E.W. SCRIPPS Co (SSP) FY 2023 MD&A

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Consolidated Financial Statements and Notes to Consolidated Financial Statements are the basis for our discussion and analysis of financial condition and results of operations. You should read this discussion in conjunction with those financial statements.

This section of the Form 10-K omits discussion of year-to-year comparisons between 2022 and 2021, which may be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our 2022 Form 10-K.

Forward-Looking Statements

Our Annual Report on Form 10-K 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.” 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 that serves audiences and businesses through a portfolio of more than 60 local television stations in more than 40 markets and national news and entertainment networks. Our local stations have programming agreements with ABC, NBC, CBS, FOX and the CW. The Scripps Networks reach nearly every American through national news outlets Scripps News and Court TV and popular entertainment brands ION, Bounce, Defy TV, Grit, ION Mystery and Laff. Effective in January 2023, we merged our nationally focused news resources into a national outlet called Scripps News. Scripps News combines the development and distribution of Newsy programming, the Local Media national desk and our award-winning investigative reporting newsroom in Washington, D.C. into one coordinated organization. The combined operation more efficiently serves national audiences and our local television stations. We also serve as the longtime steward of one of the nation's largest, most successful and longest-running educational programs, the Scripps National Spelling Bee. Additionally, we produce a television viewing device called Tablo that allows households to watch and record dozens of free, over-the-air and streaming channels anywhere in their home without a subscription.

Scripps is a leader in free, ad-supported television. All of our local stations and national networks reach consumers over the air, and all of our television brands can also be found on free streaming platforms. We have continued to expand in the fast-growing connected television marketplace, and we are leveraging our leadership position in the growing over-the-air marketplace. Currently, one in three non pay-TV homes is watching television over the air alongside their streaming subscription services, and as cord-cutting and streaming service price increases continue, over-the-air channels will be an important part of television viewers' choices. To that end, Scripps continues efforts to broaden antenna use even more, and is working with key partners in retail, manufacturing and antenna installation to help television owners understand the quality and quantity of programming available over the air and the ease of antenna use. During 2023, we continued our efforts to build awareness, grow the broadcast marketplace and improve consumers over-the-air television experiences by relaunching a new version of our Tablo product.

In December 2022, we launched Scripps Sports to further leverage our local market depth and national broadcast reach for partnerships with sports leagues, conferences and teams. In addition to the market depth of our local broadcast television stations, ION boasts the fifth-largest national broadcast viewership and its network of owned and operated and affiliate stations reaches nearly 100% of U.S. television households through broadcast, cable/satellite and connected TV platforms, providing it the opportunity to run localized, regionalized and national programming. Scripps Sports is comprised of a limited number of employees who seek and negotiate sports rights for the benefit of our Local Media and Scripps Networks businesses. The revenues earned and any sports rights fees or other direct expenses incurred reside within those respective businesses.

In January 2023, we announced a strategic restructuring and reorganization of the Company to further leverage our strong position in the U.S. television ecosystem and propel our growth across new distribution platforms and emerging media marketplaces. Lisa Knutson was named chief operating officer, assuming responsibility for the Local Media and Scripps Networks operating divisions, and was tasked with leading the Company’s restructuring efforts. The restructuring aims to create

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a leaner and more agile operating structure through the centralization of certain services and the consolidation of layers of management across our operating businesses and corporate office. We currently anticipate this effort will result in more than $40 million in annual savings, of which $20 million of the annualized savings was achieved by the end of 2023. We currently anticipate our restructuring efforts to be substantially completed by the middle of 2024. With consideration to the timing of restructuring activities initiated throughout 2023, expense reductions captured within our 2023 operating expenses totaled nearly $8.0 million.

On March 27, 2023, we shut down the multicast network TrueReal, merging certain of its programming with that of Defy TV, and began leasing the additional spectrum it created on our owned and operated stations to Jewelry Television. In connection with the TrueReal restructuring, we relinquished rights to portions of their programming library. We incurred a $13.6 million restructuring charge in the first quarter of 2023 related to the write-down of these programming assets.

