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 March 31, 20202021
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)
312 Walnut Street
Cincinnati, Ohio    45202
(Address of principal executive offices)    (Zip Code)

Registrant's telephone number, including area code: (513) (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 filer☑Accelerated filer☐Emerging growth company☐
Non-accelerated filer☐Smaller 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 March 31, 2020,2021, there were 69,456,79770,349,196 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 March 31, 20202021
Item No.Page
Item No.Page
1. Financial Statements
3
2. Management's Discussion and Analysis of Financial Condition and Results of Operations
3
3. Quantitative and Qualitative Disclosures About Market Risk
3
4. Controls and Procedures
3
PART II - Other Information
1. Legal Proceedings
3
1A. Risk Factors
3
3
1A. Risk Factors
3
2. Unregistered Sales of Equity Securities and Use of Proceeds
43
3. Defaults Upon Senior Securities
43
4. Mine Safety Disclosures
43
5. Other Information
4
6. Exhibits
54
    Signatures
65

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, thereThere have been no material changes to the risk factors disclosed in Item 1A. Risk Factors in our 20192020 Annual Report on Form 10-K.

The coronavirus (COVID-19) pandemic has materially affected how we, our vendors and our customers are operating, and the extent to which this pandemic will impact our future results of operations and overall financial condition remains uncertain.

The global spread of COVID-19 has created significant volatility, uncertainty and disruption in economies around the world. The extent to which the coronavirus pandemic impacts our operations, financial results and financial condition will depend on numerous evolving factors that we may not be able to accurately predict, including: governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the impact of the pandemic on economic activity and actions taken in response; the effect on our customers, including advertisers, and their demand for our services; our ability to sell and provide our services, including as a result of travel restrictions and individuals working from home; the ability of our customers to pay for our services; and any closures of our offices and facilities or those of our vendors and our customers. Customers may also slow down decision making, delay planned advertising or seek to modify or terminate existing agreements with us.

The duration of the pandemic and the extent of the impact on us and others depend on future developments out of our control that are unknown at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions, the pace of development of cures or vaccines, and the impact of these and other factors on our business, employees, vendors and customers. Any of these factors could exacerbate other risks and uncertainties disclosed in our Annual Report on Form 10-K and could materially adversely affect our business, financial condition, results of operations and/or stock price.


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

There were no salesOn January 7, 2021, in connection with the ION transaction, we issued to Berkshire Hathaway, Inc. and certain of unregistered equity securities during the quarter ended March 31, 2020.

In November 2016, our Boardits subsidiaries 6,000 shares of Directors authorizedseries A preferred stock (the Preferred Shares) with a repurchase programwarrant to purchase approximately 23.1 million shares of up to $100 million of ourScripps Class A Common shares. We repurchased a totalcommon stock at an exercise price of $50.3 million of shares$13 (the Warrant) for $600 million. The Preferred Shares and the Warrant have not been registered under the authorization priorSecurities Act of 1933, as amended, and were issued and sold in a private placement pursuant to its expiration on MarchSection 4(2) thereof. See Note 3. Acquisitions and Note 14. Capital Stock, in the Notes to Condensed Consolidated Financial Statements in Part I Item 1 2020. of this Form 10-Q for more information.

In February 2020, our Board of Directors authorized a new share repurchase program of up to $100 million of our Class A Common shares through March 1, 2022. Shares can beNo shares have been repurchased under the authorization via open market purchases or privately negotiated transactions, including accelerated stock repurchase transactions, block trades, or pursuant to trades intending to comply with Rule 10b5-1authorization. Under the terms of the Securities Exchange Act of 1934. NoPreferred Shares, we are prohibited from repurchasing our common shares were repurchased under either authorization during the first quarter of 2020.until all Preferred Shares are redeemed.

Item 3. Defaults Upon Senior Securities
There were no defaults upon senior securities during the quarter ended March 31, 2020.2021.

Item 4. Mine Safety Disclosures
None.
3

Item 5. Other Information
The following table presents information on matters submitted to a vote of security holders at our May 4, 2020 Annual Meeting of Shareholders:
None.
Descriptions of Matters Submitted In Favor Against Authority Withheld
       
1. Election of Directors      
          Directors elected by holders of Class A Common Shares:      
               Lauren Rich Fine 41,616,753 — 8,144,003
               Wonya Y. Lucas 41,680,519 — 8,080,237
               Kim Williams 41,248,012 — 8,512,744
          Directors elected by holders of Common Voting Shares:      
               Marcellus W. Alexander, Jr. 10,736,776 — —
               Charles L. Barmonde 10,736,776 — —
               Richard A. Boehne 10,736,776 — —
               Kelly P. Conlin 10,736,776 — —
               John W. Hayden 10,736,776 — —
               Anne M. La Dow 10,736,776 — —
               R. Michael Scagliotti 10,736,776 — —
               Adam P. Symson 10,736,776 — —
2. Vote by holders of Common Voting Shares to ratify Deloitte & Touche LLP as the independent registered public accountant 10,736,776 — —
3. Advisory (non-binding) vote by holders of Common Voting Shares on executive compensation of named executive officers 10,736,776 — —





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 quarter ended March 31, 20202021 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
THE E.W. SCRIPPS COMPANY
Dated: May 8, 202010, 2021By:
/s/ Douglas F. LyonsDaniel W. Perschke
Douglas F. LyonsDaniel W. Perschke
Senior Vice President, Controller and Treasurer
(Principal Accounting Officer)



5

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

ItemPage
ItemPage
F-F-22
F-F-33
F-F-44
F-F-55
F-F-66
Notes to Condensed Consolidated Financial Statements
F-F-77
F-F-1921
F-F-3032
F-F-3133


F-1

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

(in thousands, except share data)As of 
March 31, 
2021		As of 
December 31, 
2020
Assets
Current assets:
Cash and cash equivalents$538,185 $576,021 
Cash restricted for pending acquisition0 1,050,000 
Accounts receivable (less allowances— $3,327 and $3,443)495,895 429,017 
FCC repack receivable7,559 12,363 
Miscellaneous31,098 26,784 
Total current assets1,072,737 2,094,185 
Investments15,555 14,404 
Property and equipment397,858 343,920 
Operating lease right-of-use assets128,217 51,471 
Goodwill2,963,565 1,203,212 
Other intangible assets1,997,712 975,444 
Programming300,022 138,701 
Miscellaneous23,014 38,049 
Total Assets$6,898,680 $4,859,386 
Liabilities and Equity
Current liabilities:
Accounts payable$66,479 $68,139 
Unearned revenue21,408 14,101 
Current portion of long-term debt18,612 10,612 
Accrued liabilities:
Employee compensation and benefits45,601 55,133 
Programming liability144,641 72,743 
Accrued interest24,201 16,514 
Miscellaneous40,259 85,588 
Other current liabilities70,609 35,626 
Total current liabilities431,810 358,456 
Long-term debt (less current portion)3,690,284 2,923,359 
Deferred income taxes347,347 85,844 
Operating lease liabilities120,731 42,097 
Other liabilities (less current portion)739,321 286,365 
Equity:
Preferred stock, $0.01 par — authorized: 25,000,000 shares; NaN outstanding0 0 
Preferred stock — Series A, $100,000 par; 6,000 shares at March 31, 2021408,210 0 
Common stock, $0.01 par:
Class A — authorized: 240,000,000 shares; issued and outstanding: 70,349,196 and 69,794,917 shares704 698 
Voting — authorized: 60,000,000 shares; issued and outstanding: 11,932,722 and 11,932,722 shares119 119 
Total preferred and common stock409,033 817 
Additional paid-in capital1,133,366 1,130,789 
Retained earnings125,702 131,778 
Accumulated other comprehensive loss, net of income taxes(98,914)(100,119)
Total equity1,569,187 1,163,265 
Total Liabilities and Equity$6,898,680 $4,859,386 
(in thousands, except share data) As of 
March 31, 
2020		 As of 
December 31, 
2019
     
Assets    
Current assets:    
Cash and cash equivalents $179,627
 $32,968
Accounts receivable (less allowances— $3,961 and $3,546) 401,409
 413,567
Programming 7,779
 60,184
FCC repack receivable 29,241
 29,651
Miscellaneous 52,754
 41,074
Total current assets 670,810
 577,444
Investments 11,434
 8,553
Property and equipment 377,317
 375,904
Operating lease right-of-use assets 135,138
 138,640
Goodwill 1,275,327
 1,271,855
Other intangible assets 1,047,791
 1,061,791
Programming (less current portion) 146,187
 96,256
Deferred income taxes 11,602
 11,802
Miscellaneous 20,069
 19,108
Total Assets $3,695,675
 $3,561,353
     
Liabilities and Equity    
Current liabilities:    
Accounts payable $43,389
 $29,153
Unearned revenue 8,572
 11,678
Current portion of long-term debt 10,612
 10,612
Accrued liabilities:    
Employee compensation and benefits 30,798
 45,701
Programming liability 75,004
 96,682
Accrued interest 14,180
 15,352
Miscellaneous 64,991
 46,624
Other current liabilities 26,725
 43,678
Total current liabilities 274,271
 299,480
Long-term debt (less current portion) 2,078,232
 1,904,418
Deferred income taxes 34,575
 19,833
Operating lease liabilities 121,947
 123,739
Other liabilities (less current portion) 301,330
 315,948
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: 69,456,797 and 69,027,524 shares 695
 691
Voting — authorized: 60,000,000 shares; issued and outstanding: 11,932,722 and 11,932,722 shares 119
 119
Total 814
 810
Additional paid-in capital 1,119,485
 1,117,095
Accumulated deficit (136,898) (120,981)
Accumulated other comprehensive loss, net of income taxes (98,081) (98,989)
Total equity 885,320
 897,935
Total Liabilities and Equity $3,695,675
 $3,561,353
See notes to condensed consolidated financial statements.

F-2

The E.W. Scripps Company
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended 
March 31,
(in thousands, except per share data)20212020
Operating Revenues:
Advertising$362,614 $254,541 
Retransmission and carriage156,497 138,950 
Other21,810 20,732 
Total operating revenues540,921 414,223 
Operating Expenses:
Costs of revenues, excluding depreciation and amortization264,395 231,900 
Selling, general and administrative expenses, excluding depreciation and amortization144,026 127,711 
Acquisition and related integration costs28,645 4,910 
Restructuring costs7,050 0 
Depreciation14,125 13,351 
Amortization of intangible assets25,382 13,994 
Losses (gains), net on disposal of property and equipment80 1,433 
Total operating expenses483,703 393,299 
Operating income57,218 20,924 
Interest expense(43,882)(25,798)
Defined benefit pension plan income (expense)7 (1,026)
Gains on sale of business81,784 0 
Gains (losses) on stock warrants(67,244)0 
Miscellaneous, net(4,851)1,114 
Income (loss) from continuing operations before income taxes23,032 (4,786)
Provision for income taxes19,529 2,412 
Income (loss) from continuing operations, net of tax3,503 (7,198)
Income (loss) from discontinued operations, net of tax2,064 (4,611)
Net income (loss)5,567 (11,809)
Preferred stock dividends(11,643)0 
Net loss attributable to the shareholders of The E.W. Scripps Company$(6,076)$(11,809)
Net income (loss) per basic share of common stock:
Income (loss) from continuing operations$(0.10)$(0.09)
Income (loss) from discontinued operations0.02 (0.06)
Net income (loss) per basic share of common stock:$(0.07)$(0.15)
Net income (loss) per diluted share of common stock:
Income (loss) from continuing operations$(0.10)$(0.09)
Income (loss) from discontinued operations0.02 (0.06)
Net income (loss) per diluted share of common stock:$(0.07)$(0.15)
  Three Months Ended 
March 31,
(in thousands, except per share data) 2020 2019
     
Operating Revenues:    
Advertising $259,714
 $174,241
Retransmission and carriage 138,950
 87,283
Other 32,242
 30,639
Total operating revenues 430,906
 292,163
Costs and Expenses:    
Employee compensation and benefits 149,919
 110,203
Programming 144,969
 97,995
Other expenses 87,080
 61,442
Acquisition and related integration costs 4,910
 3,480
Restructuring costs —
 938
Total costs and expenses 386,878

274,058
Depreciation, Amortization, and (Gains) Losses:    
Depreciation 13,528
 8,975
Amortization of intangible assets 14,387
 8,817
(Gains) losses, net on disposal of property and equipment 1,433
 173
Net depreciation, amortization, and (gains) losses 29,348

17,965
Operating income 14,680
 140
Interest expense (25,798) (8,916)
Defined benefit pension plan expense (1,026) (1,572)
Miscellaneous, net 1,114
 (800)
Loss from operations before income taxes (11,030) (11,148)
Provision (benefit) for income taxes 779
 (4,334)
Net loss $(11,809) $(6,814)
     
Net loss per basic share of common stock $(0.15)
$(0.08)
Net loss per diluted share of common stock $(0.15) $(0.08)
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 
March 31,
(in thousands) 2020 2019
     
Net loss $(11,809) $(6,814)
Changes in defined benefit pension plans, net of tax of $286 and $155 902
 460
Other 6
 —
Total comprehensive loss $(10,901) $(6,354)
Three Months Ended 
March 31,
(in thousands)20212020
Net income (loss)$5,567 $(11,809)
Changes in defined benefit pension plans, net of tax of $374 and $2861,187 902 
Other18 6 
Total comprehensive income (loss) attributable to preferred and common stockholders$6,772 $(10,901)
See notes to condensed consolidated financial statements.

F-4

The E.W. Scripps Company
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended 
March 31,
(in thousands)20212020
Cash Flows from Operating Activities:
Net income (loss)$5,567 $(11,809)
Income (loss) from discontinued operations, net of tax2,064 (4,611)
Income (loss) from continuing operations, net of tax3,503 (7,198)
Adjustments to reconcile net income (loss) from continuing operations to net cash flows from operating activities:
Depreciation and amortization39,507 27,345 
Losses (gains), net on disposal of property and equipment80 1,433 
Gains on sale of business(81,784)0 
(Gains) losses on stock warrants67,244 0 
Programming assets and liabilities(37,042)(28,289)
Restructuring impairment charges7,050 0 
Deferred income taxes6,951 16,305 
Stock and deferred compensation plans11,092 2,143 
Pension expense, net of contributions(5,987)(4,034)
Other changes in certain working capital accounts, net41,045 8,806 
Miscellaneous, net(1,565)1,630 
Net cash provided by operating activities from continuing operations50,094 18,141 
Net cash used in operating activities from discontinued operations0 (4,440)
Net operating activities50,094 13,701 
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired(2,679,798)0 
Proceeds from sale of Triton Digital, net of cash disposed224,990 0 
Acquisition of intangible assets(430)(525)
Additions to property and equipment(4,139)(16,165)
Purchase of investments(1,263)(3,087)
Proceeds from FCC repack5,345 2,719 
Miscellaneous, net12 773 
Net cash used in investing activities from continuing operations(2,455,283)(16,285)
Net cash used in investing activities from discontinued operations0 (45)
Net investing activities(2,455,283)(16,330)
Cash Flows from Financing Activities:
Net borrowings under revolving credit facility0 175,000 
Proceeds from issuance of long-term debt800,000 0 
Proceeds from issuance of preferred stock600,000 0 
Payments on long-term debt(4,653)(2,653)
Payments on financing costs(50,597)0 
Payments for capitalized preferred stock issuance costs(11,526)0 
Dividends paid on common and preferred stock(9,067)(4,108)
Tax payments related to shares withheld for vested stock and RSUs(6,369)(2,266)
Miscellaneous, net(415)(16,574)
Net cash provided by financing activities from continuing operations1,317,373 149,399 
Effect of foreign exchange rates on cash and cash equivalents(20)(111)
Increase (decrease) in cash and cash equivalents(1,087,836)146,659 
Cash and cash equivalents:
Beginning of year1,626,021 32,968 
End of period$538,185 $179,627 
Supplemental Cash Flow Disclosures
Interest paid$29,354 $24,833 
Income taxes refunded (paid)$547 $(12)
Non-cash investing information
Capital expenditures included in accounts payable$5,764 $1,187 

 Three Months Ended 
March 31,
(in thousands) 2020
2019
     
Cash Flows from Operating Activities: 


Net loss $(11,809) $(6,814)
Adjustments to reconcile net loss to net cash flows from operating activities: 


Depreciation and amortization 27,915
 17,792
(Gain)/loss on sale of property and equipment 1,433
 173
Programming assets and liabilities (28,834) (1,133)
Deferred income taxes 14,672

(4,341)
Stock and deferred compensation plans 2,208

7,352
Pension expense, net of contributions (4,034)
(408)
Other changes in certain working capital accounts, net 10,996

(25,776)
Miscellaneous, net 1,154

(37)
Net cash provided by (used in) operating activities 13,701
 (13,192)
Cash Flows from Investing Activities: 


Acquisitions, net of cash acquired
—

(55,199)
Acquisition of intangible assets (525) (404)
Additions to property and equipment (16,210)
(13,440)
Purchase of investments (3,087)
(115)
Proceeds from FCC repack 2,719
 1,520
Miscellaneous, net 773
 1
Net cash used in investing activities (16,330) (67,637)
Cash Flows from Financing Activities: 


Net borrowings under revolving credit facility 175,000
 —
Payments on long-term debt (2,653)
(750)
Dividends paid (4,108) (4,040)
Repurchase of Class A Common shares —

(584)
Tax payments related to shares withheld for vested stock and RSUs (2,266)
(3,649)
Miscellaneous, net (16,574)
(2,862)
Net cash provided by (used in) financing activities 149,399

(11,885)
Effect of foreign exchange rates on cash and cash equivalents (111) 2
Increase (decrease) in cash and cash equivalents 146,659

(92,712)
Cash and cash equivalents: 


Beginning of year 32,968

107,114
End of period $179,627

$14,402
     
Supplemental Cash Flow Disclosures    
Interest paid $24,833

$3,356
Income taxes paid $12
 $50
Non-cash investing information    
Capital expenditures included in accounts payable $1,187
 $1,465
See notes to condensed consolidated financial statements.

F-5

The E.W. Scripps Company
Condensed Consolidated Statements of Equity (Unaudited)
Three Months Ended
March 31, 2021 and 2020
(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, 2020$— $817 $1,130,789 $131,778 $(100,119)$1,163,265 
Comprehensive income (loss)— — — 5,567 1,205 6,772 
Issuance of preferred stock, net of discount and issuance costs407,634 — — — — 407,634 
Preferred stock dividends, $1,511 per share576 — — (11,643)— (11,067)
Compensation plans: 554,279 net shares issued *— 6 2,577 — — 2,583 
As of March 31, 2021$408,210 $823 $1,133,366 $125,702 $(98,914)$1,569,187 
Three Months Ended
March 31, 2020 and 2019
(in thousands, except per share data)
 
Common
Stock
 
Additional
Paid-in
Capital
 Retained Earnings (Accumulated Deficit) 
Accumulated
Other
Comprehensive
Income (Loss) ("AOCI")
 
Total
Equity
As of December 31, 2019 $810
 $1,117,095
 $(120,981) $(98,989) $897,935
Comprehensive income (loss) —
 —
 (11,809) 908
 (10,901)
Cash dividend: declared and paid - $0.05 per share —
 —
 (4,108) —
 (4,108)
Compensation plans: 429,273 net shares issued * 4
 2,390
 —
 —
 2,394
As of March 31, 2020 $814
 $1,119,485
 $(136,898) $(98,081) $885,320
* Net of tax payments related to shares withheld for vested RSUs of $6,369 for the three months ended March 31, 2021.

As of December 31, 2019$— $810 $1,117,095 $(120,981)$(98,989)$897,935 
Comprehensive income (loss)— — — (11,809)908 (10,901)
Cash dividend: declared and paid - $0.05 per share— — — (4,108)— (4,108)
Compensation plans: 429,273 net shares issued *— 4 2,390 — — 2,394 
As of March 31, 2020$— $814 $1,119,485 $(136,898)$(98,081)$885,320 
* Net of tax payments related to shares withheld for vested RSUs of $2,266 for the three months ended March 31, 2020.
As of December 31, 2018 $807
 $1,106,984
 $(86,229) $(95,397) $926,165
Comprehensive income (loss) —
 —
 (6,814) 460
 (6,354)
Cash dividend: declared and paid - $0.05 per share —
 —
 (4,040) —
 (4,040)
Repurchase of 180,541 Class A Common shares (2) (582) —
 —
 (584)
Compensation plans: 297,131 net shares issued * 3
 2,183
 —
 —
 2,186
As of March 31, 2019 $808
 $1,108,585
 $(97,083) $(94,937) $917,373

* Net of tax payments related to shares withheld for vested RSUs of $3,649 for the three months ended March 31, 2019.
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 20192020 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. Additionally, certain
Expense amounts that were previously reported under the captions “Employee compensation and benefits,” “Programming,” and “Other expenses” in prior periodsour 2020 Condensed Consolidated Statements of Operations have been reclassified into line items captioned as either “Costs of revenues” or “Selling, general and administrative expenses.” Costs of revenues reflect the costs of providing our broadcast signals, programming and other content to conform torespective distribution platforms. The costs captured within the current period's presentation.costs of revenues caption include programming, content distribution, satellite transmission fees, production and operations and other direct costs. Selling, general and administrative expenses are primarily comprised of sales, marketing and advertising expenses, research costs, certain occupancy costs and other administrative costs.
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 mediatelevision 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, National MediaScripps Networks and Other. Additional information for our business segments is presented in the Notes to Condensed Consolidated Financial Statements.

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.
F-7

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,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 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 Hulu, YouTubeTV and AT&T Now. 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 MediaScripps Networks segment offers subscription services for access to premium content to its customers. Our Triton business earns revenue from monthly fees charged to audio publishers for converting their content into digital audio streams and inserting digital advertising into those audio streams and providing statistical measurement information about their listening audience. Our podcast business acts as a sales and marketing representative and earns commission for its work.
Refer to Note 12. Segment13.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.
Other — Revenues generated by our Triton business are recognized on a ratable basis over the contract term as the monthly service is provided to the customer.

Transaction Price Allocated to Remaining Performance Obligations — As of March 31, 2020, we had an aggregate transaction price of $53.2 million allocated to unsatisfied performance obligations related to contracts within our Triton business, most of which is expected to be recognized into revenue over the next 24 months.

We did not disclose the value of unsatisfied performance obligations on any other contracts with customers because they are either (i) contracts with an original expected term of one year or less, (ii) contracts for which the sales- or usage-based royalty exception was applied, or (iii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.
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 $4.0$3.3 million at March 31, 20202021 and $3.5$3.4 million at December 31, 2019.2020.

F-8

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 $8.6$21.4 million at March 31, 20202021 and is expected to be recognized within revenue over the next 12 months. Unearned revenue totaled $11.7$14.1 million at December 31, 2019.2020. We recorded $6.0$4.4 million of revenue in the three months ended March 31, 20202021 that was included in unearned revenue at December 31, 2019.2020.
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.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 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 20192020 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 $4.2$8.3 million and $5.8$4.2 million for the first quarter of 20202021 and 2019,2020, 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 
March 31,
(in thousands)20212020
Numerator (for basic and diluted earnings per share)
Income (loss) from continuing operations, net of tax$3,503 $(7,198)
Less preferred stock dividends(11,643)0 
Numerator for basic and diluted earnings per share$(8,140)$(7,198)
Denominator
Basic weighted-average shares outstanding81,902 81,077 
Effect of dilutive securities:
Restricted stock units0 0 
Diluted weighted-average shares outstanding81,902 81,077 
  Three Months Ended 
March 31,
(in thousands) 2020 2019
     
Numerator (for basic and diluted earnings per share)
    
Net loss $(11,809) $(6,814)
Less income allocated to RSUs —

—
Numerator for basic and diluted earnings per share $(11,809) $(6,814)
Denominator    
Basic weighted-average shares outstanding 81,077

80,673
Effect of dilutive securities: 


Restricted stock units —

—
Diluted weighted-average shares outstanding 81,077
 80,673

For the three monthsmonth periods ended March 31, 20202021 and 2019,2020, we incurred a net loss and the inclusion of RSUs would have been anti-dilutive. Accordingly, theThe March 31, 2021 and 2020 diluted EPS calculation for the 2020 and 2019 periods excludescalculations exclude the effect from 2.4 million and 2.2 million, and 1.4 millionrespectively, of outstanding RSUs respectively.

that were anti-dilutive. The basic and dilutive EPS calculations also exclude the impact of the common stock warrant as the effect would be anti-dilutive.

F-9



2. Recently Adopted and Issued Accounting Standards

Recently Adopted Accounting Standards —
In December 2019, the Financial Accounting Standards Board ("FASB") issued new guidance that simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The guidance also clarifies and amends existing guidance in order to improve the consistent application of, and simplify GAAP for, other areas of Topic 740. It is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We elected to early adopt this standard effective January 1, 2020, with no material impact on our condensed consolidated financial statements.

In March 2019, the FASB issued new guidance to align the accounting for the costs of producing films and episodic television series in response to changes in production and distribution models in the media and entertainment industry. The new guidance amends the capitalization, amortization, impairment, presentation and disclosure requirements for entities that produce and own content, and also aligns the impairment guidance for licensed content to the owned content fair value model. This guidance applies to broadcasters and entities that produce and distribute films and episodic television series through both traditional mediums and digital mediums. We adopted the standard on January 1, 2020. Upon adoption, we recorded all licensed programming assets and programming assets produced by us as non-current assets in our condensed consolidated balance sheets as of March 31, 2020. Prepaid programming rights for the purchase of podcast content rights continue to be reported as current assets in our condensed consolidated balance sheets. The adoption of the standard had no material impact on our condensed consolidated statements of operations.

In August 2018, the FASB issued new guidance to address a customer's accounting for implementation costs incurred in a cloud computing arrangement ("CCA") that is a service contract. The new guidance aligns the accounting for costs incurred to implement a CCA that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. We adopted the standard on January 1, 2020, with no material impact on our condensed consolidated financial statements.

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. We adopted the standard on January 1, 2020. Considering current and expected future economic and market conditions related to COVID-19, we increased our allowances for accounts receivable $0.7 million. The adoption of the standard did not result in any other material impacts to our condensed consolidated financial statements and related disclosures.

Recently Issued Accounting Standards — 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.

In August 2018, the FASB issued new guidance to add, remove and clarify annual disclosure requirements related to defined benefit pension and other postretirement plans. The guidance is effective for fiscal years ending after December 15, 2020 with early adoption permitted, and it should be applied on a retrospective basis. We believe the main impact of this guidance will be to no longer disclose the amount in accumulated other comprehensive income that is expected to be recognized as part of net periodic benefit cost over the next year. Additionally, we will have to add a narrative description for any significant gains and losses affecting the benefit obligation for the period. We are currently evaluating the impact of this guidance on our disclosures.

3. Acquisitions
3. Acquisitions

ION Acquisition
Television Stations Acquisitions

On September 19, 2019,January 7, 2021, we closed oncompleted the acquisition of 8national 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. With the acquisition of ION, we created a full-scale national television networks business by combining the ION network with the five Katz networks and national news network, Newsy.

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 seven markets from the Nexstar Media Group, Inc. ("Nexstar") transactionScripps. 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 Tribune Media Company ("Tribune"). Cash consideration for the transaction totaled $582 million. Sevenownership rules of the stations were operated by Tribune, and its subsidiaries, and one was operated by Nexstar. Nexstar was required to divest these stations in order to complete its acquisitionFederal Communications Commission, we simultaneously divested 23 of Tribune.



On May 1, 2019, we acquired 15ION's television stations in 10 markets from Cordillera Communications,for a total consideration of $30 million, which were purchased by INYO Broadcast Holdings, LLC ("Cordillera"), for $521 million in cash, plus a working capital adjustmentupon completion of $23.9 million.

Effective January 1, 2019, we acquired 3 televisionthe acquisition. These divested stations owned by Raycom Media ("Raycom") — Waco, Texas ABC affiliate KXXV/KRHD and Tallahassee, Florida ABC affiliate WTXL — for $55 million in cash. These stations were divested as partbecame independent affiliates of Gray Television's acquisition of Raycom.

ION pursuant to long-term affiliation agreements.

The following table summarizes the net cash consideration for the ION transaction.

(in thousands)
Total purchase price$2,650,000 
   Plus: Cash acquired14,493 
   Plus: Working capital59,798 
Total transaction gross cash consideration2,724,291 
   Less: Proceeds from ION stations divested(30,000)
Total transaction net cash consideration2,694,291 
   Less: Cash acquired(14,493)
Total consideration, net of cash acquired$2,679,798 
F-10

The following table summarizes the preliminary fair values of the Raycom, Cordillera and Nexstar-TribuneION assets acquired and liabilities assumed at the closing dates. The allocation of purchase price for the Cordillera and Nexstar-Tribune acquisitions reflect preliminary fair values.date.
(in thousands) Raycom Cordillera Nexstar- Tribune Total
         
Accounts receivable $—
 $26,264
 $—
 $26,264
Current portion of programming —
 —
 11,997
 11,997
Other current assets —
 986
 3,541
 4,527
Property and equipment 11,721
 53,734
 61,909
 127,364
Operating lease right-of-use assets 296
 4,667
 82,447
 87,410
Programming (less current portion) —
 —
 9,830
 9,830
Goodwill 18,349
 254,176
 167,322
 439,847
Indefinite-lived intangible assets - FCC licenses 6,800
 26,700
 176,000
 209,500
Amortizable intangible assets: 
 
   
  Television network affiliation relationships 17,400
 169,400
 181,000
 367,800
  Advertiser relationships 700
 5,900
 7,100
 13,700
  Other intangible assets —
 13,000
 —
 13,000
Accounts payable —
 (15) —
 (15)
Accrued expenses —
 (5,239) (4,580) (9,819)
Current portion of programming liabilities —
 —
 (16,211) (16,211)
Other current liabilities —
 (280) (3,185) (3,465)
Operating lease liabilities (296) (4,387) (79,766) (84,449)
Programming liabilities —
 —
 (15,079) (15,079)
Net purchase price $54,970
 $544,906
 $582,325
 $1,182,201
(in thousands)
Accounts receivable$133,559 
Other current assets4,033 
Programming rights169,027 
Property and equipment63,073 
Operating lease right-of-use assets72,717 
Other assets4,513 
Goodwill1,846,329 
Indefinite-lived intangible assets - FCC licenses433,700 
Amortizable intangible assets:
  INYO affiliation agreement433,000 
  Other affiliation relationships25,000 
  Advertiser relationships139,000 
  Trade names72,000 
Accounts payable(9,677)
Unearned revenue(13,043)
Accrued expenses(27,083)
Current portion of programming liabilities(92,721)
Other current liabilities(8,373)
Programming liabilities(191,837)
Deferred tax liabilities(266,389)
Operating lease liabilities(78,000)
Other long-term liabilities(29,030)
Total consideration, net of cash acquired$2,679,798 


Of the value allocated to amortizable intangible assets, television networkthe INYO affiliation relationships haveagreement has an estimated amortization period of 20 years, advertiser relationships have an estimated amortization periodsperiod of 5-1010 years, other affiliation relationships have an estimated amortization period of 12 years and the value allocated to a shared services agreementtrade names has an estimated amortization period of 2010 years.

