Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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
Not applicable
(Former name, former address and former fiscal year, if changed since last report.)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 þ No o
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” and “smaller reporting company “in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
 
Accelerated filer o 
 
Emerging growth company o 
Non-accelerated filer o 
(Do not check if a smaller reporting company)
 
Smaller reporting 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
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, 2018, there were 70,028,926 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, 2018
Item No.
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    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 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

There have been no material changes to the risk factors disclosed in Item 1A. Risk Factors in our 2017 Annual Report on Form 10-K.

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, 2018.
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. There were no purchases of Class A Common shares made during the quarter ended June 30, 2018. At June 30, 2018, $78.2 million remained under the authorization.

Item 3. Defaults Upon Senior Securities
There were no defaults upon senior securities during the quarter ended June 30, 2018.

Item 4. Mine Safety Disclosures
None.

Item 5. Other Information
None.



3


Item 6. Exhibits
Exhibit Number
 
Exhibit Description
31(a)
 
31(b)
 
32(a)
 
32(b)
 
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)


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 3, 2018
By:
/s/ Douglas F. Lyons 
 
 
Douglas F. Lyons
 
 
Senior Vice President, Controller and Treasurer
 
 
(Principal Accounting Officer)



5


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

Item
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Condensed Consolidated Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 


F-1


The E.W. Scripps Company
Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)
 
As of 
 June 30, 
 2018
 
As of 
 December 31, 
 2017
 
 
 
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
125,719

 
$
148,699

Accounts receivable (less allowances— $2,156 and $1,949)
 
250,728

 
245,365

Programming
 
55,067

 
53,468

Miscellaneous
 
27,038

 
21,998

Assets held for sale — current
 
111,004

 
136,004

Total current assets
 
569,556

 
605,534

Investments
 
7,351

 
7,699

Property and equipment
 
218,628

 
209,995

Goodwill
 
755,949

 
755,949

Other intangible assets
 
416,915

 
425,975

Programming (less current portion)
 
82,889

 
85,269

Deferred income taxes
 
17,524

 
20,076

Miscellaneous
 
21,113

 
19,051

Total Assets
 
$
2,089,925

 
$
2,129,548

 
 
 
 
 
Liabilities and Equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
32,402

 
$
23,647

Unearned revenue
 
7,544

 
7,353

Current portion of long-term debt
 
5,656

 
5,656

Accrued liabilities:
 
 
 
 
Employee compensation and benefits
 
35,258

 
41,939

Programming liability
 
50,481

 
58,176

Miscellaneous
 
39,977

 
44,396

Other current liabilities
 
9,923

 
10,085

Liabilities held for sale — current
 
20,131

 
19,536

Total current liabilities
 
201,372

 
210,788

Long-term debt (less current portion)
 
686,659

 
687,619

Other liabilities (less current portion)
 
290,030

 
293,656

Equity:
 
 
 
 
Preferred stock, $.01 par — authorized: 25,000,000 shares; none outstanding
 
—

 
—

Common stock, $.01 par:
 
 
 
 
Class A — authorized: 240,000,000 shares; issued and outstanding: 70,028,926 and 69,699,105 shares
 
700

 
697

Voting — authorized: 60,000,000 shares; issued and outstanding: 11,932,722 and 11,932,722 shares
 
119

 
119

Total
 
819

 
816

Additional paid-in capital
 
1,131,499

 
1,129,020

Accumulated deficit
 
(119,012
)
 
(90,061
)
Accumulated other comprehensive loss, net of income taxes
 
(101,442
)
 
(102,922
)
Total The E.W. Scripps Company shareholders' equity
 
911,864

 
936,853

Noncontrolling interest
 
—

 
632

Total equity
 
911,864

 
937,485

Total Liabilities and Equity
 
$
2,089,925

 
$
2,129,548

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)
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
Advertising
 
$
194,176

 
$
137,502

 
$
363,313

 
$
257,398

Retransmission and carriage
 
74,658

 
66,059

 
145,718

 
132,270

Other
 
14,561

 
12,681

 
28,555

 
25,049

Total operating revenues
 
283,395

 
216,242

 
537,586

 
414,717

Costs and Expenses:
 
 
 
 
 
 
 
 
Employee compensation and benefits
 
95,071

 
87,990

 
193,560

 
182,915

Programming
 
84,427

 
49,178

 
167,790

 
97,901

Other expenses
 
63,782

 
46,927

 
116,805

 
87,693

Restructuring costs
 
2,330

 
—

 
6,137

 
—

Total costs and expenses
 
245,610

 
184,095

 
484,292


368,509

Depreciation, Amortization, and (Gains) Losses:
 
 
 
 
 
 
 
 
Depreciation
 
7,890

 
8,550

 
15,989

 
16,941

Amortization of intangible assets
 
7,492

 
5,231

 
14,813

 
10,701

(Gains) losses, net on disposal of property and equipment
 
(66
)
 
15

 
651

 
62

Net depreciation, amortization, and (gains) losses
 
15,316

 
13,796

 
31,453


27,704

Operating income
 
22,469

 
18,351

 
21,841

 
18,504

Interest expense
 
(9,279
)
 
(8,248
)
 
(18,038
)
 
(12,443
)
Defined benefit pension plan expense
 
(1,389
)
 
(3,467
)
 
(2,777
)
 
(6,934
)
Miscellaneous, net
 
(156
)
 