On April 20, 2023, we announced a multi-year agreement to televise regular season Friday night WNBA games on ION. The WNBA Friday Night Spotlight on ION included games available nationally as well as games made available on a regional basis.

On May 4, 2023, we announced a multi-year agreement with the Vegas Golden Knights to televise the National Hockey League's team's games in Las Vegas and surrounding markets. The games aired on our local station KMCC, and our Las Vegas ABC affiliate KTNV provided marketing and promotion.

On October 5, 2023, we announced a multi-year agreement with the Arizona Coyotes to televise their locally broadcast games to residents of Arizona and surrounding states within the team's broadcast territory. Games will air on our television stations within the Phoenix, Tucson and Salt Lake City markets.

On November 9, 2023, we announced a multi-year agreement with the National Women's Soccer League to nationally televise Saturday night games on ION. These regular season matches will be distributed over 25 exclusive Saturday night double-headers beginning with their 2024 season.

Our Scripps Networks business continued to experience softness within the national advertising marketplace into 2023, as macroeconomic challenges continued to impact advertising budgets. A longer than anticipated television advertising recession and the impact of declining linear television viewership trends negatively impacted expected future growth rates, profitability and the cash flows derived from the business as well as the expected period of time over which those cash flows will occur. As a result, we performed an interim goodwill impairment test for our Scripps Network reporting unit in the second quarter of 2023 and recorded a non-cash goodwill impairment charge totaling $686 million. Our annual goodwill impairment test coincides with our annual planning cycle and takes place in the fourth quarter of each year. During the planning cycle, we noted trends indicating a slower than previously anticipated recovery in the television advertising marketplace. The corresponding negative impact to the Scripps Networks business' anticipated operating profits resulted in an additional non-cash goodwill impairment charge of $266 million during 2023.

Preferred stock dividends paid in 2023 and 2022 totaled $48.0 million. Under the terms of Berkshire Hathaway's preferred equity investment in Scripps, we are prohibited from paying dividends on and repurchasing our common shares until all preferred shares are redeemed.

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Results of Operations

The trends and underlying economic conditions affecting 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 individual business segments that follows.

Consolidated Results of Operations

Consolidated results of operations were as follows:

2023 compared with 2022

Operating revenues decreased $160 million or 6.5% in 2023 compared to 2022, driven primarily by the non-election year decline in political revenue of $175 million as well as a decrease in Scripps Networks advertising revenues of $76.3 million. The declines in revenues were partially offset by an increase in distribution revenues of $119 million. The increase in distribution revenues was driven by Local Media, as we completed distribution agreement renewals for approximately 75% of our subscriber households.

Cost of revenues, which is comprised of programming costs and costs associated with distributing our content, increased $49.6 million or 4.0% in 2023 compared to 2022. Network affiliation costs for Local Media and Scripps Networks increased a total of $17.8 million. Additionally, the new sports rights fees associated with the airing of the WNBA, Golden Knights and Arizona Coyotes games increased cost of revenues $16.1 million.

Selling, general and administrative expenses are primarily comprised of sales, marketing and advertising expenses, research costs and costs related to corporate administrative functions. Selling, general and administrative expenses decreased $8.4 million or 1.3% in 2023 compared to 2022, primarily attributed to a $14.5 million decrease in ratings costs following a change in service providers in Local Media as well as a $23.0 million decrease in advertising and promotion costs. These reductions were partially offset by a $21.9 million increase in employee compensation costs primarily attributed to annual merit increases and higher bonus compensation year-over-year.

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Acquisition and related integration costs were $1.6 million in 2022.

Restructuring costs totaled $38.6 million in 2023. In connection with the TrueReal restructuring, we incurred a $13.6 million first quarter charge related to the write-down of certain programming assets. Restructuring costs in 2023 also include employee severance related charges of $17.1 million, operating lease impairment charges of $1.3 million and other restructuring charges primarily attributed to strategic reorganization consulting fees.

