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us-gaap:SubsequentEventMember nxst:PurchaseAndSaleAgreementsMember 2019-11-04 2019-11-05

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

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: 000-50478

NEXSTAR MEDIA GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

 

23-3083125

(State of Incorporation or Organization)

 

(I.R.S. Employer Identification No.)

 

 

545 E. John Carpenter Freeway, Suite 700, Irving, Texas

 

75062

(Address of Principal Executive Offices)

 

(Zip Code)

(972) 373-8800

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock

 

NXST

 

NASDAQ Global Select Market

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 the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

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).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

 

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

   

  

Emerging growth company

 

 

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 November 6, 2019, the registrant had 46,138,785 shares of Class A Common Stock outstanding.

 


TABLE OF CONTENTS

 

 

 

  

 

  

Page

PART I

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

ITEM 1.

 

Financial Statements (Unaudited)

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018

 

1

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018

 

2

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended September 30, 2019 and 2018

 

3

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2019 and 2018

 

4

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018

 

5

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

 

 

 

 

Note 1: Organization and Business Operations

 

6

 

 

 

Note 2: Summary of Significant Accounting Policies

 

6

 

 

 

Note 3: Acquisitions and Dispositions

 

14

 

 

 

Note 4: Intangible Assets and Goodwill

 

18

 

 

 

Note 5: Assets Held for Sale

 

19

 

 

 

Note 6: Investments

 

20

 

 

 

Note 7: Accrued Expenses

 

21

 

 

 

Note 8: Retirement and Post Retirement Plans

 

21

 

 

 

Note 9: Debt

 

22

 

 

 

Note 10: Leases

 

24

 

 

 

Note 11: Fair Value Measurements

 

26

 

 

 

Note 12: Common Stock

 

27

 

 

 

Note 13: Stock-Based Compensation

 

27

 

 

 

Note 14: Income Taxes

 

28

 

 

 

Note 15: FCC Regulatory Matters

 

29

 

 

 

Note 16: Commitment and Contingencies

 

32

 

 

 

Note 17: Segment Data

 

35

 

 

 

Note 18: Condensed Consolidating Financial Information

 

37

 

 

 

Note 19: Subsequent Events

 

46

 

ITEM 2.

 

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

 

47

 

 

 

 

 

ITEM 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

60

 

 

 

 

 

ITEM 4.

 

Controls and Procedures

 

60

 


 


PART II

 

OTHER INFORMATION

 

 

 

 

 

 

 

ITEM 1.

 

Legal Proceedings

 

61

 

 

 

 

 

ITEM 1A.

 

Risk Factors

 

63

 

 

 

 

 

ITEM 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

67

 

 

 

 

 

ITEM 3.

 

Defaults Upon Senior Securities

 

67

 

 

 

 

 

ITEM 4.

 

Mine Safety Disclosures

 

67

 

 

 

 

 

ITEM 5.

 

Other Information

 

67

 

 

 

 

 

ITEM 6.

 

Exhibits

 

68

 

 

 

 

 


PART I. FINANCIAL INFORMATION

ITEM 1.

Financial Statements

NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for share and per share information, unaudited)

 

 

September 30,

 

 

December 31,

 

 

2019

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

317,420

 

 

$

145,115

 

Restricted cash and cash equivalents

 

16,609

 

 

 

-

 

Accounts receivable, net of allowance for doubtful accounts of $15,284 and $13,158, respectively

 

860,794

 

 

 

547,285

 

Spectrum asset

 

119,047

 

 

 

52,002

 

Prepaid expenses and other current assets

 

121,747

 

 

 

22,673

 

Total current assets

 

1,435,617

 

 

 

767,075

 

Property and equipment, net

 

1,257,086

 

 

 

731,538

 

Goodwill

 

3,082,652

 

 

 

2,167,954

 

FCC licenses

 

3,106,959

 

 

 

1,778,268

 

Network affiliation agreements, net

 

2,560,303

 

 

 

1,401,965

 

Other intangible assets, net

 

509,889

 

 

 

89,958

 

Assets held for sale

 

242,999

 

 

 

4,417

 

Investments

 

1,499,090

 

 