5,103

 
11

 
4,224

Income from continuing operations before income taxes
 
11,645

 
11,739

 
1,037

 
3,351

Provision (benefit) for income taxes
 
2,983

 
4,884

 
952

 
(771
)
Income from continuing operations, net of tax
 
8,662

 
6,855

 
85

 
4,122

Income (loss) from discontinued operations, net of tax
 
(2,942
)
 
1,690

 
(21,446
)

2,484

Net income (loss)
 
5,720

 
8,545

 
(21,361
)
 
6,606

Loss attributable to noncontrolling interest
 
—

 
—

 
(632
)
 
—

Net income (loss) attributable to the shareholders of The E.W. Scripps Company
 
$
5,720

 
$
8,545

 
$
(20,729
)
 
$
6,606

 
 
 
 
 
 
 
 
 
Net income (loss) per basic share of common stock attributable to the shareholders of
The E.W. Scripps Company:
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
0.10

 
$
0.08

 
$
0.01


$
0.05

Income (loss) from discontinued operations
 
(0.04
)
 
0.02

 
(0.26
)

0.03

Net income (loss) per basic share of common stock attributable to the shareholders of
The E.W. Scripps Company
 
$
0.06

 
$
0.10

 
$
(0.25
)

$
0.08

 
 
 
 
 
 
 
 
 
Net income (loss) per diluted share of common stock attributable to the shareholders of
The E.W. Scripps Company:
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
0.10

 
$
0.08

 
$
0.01

 
$
0.05

Income (loss) from discontinued operations
 
(0.04
)
 
0.02

 
(0.26
)
 
0.03

Net income (loss) per diluted share of common stock attributable to the shareholders of
The E.W. Scripps Company
 
$
0.06

 
$
0.10

 
$
(0.25
)
 
$
0.08

See notes to condensed consolidated financial statements.

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)
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
5,720

 
$
8,545

 
$
(21,361
)
 
$
6,606

Changes in defined benefit pension plans, net of tax of $249, $433, $497, and $866
 
740

 
695

 
1,480

 
1,390

Other
 
—

 
(16
)
 
—

 
(32
)
Total comprehensive income (loss)
 
6,460

 
9,224


(19,881
)
 
7,964

Less comprehensive net income (loss) attributable to noncontrolling interest
 
—

 
—

 
(632
)
 
—

Total comprehensive income (loss) attributable to the shareholders of The E.W. Scripps Company
 
$
6,460

 
$
9,224

 
$
(19,249
)
 
$
7,964

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)
 
2018

2017
 
 
 
 
 
Cash Flows from Operating Activities:
 



Net income (loss)
 
$
(21,361
)
 
$
6,606

Income (loss) from discontinued operations, net of tax
 
(21,446
)
 
2,484

Income from continuing operations, net of tax
 
85

 
4,122

Adjustments to reconcile net income (loss) from continuing operations to net cash flows from operating activities:
 



Depreciation and amortization
 
30,802

 
27,642

(Gain)/loss on sale of property and equipment
 
651

 
62

Programming assets and liabilities
 
(6,237
)
 
3,681

Deferred income taxes
 
2,055


(51
)
Stock and deferred compensation plans
 
8,128


10,877

Pension expense, net of contributions
 
(5,559
)

202

Other changes in certain working capital accounts, net
 
(10,075
)

(20,147
)
Miscellaneous, net
 
(2,233
)

(3,392
)
Net cash provided by operating activities from continuing operations
 
17,617

 
22,996

Net cash provided by operating activities from discontinued operations
 
4,939

 
5,999

Net operating activities
 
22,556

 
28,995

Cash Flows from Investing Activities:
 



Acquisition of intangibles
 
(5,754
)
 
—

Additions to property and equipment
 
(25,992
)

(8,741
)
Purchase of investments
 
(79
)

(834
)
Proceeds from FCC repack
 
400

 
—

Miscellaneous, net
 
2,259

 
3,627

Net cash used in investing activities from continuing operations
 
(29,166
)
 
(5,948
)
Net cash used in investing activities from discontinued operations
 
(685
)
 
(547
)
Net investing activities
 
(29,851
)
 
(6,495
)
Cash Flows from Financing Activities:
 



Proceeds from issuance of long-term debt
 
—

 
400,000

Payments on long-term debt
 
(1,500
)

(389,542
)
Deferred financing costs
 
—

 
(7,558
)
Dividends paid
 
(8,222
)
 
—

Repurchase of Class A Common shares
 
(4,409
)

(6,257
)
Proceeds from exercise of stock options
 
1,857


1,461

Tax payments related to shares withheld for RSU vesting
 
(1,900
)

(3,340
)
Miscellaneous, net
 
(1,511
)

(1,967
)
Net cash used in financing activities from continuing operations
 
(15,685
)

(7,203
)
Increase (decrease) in cash, cash equivalents and restricted cash
 
(22,980
)

15,297

Cash, cash equivalents and restricted cash:
 



Beginning of year
 
148,699


134,352

End of period
 
$
125,719


$
149,649

 
 
 
 
 
Supplemental Cash Flow Disclosures
 
 
 
 
Interest paid
 
$
16,482


$
4,855

Income taxes paid
 
$
700

 
$
776

Non-cash investing information
 
 
 
 
Capital expenditures included in accounts payable
 
$
205

 
$
493


See notes to condensed consolidated financial statements.

