UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number:
(Exact Name of Registrant as Specified in Its Charter)
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(State of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
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(Address of Principal Executive Offices) |
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(Zip Code) |
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(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that it was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 7, 2024, the registrant had
TABLE OF CONTENTS
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Page |
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PART I |
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FINANCIAL INFORMATION |
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ITEM 1. |
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Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 |
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5 |
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Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2024 and 2023 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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23 |
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ITEM 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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24 |
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ITEM 3. |
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33 |
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ITEM 4. |
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33 |
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PART II |
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OTHER INFORMATION |
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ITEM 1. |
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34 |
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ITEM 1A. |
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34 |
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ITEM 2. |
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34 |
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ITEM 3. |
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34 |
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ITEM 4. |
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34 |
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ITEM 5. |
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34 |
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ITEM 6. |
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35 |
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
NEXSTAR MEDIA GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except for share and per share information, unaudited)
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June 30, |
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December 31, |
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2024 |
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2023 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ |
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$ |
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Restricted cash and cash equivalents |
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- |
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Accounts receivable, net of allowance for credit losses of $ |
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Broadcast rights |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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FCC licenses |
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Network affiliation agreements, net |
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Other intangible assets, net |
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Investments |
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Other noncurrent assets, net |
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Total assets(1) |
$ |
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$ |
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LIABILITIES AND STOCKHOLDERSʼ EQUITY |
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Current liabilities: |
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Current portion of debt |
$ |
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$ |
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Accounts payable |
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Broadcast rights payable |
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Accrued expenses |
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Operating lease liabilities |
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Other current liabilities |
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Total current liabilities |
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Debt |
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Deferred tax liabilities |
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Other noncurrent liabilities |
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Total liabilities(1) |
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Stockholdersʼ equity: |
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Preferred stock - $ |
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Common stock - $ |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Retained earnings |
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Treasury stock - at cost; |
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Total Nexstar Media Group, Inc. stockholdersʼ equity |
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Noncontrolling interests |
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Total stockholdersʼ equity |
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Total liabilities and stockholdersʼ equity |
$ |
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$ |
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The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
3
NEXSTAR MEDIA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except for share and per share information, unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net revenue |
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$ |
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$ |
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$ |
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$ |
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Operating expenses: |
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Direct operating, excluding depreciation and amortization |
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Selling, general and administrative, excluding depreciation and amortization |
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Depreciation and amortization |
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Total operating expenses |
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Income from operations |
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Income from equity method investments, net |
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Interest expense, net |
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Pension and other postretirement plans credit, net |
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Gain on disposal of an investment |
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- |
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- |
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Other expenses, net |
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- |
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- |
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Income before income taxes |
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Income tax expense |
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Net income |
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Net loss attributable to noncontrolling interests |
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Net income attributable to Nexstar Media Group, Inc. |
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$ |
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$ |
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$ |
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$ |
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Net income per common share attributable to Nexstar Media Group, Inc.: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average number of common shares outstanding: |
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Basic (in thousands) |
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Diluted (in thousands) |
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The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
4
NEXSTAR MEDIA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Three Months Ended June 30, 2024 and 2023
(in millions, except for share and per share information, unaudited)
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-In |
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Retained |
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Comprehensive |
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Treasury Stock |
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Noncontrolling |
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Stockholdersʼ |
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Shares |
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Amount |
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Capital |
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Earnings |
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Income |
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Shares |
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Amount |
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interests |
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Equity |
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Balances as of March 31, 2024 |
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$ |
- |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Purchase of treasury stock |
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- |
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- |
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- |
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- |
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- |
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( |
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- |
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Stock-based compensation expense |
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- |
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- |
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- |
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- |
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- |
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- |
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Vesting of restricted stock units and exercise of stock options |
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- |
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- |
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- |
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- |
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- |
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Dividends declared on common stock ($ |
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- |
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- |
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- |
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( |
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- |
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- |
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- |
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- |
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( |
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Net income (loss) |
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- |
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- |
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- |
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- |
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- |
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- |
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( |
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Balances as of June 30, 2024 |
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$ |
- |
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$ |
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$ |
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$ |
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( |
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$ |
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$ |
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$ |
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Balances as of March 31, 2023 |
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$ |
- |
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$ |
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$ |
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$ |
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( |
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$ |
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$ |
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$ |
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Purchase of treasury stock |
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- |
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- |
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- |
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- |
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- |
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( |
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( |
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- |
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Stock-based compensation expense |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Vesting of restricted stock units and exercise of stock options |
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- |
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- |
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( |
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- |
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- |
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- |
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- |
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Dividends declared on common stock ($ |
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- |
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- |
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- |
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( |
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- |
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- |
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- |
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- |
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( |
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Contribution from noncontrolling interests |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Net income (loss) |
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- |
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- |
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- |
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- |
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- |
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- |
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( |
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Balances as of June 30, 2023 |
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$ |
- |
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$ |
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$ |
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$ |
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( |
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$ |
( |
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$ |
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$ |
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The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
5
NEXSTAR MEDIA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Six Months Ended June 30, 2024 and 2023
(in millions, except for share and per share information, unaudited)
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-In |
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Retained |
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Comprehensive |
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Treasury Stock |
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Noncontrolling |
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Stockholdersʼ |
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Shares |
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Amount |
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Capital |
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Earnings |
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Income |
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Shares |
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Amount |
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interests |
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Equity |
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Balances as of December 31, 2023 |
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$ |
- |
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$ |
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$ |
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$ |
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( |
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$ |
( |
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$ |
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$ |
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Purchase of treasury stock |
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- |
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- |
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- |
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- |
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- |
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( |
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( |
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- |
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( |
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Stock-based compensation expense |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Vesting of restricted stock units and exercise of stock options |
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- |
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- |
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( |
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- |
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- |
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- |
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( |
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Dividends declared on common stock ($ |
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- |
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- |
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- |
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( |
) |
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- |
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- |
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- |
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- |
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( |
) |
Contribution from noncontrolling interests |
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- |
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- |
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- |
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- |
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- |
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- |
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Net income (loss) |
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- |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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|
|
||
Balances as of June 30, 2024 |
|
|
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Balances as of December 31, 2022 |
|
|
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
Purchase of treasury stock |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Stock-based compensation expense |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Vesting of restricted stock units and exercise of stock options |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
( |
) |
||
Dividends declared on common stock ($ |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Contribution from noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Net income (loss) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
|
||
Balances as of June 30, 2023 |
|
|
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
6
NEXSTAR MEDIA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions, unaudited)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
|
|
|
|
||
Gain on disposal of an investment |
|
|
( |
) |
|
|
- |
|
Deferred income taxes |
|
|
( |
) |
|
|
( |
) |
Payments for broadcast rights |
|
|
( |
) |
|
|
( |
) |
Income from equity method investments, net |
|
|
( |
) |
|
|
( |
) |
Distribution from equity method investments – return on capital |
|
|
|
|
|
|
||
Changes in operating assets and liabilities, net of acquisitions and dispositions: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
|
||
Prepaid and other current assets |
|
|
( |
) |
|
|
( |
) |
Other noncurrent assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
( |
) |
|
|
( |
) |
Accrued expenses and other current liabilities |
|
|
( |
) |
|
|
|
|
Income tax payable |
|
|
( |
) |
|
|
( |
) |
Other noncurrent liabilities |
|
|
( |
) |
|
|
( |
) |
Other |
|
|
|
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Proceeds from disposal of an investment |
|
|
|
|
|
- |
|
|
Other investing activities, net |
|
|
|
|
|
|
||
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from debt issuance, net of debt discounts |
|
|
|
|
|
- |
|
|
Repayments of long-term debt |
|
|
( |
) |
|
|
( |
) |
Purchase of treasury stock |
|
|
( |
) |
|
|
( |
) |
Common stock dividends paid |
|
|
( |
) |
|
|
( |
) |
Payments for capitalized software obligations |
|
|
( |
) |
|
|
( |
) |
Contribution from noncontrolling interests |
|
|
|
|
|
|
||
Cash paid for shares withheld for taxes |
|
|
( |
) |
|
|
( |
) |
Other financing activities, net |
|
|
- |
|
|
|
|
|
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
Supplemental information: |
|
|
|
|
|
|
||
Interest paid |
|
$ |
|
|
$ |
|
||
Income taxes paid, net of refunds |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Non-cash investing and financing activities: |
|
|
|
|
|
|
||
Accrued and noncash purchases of property and equipment |
|
$ |
|
|
$ |
|
||
Right-of-use assets obtained in exchange for operating lease obligations |
|
$ |
|
|
$ |
|
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
7
NEXSTAR MEDIA GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Organization and Business Operations
As used in this Quarterly Report on Form 10-Q, “Nexstar” refers to Nexstar Media Group, Inc., a Delaware corporation, and its consolidated wholly-owned and majority-owned subsidiaries; the “Company” refers to Nexstar and the variable interest entities (“VIEs”) required to be consolidated in our financial statements under authoritative guidance related to the consolidation of VIEs; and all references to “we,” “our,” “ours,” and “us” refer to Nexstar.
