10-Q 1 ssp-20220630.htm 10-Q ssp-20220630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
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 001-10701
THE E.W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)
Ohio31-1223339
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification Number)
312 Walnut Street
Cincinnati,Ohio45202
(Address of principal executive offices)(Zip Code)

Registrant's telephone number, including area code: (513) 977-3000

Not applicable
(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.01 per shareSSPNASDAQ Global Select Market
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 No
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 and post such files).    Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth 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 filerAccelerated filerEmerging growth company
Non-accelerated filerSmaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of June 30, 2022, there were 71,482,546 of the registrant’s Class A Common shares, $0.01 par value per share, outstanding and 11,932,722 of the registrant’s Common Voting shares, $0.01 par value per share, outstanding.



Index to The E.W. Scripps Company Quarterly Report
on Form 10-Q for the Quarter Ended June 30, 2022
Item No.Page
 
1. Financial Statements
2. Management's Discussion and Analysis of Financial Condition and Results of Operations
3. Quantitative and Qualitative Disclosures About Market Risk
4. Controls and Procedures
PART II - Other Information
 
1. Legal Proceedings
1A. Risk Factors
3. Defaults Upon Senior Securities
4. Mine Safety Disclosures
5. Other Information
6. Exhibits
    Signatures
2


PART I

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

Item 1. Financial Statements

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

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

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

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

PART II

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

Other than the risk factor set forth below, there have been no material changes to the risk factors disclosed in Item 1A. Risk Factors in our 2021 Annual Report on Form 10-K.

The loss of skilled employees or an inability to attract and retain skilled employees could adversely affect our business.

To execute our strategic plan and maintain business continuity, we must attract and retain personnel with appropriate talent and skills. If we are unable to hire and retain employees capable of performing key functions in our business, or if measures we take to respond to a decrease in labor availability prove ineffective or have unintended negative consequences, our business could be adversely affected. We are experiencing an increasingly competitive labor market, and have had higher turnover rates and more open positions during the COVID-19 pandemic than during pre-pandemic years. Sustained labor shortages or increased turnover rates, whether caused by the pandemic, general macroeconomic factors or dynamics within our industry (including a shrinking pool of new talent interested in the media business), could lead to increased costs, such as increased wage rates to attract and retain employees, could negatively affect our revenue and profits and could have an impact on our operations and business continuity.

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

There were no sales of unregistered equity securities during the quarter ended June 30, 2022.

Item 3. Defaults Upon Senior Securities
There were no defaults upon senior securities during the quarter ended June 30, 2022.
3


Item 4. Mine Safety Disclosures
None.

Item 5. Other Information

None.
Item 6. Exhibits
Exhibit NumberExhibit Description
31(a)
31(b)
32(a)
32(b)
101The Company's unaudited Condensed Consolidated Financial Statements and related Notes for the three and six months ended June 30, 2022 from this Quarterly Report on Form 10-Q, formatted in iXBRL (Inline eXtensible Business Reporting Language).*
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* - Filed herewith
4


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

 THE E.W. SCRIPPS COMPANY
Dated: August 5, 2022By:
/s/ Daniel W. Perschke
Daniel W. Perschke
  Vice President, Controller
(Principal Accounting Officer)


5


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

F-1


The E.W. Scripps Company
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)As of 
June 30, 
2022
As of 
December 31, 
2021
Assets
Current assets:
Cash and cash equivalents$58,237 $66,223 
Restricted cash  34,257 
Accounts receivable (less allowances — $4,869 and $4,256)
580,747 572,525 
FCC repack receivable 253 773 
Miscellaneous56,170 28,503 
Total current assets695,407 702,281 
Investments25,677 21,632 
Property and equipment445,654 456,945 
Operating lease right-of-use assets115,543 124,821 
Goodwill2,920,466 2,913,384 
Other intangible assets1,870,194 1,910,311 
Programming443,117 510,316 
Miscellaneous19,612 18,624 
Total Assets$6,535,670 $6,658,314 
Liabilities and Equity
Current liabilities:
Accounts payable$84,656 $83,931 
Unearned revenue23,767 20,000 
Current portion of long-term debt18,612 18,612 
Accrued liabilities:
Employee compensation and benefits43,364 68,545 
Programming liability 164,118 180,269 
Accrued interest 32,310 34,973 
Miscellaneous49,529 50,667 
Other current liabilities54,624 54,883 
Total current liabilities470,980 511,880 
Long-term debt (less current portion)3,064,352 3,129,393 
Deferred income taxes371,924 356,777 
Operating lease liabilities 104,238 113,892 
Other liabilities (less current portion)504,562 575,938 
Equity:
Preferred stock, $0.01 par — authorized: 25,000,000 shares; none outstanding
  