 

13,971

 

Other noncurrent assets, net

 

408,780

 

 

 

106,884

 

Total assets(1)

$

14,103,375

 

 

$

7,062,030

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current portion of debt

$

142,664

 

 

$

96,093

 

Accounts payable

 

109,128

 

 

 

67,828

 

Accrued expenses

 

497,201

 

 

 

173,138

 

Income taxes payable

 

160,941

 

 

 

2,759

 

Liability to surrender spectrum asset

 

129,964

 

 

 

52,002

 

Other current liabilities

 

54,399

 

 

 

12,352

 

Total current liabilities

 

1,094,297

 

 

 

404,172

 

Debt

 

8,393,173

 

 

 

3,884,910

 

Deferred tax liabilities

 

1,688,590

 

 

 

633,880

 

Other noncurrent liabilities

 

977,282

 

 

 

270,084

 

Total liabilities(1)

 

12,153,342

 

 

 

5,193,046

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

Preferred stock - $0.01 par value, 200,000 shares authorized; none issued and outstanding at each of September 30, 2019 and December 31, 2018

 

-

 

 

 

-

 

Class A Common stock - $0.01 par value, 100,000,000 shares authorized; 47,291,463 shares issued,

46,138,785 shares outstanding as of September 30, 2019 and 47,291,463 shares issued, 45,626,246 shares

  outstanding as of December 31, 2018

 

473

 

 

 

473

 

Class B Common stock - $0.01 par value, 20,000,000 shares authorized; none issued and outstanding

  at each of September 30, 2019 and December 31, 2018

 

-

 

 

 

-

 

Class C Common stock - $0.01 par value, 5,000,000 shares authorized; none issued and outstanding

at each of September 30, 2019 and December 31, 2018

 

-

 

 

 

-

 

Additional paid-in capital

 

1,346,511

 

 

 

1,351,931

 

Accumulated other comprehensive loss

 

(14,316

)

 

 

(14,316

)

Retained earnings

 

675,356

 

 

 

620,371

 

Treasury stock - at cost; 1,152,678 and 1,665,217 shares as of September 30, 2019 and December 31, 2018, respectively

 

(79,299

)

 

 

(105,685

)

Total Nexstar Media Group, Inc. stockholders’ equity

 

1,928,725

 

 

 

1,852,774

 

Noncontrolling interests in consolidated variable interest entities

 

21,308

 

 

 

16,210

 

Total stockholders’ equity

 

1,950,033

 

 

 

1,868,984

 

Total liabilities and stockholders’ equity

$

14,103,375

 

 

$

7,062,030

 

 

 

 

 

 

 

 

 

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

 

(1)

The consolidated total assets as of September 30, 2019 and December 31, 2018 include certain assets held by consolidated variable interest entities of $394.0 million and $390.3 million, respectively, which are not available to be used to settle the obligations of Nexstar Media Group, Inc. The consolidated total liabilities as of September 30, 2019 and December 31, 2018 include certain liabilities of consolidated variable interest entities of $55.3 million and $45.1 million, respectively, for which the creditors of the VIEs have no recourse to the general credit of Nexstar. See Note 2 for additional information.

1


NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information, unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net revenue

 

$

663,575

 

 

$

693,015

 

 

$

1,939,234

 

 

$

1,968,674

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses, excluding depreciation and amortization

 

 

322,327

 

 

 

285,363

 

 

 

911,234

 

 

 

838,765

 

Selling, general and administrative expenses, excluding depreciation and amortization

 

 

183,083

 

 

 

140,297

 

 

 

469,501

 

 

 

421,105

 

Amortization of broadcast rights

 

 

18,452

 

 

 

15,021

 

 

 

46,749

 

 

 

47,034

 

Amortization of intangible assets

 

 

42,443

 

 

 

37,157

 

 

 

115,538

 

 

 

110,640

 

Depreciation

 

 

29,363

 

 

 

27,673

 

 

 

84,890

 

 

 

78,577

 

Reimbursement from the FCC related to station repack

 

 

(20,417

)

 

 

(5,389

)

 

 

(54,020

)

 

 

(12,450

)

Goodwill and intangible assets impairment

 