Nexstar is a leading diversified media company with television broadcasting, television network and digital media assets operating in the United States. As of June 30, 2024, we owned, operated, programmed or provided sales and other services to
Principles of Consolidation
The Condensed Consolidated Financial Statements include the accounts of Nexstar, subsidiaries consolidated through voting interests and VIEs for which we are the primary beneficiary (see “Variable Interest Entities” section below). Noncontrolling interests represent the minority owners’ share in profit or loss and equity of The CW and the VIE owners’ share in profit or loss and equity in the consolidated VIEs. Noncontrolling interests are presented as a component separate from Nexstar’s stockholders’ equity in the accompanying Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Changes in Stockholders’ Equity. All intercompany account balances and transactions have been eliminated in consolidation. Nexstar management evaluates each arrangement that may include variable interests and determines the need to consolidate an entity where it determines Nexstar is the primary beneficiary of a VIE in accordance with related authoritative literature and interpretive guidance.
Interim Financial Statements
The Condensed Consolidated Financial Statements as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023 are unaudited. However, in the opinion of management, such financial statements include all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement of the financial information included herein in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the period. Results of operations for interim periods are not necessarily indicative of results for the full year. Estimates are used for, but are not limited to, allowance for credit losses, valuation of assets acquired and liabilities assumed in business combinations, distribution revenue recognized, income taxes, the recoverability of goodwill, FCC licenses and long-lived assets, the recoverability of investments, the recoverability of broadcast rights and the useful lives of property and equipment and intangible assets. As of June 30, 2024, the Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or revision of the carrying value of its assets or liabilities. However, these estimates and judgments may change as new events occur and additional information is obtained, which may result in changes being recognized in the Company’s consolidated financial statements in future periods. Actual results could differ from those estimates and any such differences may have a material impact on the Company’s Condensed Consolidated Financial Statements.
8
These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related Notes included in Nexstar’s Annual Report on Form 10-K for the year ended December 31, 2023. The balance sheet as of December 31, 2023 has been derived from the audited financial statements as of that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
Variable Interest Entities
Nexstar may determine that an entity is a VIE as a result of local service agreements entered into with that entity. The term local service agreement generally refers to a contract whereby the owner-operator of a television station contracts with a third party (typically another television station owner-operator) to provide it with administrative, sales and other services required for the operation of its station. Nevertheless, the owner-operator of each station retains control of and responsibility for the operation of its station, including ultimate responsibility over all programming broadcast on its station. A local service agreement can be (i) a time brokerage agreement (“TBA”) or a local marketing agreement (“LMA”) which allows Nexstar to program most of a station’s broadcast time, sell the station’s advertising time and retain the advertising revenue generated in exchange for monthly payments, frequently based on the station’s monthly operating expenses, (ii) a shared services agreement (“SSA”) which allows Nexstar to provide services to a station including news production, technical maintenance and security, in exchange for Nexstar’s right to receive certain payments as described in the SSA, or (iii) a joint sales agreement (“JSA”) which permits Nexstar to sell certain of a station’s advertising time and retain a percentage of the related revenue, as described in the JSA.
Consolidated VIEs
Nexstar consolidates entities in which it is deemed under U.S. GAAP to have controlling financial interests for financial reporting purposes as a result of (i) local service agreements Nexstar has with the stations owned by these entities, (ii) Nexstar’s (excluding The CW) guarantee of the obligations incurred under Mission Broadcasting, Inc.’s (“Mission”) senior secured credit facility (see Note 7), (iii) Nexstar having power over significant activities affecting these VIEs’ economic performance, including budgeting for advertising revenue, certain advertising sales and, in some cases, hiring and firing of sales force personnel and (iv) purchase options granted by each consolidated VIE which permit Nexstar to acquire the assets and assume the liabilities of these VIEs’ stations, subject to FCC consent.
The following table summarizes the various local service agreements Nexstar had in effect as of June 30, 2024 with its consolidated VIEs:
Owner |
|
Service Agreements |
|
Full Power Stations |
Mission |
|
TBA |
|
WFXP, KHMT and KFQX |
|
|
SSA & JSA |
|
KJTL, KLRT, KASN, KOLR, KCIT, KAMC, KRBC, KSAN, WUTR, WAWV, WYOU, KODE, WTVO, KTVE, WTVW, WVNY, WXXA, WLAJ, KMSS, KPEJ, KLJB, KASY, KWBQ and KRWB |
|
|
LMA |
|
WNAC and WPIX |
White Knight Broadcasting (“White Knight”) |
|
SSA & JSA |
|
WVLA and KFXK |
Vaughan Media, LLC (“Vaughan”) |
|
SSA & JSA |
|
WBDT, WYTV and KTKA |
|
|
LMA |
|
KNVA |
Nexstar’s ability to receive cash from the consolidated VIEs is governed by the local service agreements. Under these agreements, Nexstar has received substantially all of the consolidated VIEs’ available cash, after satisfaction of operating costs and debt obligations. Nexstar anticipates it will continue to receive substantially all of the consolidated VIEs’ available cash, after satisfaction of operating costs and debt obligations. In compliance with FCC regulations for all the parties, each VIE maintains complete responsibility for and control over programming, finances, personnel and operations of its stations.
9
The carrying amounts and classification of the assets and liabilities, excluding intercompany amounts, of the VIEs which have been included in the Condensed Consolidated Balance Sheets were as follows (in millions):
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Accounts receivable, net |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
FCC licenses |
|
|
|
|
|
|
||
Network affiliation agreements, net |
|
|
|
|
|
|
||
Other noncurrent assets, net |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Current portion of debt |
|
$ |
|
|
$ |
|
||
Other current liabilities |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Debt |
|
|
|
|
|
|
||
Deferred tax liabilities |
|
|
|
|
|
|
||
Other noncurrent liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
$ |
|
|
$ |
|
The following are assets of consolidated VIEs, excluding intercompany amounts, that are not available to settle the obligations of Nexstar and the liabilities of consolidated VIEs, excluding intercompany amounts, for which their creditors do not have recourse to the general credit of Nexstar (in millions):
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Current assets |
|
$ |
|
|
$ |
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
FCC licenses |
|
|
|
|
|
|
||
Network affiliation agreements, net |
|
|
|
|
|
|
||
Other noncurrent assets, net |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Current liabilities |
|
$ |
|
|
$ |
|
||
Noncurrent liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
$ |
|
|
$ |
|
10
Non-Consolidated VIEs
Nexstar has an outsourcing agreement with Cunningham Broadcasting Corporation (“Cunningham”) which continues through December 31, 2025. Under the outsourcing agreement, Nexstar provides certain engineering, production, sales and administrative services for WYZZ, the FOX affiliate in the Peoria, Illinois market, through WMBD, the Nexstar television station in that market. During the term of the outsourcing agreement, Nexstar retains the broadcasting revenue and related expenses of WYZZ and is obligated to pay a monthly fee to Cunningham based on the combined operating cash flow of WMBD and WYZZ, as defined in the agreement.
In January 2024, we entered into a multi-year TBA with KAZT, L.L.C., the owner of television station KAZT-TV in Phoenix, Arizona, and acquired the station’s non-license assets for a nominal cash payment. We were also granted an option to purchase the station from KAZT, L.L.C., subject to FCC consent. On February 1, 2024, KAZT-TV became an affiliate of The CW.
Nexstar has determined that it has variable interests in WYZZ and KAZT-TV. Nexstar has also evaluated its arrangements with Cunningham and KAZT, L.L.C. and has determined that it is not the primary beneficiary of the variable interests because it does not have the ultimate power to direct the activities that most significantly impact the stations’ economic performance. Therefore, Nexstar has not consolidated WYZZ and KAZT-TV under authoritative guidance related to the consolidation of VIEs. There were no significant transactions arising from Nexstar’s outsourcing agreement with Cunningham or TBA with KAZT, L.L.C. Neither Cunningham nor KAZT, L.L.C. guarantees Nexstar’s debt.
Income Per Share
Basic income per share is computed by dividing the net income attributable to Nexstar by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed using the weighted-average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares are calculated using the treasury stock method. They consist of stock options and restricted stock units outstanding during the period and reflect the potential dilution that could occur if common shares were issued upon exercise of stock options and vesting of restricted stock units. The following table shows the amounts used in computing Nexstar’s diluted shares (in thousands):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Weighted average shares outstanding – basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of equity incentive plan instruments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding – diluted |
|
|
|
|
|
|
|
|
|
|
|
|
During the three and six months ended June 30, 2024, weighted average restricted stock units of
During the three and six months ended June 30, 2023, weighted average restricted stock units of
Recent Accounting Pronouncements
New Accounting Standards Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses for all public entities. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments in ASU 2023-07 retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the provisions of this ASU and expects to adopt them for the year ending December 31, 2024.
11
New Accounting Standards Not Yet Adopted
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 applies to all entities that are subject to Topic 740, Income Taxes and is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. The amendments in ASU 2023-09 will be effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the potential impacts ASU 2023-09 may have on its Consolidated Financial Statements.
