What changed in this filing

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Item 1A. Risk Factors

2023-02-24 compared with 2022-02-25 · 45 added, 51 removed, 148 unchanged (39% of the section changed)

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Risks Related to Our Businesses

The 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 vaccination programs and 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 this Form 10-K and could materially adversely affect our business, financial condition and/or results of operations.

We expect to derive the majority of our revenues from advertising spending, which is affected by numerous factors.

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• Programming and content offered by our businesses may not achieve desired ratings or may decline in popularity with its audience.

• Audiences continue to fragment in recent years as the broad distribution of cable and satellite television and the growth in over-the-top streaming services have greatly increased the options available to the public for accessing audio and video programming, including live sports.

Continued fragmentation of audiences, and the growth of internet programming and streaming services, could adversely impact advertising rates, which will reflect the size and demographics of the audience reached by advertisers through our media businesses.

• Linear TV viewing levels have declined in recent years due to cord-cutting and a migration of viewing to streaming platforms.

A continuation of these trends could adversely impact the size and demographic profile of our audiences and put pressure on advertising rates.

The largest Subscription Video on Demand services have introduced advertising-supported versions that could take advertising dollars from linear TV.

• Television advertising revenues in even-numbered years benefit from political advertising, which is affected by campaign finance laws, as well as the competitiveness of specific political races in the markets where our television stations operate.

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• Television stations have significant exposure to advertising in the automotive, retail and services industries.

Our national networks have significant exposure to advertising in the pharmaceutical, food and beverage, and retail industries.

Our national networks have significant exposure to advertising in the consumer-packaged goods, pharmaceutical and insurance industries.

Advertising within these industries may decline and we may not be able to secure replacement advertisers.

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These automated solutions could reduce the value of relationships with advertisers as well as result in downward pricing pressure.

• The TV industry is on the verge of adopting new measurement currencies, and Nielsen is also making methodological changes to the way it measures viewing by incorporating set top box and smart TV data.

The emerging currencies generally undercount over-the-air ("OTA") viewing, and Nielsen has not prioritized OTA enhancements.

If measurement evolves in a direction that is unfavorable to OTA it could reduce the attractiveness of our audiences to advertisers.

• Catastrophic events or geopolitical conditions that disrupt domestic or international economies.

If we are unable to respond to any or all of these factors, our advertising revenues could decline and affect our profitability.

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Our television audience is being fragmented by the digital delivery of content directly to the consumer audience.

Content providers, such as the "Big 4" broadcast networks, cable networks such as HBO and Showtime, and new content developers, distributors and syndicators such as Amazon, Hulu and Netflix, are now able to deliver their programming directly to consumers, over-the-top (“OTT”) via the internet.

The delivery of content directly to consumers allows them to bypass the programming we deliver, which may impact our audience size.

Fragmentation of our audiences could impact the rates we receive from our advertisers.

Content providers, such as the "Big 4" broadcast networks, cable networks and other content developers, distributors and syndicators can deliver their programming directly to consumers via the internet concurrently with our distribution via over-the-air and cable and satellite.

The delivery of content directly to consumers allows such distributors to compete with the programming we deliver, which may impact our audience size.

Fragmentation of our audiences could impact the rates we receive from our advertisers, as well as shift advertisers away from traditional linear advertising to digital advertising.

In addition, reduction in the number of subscribers to cable and satellite service providers could impact the revenue we receive under retransmission consent agreements.

Widespread adoption of OTT by our audiences could result in a reduction of our advertising and retransmission revenues and affect our profitability.

The reduction of our advertising and distribution revenues from these factors would affect our profitability.

The loss of affiliation and carriage agreements or the costs of renewals could adversely affect our operating results.

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ION's broadcast stations are carried by cable and satellite operators in their local television markets pursuant to the FCC’s “must carry” rules.

Additionally, in certain of our markets, our national networks are carried by local television broadcasters

and cable and satellite operators pursuant to negotiated carriage agreements.

Additionally, in certain of our markets, our national networks are carried by local television broadcasters and cable and satellite operators pursuant to negotiated carriage agreements.

These contracts typically require us to make fixed fee payments and generally have three to five-year terms.

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In addition, continued consolidation among cable television operators could adversely impact our ability to negotiate acceptable retransmission consent agreements.

There are proceedings before the FCC and legislation has been proposed in Congress reexamining policies that now protect television stations' rights to control the distribution of their programming within their local service areas.

We cannot predict the outcome of these and other proceedings that challenge traditional means of redistributing broadcast programming or their possible impact on our operations.

We make investments in television programming ("content") in advance of knowing whether that particular content will be popular enough for us to recoup our costs.