Preferred stock — Series A, $100,000 par; 6,000 shares issued and outstanding
411,092 409,939 
Common stock, $0.01 par:
Class A — authorized: 240,000,000 shares; issued and outstanding: 71,482,546 and 70,646,007 shares
715 707 
Voting — authorized: 60,000,000 shares; issued and outstanding: 11,932,722 and 11,932,722 shares
119 119 
Total preferred and common stock411,926 410,765 
Additional paid-in capital1,435,867 1,428,460 
Retained earnings244,070 205,118 
Accumulated other comprehensive loss, net of income taxes(72,249)(73,909)
Total equity2,019,614 1,970,434 
Total Liabilities and Equity$6,535,670 $6,658,314 
See notes to condensed consolidated financial statements.
F-2


The E.W. Scripps Company
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended 
June 30,
Six Months Ended 
June 30,
(in thousands, except per share data)2022202120222021
Operating Revenues:
Advertising$414,147 $396,652 $812,628 $759,266 
Retransmission and carriage170,304 156,421 326,124 312,918 
Other10,016 12,004 21,421 33,814 
Total operating revenues594,467 565,077 1,160,173 1,105,998 
Operating Expenses:
Cost of revenues, excluding depreciation and amortization308,510 268,683 606,344 533,078 
Selling, general and administrative expenses, excluding depreciation and amortization154,382 144,113 307,109 288,139 
Acquisition and related integration costs 6,686 1,642 35,331 
Restructuring costs 514  7,564 
Depreciation15,812 14,245 31,182 28,370 
Amortization of intangible assets25,207 26,506 49,582 51,888 
Losses (gains), net on disposal of property and equipment1,577 75 4,058 155 
Total operating expenses505,488 460,822 999,917 944,525 
Operating income88,979 104,255 160,256 161,473 
Interest expense(36,011)(42,010)(72,510)(85,892)
Gain (loss) on extinguishment of debt (13,775)1,234 (13,775)
Defined benefit pension plan income662 7 1,325 14 
Gain on sale of Triton business   81,784 
Losses on stock warrant (31,874) (99,118)
Miscellaneous, net2,170 (2,707)1,763 (7,558)
Income from continuing operations before income taxes55,800 13,896 92,068 36,928 
Provision for income taxes14,060 12,683 27,963 32,212 
Income from continuing operations, net of tax41,740 1,213 64,105 4,716 
Income from discontinued operations, net of tax 4,431  6,495 
Net income41,740 5,644 64,105 11,211 
Preferred stock dividends(12,577)(12,576)(25,153)(24,219)
Net income (loss) attributable to the shareholders of The E.W. Scripps Company$29,163 $(6,932)$38,952 $(13,008)
Net income (loss) per basic share of common stock attributable to the shareholders of The E.W. Scripps Company:
Income (loss) from continuing operations$0.34 $(0.14)$0.46 $(0.24)
Income from discontinued operations  0.05  0.08 
Net income (loss) per basic share of common stock attributable to the shareholders of The E.W. Scripps Company:$0.34 $(0.09)$0.46 $(0.16)
Net income (loss) per diluted share of common stock attributable to the shareholders of The E.W. Scripps Company:
Income (loss) from continuing operations$0.32 $(0.14)$0.42 $(0.24)
Income from discontinued operations  0.05  0.08 
Net income (loss) per diluted share of common stock attributable to the shareholders of The E.W. Scripps Company:$0.32 $(0.09)$0.42 $(0.16)
See notes to condensed consolidated financial statements.
The sum of net income (loss) per share from continuing and discontinued operations may not equal the reported total net income(loss) per share as each is calculated independently.
F-3