Note 3: Intangible Assets and Goodwill
The Company’s definite-lived intangible assets consisted of the following (dollars in millions):
|
|
Estimated |
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||||||||||
|
|
useful life, |
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
||||||
|
|
in years |
|
Gross |
|
|
Amortization |
|
|
Net |
|
|
Gross |
|
|
Amortization |
|
|
Net |
|
||||||
Network affiliation agreements |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Other definite-lived intangible assets |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Definite-lived intangible assets |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
The following table presents the Company’s estimate of amortization expense for the remainder of 2024, each of the five succeeding years ended December 31 and thereafter for definite-lived intangible assets as of June 30, 2024 (in millions):
Remainder of 2024 |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
The amounts recorded to goodwill and FCC licenses were as follows (in millions):
|
|
Goodwill |
|
|
FCC Licenses |
|
||||||||||||||||||
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
||||||
|
|
Gross |
|
|
Impairment |
|
|
Net |
|
|
Gross |
|
|
Impairment |
|
|
Net |
|
||||||
Balances as of December 31, 2023 |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Balances as of June 30, 2024 |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
Indefinite-lived intangible assets are not subject to amortization but are tested for impairment annually or whenever events or changes in circumstances indicate that such assets might be impaired. During the three and six months ended June 30, 2024, the Company did not identify events that would trigger impairment assessments.
12
Note 4: Investments
Investments in the Company’s Condensed Consolidated Balance Sheets consisted of the following (in millions):
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Equity method investments |
|
$ |
|
|
$ |
|
||
Other equity investments |
|
|
|
|
|
|
||
Total investments |
|
$ |
|
|
$ |
|
Equity Method Investments
During the three and six months ended June 30, 2024 and 2023, the Company received cash distributions from its equity method investments, primarily from its investment in TV Food Network, as discussed below.
During the three and six months ended June 30, 2024 and 2023, the income from equity method investments, net reported in the Company’s unaudited Condensed Consolidated Statements of Operations consisted of the following (in millions):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Income from equity method investments, net, before amortization of basis difference |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Amortization of basis difference |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income from equity method investments, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
At acquisition date, the Company measured its estimated share of the differences between the estimated fair values and carrying values (the “basis difference”) of the investees’ tangible assets and amortizable intangible assets had the fair value of the investments been allocated to the identifiable assets of the investees in accordance with ASC Topic 805, “Business Combinations.” Additionally, the Company measured its estimated share of the basis difference attributable to investees’ goodwill. The Company amortizes its share of the basis differences attributable to tangible assets and intangible long-lived assets of investees, including TV Food Network, and records the amortization (the “amortization of basis difference”) as a reduction of income from equity method investments, net in the accompanying Condensed Consolidated Statements of Operations. The Company’s share in these basis differences and related amortization is primarily attributable to its investment in TV Food Network (discussed in more detail below).
Distributions received from investments are classified in the Condensed Consolidated Statements of Cash Flows based on the nature of the investee activities that generated the distribution. Returns on capital distributions are presented as cash flow from operating activities whereas returns of capital distributions are presented as cash flow from investing activities.
Investment in TV Food Network
Nexstar acquired its
TV Food Network operates two 24-hour television networks, Food Network and Cooking Channel, offering quality television, video, internet and mobile entertainment and information focusing on food and entertaining.
The partnership agreement governing TV Food Network provides that the partnership shall, unless certain actions are taken by the partners, dissolve and commence winding up and liquidating TV Food Network upon the first to occur of certain enumerated liquidating events, one of which is a specified date of December 31, 2024. Nexstar intends to renew its partnership agreement with WBD for TV Food Network before expiration. In the event of a liquidation, Nexstar would be entitled to its proportionate share of distributions to partners, which the partnership agreement provides would occur as promptly as is consistent with obtaining fair market value for the assets of TV Food Network. The partnership agreement also provides that the partnership may be continued or reconstituted in certain circumstances.
Nexstar’s investment in TV Food Network had a book value of $
13
As of June 30, 2024 and December 31, 2023, Nexstar had a remaining share in amortizable basis difference of $
Nexstar had the following transactions related to its investment in TV Food Network during the three and six months ended June 30, 2024 and 2023, respectively (in millions):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Cash distributions received |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Recognized share in TV Food Networkʼs net income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Recorded amortization of basis difference (expense) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Summarized financial information for TV Food Network is as follows (in millions):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from operations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income attributable to Nexstar Media Group, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
Other Equity Investments
In February 2024, Nexstar received $
Note 5: Accrued Expenses
Accrued expenses consisted of the following (in millions):
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Compensation and related taxes |
|
$ |
|
|
$ |
|
||
Interest payable |
|
|
|
|
|
|
||
Network affiliation fees |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
Note 6: Retirement and Postretirement Plans
Nexstar has various funded, qualified non-contributory defined benefit retirement plans which cover certain employees and former employees. All of these retirement plans are frozen in terms of pay and service, except for a plan with immaterial pension benefit obligations.
Nexstar also has various other postretirement benefit plans (“OPEB”), including retiree medical savings account plans which reimburse eligible retired employees for certain medical expenses and unfunded plans that provide certain health and life insurance benefits to certain retired employees. The periodic benefit cost (credit) related to OPEB is not significant.
The following tables provide the components of net periodic benefit cost (credit) for Nexstar’s pension benefit plans (in millions):
|
|
Pension Benefit Plans |
|
|||||||||||||
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Interest cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amortization of net gain |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net periodic benefit credit |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
14
During the three and six months ended June 30, 2024, there were
Note 7: Debt
Long-term debt consisted of the following (dollars in millions):
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Nexstar |
|
|
|
|
|
|
||
Term Loan A, due |
|
$ |
|
|
$ |
|
||
Term Loan B, due |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Mission |
|
|
|
|
|
|
||
Term Loan B, due |
|
|
|
|
|
|
||
Revolving loans, due |
|
|
|
|
|
|
||
Total outstanding principal |
|
|
|
|
|
|
||
Less: unamortized financing costs and discount – Nexstar Term Loan A, due June 2027 |
|
|
( |
) |
|
|
( |
) |
Less: unamortized financing costs and discount – Nexstar Term Loan B, due September 2026 |
|
|
( |
) |
|
|
( |
) |
Add: unamortized premium, net of financing costs – Nexstar 5.625% Notes, due July 2027 |
|
|
|
|
|
|
||
Less: unamortized financing costs and discount – Nexstar 4.75% Notes, due November 2028 |
|
|
( |
) |
|
|
( |
) |
Less: unamortized financing costs and discount – Mission Term Loan B, due June 2028 |
|
|
( |
) |
|
|
( |
) |
Total outstanding debt |
|
|
|
|
|
|
||
Less: current portion |
|
|
( |
) |
|
|
( |
) |
Long-term debt, net of current portion |
|
$ |
|
|
$ |
|
Nexstar’s outstanding term loans are governed by Nexstar’s credit agreement and Mission’s outstanding term loans and revolving loans are governed by Mission’s credit agreement. Each credit agreement is also herein referred to as a senior secured credit facility. Nexstar’s senior unsecured notes are governed by the indentures.
2024 Activities
During the six months ended June 30, 2024, the Company repaid scheduled principal maturities of $
Unused Commitments and Borrowing Availability
Nexstar and Mission had $
Collateralization and Guarantees of Debt
The Company’s senior secured credit facilities described above are collateralized by a security interest in substantially all the combined assets, excluding FCC licenses, the other assets of consolidated VIEs unavailable to creditors of Nexstar (see Note 2) and the assets of The CW. Nexstar (excluding The CW) guarantees full payment of all obligations incurred under the Mission senior secured credit facility in the event of Mission’s default. Mission is a guarantor of Nexstar’s senior secured credit facility, Nexstar’s
In consideration of Nexstar’s guarantee of the Mission senior secured credit facility, Mission has granted Nexstar purchase options to acquire the assets and assume the liabilities of each Mission station, subject to FCC consent. These option agreements, which expire on various dates between 2024 and 2033, are freely exercisable or assignable by Nexstar without consent or approval by Mission. The Company expects these option agreements to be renewed upon expiration.
15
Debt Covenants
The Nexstar credit agreement (senior secured credit facility) contains a covenant which requires Nexstar to comply with a maximum consolidated first lien net leverage ratio of
Note 8: Leases
The Company as a Lessee
The Company has operating leases for office spaces, tower facilities, antenna sites, studios and other real estate properties and equipment. The operating leases have remaining lease terms of
Supplemental balance sheet information related to operating leases was as follows (in millions, except lease term and discount rate):
|
|
Balance Sheet Classification |
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
|
Other noncurrent assets, net |
|
$ |
|
|
$ |
|
|||
|
Operating lease liabilities |
|
$ |
|
|
$ |
|
|||
|
Other noncurrent liabilities |
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
||
Weighted Average Remaining Lease Term of Operating leases |
|
|
|
|
||||||
Weighted Average Discount Rate of Operating leases |
|
|
% |
|
|
% |
Operating lease expense for the three months ended June 30, 2024 was $
Operating lease expense for the six months ended June 30, 2024 was $
Cash paid for operating leases included in the operating cash flows was $
Future minimum lease payments under non-cancellable leases as of June 30, 2024 were as follows (in millions):
|
|
Operating Leases |
|
|
Remainder of 2024 |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Total future minimum lease payments |
|
|
|
|
Less: imputed interest |
|
|
( |
) |
Total |
|
$ |
|
16
Note 9: Fair Value Measurements
The Company measures and records in its Condensed Consolidated Financial Statements certain assets and liabilities at fair value. ASC Topic 820, “Fair Value Measurement and Disclosures,” establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). This hierarchy consists of the following three levels:
The carrying values of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable, broadcast rights payable and accrued expenses approximate fair value due to their short-term nature.