F-5


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

(in thousands)
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interest
 
Total
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2016
 
$
819

 
$
1,132,540

 
$
(94,077
)
 
$
(93,347
)
 
$
—

 
$
945,935

Comprehensive income
 
—

 
—

 
6,606

 
1,358

 
—

 
7,964

Repurchase of 321,891 Class A Common shares
 
(3
)
 
(5,008
)
 
(1,246
)
 
—

 
—

 
(6,257
)
Compensation plans: 525,392 net shares issued *
 
5

 
7,759

 
—

 
—

 
—

 
7,764

Minority interest contribution to venture
 
—

 
—

 
—

 
—

 
2,143

 
2,143

As of June 30, 2017
 
$
821

 
$
1,135,291

 
$
(88,717
)
 
$
(91,989
)
 
$
2,143

 
$
957,549

 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2017
 
$
816

 
$
1,129,020

 
$
(90,061
)
 
$
(102,922
)
 
$
632

 
$
937,485

Comprehensive income (loss)
 
—

 
—

 
(20,729
)
 
1,480

 
(632
)
 
(19,881
)
Cash dividend: declared and paid - $0.10 per share
 
—

 
—

 
(8,222
)
 
—

 
—

 
(8,222
)
Repurchase of 285,201 Class A Common shares
 
(3
)
 
(4,406
)
 
—

 
—

 
—

 
(4,409
)
Compensation plans: 615,022 net shares issued *
 
6

 
6,885

 
—

 
—

 
—

 
6,891

As of June 30, 2018
 
$
819

 
$
1,131,499

 
$
(119,012
)
 
$
(101,442
)
 
$
—

 
$
911,864

* Net of tax payments related to shares withheld for vested RSUs of $1,900 in 2018 and $3,340 in 2017.
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 2017 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.
Nature of Operations — We are a diverse media enterprise, serving audiences and businesses through a portfolio of local and national media brands. All of our media businesses provide content and advertising services via digital platforms, including the Internet, smartphones and tablets. Our media businesses are organized into the following reportable business segments: Local Media, National Media and Other. Additional information for our business segments is presented in the Notes to Condensed Consolidated Financial Statements.
In the fourth quarter of 2017, we began the process to divest our radio business. As such, we have classified the radio segment as held for sale in our Condensed Consolidated Balance Sheets and reported its results as discontinued operations in our Condensed Consolidated Statements of Operations. For additional information on our radio business, see Note 16.

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 air time, 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 sales staff and national sales representative firms. 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.
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 such as YouTubeTV, DirectTV Now

F-7


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.
Other Products and Services — We derive revenue from sponsorships and community events through our Local Media segment. Our National Media segment offers subscription services for access to premium content to its customers. Our podcast business acts as a sales and marketing representative and earns commission for its work.
Refer to Note 12. 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 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 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.
Refer to Note 2. Recently Adopted and Issued Accounting Standards for further information on the adoption of the new revenue recognition standard.
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 determine the allowance based on known troubled accounts, historical experience and other currently available evidence. Allowance for doubtful accounts totaled $2.2 million at June 30, 2018 and $1.9 million December 31, 2017.
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 $7.5 million at June 30, 2018 and is expected to be recognized within revenue over the next 12 months. Unearned revenue totaled $7.4 million at December 31, 2017.
Assets Recognized from the Costs to Obtain a Contract with a Customer — We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We apply and use the practical expedient in the revenue guidance to expense costs as incurred for costs to obtain a contract when the amortization period is one year or less. This expedient applies to advertising sales commissions since advertising contracts are short-term in nature. In addition, we also may provide inducement payments to secure carriage agreements with distributors of our content. These inducement payments are capitalized and amortized to expense over the term of the distribution contract. Capitalized costs to obtain a contract with a customer totaled $10.3 million at June 30, 2018 and $8.0 million at December 31, 2017 and are included within miscellaneous assets of our condensed consolidated balance sheets. Amortization of these costs totaled $0.3 million for the year-to-date period of 2018.
Use of Other Practical Expedients — For our arrangements that have an original duration of one year or less, we use the practical expedient applicable to such arrangements and do not consider the time value of money. In addition, we do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

F-8


Share-Based Compensation — We have a Long-Term Incentive Plan (the “Plan”) which is described more fully in our 2017 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 $2.9 million for the second quarter of 2018 and 2017. Year-to-date share-based compensation costs totaled $6.3 million and $8.7 million in 2018 and 2017, 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)
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Numerator (for basic and diluted earnings per share)
 
 
 
 
 
 
 
 
Income from continuing operations, net of tax
 
$
8,662

 
$
6,855

 
$
85

 
$
4,122

Loss attributable to noncontrolling interest
 
—

 
—


632

 
—

Less income allocated to RSUs
 
(153
)

(93
)
 
(13
)

(60
)
Numerator for basic and diluted earnings per share from continuing operations attributable to the shareholders of The E.W. Scripps Company
 
$
8,509

 
$
6,762

 
$
704

 
$
4,062

Denominator
 
 
 
 
 
 
 
 
Basic weighted-average shares outstanding
 
81,824


82,302


81,535


82,191

Effect of dilutive securities:
 



 



Stock options held by employees and directors
 
28


163

 
69


198

Diluted weighted-average shares outstanding
 
81,852

 
82,465

 
81,604

 
82,389


2. Recently Adopted and Issued Accounting Standards

Recently Adopted Accounting Standards — In August 2016, the FASB issued new guidance related to classification of certain cash receipts and payments in the statement of cash flows. This new guidance was issued with the objective of reducing diversity in practice around eight specific types of cash flows. The new guidance was effective for us January 1, 2018 and did not have an impact on our condensed consolidated statements of cash flows.

In January 2016, the FASB issued new guidance on the recognition and measurement of financial instruments. This guidance primarily affects the accounting for equity method investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The new standard was effective for us on January 1, 2018 and did not have an impact on our condensed consolidated financial statements.