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• Pursuant to FCC rules, local television stations must elect every three years to either (1) require cable operators and/or direct broadcast satellite carriers to carry the stations’ over-the-air signals or (2) enter into retransmission consent negotiations for carriage.

If our retransmission consent agreements are terminated or not renewed, or if

our broadcast signals are distributed on less-favorable terms, our ability to compete effectively may be adversely affected.

If our retransmission consent agreements are terminated or not renewed, or if our broadcast signals are distributed on less-favorable terms, our ability to compete effectively may be adversely affected.

• If we cannot renew our FCC broadcast licenses, our broadcast operations will be impaired.

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We cannot predict the nature or scope of future government regulation or its impact on our operations.

Acquisitions involve risks and, if said risks are not managed effectively, our operating results could be negatively affected.

During 2019, we acquired 27 television stations through multiple transactions for total cash consideration of $1.2 billion and, on January 7, 2021, we acquired the ION national television network for a purchase price of $2.65 billion.

Acquisitions involve inherent risks, such as increasing leverage and debt service requirements and combining company cultures, facilities and systems, which could have a material adverse effect on our results of operations.

Additionally, our revenues and profitability could be adversely affected if we are unable to implement effective cost controls, achieve expected synergies, or increase revenues as a result of these acquisitions.

Acquisitions can result in unexpected liabilities and potentially divert management’s attention from the operation of our business.

We may evaluate strategic acquisitions in the future, and there are various risks associated with an acquisition strategy.

We have pursued and may selectively continue to pursue strategic acquisitions, subject to market conditions, our liquidity, and the availability of attractive acquisition candidates, with the goal of improving our business.

We may not be able to identify other attractive acquisition targets or some of our competitors may have greater financial or managerial resources with which to pursue acquisition targets we may pursue.

Therefore, even if we are successful in identifying attractive acquisition targets, we may face considerable competition and be unsuccessful in acquiring such targets.

The loss of skilled employees or an inability to attract and retain skilled employees could adversely affect our business.

To execute our strategic plan and maintain business continuity, we must attract and retain personnel with appropriate talent and skills.

If we are unable to hire and retain employees capable of performing key functions in our business, or if measures we take to respond to a decrease in labor availability prove ineffective or have unintended negative consequences, our business could be adversely affected.

We are experiencing an increasingly competitive labor market, and have had higher turnover rates and more open positions since the COVID-19 pandemic than during pre-pandemic years.

Sustained labor shortages or increased turnover rates, whether caused by the pandemic, general macroeconomic factors or dynamics within our industry (including a shrinking pool of new talent interested in the media business), could lead to increased costs, such as increased wage rates to attract and retain employees, could negatively affect our revenue and profits and could have an impact on our operations and business continuity.

Acquisitions, joint ventures and strategic alliances involve risks and, if said risks are not managed effectively, our operating results could be negatively affected.

We expect to continue making acquisitions and entering into joint ventures and strategic alliances as part of our long-term business strategy.

Acquisitions and other strategic transactions involve inherent risks, such as increasing leverage and debt service requirements and combining company cultures, facilities and systems, which could have a material adverse effect on our results of operations.

Such transactions can also result in unexpected liabilities and potentially divert management’s attention from the operation of our business.

We may evaluate strategic acquisitions and investments in the future, and there are various risks associated with an investment strategy.

We have pursued and may selectively continue to pursue strategic transactions, subject to market conditions, our liquidity, and the availability of attractive investment candidates, with the goal of improving our business.

We may not be able to identify other attractive acquisition and investment targets or some of our competitors may have greater financial or managerial resources with which to pursue strategic targets we may pursue.

Therefore, even if we are successful in identifying attractive investment targets, we may face considerable competition and be unsuccessful in acquiring such targets.

Acquisitions of television stations are subject to the approval of the FCC and the Antitrust Division of the Department of Justice.

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Our operations are routinely involved in receiving, storing, processing and transmitting sensitive information.

Although we monitor security measures regularly, any unauthorized intrusion, malicious software infiltration, theft of data, network disruption, denial of service, or similar act by any party could disrupt the integrity, continuity, and security of our systems or the systems of our clients or vendors.

These events, or our failure to employ new technologies, revise processes and invest in people to sustain our

ability to defend against cyber threats, could create financial liability, regulatory sanction, or a loss of confidence in our ability to protect information, and adversely affect our revenue by causing the loss of current or potential clients.

We issued $600 million in preferred shares as part of our financing of the ION acquisition, the terms of which restrict us from undertaking certain actions while such preferred shares are outstanding.

clients or vendors.

These events, or our failure to employ new technologies, revise processes and invest in people to sustain our ability to defend against cyber threats, could create financial liability, regulatory sanction, or a loss of confidence in our ability to protect information, and adversely affect our revenue by causing the loss of current or potential clients.

