The E.W. Scripps Company — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing. Scripps operates more than 60 local television stations and national news and entertainment networks, with revenue primarily from advertising and distribution fees.
Financial performance
| Metric | 2023 | 2022 |
|---|---|---|
| Operating revenue | $2.293 billion | $2.453 billion |
| Operating income (loss) | $(753.2) million | $428.3 million |
| Net income (loss) | $(947.8) million | $195.9 million |
| Net income (loss) attributable to Scripps shareholders | $(998.1) million | $145.6 million |
| Operating cash flow | $111.6 million | $311.4 million |
| Capital expenditures | $59.6 million | $45.8 million |
| Cash and cash equivalents at year-end | $35.3 million | $18.0 million |
| Long-term debt principal outstanding | $2.951 billion | $2.921 billion |
- Revenue declined 6.5%. Advertising revenue was $1.478 billion, down from $1.757 billion; distribution revenue rose to $779.2 million from $660.3 million.
- Cash provided by operating activities fell $199.8 million year over year. Interest paid increased to $195.8 million from $150.8 million.
- At year-end, the company reported $248 million of additional revolver borrowing capacity. Current assets were $676.1 million and current liabilities were $477.8 million.
- The company recorded a $952 million non-cash goodwill impairment charge for Scripps Networks. Excluding this charge, the reported operating loss would have been substantially lower; the filing does not present an adjusted operating-income figure.
Material changes versus 2022
- Local Media revenue fell 6.4% to $1.398 billion and segment profit fell 25.6% to $287.4 million. Political revenue dropped $165.6 million in the non-election year, while distribution revenue increased 14.8% to $752.3 million, helped by rate increases and renewals covering about 75% of subscriber households.
- Scripps Networks revenue fell 7.1% to $893.2 million and segment profit declined 27.2% to $225.8 million. Management cited national advertising weakness and lower ratings in key monetized demographics; broader connected-TV distribution partly offset pressure.
- Interest expense rose $52.4 million to $213.5 million, primarily due to higher rates on variable-rate debt.
- Restructuring costs were $38.6 million, including a $13.6 million write-down of programming assets after the TrueReal network shutdown and $17.1 million of severance-related charges.
Outlook, risks and unusual items
- Management expects the restructuring, substantially complete by mid-2024, to generate more than $40 million in annual savings; $20 million of annualized savings had been achieved by year-end 2023. The company reported nearly $8 million of expense reductions captured in 2023.
- Management said operating cash flow should provide sufficient liquidity for operating needs over the next 12 months, based on its current business plan. The company expected to comply with its revolving-credit leverage covenant for that period. The maximum leverage limit is 5.0x through December 31, 2024, then steps down to 4.75x and 4.50x on specified dates.
- Political advertising is highly cyclical and is generally higher in even-numbered election years; actual results depend on race competitiveness and spending. Other key risks include advertising-market weakness, audience migration from linear TV, subscriber declines, distribution and network-affiliation renewals, programming and sports-rights costs, and variable interest rates.
- The $600 million Berkshire Hathaway Series A preferred investment carries an 8% annual dividend rate if paid in cash; the rate rises to 9% if dividends are not paid in full in cash. In February 2024, Scripps notified the holder it intended not to declare the first-quarter 2024 dividend, citing flexibility to accelerate deleveraging. Preferred-share terms also restrict common dividends and repurchases while the preferred shares remain outstanding.
- Other notable items: Scripps borrowed $283 million on its revolver in July 2023 to repay its 2024-maturity term loan; it received $18.1 million of pre-tax proceeds from the sale of its BMI investment in February 2024. The company reported unqualified audit opinions on its financial statements and internal controls.
Most important facts for investors to verify
- Whether operating cash flow and available revolver capacity remain adequate given debt service, programming commitments and the $330 million revolver balance at year-end.
- Progress against the leverage covenant and the scheduled covenant step-downs, alongside variable-rate exposure; management estimated a 100-basis-point SOFR increase would add about $16.1 million to annual interest expense.
- Whether the Scripps Networks recovery assumptions support its goodwill valuation: the reporting unit’s fair value approximated carrying value after the impairment, and a 50-basis-point increase in the discount rate would reduce estimated fair value by about $90 million.
- The effects of the decision not to declare the first-quarter 2024 preferred dividend, including the applicable 9% rate and implications for future capital flexibility.
- Whether distribution-rate gains, political advertising and restructuring savings can offset continuing core and national advertising weakness, declining linear viewing and rising programming costs.