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

Three Months Ended 
June 30,
Six Months Ended 
June 30,
(in thousands)2022202120222021
Net income$41,740 $5,644 $64,105 $11,211 
Changes in defined benefit pension plans, net of tax of $258, $375, $515 and $749
827 1,186 1,654 2,373 
Other3 20 6 38 
Total comprehensive income attributable to preferred and common stockholders$42,570 $6,850 $65,765 $13,622 
See notes to condensed consolidated financial statements.
F-4


The E.W. Scripps Company
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended 
June 30,
(in thousands)20222021
Cash Flows from Operating Activities:
Net income$64,105 $11,211 
Income from discontinued operations, net of tax 6,495 
Income from continuing operations, net of tax64,105 4,716 
Adjustments to reconcile net income from continuing operations to net cash flows from operating activities:
Depreciation and amortization80,764 80,258 
Losses (gains), net on disposal of property and equipment4,058 155 
Loss (gain) on extinguishment of debt(1,234)13,775 
Gain on sale of Triton business (81,784)
Losses on stock warrant 99,118 
Programming assets and liabilities(11,724)(47,490)
Restructuring impairment charges 7,050 
Deferred income taxes12,833 7,437 
Stock and deferred compensation plans11,612 18,384 
Pension contributions, net of income/expense(1,860)(12,597)
Other changes in certain working capital accounts, net(53,516)(3,029)
Miscellaneous, net1,547 6,185 
Net cash provided by operating activities from continuing operations106,585 92,178 
Net cash provided by (used in) operating activities from discontinued operations (1,935)
Net operating activities106,585 90,243 
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired(13,797)(2,679,798)
Proceeds from sale of Triton Digital, net of cash disposed 224,990 
Acquisition of intangible assets (430)
Additions to property and equipment(27,456)(27,984)
Purchase of investments(5,281)(1,431)
Proceeds from FCC repack1,742 14,190 
Miscellaneous, net(2,451)44 
Net cash used in investing activities from continuing operations(47,243)(2,470,419)
Net cash provided by (used in) investing activities from discontinued operations  
Net investing activities(47,243)(2,470,419)
Cash Flows from Financing Activities:
Net borrowings under revolving credit facility60,000  
Proceeds from issuance of long-term debt 800,000 
Proceeds from issuance of preferred stock 600,000 
Payments on long-term debt(128,850)(459,306)
Premium paid on debt extinguishment (10,252)
Payments on financing costs (50,597)
Payments for capitalized preferred stock issuance costs (11,526)
Dividends paid on common and preferred stock(24,000)(21,067)
Tax payments related to shares withheld for vested stock and RSUs(8,468)(6,604)
Miscellaneous, net(267)(517)
Net cash provided by (used in) financing activities from continuing operations(101,585)840,131 
Effect of foreign exchange rates on cash, cash equivalents and restricted cash (20)
Decrease in cash, cash equivalents and restricted cash(42,243)(1,540,065)
Cash, cash equivalents and restricted cash:
Beginning of year100,480 1,626,021 
End of period$58,237 $85,956 
Supplemental Cash Flow Disclosures
Interest paid$68,177 $54,928 
Income taxes paid$46,949 $54,215 
Non-cash investing information
Capital expenditures included in accounts payable$1,644 $2,067 
See notes to condensed consolidated financial statements.
F-5


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

Three Months Ended
June 30, 2022 and 2021
(in thousands, except per share data)
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Retained Earnings (Accumulated Deficit)Accumulated
Other
Comprehensive
Income (Loss) ("AOCI")
Total
Equity
As of March 31, 2022$410,515 $833 $1,430,853 $214,907 $(73,079)$1,984,029 
Comprehensive income (loss)— — — 41,740 830 42,570 
Preferred stock dividends, $2,000 per share
577 — — (12,577)— (12,000)
Compensation plans:124,736 net shares issued *
— 1 5,014 — — 5,015 
As of June 30, 2022$411,092 $834 $1,435,867 $244,070 $(72,249)$2,019,614 
* Net of tax payments related to shares withheld for vested RSUs of $127 for the three months ended June 30, 2022.

As of March 31, 2021$408,210 $823 $1,133,366 $125,702 $(98,914)$1,569,187 
Comprehensive income (loss)— — — 5,644 1,206 6,850 
Preferred stock dividends, $2,000 per share
576 — — (12,576)— (12,000)
Stock warrant— — 279,958 — — 279,958 
Compensation plans: 185,395 net shares issued *
— 2 6,742 — — 6,744 
As of June 30, 2021$408,786 $825 $1,420,066 $118,770 $(97,708)$1,850,739 
* Net of tax payments related to shares withheld for vested RSUs of $235 for the three months ended June 30, 2021.