 

63,317

 

 

 

-

 

 

 

63,317

 

 

 

-

 

Gain on disposal of stations, net

 

 

(96,608

)

 

 

-

 

 

 

(96,608

)

 

 

-

 

Total operating expenses

 

 

541,960

 

 

 

500,122

 

 

 

1,540,601

 

 

 

1,483,671

 

Income from operations

 

 

121,615

 

 

 

192,893

 

 

 

398,633

 

 

 

485,003

 

Income (loss) on equity investments, net

 

 

3,217

 

 

 

(887

)

 

 

2,061

 

 

 

(1,813

)

Interest expense, net

 

 

(93,199

)

 

 

(56,237

)

 

 

(197,519

)

 

 

(167,107

)

Loss on extinguishment of debt

 

 

-

 

 

 

(3,159

)

 

 

(3,724

)

 

 

(4,645

)

Pension and other postretirement plans credit, net

 

 

2,578

 

 

 

2,458

 

 

 

5,378

 

 

 

8,358

 

Other income (expenses), net

 

 

118

 

 

 

3

 

 

 

209

 

 

 

(10

)

Income before income taxes

 

 

34,329

 

 

 

135,071

 

 

 

205,038

 

 

 

319,786

 

Income tax expense

 

 

(39,507

)

 

 

(35,243

)

 

 

(82,594

)

 

 

(86,011

)

Net income (loss)

 

 

(5,178

)

 

 

99,828

 

 

 

122,444

 

 

 

233,775

 

Net (income) loss attributable to noncontrolling interests

 

 

(669

)

 

 

686

 

 

 

(5,397

)

 

 

2,593

 

Net income (loss) attributable to Nexstar Media Group, Inc.

 

$

(5,847

)

 

$

100,514

 

 

$

117,047

 

 

$

236,368

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share attributable to Nexstar Media Group, Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.13

)

 

$

2.21

 

 

$

2.54

 

 

$

5.17

 

Diluted

 

$

(0.13

)

 

$

2.12

 

 

$

2.44

 

 

$

4.99

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

46,114

 

 

 

45,552

 

 

 

45,997

 

 

 

45,751

 

Diluted

 

 

46,114

 

 

 

47,338

 

 

 

47,919

 

 

 

47,388

 

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

 

 


 

2


NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Three Months Ended September 30, 2019 and 2018

(in thousands, except for share and per share information, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

 

 

Paid-In

 

 

 

 

Retained

 

 

 

 

Comprehensive

 

 

 

 

Treasury Stock

 

 

 

 

Noncontrolling

 

 

Stockholders’

 

 

 

Shares

 

 

 

 

Amount

 

 

 

 

Capital

 

 

 

 

Earnings

 

 

 

 

(Loss) Income

 

 

 

 

Shares

 

 

 

 

Amount

 

 

 

 

interests

 

 

Equity

 

Balances as of June 30, 2019

 

 

47,291,463

 

 

 

 

$

473

 

 

 

 

$

1,337,057

 

 

 

 

$

701,946

 

 

 

 

$

(14,316

)

 

 

 

 

(1,188,353

)

 

 

 

$

(81,381

)

 

 

 

$

14,438

 

 

$

1,958,217

 

Stock-based compensation expense

 

 

-

 

 

 

 

 

-

 

 

 

 

 

11,270

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

11,270

 

Vesting of restricted stock units and

  exercise of stock options

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(1,816

)

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

35,675

 

 

 

 

 

2,082

 

 

 

 

 

-

 

 

 

266

 

Dividends declared on common stock ($0.45 per share)

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(20,743

)

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

(20,743

)

Noncontrolling interest from a business combination

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

6,201

 

 

 

6,201

 

Net income (loss)

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(5,847

)

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

669

 

 

 

(5,178

)

Balances as of September 30, 2019

 

 

47,291,463

 

 

 

 

$

473

 

 

 

 

$

1,346,511

 

 

 

 

$

675,356

 

 

 

 

$

(14,316

)

 

 

 

 

(1,152,678

)

 

 

 

$

(79,299

)

 

 

 

$

21,308

 

 

