E.W. SCRIPPS Co - FORM 8-K/A - EX-99.3 - EXHIBIT 99.3 - August 29, 2014

Attached files

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8-K/A - 8-K/A - E.W. SCRIPPS Cograniteacquisitionproforma.htm
EX-23.1 - EXHIBIT 23.1 - E.W. SCRIPPS Coexhibit231-consentofaudito.htm
EX-99.2 - EXHIBIT 99.2 - E.W. SCRIPPS Coexhibit992-mar2014auditedf.htm
EX-99.1 - EXHIBIT 99.1 - E.W. SCRIPPS Coexhibit991-dec2013auditedf.htm


Exhibit 99.3

The E.W. Scripps Company
Unaudited Pro Forma Condensed Combined Financial Information


On June 16, 2014, we closed our acquisition of two television stations owned by Granite Broadcasting Corporation — the Detroit MyNetworkTV affiliate WMYD-TV and the Buffalo, N.Y. ABC affiliate WKBW-TV ("Acquired Granite Stations") — for $110 million in cash.
The following unaudited pro forma condensed combined financial statements reflect the acquisition of the Acquired Granite Stations. The Unaudited Pro Forma Condensed Combined Statements of Operations for the three months ended March 31, 2014, and year ended December 31, 2013, give effect to the acquisition as if it had occurred on January 1, 2013.

The unaudited pro forma condensed combined information is based upon the historical consolidated financial statements and notes thereto of the Company and should be read in conjunction with the historical financial statements and the accompanying notes of the Company included in the 2013 Form 10-K, the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2014, and the accompanying notes to the unaudited pro forma condensed combined financial information.

The pro forma adjustments are based upon currently available information and certain estimates and assumptions, and therefore, the actual results may have differed from the pro forma results. The pro forma information does not include adjustments for efficiencies, cost reductions or synergies expected to result from the acquisition. However, management believes that the assumptions provide a reasonable basis for presenting the significant effects of the transaction as contemplated and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the pro forma financial information.

The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the acquisition had been completed at the dates indicated. The information does not necessarily indicate the future operating results or financial position of the Company.







The E.W. Scripps Company
Unaudited Pro Forma Condensed Combined Statements of Operations
For the Three Months Ended March 31, 2014
(in thousands, except per share data)
 
E.W. Scripps Historical
 
Acquired Granite Stations (a)
 
Pro Forma Adjustments
 
 
E.W. Scripps Pro Forma
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
Advertising
 
$
146,770

 
$
5,359

 
$
—

 
 
$
152,129

Subscriptions
 
32,299

 
—

 
—

 
 
32,299

Retransmission
 
12,474

 
1,461

 
—

 
 
13,935

Other
 
12,251

 
544

 
—

 
 
12,795

Total operating revenues
 
203,794

 
7,364

 
—

 
 
211,158

Costs and Expenses:
 
 
 
 
 
 
 
 
 
Employee compensation and benefits
 
101,749

 
2,326

 
—

 
 
104,075

Programs and program licenses
 
12,968

 
753

 
—

 
 
13,721

Newsprint, press supplies and other printing costs
 
12,038

 
—

 
—

 
 
12,038

Newspaper distribution
 
11,916

 
—

 
—

 
 
11,916

Other expenses
 
49,748

 
2,208

 
—

 
 
51,956

Defined benefit pension plan expense
 
1,378

 
—

 
—

 
 
1,378

Acquisition and related integration costs
 
262

 
—

 
—

 
 
262

Separation and restructuring costs
 
—

 
—

 
—

 
 
—

Total costs and expenses
 
190,059

 
5,287

 
—

 
 
195,346

Depreciation, Amortization, and Losses (Gains):
 
 
 
 
 
 
 
 
 
Depreciation
 
9,808

 
303

 
100

b
 
10,211

Amortization of intangible assets
 
1,921

 
283

 
300

b
 
2,504

Losses (gains), net on disposal of property, plant and equipment
 
68

 
—

 
—

 
 