Depreciation and amortization of intangible assets decreased year-over-year, at $155 million in 2023 compared to $160 million in 2022.

During 2023, we recorded $952 million of non-cash charges to reduce the carrying value of goodwill associated with our Scripps Networks reporting unit.

Interest expense increased $52.4 million in 2023 compared to 2022 primarily due to higher year-over-year interest rates on our variable debt borrowings.

During 2022, we redeemed $59.0 million of the 2027 Senior Notes, $26.6 million of the 2029 Senior Notes and $85.9 million of the 2031 Senior Notes. The redemptions resulted in a gain on extinguishment of debt of $8.6 million, as the notes were redeemed for total consideration below par value of the notes.

The effective income tax rate was 2.0% and 29% for 2023 and 2022, respectively. The comparability of our year-over-year effective tax rate was affected by an $855 million non-deductible expense related to the write-down of Scripps Networks goodwill in 2023. Differences between our effective income tax rate and the U.S. federal statutory rate are due to the impact of state taxes, foreign taxes, non-deductible expenses, changes in reserves for uncertain tax positions, excess tax benefits or expense from the exercise and vesting of share-based compensation awards ($1.5 million expense in 2023 and $1.0 million benefit in 2022), state deferred rate changes ($2.5 million benefit in 2023 and $3.4 million expense in 2022) and state NOL valuation allowance changes.

Business Segment Results — As discussed in the Notes to 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 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 accounting, human resources, employee benefit and information technology to our business segments. These intercompany agreements and allocations are generally amounts agreed upon by management, which may differ from an arms-length amount.

The other segment caption aggregates our operating segments that are too small to report separately. Costs for centrally provided services and certain corporate costs that are not allocated to the business segments are included in shared services and corporate costs. These unallocated corporate costs would also include the costs associated with being a public company. Corporate assets are primarily cash and cash equivalents, property and equipment primarily used for corporate purposes and deferred income taxes.

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Information regarding the operating performance of our business segments and a reconciliation of such information to the Consolidated Financial Statements is as follows:

Local Media — Our Local Media segment includes more than 60 local television 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 seven CW affiliates - four on full power stations and three on multicast; seven independent stations and 10 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, telecommunication companies, satellite carriers and over-the-top virtual MVPDs.

National television networks offer affiliates a variety of programming 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 services and automotive 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.

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Operating results for our Local Media segment were as follows:

2023 compared with 2022

Revenues

Total Local Media revenues decreased $96.1 million or 6.4% in 2023 compared to 2022. Core advertising revenues decreased $27.3 million or 4.4% in 2023 compared to 2022, reflecting the impact of macroeconomic conditions. During this non-election year, political revenue decreased $166 million in 2023 compared to 2022. These decreases were partially offset by an increase in distribution revenues of $96.8 million or 15% in 2023 compared to 2022. Rate increases favorably impacted year-over-year distribution revenues by approximately 20% which more than offset the mid-single-digit subscriber declines experienced during the year. During 2023, we completed renewal negotiations on distribution agreements covering about 75% of our subscriber households.

Costs and expenses

Employee compensation and benefits increased $10.1 million or 2.4% in 2023 compared to 2022, primarily due to annual merit increases.

Programming expense increased $11.9 million or 2.5% in 2023 compared to 2022. Costs attributed to the new Vegas Golden Knights and Arizona Coyotes sports rights agreements increased year-over-year programming expense by 1.3%. The remainder of the increase is due to an increase in network affiliation fees, driven by higher rates on renewals as well as contractual rate increases during the terms of the affiliation agreements.

Other expenses decreased $19.1 million or 9.5% in 2023 compared to 2022, driven primarily by lower ratings costs following a change in service providers.