$

1,950,033

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of June 30, 2018

 

 

47,291,463

 

 

 

 

$

473

 

 

 

 

$

1,337,738

 

 

 

 

$

400,934

 

 

 

 

$

6,140

 

 

 

 

 

(1,769,428

)

 

 

 

$

(111,846

)

 

 

 

$

9,015

 

 

$

1,642,454

 

Stock-based compensation expense

 

 

-

 

 

 

 

 

-

 

 

 

 

 

8,212

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

8,212

 

Vesting of restricted stock units and

  exercise of stock options

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(1,820

)

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

81,275

 

 

 

 

 

4,809

 

 

 

 

 

-

 

 

 

2,989

 

Dividends declared on common stock ($0.375 per share)

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(17,081

)

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

(17,081

)

Consolidation of a variable interest entity

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

15,574

 

 

 

15,574

 

Net income (loss)

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

100,514

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(686

)

 

 

99,828

 

Balances as of September 30, 2018

 

 

47,291,463

 

 

 

 

$

473

 

 

 

 

$

1,344,130

 

 

 

 

$

484,367

 

 

 

 

$

6,140

 

 

 

 

 

(1,688,153

)

 

 

 

$

(107,037

)

 

 

 

$

23,903

 

 

$

1,751,976

 

 

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

 


3


NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Nine Months Ended September 30, 2019 and 2018

(in thousands, except for share and per share information, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

 

 

Paid-In

 

 

 

 

Retained

 

 

 

 

Comprehensive

 

 

 

 

Treasury Stock

 

 

 

 

Noncontrolling

 

 

 

 

Stockholders’

 

 

 

Shares

 

 

 

 

Amount

 

 

 

 

Capital

 

 

 

 

Earnings

 

 

 

 

(Loss) Income

 

 

 

 

Shares

 

 

 

 

Amount

 

 

 

 

interests

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of December 31, 2018

 

 

47,291,463

 

 

 

 

$

473

 

 

 

 

$

1,351,931

 

 

 

 

$

620,371

 

 

 

 

$

(14,316

)

 

 

 

 

(1,665,217

)

 

 

 

$

(105,685

)

 

 

 

$

16,210

 

 

 

 

$

1,868,984

 

Stock-based compensation expense

 

 

-

 

 

 

 

 

-

 

 

 

 

 

29,030

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

29,030

 

Vesting of restricted stock units and

  exercise of stock options

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(34,450

)

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

512,539

 

 

 

 

 

26,386

 

 

 

 

 

-

 

 

 

 

 

(8,064

)

Dividends declared on common stock ($1.35 per share)

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(62,062

)

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(62,062

)

Purchase of noncontrolling interest from a consolidated variable interest entity

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(6,500

)

 

 

 

 

(6,500

)

Noncontrolling interest from a business combination

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

6,201

 

 

 

 

 

6,201

 

Net income

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

117,047

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

5,397

 

 

 

 

 

122,444

 

Balances as of September 30, 2019

 

 

47,291,463

 

 

 

 

$

473

 

 

 

 

$

1,346,511

 

 

 

 

$

675,356

 

 

 

 

$

(14,316

)

 

 

 

 

(1,152,678

)

 

 

 

$

(79,299

)

 

 

 

$

21,308

 

 

 

 

$

1,950,033

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of December 31, 2017

 

 

47,291,463

 

 

 

 

$

473

 

 

 

 

$

1,342,541

 

 

 

 

$

299,523

 

 

 

 

$

6,140

 

 

 

 

 

(1,325,049

)

 

 

 

$

(78,063

)

 

 

 

$

10,696

 

 

 

 

$

1,581,310

 

Purchase of treasury stock

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(751,920

)

 

 

 

 

(50,524

)

 

 

 

 

-

 

 

 

 

 

(50,524

)

Stock-based compensation expense

 

 

-

 

 

 

 

 

-

 

 

 

 

 

22,807

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

22,807

 

Vesting of restricted stock units and

  exercise of stock options

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(21,218

)

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

388,816

 

 

 

 

 

21,550

 

 

 

 

 

-

 

 

 

 

 

332

 

Dividends declared on common stock ($1.125 per share)