Six Months Ended
June 30, 2022 and 2021
(in thousands, except per share data)
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Retained Earnings (Accumulated Deficit)Accumulated
Other
Comprehensive
Income (Loss) ("AOCI")
Total
Equity
As of December 31, 2021$409,939 $826 $1,428,460 $205,118 $(73,909)$1,970,434 
Comprehensive income (loss)— — — 64,105 1,660 65,765 
Preferred stock dividends, $4,000 per share
1,153 — — (25,153)— (24,000)
Compensation plans: 836,539 net shares issued *
— 8 7,407 — — 7,415 
As of June 30, 2022$411,092 $834 $1,435,867 $244,070 $(72,249)$2,019,614 
* Net of tax payments related to shares withheld for vested RSUs of $8,468 for the six months ended June 30, 2022.

As of December 31, 2020$ $817 $1,130,789 $131,778 $(100,119)$1,163,265 
Comprehensive income (loss)— — — 11,211 2,411 13,622 
Issuance of preferred stock, net of discount and issuance costs407,634 — — — — 407,634 
Preferred stock dividends, $3,511 per share
1,152 — — (24,219)— (23,067)
Stock warrant— — 279,958 — — 279,958 
Compensation plans: 739,674 net shares issued *
— 8 9,319 — — 9,327 
As of June 30, 2021$408,786 $825 $1,420,066 $118,770 $(97,708)$1,850,739 
* Net of tax payments related to shares withheld for vested RSUs of $6,604 for the six months ended June 30, 2021.
See notes to condensed consolidated financial statements.
F-6


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

1. Summary of Significant Accounting Policies
As used in the Notes to Condensed Consolidated Financial Statements, the terms “Scripps,” “Company,” “we,” “our,” or “us” may, depending on the context, refer to The E.W. Scripps Company, to one or more of its consolidated subsidiary companies, or to all of them taken as a whole.
Basis of Presentation — The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto included in our 2021 Annual Report on Form 10-K. In management's opinion, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the interim periods have been made.
Results of operations are not necessarily indicative of the results that may be expected for future interim periods or for the full year.
Principles of Consolidation — The consolidated financial statements include our accounts and those of our wholly-owned and majority-owned subsidiaries and variable interest entities (VIEs) for which we are the primary beneficiary. We are the primary beneficiary of a VIE when we have the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and have the obligation to absorb losses or the right to receive returns that would be significant to the VIE. Noncontrolling interest represents an owner’s share of the equity in certain of our consolidated entities. All intercompany transactions and account balances have been eliminated in consolidation.

Investments in entities over which we have significant influence but not control are accounted for using the equity method of accounting. Income from equity method investments represents our proportionate share of net income generated by equity method investees.
Nature of Operations — We are a diverse media enterprise, serving audiences and businesses through a portfolio of local television stations and national media brands. All of our businesses provide content and services via digital platforms, including the Internet, smartphones and tablets. Our media businesses are organized into the following reportable business segments: Local Media, Scripps Networks and Other. Additional information for our business segments is presented in Note 13. Segment Information.

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

Our financial statements include estimates and assumptions used in accounting for our defined benefit pension plans; the periods over which long-lived assets are depreciated or amortized; the fair value of long-lived assets, goodwill and indefinite lived assets; the liability for uncertain tax positions and valuation allowances against deferred income tax assets; the fair value of assets acquired and liabilities assumed in business combinations; and self-insured risks.
While we re-evaluate our estimates and assumptions on an ongoing basis, actual results could differ from those estimated at the time of preparation of the financial statements.
Nature of Products and Services — The following is a description of principal activities from which we generate revenue.
Core Advertising Core advertising is comprised of sales to local and national customers. The advertising includes a combination of broadcast airtime, as well as digital advertising. Pricing of advertising time is based on audience size and share, the demographic of our audiences and the demand for our limited inventory of commercial time. Advertising time is sold through a combination of local and national sales staff and national sales representative firms. Digital revenues are primarily
F-7