68

Net depreciation, amortization, and losses (gains)
 
11,797

 
586

 
400

 
 
12,783

Operating (loss) income
 
1,938

 
1,491

 
(400
)
 
 
3,029

Interest expense
 
(2,254
)
 
—

 
—

 
 
(2,254
)
Miscellaneous, net
 
(445
)
 
10

 
 
 
 
(435
)
(Loss) income from operations before income taxes
 
(761
)
 
1,501

 
(400
)
 
 
340

(Benefit) provision for income taxes
 
(149
)
 
899

 
(200
)
c
 
550

Net (loss) income
 
(612
)
 
602

 
(200
)
 
 
(210
)
Net loss attributable to noncontrolling interests
 
—

 
—

 
—

 
 
—

Net (loss) income attributable to the shareholders of The E.W. Scripps Company
 
$
(612
)
 
$
602

 
$
(200
)
 
 
$
(210
)
Net (loss) income per basic share of common stock attributable to the shareholders of The E.W. Scripps Company:
 
$
(0.01
)
 
 
 
 
 
 
$
—

Net (loss) income per diluted share of common stock attributable to the shareholders of The E.W. Scripps Company:
 
$
(0.01
)
 
 
 
 
 
 
$
—







The E.W. Scripps Company
Unaudited Pro Forma Condensed Combined Statements of Operations
For the Year Ended December 31, 2013
(in thousands, except per share data)
 
E.W. Scripps Historical
 
Acquired Granite Stations (a)
 
Pro Forma Adjustments
 
 
E.W. Scripps Pro Forma
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
Advertising
 
$
613,093

 
$
24,980

 
$
—

 
 
$
638,073

Subscriptions
 
117,762

 
—

 
—

 
 
117,762

Retransmission
 
42,505

 
4,799

 
—

 
 
47,304

Other
 
43,511

 
1,240

 
—

 
 
44,751

Total operating revenues
 
816,871

 
31,019

 
—

 
 
847,890

Costs and Expenses:
 
 
 
 
 
 
 
 
 
Employee compensation and benefits
 
391,207

 
9,193

 
—

 
 
400,400

Programs and program licenses
 
53,826

 
3,080

 
—

 
 
56,906

Newsprint, press supplies and other printing costs
 
46,965

 
—

 
—

 
 
46,965

Newspaper distribution
 
48,490

 
—

 
—

 
 
48,490

Other expenses
 
201,089

 
6,927

 
—

 
 
208,016

Defined benefit pension plan expense
 
8,837

 
—

 
—

 
 
8,837

Acquisition and related integration costs
 
—

 
—

 
—

 
 
—

Separation and restructuring costs
 
4,893

 
—

 
—

 
 
4,893

Total costs and expenses
 
755,307

 
19,200

 
—

 
 
774,507

Depreciation, Amortization, and Losses (Gains):
 
 
 
 
 
 
 
 
 
Depreciation
 
40,839

 
1,330

 
200

b
 
42,369

Amortization of intangible assets
 
6,923

 
1,133

 
1,200

b
 
9,256

Losses (gains), net on disposal of property, plant and equipment
 
166

 
—

 
—

 
 
166

Net depreciation, amortization, and losses (gains)
 
47,928

 
2,463

 
1,400

 
 
51,791

Operating (loss) income
 
13,636

 
9,356

 
(1,400
)
 
 
21,592

Interest expense
 
(10,448
)
 
—

 
—

 
 
(10,448
)
Miscellaneous, net
 
(11,760
)
 
60

 
—

 
 
(11,700
)
(Loss) income from operations before income taxes
 
(8,572
)
 
9,416

 
(1,400
)
 
 
(556
)
(Benefit) provision for income taxes
 
(7,848
)
 
3,701

 
(600
)
c
 
(4,747
)
Net (loss) income
 
(724
)
 