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
||||
|
|
Amount |
|
|
Value |
|
|
Amount |
|
|
Value |
|
||||
Nexstar |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Term Loan A, due June 2027(1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Term Loan B, due September 2026(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mission |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Term Loan B, due June 2028(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revolving loans due June 2027(1) |
|
|
|
|
|
|
|
|
|
|
|
|
During the three and six months ended June 30, 2024, there were no events or changes in circumstance that triggered an impairment to the Company’s significant assets, including equity method investments, indefinite-lived intangible assets, long-lived assets and goodwill.
Note 10: Common Stock
On July 27, 2022, Nexstar’s board of directors approved a share repurchase program authorizing Nexstar to repurchase up to $
Share repurchases are executed from time to time in open market transactions, block trades or private transactions, including through Rule 10b5-1 plans. There is no minimum number of shares that Nexstar is required to repurchase. The repurchase program does not have an expiration date and may be suspended or discontinued at any time without prior notice.
On
17
Note 11: Income Taxes
Income tax expense was $
For the three months ended June 30, 2024, changes in the valuation allowance resulted in a
Income tax expense was $
For the six months ended June 30, 2024, changes in the valuation allowance resulted in a
The Company calculates its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income or loss and adjusts the provision for discrete tax items recorded in the period. Future changes in the forecasted annual income projections could result in significant adjustments to quarterly income tax expense in future periods.
Note 12: Commitments and Contingencies
Guarantee of Mission Debt
Nexstar (excluding The CW) guarantees full payment of all obligations incurred under the Mission senior secured credit facility. In the event that Mission is unable to repay amounts due, Nexstar will be obligated to repay such amounts. The maximum potential amount of future payments that Nexstar would be required to make under this guarantee would be generally limited to the outstanding principal amounts. As of June 30, 2024, Mission had a maximum commitment of $
Indemnification Obligations
In connection with certain agreements that the Company enters into in the normal course of its business, including local service agreements, business acquisitions and borrowing arrangements, the Company enters into contractual arrangements under which the Company agrees to indemnify the third party to such arrangement from losses, claims and damages incurred by the indemnified party for certain events as defined within the particular contract. Such indemnification obligations may not be subject to maximum loss clauses and the maximum potential amount of future payments the Company could be required to make under these indemnification arrangements may be unlimited. Historically, payments made related to these indemnifications have been insignificant and the Company has not incurred significant costs to defend lawsuits or settle claims related to these indemnification agreements.
Litigation
From time to time, the Company is involved in litigation that arises from the ordinary operations of business, such as contractual or employment disputes or other general actions. In the event of an adverse outcome of these proceedings, the Company believes the resulting liabilities would not have a material adverse effect on its financial condition or results of operations.
Local TV Advertising Antitrust Litigation—On March 16, 2018, a group of companies including Nexstar and Tribune (the “Defendants”) received a Civil Investigative Demand from the Antitrust Division of the Department of Justice (“DOJ”) regarding an investigation into the exchange of certain information related to the pacing of sales related to the same period in the prior year among broadcast stations in some local markets in alleged violation of federal antitrust law. Without admitting any wrongdoing, some Defendants, including Tribune, entered into a proposed consent decree (referred to herein as the “consent decree”) with the DOJ on November 6, 2018. Without admitting any wrongdoing, Nexstar agreed to settle the matter with the DOJ on December 5, 2018. The consent decree was entered in final form by the U.S. District Court for the District of Columbia on May 22, 2019. The consent decree, which settles claims by the government of alleged violations of federal antitrust laws in connection with the alleged information sharing, does not include any financial penalty. Pursuant to the consent decree, Nexstar and Tribune agreed not to exchange certain non-public information with other stations operating in the same market except in certain cases, and to implement certain antitrust compliance measures and monitor and report on compliance with the consent decree.
18
Starting in July 2018, a series of plaintiffs filed putative class action lawsuits against the Defendants and others alleging that they coordinated their pricing of television advertising, thereby harming a proposed class of all buyers of television advertising time from one or more of the Defendants since at least January 1, 2014. The plaintiff in each lawsuit seeks injunctive relief and money damages caused by the alleged antitrust violations. On October 9, 2018, these cases were consolidated in a multi-district litigation in the District Court for the Northern District of Illinois captioned In Re: Local TV Advertising Antitrust Litigation, No. 1:18-cv-06785 (“MDL Litigation”). On January 23, 2019, the Court in the MDL Litigation appointed plaintiffs’ lead and liaison counsel.
The MDL Litigation is ongoing. The Plaintiffs’ Consolidated Complaint was filed on
The parties are in the discovery phase of litigation. The Court has not yet set a trial date. Nexstar and Tribune deny all allegations against them and will defend their advertising practices.
Tribune Related Contingencies
In connection with Nexstar’s acquisition of Tribune on September 19, 2019, Nexstar assumed contingencies from certain legal proceedings, as follows:
Chicago Cubs Transactions—On August 21, 2009, Tribune and Chicago Entertainment Ventures, LLC (formerly Chicago Baseball Holdings, LLC) (“CEV LLC”), and its subsidiaries (collectively, “New Cubs LLC”), among other parties, entered into an agreement (the “Cubs Formation Agreement”) governing the contribution of certain assets and liabilities related to the businesses of the Chicago Cubs Major League Baseball franchise then owned by Tribune and its subsidiaries to New Cubs LLC. The transactions contemplated by the Cubs Formation Agreement and the related agreements thereto (the “Chicago Cubs Transactions”) closed on October 27, 2009. As a result of these transactions, Northside Entertainment Holdings LLC (f/k/a Ricketts Acquisition LLC) (“NEH”) owned
On June 28, 2016, the Internal Revenue Service (“IRS”) issued Tribune a Notice of Deficiency which presented the IRS’s position that the gain with respect to the Chicago Cubs Transactions should have been included in Tribune’s 2009 taxable income. Accordingly, the IRS proposed a $
On September 19, 2019, Tribune became a wholly owned subsidiary of Nexstar following Nexstar’s merger with Tribune. Nexstar disagrees with the IRS’s position that the Chicago Cubs Transactions generated taxable gain in 2009, the proposed penalty and the IRS’s calculation of the gain. If the IRS prevails in its position, the gain on the Chicago Cubs Transactions would be deemed to be taxable in 2009. Nexstar estimates that the federal and state income taxes would be approximately $
A bench trial in the U.S. Tax Court took place between October 28, 2019 and November 8, 2019, and closing arguments took place on December 11, 2019. The Tax Court issued a separate opinion on January 6, 2020 holding that the IRS satisfied the procedural requirements for the imposition of the gross valuation misstatement penalty. The judge deferred any litigation of the penalty until a final determination was reached by the Tax Court or Court of Appeals.
On October 26, 2021, the Tax Court issued an opinion related to the Chicago Cubs Transactions, which held that Tribune’s structure was, in substantial part, in compliance with partnership provisions of the Code and, as a result, did not trigger the entire 2009 taxable gain proposed by the IRS. On October 19, 2022, the Tax Court entered the decision that there is no tax deficiency or penalty due in the 2009 tax year. On January 13, 2023, the IRS filed a notice of appeal to the U.S. Court of Appeals for the Seventh Circuit. On February 3, 2023, the Company filed a notice of cross-appeal. On February 15, 2024, the case was argued before the U.S. Court of Appeals for the Seventh Circuit. The Company expects a ruling from the Court of Appeals in the second half of 2024.
19
As of June 30, 2024, Nexstar believes the tax impact of applying the Tax Court opinion to 2009 and its impact on subsequent tax years is not material to the Company’s accounting for uncertain tax positions or to its Consolidated Financial Statements. Although management believes its estimates and judgments are reasonable, the timing and ultimate resolution are unpredictable and could materially change.
Revenue Agent’s Report on Tribune’s 2014 to 2015 Federal Income Tax Audits— Prior to Nexstar’s merger with Tribune in September 2019, Tribune was undergoing federal income tax audits for taxable years 2014 and 2015. In the third quarter of 2020, the IRS completed its audits of Tribune and issued a Revenue Agent’s Report which disallows the reporting of certain assets and liabilities related to Tribune’s emergence from Chapter 11 bankruptcy on December 31, 2012. Nexstar disagrees with the IRS’s proposed adjustments to the tax basis of certain assets and the related taxable income impact, and Nexstar is contesting the adjustments through the IRS administrative appeal procedures. If the IRS prevails in its position and after taking into account the impact of the Tax Court opinion, Nexstar would be required to reduce its tax basis in certain assets resulting in a $
Regulatory Matters
On March 21, 2024, the FCC issued a Notice of Apparent Liability for Forfeiture (“NAL”) to Nexstar and to Mission, a consolidated VIE, for alleged violations of the Communications Act and FCC rules relating to Mission television station WPIX, New York, New York. The NAL alleges that Nexstar and Mission engaged in an unauthorized transfer of control of WPIX and that Nexstar violated the national television ownership limit by acquiring undisclosed attributable interests in the station. The NAL proposes forfeitures to Nexstar and Mission for the alleged violations and additionally requires that within 12 months of a forfeiture order or payment of the forfeitures, either (i) Mission divest WPIX to an “unrelated third party” or (ii) Mission sell WPIX to Nexstar, with Nexstar divesting a sufficient number of other stations to reduce its national reach below the FCC national ownership limit. Nexstar and Mission have filed responses vigorously disputing the NAL. Nexstar is unable to reasonably estimate the possible financial statement impact, if any, relating to the NAL.