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Scripps Networks — Our Scripps Networks segment includes national news outlets Scripps News and Court TV and popular entertainment brands ION, Bounce, Defy TV, Grit, ION Mystery and Laff. The networks reach nearly every U.S. television home through free over-the-air broadcast, cable/satellite, connected TV and digital distribution. Our Scripps Networks group earns revenue primarily through the sale of advertising. The advertising received by our national networks can be subject to seasonal and cyclical variations and is most impacted by national economic conditions.

Operating results for our Scripps Networks segment were as follows:

2023 compared with 2022

Revenues

Scripps Networks revenues, which are primarily comprised of advertising revenues, decreased $68.0 million or 7.1% in 2023 compared to 2022. Excluding the impact of the low-margin programmatic product we began to sunset in the second quarter of 2023, Scripps Networks revenues decreased 4.8% year-over-year. The amount of advertising revenue we earn is a function of the pricing negotiated with advertisers, the number of advertising spots sold and the audience impressions delivered. During 2023, our Scripps Networks brands experienced softness within the national advertising marketplace as macroeconomic challenges continued to impact advertiser budgets. Lower ratings in our key monetized demographics unfavorably impacted Scripps Networks revenues by 7.5% year-over-year, which was partially offset by the expanded distribution of our networks on connected TV ("CTV") platforms that increased revenues 3.6% year-over-year.

Cost and Expenses

Employee compensation and benefits increased $4.5 million or 3.7% in 2023 compared to 2022, primarily due to annual merit increases.

Programming expense increased $17.8 million or 5.2% in 2023 compared to 2022. Costs attributed to new 2023 sports rights agreements increased year-over-year programming expense by 2.9%. Additionally, higher affiliate fees, reflecting both contractual rate increases and increased distribution of our networks, increased year-over-year programming expense by 2.5%.

Other expenses decreased $5.8 million or 3.1% in 2023 compared to 2022. Excluding the costs associated with the programmatic product we began to sunset in 2023, other expenses increased 8.7% year-over-year. Other expenses were increased 2.5% from higher ratings costs, reflecting annual contractual rate increases, and were also increased approximately 2.2% from higher CTV related operating costs.

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.

Shared services and corporate expenses were $92.0 million in 2023 and $82.3 million in 2022.

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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 and can be affected by various risks and uncertainties. At the end of December 2023, we had $35.3 million of cash on hand and $248 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 to meet the Company’s operating needs for the next 12 months.

Cash Flows

Cash flows from operating activities

Cash provided by operating activities decreased $200 million in 2023 compared to 2022 driven by a $201 million year-over-year decrease in segment profit and a $45.0 million increase in interest paid. These year-over-year decreases to cash provided by operating activities were partially offset by a decrease of $30.6 million in income taxes paid.

Cash flows from investing activities

Cash used in investing activities was $60.6 million in 2023 compared to $66.4 million in 2022. Capital expenditures totaled $59.6 million in 2023 compared to $45.8 million in 2022. Investing activities in 2022 also reflect the $13.8 million acquisition of Nuvyyo.

Cash flows from financing activities

Cash used in financing activities was $33.7 million in 2023 compared to $327 million in 2022. During 2023, we had net debt proceeds of $330 million, reflecting borrowings on our Revolving Credit Facility. On July 31, 2023, we borrowed $283 million on the Revolving Credit Facility to pay off the remaining principal balance of our term loan maturing in October 2024. Preferred stock dividends paid were $48.0 million in 2023 and 2022. During the full year of 2022, we redeemed $59.0 million of our 2027 Senior Notes, $26.6 million of our 2029 Senior Notes, $85.9 million of our 2031 Senior Notes and made additional principal payments on the 2028 term loan totaling $100 million.

Debt

On July 31, 2023, we entered into the Eighth Amendment to the Third Amended Restated Credit Agreement ("Eighth Amendment"). Under the Eighth Amendment, we have a $585 million Revolving Credit Facility that matures on January 7, 2026. On July, 31, 2023, we borrowed $283 million on the revolver to pay off the remaining principal balance of our term loan maturing on October of 2024. In connection with our credit agreement, we have $1.3 billion of outstanding balance on our term loans as of December 31, 2023. The annual required principal payments on these term loans total $15.6 million and the earliest maturity date for any of the loans is May of 2026.