The goodwill of $440 million$1.8 billion arising from the transactions consists largely of synergies, economies of scale and other benefits of a larger national broadcast footprint.footprint and becoming the largest holder of broadcast spectrum. We allocated the goodwill to our Local MediaScripps Networks segment. We treatedThe transaction is accounted for as a stock acquisition which applies carryover tax basis to the transactions as asset acquisitions for income tax purposes resulting in a step-up in the assets and liabilities acquired. The goodwill is not deductible for income tax purposes.

Omny StudioFrom the January 7, 2021 acquisition date through March 31, 2021, revenues from ION's operations of $126 million have been included in the accompanying Condensed Consolidated Statements of Operations. Acquisition and integration costs related to the transaction, including legal and professional fees and severance costs, totaled $26.2 million for the three months ended March 31, 2021.

KCDO Television Station

On June 10, 2019,November 20, 2020, we completedclosed on the acquisition of Omny Studio ("Omny")the KCDO television station in the Denver, Colorado market. Included in the sale was KSBS-CD, a low power translator of KCDO. Total consideration for a cash purchase price of $8.3the transaction totaled $9.6 million. Omny is a Melbourne, Australia-based podcasting software-as-a-service company operating as a part of Triton in our National Media segment. Omny is an audio-on-demand platform built specifically for professional audio publishers. The platform enables audio publishers to seamlessly record, edit, distribute, monetize and analyze podcast content; replace static ads with dynamically inserted, highly targeted ads; and automates key aspects of campaign management, such as industry separation, frequency capping and volume normalization.

The preliminary purchase price allocation assigned $5.3allocated $6.9 million to the acquired FCC license, $1.7 million to goodwill, $3.8$0.9 million to a developed technology intangible assetproperty and equipment and the remainder was allocated to various working capital and deferred tax liability accounts. The developed
F-11


technology intangible asset has an estimated amortization period of 10 years. The goodwill arising from the transaction consists largely of the fact that the addition of Omny's podcast and on-demand audio publishing platform to Triton's portfolio of streaming, advertising and measurement technologies provides audio publishers around the world with a full-stack enterprise solution to increase reach and revenue.

Pro forma results of operations

Pro forma results of operations, assuming the Cordillera and Nexstar-Tribune acquisitionsION acquisition had taken place at the beginning of 2019,2020, are presented in the following table. The pro forma results do not include Raycom or Omny Studio,KCDO, as the impact of these acquisitions,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 Cordillera and Nexstar-Tribune,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 transactiontransactions and other transactional adjustments. The pro forma results exclude the $1.2 million of transaction related costs that were expensed in conjunction with the acquisitions and do not include efficiencies, cost reductions or synergies expected to result from the acquisitions. The unaudited pro forma financial information is not necessarily indicative of the results that actually would have occurred had the acquisitions been completed at the beginning of the period.

Three Months Ended March 31,
(in thousands, except per share data) (unaudited)20212020
Operating revenues$547,643 $559,436 
Net income (loss) attributable to Scripps shareholders13,009 (15,146)
Net income (loss) per share:
          Basic$0.15 $(0.19)
          Diluted0.15 (0.19)
(in thousands, except per share data) (unaudited) Three Months Ended 
March 31, 2019
   
Operating revenues $384,304
Net loss (19,930)
Net loss per share:  
          Basic $(0.25)
          Diluted (0.25)


Pro forma results in 2020 include $35.6 million of non-recurring transaction related costs. The pro forma results in 2021 reflect a $26.2 million reversal of ION transaction costs incurred that are already being captured in the 2020 pro forma results.

4. Asset Write-Downs and Other Charges and Credits


LossIncome (loss) from continuing operations before income taxes was affected by the following:

2021 - Acquisition and related integration costs of $28.6 million in the first quarter of 2021 primarily reflect investment banking, legal fees and professional service costs incurred to complete and integrate the ION Media Networks, Inc. acquisition, which closed on January 7, 2021.

Restructuring costs totaled $7.1 million in the first quarter of 2021. In connection with the Newsy restructuring plan, we incurred charges for the write-downs of both capitalized carriage agreement payments and certain Newsy intangible assets.

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.

The first quarter of 2021 includes a $67.2 million non-cash charge related to our outstanding common stock warrant. The warrant obligation is marked-to-market each reporting period with the increase in our common stock price being the significant contributor to a higher valuation.

2020 - Acquisition and related integration costs of $4.9 million in the first quarter of 2020 reflect contract termination costs and professional service costs incurred to integrate the Cordillera and Nexstar-Tribune television stations.


2019 - Acquisition and related integration costs of $3.5 million in the first quarter of 2019 reflect professional service costs incurred to integrate Triton and the Raycom and Cordillera television stations, as well as costs related to the Nexstar-Tribune acquisition.

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
F-12

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.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was enacted and signed into law. The CARES Act includes several provisions for corporations including increasing the amount of deductible interest, allowing companies to carryback certain net operating losses (“NOLs”) and increasing the amount of NOLs that corporations can use to offset income. The CARES Act did not materially affect our first quarter income tax provision. We do expect to receive an additional tax refund of $13.9 million from the carryback of NOLs to prior periods. We are currently assessing the


future implications of these provisions within the CARES Act on our condensed consolidated financial statements, but do not expect the impact to be material.

The effective income tax rate for the three months ended March 31, 2021 and 2020 was 85% and 2019 was (7)(50)% and 39%, 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, and excess tax benefits or expense from the exercise and vesting of share-based compensation awards ($1.01.3 million benefit in 2021 and $1.0 million expense in 20202020), state deferred rate changes and $0.6state NOL valuation allowance changes ($1.2 million benefit in 2019)2021 and $4.0 million expense in 2020). Additionally, in the first quarter of 2020,2021, we had a net discrete tax provision charge of $4.0$17.1 million related to state deferred rate changesa taxable gain on the sale of the Triton business, and state NOL valuation allowance reductions.

a $1.0 million discrete tax provision charge related to nondeductible transaction costs for the ION acquisition. Finally, a non-deductible expense of $70.7 million was recorded in the first quarter of 2021 related to issuance costs and unrealized losses on mark-to-market adjustments recorded on the common stock warrants issued in connection with the ION acquisition.
Deferred tax assets totaled $11.6 million at
March 31, 2020, which includes the tax effect of state NOL carryforwards.
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
6. Leases
At December 31, 2020, our cash and cash equivalents included $1.1 billion held in a restricted cash account for the ION Media Networks, Inc. ("ION") acquisition. The restricted balance represents the senior secured notes and senior unsecured notes proceeds that were segregated as financing for the January 7, 2021 closing of the ION acquisition. Refer to Note 9. Long-Term Debt and Note 3. Acquisitions for further information on the $550 million senior secured notes and $500 million senior unsecured notes that were issued on December 30, 2020. At March 31, 2021, 0 cash was held in a restricted cash account.

7. Leases

We have operating leases for office space, data centers and certain equipment. Our leases have remaining lease terms of 1 year to 20 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 statementsCondensed Consolidated Statements of operationsOperations for the three months ended March 31, 2021 and 2020 and 2019 totaled $5.6$5.9 million and $3.4$4.9 million, including short-term lease costs of $0.2$0.5 million and $0.1$0.2 million, respectively.

Other information related to our operating leases was as follows:
(in thousands, except lease term and discount rate)As of 
March 31, 
2021		As of 
December 31, 
2020
Balance Sheet Information
  Right-of-use assets$128,217 $51,471 
  Other current liabilities19,396 9,623 
  Operating lease liabilities120,731 42,097 
Weighted Average Remaining Lease Term
       Operating leases8.82 years7.64 years
Weighted Average Discount Rate
       Operating leases4.33 %5.96 %
(in thousands, except lease term and discount rate) As of 
March 31, 
2020		 As of 
December 31, 
2019
     
Balance Sheet Information    
  Right-of-use assets $135,138
 $138,640
  Other current liabilities 15,170
 16,168
  Operating lease liabilities 121,947
 123,739
Weighted Average Remaining Lease Term    
       Operating leases 11.95 years
 12.09 years
Weighted Average Discount Rate    
       Operating leases 5.27% 5.29%


Three Months Ended 
March 31,
(in thousands)20212020
Supplemental Cash Flows Information
    Cash paid for amounts included in the measurement of lease liabilities$4,875 $4,178 
    Right-of-use assets obtained in exchange for lease obligations5,980 410 
  Three Months Ended 
March 31,
(in thousands) 2020 2019
     
Supplemental Cash Flows Information    
    Cash paid for amounts included in the measurement of lease liabilities $5,031
 $3,471
    Right-of-use assets obtained in exchange for lease obligations 929
 —
F-13






Future minimum lease payments under non-cancellable operating leases as of March 31, 20202021 were as follows:
(in thousands)Operating
Leases
Remainder of 2021$23,470 
202226,005 
202321,735 
202418,924 
202514,917 
Thereafter62,886 
  Total future minimum lease payments167,937 
Less: Imputed interest(27,810)
    Total$140,127 
(in thousands) 
Operating
Leases
   
Remainder of 2020 $18,072
2021 13,553
2022 16,755
2023 16,886
2024 15,612
Thereafter 105,413
  Total future minimum lease payments 186,291
Less: Imputed interest (49,174)
    Total $137,117


7.8. Goodwill and Other Intangible Assets
Goodwill consisted of the following:
(in thousands)Local MediaScripps NetworksOtherTotal
Gross balance as of December 31, 2020$1,122,408 $232,742 $85,976 $1,441,126 
Accumulated impairment losses(216,914)(21,000)0 (237,914)
Net balance as of December 31, 2020$905,494 $211,742 $85,976 $1,203,212 
Gross balance as of March 31, 2021$1,122,408 $2,079,071 $0 $3,201,479 
Accumulated impairment losses(216,914)(21,000)0 (237,914)
Net balance as of March 31, 2021$905,494 $2,058,071 $0 $2,963,565 
(in thousands) Local Media National Media Total
       
Gross balance as of December 31, 2019 $1,143,859
 $395,313
 $1,539,172
Accumulated impairment losses (216,914) (50,403) (267,317)
Net balance as of December 31, 2019 $926,945
 $344,910
 $1,271,855
       
Gross balance as of March 31, 2020 $1,147,347
 $395,297
 $1,542,644
Accumulated impairment losses (216,914) (50,403) (267,317)
Net balance as of March 31, 2020 $930,433
 $344,894
 $1,275,327


Other intangible assets consisted of the following:
(in thousands) As of 
March 31, 
2020		 As of 
December 31, 
2019		(in thousands)As of 
March 31, 
2021		As of 
December 31, 
2020
    
Amortizable intangible assets:    Amortizable intangible assets:
Carrying amount:    Carrying amount:
Television network affiliation relationships $616,244
 $616,244
Television affiliation relationshipsTelevision affiliation relationships$1,074,244 $616,244 
Customer lists and advertiser relationships 111,700
 111,700
Customer lists and advertiser relationships213,400 102,900 
Other 109,281
 109,156
Other132,092 104,445 
Total carrying amount 837,225
 837,100
Total carrying amount1,419,736 823,589 
Accumulated amortization:    Accumulated amortization:
Television network affiliation relationships (90,872) (82,917)
Television affiliation relationshipsTelevision affiliation relationships(127,490)(113,950)
Customer lists and advertiser relationships (51,419) (48,586)Customer lists and advertiser relationships(53,871)(53,232)
Other (33,058) (29,721)Other(31,178)(37,778)
Total accumulated amortization (175,349) (161,224)Total accumulated amortization(212,539)(204,960)
Net amortizable intangible assets 661,876
 675,876
Net amortizable intangible assets1,207,197 618,629 
Indefinite-lived intangible assets — FCC licenses 385,915
 385,915
Indefinite-lived intangible assets — FCC licenses790,515 356,815 
Total other intangible assets $1,047,791
 $1,061,791
Total other intangible assets$1,997,712 $975,444 


F-14


Estimated amortization expense of intangible assets for each of the next five years is $43.3$67.7 million for the remainder of 2020, $55.2 million in 2021, $49.8$88.6 million in 2022, $44.7$83.5 million in 2023, $42.9$82.1 million in 2024, $40.0$80.4 million in 2025, $77.4 million in 2026 and $386.0$727.5 million in later years.

Goodwill and other indefinite-lived intangible assets are tested for impairment annually and any time events occur or changes in circumstances indicate it is more likely than not the fair value of a reporting unit, or respective indefinite-lived intangible asset, is below its carrying value. Our reporting units are Local Media, Katz, Triton, Stitcher and Newsy. Such events or changes in circumstances include, but are not limited to, changes in business climate, declines in the price of our stock, or other factors resulting in lower cash flow related to such assets. If the carrying amount exceeds its fair value, then an impairment loss is recognized.

Weakness in economic conditions toward the end of the first quarter, reflecting the impact of the COVID-19 pandemic, and declines in our stock price, created indications of fair value declines for our reporting units as of March 31, 2020. Accordingly, during the quarter, we considered impacts to the estimated fair values for each of our reporting units to determine if it was more likely than not that fair value had declined below carrying value. Our analysis primarily relied upon market data and discounted cash flow analyses. The use of a discounted cash flow approach requires significant judgment to estimate future cash flows of the business and the period of time over which those cash flows will occur, as well as to determine an appropriate discount rate. While we believe the estimates and judgments used in the discounted cash flow analyses for our reporting units were appropriate, different assumptions with respect to future cash flows, long-term growth rates and discount rates, could produce different estimates of value.

We concluded that it was not more likely than not that the carrying value for any of our reporting units exceeded its fair value. However, the discounted cash flow values for each of our reporting units were lower than the values determined during our 2019 annual impairment test. In 2019, the fair value for our Local Media reporting unit exceeded its carrying value by approximately 25% and our other reporting units exceeded their carrying values by over 30%. The Local Media reporting unit has $0.9 billion of goodwill or 73% of the consolidated total for the Company.