generated from the sale of advertising to local and national customers on our local television websites, smartphone apps, tablet apps and other platforms.
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.
Retransmission Revenues We earn revenue from retransmission consent agreements with multi-channel video programming distributors (“MVPDs”) in our markets. The MVPDs are cable operators and satellite carriers who pay us to offer our programming to their customers. We also receive fees from over-the-top virtual MVPDs. The fees we receive are typically based on the number of subscribers in our local market and the contracted rate per subscriber.
Other Products and Services We derive revenue from sponsorships and community events through our Local Media segment. Our Scripps Networks segment offers subscription services for access to premium content to its customers.
Refer to Note 13. Segment Information for further information, including revenue by significant product and service offering.
Revenue Recognition — Revenue is measured based on the consideration we expect to be entitled to in exchange for promised goods or services provided to customers, and excludes any amounts collected on behalf of third parties. Revenue is recognized upon transfer of control of promised products or services to customers.
Advertising Advertising revenue is recognized, net of agency commissions, over time primarily as ads are aired or impressions are delivered and any contracted audience guarantees are met. We apply the practical expedient to recognize revenue at the amount we have the right to invoice, which corresponds directly to the value a customer has received relative to our performance. For advertising sold based on audience guarantees, audience deficiency may result in an obligation to deliver additional advertisements to the customer. To the extent that we do not satisfy contracted audience ratings, we record deferred revenue until such time that the audience guarantee has been satisfied.
Retransmission Retransmission revenues are considered licenses of functional intellectual property and are recognized at the point in time the content is transferred to the customer. MVPDs report their subscriber numbers to us generally on a 30- to 90-day lag. Prior to receiving the MVPD reporting, we record revenue based on estimates of the number of subscribers, utilizing historical levels and trends of subscribers for each MVPD.
Contract Balances — Timing of revenue recognition may differ from the timing of invoicing to customers. We record a receivable when revenue is recognized prior to invoicing, or unearned revenue when revenue is recognized subsequent to invoicing.
Payment terms may vary by contract type, although our terms generally include a requirement of payment within 30 to 90 days. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing from our customers.
The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We estimate the allowance based on expected credit losses, including our historical experience of actual losses and known troubled accounts. The allowance for doubtful accounts totaled $4.9 million at June 30, 2022 and $4.3 million at December 31, 2021.
We record unearned revenue when cash payments are received in advance of our performance. We generally require amounts payable under advertising contracts with political advertising customers to be paid in advance. Unearned revenue totaled $23.8 million at June 30, 2022 and is expected to be recognized within revenue over the next 12 months. Unearned revenue totaled $20.0 million at December 31, 2021. We recorded $9.2 million of revenue in the six months ended June 30, 2022 that was included in unearned revenue at December 31, 2021.
Leases — We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities and operating lease liabilities in our Condensed Consolidated Balance Sheets.
  
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the implicit rate is not readily determinable for most of our leases, we use our incremental borrowing rate when determining the present value of lease payments. The incremental
F-8


borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease. The operating lease ROU asset also includes any payments made at or before commencement and is reduced by any lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Share-Based Compensation — We have a Long-Term Incentive Plan (the “Plan”) which is described more fully in our 2021 Annual Report on Form 10-K. The Plan provides for the award of incentive and nonqualified stock options, stock appreciation rights, restricted stock units (RSUs) and unrestricted Class A Common shares and performance units to key employees and non-employee directors.
Share-based compensation costs totaled $4.6 million and $6.4 million for the second quarter of 2022 and 2021, respectively. Year-to-date share-based compensation costs totaled $13.9 million and $14.7 million in 2022 and 2021, respectively.
Earnings Per Share (“EPS”) — Unvested awards of share-based payments with rights to receive dividends or dividend equivalents, such as our RSUs, are considered participating securities for purposes of calculating EPS. Under the two-class method, we allocate a portion of net income to these participating securities and, therefore, exclude that income from the calculation of EPS for common stock. We do not allocate losses to the participating securities.