As of December 31, 2023, we also have $1.3 billion of senior notes outstanding. Senior secured notes totaling $523 million bear interest at a rate of 3.875% per annum and mature on January 15, 2029. Senior unsecured notes have a total outstanding principal balance of $818 million. The senior unsecured notes that mature on July 15, 2027 bear interest at 5.875% per annum and the senior unsecured notes that mature on January 15, 2031 bear interest at a rate of 5.375% per annum.

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Debt Covenants

Our term loans and notes do not have maintenance covenants. The earliest maturity of our term loans and notes is the second quarter of 2026. The Eighth Amendment to our Revolving Credit Facility permits a maximum leverage through December 31, 2024 of 5.0 times the two-year average earnings before interest, taxes, depreciation and amortization (EBITDA) as defined by our credit agreement. Based upon our current outlook, we expect to be in compliance with that covenant for the next 12 months. The maximum leverage covenant steps down to 4.75 times through September 30, 2025, and then steps down to 4.50 times thereafter.

Debt Repurchase Program

In February 2023, our Board of Directors provided a new debt repurchase authorization, 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. The authorization permits an aggregate principal amount reduction of up to $500 million and expires on March 1, 2026. Our previous debt repurchase authorization expired on March 1, 2023.

Equity

On January 7, 2021, we issued 6,000 shares of Series A preferred stock, having a face value of $100,000 per share. The preferred shares 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 paid in 2023 and 2022 totaled $48.0 million. In connection with the issuance of the preferred shares, Berkshire Hathaway also received a warrant to purchase up to 23.1 million Class A shares, at an exercise price of $13 per share.

Under the terms of the preferred shares, we are prohibited from paying dividends on and repurchasing our common shares until all preferred shares are redeemed.

Contractual Obligations

The following table summarizes contractual cash obligations as of December 31, 2023:

(a) — Refer to Note 10. Long-Term Debt of the Notes to Consolidated Financial Statements (Part II, Item 8 of this Form 10-K). Interest amounts included in the table may differ from amounts actually paid due to changes in SOFR. Repayment of outstanding borrowings under the Revolving Credit Facility are assumed to occur on the January 2026 expiration of our credit agreement. Interest payments as of December 31, 2023 assume the Revolving Credit Facility outstanding balance and related interest rates remain unchanged until the expiration date of our credit agreement.

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(b) — Program licenses and sports programming rights fees generally require payments over the terms of the agreements. Sports programming commitments totaled $186 million in aggregate as of December 31, 2023. Licensed programming includes both programs that have been delivered and are available for telecast and programs that have not yet been produced. It also includes payments for our broadcast television station network affiliation agreements and Scripps Networks carriage agreements with local television broadcasters. If the programs are not produced, our commitments would generally expire without obligation. Fixed fee amounts payable under our network affiliation and carriage agreements are also included. Variable amounts, including certain sports programming rights payments that are variable based primarily on revenues, in excess of the contractual amounts payable to the networks and broadcasters are not included in the amounts above.

(c) — We secure on-air talent for our television stations through multi-year talent agreements. Certain agreements may be terminated under certain circumstances or at certain dates prior to expiration. We expect our employment and talent contracts will be renewed or replaced with similar agreements upon their expiration. Amounts due under the contracts, assuming the contracts are not terminated prior to their expiration, are included in the contractual obligations table.

(d) — Contractual commitments summarized include payments to meet minimum funding requirements of our defined benefit pension plans and estimated benefit payments for our unfunded SERPs. Contractual pension obligations reflect anticipated minimum statutory pension contributions as of December 31, 2023, based upon pension funding regulations in effect at the time and our current pension assumptions regarding discount rates and returns on plan assets. Actual funding requirements may differ from amounts presented due to changes in discount rates, returns on plan assets or pension funding regulations that are in effect at the time. Payments for the SERPs have been estimated over a ten-year period. Accordingly, the amounts in the "over 5 years" column include estimated payments for the periods of 2029-2033. While benefit payments under these plans are expected to continue beyond 2033, we do not believe it is practicable to estimate payments beyond this period.