WADL-TV
On May 22, 2024, Mission terminated its proposed acquisition of WADL-TV serving the Detroit, Michigan market from Adell Broadcasting Corporation. There were no fees that resulted from the termination.
Note 13: Segment Data
The Company’s reportable broadcast segment includes (i) television stations and related local websites that Nexstar owns, operates, programs or provides sales and other services to in various markets across the United States, (ii) NewsNation, a national cable news network, (iii)
The Company evaluates the performance of its operating segments based on net revenue and segment profit (loss). Segment profit (loss) includes net revenue, direct operating expenses and selling, general and administrative expenses (excluding corporate) and payments for broadcast rights. Segment profit (loss) excludes depreciation and amortization, any nonrecurring transaction and restructuring expenses, reimbursement from the FCC related to station repack, impairment charges, gain on disposal of assets and business divestitures and non-operating income statement items. Other segment loss is calculated in this manner except it includes The CW’s amortization of broadcast rights and excludes The CW’s payments for broadcast rights.
Beginning in the first quarter of 2024, The CW’s operating results and assets are included in the “Other” segment because they did not meet the threshold for separate segment disclosure. Additionally, The CW’s segment loss is now reported at its full consolidated financial results in accordance with Nexstar’s current internal financial reporting. Prior to this change, The CW reported its operating performance in past segment footnote disclosures at amounts reflecting Nexstar’s ownership interest. These changes were reflected in the current presentation of “Other” segment in the tables below. The comparative prior year disclosures were also recast to conform with the current presentation.
20
Segment financial information is included in the following tables for the periods presented (in millions):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
Net revenue |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Broadcast |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate (unallocated) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total net revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
Operating income (loss) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Broadcast segment profit |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other segment loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Corporate (unallocated) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Depreciation and amortization expense(1) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Payments for broadcast rights(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Miscellaneous, net |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Income from operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Assets |
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Broadcast(3) |
|
$ |
|
|
$ |
|
||
Other |
|
|
|
|
|
|
||
Corporate (unallocated) |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
Goodwill |
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Broadcast |
|
$ |
|
|
$ |
|
||
Other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
21
The following tables present the disaggregation of the Company’s revenue under ASC 606 for the periods presented (in millions):
Three Months Ended June 30, 2024 |
|
Broadcast |
|
|
Other |
|
|
Corporate & |
|
|
Consolidated |
|
||||
Distribution |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Advertising |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|||
Other |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|||
Total net revenue |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
Six Months Ended June 30, 2024 |
|
Broadcast |
|
|
Other |
|
|
Corporate & |
|
|
Consolidated |
|
||||
Distribution |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Advertising |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net revenue |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
Three Months Ended June 30, 2023 |
|
Broadcast |
|
|
Other |
|
|
Corporate & |
|
|
Consolidated |
|
||||
Distribution |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Advertising |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net revenue |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
Six Months Ended June 30, 2023 |
|
Broadcast |
|
|
Other |
|
|
Corporate & |
|
|
Consolidated |
|
||||
Distribution |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Advertising |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net revenue |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
Our primary sources of revenue include: (i) distribution, comprised primarily of retransmission revenue, carriage fees, affiliation fees and spectrum leasing revenue and (ii) advertising, comprised of non-political and political advertising.
Distribution revenue, our largest category of revenue, primarily results from compensation from cable, satellite and other multichannel video distributors (“MVPDs”) and online video distributors, or virtual multichannel video distributors, (“vMVPDs”) in return for our consent to the retransmission of the signals of our television stations and the carriage of NewsNation, typically based on the number of subscribers the MVPDs and vMVPDs have. We also generate distribution revenues from affiliation fees paid by affiliates of The CW and from programmers who lease the use of our spectrum in selected local markets to air their content on our multicast streams. Distribution revenue is recognized at the point in time the broadcast signal or cable network feed is delivered to the distributors in the case of retransmission and carriage fee revenue or, in the case of affiliation fees and spectrum leasing revenue, as network programming and spectrum capacity are delivered to our affiliates and customers.
Advertising revenue primarily results from the sale to local, regional and national businesses, political candidates and other political advertisers of commercial airtime by our stations and networks and the sale of advertising on our owned or third-party websites, and through mobile and OTT applications and other digital advertising solutions. Advertising revenue is generally highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to, and including, the holiday season. Advertising revenue is generally higher during even-numbered years when congressional and/or presidential elections occur and advertising is aired during the Olympic Games. Advertising revenue is recognized at the time the advertisement airs or is delivered on our websites or mobile or OTT applications or the advertising solution is delivered.
22
During the three and six months ended June 30, 2024, revenues for
Note 14: Subsequent Events
On
On July 26, 2024, Nexstar announced that its Board of Directors increased its share repurchase authorization by $
From July 1, 2024 to August 7, 2024, we repurchased
23
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and related Notes included elsewhere in this Quarterly Report on Form 10-Q and the Consolidated Financial Statements and related Notes contained in our Annual Report on Form 10-K for the year ended December 31, 2023.
As used in this Quarterly Report on Form 10-Q and unless the context indicates otherwise, “Nexstar” refers to Nexstar Media Group, Inc., a Delaware corporation, and its consolidated wholly owned and majority-owned subsidiaries; the “Company” refers to Nexstar and the variable interest entities (“VIEs”) required to be consolidated in our financial statements; and all references to “we,” “our,” “ours,” and “us” refer to Nexstar.
As a result of our deemed controlling financial interests in the consolidated VIEs in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), we consolidate the financial position, results of operations and cash flows of these VIEs as if they were wholly-owned entities. We believe this presentation is meaningful for understanding our financial performance. Refer to Note 2 to our Condensed Consolidated Financial Statements for a discussion of our determinations of VIE consolidation under the related authoritative guidance. The following discussion of our financial position and results of operations includes the consolidated VIEs’ financial position and results of operations.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: the risks and uncertainties of current economic factors that are beyond our control, such as inflation, rising interest rates and supply chain disruptions; any projections or expectations of earnings, revenue, financial performance, liquidity and capital resources or other financial items; any assumptions or projections about the television broadcasting industry; any statements of our plans, strategies and objectives for our future operations, performance, liquidity and capital resources or other financial items; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and other similar words.
Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ from a projection or assumption in any of our forward-looking statements. Our future financial position and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties, including those described in our Annual Report on Form 10-K for the year ended December 31, 2023 and in our other filings with the United States Securities and Exchange Commission (“SEC”). The forward-looking statements made in this Quarterly Report on Form 10-Q are made only as of the date hereof, and we do not have or undertake any obligation to update any forward-looking statements to reflect subsequent events or circumstances.
Executive Summary
Six Months Ended June 2024 Highlights
24
Overview of Operations
As of June 30, 2024, we owned, operated, programmed or provided sales and other services to 201 full power television stations and one AM radio station, including those owned by VIEs, in 117 markets in 40 states and the District of Columbia. The stations are affiliates of ABC, NBC, FOX, CBS, The CW, MyNetworkTV and other broadcast television networks. Through various local service agreements, we provided sales, programming and other services to 37 full power television stations owned by independent third parties, of which 35 full power television stations are VIEs that are consolidated into our financial statements. We also own a 75.0% interest in The CW, the fifth major broadcast network in the U.S., NewsNation, a national cable news network, two digital multicast networks, Antenna TV and REWIND TV, multicast network services provided to third parties, and a 31.3% ownership stake in TV Food Network. Our digital assets include 142 local websites, 279 mobile applications, 24 connected television applications, seven free ad-supported television channels representing products of our local television stations, The CW, NewsNation, The Hill and BestReviews, and a suite of advertiser solutions.
We (excluding The CW) guarantee full payment of all obligations incurred under Mission Broadcasting, Inc.’s (“Mission”) senior secured credit facility in the event of its default. Mission is a guarantor of our senior secured credit facility, our 5.625% Notes, due July 2027 and our 4.75% Notes, due November 2028. In consideration of our guarantee of Mission’s senior secured credit facility, Mission has granted us purchase options to acquire the assets and assume the liabilities of each Mission station, subject to FCC consent. These option agreements (which expire on various dates between 2024 and 2033) are freely exercisable or assignable by us without consent or approval by Mission or its shareholders. We expect these option agreements to be renewed upon expiration.
