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Commitments and Contingencies
12 Months Ended
Dec. 31, 2018
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

13. Commitments and Contingencies

Merger Agreement with Tribune

On November 30, 2018, Nexstar entered into a definitive merger agreement with Tribune to acquire the latter’s outstanding equity and equity-based awards for $46.50 per share in a cash transaction. The estimated total purchase price is valued at $6.4 billion, consisting of the merger cash consideration and the refinancing of Tribune's outstanding debt. The merger has been approved by the boards of directors of both companies and is projected to close late in the third quarter of 2019, subject to (i) the approval of the merger by the stockholders of Tribune, (ii) FCC approval, (iii) other regulatory approvals (including expiration of the applicable HSR waiting period) and (iv) satisfaction of other customary closing conditions. On November 30, 2018, Nexstar received committed financing up to a maximum of $6.4 billion from a group of commercial banks to provide the debt financing to consummate the merger and the refinancing of certain of the existing indebtedness of Tribune and related transactions. See Note 3 for additional information.

Broadcast Rights Commitments

Broadcast rights acquired for cash under license agreements are recorded as an asset and a corresponding liability at the inception of the license period. Future minimum payments for license agreements for which the license period has not commenced and no asset or liability has been recorded are as follows as of December 31, 2018 (in thousands):

 

2019

 

$

46,118

 

2020

 

 

35,731

 

2021

 

 

20,090

 

2022

 

 

12,740

 

2023

 

 

78

 

 

 

$

114,757

 

 

Operating Leases

The Company leases office space, vehicles, towers, antenna sites, studio and other operating equipment under noncancelable operating lease arrangements expiring through June 2114. Rent expense recorded in the Company’s Consolidated Statements of Operations and Comprehensive Income for such leases was $22.8 million, $24.6 million and $12.7 million for the years ended December 31, 2018, 2017 and 2016, respectively. Future minimum lease payments under these operating leases are as follows as of December 31, 2018 (in thousands):

 

2019

 

$

22,179

 

2020

 

 

19,841

 

2021

 

 

16,794

 

2022

 

 

13,573

 

2023

 

 

11,108

 

Thereafter

 

 

37,577

 

 

 

$

121,072

 

 

Capital Leases

 

The Company leases certain equipment, tower facilities and other real estate properties under noncancelable lease arrangements. These contracts were accounted for as capital leases and included in property and equipment (See Note 4). The future minimum lease payments under these agreements as of December 31, 2018 are as follows (in thousands):

 

2019

 

$

1,766

 

2020

 

 

1,795

 

2021

 

 

1,843

 

2022

 

 

1,803

 

2023

 

 

1,818

 

Thereafter

 

 

15,202

 

 

 

 

24,227

 

Less: Amount representing interest

 

 

7,323

 

 

 

$

16,904

 

 

Guarantee of Mission, Marshall and Shield Debt

Nexstar and its subsidiaries guarantee full payment of all obligations incurred under the Mission, Marshall and Shield senior secured credit facilities. In the event that Mission, Marshall or Shield are 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 these guarantees would be generally limited to the borrowings outstanding. As of December 31, 2018, Mission had a maximum commitment of $227.6 million under its senior secured credit facility, of which $224.6 million of debt was outstanding, Marshall had used all its commitment under its senior secured credit facility and had outstanding obligations of $51.1 million, and Shield had also used all of its commitment and had outstanding obligations of $22.6 million. Based on the terms of the credit agreements, Mission’s outstanding debt is due January 2024, Marshall’s outstanding debt is due December 2019 and Shield’s outstanding debt is due October 2023. Marshall’s debt is included in the current liabilities in the accompanying December 31, 2018 Consolidated Balance Sheet. The other debts guaranteed by Nexstar are long-term debt obligations of Mission and Shield.

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.

Collective Bargaining Agreements

As of December 31, 2018, certain technical, production and news employees at 14 of the Company’s stations are covered by collective bargaining agreements. The Company believes that employee relations are satisfactory and has not experienced any work stoppages at any of its stations. However, there can be no assurance that the collective bargaining agreements will be renewed in the future or that the Company will not experience a prolonged labor dispute, which could have a material adverse effect on its business, financial condition, or results of operations.

Litigation

From time to time, the Company is involved with claims that arise out of the normal course of its business. In the opinion of management, any resulting liability with respect to these claims would not have a material adverse effect on the Company’s financial position or results of operations.

On March 16, 2018, a group of companies including Nexstar (the “Defendants”) received a Civil Investigative Demand from the Antitrust Division of the 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 DMAs in alleged violation of federal antitrust law. Other Defendants entered into a proposed 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 DOJ filed an amended complaint adding Nexstar to the consent decree on December 13, 2018.  The consent decree, which settles any 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, we have agreed not to exchange certain non-public information with other stations operating in the same DMA except in certain cases, to implement certain antitrust compliance measures and to monitor and report on compliance with the consent decree.

On July 30, 2018, Clay, Massey & Associates, PC filed an antitrust class action complaint in the U.S. District Court for the Northern District of Illinois on behalf of itself and all others similarly situated against Gray Television, Inc., Hearst Communications, Nexstar Media Group, Inc., Tegna Inc., Tribune Media Company and Sinclair Broadcast Group, Inc. The lawsuit alleges unlawful coordination between broadcast television station owners to artificially increase prices of television spot advertisements in violation of Section 1 of the Sherman Act (15 U.S.C. §1). Nexstar has since been named in 15 similar complaints, including ten in the Northern District of Illinois, three in the Southern District of New York, and two in the District of Maryland.  Each complaint includes similar allegations and claims a violation of Section 1 of the Sherman Act.  One, filed in the District of Maryland, also alleges violations of state antitrust and consumer protection statutes and a claim for unjust enrichment.

 

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.  Nexstar denies the allegations against it and will defend its advertising practices as necessary.