(e) — Refer to Note 8. Leases of the Notes to Consolidated Financial Statements (Part II, Item 8 of this Form 10-K).

(f) — We obtain audience ratings, market research and certain other services under multi-year agreements. These agreements are generally not cancelable prior to expiration of the service agreement. We may also enter into contracts with certain vendors and suppliers. These contracts typically do not require the purchase of fixed or minimum quantities and generally may be terminated at any time without penalty. Included in the table are purchase orders placed as of December 31, 2023. The table does not include any reserves for income taxes recognized because we are unable to reasonably predict the ultimate amount or timing of settlement of our reserves for income taxes. As of December 31, 2023, our reserves for income taxes totaled $16.3 million, which is reflected as a long-term liability in our Consolidated Balance Sheet.

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 our Consolidated Financial Statements describes the significant accounting policies we have selected for use in the preparation of our financial statements and related disclosures. We believe the following to be the most critical accounting policies, estimates and assumptions affecting our reported amounts and related disclosures.

Goodwill and Other Indefinite-Lived Intangible Assets — Goodwill for each reporting unit must be tested for impairment on an annual basis or when events occur or circumstances change that would indicate the fair value of a reporting unit is below its carrying value. If the fair value of the reporting unit is less than its carrying value, we would be required to record an impairment charge.

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The following is goodwill by business segment as of December 31, 2023:

For our annual impairment testing, we utilized the quantitative approach for performing our test. Under that approach, we determine the fair value of each reporting unit using the discounted cash flow method of the income approach, the general public company (“GPC”) method of the market approach and the guideline transactions method of the market approach. The use of a discounted cash flow analysis requires significant judgment to estimate the future cash flows derived from the business and the period of time over which those cash flows will occur, as well as to determine an appropriate discount rate. The determination of the discount rate is based on a cost of capital model, using a risk-free rate, adjusted by a stock-beta adjusted risk premium and a size premium. These reporting unit valuations are dependent on a number of significant estimates and assumptions, including macroeconomic conditions, market growth rates, competitive activities, cost containment, margin expansion and strategic business plans (inputs of which are categorized as Level 3 under the fair value hierarchy). While we believe the estimates and judgments used in determining the fair values were appropriate, different assumptions with respect to future cash flows, long-term growth rates and discount rates, could produce a different estimate of fair value. The estimate of fair value assumes certain growth of our businesses, which, if not achieved, could impact the fair value and possibly result in an impairment of the goodwill.

The GPC method relies upon valuation multiples derived from stock prices and operating values of publicly traded companies that are comparable to our reporting units. These multiples are then used to develop an estimate of value for the respective reporting unit. The valuation multiples applied are based on the operating values of the guideline companies divided by EBITDA. The EBITDA financial measure reflects the mature business stage of our reporting units. The estimated operating value determined by applying EBITDA to the selected multiple is then increased by a control premium factor derived from historical control premium indicators from industry transactions.

The guideline transactions method is based on valuation multiples derived from actual transactions for public and private companies comparable to our reporting units. Similar to the GPC method, these multiples are then used to develop an estimate of value for the respective reporting unit. When evaluating the respective transactions to include in this valuation method, we consider the acquirer and target companies involved, the date of the transactions, and the business description, size and financial condition of the companies, among other factors.

Upon completing our annual test in the fourth quarter of 2023, we determined that the fair value of our Local Media reporting unit exceeded its carrying value by more than 20% and that the fair value of our Scripps Networks reporting unit did not exceed its carrying value. Accordingly, we recognized a goodwill impairment charge of $266 million for the Scripps Networks reporting unit in the fourth quarter of 2023. A goodwill impairment charge of $686 million was recognized following an interim test of the Scripps Networks business during the second quarter of 2023, resulting in a total goodwill impairment charge of $952 million for the year ended December 31, 2023.