We have issued $600 million in preferred shares, the terms of which restrict us from undertaking certain actions while such preferred shares are outstanding.

Berkshire Hathaway Inc.

(“Berkshire Hathaway”) provided $600 million of financing for the ION acquisition in exchange for Series A Preferred Shares of the Company.

The preferred shares are redeemable at the option of Scripps 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).

The preferred shares are redeemable at the option of Scripps beginning on January 7, 2026, 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 Scripps pays quarterly dividends in cash on the preferred shares, the dividend rate will be 8% per annum.

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Some of the factors that could cause fluctuation in the stock price or trading volume of Class A Common shares include:

• major world events;

• major world events and geopolitical conditions;

• general market and economic conditions and market trends, including in the television broadcast industry, the national media marketplace and the financial markets generally;

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• operating and stock performance of companies that investors may consider to be comparable to us;

• changes in the regulatory environment, including rulemaking or other actions by the FCC.

• changes in the regulatory environment, including rulemaking or other actions by the FCC or the SEC.

There can be no assurance that the price of our Class A Common shares will not fluctuate or decline significantly.

The stock market in recent years has experienced considerable price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of individual companies and that could adversely affect the price of our Class A Common shares, regardless of the Company’s operating performance.

The stock market may experience considerable price and volume fluctuations that could be unrelated or disproportionate to the operating performance of individual companies and that could adversely affect the price of our Class A Common shares, regardless of the Company’s operating performance.

Stock price volatility might be higher if the trading volume of our Class A Common shares is low.

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The principal and interest payment obligations on such debt may restrict our future operations and impair our ability to meet our long-term obligations.

As of December 31, 2021, we had approximately $3.21 billion in aggregate principal amount of outstanding indebtedness, approximately $963 million of which constituted senior unsecured debt, $550 million of which constituted senior secured debt and $1.7 billion aggregate principal amount of term loans under our Credit Agreement.

As of December 31, 2022, we had approximately $2.9 billion in aggregate principal amount of outstanding indebtedness, approximately $818 million of which constituted senior unsecured debt, $523 million of which constituted senior secured debt and $1.6 billion of which constituted the aggregate principal amount of term loans under our Credit Agreement.

We have the ability to incur up to $400 million of indebtedness under our Credit Agreement, all of which is secured indebtedness, effectively ranking senior to unsecured indebtedness to the extent of the value of the assets securing such indebtedness.

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Specifically, volatility in the capital markets may also impact our ability to obtain additional financing, or to refinance our existing debt, on terms or at times favorable to us.

If we are unable to implement one or more of these alternatives, we may not be able to service our debt or other obligations, which could result in us being in default thereon, in which circumstances our lenders could cease making

loans to us, and lenders or other holders of our debt could accelerate and declare due all outstanding obligations under the respective agreements, which would likely have a material adverse effect on us.

If we are unable to implement one or more of these alternatives, we may not be able to service our debt or

other obligations, which could result in us being in default thereon, in which circumstances our lenders could cease making loans to us, and lenders or other holders of our debt could accelerate and declare due all outstanding obligations under the respective agreements, which would likely have a material adverse effect on us.

The agreements governing our various debt obligations impose restrictions on our operations and limit our ability to undertake certain corporate actions.

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The phase-out of LIBOR could affect interest rates under our Senior Secured Credit Facilities.

The United Kingdom’s Financial Conduct Authority announced the intent to phase out LIBOR over the next couple of years.

While LIBOR will no longer be used to price new loans starting in 2022, the index will formally exist until at least 2023.

The United States has identified the Secured Overnight Financing Rate (“SOFR”) as the suggested replacement for LIBOR and that the phase-out from LIBOR to SOFR will be June 30, 2023.

Further, our Credit Agreement has replacement rate language in place that will provide for transition to the new SOFR benchmark.

The utilization of SOFR may produce higher rates than those

that would have been in effect prior to any LIBOR phase-out which could negatively impact our interest expense, results of operations and cash flow.

The United Kingdom’s Financial Conduct Authority announced the intent to phase out LIBOR.

LIBOR was no longer used to price new loans starting in 2022, and the index will formally be phased out in the United States by June 30, 2023.

The United States has identified the Secured Overnight Financing Rate (“SOFR”) as the replacement for LIBOR.

Our Credit Agreement has replacement rate language in place that will provide for transition to the new SOFR benchmark, but an

amendment will be required.

The utilization of SOFR may produce higher rates than those that would have been in effect prior to any LIBOR phase-out, which could negatively impact our interest expense, results of operations and cash flow.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors