UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 8, 2017
THE E.W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)
Ohio | 0-16914 | 31-1223339 |
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification Number) |
312 Walnut Street Cincinnati, Ohio | 45202 | |||
(Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: (513) 977-3000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
THE E.W. SCRIPPS COMPANY
INDEX TO CURRENT REPORT ON FORM 8-K
Item No. | Page | |
7.01 | Regulation FD Disclosure | 3 |
9.01 | Financial Statements and Exhibits | 3 |
2
Item 7.01 Regulation FD Disclosure
Beginning on August 8, 2017, The E.W. Scripps Company (the "Company") intends to meet with and make presentations to prospective lenders in connection with a proposed senior credit facility financing, the proceeds of which are expected to be used to pay for the pending acquisition of Katz Broadcasting networks, which is expected to close on October 2, 2017. These presentations are expected to include certain strategic business and financial information relating to the Company's historical and expected results of operations and financial condition (after giving effect to various completed and pending acquisitions).
A copy of the slides to be used in connection with such meetings and presentations is furnished as Exhibit 99.1 hereto and incorporated herein by this reference.
The information set forth under this Item 7.01 is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
Exhibit Number | Description of Item | |
99.1 | Prospective lender meeting slides | |
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
THE E.W. SCRIPPS COMPANY | ||
BY: | /s/ Douglas F. Lyons | |
Douglas F. Lyons | ||
Vice President and Controller | ||
(Principal Accounting Officer) | ||
Dated: August 8, 2017
4
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LENDER PRESENTATION
AUGUST 8, 2017
Exhibit 99.1
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1
This presentation contains forward-looking statements that involve a number of risks and
uncertainties. For this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the
words “believes,” “anticipates,” “plans,” “expects,” “intends,” and similar expressions are intended
to identify forward-looking statements. Important factors that could cause actual results to differ
materially from those indicated by such forward-looking statements are set forth in The E.W.
Scripps Company’s annual report on Form 10-K for the year ended Dec. 31, 2016, and on Form
10-Q for the quarter ended Jun. 30, 2017 as filed with the Securities and Exchange Commission.
We undertake no obligation to publicly update any forward-looking statements to reflect events or
circumstances after the date the statement is made.
SAFE HARBOR / DISCLOSURES
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2
•On August 1st, 2017, The E.W. Scripps Company (“Scripps”, “SSP”, or the “Company”) announced that it
had reached an agreement to acquire Bounce Media, LLC and Katz Broadcasting Holdings, LLC (together
“Katz”) for $292 million1
• Provides Scripps with four fast-growing, target-audience broadcast networks, delivered through
multicast – over-the-air on digital subchannels of existing television stations
• Scripps will add Katz’s talented management team and benefit from a proven strategy to develop and
launch target-audience broadcast networks
• Scripps intends to finance the acquisition through the issuance of a new $250 million 7-year Senior
Secured Term Loan B (“Term Loan B”) and cash on hand
• Pro forma 6/30/17 L8QA Net Secured and Net Leverage remain conservative at 0.9x and 3.4x,
respectively
• Term Loan B to fund concurrent with the acquisition closing (expected early-October)
1 Net of Scripps current equity ownership of 5% in Katz Broadcasting Holdings, LLC. Scripps will receive Katz cash on hand at closing of ~$10 million as of June 30, 2017
SCRIPPS ACQUIRES FAST-GROWING,
TARGET-AUDIENCE BROADCAST NETWORKS
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ACQUISITION OVERVIEW
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• National reach through leading fast-growing, target-audience broadcast networks
• Over-the-air ecosystem is evolving and growing. 22% of adults 18 to 34 watch TV OTA
• Over-the-air is integrating with over-the-top services in a one remote world
• Significant financial returns expected. The four networks are projected to generate about $180 million
in revenue and about $30 million in segment profit in 2018
4
Jonathan Katz, a former Turner programming executive, formed Bounce in
2011 to launch the first African-American multicast network, leveraging
broadcast stations’ subchannels for distribution. He has since launched three
additional fast-growing, target-audience broadcast networks.
