures and acquisitions;
place us at a competitive disadvantage compared to some of our competitors that may have less debt and better access to capital resources;
limit our ability to obtain additional financing required to fund acquisitions, working capital and capital expenditures and for other general corporate purposes; and
make it more difficult for us to satisfy our financial obligations, including those relating to the Senior Notes.


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Our ability to service our significant financial obligations depends on our ability to generate significant cash flow. This is partially subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control. We cannot assure you that our business will generate cash flow from operations, that future borrowings will be available to us under our Credit Agreement or any other credit facilities, or that we will be able to complete any necessary financings, in amounts sufficient to enable us to fund our operations or pay our debts and other obligations, or to fund other liquidity needs. If we are not able to generate sufficient cash flow to service our obligations, we may need to refinance or restructure our debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. Additional debt or equity financing may not be available in sufficient amounts, at times or on terms acceptable to us, or at all. Specifically, volatility in the capital markets may also impact our ability to obtain additional financing, or to refinance our existing debt, on terms or at times favorable to us. If we are unable to implement one or more of these alternatives, we may not be able to service our debt or other obligations, which could result in us being in default thereon, in which circumstances our lenders could cease making loans to us, and lenders or other holders of our debt could accelerate and declare due all outstanding obligations under the respective agreements, which would likely have a material adverse effect on us.

The agreements governing our various debt obligations impose restrictions on our operations and limit our ability to undertake certain corporate actions.

The agreements governing our various debt obligations, including the indenture that governs the Senior Notes and the agreements governing our Credit Agreement, include covenants imposing significant restrictions on our operations. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. These covenants place restrictions, subject to certain limitations, on our ability to, among other things:
incur additional debt;
declare or pay dividends, redeem stock or make other distributions to stockholders;
make investments or acquisitions;
create liens or use assets as security in other transactions;
issue guarantees;
merge or consolidate, or sell, transfer, lease or dispose of substantially all of our assets;
engage in transactions with affiliates; and
purchase, sell or transfer certain assets.

Any of these restrictions and limitations could make it more difficult for us to execute our business strategy.

Our Credit Agreement requires us to comply with certain financial ratios and covenants; our failure to do so will result in a default thereunder, which would have a material adverse effect on us.

We are required to comply with certain financial covenants under our Credit Agreement. Our ability to comply with these requirements may be affected by events affecting our business, but beyond our control, including prevailing general economic, financial and industry conditions. These covenants could have an adverse effect on us by limiting our ability to take advantage of financing, merger and acquisition or other corporate opportunities. The breach of any of these covenants or restrictions could result in a default under the applicable senior credit facility. Upon a default under any of our debt agreements, the lenders or debt holders thereunder could have the right to declare all amounts outstanding, together with accrued and unpaid interest, to be immediately due and payable, which could, in turn, trigger defaults under other debt obligations and could result in the termination of commitments of the lenders to make further extensions of credit under such senior credit facility. If we were unable to repay our secured debt to our lenders, or were otherwise in default under any provision governing our outstanding secured debt obligations, our secured lenders could proceed against us and the subsidiary guarantors and against the collateral securing that debt. Any default resulting in an acceleration of outstanding indebtedness, a termination of commitments under our financing arrangements or lenders proceeding against the collateral securing such indebtedness would likely result in a material adverse effect on our business, financial condition and results of operations.


18



Our variable rate indebtedness subjects us to interest rate risk, which could cause our annual debt service obligations to increase significantly.

Borrowings under our Credit Agreement are at variable rates of interest and expose us to interest rate risk. If the London Interbank Offered Rate were to increase, our debt service obligations on our variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash available to service our obligations, including making payments on the notes, would decrease.


19



Item 1B.
Unresolved Staff Comments
None.

Item 2.
Properties
We lease our principal executive offices in a building located at 312 Walnut Street, Cincinnati, OH 45202.
We own substantially all of the facilities and equipment used by our television stations. We own, or co-own with other broadcast television stations, the towers used to transmit our television signals.
Our national businesses lease their facilities. This includes facilities for executive offices, sales offices, studio space and data centers.
All of our owned and leased properties are in good condition, and suitable for the conduct of our present business. We believe that suitable additional or alternative space, including those under lease options, will be available at commercially reasonable terms for future expansion.

Item 3.
Legal Proceedings
We are involved in litigation arising in the ordinary course of business, such as defamation actions and governmental proceedings primarily relating to renewal of broadcast licenses, none of which is expected to result in material loss.

Item 4.
Mine Safety Disclosures
None.

20



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

Name
 
Age
 
Position
 
 
 
 
 
Adam P. Symson
 
44
 
President and Chief Executive Officer (since August 2017); Chief Operating Officer (November 2016 to August 2017); Senior Vice President, Digital (February 2013 to November 2016); Chief Digital Officer (2011 to February 2013); Vice President Interactive Media, Television (2007 to 2011)
Lisa A. Knutson
 
53
 
Executive Vice President, Chief Financial Officer (since October 2017); Executive Vice President, Chief Strategy Officer (August 2017 to October 2017); Senior Vice President, Chief Administrative Officer (2011 to 2017); Senior Vice President, Human Resources (2008 to 2011)
William Appleton
 
70
 
Executive Vice President, General Counsel (since August 2017); Senior Vice President, General Counsel (July 2008 to August 2017); Managing Partner Cincinnati office, Baker & Hostetler, LLP (2003 to 2008)
Brian G. Lawlor
 
52
 
President, Local Media (since August 2017); Senior Vice President, Broadcast (January 2009 to August 2017); Vice President/General Manager of WPTV (2004 to 2008)
Douglas F. Lyons
 
62
 
Senior Vice President, Controller and Treasurer (since December 2017), Vice President, Controller and Treasurer (May 2015 to December 2017), Vice President, Controller (2008 to May 2015), Vice President, Finance and Administration (2006 to 2008)
Laura M. Tomlin
 
43
 
Senior Vice President, National Media (since August 2017); Vice President, Digital Operations (2014 to 2017)


21



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

Our Class A Common shares are traded on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “SSP.” As of December 31, 2018, there were approximately 11,000 owners of our Class A Common shares, based on security position listings, and approximately 50 owners of our Common Voting shares (which do not have a public market).
There were no sales of unregistered equity securities during the quarter for which this report is filed.

In November 2016, our Board of Directors authorized a repurchase program of up to $100 million of our Class A Common shares. The authorization currently expires on March 1, 2020. Shares can be repurchased under the authorization via open market purchases or privately negotiated transactions, including accelerated stock repurchase transactions, block trades, or pursuant to trades intending to comply with Rule 10b5-1 of the Securities Exchange Act of 1934. At December 31, 2018, $50.3 million remained under the authorization.

The following table provides information about Company purchases of Class A Common shares during the quarter ended December 31, 2018 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
 
 
 
 
 
 
 
 
 
10/1/2018 — 10/31/2018
 
45,813

 
$
16.56

 
$
758,647

 
$
51,577,433

11/1/2018 — 11/30/2018
 
39,000

 
17.27

 
673,405

 
$
50,904,028

12/1/2018 — 12/31/2018
 
37,700

 
16.48

 
621,371

 
$
50,282,657

Total
 
122,513

 
$
16.76

 
$
2,053,423

 
 

As part of the share repurchase program, the Company entered into an Accelerated Share Repurchase ("ASR") agreement with JP Morgan to repurchase $25 million of the Company's common stock and received an initial delivery of 1,349,528 shares during third quarter of 2018, which represents 80% of the total shares the Company expects to receive based on the market price at the time of initial delivery. Upon final settlement of the ASR agreement in February 2019, the Company received additional deliveries totaling 147,164 shares of its common stock based on a weighted average cost per share of $16.70 over the term of the ASR agreement.

22



Performance Graph — Set forth below is a line graph comparing the cumulative return on the Company’s Class A Common shares, assuming an initial investment of $100 as of December 31, 2013, and based on the market prices at the end of each year and assuming dividend reinvestment, with the cumulative return of the Standard & Poor’s Composite-500 Stock Index and an Index based on a peer group of media companies. The spin-off of our newspaper business at April 1, 2015 is treated as a reinvestment of a special dividend pursuant to SEC rules.
We regularly evaluate and revise our Peer Group Index as necessary so that it is reflective of our Company’s portfolio of businesses. The companies that comprise our Peer Group Index are Nexstar Media Group, TEGNA, Sinclair Broadcast Group, Tribune Media and Gray Television. The Peer Group Index is weighted based on market capitalization.
Our peer group was revised in 2018 to exclude Saga Communications and Beasley Broadcast Group following the sale of our radio business.



peergraphimage2018a01.jpg



 
 
12/31/2013
 
12/31/2014
 
12/31/2015
 
12/31/2016
 
12/31/2017
 
12/31/2018
 
 
 
 
 
 
 
 
 
 
 
 
 
The E.W. Scripps Company
 
$
100.00

 
$
102.90

 
$
99.12

 
$
100.84

 
$
81.54

 
$
83.17

S&P 500 Index
 
100.00

 
113.69

 
115.26

 
129.05

 
157.22

 
150.33

Current Peer Group Index
 
100.00

 
92.03

 
86.88

 
83.17

 
103.21

 
93.55

Previous Peer Group Index
 
100.00

 
91.69

 
86.39

 
83.60

 
104.06

 
92.71




23



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

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

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

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

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

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

Item 9B.
Other Information
None.


24



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

Information required by Item 10 of Form 10-K relating to directors is incorporated by reference to the material captioned “Election of Directors” in our definitive proxy statement for the Annual Meeting of Shareholders (“Proxy Statement”). Information regarding Section 16(a) compliance is incorporated by reference to the material captioned “Report on Section
16(a) Beneficial Ownership Compliance” in the Proxy Statement.
We have adopted a code of conduct that applies to all employees, officers and directors of Scripps. We also have a code of ethics for the CEO and Senior Financial Officers that meets the requirements of Item 406 of Regulation S-K and the NASDAQ listing standards. Copies of our codes of ethics are posted on our website at http://www.scripps.com.
Information regarding our audit committee financial expert is incorporated by reference to the material captioned “Corporate Governance” in the Proxy Statement.
The Proxy Statement will be filed with the Securities and Exchange Commission in connection with our 2019 Annual Meeting of Shareholders.

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

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

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

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


25



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

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

The reports of Deloitte & Touche LLP, an Independent Registered Public Accounting Firm, dated March 1, 2019, are filed as part of this Form 10-K. See Index to Consolidated Financial Statement Information at page F-1.

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

(c)
An exhibit index required by this item appears below.

Item 16.
Form 10-K Summary
None.



26



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

Exhibit Number
 
Exhibit Description
 
Form
 
File Number
 
Exhibit
 
Report Date
2.01
 
 
S-4
 
333-200388
 
2.1
 
11/20/2014
2.02
 
 
8-K
 
001-10701
 
2.1
 
10/27/2018
3.01
 
 
8-K
 
000-16914
 
99.03
 
2/17/2009
3.02
 
 
8-K
 
000-16914
 
10.02
 
5/10/2007
3.03
 
 
8-K
 
000-16914
 
3.1
 
3/11/2015
10.01
 
 
DEF 14A
 
000-16914
 
Appendix
 
5/4/2015
10.02
 
 
10-Q
 
000-16914
 
10.02
 
9/30/2017
10.03
 
 
DEF 14A
 
000-16914
 
Appendix
 
6/13/2008
10.04
 
 
8-K
 
000-16914
 
10.03B
 
2/9/2005
10.05
 
 
10-K
 
000-16914
 
10.07
 
12/31/2015
10.06
 
 
8-K
 
000-16914
 
10.1
 
2/23/2015
10.07
 
 
S-8
 
333-151963
 
99
 
6/26/2008
10.08
 
 
SC 13D
 
005-43473
 
2
 
6/5/2015
10.09
 
 
10-Q
 
000-16914
 
10.01
 
3/31/2017
10.10
 
 
8-K
 
000-16914
 
10.61
 
5/8/2008
10.11
 
 
10-Q
 
000-16914
 
10.10
 
9/30/2017
10.12
 
 
8-K
 
000-16914
 
10.66
 
2/15/2011
10.13
 
 
8-K
 
000-16914
 
10.1
 
11/4/2014
10.14
 
 
8-K
 
000-16914
 
10.1
 
7/10/2017
10.15
 
 
10-K
 
000-16914
 
10.13
 
12/31/2016
10.16
 
 
10-Q
 
000-16914
 
10.14
 
9/30/2017
10.17
 
 
10-Q
 
000-16914
 
10.15
 
9/30/2017
10.18
 
 
10-Q
 
000-16914
 
10.16
 
9/30/2017
10.19
 
 
8-K
 
000-16914
 
10.1
 
4/20/2017
10.20
 
 
8-K
 
000-16914
 
10.1
 
4/28/2017
10.21
 
 
8-K
 
000-16914
 
10.2
 
4/28/2017
10.22
 
 
8-K
 
000-16914
 
99.1
 
10/2/2017
10.23
 
 
10-Q
 
000-16914
 
10.10
 
3/31/2018
14
 
 
10-K
 
000-16914
 
14
 
12/31/2004
21
 
 
*
 
  
 
 
 
 
23
 
 
*
 
 
 
 
 
 
31(a)
 
 
*
 
 
 
 
 
 
31(b)
 
 
*
 
 
 
 
 
 
32(a)
 
 
*
 
 
 
 
 
 
32(b)
 
 
*
 
 
 
 
 
 
* - As filed herewith




27



The E.W. Scripps Company
Index to Consolidated Financial Statement Schedules (cont.)

Exhibit Number
 
Exhibit Description
 
Form
 
File Number
 
Exhibit
 
Report Date
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)
 
*
 
 
 
 
 
 
* - As filed herewith


28



Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
THE E. W. SCRIPPS COMPANY
 
 
 
Dated: March 1, 2019
By:
/s/ Adam P. Symson
 
 
 
Adam P. Symson
 
 
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated, on March 1, 2019.

Signature
 
Title
 
 
 
/s/ Adam P. Symson
 
 
President and Chief Executive Officer
Adam P. Symson
 
(Principal Executive Officer)
 
 
 
/s/ Lisa A. Knutson
 
 
Executive Vice President and Chief Financial Officer
Lisa A. Knutson
 
 
 
 
 
/s/ Douglas F. Lyons
 
Senior Vice President, Controller and Treasurer
Douglas F. Lyons
 
(Principal Accounting Officer)
 
 
 
/s/ Charles Barmonde
 
Director 
Charles Barmonde
 
 
 
 
 
/s/ Richard A. Boehne
 
 
Chairman of the Board of Directors
Richard A. Boehne
 
 
 
 
 
/s/ Kelly P. Conlin 
 
Director 
Kelly P. Conlin
 
 
 
 
 
/s/ John W. Hayden
 
 
Director 
John W. Hayden
 
 
 
 
 
/s/ Anne M. La Dow
 
 
Director
Anne M. La Dow
 
 
 
 
 
/s/ Roger L. Ogden
 
Director 
 
Roger L. Ogden
 
 
 
 
 
/s/ R. Michael Scagliotti
 
 
Director 
R. Michael Scagliotti
 
 
 
 
 
/s/ Lauren R. Fine
 
Director 
Lauren R. Fine
 
 
 
 
 
/s/ Kim Williams
 
Director 
Kim Williams
 
 

29



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



F-1



Selected Financial Data
Five-Year Financial Highlights

 
 
For the years ended December 31,
(in millions, except per share data)
 
2018 (1)
 
2017 (1)
 
2016 (1)
 
2015 (1)
 
2014 (1)
 
 
 
 
 
 
 
 
 