We also concluded that it was not more likely than not that the carrying value of any of our FCC licenses exceeded their fair values. Our FCC licenses are indefinite-lived assets that are not subject to amortization. The value of a FCC license is estimated using an income approach, which requires multiple assumptions relating to the future prospects of each individual FCC license. While we believe the estimates and judgments used in determining that it was not more likely than not that the carrying values of the FCC licenses exceeded fair values were appropriate, different assumptions with respect to the income approach could produce different estimates of value. For example, as it relates to our 2019 annual impairment test, a 50-basis point increase in discount rates would reduce the aggregate fair value of the FCC licenses by approximately $65 million.
8.9. Long-Term Debt
Long-term debt consisted of the following:
(in thousands) As of 
March 31, 
2020		 As of 
December 31, 
2019		(in thousands)As of 
March 31, 
2021		As of 
December 31, 
2020
    
Revolving credit facility $175,000
 $—
Revolving credit facility$0 $0 
Senior secured notes, due in 2029Senior secured notes, due in 2029550,000 550,000 
Senior unsecured notes, due in 2025 400,000
 400,000
Senior unsecured notes, due in 2025400,000 400,000 
Senior unsecured notes, due in 2027 500,000
 500,000
Senior unsecured notes, due in 2027500,000 500,000 
Senior unsecured notes, due in 2031Senior unsecured notes, due in 2031500,000 500,000 
Term loan, due in 2024 292,500
 293,250
Term loan, due in 2024289,500 290,250 
Term loan, due in 2026 757,369
 759,272
Term loan, due in 2026749,757 751,660 
Term loan, due in 2028Term loan, due in 2028798,000 0 
Total outstanding principal 2,124,869
 1,952,522
 Total outstanding principal3,787,257 2,991,910 
Less: Debt issuance costs and issuance discounts (36,025) (37,492)Less: Debt issuance costs and issuance discounts(78,361)(57,939)
Less: Current portion (10,612) (10,612)Less: Current portion(18,612)(10,612)
Net carrying value of long-term debt $2,078,232
 $1,904,418
 Net carrying value of long-term debt$3,690,284 $2,923,359 
Fair value of long-term debt * $1,979,412
 $1,991,164
Fair value of long-term debt *$3,797,121 $3,064,194 
* Fair values of the 2025, 2027, 2029 and 20272031 Senior Notes are estimated based on quoted private market transactions and are classified as Level 1 in the fair value hierarchy. The fair values of the term loans are based on observable estimates provided by third party financial professionals, and as such, are classified within Level 2 of the fair value hierarchy.
2025 Senior Unsecured Notes

On April 28, 2017, we issued $400 million senior unsecured notes ("the 2025 Senior Notes"), which bear interest at a rate of 5.125% per annum and mature on May 15, 2025. The 2025 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 2025 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 2025 Senior Notes, plus accrued and unpaid interest, if any, to the date of redemption, plus a “make-whole” premium, as set forth in the 2025 Senior Notes indenture. In addition, on or prior to May 15, 2020, we may redeem up to 40% of the 2025 Senior Notes, using proceeds of equity offerings. If we sell certain of our assets or have a change of control, the holders of the 2025 Senior Notes may require us to repurchase some or all of the notes. The 2025 Senior Notes are also guaranteed by us and the majority of our subsidiaries. The 2025 Senior Notes contain covenants that, among other things, limit the ability to incur additional debt, make certain restricted payments, and/or create liens, 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 2025 Senior Notes, which are being amortized over the life of the notes.

2027 Senior Unsecured Notes

On July 26, 2019, our wholly-owned subsidiary, Scripps Escrow, Inc. ("Scripps Escrow"), issued $500 million of senior unsecured notes, which bear interest at a rate of 5.875% per annum and mature on July 15, 2027 ("the 2027 Senior Notes"). The 2027 Senior Notes were priced at 100% of par value and interest is payable semi-annually on July 15 and January 15, commencing on January 15, 2020. Prior to July 15, 2022, we may redeem up to 40% of the aggregate principal amount of the 2027 Senior Notes at a redemption price of 105.875% of the principal amount plus accrued and unpaid interest, if any, to the date of redemption. We may also redeem some or all of the notes before 2022 at a redemption price of 100% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date. If we sell certain of our assets or have a change of control, the holders of the 2027 Senior Notes may require us to repurchase some or all of the notes. The 2027 Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of our existing and future domestic restricted subsidiaries. The 2027 Senior Notes contain covenants that, among other things, limit the ability to incur additional debt, make certain restricted payments, and/or create liens, that are typical for borrowing transactions of this nature. There are no registration rights associated with the 2027 Senior Notes.

We incurred approximately $10.7 million of deferred financing costs in connection with the issuance of the 2027 Senior Notes, which are being amortized over the life of the notes.

Scripps Senior Secured Credit Agreement

On January 7, 2021, we entered into the Sixth Amendment to the Third Amended Restated Credit Agreement ("Sixth Amendment"). Under the Sixth Amendment, the capacity of our Revolving Credit Facility was increased from $210 million to $400 million. Additionally, the Sixth Amendment extended the facility's maturity date to the earlier of January 2026 or 91 days prior to the stated maturity date for any of our existing loans and our existing unsecured notes that mature within the facility's term. 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. 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%. As of March 31, 2021, we had 0 borrowings under the Revolving Credit Facility. As of March 31, 2021 and December 31, 2020, we had outstanding letters of credit totaling $6.8 million and $6.0 million, respectively, under the Revolving Credit Facility.

On October 2, 2017, we issued a $300 million term loan B which matures in October 2024 ("2024 term loan"). We amended the term loan on April 4, 2018, reducing the interest rate by 25 basis points. Following the amendment, interestInterest is currently payable on the 2024 term loan 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. The 2024 term loan requires annual principal payments of $3 million.
As of March 31, 20202021 and December 31, 2019,2020, the interest rate on the 2024 term loan was 2.99%2.11% and 3.80%2.15%, respectively. The weighted-average interest rate was 3.67%2.13% and 4.50%3.67% for the three months ended March 31, 20202021 and 2019,2020, respectively.

On May 1, 2019, we entered into a Fourth Amendment to the Third Amended and Restated Credit Agreement ("Fourth Amendment"). Under the Fourth Amendment, we issued a $765$765 million term loan B ("2026 term loan") that matures in May 2026 with interest payable at rates based on LIBOR, plus a fixed margin of 2.75%. We amended this term loan on December 18, 2019, reducing the interest rate by 25 basis points. Following the amendment, interest2026. Interest is currently payable on the 2026 term loan at a rate based on LIBOR, plus a fixed margin of 2.50%2.56%. The 2026 term loan requires annual principal payments of $7.6 million.$7.6 million. Deferred financing costs and original issuance discount totaled approximately $23.0 million with this term loan, which are being amortized over the life of the loan.

As of March 31, 20202021 and December 31, 2019,2020, the interest rate on the 2026 term loan was 3.49%3.31% and 4.30%2.65%, respectively. The weighted-average interest rate on the term loan was 3.26% and 4.17% for the three months ended March 31, 2020.2021 and 2020, respectively.

We have a $210Under the Sixth Amendment, we also issued an $800 million revolving credit facility ("Revolving Credit Facility")term loan B that expires in April 2022. Commitment fees of 0.30%contributed to 0.50% per annum, based on our leverage ratio,the financing of the total unused commitment areION acquisition. The term loan matures in 2028 with interest payable under the Revolving Credit Facility. Interest is payable on the Revolving Credit Facility at rates based on LIBOR, plus a fixed margin based onof 3.00%. Additionally, the Sixth Amendment provided that the LIBOR rate could not be less than 0.75% for our leverage ratio, ranging from 1.75%term loans that mature in 2026 and 2028. The 2028 term loan requires annual principal payments of $8.0 million. We incurred deferred financing costs totaling $23.4 million related to 2.50%. this term loan and the amendment to the Revolving Credit Facility, which are being amortized over the life of the term loan.

As of March 31, 2020, we had $175 million outstanding under2021, the Revolving Credit Facility with an interest rate of 3.03%on the 2028 term loan was 3.75%. The weighted-average interest rate overon the period during which we had a drawn revolver balance in 2020term loan was 3.73%. As of3.75% for the three months ended March 31, 2020 and December 31, 2019, we had outstanding letters of credit totaling $6.8 million and $6.0 million, respectively, under the Revolving Credit Facility.2021.

The Senior Secured Credit Agreement contains covenants that limit our ability to incur additional debt and provideprovides for restrictions on certain payments (dividends and share repurchases). Additionally, we must be in compliance with certain leverage ratios in order to proceed with acquisitions. Our credit agreement also includes a provision that in certain circumstances we must use a portion of excess cash flow to repay debt. 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. In addition, the Revolving Credit Facility contains a covenant to comply with a maximum first lien net leverage ratio of 4.54.75 to 1.0 when we have outstanding borrowings on the facility. As of March 31, 2020,2021, we were in compliance with our financial covenants.

2029 Senior Secured Notes
9.
On December 30, 2020, we issued $550 million of senior secured notes (the "2029 Senior Notes"), which bear interest at a rate of 3.875% per annum and mature on January 15, 2029. The proceeds of the 2029 Senior Notes were deposited into a segregated escrow account. The escrow account was subsequently released on January 7, 2021 and used toward the financing of the ION acquisition (See Note 3). The 2029 Senior Notes were priced at 100% of par value and interest is payable semi-annually on January 15 and July 15, commencing on July 15, 2021. Prior to January 15, 2024 we may redeem up to 40% of the aggregate principal amount of the 2029 Senior Notes at a redemption price of 103.875% of the principal amount plus accrued and unpaid interest, if any, to the date of redemption. We may also redeem some or all of the 2029 Senior Notes before January 15, 2024 at a redemption price of 100% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date plus a "make whole" premium. On or after January 15, 2024 and before January 15, 2026, we may redeem the notes, in whole or in part, at applicable redemption prices noted in the indenture agreement. If we sell certain of our assets or have a change of control, the holders of the 2029 Senior Notes may require us to repurchase some or all of the notes. Our credit agreement also includes a provision that in certain circumstances we must use a portion of excess cash flow to repay debt. The 2029 Senior Notes are guaranteed by us and the majority our subsidiaries and are secured on equal footing with the obligations under the Senior Secured Credit Agreement. Following the release of the proceeds from escrow on January 7, 2021, the notes became secured, on a first lien basis, from pledges of equity interests in our subsidiaries and by substantially all of the existing and future assets of Scripps. The 2029 Senior Notes contain covenants with which we must comply that are typical for borrowing transactions of this nature.

We incurred approximately $13.8 million of deferred financing costs in connection with the issuance of the 2029 Senior Notes, which are being amortized over the life of the notes.

2025 Senior Unsecured Notes

On April 28, 2017, we issued $400 million of senior unsecured notes (the "2025 Senior Notes"), which bear interest at a rate of 5.125% per annum and mature on May 15, 2025. The 2025 Senior Notes were priced at 100% of par value and interest is payable semi-annually on May 15 and November 15. On or after May 15, 2020 and before May 15, 2023, we may redeem the notes, in whole or in part, at applicable redemption prices noted in the indenture agreement. If we sell certain assets or have a change of control, the holders of the 2025 Senior Notes may require us to repurchase some or all of the notes. The 2025 Senior Notes are also guaranteed by us and the majority our subsidiaries. The 2025 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 2025 Senior Notes, which are being amortized over the life of the notes.

On April 15, 2021, we announced our intention to redeem the 2025 Senior Notes on May 15, 2021. The redemption price of the notes will be equal to 102.563% of the aggregate principal amount plus accrued and unpaid interest up to the redemption date. The notes will be redeemed with cash on hand.

2027 Senior Unsecured Notes

On July 26, 2019, we issued $500 million of senior unsecured notes, which bear interest at a rate of 5.875% per annum and mature on July 15, 2027 ("the 2027 Senior Notes"). The 2027 Senior Notes were priced at 100% of par value and interest is payable semi-annually on July 15 and January 15. Prior to July 15, 2022, we may redeem up to 40% of the aggregate principal amount of the 2027 Senior Notes at a redemption price of 105.875% of the principal amount plus accrued and unpaid interest, if any, to the date of redemption. We may also redeem some or all of the notes before July 15, 2022 at a redemption price of 100% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date plus a "make whole" premium. On or after July 15, 2022 and before July 15, 2025, we may redeem the notes, in whole or in part, at applicable redemption prices noted in the indenture agreement. If we sell certain of our assets or have a change of control, the holders of the 2027 Senior Notes may require us to repurchase some or all of the notes. The 2027 Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of our existing and future domestic restricted subsidiaries. The 2027 Senior Notes contain covenants with which we must comply that are typical for borrowing transactions of this nature. There are no registration rights associated with the 2027 Senior Notes.

We incurred approximately $10.7 million of deferred financing costs in connection with the issuance of the 2027 Senior Notes, which are being amortized over the life of the notes.

2031 Senior Unsecured Notes

On December 30, 2020, we issued $500 million of senior unsecured notes (the "2031 Senior Notes"), which bear interest at a rate of 5.375% per annum and mature on January 15, 2031. The proceeds of the 2031 Senior Notes were deposited into a segregated escrow account. The escrow account was subsequently released on January 7, 2021 and used toward the financing of the ION acquisition (See Note 3). The 2031 Senior Notes were priced at 100% of par value and interest is payable semi-annually on January 15 and July 15, commencing on July 15, 2021. Prior to January 15, 2024 we may redeem up to 40% of the aggregate principal amount of the 2031 Senior Notes at a redemption price of 105.375% of the principal amount plus accrued and unpaid interest, if any, to the date of redemption. We may also redeem some or all of the 2031 Senior Notes before January 15, 2026 at a redemption price of 100% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date plus a "make whole" premium. On or after January 15, 2026 and before January 15, 2029, we may redeem the notes, in whole or in part, at applicable redemption prices noted in the indenture agreement. If we sell certain of our assets or have a change of control, the holders of the 2031 Senior Notes may require us to repurchase some or all of the notes. The 2031 Senior Notes are also guaranteed by us and the majority our subsidiaries. The 2031 Senior Notes contain covenants with which we must comply that are typical for borrowing transactions of this nature.

We incurred approximately $12.5 million of deferred financing costs in connection with the issuance of the 2031 Senior Notes, which are being amortized over the life of the notes.

Debt Repurchase Authorization

In November 2020, our Board of Directors authorized a debt repurchase program pursuant to which we may reduce, through redemptions or open market purchases and retirement, a combination of the outstanding principal balance of our senior secured and senior unsecured notes, and the additional indebtedness incurred with the closing of the ION acquisition. The authorization permits an aggregate principal amount reduction of up to $500 million and expires on March 1, 2023.

F-15

10. Other Liabilities
Other liabilities consisted of the following:
(in thousands)As of 
March 31, 
2021		As of 
December 31, 
2020
Employee compensation and benefits$36,614 $34,020 
Deferred FCC repack income44,442 44,945 
Programming liability207,093 33,481 
Liability for pension benefits154,212 161,845 
Liabilities for uncertain tax positions21,760 2,332 
Liability for common stock warrants248,084 0 
Other27,116 9,742 
Other liabilities (less current portion)$739,321 $286,365 
(in thousands) As of 
March 31, 
2020		 As of 
December 31, 
2019
     
Employee compensation and benefits $19,795
 $21,403
Deferred FCC repack income 38,720
 36,770
Programming liability 47,912
 57,291
Liability for pension benefits 184,912
 190,219
Other 9,991
 10,265
Other liabilities (less current portion) $301,330
 $315,948


In connection with the acquisition of ION, we assumed $19.3 million of uncertain tax position liabilities. Approximately $15.1 million of the liability is attributed to disallowed domestic production activities deductions (DPAD). We currently expect this DPAD liability will be resolved through settlement, amendments and/or payment within the next twelve months.
10.
With the Preferred Shares issuance, Berkshire Hathaway also received a warrant to purchase up to 23.1 million Class A shares, at an exercise price of $13 per share. The warrant is exercisable at the holder's option at any time or from time to time, in whole or in part, until the first anniversary of the date on which no Preferred Shares remain outstanding. Since the holder has the option to settle the warrant through cash payment of the exercise price and/or through surrendering portions of their Preferred Shares for the stated par value, a liability must be recognized for the fair value of the warrant. The valuation model, classified within Level 3 of the fair value hierarchy, includes inputs for the estimated term of the warrant, the historical volatility rate of Scripps common stock and the exercise price for the warrant. At time of issuance, the fair value of the warrant totaled $181 million. The fair value of the warrant is remeasured each reporting period and totaled $248 million at March 31, 2021. The increase in our stock price during 2021 was the primary contributor to the increase in the fair value of the warrant. Change in the fair value of the warrant during each reporting period is captured in the gains/ losses on stock warrants caption in the Condensed Consolidated Statements of Operations.