We do not own the consolidated VIEs or their television stations. However, we are deemed under U.S. GAAP to have controlling financial interests for financial reporting purposes in these entities because of (i) the local service agreements we have with their stations, (ii) our (excluding The CW) guarantee of the obligations incurred under Mission’s senior secured credit facility, (iii) our power over significant activities affecting the VIEs’ economic performance, including budgeting for advertising revenue, certain advertising sales and, in some cases, hiring and firing of sales force personnel and (iv) purchase options granted by each consolidated VIE which permit us to acquire the assets and assume the liabilities of each of these VIEs’ stations at any time, subject to FCC consent. In compliance with FCC regulations for all the parties, each of the consolidated VIEs maintains complete responsibility for and control over programming, finances and personnel for its stations.
See Note 2, “Variable Interest Entities” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for additional information on VIEs, including a discussion of the local service agreements we have with these independent third parties.
Seasonality
In even-numbered years we generate substantial advertising revenue from the political advertising we sell to candidates and non-candidate entities such as political action committees and political parties. Advertising revenue is also positively affected by certain events such as the Olympic Games or the Super Bowl. Advertising revenue is generally highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to, and including, the holiday season. As 2024 is an election year, we expect an increase in political advertising revenue, a component of our advertising revenue, to be reported in 2024 compared to 2023.
25
Historical Performance
Results of Operations
The following table sets forth the Company’s operating results (dollars in millions):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
% Change |
|
|
2024 |
|
|
2023 |
|
|
% Change |
|
||||||
Net revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Distribution |
|
$ |
734 |
|
|
$ |
696 |
|
|
|
5.5 |
|
|
$ |
1,495 |
|
|
$ |
1,424 |
|
|
|
5.0 |
|
Advertising |
|
|
522 |
|
|
|
511 |
|
|
|
2.2 |
|
|
|
1,034 |
|
|
|
1,028 |
|
|
|
0.6 |
|
Other |
|
|
13 |
|
|
|
33 |
|
|
|
(60.6 |
) |
|
|
24 |
|
|
|
45 |
|
|
|
(46.7 |
) |
Net revenue |
|
|
1,269 |
|
|
|
1,240 |
|
|
|
2.3 |
|
|
|
2,553 |
|
|
|
2,497 |
|
|
|
2.2 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Direct operating |
|
|
552 |
|
|
|
537 |
|
|
|
2.8 |
|
|
|
1,100 |
|
|
|
1,075 |
|
|
|
2.3 |
|
Selling, general and administrative |
|
|
269 |
|
|
|
262 |
|
|
|
2.7 |
|
|
|
539 |
|
|
|
528 |
|
|
|
2.1 |
|
Depreciation and amortization |
|
|
208 |
|
|
|
262 |
|
|
|
(20.6 |
) |
|
|
398 |
|
|
|
511 |
|
|
|
(22.1 |
) |
Total operating expenses |
|
|
1,029 |
|
|
|
1,061 |
|
|
|
(3.0 |
) |
|
|
2,037 |
|
|
|
2,114 |
|
|
|
(3.6 |
) |
Income from operations |
|
|
240 |
|
|
|
179 |
|
|
|
34.1 |
|
|
|
516 |
|
|
|
383 |
|
|
|
34.7 |
|
Income from equity method investments, net |
|
|
16 |
|
|
|
32 |
|
|
|
|
|
|
35 |
|
|
|
57 |
|
|
|
|
||
Interest expense, net |
|
|
(113 |
) |
|
|
(111 |
) |
|
|
|
|
|
(227 |
) |
|
|
(218 |
) |
|
|
|
||
Pension and other postretirement plans credit, net |
|
|
7 |
|
|
|
10 |
|
|
|
|
|
|
14 |
|
|
|
19 |
|
|
|
|
||
Gain on disposal of an investment |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
40 |
|
|
|
- |
|
|
|
|
||
Other expenses, net |
|
|
(1 |
) |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
(1 |
) |
|
|
|
||
Income before income taxes |
|
|
149 |
|
|
|
110 |
|
|
|
|
|
|
378 |
|
|
|
240 |
|
|
|
|
||
Income tax expense |
|
|
(43 |
) |
|
|
(35 |
) |
|
|
|
|
|
(105 |
) |
|
|
(77 |
) |
|
|
|
||
Net income |
|
|
106 |
|
|
|
75 |
|
|
|
|
|
|
273 |
|
|
|
163 |
|
|
|
|
||
Net loss attributable to noncontrolling interests |
|
|
12 |
|
|
|
21 |
|
|
|
|
|
|
20 |
|
|
|
44 |
|
|
|
|
||
Net income attributable to Nexstar Media Group, Inc. |
|
$ |
118 |
|
|
$ |
96 |
|
|
|
|
|
$ |
293 |
|
|
$ |
207 |
|
|
|
|
26
Three Months Ended June 30, 2024 Compared to the Same Period in 2023
The Company’s revenues increased 2.3% for the three months ended June 30, 2024, compared to the same period in 2023, primarily due to higher revenues from distribution and political advertising, partially offset by lower revenue from non-political advertising.
Distribution revenue increased by $38 million primarily due to the successful renewal of our distribution agreements in 2023 on terms favorable to us and scheduled annual escalation of rates per subscriber, growth in vMVPD subscribers, the addition of CW affiliations on certain of our stations, and the return of our partner stations on one MVPD in January, partially offset by continued MVPD subscriber attrition. We anticipate a continued increase in retransmission fees year over year until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers, subject to trends in subscriber attrition or growth.
Advertising revenue increased by $11 million, primarily due to an increase in political advertising of $37 million as 2024 is an election year, offset in part by a decrease in non-political revenue of $24 million due to ongoing advertising market softness.
Direct operating expenses, consisting primarily of programming, news and technical expenses, and selling, general and administrative expenses increased by $22 million primarily due to increase in news programming, stock-based compensation expense from new restricted stock grants and the timing of restricted stock grants, direct digital operating, and various administrative expenses, partially offset by a reduction in restructuring costs at The CW.
Depreciation and amortization expenses decreased by $54 million, as follows:
Income from equity method investments, net decreased by $16 million primarily due to a decrease in net income of TV Food Network, our largest equity method investment. TV Food Network’s net income decreased primarily due to a decrease in its advertising revenue. For additional information on our investment in TV Food Network, refer to Note 4 to our Condensed Consolidated Financial Statements.
The Company’s effective tax rates were 28.9% and 31.8% for each of the respective periods.
For the three months ended June 30, 2024, changes in the valuation allowance resulted in a 2.0% decrease to the effective tax rate. Other permanent differences, including a reduction in losses related to the minority interest in The CW, resulted in a 2.8% decrease to the effective tax rate. This is partially offset by a decrease in the excess benefit from stock option exercises and restricted stock unit vesting in 2024 compared to 2023 which resulted in a 1.3% increase in the rate.
The Company calculates its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income or loss and adjusts the provision for discrete tax items recorded in the period. Future changes in the forecasted annual income projections could result in significant adjustments to quarterly income tax expense in future periods.
27
Six Months Ended June 30, 2024 Compared to the Same Period in 2023
The Company’s revenues increased 2.2% for the six months ended June 30, 2024, compared to the same period in 2023, primarily due to higher revenues from distribution and political advertising, partially offset by lower revenue from non-political advertising.
Distribution revenue increased by $71 million for the six months ended June 30, 2024, compared to the same period in 2023, primarily due to the successful renewal of our distribution agreements in 2023 on terms favorable to us and scheduled annual escalation of rates per subscriber, growth in vMVPD subscribers, the addition of CW affiliations on certain of our stations and the return of our partner stations on one MVPD in January, partially offset by continued MVPD subscriber attrition. We anticipate a continued increase in retransmission fees year over year until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers, subject to trends in subscriber attrition or growth.
Advertising revenue increased by $6 million for the six months ended June 30, 2024, compared to the same period in 2023, primarily due to an increase of $67 million in political advertising as 2024 is an election year, offset in part by a decrease in non-political revenue of $61 million due to ongoing advertising market softness.
Direct operating expenses, consisting primarily of programming, news and technical expenses, and selling, general and administrative expenses increased by $36 million primarily due to increase in news programming, stock-based compensation expense from new restricted stock grants and the timing of restricted stock grants, direct digital operating, and various administrative expenses, partially offset by a reduction in restructuring costs at The CW.
Depreciation and amortization expense decreased by $113 million, as follows:
Income from equity method investments, net decreased by $22 million primarily due to a decrease in net income of TV Food Network, our largest equity method investment. TV Food Network’s net income decreased primarily due to a decrease in its advertising revenue. For additional information on our investment in TV Food Network, refer to Note 4 to our Condensed Consolidated Financial Statements.
Interest expense, net increased by $9 million, primarily due to increases in interest rates in the Company’s outstanding loans under its senior secured credit facilities, partially offset by decreases in interest expense from debt repayments.
In February 2024, Nexstar received $40 million in cash proceeds, and recorded a gain on disposal of an investment for the same amount, in connection with BMI’s sale to New Mountain Capital.
The Company’s effective tax rates were 27.8% and 32.1% for each of the respective periods.
For the six months ended June 30, 2024, changes in the valuation allowance resulted in a 3.4% decrease to the effective tax rate. Other permanent differences, including a reduction in losses related to the minority interest in The CW, resulted in a 1.9% decrease to the effective tax rate. This is partially offset by a decrease in the excess benefit from stock option exercises and restricted stock unit vesting in 2024 compared to 2023 which resulted in a 1.0% increase in the rate.