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(51,524

)

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(51,524

)

Consolidation of variable interest entities

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

15,574

 

 

 

 

 

15,574

 

Contribution from a

  noncontrolling interest

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

226

 

 

 

 

 

226

 

Net income (loss)

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

236,368

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(2,593

)

 

 

 

 

233,775

 

Balances as of September, 2018

 

 

47,291,463

 

 

 

 

$

473

 

 

 

 

$

1,344,130

 

 

 

 

$

484,367

 

 

 

 

$

6,140

 

 

 

 

 

(1,688,153

)

 

 

 

$

(107,037

)

 

 

 

$

23,903

 

 

 

 

$

1,751,976

 

 

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.


 

4


NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

122,444

 

 

$

233,775

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

115,538

 

 

 

110,640

 

Depreciation of property and equipment

 

 

84,890

 

 

 

78,577

 

Goodwill and intangible assets impairment

 

 

63,317

 

 

 

-

 

Amortization of broadcast rights

 

 

46,749

 

 

 

47,034

 

Stock-based compensation expense

 

 

29,030

 

 

 

22,807

 

Provision for bad debt

 

 

8,119

 

 

 

8,301

 

Amortization of debt financing costs and debt discounts

 

 

6,592

 

 

 

7,663

 

Loss on extinguishment of debt

 

 

3,724

 

 

 

4,645

 

(Gain) loss on asset disposal, net

 

 

(229

)

 

 

1,116

 

Deferred income taxes

 

 

(14,899

)

 

 

12,095

 

Gain on disposal of stations, net

 

 

(96,608

)

 

 

-

 

Spectrum repack reimbursements

 

 

(54,020

)

 

 

(12,450

)

Payments for broadcast rights

 

 

(47,150

)

 

 

(47,652

)

(Income) loss on equity investments, net

 

 

(2,061

)

 

 

1,813

 

Other noncash credits, net

 

 

(1,234

)

 

 

(3,562

)

Non-cash compensation expense related to an acquisition's contingent consideration

 

 

-

 

 

 

1,933

 

Changes in operating assets and liabilities, net of acquisitions and dispositions:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

54,633

 

 

 

29,152

 

Prepaid expenses and other current assets

 

 

1,827

 

 

 

3,419

 

Other noncurrent assets

 

 

(1,580

)

 

 

481

 

Accounts payable

 

 

26

 

 

 

(3,070

)

Accrued expenses and other current liabilities

 

 

(26,578

)

 

 

(11,346

)

Taxes payable

 

 

28,822

 

 

 

13,512

 

Other noncurrent liabilities

 

 

(5,370

)

 

 

(11,669

)

Net cash provided by operating activities

 

 

315,982

 

 

 

487,214

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(110,225

)

 

 

(63,586

)

Payments for acquisitions, net of cash and restricted cash acquired

 

 

(5,881,179

)

 

 

(103,246

)

Proceeds from sale of stations

 

 

1,352,958

 

 

 

-

 

Spectrum repack reimbursements from the FCC

 

 

54,020

 

 

 

12,450

 

Proceeds from disposals of property and equipment

 

 

2,026

 

 

 

4,282

 

Distribution from an equity investment

 

 

1,557

 

 

 

-

 

Other investing activities, net

 

 

(1,310

)

 

 

812

 

Net cash used in investing activities

 

 

(4,582,153

)

 

 

(149,288

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from long-term debt, net of debt discounts

 

 

4,831,050

 

 

 

101,387

 

Repayments of long-term debt

 

 

(215,413

)

 

 

(327,489

)

Payments for debt financing costs

 

 

(70,717

)

 

 

-

 

Common stock dividends paid

 

 

(62,062

)

 

 

(51,524

)

Cash paid for shares withheld for taxes

 

 

(9,813

)

 

 

(4,852

)

Purchase of noncontrolling interest from a consolidated variable interest entity

 

 

(6,393

)

 

 

-

 

Proceeds from exercise of stock options

 

 

1,749

 

 

 

5,184

 

Payments for capital lease and capitalized software obligations

 

 

(6,419

)

 

 

(7,426

)

Purchase of treasury stock

 

 