 
 
Summary of Operations (2)
 
 
 
 
 
 
 
 
 
 
Total operating revenues (3)
 
$
1,208

 
$
877

 
$
874

 
$
654

 
$
499

Income (loss) from continuing operations before income taxes
 
74

 
(32
)
 
93

 
(112
)
 
9

Income (loss) from continuing operations, net of tax
 
56

 
(12
)
 
60

 
(74
)
 
9

Depreciation and amortization of intangible assets
 
(64
)
 
(56
)
 
(55
)
 
(50
)
 
(32
)
 
 
 
 
 
 
 
 
 
 
 
Per Share Data
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations — diluted
 
$
0.68

 
$
(0.13
)
 
$
0.71

 
$
(0.95
)
 
$
0.16

Cash dividends
 
0.20

 

 

 
1.03

 

 
 
 
 
 
 
 
 
 
 
 
Market Value of Common Shares at December 31
 
 
 
 
 
 
 
 
 
 
Per share
 
$
15.73

 
$
15.63

 
$
19.33

 
$
19.00

 
$
22.35

Total
 
1,269

 
1,276

 
1,585

 
1,591

 
1,274

 
 
 
 
 
 
 
 
 
 
 
Balance Sheet Data
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
2,130

 
$
2,130

 
$
1,736

 
$
1,706

 
$
1,031

Long-term debt (including current portion)
 
696

 
702

 
396

 
399

 
196

Equity
 
926

 
937

 
946

 
901

 
520

Notes to Selected Financial Data
As used herein and in Management’s Discussion and Analysis of Financial Condition and Results of Operations, the terms “Scripps,” “Company,” “we,” “our,” or “us” may, depending on the context, refer to The E. W. Scripps Company, to one or more of its consolidated subsidiary companies, or to all of them taken as a whole.
The statement of operations and cash flow data for the five years ended December 31, 2018, and the balance sheet data as of the same dates have been derived from our audited consolidated financial statements. All per-share amounts are presented on a diluted basis.
(1)
 
2018 — On November 30, 2018, we acquired Triton Digital Canada, Inc. Operating results are included for periods after the acquisition.
 
 
 
 
 
2017 — On October 2, 2017, we acquired the Katz networks. Operating results are included for periods after the acquisition.
 
 
 
 
 
2016 — On April 12, 2016, we acquired Cracked. On June 6, 2016, we acquired Stitcher. Operating results for each are included for periods after the acquisitions.
 
 
 
 
 
2015 — On April 1, 2015, we acquired the broadcast group owned by Journal Communications, Inc. On July 22, 2015, we acquired Midroll Media. Operating results for each are included for periods after the acquisitions.
 
 
2014 — On January 1, 2014, we acquired Media Convergence Group, Inc., which operates as Newsy. On June 16, 2014, we acquired two television stations owned by Granite Broadcasting Corporation. Operating results for each are included for periods after the acquisitions.
(2)
 
The five-year summary of operations excludes the operating results of the following entities and the gains (losses) on their divestiture as they are accounted for as discontinued operations:
 
 
 
 
 
- During the fourth quarter of 2018, we completed the sale of our radio station group.
 
 
 
 
 
- On April 1, 2015, we completed the spin-off of our newspaper business.
 
 
 
(3)
 
Only the years ended December 31, 2018, 2017 and 2016 have been retroactively-adjusted for the adoption of the new revenue standard on January 1, 2018.

F-2



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

Forward-Looking Statements
Our Annual Report on Form 10-K 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 that may cause actual results and events to differ materially from such forward-looking statements is included 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.

Executive Overview
The E.W. Scripps Company (“Scripps”) is a diverse media enterprise, serving audiences and businesses through a portfolio of local and national media brands. Our Local Media division is one of the nation’s largest independent TV station ownership groups. Following the completion of the Raycom Media acquisition in January 2019 and the anticipated closing of the Cordillera Communications, LLC acquisition in the second quarter of 2019, we will have 51 television stations in 36 markets and a reach of more than one in five U.S. television households. We have affiliations with all of the “Big Four” television networks. In our National Media division, we operate national media brands including podcast industry-leader, Stitcher, and its advertising network Midroll Media; next-generation national news network, Newsy; four national broadcast networks, the Katz networks; and the global leader in digital audio technology and measurement services, Triton. We also operate an award-winning investigative reporting newsroom in Washington, D.C., and serve as the longtime steward of one of the nation's largest, most successful and longest-running educational programs, the Scripps National Spelling Bee.
In 2018, management announced a comprehensive growth strategy for the Company to improve short-term performance and position itself for long-term growth in the form of a five-point plan.
The strategy began at the end of 2017 with a reorganization of our Company into Local Media and National Media divisions to better reflect how audiences and advertisers view our businesses.
We performed an analysis of our operating divisions and corporate cost structure in order to reduce expenses and improve both operating performance and company cash flow. We have incurred restructuring charges totaling $13.3 million since the third quarter of 2017 and have completed our plan to achieve $30 million in annualized cost reductions.
We executed on further optimizing our portfolio through the sale of our radio business. By the end of 2018, all 34 radio stations had been sold through multiple transactions for total consideration of $83.5 million.
We continue to pursue a television station acquisition strategy that allows us to assemble the best-performing portfolio possible. On January 1, 2019, we acquired ABC-affiliated stations in Waco, Texas and Tallahassee, Florida for $55 million in cash. Additionally, we have entered into a definitive agreement to acquire 15 top ranked and high performing television stations, serving 10 markets, for $521 million. Completion of the acquisition, which is anticipated to close in the second quarter of 2019, is subject to regulatory approvals and customary closing conditions. These acquisitions allow us to move into new markets that enhance our portfolio and will diversify our network affiliate mix.
We also are committed to the continued investment in our national media businesses for long-term growth. On November 30, 2018, we acquired Triton Digital Canada, Inc., a leading global digital audio infrastructure and audience measurement services company, for $150 million, net of cash acquired. We have increased our Newsy cable subscribers, Stitcher podcast listeners and Katz U.S. household reach through our investment in and creation of quality content.
Additionally, during 2018, we delivered value to shareholders through our share repurchase program and initiation of a quarterly dividend of 5 cents per share.