In May 2014, the FASB issued a new standard related to revenue recognition. Under this standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. The standard creates a five-step process that requires entities to exercise judgment when considering the terms of the contract(s) and all relevant facts and circumstances. In addition, the standard requires expanded footnote disclosure.

We adopted this standard on January 1, 2018, using the full retrospective method. Regarding our advertising contracts, which comprised 65% of 2017 operating revenues, the contracts are short-term in nature with transaction price consideration agreed upon in advance. Revenue on broadcast advertising spots continue to be recognized when commercials are aired. Online advertising revenue earned through the display of digital advertisements across various digital platforms typically take the form of an impression-based contract, fixed fee time-based contract or transaction-based contract. Revenue continues to be recognized evenly over the contract term for fixed fee contracts where a minimum number of impressions or click-throughs is not guaranteed. Revenue is recognized as the service is delivered for impression and transaction-based contracts.

F-9


Retransmission revenue, which comprised 30% of 2017 operating revenues, is recognized under the licensing of intellectual property guidance in the standard, which did not result in a change to our previous revenue recognition.

The only identified impacts of the standard were to record certain revenue transactions on a gross basis that were previously recorded on a net basis and to no longer recognize barter revenue and expense related to syndicated programming.

Adoption of this standard on January 1, 2018 using the full retrospective method required us to adjust certain previously reported results. The following tables present the impact of adoption of the standard on our condensed consolidated statements of operations:

 
 
Three Months Ended June 30, 2017
(in thousands)
 
As Previously Reported
 
Adjustments for Adoption of New Revenue Standard
 
As Adjusted
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
Advertising
 
$
137,716

 
$
(214
)
 
$
137,502

Retransmission and carriage
 
66,059

 
—

 
66,059

Other
 
9,974

 
2,707

 
12,681

Total operating revenues
 
213,749

 
2,493

 
216,242

Costs and Expenses:
 
 
 
 
 
 
Employee compensation and benefits
 
87,990

 
—

 
87,990

Programming
 
46,685

 
2,493

 
49,178

Other expenses
 
46,927

 
—

 
46,927

Total costs and expenses
 
$
181,602

 
$
2,493

 
$
184,095


 
 
Six Months Ended June 30, 2017
(in thousands)
 
As Previously Reported
 
Adjustments for Adoption of New Revenue Standard
 
As Adjusted
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
Advertising
 
$
257,827

 
$
(429
)
 
$
257,398

Retransmission and carriage
 
132,270

 
—

 
132,270

Other
 
19,981

 
5,068

 
25,049

Total operating revenues
 
410,078

 
4,639

 
414,717

Costs and Expenses:
 
 
 
 
 
 
Employee compensation and benefits
 
182,915

 
—

 
182,915

Programming
 
93,262

 
4,639

 
97,901

Other expenses
 
87,693

 
—

 
87,693

Total costs and expenses
 
$
363,870

 
$
4,639

 
$
368,509


Adoption of the new revenue recognition standard had no impact on our condensed consolidated balance sheets, condensed consolidated statements of comprehensive income (loss), condensed consolidated statements of cash flows or condensed consolidated statements of equity.

In February 2018, the FASB issued new guidance that permits companies to reclassify the disproportionate tax effect in accumulated other comprehensive income ("AOCI") caused by the Tax Cuts and Jobs Act of 2017. We have adopted this guidance as of December 31, 2017. The impact of the adoption was to reclassify $19.4 million of tax effects related to our defined benefits plans from AOCI to retained earnings.


F-10


Recently Issued Accounting Standards — In June 2016, the FASB issued new guidance that changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred loss” model, which generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized as an allowance. The guidance is effective in 2020 with early adoption permitted in 2019. We are currently evaluating the impact of this guidance on our condensed consolidated financial statements, as well as the timing of adoption.

In February 2016, the FASB issued new guidance on the accounting for leases. Under this guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. In March 2018, the FASB approved amendments to create an optional transition method. The amendments provide an option to implement the new leasing standard through a cumulative-effect adjustment in the period of adoption without having to restate the comparative periods presented. We are currently evaluating the impact of this guidance on our condensed consolidated financial statements, but expect a significant increase in the assets and liabilities recorded on the condensed consolidated balance sheets.

3. Acquisitions

Katz

On October 2, 2017, we acquired the Katz networks for $292 million, which is net of a 5.33% noncontrolling interest we owned prior to the acquisition date. Katz owns and operates four national television networks — Bounce, Grit, Escape and Laff. The acquisition was funded through the issuance of a new term loan B. Katz is included as part of our National Media segment.

Pending the finalization of asset valuations, the following table summarizes the preliminary fair values of the assets acquired and the liabilities assumed:
(in thousands)
 
 
 
 
 
Assets:
 
 
Cash
 
$
21,372

Accounts receivable
 
44,306

Current portion of programming
 
47,120

Intangible assets
 
32,300

Goodwill
 
209,572

Programming (less current portion)
 
74,998

Other assets
 
1,395

Total assets acquired
 
431,063

Accounts payable and accrued liabilities
 
29,339

Current portion of programming liabilities
 
46,376

Programming liabilities
 
53,036

Net purchase price
 
$
302,312


Of the $32 million allocated to intangible assets, $8 million was assigned to trade names with a life of 10 years and $24 million was assigned to advertiser relationships with a life of 5 years.

The goodwill of $210 million arises from being able to enter into the market for established over-the-air networks. The goodwill was allocated to our National Media segment. We treated the transaction as an asset acquisition for income tax purposes with a step-up in the assets acquired. The goodwill is deductible for income tax purposes.


F-11


Pro forma results of operations

Pro forma results of operations, assuming the Katz acquisition had taken place at the beginning of 2017, are presented in the following table. The pro forma information includes the historical results of operations of Scripps and Katz, as well as adjustments for additional depreciation and amortization of the assets acquired and additional interest expense related to the financing of the transaction. The pro forma information does not include efficiencies, cost reductions or synergies expected to result from the acquisition. 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.
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in thousands, except per share data) (unaudited)
 
2017
 
2017
 
 
 
 
 
Operating revenues
 
$
254,342

 
$
487,630

Income from continuing operations, net of tax
 
7,864

 
5,326

Income per share from continuing operations attributable to the shareholders of The E.W. Scripps Company:
 
 
 
 
          Basic
 
$
0.10

 
$
0.06

          Diluted
 
0.10

 
0.06


4. Asset Write-Downs and Other Charges and Credits

Income from continuing operations includes the following:

2018 - In the second quarter, costs associated with our previously announced restructuring totaled $2.3 million. For the six months ended June 30, 2018 these restructuring costs totaled $6.1 million.

2017 - In the second quarter, we sold our newspaper syndication business, resulting in a gain of $3.0 million.

In the second quarter, there was a $2.5 million reduction to the Midroll earn out provision resulting in other income.

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, 2018 and 2017 was 92% and (23)%, respectively. On December 22, 2017, the U.S. government enacted comprehensive tax legislation referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act significantly revises the future ongoing U.S. corporate income tax by, among other things, lowering U.S. corporate income tax rates. The U.S. federal statutory rate was 21% in the second quarter 2018 and 35% in the second quarter 2017, impacting the comparability of the income tax provision between those periods. We made a preliminary estimate of the impact of the Tax Act on our deferred taxes in our 2017 consolidated financial statements. There were no changes to that provisional estimate during the second quarter of 2018.

Other differences between our effective income tax rate and the U.S. federal statutory rate are the impact of state taxes, non-deductible expenses, release of reserves for uncertain tax positions and excess tax benefits or expense on share-based compensation ($0.7 million expense and $2.4 million benefit in 2018 and 2017, respectively).

F-12



Deferred tax assets totaled $17.5 million at June 30, 2018, which includes the tax effect of state net operating loss carryforwards. We recognize state net operating loss 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 June 30, 2018 and December 31, 2017, our cash and cash equivalents included $5.1 million held in a restricted cash account on deposit with our insurance carrier. This account serves as collateral, in place of an irrevocable stand-by letter of credit, to provide financial assurance that we will fulfill our obligations with respect to cash requirements associated with our workers' compensation self-insurance. This cash is to remain on deposit with the carrier until all claims have been paid or we provide a letter of credit in lieu of the cash deposit.

7. Goodwill and Other Intangible Assets
Goodwill consisted of the following:
(in thousands)
 
Local Media
 
National Media
 
Total
 
 
 
 
 
 
 
Gross balance as of December 31, 2017
 
$
708,133

 
$
315,133

 
$
1,023,266

Accumulated impairment losses
 
(216,914
)
 
(50,403
)
 
(267,317
)
Net balance as of December 31, 2017
 
$
491,219

 
$
264,730

 
$
755,949

 
 
 
 
 
 
 
Gross balance as of June 30, 2018
 
$
708,133

 
$
315,133

 
$
1,023,266

Accumulated impairment losses
 
(216,914
)
 
(50,403
)
 
(267,317
)
Net balance as of June 30, 2018
 
$
491,219

 
$
264,730

 
$
755,949


Other intangible assets consisted of the following:
(in thousands)
 
As of 
 June 30, 
 2018
 
As of 
 December 31, 
 2017
 
 
 
 
 
Amortizable intangible assets:
 
 
 
 
Carrying amount:
 
 
 
 
Television network affiliation relationships
 
$
248,444

 
$
248,444

Customer lists and advertiser relationships
 
69,500

 
69,500

Other
 
42,823

 
37,069

Total carrying amount
 
360,767

 
355,013

Accumulated amortization:
 
 
 
 
Television network affiliation relationships
 
(55,830
)
 
(49,639
)
Customer lists and advertiser relationships
 
(28,255
)
 
(26,345
)
Other
 
(16,982
)
 
(10,269
)
Total accumulated amortization
 
(101,067
)
 
(86,253
)
Net amortizable intangible assets
 
259,700

 
268,760

Indefinite-lived intangible assets — FCC licenses
 
157,215

 
157,215

Total other intangible assets
 
$
416,915

 
$
425,975


Estimated amortization expense of intangible assets for each of the next five years is $13.8 million for the remainder of 2018, $27.5 million in 2019, $26.3 million in 2020, $23.9 million in 2021, $20.8 million in 2022, $15.8 million in 2023 and $131.6 million in later years.


F-13


8. Long-Term Debt
Long-term debt consisted of the following:
(in thousands)
 
As of 
 June 30, 
 2018
 
As of 
 December 31, 
 2017
 
 
 
 
 
Variable rate credit facility
 
$
—

 
$
—

Senior unsecured notes
 
400,000

 
400,000

Term loan B
 
297,750

 
299,250

Unsecured subordinated notes
 
2,656

 
2,656

    Total outstanding principal
 
700,406

 
701,906

Less: Debt issuance costs
 
(8,091
)
 
(8,631
)
Less: Current portion
 
(5,656
)
 
(5,656
)
   Net carrying value of long-term debt
 
$
686,659

 
$
687,619

Fair value of long-term debt *
 
$
679,425

 
$
703,572

* Fair value of the Senior Notes and the term loan B were estimated based on quoted private market transactions and are classified as Level 1 in the fair value hierarchy. The fair value of the unsecured subordinated notes is determined based on a discounted cash flow analysis using current market interest rates of comparable instruments and is classified as Level 2 in the fair value hierarchy.

Senior Unsecured Notes

On April 28, 2017, we issued $400 million of senior unsecured notes ("the Senior Notes"), which bear interest at a rate of 5.125% per annum and mature on May 15, 2025. The proceeds of the Senior Notes were used to repay our term loan B, for the payment of the related issuance costs and for general corporate purposes. The Senior Notes were priced at 100% of par value and interest is payable semi-annually on May 15 and November 15. Prior to May 15, 2020, we may redeem the Senior Notes, in whole or in part, at any time, or from time to time, at a price equal to 100% of the principal amount of the Senior Notes, plus accrued and unpaid interest, if any, to the date of redemption, plus a “make-whole” premium, as set forth in the Senior Notes indenture. In addition, on or prior to May 15, 2020, we may redeem up to 40% of the Senior Notes, using proceeds of equity offerings. If we sell certain of our assets or have a change of control, the holders of the Senior Notes may require us to repurchase some or all of the notes. The Senior Notes are also guaranteed by us and the majority of our subsidiaries. The Senior Notes contain covenants with which we must comply that are typical for borrowing transactions of this nature. 

We incurred approximately $7.0 million of deferred financing costs in connection with the issuance of the Senior Notes, which are being amortized over the life of the Senior Notes. Additionally, we wrote off $2.4 million of deferred financing costs associated with our old term loan B to interest expense in the second quarter of 2017.

Term Loan B

On October 2, 2017, we issued a $300 million term loan B which matures in October 2024. We amended term loan B on April 4, 2018, reducing the interest rate by 25 basis points. Following the amendment, interest is payable on term loan B at a rate based on LIBOR, plus a fixed margin of 2.00%. Interest will reduce to a rate of LIBOR plus a fixed margin of 1.75% if the company’s total net leverage, as defined by the amended agreement, is below 2.75. Term loan B requires annual principal payments of $3 million.

Our Financing Agreement also includes a provision that in certain circumstances we must use a portion of excess cash flow to repay debt. As of June 30, 2018, we were not required to make any additional principal payments for excess cash flow.

Under a previous financing agreement, we had a $400 million term loan B that matured in November 2020. We repaid the term loan B in 2017 with the proceeds of our Senior Notes.
 
As of June 30, 2018 and December 31, 2017, the interest rate on the term loan B was 4.09% and 3.82%, respectively. The weighted-average interest rate on the term loan B was 3.97% for the six months ended June 30, 2018.

Revolving Credit Facility

On April 28, 2017, we amended and restated our $100 million revolving credit facility ("Revolving Credit Facility"), increasing its capacity to $125 million and extending the maturity to April 2022. Interest is payable on the Revolving Credit Facility at rates based on LIBOR, plus a margin based on our leverage ratio, ranging from 1.75% to 2.50%.

The Revolving Credit Facility includes maintaining a net leverage ratio when we have outstanding borrowings on the facility, as well as other restrictions on payments (dividends and share repurchases). Additionally, we can make acquisitions as long as the pro forma net leverage ratio is less than 5.5 to 1.0.

We granted the lenders pledges of our equity interests in our subsidiaries and security interests in substantially all other personal property including cash, accounts receivables, and equipment.

Commitment fees of 0.30% to 0.50% per annum, based on our leverage ratio, of the total unused commitment are payable under the Revolving Credit Facility.

Unsecured Subordinated Notes

The unsecured subordinated promissory notes bear interest at a rate of 7.25% per annum, payable quarterly. The remaining principal payment of $2.7 million will be paid in the third quarter of 2018.

9. Other Liabilities
Other liabilities consisted of the following:
(in thousands)
 
As of 
 June 30, 
 2018
 
As of 
 December 31, 
 2017
 
 
 
 
 
Employee compensation and benefits
 
$
20,424

 
$
18,520

Programming liability
 
55,318

 
54,641

Liability for pension benefits
 
200,843

 
207,406

Liabilities for uncertain tax positions
 
676

 
644

Other
 
12,769

 
12,445

Other liabilities (less current portion)
 
$
290,030

 
$
293,656


10. Supplemental Cash Flow Information
The following table presents additional information about the change in certain working capital accounts:
 
 
Six Months Ended 
 June 30,
(in thousands)
 
2018
 
2017
 
 
 
 
 
Accounts receivable
 
$
(5,363
)
 
$
(9,086
)
Other current assets
 
(5,040
)
 
(8,939
)
Accounts payable
 
8,836

 
(3,905
)
Accrued employee compensation and benefits
 
(4,812
)
 
(3,406
)
Other accrued liabilities
 
(4,484
)
 
6,764

Other, net
 
788

 
(1,575
)
Total
 
$
(10,075
)
 
$
(20,147
)

11. Employee Benefit Plans

We sponsor two noncontributory defined benefit pension plans, as well as two non-qualified Supplemental Executive Retirement Plans ("SERPs"). Both of the defined benefit pension plans and the SERPs have frozen the accrual of future benefits.

F-14



We sponsor a defined contribution plan covering substantially all non-union and certain union employees. We match a portion of employees' voluntary contributions to this plan.