The following table presents information about basic and diluted weighted-average shares outstanding:
 Three Months Ended 
June 30,
Six Months Ended 
June 30,
(in thousands)2022202120222021
Numerator (for basic and diluted earnings per share)
Income from continuing operations, net of tax$41,740 $1,213 $64,105 $4,716 
Less income allocated to RSUs(872) (1,105) 
Less preferred stock dividends(12,577)(12,576)(25,153)(24,219)
Numerator for basic and diluted earnings per share$28,291 $(11,363)$37,847 $(19,503)
Denominator
Basic weighted-average shares outstanding83,270 82,381 83,030 82,143 
Effect of dilutive securities:
Restricted stock units235  424  
Common stock warrant4,315  6,594  
Diluted weighted-average shares outstanding87,820 82,381 90,048 82,143 

For the three and six month periods ended June 30, 2021, we incurred a net loss and the inclusion of RSUs would have been anti-dilutive. The June 30, 2021 diluted EPS calculation excludes the effect from 2.5 million of outstanding RSUs that were anti-dilutive. On May 14, 2021, we amended our common stock warrant agreement with Berkshire Hathaway. Prior to the May 14, 2021 amendment of the common stock warrant agreement, the basic and dilutive EPS calculations excluded the impact of the common stock warrant as the effect would have been anti-dilutive. Following the amendment date, the EPS calculations include the dilutive impact of the common stock warrant. As of June 30, 2022, we had 1.8 million of outstanding RSUs that were anti-dilutive.
F-9



2. Recently Adopted and Issued Accounting Standards

Recently Adopted Accounting Standards — In October 2021, the Financial Accounting Standards Board ("FASB") issued new guidance requiring entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with the revenue from contracts with customers accounting standard. The guidance will generally result in an entity recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date rather than at fair value. The guidance is effective on a prospective basis for fiscal years beginning after December 15, 2022, with early adoption permitted. We adopted the new guidance effective January 1, 2022. The adoption of the guidance did not have an impact on our condensed consolidated financial statements.

In May 2021, the FASB issued new guidance that clarifies an issuer's accounting for certain modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. Specifically, the guidance provides a "principles-based framework to determine whether an issuer should recognize the modification or exchange as an adjustment to equity or an expense." The guidance is effective for all entities with fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. We adopted the new guidance effective January 1, 2022. The adoption of the guidance did not have an impact on our condensed consolidated financial statements.

Recently Issued Accounting Standards — In November 2021, the FASB issued new guidance for entities to provide certain disclosures for material government assistance transactions that are accounted for by applying a grant or contribution accounting model by analogy. The guidance is effective for our 2022 annual reporting period and we do not expect adoption of the guidance to have a material impact on our annual consolidated financial statements and related disclosures.

In March 2020, the FASB issued new guidance that provides optional expedients and exceptions to certain accounting requirements to facilitate the transition away from the use of the London Interbank Offered Rate (LIBOR) and other interbank offered rates. The guidance is effective as of March 12, 2020 and will apply through December 31, 2022 to all entities, subject to meeting certain criteria, that have contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. We will evaluate transactions or contract modifications occurring as a result of reference rate reform to determine whether to apply the optional guidance on an ongoing basis.

3. Acquisitions

Nuvyyo Acquisition

On January 5, 2022, we acquired Nuvyyo for net cash consideration totaling $13.8 million. Nuvyyo provides consumers DVR product solutions to watch and record free over-the-air HDTV on connected devices. The preliminary purchase price allocation assigned $7.2 million to intangible assets with useful lives ranging from three to five years, $7.1 million to goodwill and the remainder was allocated to various working capital and deferred tax liability accounts. The estimated goodwill, which is not tax deductible, reflects the synergies and increased market penetration expected from combining the operations of Nuvyyo with Scripps. We allocated the goodwill to our Other segment.

ION Acquisition

On January 7, 2021, we completed the acquisition of national broadcast network ION Media Networks, Inc. ("ION") for $2.65 billion. ION is a national network of broadcast stations and is the largest holder of U.S. broadcast television spectrum. The business distributes its programming through owned Federal Communications Commission-licensed television stations as well as affiliated TV stations, reaching 100 million of U.S. homes through its over-the-air broadcast and pay TV platforms. The acquisition of ION enabled us to create a full-scale national television networks business by combining the ION network with our other news and entertainment networks.

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

To comply with ownership rules of the Federal Communications Commission, we simultaneously divested 23 of ION's television stations for a total consideration of $30 million, which were purchased by INYO Broadcast Holdings, LLC upon completion of the acquisition. These divested stations became independent affiliates of ION pursuant to long-term affiliation agreements.
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The following table summarizes the net cash consideration for the ION transaction.