F-3



Results of Operations
The trends and underlying economic conditions affecting operating performance and future prospects differ for each of our business segments. Accordingly, you should read the following discussion of our consolidated results of operations in conjunction with the discussion of the operating performance of our individual business segments that follows.
Consolidated Results of Operations
Consolidated results of operations were as follows:
 
 
For the years ended December 31,
(in thousands)
 
2018
 
Change
 
2017
 
Change
 
2016
 
 
 
 
 
 
 
 
 
 
 
Operating revenues
 
$
1,208,425

 
37.8
%
 
$
876,972

 
0.3
%
 
$
874,451

Employee compensation and benefits
 
(394,029
)
 
7.2
%
 
(367,735
)
 
7.0
%
 
(343,570
)
Programming
 
(350,753
)
 
53.4
%
 
(228,605
)
 
32.4
%
 
(172,617
)
Impairment of programming assets
 
(8,920
)
 


 

 


 

Other expenses
 
(246,487
)
 
32.6
%
 
(185,869
)
 
6.9
%
 
(173,797
)
Acquisition and related integration costs
 
(4,124
)
 
 
 

 
 
 
(578
)
Restructuring costs
 
(8,911
)
 
 
 
(4,422
)
 
 
 

Depreciation and amortization of intangible assets
 
(63,987
)
 
 
 
(56,343
)
 
 
 
(55,204
)
Impairment of goodwill and intangible assets
 

 
 
 
(35,732
)
 
 
 

Gains (losses), net on disposal of property and equipment
 
(1,255
)
 
 
 
(169
)
 
 
 
(480
)
Operating income (loss)
 
129,959

 
 
 
(1,903
)
 
 
 
128,205

Interest expense
 
(36,184
)
 
 
 
(26,697
)
 
 
 
(18,039
)
Defined benefit pension plan expense
 
(19,752
)
 


 
(14,112
)
 


 
(14,332
)
Miscellaneous, net
 
152

 
 
 
10,636

 
 
 
(2,646
)
Income (loss) from continuing operations before income taxes
 
74,175

 
 
 
(32,076
)
 
 
 
93,188

(Provision) benefit for income taxes
 
(18,098
)
 
 
 
20,054

 
 
 
(33,266
)
Income (loss) from continuing operations, net of tax
 
56,077

 
 
 
(12,022
)
 
 
 
59,922

Income (loss) from discontinued operations, net of tax
 
(36,328
)
 
 
 
(2,595
)
 
 
 
7,313

Net income (loss)
 
19,749

 
 
 
(14,617
)
 
 
 
67,235

Loss attributable to noncontrolling interest
 
(632
)
 
 
 
(1,511
)
 
 
 

Net income (loss) attributable to the shareholders of The E.W. Scripps Company
 
$
20,381

 
 
 
$
(13,106
)
 
 
 
$
67,235


Triton, Katz and Cracked were acquired on November 30, 2018, October 2, 2017, and April 12, 2016, respectively, and the inclusion of operating results from these businesses for the periods subsequent to their acquisitions impacts the comparability of our consolidated and segment operating results.
2018 compared with 2017

Operating revenues increased 37.8% in 2018. Higher retransmission and political revenues in our Local Media group and the inclusion of a full year of Katz revenues within our National Media group were the main contributors to the year-over-year revenue increases. Revenues from Katz were $186 million in 2018 compared to $41.0 million in 2017. Revenues from Triton for December 2018 were $3.3 million.

Employee compensation and benefits increased 7.2% in 2018, primarily driven by the expansion of our National Media group, including a full year of Katz expenses and one month of Triton expenses. This increase was partially offset by employee cost savings attributed to restructuring activities initiated in the fourth quarter of 2017.

Programming expense increased 53.4% in 2018, primarily due to higher network affiliation fees reflecting contractual rate increases, as well as a full year of programming costs for Katz.


F-4



In the fourth quarter of 2018, we incurred a non-cash impairment charge of $8.9 million related to our original programming show, Pickler & Ben, which will not be renewed for a third season.

Other expenses increased 32.6% in 2018 compared to the prior year, most of which was driven by a full year of expenses for Katz. Increases in marketing and promotion costs for our national brands, mainly Newsy and Stitcher, also contributed to the increase in other expenses in 2018.

Acquisition and related integration costs of $4.1 million in 2018 reflect professional service costs incurred to integrate Triton and the former Raycom stations, as well as costs incurred for the pending Cordillera acquisition.