All Networks Reach Close to 100 Million Households
Acquisition Overview
WHAT SCRIPPS IS ACQUIRING AND WHY
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$88
$129
5
$ in millions
2015 2016
Historical Katz Revenue
OVERVIEW OF THE NETWORKS
• Bounce is the 5th ranked network among
African-Americans in primetime, targeting
adults 18-34 and features original dramas,
comedies, news / public affairs and live sports
• Launched 2011
• Fastest-growing African-American network
on television reaching 94% of U.S. African-
American households
• Targets adults (18-49)
• Launched 2015
• Reaches 95MM households
• Classic network comedies, early stages of
programming growth
Biggest Collection of
Big-Time Funny
True Crime
Documentary
and Drama
• Targets women (25-54)
• Launched 2014
• Reaches 95MM households
• Crime-oriented movies and shows, with six
original series
• Targets men (25+)
• Launched 2014
• Reaches 96MM households
• Action, adventure movies and television
programming
“Television with
a Backbone”
First and Only
African-American-
Focused Multicast
Network
• Each network reaches close to 100 million or
80%+ of U.S. households
• Provides national scale and reach
• Mix of original and syndicated programming
• Direct response and general market advertising
• Significant expected financial returns
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Essentially 100% Advertising Revenue Model
6
CONTENT DISTRIBUTION AND MONETIZATION
How is Revenue Generated?
Antennas transmit
multiple channels that
can be distributed
multiple ways
Channel
7.2
Channel
7.1
Channel
7.3
Channel
7.4
• Generates revenue through ad sales
• Pays a carriage fee to local affiliates
Delivery Over New Channels
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E.W. SCRIPPS COMPANY OVERVIEW
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• Scripps is a leading media enterprise with
interests in television and radio
broadcasting as well as local and national
digital media brands
• The three reporting segments are
Television, Radio and Digital
• Presence in 24 television markets and
reaching nearly one in five U.S. television
households
• Operating a collection of local and national
digital brands including:
• Midroll – creates original podcasts and
operates a podcast network
• Newsy – millennial-focused digital video
news service
• Cracked – multi-platform humor and
satire brand
# of Television Stations
33
# of Radio Stations 34 (28 FM / 6 AM)
PF L8QA Q2 2017
Total Revenue
$1,018 million
PF L8QA Q2 2017
Adjusted EBITDA
$165 million
Key Stats
SCRIPPS OVERVIEW
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Wichita, KS
Radio
4 FM, 1 AM
Springfield, MO
Radio 4 FM, 1 AM
Knoxville, TN
Radio
4 FM
Scripps Washington
News Bureau &
Political Sales Office
Green Bay-Appleton, WI
WGBA, WACY
Indianapolis
WRTV
Baltimore
WMAR
Cleveland
WEWS
Cincinnati
WCPO
West Palm Beach
WPTV
Kansas City, MO
KSHB, KMCI
Tulsa, OK
KJRH
Radio
4 FM, 1 AM
Phoenix
KNXV
Buffalo
WKBW
Boise, ID
KIVI
Radio, 4 FM
Las Vegas
KTNV
Tucson
KGUN
KWBA
Radio 3 FM, 1 AM
Omaha, NE
KMTV
Radio
4 FM, 1 AM
Milwaukee
WTMJ
Radio
1 FM 1 AM
Nashville
WTVF
Twin Falls, ID
KSAW-LD
Lansing, MI
WSYM
Ft. Myers – Naples
WFTX
Denver
KMGH, KZCO, KZFC
Bakersfield
KERO
KZKC
San Diego
KGTV
KZSD
Colorado Springs, CO
KZCS Detroit
WXYZ, WMYD
Tampa
WFTS
COAST-TO-COAST PORTFOLIO OF TELEVISION,
RADIO & DIGITAL BRANDS
KATZ
Top 50 Nielsen DMA
TV Markets
Other
TV Markets
Radio Markets Digital Brands Katz
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REBUILDING SCRIPPS FOR GROWTH
10
2008
Complete
separation of
Scripps
Networks
Interactive
2010
Divest
“Peanuts”
and
licensing
2012
Launch original
programming
unit, two
access shows
2014
Buy Newsy
Buy Granite
Stations
2009
Reset
expenses
2011
Combine digital
operations;
announce
investment and
salesforce overbuild
Acquire four
McGraw Hill
TV Stations
2013
Launch D.C.
National
Investigative Unit
2015
Spin/combine
newspapers with
Journal
Merge Journal TV
and radio
operations into
Scripps
Buy Midroll
2016
Buy
Cracked; Stitcher
National brands
move to 45% of
Digital revenue
ECONOMIC
CRISIS
2017
National
brands move
to ~55%
of Digital
revenue
Acquire Katz
Broadcasting
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• Scripps owns or operates 33 television
stations in 24 markets across the U.S.
• The Company reaches nearly one in five
U.S. television households
• Affiliations with all of the “Big Four”
networks
• Second largest ABC affiliate group by
audience reach
• L8QA Q2 2017 Revenue mix consists
of 70% advertising, 28% retransmission
revenues and 2% of other revenue
• Scripps partners with or produces three
original shows that run across its footprint.