(in thousands)
Total purchase price$2,650,000 
   Plus: Cash acquired 14,493 
   Plus: Working capital57,755 
Total transaction gross cash consideration2,722,248 
   Less: Proceeds from ION stations divested(30,000)
Total transaction net cash consideration2,692,248 
   Less: Cash acquired(14,493)
Total consideration, net of cash acquired$2,677,755 

The following table summarizes the final fair values of the ION assets acquired and liabilities assumed at the closing date.
(in thousands)
Accounts receivable $135,006 
Other current assets 25,353 
Programming rights169,027 
Property and equipment 122,520 
Operating lease right-of-use assets72,717 
Other assets2,295 
Goodwill1,796,148 
Indefinite-lived intangible assets - FCC licenses424,200 
Amortizable intangible assets:
  INYO affiliation agreement422,000 
  Other affiliation relationships22,000 
  Advertiser relationships143,000 
  Trade names72,000 
Accounts payable (9,674)
Unearned revenue(13,043)
Accrued expenses (15,814)
Current portion of programming liabilities (92,721)
Other current liabilities (24,810)
Programming liabilities(191,837)
Deferred tax liabilities(265,291)
Operating lease liabilities (78,438)
Other long-term liabilities (36,883)
Total consideration, net of cash acquired$2,677,755 

Of the value allocated to amortizable intangible assets, the INYO affiliation agreement has an estimated amortization period of 20 years, advertiser relationships have an estimated amortization period of 7 years, other affiliation relationships have an estimated amortization period of 10 years and the value allocated to trade names has an estimated amortization period of 10 years.

The goodwill of $1.8 billion arising from the transactions consists largely of synergies, economies of scale and other benefits of a larger national broadcast footprint and becoming the largest holder of broadcast spectrum. We allocated the goodwill to our Scripps Networks segment. The transaction is accounted for as a stock acquisition which applies carryover tax basis to the assets and liabilities acquired. The goodwill is not deductible for income tax purposes.

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Pro forma results of operations

Pro forma results of operations, assuming the ION acquisition had taken place at the beginning of 2020, are presented in the following table. The pro forma results do not include Nuvyyo, as the impact of this acquisition, individually or in the aggregate, is not material to prior year results of operations. The pro forma information includes the historical results of operations of Scripps and ION (excluding the results of the divested stations sold to INYO), as well as adjustments for additional depreciation and amortization of the assets acquired, additional interest expense related to the financing of the transactions and other transactional adjustments. The pro forma results do not include efficiencies, cost reductions or synergies expected to result from the acquisition, or retrospective fair value adjustments to the warrant. The unaudited pro forma financial information is not necessarily indicative of the results that actually would have occurred had the acquisition been completed at the beginning of the period.

(in thousands, except per share data) (unaudited)Six Months Ended June 30, 2021
Operating revenues$1,112,720 
Net income attributable to Scripps shareholders19,911 
Net income per share:
          Basic$0.24 
          Diluted0.23 

The pro forma results in 2021 reflect a $32.8 million reversal of ION transaction costs incurred that were already captured in the 2020 pro forma results.

4. Asset Write-Downs and Other Charges and Credits

Income from continuing operations before income taxes was affected by the following:

2022 - Acquisition and related integration costs of $1.6 million in the first six months of 2022 primarily reflect professional service costs associated with the ION acquisition.

During the first quarter of 2022, we redeemed $42.2 million of the 2027 Senior Notes, $26.6 million of the 2029 Senior Notes and $54.5 million of the 2031 Senior Notes. The redemptions resulted in a gain on extinguishment of debt of $1.2 million as the notes were redeemed for total consideration below par value of the notes.

2021 - Acquisition and related integration costs of $35.3 million in the first six months of 2021 primarily reflect investment banking, legal and professional service costs incurred to complete and integrate the ION Media Networks, Inc. acquisition, which closed on January 7, 2021.

Restructuring costs totaled $7.6 million in the first six months of 2021. In connection with the Newsy restructuring plan, we incurred charges in the first quarter of 2021 totaling $7.1 million for the write-downs of both capitalized carriage agreement payments and certain Newsy intangible assets. The additional restructuring charges in the second quarter were primarily attributed to employee severance and relocation costs.