11. Supplemental Cash Flow Information
The following table presents additional information about the change in certain working capital accounts:
Three Months Ended 
March 31,
(in thousands)20212020
Accounts receivable$43,559 $8,850 
Other current assets1,851 (11,969)
Accounts payable6,342 14,034 
Accrued employee compensation and benefits(19,387)(13,711)
Accrued interest7,687 (1,172)
Other accrued liabilities(16,151)15,041 
Unearned revenue(5,672)(3,130)
Other, net22,816 863 
Total$41,045 $8,806 
  Three Months Ended 
March 31,
(in thousands) 2020 2019
     
Accounts receivable $12,158
 $4,031
Other current assets (11,569) (4,812)
Accounts payable 14,032
 4,539
Accrued employee compensation and benefits (14,813) (22,399)
Accrued interest (1,172) 5,124
Other accrued liabilities 14,603
 (4,789)
Unearned revenue (3,106) (3,339)
Other, net 863
 (4,131)
Total $10,996
 $(25,776)



F-16

11.12. Employee Benefit Plans

We sponsor a noncontributory defined benefit pension plan and non-qualified Supplemental Executive Retirement Plans ("SERPs"). The accrual for future benefits has been frozen in our defined benefit pension plan and SERPs.

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.
Other union-represented employees are covered by defined benefit pension plans jointly sponsored by us and the union, or by union-sponsored multi-employer plans.

The components of the employee benefit plansplan expense consisted of the following:
 Three Months Ended 
March 31,		 Three Months Ended 
March 31,
(in thousands) 2020 2019(in thousands)20212020
    
Interest cost $4,917
 $5,800
Interest cost$4,103 $4,917 
Expected return on plan assets, net of expenses (5,256) (5,058)Expected return on plan assets, net of expenses(5,820)(5,256)
Amortization of actuarial loss and prior service cost 1,125
 572
Amortization of actuarial loss and prior service cost1,487 1,125 
Total for defined benefit pension plan 786

1,314
Total for defined benefit pension plan(230)786 
Multi-employer plans 9
 41
Multi-employer plans0 9 
SERPs 240
 258
SERPs223 240 
Defined contribution plan 3,779
 2,995
Defined contribution plan3,978 3,779 
Net periodic benefit cost $4,814
 $4,608
Net periodic benefit cost3,971 4,814 
Allocated to discontinued operationsAllocated to discontinued operations0 (205)
Net periodic benefit cost — continuing operationsNet periodic benefit cost — continuing operations$3,971 $4,609 


We contributed $0.3 million to fund current benefit payments for our SERPs and $4.8$5.7 million for our defined benefit pension plan during the three months ended March 31, 2020.2021. During the remainder of 2020,2021, we anticipate contributing an additional $1.0$1.1 million to fund the SERPs' benefit payments. We are required to contribute an additional $27.0$18.7 million to fund our qualified defined benefit pension plan in order to meet our 20202021 funding requirements under the provisions of the Pension Funding Equity Act of 2004 and the Pension Protection Act of 2006. In response to COVID-19, President Donald Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The CARES Act provides a provision to defer 2020 pension contributions until January 1, 2021. We anticipate delaying the payment of 2020 pension contributions in accordance with the CARES Act provision.

12.
13. Segment Information
We determine our business segments based upon our management and internal reporting structures, as well as the basis on which our chief operating decision maker makes resource-allocation decisions. We report
Effective with the January 7, 2021 close of the ION acquisition, we realigned our financial performance based oninternal reporting structure and changed the following segments:reporting of our businesses’ operating results to reflect this new structure. Under the new structure, our operating results are reported under Local Media, National Media, Other.Scripps Networks and Other segment captions.
Our Local Media segment includes our 6061 local broadcast stations and their related digital operations. It is comprised of 18 ABC affiliates, 11 NBC affiliates, 9 CBS affiliates and 4 FOX affiliates. We also have 1312 CW affiliates - 54 on full power stations and 8 on multicast; 2 MyNetworkTV affiliates; 23 independent stations and 910 additional low power stations. Our Local Media segment earns revenue primarily from the sale of advertising to local, national and political advertisers and retransmission fees received from cable operators, telecommunications companies and satellite carriers. We also receive retransmission fees from over-the-top virtual MVPDs such as Hulu, YouTubeTV and AT&T Now.

Our National MediaScripps Networks segment includes our collectionis comprised of the ION national brands. Ournetwork, the Katz multicast networks and the Newsy national brands include Katz, Stitcher and its advertising network Midroll Media (Midroll), Newsy, Triton and other national brands.news network. These operations earn revenue primarily through the sale of advertising.
The operating results of our recently sold Triton business, and the other national businesses that were previously reported in our National Media segment, are aggregated with our remaining business activities in the Other segment caption.
Our respective business segment results reflect the impact of intercompany carriage agreements between our local broadcast television stations and our national networks. We also allocate a portion of certain corporate costs and expenses,
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including information technology, certain employee benefits and shared services to our business segments. TheThese intercompany agreements and allocations are generally amounts agreed upon by management, which may differ from an arms-length amount.

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,amounts, income taxes, depreciation and amortization, impairment charges, divested operating units, restructuring activities, investment results and certain other items that are included in net income (loss) determined in accordance with accounting principles generally accepted in the United States of America.


Information regarding our business segments is as follows:
 Three Months Ended 
March 31,		Three Months Ended 
March 31,
(in thousands) 2020 2019(in thousands)20212020
    
Segment operating revenues:    Segment operating revenues:
Local Media $321,804
 $203,387
Local Media$312,581 $324,933 
National Media 107,602
 87,317
Scripps NetworksScripps Networks213,660 76,755 
Other 1,500
 1,459
Other18,121 15,664 
Intersegment eliminationsIntersegment eliminations(3,441)(3,129)
Total operating revenues $430,906
 $292,163
Total operating revenues$540,921 $414,223 
Segment profit (loss):    Segment profit (loss):
Local Media $55,977
 $34,173
Local Media$55,937 $59,106 
National Media 11,785
 4,941
Scripps NetworksScripps Networks92,203 9,969 
Other (170) (433)Other3,281 4,191 
Shared services and corporate (18,654) (16,158)Shared services and corporate(18,921)(18,654)
Acquisition and related integration costs (4,910) (3,480)Acquisition and related integration costs(28,645)(4,910)
Restructuring costs —
 (938)Restructuring costs(7,050)0 
Depreciation and amortization of intangible assets (27,915) (17,792)Depreciation and amortization of intangible assets(39,507)(27,345)
Gains (losses), net on disposal of property and equipment (1,433) (173)Gains (losses), net on disposal of property and equipment(80)(1,433)
Interest expense (25,798) (8,916)Interest expense(43,882)(25,798)
Defined benefit pension plan expense (1,026) (1,572)
Defined benefit pension plan income (expense)Defined benefit pension plan income (expense)7 (1,026)
Gains on sale of businessGains on sale of business81,784 0 
Gains (losses) on stock warrantsGains (losses) on stock warrants(67,244)0 
Miscellaneous, net 1,114
 (800)Miscellaneous, net(4,851)1,114 
Loss from operations before income taxes $(11,030) $(11,148)
Income (loss) from continuing operations before income taxesIncome (loss) from continuing operations before income taxes$23,032 $(4,786)
Depreciation:    Depreciation:
Local Media $11,490
 $7,591
Local Media$9,685 $11,490 
National Media 1,620
 1,004
Scripps NetworksScripps Networks3,835 1,295 
Other 37
 38
Other249 185 
Shared services and corporate 381
 342
Shared services and corporate356 381 
Total depreciation $13,528
 $8,975
Total depreciation$14,125 $13,351 
Amortization of intangible assets:    Amortization of intangible assets:
Local Media $9,921
 $3,958
Local Media$9,597 $9,921 
National Media 4,128
 4,521
Scripps NetworksScripps Networks13,117 1,835 
OtherOther2,147 1,900 
Shared services and corporate 338
 338
Shared services and corporate521 338 
Total amortization of intangible assets $14,387
 $8,817
Total amortization of intangible assets$25,382 $13,994 
Additions to property and equipment:    Additions to property and equipment:
Local Media $14,441
 $9,480
Local Media$5,454 $14,441 
National Media 1,854
 4,290
Scripps NetworksScripps Networks1,489 1,591 
Other 5
 31
Other430 223 
Shared services and corporate 114
 411
Shared services and corporate19 114 
Total additions to property and equipment $16,414
 $14,212
Total additions to property and equipment$7,392 $16,369 



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A disaggregation of the principal activities from which we generate revenue is as follows:
Three Months Ended 
March 31,
(in thousands)20212020
Operating revenues:
Core advertising$361,303 $235,821 
Political1,311 18,720 
Retransmission and carriage fees156,497 138,950 
Other21,810 20,732 
Total operating revenues$540,921 $414,223 
  Three Months Ended 
March 31,
(in thousands) 2020 2019
     
Operating revenues:    
Core advertising $240,994
 $173,361
Political 18,720
 880
Retransmission and carriage 138,950
 87,283
Other 32,242
 30,639
Total operating revenues $430,906
 $292,163


13.14. Capital Stock
Capital Stock — We have 2 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 3 or one-third of the directors and other matters as required by Ohio law.
In connection with the January 7, 2021 closing of the ION acquisition, we entered into a Securities Purchase Agreement with Berkshire Hathaway Inc., ("Berkshire Hathaway"), pursuant to which Berkshire Hathaway provided $600 million of financing in exchange for 6,000 Series A Preferred Shares of the Company. The Preferred Shares, having a face value of $100,000 per share, are perpetual and will be redeemable at the option of the Company beginning on the fifth anniversary of issuance, and redeemable at the option of the holders in the event of a Change of Control (as defined in the terms of the Preferred Shares), in each case at a redemption price of 105% of the face value, plus accrued and unpaid dividends (whether or not declared). As long as the Company pays quarterly dividends in cash on the Preferred Shares, the dividend rate will be 8% per annum. If dividends on the Preferred Shares, which compound quarterly, are not paid in full in cash, the rate will increase to 9% per annum for the remaining period of time that the Preferred Shares are outstanding. Preferred stock dividends, effective through March 15, 2021, were paid in the first quarter totaling $9.1 million.
Share Repurchase Plan — Shares may be repurchased from time to time at management's discretion. Shares can be repurchased under an authorization via open market purchases or privately negotiated transactions, including accelerated stock repurchase transactions, block trades, or pursuant to trades intending to comply with Rule 10b5-1 of the Securities Exchange Act of 1934. In November 2016, our Board of Directors authorized a repurchase program of up to $100 million of our Class A Common shares. We repurchased a total of $50.3 million of shares under this authorization prior to its expiration on March 1, 2020. In February 2020, our Board of Directors authorized a new share repurchase program of up to $100 million of our Class A Common shares through March 1, 2022. NaN shares were repurchased under either authorization during the first quarter of 2020. During the three months ended March 31, 2019,2021. Under the terms of the Preferred Shares, we repurchased $0.6 million ofare prohibited from paying dividends on and repurchasing our common shares at prices ranging from $15.54 to $18.72 per share.until all Preferred Shares are redeemed.

14.15. 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 March 31, 2021
(in thousands)Defined Benefit Pension ItemsOtherTotal
Beginning balance, December 31, 2020$(99,789)$(330)$(100,119)
Other comprehensive income (loss) before reclassifications0 0 0 
Amounts reclassified from AOCI, net of tax of $374(a)
1,187 18 1,205 
Net current-period other comprehensive income (loss)1,187 18 1,205 
Ending balance, March 31, 2021$(98,602)$(312)$(98,914)
  Three Months Ended March 31, 2020
(in thousands) Defined Benefit Pension Items Other Total
       
Beginning balance, December 31, 2019 $(98,734) $(255) $(98,989)
Other comprehensive income (loss) before reclassifications —
 —
 —
Amounts reclassified from AOCI, net of tax of $286(a)
 902
 6
 908
Net current-period other comprehensive income (loss) 902
 6
 908
Ending balance, March 31, 2020 $(97,832) $(249) $(98,081)

  Three Months Ended March 31, 2019
(in thousands) Defined Benefit Pension Items Other Total
       
Beginning balance, December 31, 2018 $(95,365) $(32) $(95,397)
Other comprehensive income (loss) before reclassifications —
 —
 —
Amounts reclassified from AOCI, net of tax of $155(a)
 460
 —
 460
Net current-period other comprehensive income (loss) 460
 —
 460
Ending balance, March 31, 2019 $(94,905) $(32) $(94,937)

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Three Months Ended March 31, 2020
(in thousands)Defined Benefit Pension ItemsOtherTotal
Beginning balance, December 31, 2019$(98,734)$(255)$(98,989)
Other comprehensive income (loss) before reclassifications0 0 0 
Amounts reclassified from AOCI, net of tax of $286(a)
902 6 908 
Net current-period other comprehensive income (loss)902 6 908 
Ending balance, March 31, 2020$(97,832)$(249)$(98,081)
(a) Actuarial gain (loss) is included in defined benefit pension plan expense in the Condensed Consolidated Statements of Operations

16. Assets Held for Sale and Discontinued Operations

Stitcher

During the second quarter of 2020, our Board of Directors approved the sale of our Stitcher podcasting business. On July 10, 2020, we signed a definitive agreement to sell the business for $325 million, with $265 million of cash upfront; earnout of up to $30 million based on 2020 financial results and paid in 2021; and earnout of up to $30 million based on 2021 financial results and paid in 2022. The transaction closed on October 16, 2020.

Beginning in the second quarter of 2020, Stitcher was classified as discontinued operations in our condensed consolidated financial statements of operationsfor all periods presented.

Operating results of our discontinued Stitcher operations were as follows:

Three Months Ended 
March 31,
(in thousands)20212020
Operating revenues$0 $17,128 
Total costs and expenses— (22,802)
Depreciation and amortization of intangible assets— (570)
Other, net2,686 — 
Income (loss) from discontinued operations before income taxes2,686 (6,244)
Provision (benefit) for income taxes622 (1,633)
Net income (loss) from discontinued operations$2,064 $(4,611)

During the first quarter of 2021, the estimate for the contingent earnout consideration was increased by $2.7 million. The current fair value estimate for the contingent earnout consideration is $12.7 million.

Triton Digital

During the first quarter of 2021, our Board of Directors approved the sale of our Triton Digital business. On February 16, 2021, we signed a definitive agreement to sell the business and the transaction closed on March 31, 2021. The sale generated total net proceeds of $225 million and we recognized a pre-tax gain from disposition totaling $81.8 million.

WPIX

When we acquired the Nexstar-Tribune television stations in 2019, we granted Nexstar the option to repurchase WPIX, the CW-affiliated station in New York City. The option was exercisable from March 31, 2020, through the end of 2021, and was assignable by Nexstar to a third party. In July 2020, Nexstar assigned their option to repurchase WPIX to Mission Broadcasting, Inc., and Mission immediately exercised the option. The option price was $75 million plus accrued interest, to be calculated on the period between September 19, 2019, the purchase date of WPIX, and the option sale closing date. The transaction closed on December 30, 2020 for cash consideration of $83.7 million. Including interest income of $7.6 million, we recognized gains from the WPIX disposition totaling $6.5 million in the fourth quarter of 2020.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion and analysis of financial condition and results of operations is based upon the Condensed Consolidated Financial Statements and the Notes to Condensed Consolidated Financial Statements. You should read this discussion in conjunction with those financial statements.

Forward-Looking Statements
This document contains certain forward-looking statements related to the Company's businesses that are based on management’s current expectations. Forward-looking statements are subject to certain risks, trends and uncertainties, including changes in advertising demand and other economic conditions that could cause actual results to differ materially from the expectations expressed in forward-looking statements. Such forward-looking statements are made as of the date of this document and should be evaluated with the understanding of their inherent uncertainty. A detailed discussion of principal risks and uncertainties that may cause actual results and events to differ materially from such forward-looking statements is included in the section titled “Risk Factors.” Such Risk Factors include the potential materially adverse impact of the COVID-19 pandemic on the Company��sCompany’s financial results or condition as a result of financial market volatility, government and regulatory actions, and disruptions to the Company’s businesses. The Company undertakes no obligation to publicly update any forward-looking statements to reflect events or circumstances after the date the statement is made.
Executive Overview
The E.W. Scripps Company (“Scripps”) is a diverse media enterprise, serving audiences and businesses through a portfolio of local and national media brands. We are one of the fourth-largestnation's largest independent ownerowners of local television stations, with 6061 stations in 4241 markets that reach about 31%25% of U.S. television households. We have affiliations with all of the “Big Four” television networks as well as the CW and MyNetworkTV networks. In our National MediaScripps Networks division, we operate national brands including podcast industry-leader Stitcher and its advertisingthe ION national network, Midroll Media; next-generation national news network Newsy; five national multicast networks - Bounce, Grit, Laff, Court TV and Court TV Mystery, - that make upand the Katz Networks; and Triton, a global leader in digital audio technology and measurement services. next-generation national news network Newsy. We also operate an award-winning investigative reporting newsroom in Washington, D.C., and serve as the longtime steward of one of the nation's largest, most successful and longest-running educational programs, the Scripps National Spelling Bee.

We completed the acquisition of ION Media Networks, Inc. (“ION”) on January 7, 2021, for $2.65 billion. ION is a national broadcast television network that delivers popular crime and justice procedural programming to more than 100 million U.S. homes through its over-the-air broadcast and pay TV platforms. To comply with ownership rules of the Federal Communications Commission, we simultaneously divested 23 of ION's television stations, 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. As a result of the acquisition and related divestitures, ION's programming is delivered through 48 owned and operated stations and 63 independent ION affiliated stations.
The acquisition of ION enables us to create a full-scale national television networks business. By combining ION with the Katz networks and Newsy, Scripps Networks reaches nearly every American through free over-the-air broadcast, cable/satellite, over-the-top and digital distribution, with multiple advertising-supported programming streams. The ION network airs on primary channels in its owned and operated markets and on digital subchannels in its affiliates’ markets. Our five Katz networks air on digital subchannels on our and other broadcast stations.

The ION 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 did not receive any board seats or other governance rights with the preferred equity investment. Berkshire Hathaway also received a warrant to purchase up to 23.1 million Class A shares, at an exercise price of $13 per share.

We also announced plans to launch two new national television networks later in 2021. The two networks, which will be distributed for free to viewers over-the-air, will be demo-specific and reality-based and are expected to be available in at least 75% of U.S. television homes on their July 1, 2021 launch. One of the networks will target women in the 25-54 demographic and will feature off-network shows such as "Storage Wars," "Married at First Sight," "Hoarders," and "Little Women: LA." The other network will target men ages 25-54 and its programming will include off-network series such as "Pawn Stars," "Forged in Fire," "American Pickers," and "The Curse of Oak Island."

During the first quarter of 2020, an outbreak2021, the Company began notifying MVPDs carrying Newsy of our intent to exit cable and satellite distribution of the coronavirusnetwork later this year. In April 2021, we announced plans for the over-the-top national news network to launch on over the air television stations as well. At its planned launch in October, we anticipate that causesNewsy will be
F-21

available over-the-air in all major markets and in at least 80% of U.S. television homes. The network will be headquartered in Atlanta and will be carried primarily on the disease COVID-19 was declaredScripps-owned ION stations and select Scripps local television stations and those of other station groups. In connection with this Newsy restructuring plan, we expect to incur costs related to relocating certain employees, exiting certain contractual agreements and writing down assets associated with existing cable and satellite provider relationships. We incurred a pandemic by the World Health Organization. As the United States began to combat the crisis, the Company identified three priorities to guide its actions: maintaining the health and well-being of its employees; serving its audiences and communities; and maintaining business continuity. By mid-March, we had transitioned nearly all of our employees out of our workplaces without the interruption of news programming or other media delivery.

The full impact of COVID-19 is unknown and rapidly evolving. The outbreak and any preventative or protective actions that the Company, its vendors or its customers may take in respect of this virus may result in a period of disruption that could potentially impact our operations, financial results and financial condition. We estimate that our consolidated revenues were impacted by about $10$7.1 million restructuring charge in the first quarter of 2020. The extent to which COVID-19 impacts our results and financial condition in future periods depends on future developments that we cannot predict, including new information that may emerge concerning the severity of COVID-19 and the actions to contain the virus or treat its impact, among others. As media has been designated an essential business, we have implemented work from home procedures, including for newscast production, to continue our operations without disruption. We have seen increases in viewership at our broadcast television stations but do not anticipate that these positive audience trends will offset the loss of advertising revenue resulting from the downturn in the economy. In order to preserve liquidity in response to this changing environment, we also have undertaken a number of cost saving initiatives through reductions in capital expenses, hiring freezes, freezes on 2020 merit pay raises, reduced executive pay and Board of Directors’ fees, and other general expense reductions in areas of travel, entertainment and marketing. These initiatives are expected to provide cash savings of more than $85 million2021 for the full year, approximately $75 millionwrite-downs of which will be in the last three quarters of 2020. We will continue to evaluateboth capitalized carriage agreement payments and quantify the impact of COVID-19 on our consolidated financial statements.certain Newsy intangible assets.

In response to COVID-19, President Donald Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) on March 27, 2020. The CARES Act provides a number of provisions intended to support the economy and business operations, including the deferral of 2020 pension contributions to 2021, the temporary suspension of certain payment requirements for the employer portion of Social Security taxes, temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property and the creation of certain


refundable employee retention credits. We anticipate benefiting from deferring $27 million in pension contributions to 2021, deferring $17 million of Social Security tax payments beyond 2020, and receiving an additional tax refund of $13.9 million from the carryback of net operating losses to prior periods. We are also continuing to evaluate the other provisions of the CARES Act on our consolidated financial statements and have not yet quantified what material impacts to the financial statements (if any) may result. 

Due to the current uncertainty in the global economy resulting from the COVID-19 pandemic, we also took measures to preserve the Company's financial flexibility. During the first quarter of 2020,2021, our Board of Directors approved the sale of our Triton business and we drew $175 million under our $210 million revolving credit facility. We are also evaluating government-supported programs intendedsigned a definitive agreement to facilitate lending to small and medium-sized businesses. Based upon expected financial results, our cost saving initiatives,sell the stimulus provisions under the CARES Act, as well as about $10 millionbusiness on February 16, 2021. The transaction closed on March 31, 2021 for total net proceeds of expected interest savings from declines in LIBOR interest rates, we currently anticipate having sufficient liquidity for navigating the next 12 months. Our term loans and unsecured notes do not have maintenance covenants, and our revolving credit facility has a leverage ratio covenant, that only applies when there are outstanding borrowings under the facility. While we believe we currently have sufficient liquidity and will remain in compliance with our revolving credit covenant, in the event of a prolonged period of economic weakness there are additional cost saving initiatives we could undertake that would further enhance our liquidity.$225 million.

Results of Operations
The trends and underlying economic conditions affecting the operating performance and future prospects differ for each of our business segments. Accordingly, you should read the following discussion of our consolidated results of operations in conjunction with the discussion of the operating performance of our business segments that follows.
Consolidated Results of Operations
Consolidated results of operations were as follows:
Three Months Ended 
March 31,
(in thousands)2021Change2020
Operating revenues$540,921 30.6 %$414,223 
Cost of revenues, excluding depreciation and amortization(264,395)14.0 %(231,900)
Selling, general and administrative expenses, excluding depreciation and amortization(144,026)12.8 %(127,711)
Acquisition and related integration costs(28,645)(4,910)
Restructuring costs(7,050)— 
Depreciation and amortization of intangible assets(39,507)(27,345)
Gains (losses), net on disposal of property and equipment(80)(1,433)
Operating income57,218 20,924 
Interest expense(43,882)(25,798)
Defined benefit pension plan income (expense)7 (1,026)
Gains on sale of business81,784 — 
Gains (losses) on stock warrants(67,244)— 
Miscellaneous, net(4,851)1,114 
Income (loss) from continuing operations before income taxes23,032 (4,786)
Provision for income taxes(19,529)(2,412)
Income (loss) from continuing operations, net of tax3,503 (7,198)
Income (loss) from discontinued operations, net of tax2,064 (4,611)
Net income (loss)$5,567 $(11,809)
  Three Months Ended 
March 31,
(in thousands) 2020 Change 2019
       
Operating revenues $430,906
 47.5% $292,163
Employee compensation and benefits (149,919) 36.0% (110,203)
Programming (144,969) 47.9% (97,995)
Other expenses (87,080) 41.7% (61,442)
Acquisition and related integration costs (4,910)   (3,480)
Restructuring costs —
   (938)
Depreciation and amortization of intangible assets (27,915)   (17,792)
Gains (losses), net on disposal of property and equipment (1,433)   (173)
Operating income 14,680
   140
Interest expense (25,798)   (8,916)
Defined benefit pension plan expense (1,026)   (1,572)
Miscellaneous, net 1,114
   (800)
Loss from operations before income taxes (11,030)   (11,148)
(Provision) benefit for income taxes (779)   4,334
Net loss $(11,809)   $(6,814)

On September 19, 2019,January 7, 2021, we acquired eight television stations from the Nexstar-Tribune transaction, and on May 1, 2019, we acquired 15 television stations from Cordillera. These are referred to as the "acquired stations" in the discussion that follows.national broadcast network ION. The inclusion of operating results from these businessesthis business for the periods subsequent to theirthe acquisition impacts the comparability of our consolidated and segment operating results.

Operating revenues increased $139$127 million or 47%31% for the first three months of 20202021 when compared to the prior period.year quarter. Excluding the acquired stations,impact of ION, as well as the impact of the WPIX television station that was sold in the fourth quarter of 2020, operating revenues increased 15%.5.0% year-over-year. Higher political advertising revenue and retransmission revenuerevenues in our Local Media group and overall growth withinin our National Media businesseslegacy Scripps Networks operations contributed to the remainderyear-over-year increase. These revenue increases were partially offset by a decline in same-station political revenue of the increase. Weakness$16.6 million in economic conditions toward the endthis non-election year.

Costs of revenues, which are comprised of programming costs and costs associated with distributing our content, increased $32.5 million or 14% for the first quarter, reflectingthree months of 2021 when compared to the impactprior year quarter. Programming costs,
F-22

which represent the primary driver of the COVID-19


pandemic, negatively affected spending from our advertisers. We estimate that our consolidatedfluctuation in costs of revenues, primarily at Local Media, were impacted by about $10increased $37.0 million in the first quarter of 2020. While we face a period of uncertainty regarding the duration of the pandemic and the extent of the impact on our operations, we do expect that revenue will continue to be under pressure for the remainder of 2020. We do not expect revenue from retransmission fees, political advertising and subscription fees to be significantly impacted by the economic downturn, which accounts for about 50% of our consolidated revenue.

Employee compensation and benefits increased $39.7 million or 36% for the first three months of 2020 when2021 compared to the prior period.year quarter. Excluding the acquired stations, employee compensationimpacts of the ION acquisition and benefitsthe WPIX disposition, programming costs increased 5.8% in the quarter due to the annual merit increase that occurred in March 2019, as well as expansion of our National Media group throughout 2019.

Programming expense increased $47.0$15.9 million or 48% in the first three months12% year-over-year as a result of 2020 when compared to the prior period. Excluding the acquired stations, programming expense increased 20% in the quarter due to higher network affiliation fees at our Local Media and Scripps Networks stations, reflecting contractual rate increases, as well as an increase in programming costs associated with our National Media businesses, Katzlegacy Scripps Networks operations.

Selling, general and Stitcher.

Otheradministrative expenses are primarily comprised of sales, marketing and advertising expenses, research costs and costs related to corporate administrative functions. Selling, general and administrative expenses increased $25.6$16.3 million or 42% in13% for the first three months of 20202021 when compared to the prior period. Excluding the acquired stations, other expenses increased 12% in theyear quarter, primarily driven by increases in rating serviceattributed to incremental costs incurred related to the ION acquisition, as well as higher marketing and promotionadvertising costs for our national brands.legacy Scripps Networks businesses.

Acquisition and related integration costs of $4.9$28.6 million incurred duringin the first three months of 20202021 primarily reflect contract termination costsinvestment banking, legal fees and professional service costs incurred to complete and integrate the Cordillera and Nexstar-Tribune television stations.ION acquisition, which closed on January 7, 2021.

ForRestructuring costs of $7.1 million incurred in the first three months ended 2019, restructuring costs were $0.9 million. These restructuringof 2021 reflect charges reflect severance, outside consulting feesincurred for the write-downs of both capitalized carriage agreement payments and other costs associated with our previously announced changes in management and operating structure.certain Newsy intangible assets.

Depreciation and amortization of intangible assets increased from $17.8 million in 2019 to $27.9$27.3 million in 2020 to $39.5 million in 2021 primarily due to the acquired stations.acquisition of ION.

Interest expense increased in 2020the first three months of 2021 due to the issuance of a $765new debt to finance the ION acquisition, which included $550 million term loan B in May 2019 and issuance of senior secured notes, $500 million of senior unsecured notes and an $800 million term loan issued upon the close of the acquisition.

In the first quarter of 2021, we recognized an $81.8 million pre-tax gain from the disposition of the Triton business. The transaction closed on March 31, 2021 for total net proceeds of $225 million.

The first quarter of 2021 includes a $67.2 million non-cash charge related to our outstanding common stock warrant. The warrant obligation is marked-to-market each reporting period with the increase in July 2019 in orderour common stock price being the significant contributor to fund the Cordillera and Nexstar-Tribune acquisitions.a higher valuation.

The effective income tax rate was (7)%85% and 39%(50)% for the three months ended March 31, 20202021 and 2019,2020, respectively. Other 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, and excess tax benefits or expense from the exercise and vesting of share-based compensation awards ($1.01.3 million benefit in 2021 and $1.0 million expense in 20202020), state deferred rate changes and $0.6state NOL valuation allowance changes ($1.2 million benefit in 2019)2021 and $4 million expense in 2020). Additionally, in the first quarter of 2020,2021, we had a net discrete tax provision charge of $4.0$17.1 million related to state deferred rate changesa taxable gain on the sale of our Triton business, and state net operating loss valuation allowance reductions.a $1.0 million discrete tax provision charge related to nondeductible transaction costs for the ION acquisition. Finally, a non-deductible expense of $70.7 million was recorded in the first quarter of 2021 related to issuance costs and unrealized losses on mark-to-market adjustments recorded on the common stock warrants issued in connection with the ION acquisition.

Discontinued Operations

Discontinued operations reflect the historical results of our Stitcher operations. During the second quarter of 2020, our Board of Directors approved the sale of our Stitcher podcasting business and we signed a definitive agreement for its sale on July 10, 2020. The transaction closed on October 16, 2020.






F-23

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

Our respective business segment results reflect the impact of intercompany carriage agreements between our local broadcast television stations and our national networks. We also allocate a portion of certain corporate costs and expenses, including information technology, certain employee benefits and shared services to our business segments. TheThese intercompany agreements and 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.

Effective with the January 7, 2021 close of the ION acquisition, we realigned our internal reporting structure and changed the reporting of our businesses’ operating results to reflect this new structure. Under the new structure, our operating results are reported under Local Media, Scripps Networks and Other segment captions. The Scripps Networks segment is comprised of the ION national network, the Katz multicast networks and the Newsy national news network. The operating results of our recently sold Triton business, and the other national businesses that were previously reported in our National Media segment, are aggregated with our remaining business activities in the Other segment caption.