Restructuring costs of $8.9 million in 2018 and $4.4 million in 2017 reflect severance, outside consulting fees and other costs associated with our previously announced changes in management and operating structure.

Depreciation and amortization expense increased from $56 million in 2017 to $64 million in 2018 mainly due to the acquisition of Katz in the fourth quarter of 2017.

The slower development of our original revenue model for Cracked created indications of impairment of goodwill as of September 30, 2017. We concluded that the fair value of Cracked did not exceed its carrying value as of September 30, 2017. We recorded a $29.4 million non-cash impairment charge in the three months ended September 30, 2017 to reduce the carrying value of goodwill and $6.3 million to reduce the carrying value of intangible assets.

Interest expense increased in 2018 due to the new debt issued to finance the Katz acquisition, the higher interest rate on the senior secured notes that were issued in April 2017 and from increases throughout the year in London Interbank Offering Rates ("LIBOR"), which is the benchmark upon which interest on our term loan B is based. Interest expense in 2017 includes a $2.4 million write-off of loan fees associated with the refinancing of our term loan B in the second quarter 2017.

Defined benefit pension plan expense in 2018 includes a $1.8 million non-cash settlement charge related to lump-sum distributions from our Supplemental Executive Retirement Plans and an $11.7 million non-cash settlement charge in connection with the merger of our Scripps Pension Plan into the Journal Communications, Inc. Plan and related transactions.

Miscellaneous, net in 2017 includes a $5.4 million gain on the change in control when we acquired Katz, a $3.0 million gain from the sale of our newspaper syndication business and other income of $3.2 million resulting from an adjustment to the Midroll Media acquisition purchase price earn out.

The effective income tax rate was 24.4% and 62.5% for 2018 and 2017, respectively. State taxes, non-deductible expenses, excess tax benefits or expense on share-based compensation, tax settlements and changes in our reserves for uncertain tax positions impacted our effective rate. Our 2018 provision includes $0.6 million of excess tax benefits from the exercise and vesting of share-based compensation awards. In 2017, we had a provisional estimated benefit of $4.2 million from the change in federal income tax rates for the enactment of the Tax Cuts and Jobs Act which reduced the corporate income tax rate from 35% to 21%.

2017 compared with 2016

Operating revenues were comparable year-over-year. We had higher retransmission and carriage revenues of $39 million and revenues in our National Media group increased more than $58 million. The increase in our National Media group revenues includes $41 million of revenues from Katz. These increases were offset by $92 million of lower political revenues from our Local Media group in a non-political year.

Employee compensation and benefits increased 7.0% in 2017, primarily driven by the expansion of our National Media group, including almost $5 million related to Katz.

Programming expense increased 32.4% in 2017, primarily due to $22 million of higher network affiliation fees and additional programming costs from Katz. Network affiliation fees increased due to contractual rate increases.

Other expenses increased approximately 6.9% in 2017, most of which was driven by Katz.

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

F-5




Depreciation and amortization expense increased slightly from $55 million in 2016 to $56 million in 2017 due to the acquisition of Katz.

Restructuring of $4.4 million in 2017 includes $3.5 million for severance associated with a change in senior management and other employee groups, as well as outside consulting fees associated with the realignment of the Local and National Media businesses.

Impairment of goodwill and intangible assets in 2017 reflects the non-cash impairment charge to reduce the carrying value of goodwill and intangible assets for our Cracked business.

Interest expense increased in 2017 due to a $2.4 million write-off of loan fees associated with our old term loan B which was refinanced in the second quarter of 2017, the higher interest rate on our new senior secured notes and additional interest on new debt issued to finance the Katz acquisition.

Miscellaneous, net increased in 2017 due to a $5.4 million gain on the change in control when we acquired Katz, a $3.0 million gain from the sale of our newspaper syndication business and other income of $3.2 million resulting from an adjustment to the Midroll Media acquisition purchase price earn out.

The effective income tax rate was 62.5% and 35.7% for 2017 and 2016, respectively. State taxes and non-deductible expenses impacted our effective rate. In 2017, we had a provisional estimated benefit of $4.2 million from the change in federal income tax rates for the enactment of the Tax Cuts and Jobs Act which reduced the corporate income tax rate from 35% to 21%. Our effective income tax rates for 2017 and 2016 were impacted by tax settlements and changes in our reserve for uncertain tax positions. Our 2016 provision includes $1.7 million of excess tax benefits from the exercise and vesting of share-based compensation awards.

Discontinued Operations

Discontinued operations reflect the historical results of our radio operations. We closed on the sale of our Tulsa radio stations on October 1, 2018, closed on the sales of our Milwaukee, Knoxville, Omaha, Springfield and Wichita radio stations on November 1, 2018 and closed on the sales of our Boise and Tucson radio stations on December 12, 2018.

In 2018 and 2017, results of discontinued operations included $25.9 million and $8 million, respectively, of non-cash impairment charges to write-down the goodwill of our radio business to fair value.