Given that the fair value of the Scripps Networks reporting unit currently approximates carrying value, this reporting unit is more sensitive to changes in assumptions regarding its fair value. While we believe the estimates and judgments used in determining the fair values were appropriate, these estimates of fair value assume certain levels of growth for the business, which, if not achieved, could impact the fair value and possibly result in an impairment of the goodwill in future periods. For example, a 50 basis point increase in the discount rate would reduce the fair value of the Scripps Networks reporting unit by approximately $90 million.

We have determined that our FCC licenses are indefinite lived assets and not subject to amortization. At December 31, 2023, the carrying value of our television FCC licenses was $779 million, which are tested for impairment annually, or more frequently if events or changes in circumstances indicate that they might be impaired. We compare the estimated fair value of each individual FCC license to its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized. Fair value is estimated for our FCC licenses using a method referred to as the “Greenfield Approach.” This approach uses a discounted cash flow model that incorporates multiple assumptions relating to the future prospects of each individual FCC license, including market revenues, long-term growth projections, and estimated cash flows based on market size and station type. The fair value of the FCC license is sensitive to each of the assumptions used in

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the Greenfield Approach and a change in any individual assumption could result in the fair value being less than the carrying value of the asset and an impairment charge being recorded. For example, a 50 basis point increase in the discount rate would reduce the aggregate fair value of the FCC licenses by approximately $165 million and any resulting impairment charge would be less than $1.0 million.

Pension Plans — We sponsor a noncontributory defined benefit pension plan as well as non-qualified Supplemental Executive Retirement Plans ("SERPs"). Both the defined benefit plan and the SERPs have frozen the accrual of future benefits.

The measurement of our pension obligation and related expense is dependent on a variety of estimates, including: discount rates; expected long-term rate of return on plan assets; and employee turnover, mortality and retirement ages. We review these assumptions on an annual basis and make modifications to the assumptions based on current rates and trends when appropriate. In accordance with accounting principles, we record the effects of these modifications currently or amortize them over future periods. We consider the most critical of our pension estimates to be our discount rate and the expected long-term rate of return on plan assets.

The assumptions used in accounting for our defined benefit pension plan for 2023 and 2022 are as follows:

The discount rate used to determine our future pension obligation is based upon a dedicated bond portfolio approach that includes securities rated Aa or better with maturities matching our expected benefit payments from the plans. The rate is determined each year at the plan measurement date and affects the succeeding year’s pension cost. Discount rates can change from year to year based on economic conditions that impact corporate bond yields. A 50 basis point increase or decrease in the discount rate would decrease or increase our pension obligation as of December 31, 2023 by approximately $21.8 million and decrease or increase 2024 pension expense by approximately $1.0 million.

Under our asset allocation strategy, approximately 55% of plan assets are invested in a portfolio of fixed income securities with a duration approximately that of the projected payment of benefit obligations. The remaining 45% of plan assets are invested in equity securities and other return-seeking assets. The expected long-term rate of return on plan assets is based primarily upon the target asset allocation for plan assets and capital markets forecasts for each asset class employed. A decrease in the expected rate of return on plan assets increases pension expense. A 50 basis point change in the 2024 expected long-term rate of return on plan assets would increase or decrease our 2024 pension expense by approximately $2.2 million.

We had unrecognized accumulated other comprehensive loss related to net actuarial losses for our pension plan and SERPs of $99.6 million at December 31, 2023. Unrealized actuarial gains and losses result from deferred recognition of differences between our actuarial assumptions and actual results. In 2023, we had an actuarial gain of $2.6 million.

Recent Accounting Guidance

Refer to Note 2. Recently Adopted and Issued Accounting Standards of the Notes to Consolidated Financial Statements (Part II, Item 8 of this Form 10-K) for further discussion.

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