Information regarding the operating performance of our business segments and a reconciliation of such information to the condensed consolidated financial statements is as follows:
 Three Months Ended 
March 31,		 Three Months Ended 
March 31,
(in thousands) 2020 Change 2019(in thousands)2021Change2020
      
Segment operating revenues:      Segment operating revenues:
Local Media $321,804
 58.2 % $203,387
Local Media$312,581 (3.8)%$324,933 
National Media 107,602
 23.2 % 87,317
Scripps NetworksScripps Networks213,660 76,755 
Other 1,500
 2.8 % 1,459
Other18,121 15.7 %15,664 
Intersegment eliminations Intersegment eliminations(3,441)10.0 %(3,129)
Total operating revenues $430,906
 47.5 % $292,163
Total operating revenues$540,921 30.6 %$414,223 
Segment profit (loss):      Segment profit (loss):  
Local Media $55,977
 63.8 % $34,173
Local Media$55,937 (5.4)%$59,106 
National Media 11,785
 

 4,941
Scripps NetworksScripps Networks92,203 9,969 
Other (170) (60.7)% (433)Other3,281 (21.7)%4,191 
Shared services and corporate (18,654) 15.4 % (16,158)Shared services and corporate(18,921)1.4 %(18,654)
Acquisition and related integration costs (4,910)   (3,480)Acquisition and related integration costs(28,645)(4,910)
Restructuring costs —
   (938)Restructuring costs(7,050)— 
Depreciation and amortization of intangible assets (27,915) 

 (17,792)Depreciation and amortization of intangible assets(39,507)(27,345)
Gains (losses), net on disposal of property and equipment (1,433)   (173)Gains (losses), net on disposal of property and equipment(80)(1,433)
Interest expense (25,798)   (8,916)Interest expense(43,882)(25,798)
Defined benefit pension plan expense (1,026)   (1,572)
Defined benefit pension plan income (expense)Defined benefit pension plan income (expense)7 (1,026)
Gains on sale of businessGains on sale of business81,784 — 
Gains (losses) on stock warrantsGains (losses) on stock warrants(67,244)— 
Miscellaneous, net 1,114
   (800)Miscellaneous, net(4,851)1,114 
Loss from operations before income taxes $(11,030)   $(11,148)
Income (loss) from continuing operations before income taxesIncome (loss) from continuing operations before income taxes$23,032  $(4,786)

F-24

Local Media — Our Local Media segment includes our 6061 local broadcast stations and their related digital operations. It is comprised of 18 ABC affiliates, 11 NBC affiliates, nine CBS affiliates and four FOX affiliates. We also have 1312 CW affiliates - fivefour on full power stations and eight on multicast; two MyNetworkTV affiliates; twothree independent stations and nine10 additional low power stations. Our Local Media segment earns revenue primarily from the sale of advertising to local, national and political advertisers and retransmission fees received from cable operators, telecommunications companies and satellite carriers. We also receive retransmission fees from over-the-top virtual MVPDs such as Hulu, YouTubeTV and AT&T Now.
National television networks offer affiliates a variety of programs and sell the majority of advertising within those programs. In addition to network programs, we broadcast internally produced local and national programs, syndicated programs, sporting events and other programs of interest in each station's market. News is the primary focus of our locally produced programming.
The operating performance of our Local Media group is most affected by local and national economic conditions, particularly conditions within the automotive and services categories, and by the volume of advertising purchased by campaigns for elective office and political issues. The demand for political advertising is significantly higher in the third and fourth quarters of even-numbered years.
Operating results for our Local Media segment were as follows:
 Three Months Ended 
March 31,
(in thousands)2021Change2020
Segment operating revenues:   
Core advertising$152,138 (5.2)%$160,522 
Political1,311 18,720 
Retransmission and carriage fees155,659 10.9 %140,327 
Other3,473 (35.3)%5,364 
Total operating revenues312,581 (3.8)%324,933 
Segment costs and expenses:
Employee compensation and benefits106,828 (4.3)%111,596 
Programming110,330 7.9 %102,273 
Other expenses39,486 (24.0)%51,958 
Total costs and expenses256,644 (3.5)%265,827 
Segment profit$55,937 (5.4)%$59,106 
  Three Months Ended 
March 31,
(in thousands) 2020 Change 2019
       
Segment operating revenues:  
    
Core advertising $160,522
 41.5% $113,404
Political 18,720
 

 880
Retransmission 137,198
 60.7% 85,377
Other 5,364
 44.0% 3,726
Total operating revenues 321,804
 58.2% 203,387
Segment costs and expenses:   

  
Employee compensation and benefits 111,596
 49.0% 74,911
Programming 102,273
 68.4% 60,717
Other expenses 51,958
 54.7% 33,586
Total costs and expenses 265,827
 57.1% 169,214
Segment profit $55,977
 63.8% $34,173

On September 19, 2019,December 30, 2020, we acquired eightcompleted the sale of our WPIX television stations fromstation. The exclusion of the Nexstar-Tribune transaction, and on May 1, 2019, we acquired 15 television stations from Cordillera. These stations are referred to as the "acquired stations" in the discussion that follows. The inclusion ofstation's operating results from these stations for the periods subsequent to their acquisitionthe disposition impacts the comparability of our Local Media segment operating results.

Revenues

Total Local Media revenues increased $118decreased $12.4 million or 58% in3.8% for the first three months of 20202021 when compared to the prior period.year quarter. Excluding the acquired stations,impact of the WPIX disposition, Local Media revenues increased 11% in the quarter, driven by higher political revenues in an election year and an increase$9.9 million or 3.3% year-over-year. Increases in retransmission revenue,revenues on a same-station basis of $23.2 million were partially offset by decreases in political revenues during this non-election year. While retransmission revenues have been affected by subscriber losses by the MVPDs, particularly among satellite providers, rate increases have more than offset those subscriber declines. Core advertising revenues on a 5.6% decrease in core advertising revenue. Wesame-station basis increased $3.4 million or 2.3% when compared to the prior year quarter; however, we estimate that the impact of the COVID-19 pandemic reduced our core advertising revenues by at least $8 million in the first quarter of 2020. Retransmission revenue increased during the first quarter of 2020 as we renegotiated retransmission consent contracts covering just over 20% of our subscriber households. In addition, on December 31, 2019, our agreement with Comcast reset, and for those stations we owned prior to 2019, we began to receive retransmission fees for which we had historically received little to no compensation. We expect to renegotiate retransmission consent agreements covering an additional 20% of our subscribers during the remainder of 2020.

Our Local Media revenues are being impacted due to weakened economic conditions resulting from the COVID-19 pandemic, primarily our core advertising revenues. We do not expect our retransmission revenues or political advertising revenues, which are more than 55% of Local Media revenues, to be significantly impacted. A number of factors will ultimately have an impact on our second quarter core advertising revenues, including the pace of businesses re-opening and consumer


spending rebounding across our markets. Core advertising revenues decreased 40% in April 2020 from March 2020 as our markets felt the impact of state governments' stay-at-home and business shutdown orders. Based on our advertising pacing, we expect core advertising revenue to improve from April 2020 to May 2020 and from May 2020 to June 2020.

Costs and expenses

Employee compensation and benefits increased $36.7decreased $4.8 million or 49% in4.3% for the first three months of 2020.2021 when compared to the prior year quarter. Excluding the acquired stations,impact of the expenseWPIX disposition, employee compensation and benefits increased 4.5% due$3.7 million or 3.6%. The increase in employee compensation and benefits is primarily attributed to the annual merit increase that occurred in March 2019.higher bonus compensation year-over-year.

F-25

Programming expense increased $41.6$8.1 million or 68% in7.9% for the first three months of 20202021 when compared to the prior period.year quarter. Excluding the acquired stations, programmingimpact of the WPIX disposition, the expense increased 23% in$10.9 million or 11% reflecting the quarter primarily due toimpact of higher network affiliation fees. Network affiliation fees have been increasing industry-wide due to higher rates on renewals, as well as contractual rate increases during the terms of the affiliation agreements, and we expect that they may continue to increase overagreements.

Excluding the next several years.

Otherimpact of the WPIX disposition, other expenses increased $18.4decreased $7.2 million or 55%15% in the first three months of 20202021 when compared to the prior period, mainly dueyear quarter. In response to the acquired stations. Excludingweakened economic conditions created by COVID-19, we implemented various cost saving initiatives through general expense reductions in areas of travel, entertainment and marketing toward the acquired stations, other expenses increased just 1.0% inend of the quarter.

first quarter of 2020.
National Media
Scripps Networks — Our National MediaScripps Networks segment is comprised of the operations of our national media businesses, including fivesix national broadcast networks the Katz networks; podcast industry-leader, Stitcher, - ION, Bounce, Grit, Laff, Court TV and its advertising network Midroll Media;Court TV Mystery and next-generation national news network, Newsy; a global leader in digital audio technology and measurement services, Triton; and other national brands.Newsy. Our National MediaScripps Networks group earns revenue primarily through the sale of advertising. Intrasegment revenue eliminations totaled $0.4
Operating results for our Scripps Networks segment were as follows:
 Three Months Ended 
March 31,
(in thousands)2021Change2020
Total operating revenues$213,660 $76,755 
Segment costs and expenses:
Employee compensation and benefits23,637 74.6 %13,536 
Programming61,627 90.3 %32,392 
Other expenses36,193 73.5 %20,858 
Total costs and expenses121,457 81.9 %66,786 
Segment profit$92,203 $9,969 

On January 7, 2021, we acquired the national broadcast network ION. The inclusion of operating results from this business for the periods subsequent to the acquisition impacts the comparability of our consolidated and segment operating results.

Revenues

Scripps Networks revenues, which are primarily comprised of advertising revenues, increased $137 million infor the first three months of 2020 and are included in the other revenue caption.
Operating results for our National Media segment were as follows:
  Three Months Ended 
March 31,
(in thousands) 2020 Change 2019
       
Segment operating revenues:      
Katz $65,891
 30.7 % $50,395
Stitcher 17,128
 13.4 % 15,104
Newsy 10,864
 29.7 % 8,378
Triton 10,347
 (1.1)% 10,462
Other 3,372
 13.2 % 2,978
Total operating revenues 107,602
 23.2 % 87,317
Segment costs and expenses:   
  
Employee compensation and benefits 22,820
 11.2 % 20,525
Programming 42,696
 14.1 % 37,418
Other expenses 30,301
 24.0 % 24,433
Total costs and expenses 95,817
 16.3 % 82,376
Segment profit $11,785
 

 $4,941

Revenues

National Media revenues increased $20.3 million or 23% in the first three months of 20202021 when compared to the prior period. Katz's revenues increased $15.5 million or 31% asyear quarter. The amount of advertising revenue we earn is a result of growth on all of its networks, as well as the launchfunction of the new network, Court TV, in May 2019. Newsy's revenues increased $2.5 million or 30% primarily from growthpricing negotiated with advertisers, the number of advertising on over-the-top platforms. Stitcherspots sold and our other national brands had moderate revenue growth, while Triton's revenue remained relatively flat year-over-year. Due to weakened economic conditions as a resultthe audience impressions delivered. The impact of the COVID-19 pandemic, we estimate thatION acquisition and an overall high-teens percentage increase in year-over-year direct response adverting rates for our National Media revenueslegacy Scripps Networks businesses were the primary drivers of the increase in revenues. Advertising rates in the latter half of the 2020 first quarter were impacted by approximately $1.3 million in the first quarter of 2020 and have felt the effects of the soft advertising environment into the second quarter. National Media revenues in April 2020 were down 19% from March 2020 revenues, but we are seeing stabilization in revenues for the remainder of the second quarter.COVID-19 pandemic.




Costs and expenses

Employee compensation and benefits increased $2.3$10.1 million or 11% in75% for the first three months of 20202021 when compared to the prior period, mainly attributableyear quarter. Full-time equivalent employees increased over 70% when compared to increased hiring at Katzthe first quarter of 2020, reflecting the impact of the ION acquisition and Newsycontinued investment to support the growth of our legacy Scripps Networks' businesses. Higher year-over-year bonus compensation also contributed to the brands.increase in employee compensation and benefits.

Programming expense increased $5.3$29.2 million or 14% in90% for the first three months of 20202021 when compared to the prior period. Programming expense includesyear quarter. Costs attributed to acquired ION programming and ION affiliation fees totaled $23.9 million for the amortization and distributionfirst quarter of programming for Katz, podcast production costs and other programming costs.2021. The overallremaining increase is attributable to the continual investment in Katz programming,primarily driven by higher affiliate fees related to thereflecting both contractual rate increases and increased distribution of all ofacross the Katz networks and the additional programming costs for our podcast business as a result of higher revenue.legacy Scripps Networks' businesses.

Other expenses increased $5.9$15.3 million or 24% in74% for the first three months of 20202021 when compared to the prior period. Katz hadyear quarter. The increase primarily reflects incremental occupancy, marketing and other administrative costs related to the ION acquisition and $2.8 million of higher rating expenses due to contractual increases and the addition of Court TV ratings. Additionally,marketing, advertising and promotionrating services costs were higher dueattributed to the launch of Court TV, promotion of Bounce network's original programming and Newsy's audience extension product.our legacy Scripps Networks’ businesses.

F-26

Shared services and corporate

We centrally provide certain services to our business segments. Such services include accounting, tax, cash management, procurement, human resources, employee benefits and information technology. The business segments are allocated costs for such services at amounts agreed upon by management. Such allocated costs may differ from amounts that might be negotiated at arms-length. Costs for such services that are not allocated to the business segments are included in shared services and corporate costs. Shared services and corporate also includes unallocated corporate costs, such as costs associated with being a public company.




Liquidity and Capital Resources

Our primary source of liquidity is our available cash and borrowing capacity under our revolving credit facility. Our primary source of cash is generated from our ongoing operations. Cash from operations can be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic. At the end of March 2020,31, 2021, we had approximately $180$538 million of cash on hand and about $28$393 million of additional borrowing capacity under our revolving credit facility. Based on our current business plan, we believe our cash flow from operations will provide sufficient liquidity during this economic downturn to meet the Company’s operating needs for the next 12 months. In addition, the Company’s liquidity is enhanced through the federal government’s stimulus measures, including the deferral of social security taxes and pension contributions; tax relief on the use of net operating losses and interest expense limitations; and a few other provisions that either bring in cash this year or push out cash payments to 2021 and beyond. While we currently do not anticipate liquidity constraints, in the event of a prolonged period of economic weakness there are additional measures we could take to further control cost, slow our working capital needs and generate cash.

Debt Covenants

Our term loans and our unsecured notes do not have maintenance covenants. The earliest maturity of our term loans and unsecured notes is the fourth quarter of 2024. Our revolving credit facility permits maximum leverage of 4.54.75 times the two-year average earnings before interest, taxes, depreciation and amortization (EBITDA) as defined by our credit agreement, through second quarter of 2021,2022, at which point it steps down to 4.254.5 times. Based upon our current outlook, we expect to be in compliance with that covenant.