The Company calculates its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income or loss and adjusts the provision for discrete tax items recorded in the period. Future changes in the forecasted annual income projections could result in significant adjustments to quarterly income tax expense in future periods.
28
Liquidity and Capital Resources
The Company is leveraged, which makes it vulnerable to changes in general economic conditions. The Company’s ability to repay or refinance its debt will depend on, among other things, financial, business, market, competitive and other conditions, many of which are beyond the Company’s control. The Company’s primary sources of liquidity include cash on hand, borrowing capacity under its revolving credit facilities (with a maturity date of June 2027) and cash generated from operations. The Company believes these sources of liquidity are sufficient to meet its business operating requirements, its capital expenditures and to continue to service its debt for at least the next 12 months as of the filing date of this Quarterly Report on Form 10-Q. As of June 30, 2024, the Company was in compliance with the financial covenants contained in the amended credit agreements governing its senior secured credit facilities.
Any future adverse economic conditions, including those resulting from heightened and sustained inflation and higher interest rates, could adversely affect the Company’s future operating results, cash flows and financial condition.
Cash Flow Summary
The following tables present summarized financial information management believes is helpful in evaluating the Company’s liquidity and capital resources (in millions):
|
|
Six Months Ended June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net cash provided by operating activities |
|
$ |
452 |
|
|
$ |
679 |
|
Net cash used in investing activities |
|
|
(39 |
) |
|
|
(73 |
) |
Net cash used in financing activities |
|
|
(414 |
) |
|
|
(466 |
) |
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
$ |
(1 |
) |
|
$ |
140 |
|
Cash paid for interest |
|
$ |
219 |
|
|
$ |
214 |
|
Income taxes paid, net of refunds |
|
$ |
177 |
|
|
$ |
121 |
|
|
|
As of June 30, |
|
|
As of December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Cash, cash equivalents and restricted cash |
|
$ |
146 |
|
|
$ |
147 |
|
Cash Flows—Operating Activities
Net cash flows provided by operating activities decreased by $227 million during the six months ended June 30, 2024, compared to the same period in 2023. This was primarily due to an increase in uses of cash from (i) timing of receipts and payables of $174 million, including prepaying fees associated with our TBA of KAZT-TV and (ii) a decrease in distribution from our equity investment in TV Food Network of $112 million, partially offset by a decrease in payments for broadcast rights of $52 million.
Cash Flows—Investing Activities
Net cash flows used in investing activities decreased by $34 million during the six months ended June 30, 2024, compared to the same period in 2023. This was primarily due to the proceeds received from the disposal of an investment in connection with BMI’s sale to New Mountain Capital of $40 million, partially offset by an increase in capital expenditures of $4 million.
Cash Flows—Financing Activities
Net cash flows used in financing activities decreased by $52 million during the six months ended June 30, 2024, compared to the same period in 2023. This was primarily due to fewer shares of Nexstar common stock repurchased in the current year, or a decrease in stock buybacks of $69 million and lower cash paid for shares withheld for taxes of $14 million, offset in part by a $17 million decrease in contribution from noncontrolling interests and a $14 million increase in common stock dividends paid.
29
Subsequent Investing and Financing Activities
On July 26, 2024, Nexstar announced that its Board of Directors increased its share repurchase authorization by $1.5 billion. From July 1, 2024 to August 7, 2024, we repurchased 266,014 shares of our common stock for $46 million, funded by cash on hand. As of the date of filing this Quarterly Report on Form 10-Q, the remaining available amount under the share repurchase authorization was $1.9 billion.
On July 26, 2024, Nexstar’s Board of Directors declared a quarterly cash dividend of $1.69 per share of Nexstar’s common stock. The dividend is payable on August 23, 2024 to stockholders of record on August 9, 2024.
Our senior secured credit facility may limit the amount of dividends we may pay to stockholders over the term of the agreement.
Long-term debt
As of June 30, 2024, the Company had total outstanding debt of $6.781 billion, net of unamortized financing costs, discounts and premium, which represented 74.9% of the Company’s combined capitalization. The Company’s high level of debt requires that a substantial portion of cash flow be dedicated to pay principal and interest on debt, which reduces the funds available for working capital, capital expenditures, acquisitions and other general corporate purposes.
|
|
As of June 30, |
|
|
As of December 31, |
|
||
(dollars in millions) |
|
2024 |
|
|
2023 |
|
||
Nexstar senior secured credit facility |
|
$ |
3,743 |
|
|
$ |
3,804 |
|
Mission senior secured credit facility |
|
|
354 |
|
|
|
354 |
|
5.625% Notes, due July 2027 |
|
|
1,714 |
|
|
|
1,714 |
|
4.75% Notes, due November 2028 |
|
|
1,000 |
|
|
|
1,000 |
|
Total outstanding principal |
|
|
6,811 |
|
|
|
6,872 |
|
Less: Unamortized financing costs, discounts and premium, net |
|
|
(30 |
) |
|
|
(35 |
) |
Total outstanding debt |
|
$ |
6,781 |
|
|
$ |
6,837 |
|
|
|
|
|
|
|
|
||
Unused revolving loan commitments under senior secured credit facilities (1) |
|
$ |
545 |
|
|
$ |
544 |
|
The following table summarizes the principal indebtedness scheduled to mature for the periods referenced as of June 30, 2024 (in millions):
|
|
|
|
|
Payments Due by Period |
|
||||||||||||||||||
|
|
Total |
|
|
Remainder of 2024 |
|
|
2025 |
|
|
2026-2027 |
|
|
2028-2029 |
|
|
Thereafter |
|
||||||
Nexstar senior secured credit facility |
|
$ |
3,743 |
|
|
$ |
60 |
|
|
$ |
121 |
|
|
$ |
3,562 |
|
|
$ |
- |
|
|
$ |
- |
|
Mission senior secured credit facility |
|
|
354 |
|
|
|
2 |
|
|
|
3 |
|
|
|
68 |
|
|
|
281 |
|
|
|
- |
|
5.625% Notes, due July 2027 |
|
|
1,714 |
|
|
|
- |
|
|
|
- |
|
|
|
1,714 |
|
|
|
- |
|
|
|
- |
|
4.75% Notes, due November 2028 |
|
|
1,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,000 |
|
|
|
- |
|
|
|
$ |
6,811 |
|
|
$ |
62 |
|
|
$ |
124 |
|
|
$ |
5,344 |
|
|
$ |
1,281 |
|
|
$ |
- |
|
We (excluding The CW) guarantee full payment of all obligations incurred under Mission’s senior secured credit facility in the event of its default. Mission is a guarantor of our senior secured credit facility, our 5.625% Notes, due July 2027 and our 4.75% Notes, due November 2028. In consideration of our guarantee of Mission’s senior secured credit facility, Mission has granted us purchase options to acquire the assets and assume the liabilities of each Mission station, subject to FCC consent. These option agreements (which expire on various dates between 2024 and 2033) are freely exercisable or assignable by us without consent or approval by Mission or its shareholders. We expect these option agreements to be renewed upon expiration.
We make semiannual interest payments on the 5.625% Notes, due July 2027 on January 15 and July 15 of each year. We make semiannual interest payments on our 4.75% Notes, due November 2028 on May 1 and November 1 of each year. Interest payments on our and Mission’s senior secured credit facilities are generally paid every one to three months and are payable based on the type of interest rate selected.
30
The terms of our and Mission’s senior secured credit facilities, as well as the indentures governing our 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028, limit, but do not prohibit us or Mission, from incurring substantial amounts of additional debt in the future. The Company’s senior secured credit facilities and the indentures governing our existing notes may limit the amount of dividends we may pay to stockholders and share repurchases we may make over the term of the agreement.
The Company does not have any rating downgrade triggers that would accelerate the maturity dates of its debt. However, a downgrade in the Company’s credit rating could adversely affect its ability to renew the existing credit facilities, obtain access to new credit facilities or otherwise issue debt in the future and could increase the cost of such debt.
The Company’s ability to access funds under its senior secured credit facilities depends, in part, on its compliance with certain financial covenants. Any additional drawings under the senior secured credit facilities will reduce the Company’s future borrowing capacity and the amount of total unused revolving loan commitments. Any future adverse economic conditions, including those resulting from heightened and sustained inflation and higher interest rates, could adversely affect our future operating results and cash flows and may cause us to seek alternative sources of funding, including accessing capital markets, subject to market conditions. Such alternative sources of funding may not be available on commercially reasonable terms or at all.
Our credit agreement contains a covenant which requires us to comply with a maximum consolidated first lien net leverage ratio of 4.25 to 1.00. The financial covenant, which is formally calculated on a quarterly basis, is based on the Company’s combined results, excluding the operating results of The CW, which Nexstar designated as an unrestricted subsidiary under its credit agreements and indentures. The Mission amended credit agreement does not contain financial covenant ratio requirements but does provide for default in the event we do not comply with all covenants contained in our credit agreement. As of June 30, 2024, we were in compliance with our financial covenant. We believe the Company will be able to maintain compliance with all covenants contained in the credit agreements governing its senior secured facilities and the indentures governing Nexstar’s 5.625% Notes, due July 2027 and Nexstar’s 4.75% Notes, due November 2028 for a period of at least the next 12 months as of the filing date of this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
As of June 30, 2024, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or VIEs, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. All of our arrangements with our VIEs in which we are the primary beneficiary are on-balance sheet arrangements. Our variable interests in other entities are obtained through local service agreements, which have valid business purposes and transfer certain station activities from the station owners to us. We are, therefore, not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.