A fourth show, starring Kellie Picker and
Ben Aaron, will begin airing in September.
Three of the four shows are available
nationally
TELEVISION SEGMENT OVERVIEW
15
5
2
2
4
5
Television Station Affiliation Mix
Other
Historical Television Revenue
1 Based on adjusted combined historical results as if the acquisition of Journal Communications had occurred 1/1/2015
$ in millions
$654
$802
$752
2015
1
2016
L8QA Q2
2017
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12 Source: Company filings, company websites for non-public companies and BIA Investing in Television Market Report, 2017 1st Edition
Note: Pro forma for all announced and closed transactions
1 Prior to any potential divestitures
BROADCAST PEER LANDSCAPE
Sinclair /
Tribune
Univision
Nexstar
Media
Group
TEGNA Hearst
EW
Scripps
Raycom Entravision Cox Meredith Gray Graham
72%¹
44%
39%
32%
19% 18%
16% 14%
11% 11% 11%
7%
U.S. Household Reach
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$36 $36
$54 $53 $53
$61
$66 $66
Gross Retransmission Revenue
$213M
Network and MVPD Renewals
L8QA Q2 2017
gross retrans
revenue
$ in millions
4 stations
1 station
10 stations
5 stations
2 stations
1 station
19% of subs
5% of subs
36% of subs
40% of subs
(Including more than
2 million Comcast
households)
13
RETRANS HAS STRONG POTENTIAL IN
UPCOMING RENEWALS
1 station
2020+ 2018 2017 2016 2019
Q1 2016
3 million TWC
subs renewed
Q4 2016
3 million
subs renewed
Q4 ’16 Q3 ’16 Q2 ’16 Q1 ’16 Q4 ’15 Q3 ’15 Q2 ’17 Q1 ’17
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$82 $83
$144
$75
$101
2016
saw the second-highest-grossing election season ever
• Local broadcast TV spending for all candidates,
excluding presidential, was up 5% from 2012
• Candidates, the national parties and outside groups
spent more than $1.2 billion on local broadcast TV
ads in 11 battleground states
• Local broadcast TV spending on U.S. Senate races
was $679 million, 18% higher than 2012
2018
is expected to see broadcast TV play a leading role in
U.S. elections
• Control of the U.S. Senate will again be up for
grabs, with Democrats having to defend 23 of 33
seats
• Scripps markets will host 10 U.S. Senate races
• 36 states will have governors’ races, of which
Scripps markets will host 16 races
$ in millions
2008 2010 2012 2014 2016
Adj. Combined Scripps Political Revenue
Scripps 2018 Political Footprint
WISCONSIN
CALIFORNIA
NEVADA
ARIZONA
TENNESEE
IND.
OHIO MARYLAND
FLORIDA
COLORADO
KANSAS
NEBRASKA
IOWA
OKLAHOMA
MICHIGAN
NEW YORK
IDAHO
MISSOURI
U.S. Senate race
Governor’s race
Both Senate and Governor’s races
14
BROADCAST TELEVISION IS POSITIONED
TO PLAY A KEY ROLE IN 2018 ELECTIONS
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• Scripps owns 34 radio stations in eight
markets
• The Company operates 28 FM stations
and 6 AM stations
• In five markets, Scripps operates both
television and radio stations
• Multiple properties in the same market
help to better serve advertisers, viewers
and listeners as well as to leverage
expenses and enhance operating results
• The Milwaukee station currently maintains
exclusive radio broadcast rights for the
Green Bay Packers and Milwaukee
Brewers and offers the broadcast of their
games to other radio stations
RADIO SEGMENT OVERVIEW
Strategy
Historical Radio Revenue
• Focus on providing targeted and
relevant local programming
responsive to the interest of the
communities we serve
• Create unique and differentiated
brand positions at each station
1 Based on adjusted combined historical results as if the acquisition of Journal
Communications had occurred 1/1/2015
$74 $71
15
$ in millions
2016 2015
1
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• Scripps’ digital segment provides locally
branded news content and information
across 27 television and radio markets on
multiple digital platforms
• Local brands consist of the local TV and
radio station websites as well as the related
smartphone and tablet apps
• Video views were up over 25% from
Q1’17 to Q2’17
• National brands include:
• Newsy competes on multiple platforms:
desktop, mobile, and OTT services including
Hulu, Roku, Amazon Fire TV, Apple TV, Sling
TV and Comcast’s Watchable
• Midroll is the nation’s leading podcast
company
DIGITAL SEGMENT OVERVIEW
Q2 2017 Digital Highlights
Historical Digital Revenue
1 Based on adjusted combined historical results as if the acquisition of Journal Communications had occurred 1/1/2015
(Acquired July 2015) (Acquired January 2014) (Acquired April 2016) $41
$62
$ in millions