The components of the employee benefit plans expense consisted of the following:
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in thousands)
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Interest cost
 
$
5,925

 
$
6,486

 
$
11,850

 
$
12,971

Expected return on plan assets, net of expenses
 
(5,733
)
 
(4,360
)
 
(11,465
)
 
(8,720
)
Amortization of actuarial loss
 
920

 
1,084

 
1,841

 
2,168

Total for defined benefit pension plans
 
1,112

 
3,210


2,226


6,419

Multi-employer plans
 
44

 
59

 
91

 
133

SERPs
 
277

 
257

 
551

 
515

Defined contribution plan
 
1,978

 
1,957

 
4,771

 
4,861

Net periodic benefit cost
 
3,411

 
5,483

 
7,639

 
11,928

Allocated to discontinued operations
 
(174
)
 
(177
)
 
(377
)
 
(368
)
Net periodic benefit cost — continuing operations
 
$
3,237


$
5,306


$
7,262


$
11,560


We contributed $1.7 million to fund current benefit payments for our SERPs and $6.6 million for our defined benefit pension plans during the six months ended June 30, 2018. During the remainder of 2018, we anticipate contributing an additional $4.8 million to fund the SERPs' benefit payments and an additional $10.8 million to fund our qualified defined benefit pension plans.

12. Segment Information
We determine our business segments based upon our management and internal reporting structures, as well as the basis that our chief operating decision maker makes resource allocation decisions.
Effective December 31, 2017, we realigned our businesses into a new internal organization and began reporting to reflect this new structure. Under the new structure, we have the following reportable segments: Local Media, National Media and Other. We have recast the operating results for all periods to reflect this change.
Our Local Media segment includes our local broadcast stations and their related digital operations. 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, one independent station and three 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, telecommunications companies and satellite carriers. We also receive retransmission fees from over-the-top virtual MVPDs such as YouTubeTV, DirectTV Now and Sony Vue.

Our National Media segment includes our collection of national brands. Our national brands include Katz, Midroll, Newsy and other national brands. These operations earn revenue primarily through the sale of advertising.
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. Corporate assets are primarily cash and cash equivalents, restricted cash, property and equipment primarily used for corporate purposes and deferred income taxes.

Our chief operating decision maker evaluates the operating performance of our business segments and makes decisions about the allocation of resources to our business segments using a measure called segment profit. Segment profit excludes interest, defined benefit pension plan 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.


F-15


Information regarding our business segments is as follows:
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in thousands)
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Segment operating revenues:
 
 
 
 
 
 
 
 
Local Media
 
$
213,248


$
201,430

 
$
405,307

 
$
388,494

National Media
 
68,226

 
13,016

 
128,947

 
22,703

Other
 
1,921


1,796

 
3,332

 
3,520

Total operating revenues
 
$
283,395

 
$
216,242

 
$
537,586

 
$
414,717

Segment profit (loss):
 
 
 
 
 
 
 
 
Local Media
 
$
53,368

 
$
48,736

 
$
84,987

 
$
81,087

National Media
 
2,037

 
(3,596
)
 
4,072

 
(7,553
)
Other
 
(1,643
)
 
(1,658
)
 
(1,894
)
 
(1,409
)
Shared services and corporate
 
(13,647
)
 
(11,335
)
 
(27,734
)
 
(25,917
)
Restructuring costs
 
(2,330
)
 
—

 
(6,137
)
 
—

Depreciation and amortization of intangibles
 
(15,382
)
 
(13,781
)
 
(30,802
)
 
(27,642
)
Gains (losses), net on disposal of property and equipment
 
66

 
(15
)
 
(651
)
 
(62
)
Interest expense
 
(9,279
)
 
(8,248
)
 
(18,038
)
 
(12,443
)
Defined benefit pension plan expense
 
(1,389
)
 
(3,467
)
 
(2,777
)
 
(6,934
)
Miscellaneous, net
 
(156
)
 
5,103

 
11

 
4,224

Income from continuing operations before income taxes
 
$
11,645

 
$
11,739

 
$
1,037

 
$
3,351

Depreciation:
 
 
 
 
 
 
 
 
Local Media
 
$
7,331

 
$
8,002

 
$
14,887

 
$
15,837

National Media
 
134

 
15

 
230

 
22

Other
 
38

 
59

 
76

 
126

Shared services and corporate
 
387

 
474

 
796

 
956

Total depreciation
 
$
7,890

 
$
8,550

 
$
15,989

 
$
16,941

Amortization of intangibles:
 
 
 
 
 
 
 
 
Local Media
 
$
3,705

 
$
3,632

 
$
7,410

 
$
7,586

National Media
 
3,448

 
1,260

 
6,726

 
2,438

Shared services and corporate
 
339

 
339

 
677

 
677

Total amortization of intangibles
 
$
7,492

 
$
5,231

 
$
14,813

 
$
10,701

Additions to property and equipment:
 
 
 
 
 
 
 
 
Local Media
 
$
10,613

 
$
4,855

 
$
20,113

 
$
8,802

National Media
 
4,051

 
186

 
5,725

 
197

Shared services and corporate
 
13

 
22

 
73

 
121

Total additions to property and equipment
 
$
14,677

 
$
5,063

 
$
25,911

 
$
9,120



F-16


A disaggregation of the principal activities from which we generate revenue is as follows:
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in thousands)
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Operating revenues:
 
 
 
 
 
 
 