5,715

 
(800
)
 
 
4,191

Net loss attributable to noncontrolling interests
 
(250
)
 
—

 
—

 
 
(250
)
Net (loss) income attributable to the shareholders of The E.W. Scripps Company
 
$
(474
)
 
$
5,715

 
$
(800
)
 
 
$
4,441

Net (loss) income per basic share of common stock attributable to the shareholders of The E.W. Scripps Company
 
$
(0.01
)
 
 
 
 
 
 
$
0.08

Net (loss) income per diluted share of common stock attributable to the shareholders of The E.W. Scripps Company
 
$
(0.01
)
 
 
 
 
 
 
$
0.07






Notes to Unaudited Pro Forma Condensed Combined Financial Statements
(in thousands)

1.
Basis of Pro Forma Presentation

Pending the finalization of third-party valuation and other items, the following table summarizes the preliminary fair values of the assets acquired and the liabilities assumed:

(in thousands)
 
 
 
 
 
Assets:
 
 
Property, plant and equipment
 
$
12,133

Intangible assets
 
49,200

Goodwill
 
48,667

Net purchase price
 
$
110,000


Of the $49 million allocated to intangible assets, $21 million was for FCC licenses which we have determined to have an indefinite life and therefore will not be amortized. The remaining balance of $28 million will be allocated to retransmission agreements, television network affiliation relationships and advertiser relationships with estimated amortization periods of 10 to 20 years.

The goodwill of $49 million arising from the transaction consists largely of synergies and economies of scale and other benefits of a larger broadcast footprint, as well as synergies from being able to create a duopoly in our Detroit market. We have allocated the goodwill to our television segment. We will treat the transaction as an asset acquisition for income tax purposes resulting in a step-up in the assets acquired. The goodwill is deductible for income tax purposes.

2.
Pro Forma Assumptions and Adjustments

a.
Certain reclassifications have been made to the presentation of the historical Acquired Granite Stations' Income Statements to conform to the presentation used in the unaudited pro forma financial information.

b.
Reflects an adjustment to depreciation and amortization expense resulting from the fair value adjustments to the Acquired Granite Stations’ property, plant and equipment and intangible assets.

c.
Income tax effects of the pro forma adjustments are reflected at the Company’s best estimate of statutory income tax rates.





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:
 
 
For the three months ended
March 31, 2014
(in thousands)
 
E.W. Scripps Historical
 
E.W. Scripps Pro Forma
 
 
 
 
 
Numerator (for basic and diluted earnings per share)
 
 
 
 
Net (loss) income attributable to the shareholders of The E.W. Scripps Company
 
$
(612
)
 
$
(210
)
Less income allocated to RSUs
 
—

 
—

Numerator for basic and diluted earnings per share
 
$
(612
)
 
$
(210
)
Denominator
 
 
 
 
Basic weighted-average shares outstanding
 
56,084

 
56,084

Effect of dilutive securities:
 
 
 
 
Stock options held by employees and directors
 
—

 
—

Diluted weighted-average shares outstanding
 
56,084

 
56,084


 
 
For the year ended
December 31, 2013
(in thousands)
 
E.W. Scripps Historical
 
E.W. Scripps Pro Forma
 
 
 
 
 
Numerator (for basic and diluted earnings per share)
 
 
 
 
Net (loss) income attributable to the shareholders of The E.W. Scripps Company
 
$
(474
)
 
$
4,441

Less income allocated to RSUs
 
—

 
(133
)
Numerator for basic and diluted earnings per share
 
$
(474
)
 
$
4,308

Denominator
 
 
 
 
Basic weighted-average shares outstanding
 
56,516

 
56,516

Effect of dilutive securities:
 
 
 
 
Stock options held by employees and directors
 
—

 
1,228

Diluted weighted-average shares outstanding
 
56,516

 
57,744



E.W. SCRIPPS Co Reports