F-6



Business Segment Results — As discussed in the Notes to Consolidated Financial Statements, our chief operating decision maker evaluates the operating performance of our business segments using a measure called segment profit. Segment profit excludes interest, defined benefit pension plan expense, income taxes, depreciation and amortization, impairment charges, divested operating units, restructuring activities, investment results and certain other items that are included in net income (loss) determined in accordance with accounting principles generally accepted in the United States of America.
Items excluded from segment profit generally result from decisions made in prior periods or from decisions made by corporate executives rather than the managers of the business segments. Depreciation and amortization charges are the result of decisions made in prior periods regarding the allocation of resources and are therefore excluded from the measure. Generally, our corporate executives make financing, tax structure and divestiture decisions. Excluding these items from measurement of our business segment performance enables us to evaluate business segment operating performance based upon current economic conditions and decisions made by the managers of those business segments in the current period.

We allocate a portion of certain corporate costs and expenses, including information technology, certain employee benefits and shared services, to our business segments. The allocations are generally amounts agreed upon by management, which may differ from an arms-length amount.
Information regarding the operating performance of our business segments and a reconciliation of such information to the consolidated financial statements is as follows:
 
 
For the years ended December 31,
(in thousands)
 
2018
 
Change
 
2017
 
Change
 
2016
 
 
 
 
 
 
 
 
 
 
 
Segment operating revenues:
 
 
 
 
 
 
 
 
 
 
  Local Media
 
$
917,480

 
17.9
 %
 
$
778,376

 
(6.8
)%
 
$
835,290

  National Media
 
286,170

 


 
93,141

 

 
34,424

Other
 
4,775

 
(12.5
)%
 
5,455

 
15.2
 %
 
4,737

  Total operating revenues
 
$
1,208,425

 
37.8
 %
 
$
876,972

 
0.3
 %
 
$
874,451

Segment profit (loss):
 
 
 
 
 
 
 
 
 
 
  Local Media
 
$
251,119

 
60.1
 %
 
$
156,890

 
(35.5
)%
 
$
243,298

  National Media
 
13,920

 


 
(9,260
)
 
(8.8
)%
 
(10,156
)
  Other
 
(3,680
)
 
55.9
 %
 
(2,361
)
 
(6.0
)%
 
(2,513
)
  Shared services and corporate
 
(53,123
)
 
5.2
 %
 
(50,506
)
 
9.4
 %
 
(46,162
)
Acquisition and related integration costs
 
(4,124
)
 
 
 

 
 
 
(578
)
Restructuring costs
 
(8,911
)
 
 
 
(4,422
)
 
 
 

Depreciation and amortization of intangible assets
 
(63,987
)
 
 
 
(56,343
)
 

 
(55,204
)
Impairment of goodwill and intangible assets
 

 
 
 
(35,732
)
 
 
 

Gains (losses), net on disposal of property and equipment
 
(1,255
)
 
 
 
(169
)
 
 
 
(480
)
Interest expense
 
(36,184
)
 
 
 
(26,697
)
 
 
 
(18,039
)
Defined benefit pension plan expense
 
(19,752
)
 
 
 
(14,112
)
 
 
 
(14,332
)
Miscellaneous, net
 
152

 
 
 
10,636

 
 
 
(2,646
)
Income (loss) from continuing operations before income taxes
 
$
74,175

 
 
 
$
(32,076
)
 
 
 
$
93,188


F-7



Local Media — Our Local Media segment includes our local broadcast stations and their related digital properties. It is comprised of fifteen ABC affiliates, five NBC affiliates, two FOX affiliates and two CBS affiliates. We also have two MyTV affiliates, one CW affiliate, two independent stations and four Azteca America Spanish-language affiliates. 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, telecommunication companies and satellite carriers. We also receive retransmission fees from over-the-top virtual MVPDs such as YouTubeTV, DirectTV Now and Sony Vue.
National television networks offer affiliates a variety of programs and sell the majority of advertising within those programs. In addition to network programs, we broadcast local and national internally produced programs, syndicated programs, sporting events and other programs of interest in each station's market. News is the primary focus of our locally-produced programming.
The operating performance of our Local Media group is most affected by local and national economic conditions, particularly conditions within the automotive and services categories, and by the volume of advertising purchased by campaigns for elective office and political issues. The demand for political advertising is significantly higher in the third and fourth quarters of even-numbered years.
Operating results for our Local Media segment were as follows:
 
 
For the years ended December 31,
(in thousands)
 
2018
 
Change
 
2017
 
Change
 
2016
 
 
 
 
 
 
 
 
 
 
 
Segment operating revenues:
 
 

 
 
 
 
 
 
 
 
Core advertising
 
$
465,275

 
(5.6
)%
 
$
492,633

 
(1.3
)%
 
$
499,227

Political
 
139,600

 


 
8,651

 


 
100,761

Retransmission
 
301,411

 
16.2
 %
 
259,499

 
17.6
 %
 
220,723

Other
 
11,194

 
(36.4
)%
 
17,593

 
20.7
 %
 
14,579

Total operating revenues
 
917,480

 
17.9
 %
 
778,376

 
(6.8
)%
 
835,290

Segment costs and expenses:
 
 
 


 
 
 
 
 
 
Employee compensation and benefits
 
292,079

 
1.5
 %
 
287,758

 
2.1
 %
 
281,956

Programming
 
219,690

 
18.0
 %
 
186,116

 
14.9
 %
 
161,957

Impairment of programming assets
 
8,920

 
 
 

 
 
 

Other expenses
 
145,672

 
(1.3
)%
 
147,612

 
(0.3
)%
 
148,079

Total costs and expenses
 
666,361

 
7.2
 %
 
621,486

 
5.0
 %
 
591,992

Segment profit
 
$
251,119

 
60.1
 %
 
$
156,890

 
(35.5
)%
 
$
243,298

2018 compared with 2017
Revenues

Total Local Media revenues increased 17.9% in 2018. Higher retransmission revenues and higher political advertising revenues from an even-year election cycle contributed to the increase in revenues. The increase in retransmission revenues was due to rate step-ups for approximately 5 million of our subscribers, as well as regular annual contractual rate increases. Political advertising revenues were $139.6 million, leading to displacement of core advertising revenues, which declined 5.6%. Following the acquisition of Katz on October 2, 2017, we no longer receive carriage fees from the Katz networks, which primarily represents the decrease in other revenues in 2018.