2015
1
2016
• Newsy OTT video views increased 25%
from Q1’17, to more than 130 million
• 90% of Newsy revenue from OTT
• Midroll had 1 billion downloads in Q2’17
• Midroll added 50 new shows to its
advertising and distribution network,
bringing the total number of shows close to
300
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LOCAL
NATIONAL
2017E revenue split
17
SCRIPPS IS BUILDING STRONG LOCAL
AND NATIONAL DIGITAL BRANDS
• By millennials for millennials
• Terrific content for an OTT news audience
• Purchased: January 2014, $35 million
• Nearly 60 million (and growing) Americans
listen to podcasts
• Multiple revenue streams
• Purchased: July 2015, $50 million1
• Strong brand loyalty
• Satire and humor video lends itself to OTT
• Purchased: April 2016, $39 million
1 Excludes $10 million earnout provision
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KEY CREDIT HIGHLIGHTS
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National portfolio of television, radio and digital
brands provides diversified revenue sources
Leading television stations positioned in large,
NFL-sized markets
Continued growth of retransmission revenue
One of the strongest TV footprints for political
advertising
National digital brands are rapidly gaining scale
and attracting large audiences
Seasoned management team with extensive
broadcast industry experience
Strong balance sheet and robust free cash flow
generation
SCRIPPS CREDIT HIGHLIGHTS
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Scripps Markets Revenue by Segment
PF L8QA Q2 2017 Total Revenue: $1,018 million
SCRIPPS IS DIVERSIFIED ACROSS REVENUE
STREAMS AND MARKETS
TV Only
19 Markets
TV/Radio
Overlap
5 Markets
Radio Only
3 Markets
27 Television and Radio Markets
TV: Local
32%
TV: National
14%
TV: Political
5%
TV: Other
1%
TV:
Retransmission
21%
Katz
13%
Radio
7%
Digital
6%
Other
1%
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(Pro Forma
L8QA 6/30/17)
Closing Period 6/30/2017 6/30/2017 3/31/2017 3/31/2017 3/31/2017
Market Cap $1,648 $3,172 $1,090 $4,569 $3,218
Note: Market data as of 8/1/17; Net leverage stats for public peers based on 2015A / 2016A Adj. EBITDA and book value of debt
and adjusted for all announced and closed transactions; Scripps based on pro forma L8QA 6/30/17 EBITDA and pro forma net debt as of 6/30/17
3.4x
4.1x
5.3x
5.4x 5.5x
Attractive Net Leverage Profile vs. Peers
Peer Average:5.1x
INDUSTRY-LEADING BALANCE SHEET
$ in millions
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Management Overview
• The current leadership team has led the Company’s transformation from 13 newspapers and 10 TV
stations to 33 TV stations, 34 radio stations and valuable local and national digital businesses over
the last five years
• Disciplined capital allocation strategy
Sector/Relevant
Experience
Richard Boehne Board Chairman 35
Adam Symson President, Chief Executive Officer (Effective Aug. 8, 2017) 24
Brian Lawlor Senior Vice President, Broadcast 28
Timo hy Wesolowski Senior Vice President, Chief Financial Officer 30
Douglas Lyons Vice President, Controller, Treasurer 32
William Appleton Senior Vice President, General Counsel 28
Lisa Knutson Senior Vice President, Chief Administrative Officer 26
EXPERIENCED MANAGEMENT TEAM
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FINANCIAL OVERVIEW
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$88
$177
$139
107
196
153
5
10
12
$112
$206
$165
13%
19%
16%
777
943 890
88
129 128 $865
$1,072
$1,018
Note: 2015 financials based on adjusted combined historical results as if the acquisition of Journal Communications had occurred 1/1/2015
1 Unlevered free cash flow is calculated based on Adjusted EBITDA less Capital Expenditures
Revenue Adjusted EBITDA & Margin
2015 2016
L8QA Q2
2017
Capital Expenditures Unlevered Free Cash Flow
1
$ in millions $ in millions
$ in millions $ in millions
24
PRO FORMA FINANCIAL PERFORMANCE
Katz Scripps
2015 2016
L8QA Q2
2017
23
28 25
1
1
1
$24
$29
$26
2015 2016
L8QA Q2
2017
Katz Scripps
2015 2016
L8QA Q2
2017
Katz Scripps Margin
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STRONG BALANCE SHEET AND
CASH FLOW GENERATION
Capitalization LTM Q2’17 Free Cash Flow Bridge
• Cash Balance1: $105 million
• Total Debt1: $661 million
• Net Leverage1: 3.4x
• Liquidity2: $230 million
1 Pro forma for the acquisitions and new $250 million Term Loan B
2 Liquidity defined as revolver availability, plus cash, less outstanding LCs
As Reported
$186 ($23)
$163 ($12) ($2)
$149
Adj.
