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Acquisitions | 6 Months Ended
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Jun. 30, 2021
Business Combinations [Abstract] |
Acquisitions | Acquisitions ION Acquisition On January 7, 2021, we completed the acquisition of national broadcast network ION Media Networks, Inc. ("ION") for $2.65 billion. ION is a national network of broadcast stations and is the largest holder of U.S. broadcast television spectrum. The business distributes its programming through owned Federal Communications Commission-licensed television stations as well as affiliated TV stations, reaching 100 million of U.S. homes through its over-the-air broadcast and pay TV platforms. The acquisition of ION enabled us to create a full-scale national television networks business by combining the ION network with our other news and entertainment networks - Bounce, Grit, Laff, Court TV, Court TV Mystery and Newsy. The transaction was financed with a combination of cash, debt financing and preferred equity financing, including Berkshire Hathaway's $600 million preferred equity investment in Scripps. Berkshire Hathaway also received a warrant to purchase up to 23.1 million Class A shares, at an exercise price of $13 per share. To comply with ownership rules of the Federal Communications Commission, we simultaneously divested 23 of ION's television stations for a total consideration of $30 million, which were purchased by INYO Broadcast Holdings, LLC upon completion of the acquisition. These divested stations became independent affiliates of ION pursuant to long-term affiliation agreements. The following table summarizes the net cash consideration for the ION transaction.
(in thousands) |  |
Total purchase price |  | $ | 2,650,000 |
Plus: Cash acquired |  | 14,493 |
Plus: Working capital |  | 59,798 |
Total transaction gross cash consideration |  | 2,724,291 |
Less: Proceeds from ION stations divested |  | (30,000) |
Total transaction net cash consideration |  | 2,694,291 |
Less: Cash acquired |  | (14,493) |
Total consideration, net of cash acquired |  | $ | 2,679,798 |
The following table summarizes the preliminary fair values of the ION assets acquired and liabilities assumed at the closing date.
(in thousands) |  |
Accounts receivable |  | $ | 135,006 |
Other current assets |  | 24,701 |
Programming rights |  | 169,027 |
Property and equipment |  | 120,495 |
Operating lease right-of-use assets |  | 72,717 |
Other assets |  | 3,993 |
Goodwill |  | 1,803,961 |
Indefinite-lived intangible assets - FCC licenses |  | 424,200 |
Amortizable intangible assets: |  |
INYO affiliation agreement |  | 422,000 |
Other affiliation relationships |  | 22,000 |
Advertiser relationships |  | 143,000 |
Trade names |  | 72,000 |
Accounts payable |  | (9,674) |
Unearned revenue |  | (13,043) |
Accrued expenses |  | (27,141) |
Current portion of programming liabilities |  | (92,721) |
Other current liabilities |  | (8,373) |
Programming liabilities |  | (191,837) |
Deferred tax liabilities |  | (277,009) |
Operating lease liabilities |  | (78,438) |
Other long-term liabilities |  | (35,066) |
Total consideration, net of cash acquired |  | $ | 2,679,798 |
In the second quarter of 2021, we recorded measurement period adjustments to the preliminary ION purchase price allocation as a result of ongoing valuation procedures on assets acquired and liabilities assumed. These adjustments included increases in property and equipment of $57.4 million and advertiser relationships of $4.0 million, as well as decreases in FCC licenses of $9.5 million and INYO and other affiliation relationships of $14.0 million. The estimated amortization period for certain intangible assets were adjusted as well. These adjustments in fair value also resulted in an increase to the deferred tax liability of $9.7 million. The impact of the measurement period adjustments to our results of operations resulted in increases to previously reported depreciation and amortization expense of $2.0 million in 2021. Of the value allocated to amortizable intangible assets, the INYO affiliation agreement has an estimated amortization period of 20 years, advertiser relationships have an estimated amortization period of 7 years, other affiliation relationships have an estimated amortization period of 10 years and the value allocated to trade names has an estimated amortization period of 10 years. The goodwill of $1.8 billion arising from the transactions consists largely of synergies, economies of scale and other benefits of a larger national broadcast footprint and becoming the largest holder of broadcast spectrum. We allocated the goodwill to our Scripps Networks segment. The transaction is accounted for as a stock acquisition which applies carryover tax basis to the assets and liabilities acquired. The goodwill is not deductible for income tax purposes. From the January 7, 2021 acquisition date through June 30, 2021, revenues from ION's operations of $266 million have been included in the accompanying Condensed Consolidated Statements of Operations. Acquisition and integration costs related to the transaction, including legal and professional fees and severance costs, totaled $32.8 million for the six months ended June 30, 2021. KCDO Television Station On November 20, 2020, we closed on the acquisition of the KCDO television station in the Denver, Colorado market. Included in the sale was KSBS-CD, a low power translator of KCDO. Total consideration for the transaction totaled $9.6 million. The preliminary purchase price allocated $6.9 million to the acquired FCC license, $1.7 million to goodwill, $0.9 million to property and equipment and the remainder was allocated to various working capital accounts. Pro forma results of operations Pro forma results of operations, assuming the ION acquisition had taken place at the beginning of 2020, are presented in the following table. The pro forma results do not include KCDO, as the impact of this acquisition, individually or in the aggregate, is not material to prior year results of operations. The pro forma information includes the historical results of operations of Scripps and ION (excluding the results of the divested stations sold to INYO), as well as adjustments for additional depreciation and amortization of the assets acquired, additional interest expense related to the financing of the transactions and other transactional adjustments. The pro forma results do not include efficiencies, cost reductions or synergies expected to result from the acquisition, or retrospective fair value adjustments to the warrant. The unaudited pro forma financial information is not necessarily indicative of the results that actually would have occurred had the acquisitions been completed at the beginning of the period.
|  | Six Months Ended June 30,
(in thousands, except per share data) (unaudited) |  | 2021 |  | 2020
Operating revenues |  | $ | 1,112,720 |  |  | $ | 1,045,043 |
Net income (loss) attributable to Scripps shareholders |  | 19,911 |  |  | (34,056) |
Net income (loss) per share: |  |  |  |
Basic |  | $ | 0.24 |  |  | $ | (0.42) |
Diluted |  | 0.23 |  |  | (0.42) |
Pro forma results in 2020 include $42.2 million of non-recurring transaction related costs. The pro forma results in 2021 reflect a $32.8 million reversal of ION transaction costs incurred that are already being captured in the 2020 pro forma results.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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