 
Core advertising
 
$
179,294

 
$
134,977

 
$
345,847

 
$
253,832

Political advertising
 
14,882

 
2,525

 
17,466

 
3,566

Retransmission and carriage
 
74,658

 
66,059

 
145,718

 
132,270

Other
 
14,561

 
12,681

 
28,555

 
25,049

Total operating revenues
 
$
283,395

 
$
216,242

 
$
537,586

 
$
414,717


13. Capital Stock
Capital Stock — We have two classes of common shares, Common Voting shares and Class A Common shares. The Class A Common shares are only entitled to vote on the election of the greater of three or one-third of the directors and other matters as required by Ohio law.
Share Repurchase Plan — Shares may be repurchased from time to time at management's discretion. 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 purchase 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. For the six months ended June 30, 2017, we repurchased $6.3 million of shares at prices ranging from $16.82 to $23.01 and for the six months ended June 30, 2018, we repurchased $4.4 million of shares at prices ranging from $13.29 to $16.86 per share. At June 30, 2018, $78.2 million remained under this authorization.

14. Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) ("AOCI") by component, including items reclassified out of AOCI, were as follows:
 
 
Three Months Ended June 30, 2018
(in thousands)
 
Defined Benefit Pension Items
 
Other
 
Total
 
 
 
 
 
 
 
Beginning balance, March 31, 2018
 
$
(102,215
)
 
$
33

 
$
(102,182
)
  Other comprehensive income before reclassifications
 
—

 
—

 
—

  Amounts reclassified from accumulated other
  comprehensive loss:
 
 
 
 
 
 
     Actuarial gain (loss), net of tax of $249 (a)
 
740

 
—

 
740

Net current-period other comprehensive income
 
740

 
—

 
740

Ending balance, June 30, 2018
 
$
(101,475
)
 
$
33

 
$
(101,442
)


F-17


 
 
Three Months Ended June 30, 2017
(in thousands)
 
Defined Benefit Pension Items
 
Other
 
Total
 
 
 
 
 
 
 
Beginning balance, March 31, 2017
 
$
(92,981
)
 
$
313

 
$
(92,668
)
  Other comprehensive income before reclassifications
 
—

 
—

 
—

  Amounts reclassified from accumulated other
  comprehensive loss:
 
 
 
 
 
 
     Actuarial gain (loss), net of tax of $423 (a)
 
695

 
(16
)
 
679

Net current-period other comprehensive income (loss)
 
695

 
(16
)
 
679

Ending balance, June 30, 2017
 
$
(92,286
)
 
$
297

 
$
(91,989
)

 
 
Six Months Ended June 30, 2018
(in thousands)
 
Defined Benefit Pension Items
 
Other
 
Total
 
 
 
 
 
 
 
Beginning balance, December 31, 2017
 
$
(102,955
)
 
$
33

 
$
(102,922
)
  Other comprehensive income before reclassifications
 
—

 
—

 
—

  Amounts reclassified from accumulated other
  comprehensive loss:
 
 
 
 
 
 
     Actuarial gain (loss), net of tax of $497 (a)
 
1,480

 
—

 
1,480

Net current-period other comprehensive income (loss)
 
1,480

 
—

 
1,480

Ending balance, June 30, 2018
 
$
(101,475
)
 
$
33

 
$
(101,442
)

 
 
Six Months Ended June 30, 2017
(in thousands)
 
Defined Benefit Pension Items
 
Other
 
Total
 
 
 
 
 
 
 
Beginning balance, December 31, 2016
 
$
(93,676
)
 
$
329

 
$
(93,347
)
  Other comprehensive income before reclassifications
 
—

 
—

 
—

  Amounts reclassified from accumulated other
  comprehensive loss:
 
 
 
 
 
 
     Actuarial gain (loss), net of tax of $846 (a)
 
1,390

 
(32
)
 
1,358

Net current-period other comprehensive income (loss)
 
1,390

 
(32
)
 
1,358

Ending balance, June 30, 2017
 
$
(92,286
)
 
$
297

 
$
(91,989
)

(a) Actuarial gain (loss) is included in defined benefit pension plan expense in the condensed consolidated statements of operations

15. Noncontrolling Interest

A noncontrolling owner holds a 30% interest in our venture to develop, produce and air our lifestyle daytime talk show. In April 2017, on the formation of the venture, the noncontrolling owner made a $2.1 million non-cash contribution to the venture. The contribution included the rights to the show concept, contractual rights with the show's talent, as well as other pre-production items.

16. Assets Held for Sale and Discontinued Operations
Radio Divestiture
In the fourth quarter of 2017, we began the process to divest our radio business. Our radio business consists of 34 radio stations in eight markets. We have classified the radio segment as held for sale in our condensed consolidated balance sheets and reported its results as discontinued operations in our condensed consolidated statements of operations.

F-18


Operating results of our discontinued radio operations were as follows:
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(in thousands)
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Operating revenues
 
$
17,386

 
$
17,784

 
$
30,685

 
$
32,213

Total costs and expenses
 
(13,421
)
 
(14,163
)
 
(24,937
)
 
(26,353
)
Depreciation and amortization of intangibles
 
—

 
(868
)
 
—

 
(1,731
)
Impairment of goodwill
 
(5,900
)
 
—

 
(25,900
)
 
—

Other, net
 
(9
)
 
(211
)
 
(157
)
 
(251
)
Income (loss) from discontinued operations before income taxes
 
(1,944
)
 
2,542

 
(20,309
)
 
3,878

Provision for income taxes
 
998

 
852

 
1,137

 
1,394

Net income (loss) from discontinued operations
 
$
(2,942
)
 
$
1,690

 
$
(21,446
)