EBITDA
Capital
Expenditures
Unlevered
Free Cash
Flow
Cash
Interest
Cash
Taxes
Free Cash
Flow
Pro Forma for Katz Acquisition
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APPENDIX
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27
SELECTED STATEMENT OF OPERATIONS
($ in Millions) Fiscal Year Ending December 31, L8QA
2015 2016 Q2 2017A
Operating Revenues
Advertising $598 $681 $637
Retransmission 147 221 213
Other 32 42 40
Total Operating Revenues $777 $943 $890
Costs and Expenses
Employee Compensation and benefits $364 $374 $376
Programs and program licenses 133 175 169
Other expenses 170 194 192
Acquisition and related integration costs 38 1 3
Total costs and expenses $704 $743 $739
Depreciation, Amortization, and Losses (Gains):
Depreciation $38 $35 $36
Amortization of intangible assets 20 24 23
Impairment of goodwill and intangibles 25 0 12
Losses (gains), net on disposal of property and equipment 1 1 0
Net Depreciation, Amortization, and Losses (Gains): 83 59 72
Operating (loss) income (11) 141 79
Interest expense (17) (18) (20)
Defined benefit pension plan expense (59) (14) (37)
Miscellaneous, net (0) (3) 1
Income (loss) from operations before income taxes before income taxes ($87) $106 $23
Segment Operating Revenues
Television $654 $802 $752
Radio 74 71 71
Digital 41 62 60
Syndication and other 8 8 7
Total Revenue $777 $943 $890
Katz Contribution 88 129 128
Total Pro Forma Revenue $865 $1,072 $1,018
Note: 2015 financials based on adjusted combined historical results as if the acquisition of Journal Communications had occurred 1/1/2015
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G 151
B 202
R 127
G 127
B 127
“EBITDA" is defined by us as net earnings before income taxes, interest expense and depreciation, amortization and impairment of goodwill and intangibles. "Adjusted EBITDA" is defined by us as EBITDA,
losses(gains), net on disposal of property and equipment, loss (income) from discontinued operations, net of tax, acquisition and related integration costs, amortization of pension actuarial loss, pension curtailment
charges, miscellaneous expense, net, and share based compensation expense. We present EBITDA and Adjusted EBITDA because we believe that EBITDA and Adjusted EBITDA are useful supplemental measures
in evaluating the performance of our business and provide greater transparency into our results of operations. EBITDA and Adjusted EBITDA are used by our management to perform such evaluation. We also believe
that EBITDA and Adjusted EBITDA facilitate company-to-company operating performance comparisons by backing out potential differences caused by variations in capital structures (affecting net interest expense),
taxation and the age and book appreciation of facilities (affecting relative depreciation expense), which may vary for different companies for reasons unrelated to operating performance. We believe that EBITDA and
Adjusted EBITDA are frequently used by investors, securities analysts and other interested parties in their evaluation of companies, many of which present EBITDA and Adjusted EBITDA when reporting their results.
Our presentation of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies. EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not
consider them either in isolation or as substitutes for analyzing our results as reported under GAAP. Some of these limitations are:
EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
EBITDA and Adjusted EBITDA do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;
EBITDA and Adjusted EBITDA do not reflect our income tax expense or the cash requirements to pay our taxes;
EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
Although depreciation and amortization are non-cash charges, the assets being depreciated, depleted and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect
any cash requirements for such replacements; and
Other companies in our industry may calculate EBITDA and Adjusted EBITDA differently so they may not be comparable. 28
ADJUSTED EBITDA RECONCILIATION
($ in Millions) Fiscal Year Ending December 31, L8QA
2015 2016 Q2 2017A
Net Income ($56) $67 $14
Amortization of Pension Losses 5 4 4
Interest Expense 17 18 20
Income Taxes (28) 39 9
Depreciation and Amortization 58 59 59
Restructuring Costs 0 0 0
Acquisition and Related Integration Costs 32 1 1
Unusual and Non-Recurring Non-Cash Charges 70 0 35
Non-Cash Share Based Compensation Charges 8 8 10
Gain (loss) on Fair Value Adjustments to Derivatives 1 0 0
Adjusted EBITDA $107 $196 $153
Katz Contribution 5 10 12
Total Pro Forma Adjusted EBITDA $112 $206 $165