Cash Flows - Operating Activities

Cash flows from operating activities for the three months ended March 31 are as follows:
Three Months Ended 
March 31,
(in thousands)20212020
Cash Flows from Operating Activities:
Income (loss) from continuing operations, net of tax$3,503 $(7,198)
Adjustments to reconcile net income (loss) from continuing operations to net cash flows from operating activities:
Depreciation and amortization39,507 27,345 
Losses (gains), net on disposal of property and equipment80 1,433 
Gains on sale of business(81,784)— 
(Gains) losses on stock warrants67,244 — 
Programming assets and liabilities(37,042)(28,289)
Restructuring impairment charges7,050 — 
Deferred income taxes6,951 16,305 
Stock and deferred compensation plans11,092 2,143 
Pension expense, net of contributions(5,987)(4,034)
Other changes in certain working capital accounts, net41,045 8,806 
Miscellaneous, net(1,565)1,630 
Net cash provided by operating activities from continuing operations50,094 18,141 
Net cash used in operating activities from discontinued operations— (4,440)
Net operating activities$50,094 $13,701 

F-27

  Three Months Ended 
March 31,
(in thousands) 2020 2019
     
Cash Flows from Operating Activities:    
Net loss $(11,809) $(6,814)
Adjustments to reconcile net loss to net cash flows from operating activities:    
Depreciation and amortization 27,915
 17,792
(Gain)/loss on sale of property and equipment 1,433
 173
Programming assets and liabilities (28,834) (1,133)
Deferred income taxes 14,672
 (4,341)
Stock and deferred compensation plans 2,208
 7,352
Pension expense, net of contributions (4,034) (408)
Other changes in certain working capital accounts, net 10,996
 (25,776)
Miscellaneous, net 1,154
 (37)
Net cash provided by (used in) operating activities $13,701
 $(13,192)

In 2021 and 2020, cash provided by operating activities from continuing operations was $13.7$50.1 million compared to $13.2and $18.1 million, of cash used in operating activities in 2019.respectively. The $27$32 million increase in cash provided by operating activities from continuing operations was attributable to a $26$78 million year-over-year increase in segment profit combined with a $37 million year-over-yearprofit. This increase in cash provided from changes in certain working capital accounts. These increases in cash flow werewas partially offset by a $21$5 million increase in interest paid and year-over-year cash outlay increase of $28$9 million for programming investments in excess of programming amortization. InterestThe increase in interest payments increased due toreflects the issuanceimpact of a $765the $800 million term loan B issued in May 2019 and issuance of $500 million of senior unsecured notes in July 2019 in orderJanuary 2021 related to fund the Cordillera and Nexstar-Tribune acquisitions.ION acquisition.

The primary factors affecting changes in certain working capital accounts are described below:

Year-over-year cash provided from changes in accounts receivable increased $8 million in 2020 compared to 2019 due to political advertising revenue recognized during an election year, which is paid in advance and displaces traditional local and national advertising.


Timing of payments made on accrued liabilities increased the year-over year cash provided from working capital by $19 million. Timing of Katz carriage fee payments accounted for nearly $18 million of this increase.
•
The accrual of payroll and lower year-over-year annual incentive payments increased cash provided from working capital by $8 million.

Cash Flows - Investing Activities

Cash flows from investing activities for the three months ended March 31 are as follows:
 Three Months Ended 
March 31,		Three Months Ended 
March 31,
(in thousands) 2020 2019(in thousands)20212020
    
Cash Flows from Investing Activities:    Cash Flows from Investing Activities:
Acquisitions, net of cash acquired $—
 $(55,199)Acquisitions, net of cash acquired$(2,679,798)$— 
Proceeds from sale of Triton Digital, net of cash disposedProceeds from sale of Triton Digital, net of cash disposed224,990 — 
Acquisition of intangible assets (525) (404)Acquisition of intangible assets(430)(525)
Additions to property and equipment (16,210) (13,440)Additions to property and equipment(4,139)(16,165)
Purchase of investments (3,087) (115)Purchase of investments(1,263)(3,087)
Proceeds from FCC repack 2,719
 1,520
Proceeds from FCC repack5,345 2,719 
Miscellaneous, net 773
 1
Miscellaneous, net12 773 
Net cash used in investing activities $(16,330) $(67,637)
Net cash used in investing activities from continuing operationsNet cash used in investing activities from continuing operations(2,455,283)(16,285)
Net cash used in investing activities from discontinued operationsNet cash used in investing activities from discontinued operations— (45)
Net investing activitiesNet investing activities$(2,455,283)$(16,330)

In 20202021 and 2019,2020, we used $16.3 million$2.5 billion and $67.6$16.3 million, respectively, in cash for investing activities.activities from continuing operations. The primary factors affecting ourthese cash flows from investing activities for the periods presented are described below.

•In 2021, we acquired ION for $2.7 billion, net of cash acquired.
•In March 2021, we completed the sale of our Triton business for a total net proceeds of $225 million.
•Capital expenditures increased $2.8decreased $12 million reflecting both the year-over-year due to an increase in spending at Local Media, partially offset by a decrease in year-over-yearimpacts of reduced FCC repack expenditures.expenditures and timing of capital expenditure spend.
•In 2020,2021, we contributed just over $3$1.3 million in cash to our investments.
•In 20202021 and 2019,2020, we received $2.7$5.3 million and $1.5$2.7 million, respectively, in reimbursement proceeds from the FCC.FCC repacking process.
During 2019, we acquired three television stations owned by Raycom Media for $55 million in cash.

In the repacking process associated with the incentive spectrum auction conducted by the FCC in 2017, the FCC has reassigned some stations to new post-auction channels. We do not expect reassignment to new channels to have a material impact on our stations' broadcast signals as viewed in their markets. Twenty-seven of our current full power stations (including nine from recent acquisitions) have been assigned to new channels. The legislation authorizing the incentive auction and repack provides the FCC with up to a $2.75 billion fund to reimburse reasonable costs incurred by stations that are reassigned to new channels in the repack. We expect the FCC fund will be sufficient to cover the costs we would expect to incur for the repack and that our only potential funding risks would be limited to any disagreements with the FCC over reimbursement of expenditures incurred. Reimbursements provided by the FCC are recognized as the cash is received.

We have spent $39.8$49.1 million to date on FCC repack and expect torepack. As of early July 2020, all full power stations were operating on their reassigned channels. We will incur approximately $18 million of additional expendituresincremental costs through the endremainder of 2020.2021 to complete work delayed by the COVID-19 pandemic. We have received total reimbursement proceeds from the FCC of $11.2$5.3 million of which, $2.7 million was received during the three months ended March 31, 2020.2021 and have a remaining FCC repack receivable balance of $7.6 million as of March 31, 2021.

F-28

Cash Flows - Financing Activities
Cash flows from financing activities for the three months ended March 31 are as follows:
Three Months Ended 
March 31,
(in thousands)20212020
Cash Flows from Financing Activities:
Net borrowings under revolving credit facility$— $175,000 
Proceeds from issuance of long-term debt800,000 — 
Proceeds from issuance of preferred stock600,000 — 
Payments on long-term debt(4,653)(2,653)
Payments on financing costs(50,597)— 
Payments for capitalized preferred stock issuance costs(11,526)— 
Dividends paid on common and preferred stock(9,067)(4,108)
Tax payments related to shares withheld for vested stock and RSUs(6,369)(2,266)
Miscellaneous, net(415)(16,574)
Net cash provided by financing activities from continuing operations$1,317,373 $149,399 
  Three Months Ended 
March 31,
(in thousands) 2020 2019
     
Cash Flows from Financing Activities:    
Net borrowings under revolving credit facility $175,000
 $—
Payments on long-term debt (2,653) (750)
Dividends paid (4,108) (4,040)
Repurchase of Class A Common shares —
 (584)
Tax payments related to shares withheld for vested stock and RSUs (2,266) (3,649)
Miscellaneous, net (16,574) (2,862)
Net cash provided by (used in) financing activities $149,399
 $(11,885)

In 2021 and 2020, cash provided by financing activities from continuing operations was $1.3 billion and $149 million, and in 2019,respectively. As of March 31, 2021, we used $11.9 million in cash for financing activities. Due to current uncertainty in the global economy resulting from the COVID-19 pandemic, in order to preserve the Company's financial flexibility, we drew $175 millionhad no outstanding borrowings under our revolving credit facility in March 2020.facility. Other factors impacting our cash flows from financing activities from continuing operations are described below.

We have $900On January 7, 2021, we issued an $800 million term loan B, maturing in 2028, in connection with the closing of the ION acquisition. Additionally, we entered into a Securities Purchase Agreement with Berkshire Hathaway Inc., ("Berkshire Hathaway"), pursuant to which Berkshire Hathaway provided $600 million of unsecuredfinancing in exchange for 6,000 Series A Preferred Shares of the Company. The Preferred Shares, having a face value of $100,000 per share, are perpetual and will be redeemable at the option of the Company beginning on the fifth anniversary of issuance, and redeemable at the option of the holders in the event of a Change of Control (as defined in the terms of the Preferred Shares), in each case at a redemption price of 105% of the face value, plus accrued and unpaid dividends (whether or not declared). Preferred stock dividends, effective through March 15, 2021, were paid in the first quarter totaling $9.1 million.

As of March 31, 2021, we have $1.95 billion of senior notes and $1.0$1.84 billion outstanding balance on our term loans. Our debt hadhas required annual principal payments of nearly $2.7 million in$18.6 million.

In November 2020, our Board of Directors authorized a debt repurchase program pursuant to which we may reduce, through redemptions or open market purchases and retirement, a combination of the first quarteroutstanding principal balance of 2020our senior secured and will have required paymentssenior unsecured notes, and the additional indebtedness incurred with the closing of $8.0 million for the remainderION acquisition. The authorization permits an aggregate principal amount reduction of 2020.

We paid quarterly dividends of 5 cents per share, totaling $4.1up to $500 million and $4.0 million in 2020 and 2019, respectively.expires on March 1, 2023.

In November 2016, our Board of Directors authorized a share repurchase program of up to $100 million of our Class A Common shares, which expired on March 1, 2020. In February 2020, our Board of Directors authorized a new share repurchase program of up to$100to $100 million of our Class A Common shares through March 1, 2022. Shares can be repurchased under the authorization via open market purchases or privately negotiated transactions, including accelerated stock repurchase transactions, block trades, or pursuant to trades intended to comply with Rule 10b5-1 of the Securities Exchange Act of 1934. No shares were repurchased under either authorization during the first quarter of 2020 as the Company has temporarily suspended share buybacks. During the first three months of 2019,2021 and 2020. Under the terms of the Preferred Shares, we repurchased $0.6 million of shares.are prohibited from paying dividends on and repurchasing our common shares until all Preferred Shares are redeemed.

Other
We are requiredexpect to contribute an additional $27approximately $19.8 million during the remainder of 2021 to fund our qualified defined benefit pension plan and our SERPs in order to meet our 2020 funding requirements under the provisions of the Pension Funding Equity Act of 2004 and the Pension Protection Act of 2006. In response to COVID-19, President Donald Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The CARES Act provides a provision to defer 2020 pension contributions until January 1, 2021. We anticipate delaying the payment of 2020 pension contributions in accordance with the CARES Act provision.


F-29


Off-Balance Sheet Arrangements and Contractual Obligations
Off-Balance Sheet Arrangements
There have been no material changes to the off-balance sheet arrangements disclosed in our 20192020 Annual Report on Form 10-K.

F-30

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make a variety of decisions that affect reported amounts and related disclosures, including the selection of appropriate accounting principles 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. We are committed to incorporating accounting principles, assumptions and estimates that promote the representational faithfulness, verifiability, neutrality and transparency of the accounting information included in the financial statements.

Note 1 to the Consolidated Financial Statements included in our 20192020 Annual Report on Form 10-K describes the significant accounting policies we have selected for use in the preparation of our financial statements and related disclosures. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made and if different estimates that reasonably could have been used or changes in estimates that are likely to occur could materially change the financial statements. We believe the accounting for acquisitions, goodwill and indefinite-lived intangible assets and pension plans to be our most critical accounting policies and estimates. A detailed description of these accounting policies is included in the Critical Accounting Policies section of Management's Discussion and Analysis of Financial Condition and Results of Operations included in our 20192020 Annual Report on Form 10-K.

Recent Accounting Guidance
Refer to Note 2 –2. Recently Adopted and Issued Accounting Standards of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for further discussion.








F-31

Quantitative and Qualitative Disclosures About Market Risk
Earnings and cash flow can be affected by, among other things, economic conditions and interest rate changes. We are also exposed to changes in the market value of our investments.
Our objectives in managing interest rate risk are to limit the impact of interest rate changes on our earnings and cash flows and to reduce overall borrowing costs. We may use derivative financial instruments to modify exposure to risks from fluctuations in interest rates. In accordance with our policy, we do not use derivative instruments unless there is an underlying exposure, and we do not hold or enter into financial instruments for speculative trading purposes.
We are subject to interest rate risk associated with our credit agreement, as borrowings bear interest at LIBOR plus respective fixed margin spreads or spreads determined relative to our Company’s leverage ratio. Accordingly, the interest we pay on our borrowings is dependent on interest rate conditions and the timing of our financing needs. With consideration for the LIBOR floor that is present in our term loans due in 2026 and 2028, a 100 basis point increase in LIBOR would increase annual interest expense on our variable rate borrowings by approximately $8.4 million.
The following table presents additional information about market-risk-sensitive financial instruments:
 As of March 31, 2021As of December 31, 2020
(in thousands)Cost
Basis		Fair
Value		Cost
Basis		Fair
Value
Financial instruments subject to interest rate risk:    
Revolving credit facility$— $— $— $— 
Senior secured notes, due in 2029550,000 541,063 550,000 573,375 
Senior unsecured notes, due in 2025400,000 409,000 400,000 409,000 
Senior unsecured notes, due in 2027500,000 516,875 500,000 522,500 
Senior unsecured notes, due in 2031500,000 498,125 500,000 525,800 
Term loan, due in 2024289,500 289,138 290,250 288,436 
Term loan, due in 2026749,757 747,414 751,660 745,083 
Term loan, due in 2028798,000 795,506 — — 
Long-term debt, including current portion$3,787,257 $3,797,121 $2,991,910 $3,064,194 
Financial instruments subject to market value risk:    
Investments held at cost$4,745 (a)$4,564 (a)
(a) Includes securities that do not trade in public markets, thus the securities do not have readily determinable fair values. We estimate the fair value of these securities approximates their carrying value.


F-32
  As of March 31, 2020 As of December 31, 2019
(in thousands) 
Cost
Basis
 
Fair
Value
 
Cost
Basis
 
Fair
Value
         
Financial instruments subject to interest rate risk:        
Revolving credit facility $175,000
 $175,000
 $—
 $—
Senior unsecured notes, due in 2025 400,000
 358,000
 400,000
 409,000
Senior unsecured notes, due in 2027 500,000
 440,000
 500,000
 525,000
Term loan, due in 2024 292,500
 279,338
 293,250
 293,617
Term loan, due in 2026 757,369
 727,074
 759,272
 763,547
Long-term debt, including current portion $2,124,869
 $1,979,412
 $1,952,522
 $1,991,164
         
Financial instruments subject to market value risk:        
Investments held at cost $4,493
 (a)
 $4,405
 (a)
         
(a) Includes securities that do not trade in public markets, thus the securities do not have readily determinable fair values. We estimate the fair value of these securities approximates their carrying value.




Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Scripps management is responsible for establishing and maintaining adequate internal controls designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company’s internal control over financial reporting includes those policies and procedures that:
1.pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
2.provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the directors of the Company; and
3.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error, collusion and the improper overriding of controls by management. Accordingly, even effective internal control can only provide reasonable but not absolute assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.
The effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) was evaluated as of the date of the financial statements. This evaluation was carried out under the supervision of and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures are effective.
There were no changes to the Company's internal controls over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. We acquired 15 television stations from Cordillera Communications, LLC on May 1, 2019 and eight television stations fromOn January 7, 2021, we completed the Nexstaracquisition of the ION Media Group,Networks, Inc. transaction with Tribune Media Company on September 19, 2019,, and have excluded these businessesthe business from management's reporting on internal control over financial reporting, as permitted by SEC guidance, for the quarter ended March 31, 2020. The acquired operations have2021. ION has total assets of approximately $1.3$3.3 billion, or 35%49% of our total assets as of March 31, 2020,2021, and revenues of $95.8$126 million, or 22%23% of our total revenues for the three months ended March 31, 2020.2021.


F-31F-33