We redeemed the outstanding principal amount of our 2025 Senior Notes during the second quarter of 2021. The redemption resulted in a loss on extinguishment of debt of $13.8 million, representing the premium paid to retire the notes and write-off of unamortized debt financing costs.

During the first quarter of 2021, we completed the sale of our Triton business. The sale generated total net proceeds of $225 million and we recognized a pre-tax gain from disposition totaling $81.8 million.

Related to our outstanding common stock warrant, we recognized non-cash charges totaling $31.9 million in the second quarter of 2021 and $99.1 million for the year-to-date period in 2021. The warrant obligation was being marked-to-market each reporting period with the increase in our common stock price being the significant contributor to the higher valuation. Following an amendment to the common stock warrant agreement on May 14, 2021, the fair value of the warrant was reclassified to equity and no longer marked-to-market each reporting period.

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5. Income Taxes

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

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

The effective income tax rate for the six months ended June 30, 2022 and 2021 was 30% and 87%, respectively. Differences between our effective income tax rate and the U.S. federal statutory rate are the impact of state taxes, foreign taxes, non-deductible expenses, changes in reserves for uncertain tax positions, excess tax benefits or expense from the exercise and vesting of share-based compensation awards ($1.0 million benefit in 2022 and $1.7 million benefit in 2021), state deferred rate changes ($4.3 million expense in 2022) and state NOL valuation allowance changes ($1.2 million benefit in 2021). Additionally, in the first quarter of 2021, the income tax provision was impacted by a net discrete tax provision charge of $17.1 million related to a taxable gain on the sale of the Triton business and a $1.0 million discrete tax provision charge related to nondeductible transaction costs for the ION acquisition. Finally, a non-deductible expense of $102.6 million recorded in 2021 related to issuance costs and unrealized losses on mark-to-market adjustments recorded on the common stock warrant issued in connection with the ION acquisition.

We recognize state NOL carryforwards as deferred tax assets, subject to valuation allowances. At each balance sheet date, we estimate the amount of carryforwards that are not expected to be used prior to expiration of the carryforward period. The tax effect of the carryforwards that are not expected to be used prior to their expiration is included in the valuation allowance.

6. Restricted Cash

At December 31, 2021, we had restricted cash of $34.3 million. The balance reflected restricted cash held in escrow from the KMGH Denver television station building sale, which was received in January 2022.

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7. Leases

We have operating leases for office space, data centers and certain equipment. Our leases have remaining lease terms of 1 year to 30 years, some of which may include options to extend the leases for up to 5 years, and some of which may include options to terminate the leases within 1 year. Operating lease costs recognized in our Condensed Consolidated Statements of Operations for the three months ended June 30, 2022 and 2021 totaled $6.7 million and $6.0 million, including short-term lease costs of $0.3 million and $0.4 million, respectively. Year-to-date June 30, 2022 and 2021 costs totaled $13.2 million and $11.9 million, including short-term lease costs of $0.7 million and $0.9 million, respectively.

Other information related to our operating leases was as follows:
(in thousands, except lease term and discount rate)As of 
June 30, 
2022
As of 
December 31, 
2021
Balance Sheet Information
  Right-of-use assets$115,543 $124,821 
  Other current liabilities19,022 20,066 
  Operating lease liabilities 104,238 113,892 
Weighted Average Remaining Lease Term
       Operating leases 8.11 years8.35 years
Weighted Average Discount Rate
       Operating leases 4.15 %4.16 %


Three Months Ended 
June 30,
Six Months Ended 
June 30,
(in thousands)2022202120222021
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease
       liabilities
$6,198 $5,801 $12,256 $10,676 
    Right-of-use assets obtained in exchange for lease obligations 1,232 977 1,463 6,957 


Future minimum lease payments under non-cancellable operating leases as of June 30, 2022 were as follows:
(in thousands)Operating
Leases
Remainder of 2022$13,319 
202324,481 
202421,555 
202517,245 
202615,168 
Thereafter54,503 
  Total future minimum lease payments146,271 
Less: Imputed interest(23,011)
    Total$123,260 

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8. Goodwill and Other Intangible Assets
Goodwill consisted of the following:
(in thousands)Local MediaScripps NetworksOtherTotal
Gross balance as of December 31, 2021$1,122,408 $2,028,890 $