Costs and expenses

Employee compensation and benefits were relatively flat in 2018 compared to 2017.

Programming expense increased 18.0% in 2018 due to higher network affiliation fees as well as the costs of producing our original programming show, Pickler & Ben. Network affiliation fees increased $26.8 million in 2018 compared with 2017. Network affiliation fees have been increasing industry-wide due to higher rates on renewals, as well as year-over-year contractual rate increases. We expect that the rates on renewals may continue to increase over the next several years.


F-8



In the fourth quarter of 2018, we incurred a non-cash impairment charge of $8.9 million related to our original programming show, Pickler & Ben, which will not be renewed for a third season.

Lower marketing and promotion costs contributed to the decrease in other expenses in 2018 compared with 2017.
2017 compared with 2016
Revenues

Total Local Media revenues decreased 6.8% in 2017. Core advertising, which includes local and national spot revenues, as well as revenues from our digital sites, decreased by $6.6 million in 2017. The decrease was from weakness in our retail, food stores, media and auto categories, offset by improvement in communications, home improvement and services. Political revenues decreased by $92 million year-over-year in a non-presidential election year.

Retransmission revenues increased by almost $39 million as a result of contractual rate increases, more than offsetting a slight decline in subscribers. Retransmission contracts with cable and satellite television systems with 3 million subscribers were renewed in the fourth quarter of 2016. While we had not previously seen any significant declines in subscribers reported to us by cable and satellite television operators, we began to see declines as second quarter subscriber counts were reported to us in the third quarter.

Other revenues increased from an additional $3 million of fees we receive for a news production and services agreement. Upon the acquisition of Katz, we no longer receive carriage fees from the Katz networks which accounted for $8 million of other revenue in 2017.

Costs and expenses

Employee compensation and benefits increased 2.1% in 2017. The increase was primarily from merit increases and higher benefit costs.

Programming expense, which includes our network affiliation fees and other programming costs, increased nearly 15% in 2017 primarily due to $22 million of higher network affiliation license fees and the cost of producing our original programming show, Pickler & Ben, which aired for the first time in September 2017. Network affiliation fees have been increasing industry-wide due to higher rates on renewals, as well as contractual rate increases, and we expect that they may continue to increase over the next several years.



F-9



National Media — Our National Media segment is comprised of the operations of our national media businesses including four national broadcast networks, the Katz networks; podcast industry-leader, Stitcher, and its advertising network Midroll Media; next-generation national news network, Newsy; the global leader in digital audio technology and measurement services, Triton; and other national brands. Our National Media group earns revenue primarily through the sale of advertising.

Operating results for our National Media segment were as follows:
 
 
For the years ended December 31,
(in thousands)
 
2018
 
Change
 
2017
 
Change
 
2016
 
 
 
 
 
 
 
 
 
 
 
Segment operating revenues:
 
 
 
 
 
 
 
 
 
 
Katz
 
$
185,852

 


 
$
40,975

 


 
$

Stitcher
 
51,063

 
63.7
%
 
31,199

 
51.5
%
 
20,588

Newsy
 
24,588

 


 
10,089

 


 
4,806

Triton
 
3,292

 


 

 
 
 

Other
 
21,375

 
96.5
%
 
10,878

 
20.5
%
 
9,030

Total operating revenues
 
286,170

 


 
93,141

 


 
34,424

Segment costs and expenses:
 
 
 


 
 
 

 
 
Employee compensation and benefits
 
58,033

 
86.5
%
 
31,121

 
49.9
%
 
20,767

Programming
 
131,063

 


 
42,489

 


 
10,660

Other expenses
 
83,154

 


 
28,791

 


 
13,153

Total costs and expenses
 
272,250

 


 
102,401

 


 
44,580

Segment profit (loss)
 
$
13,920

 


 
$
(9,260
)
 


 
$
(10,156
)

Our National Media businesses, Triton, Katz and Cracked, were acquired on November 30, 2018, October 2, 2017, and April 12, 2016, respectively. The inclusion of operating results from these businesses for the periods subsequent to the acquisitions impacts the comparability of our National Media segment operating results.
2018 compared with 2017

Revenues

National Media revenues increased $193 million in 2018. The results of Katz and Triton accounted for $148.2 million of the increase in 2018. The remainder of the increase is primarily driven by increased revenues from Stitcher and Newsy. Increases in Stitcher's revenues reflect advertising growth from existing podcasts, as well as the addition of new titles to its portfolio of podcasts. Newsy's revenues increased primarily from the growth of advertising on over-the-top platforms, as well as revenues from its expansion into cable in the fourth quarter of 2017.