As of June 30, 2024, we had outstanding standby letters of credit with various financial institutions amounting to $19 million. The outstanding balance of standby letters of credit is deducted against our unused revolving loan commitment under our senior secured credit facility and would not be available for withdrawal.
Issuer and Guarantor Summarized Financial Information
Nexstar Media Inc. (the “Issuer”) is the issuer of 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028. These notes are fully and unconditionally guaranteed, jointly and severally, by Nexstar Media Group, Inc. (“Parent”), Mission (a consolidated VIE) and the Subsidiary Guarantors (as defined below). The Issuer, Subsidiary Guarantors, Parent and Mission are collectively referred to as the “Obligor Group” for the 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028. “Subsidiary Guarantors” refers to certain of the Issuer’s restricted subsidiaries (excluding The CW) that guarantee these notes. The guarantees of the notes are subject to release in limited circumstances upon the occurrence of certain customary conditions set forth in the indentures governing the 5.625% Notes, due July 2027 and the 4.75% Notes, due November 2028. The 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028 are not registered with the SEC.
31
The following combined summarized financial information is presented for the Obligor Group after elimination of intercompany transactions between Parent, Issuer, Subsidiary Guarantors and Mission in the Obligor Group and amounts related to investments in any subsidiary that is a non-guarantor. This information is not intended to present the financial position or results of operations of the consolidated group of companies in accordance with U.S. GAAP.
Summarized Balance Sheet Information for the Obligor Group (in millions):
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Current assets – external(1) |
$ |
1,266 |
|
|
$ |
1,246 |
|
Current assets – due from consolidated entities outside of Obligor Group |
|
12 |
|
|
|
7 |
|
Total current assets |
$ |
1,278 |
|
|
$ |
1,253 |
|
Noncurrent assets – external(1)(2) |
|
9,279 |
|
|
|
9,429 |
|
Noncurrent assets – due from consolidated entities outside of Obligor Group |
|
74 |
|
|
|
75 |
|
Total noncurrent assets |
$ |
9,353 |
|
|
$ |
9,504 |
|
Total current liabilities(1) |
$ |
716 |
|
|
$ |
818 |
|
Total noncurrent liabilities(1) |
$ |
8,680 |
|
|
$ |
8,775 |
|
Noncontrolling interests |
$ |
- |
|
|
$ |
- |
|
Summarized Statements of Operations Information for the Obligor Group (in millions):
|
Six Months Ended |
|
|
|
June 30, 2024 |
|
|
Net revenue – external |
$ |
2,458 |
|
Net revenue – from consolidated entities outside of Obligor Group |
|
9 |
|
Total net revenue |
|
2,467 |
|
Costs and expenses – external |
|
1,849 |
|
Costs and expenses – to consolidated entities outside of Obligor Group |
|
30 |
|
Total costs and expenses |
|
1,879 |
|
Income from operations |
$ |
588 |
|
Net income |
$ |
308 |
|
Net income attributable to Obligor Group |
$ |
308 |
|
Income from equity method investments, net |
$ |
35 |
|
Critical Accounting Estimates
Our Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures. On an ongoing basis, we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from those estimates, and any such differences could be material to our Condensed Consolidated Financial Statements.
Information with respect to the Company’s critical accounting estimates which it believes could have the most significant effect on the Company’s reported results and require subjective or complex judgments by management is contained in our Annual Report on Form 10-K for the year ended December 31, 2023. Management believes that as of June 30, 2024, there has been no material change to this information.
Recent Accounting Pronouncements
Refer to Note 2 of our Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recently issued accounting pronouncements, including our expected date of adoption and effects on results of operations and financial position.
32
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
The Company’s exposure to market risk for changes in interest rates relates primarily to its long-term debt obligations.
The term loan borrowings under the Company’s senior secured credit facilities bear interest at rates ranging from 6.84% to 7.84% as of June 30, 2024, which represent (i) the base rate, the Secured Overnight Financing Rate (“SOFR”) plus (ii) a credit spread adjustment, and (iii) the applicable margin, as defined. Interest is payable in accordance with the credit agreements.
Based on the outstanding balances of the Company’s senior secured credit facilities (term loans and revolving loans) as of June 30, 2024, an increase in SOFR by 100 basis points would increase our annual interest expense and decrease our cash flow from operations by $41 million (excluding tax effects). A decrease in SOFR by 100 basis points would decrease our annual interest expense and increase our cash flow from operations by $41 million (excluding tax effects). Our 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028 are fixed rate debt obligations and therefore are not exposed to market interest rate changes. As of June 30, 2024, the Company has no financial instruments in place to hedge against changes in the benchmark interest rates on its senior secured credit facilities.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Nexstar’s management, with the participation of its Chairman and Chief Executive Officer along with its Chief Financial Officer, conducted an evaluation as of the end of the period covered by this report of the effectiveness of the design and operation of Nexstar’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.
Based upon that evaluation, Nexstar’s Chairman and Chief Executive Officer and its Chief Financial Officer concluded that as of the end of the period covered by this report, Nexstar’s disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed in the reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to Nexstar’s management, including its Chairman and Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
As of the quarter ended June 30, 2024, there have been no changes in Nexstar’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
33
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
From time to time, the Company is involved in litigation that arises from the ordinary operations of business, such as contractual or employment disputes or other general actions. In the event of an adverse outcome of these proceedings, the Company believes the resulting liabilities would not have a material adverse effect on its financial condition or results of operations. See Part I, Item 1, Note 12, “Commitments and Contingencies” for detailed discussion of ongoing litigation.
ITEM 1A. Risk Factors
There have been no material changes to the risk factors that were previously disclosed in Item 1A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 28, 2024.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
On July 27, 2022, Nexstar’s board of directors approved a share repurchase program authorizing Nexstar to repurchase up to $1.5 billion of its common stock, of which $652 million of capacity remained available as of December 31, 2023. During the six months ended June 30, 2024, Nexstar repurchased a total of 1,514,478 shares of its common stock for $246 million, funded by cash on hand, which was accounted for as treasury cost. As of June 30, 2024, the remaining available amount under the share repurchase authorization was $406 million.
The following is a summary of Nexstar’s repurchases of its common stock by month during the quarter ended June 30, 2024 (in millions, except for share and per share information):
|
|
|
|
|
|
|
|
Total Number of Shares |
|
|
Approximate Dollar Value |
|
||||
|
|
|
|
|
|
|
|
Purchased as Part of |
|
|
of Shares That May Yet Be |
|
||||
|
|
Total Number |
|
|
Average Price |
|
|
Publicly Announced |
|
|
Purchased Under the |
|
||||
|
|
of Shares Purchased |
|
|
Paid per Share |
|
|
Plans or Programs |
|
|
Plans or Programs |
|
||||
April 4 to 30, 2024 |
|
|
231,460 |
|
|
$ |
163.51 |
|
|
|
231,460 |
|
|
$ |
504 |
|
May 1 to 31, 2024 |
|
|
185,708 |
|
|
$ |
162.33 |
|
|
|
185,708 |
|
|
|
474 |
|
June 3 to 27, 2024 |
|
|
430,736 |
|
|
$ |
155.55 |
|
|
|
430,736 |
|
|
|
406 |
|
|
|
|
847,904 |
|
|
$ |
159.21 |
|
|
|
847,904 |
|
|
|
|
On July 26, 2024, Nexstar announced that its Board of Directors increased its share repurchase authorization by $1.5 billion. From July 1, 2024 to August 7, 2024, we repurchased 266,014 shares of our common stock for $46 million, funded by cash on hand. As of the date of filing this Quarterly Report on Form 10-Q, the remaining available amount under the share repurchase authorization was $1.9 billion.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Mine Safety Disclosures
None.
ITEM 5. Other Information
None of the Company’s directors or officers
34
ITEM 6. Exhibits
Exhibit No. |
|
Description |
31.1 |
|
Certification of Perry A. Sook pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
31.2 |
|
Certification of Lee Ann Gliha pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
32.1 |
|
Certification of Perry A. Sook pursuant to 18 U.S.C. ss. 1350.* |
32.2 |
|
Certification of Lee Ann Gliha pursuant to 18 U.S.C. ss. 1350.* |
101.INS |
|
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbases Document. |
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* Filed herewith
35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NEXSTAR MEDIA GROUP, INC. |
||
|
|
|
|
|
/S/ PERRY A. SOOK |
By: |
|
Perry A. Sook |
Its: |
|
Chairman and Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
|
/S/ LEE ANN GLIHA |
By: |
|
Lee Ann Gliha |
Its: |
|
Chief Financial Officer (Principal Accounting and Financial Officer) |
Dated: August 8, 2024
36