-

 

 

 

(50,524

)

Other financing activities, net

 

 

(6,897

)

 

 

89

 

Net cash provided by (used in) financing activities

 

 

4,455,085

 

 

 

(335,155

)

Net increase in cash, cash equivalents and restricted cash

 

 

188,914

 

 

 

2,771

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

145,115

 

 

 

115,652

 

Cash, cash equivalents and restricted cash at end of period

 

$

334,029

 

 

$

118,423

 

Supplemental information:

 

 

 

 

 

 

 

 

Interest paid

 

$

178,882

 

 

$

170,790

 

Income taxes paid, net of refunds

 

$

68,627

 

 

$

59,082

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Accrued purchases of property and equipment

 

$

27,683

 

 

$

18,208

 

Right-of-use assets obtained in exchange for operating lease obligations(1)

 

$

115,579

 

 

$

-

 

Consolidation of variable interest entities

 

$

-

 

 

$

15,573

 

Relinquishment of spectrum asset and derecognition of liability to surrender spectrum asset

 

$

-

 

 

$

314,086

 

 

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

 

(1)   Amounts for the nine months ended September 30, 2019 include the transition adjustment of $112.8 million for the adoption of ASC 842.

 

5


NEXSTAR MEDIA GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1:  Organization and Business Operations

As of September 30, 2019, Nexstar Media Group, Inc. and its wholly-owned subsidiaries (“Nexstar”) owned, operated, programmed or provided sales and other services to 197 full power television stations, including those owned by consolidated variable interest entities (“VIEs”), and one AM radio station in 115 markets in the states of Alabama, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nevada, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, and Wisconsin. The stations are affiliates of ABC, NBC, FOX, CBS, The CW, MNTV and other broadcast television networks. As of September 30, 2019, the stations reached approximately 39% of all U.S. television households (applying the Federal Communication Commission’s (“FCC”) ultra-high frequency (“UHF”) discount). Through various local service agreements, Nexstar provided sales, programming and other services to 36 full power television stations owned and/or operated by independent third parties. Nexstar also owns WGN America, a national general entertainment cable network, a 31.3% ownership stake in Television Food Network, G.P. (“TV Food Network”) and a portfolio of real estate assets.

On September 19, 2019, Tribune Media Company, a Delaware corporation (“Tribune”) became a wholly owned subsidiary of Nexstar as a result of the merger of Titan Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Nexstar (“Merger Sub”), with and into Tribune (the “Merger”). The Merger was effected pursuant to the previously announced agreement and Plan of Merger, dated as of November 30, 2018 (the “Merger Agreement”) by and among Nexstar, Merger Sub and Tribune. Substantially concurrently with the Merger, Nexstar also completed the previously announced sale of the assets of 21 television stations in 16 markets for a total consideration of approximately $1.36 billion (inclusive of preliminary working capital adjustments). See Note 3 for additional information.  

 

Note 2:  Summary of Significant Accounting Policies

Principles of Consolidation

 

The Condensed Consolidated Financial Statements include the accounts of Nexstar and the accounts of independently-owned VIEs for which Nexstar is the primary beneficiary (See “Variable Interest Entities” section). Nexstar and the consolidated VIEs are collectively referred to as the “Company”. Noncontrolling interests represent the VIE owners’ share of the equity in the consolidated VIEs and are presented as a component separate from Nexstar Media Group, Inc. 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.

 

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 thousands):

 

 

 

September 30, 2019

 

 

December 31, 2018

 

Current assets

 

$

24,098

 

 

$

20,898

 

Property and equipment, net

 

 

17,162

 

 

 

10,994

 

Goodwill

 

 

121,600

 

 

 

121,600

 

FCC licenses

 

 

151,808

 

 

 

157,658

 

Network affiliation agreements

 

 

70,122

 

 

 

74,726

 

Other intangible assets, net

 

 

152

 

 

 

787

 

Other noncurrent assets, net

 

 

9,013

 

 

 

3,652

 

Total assets

 

$

393,955

 

 

$

390,315

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

$

19,072

 

 

$

17,594

 

Noncurrent liabilities

 

 

36,258

 

 

 

27,542

 

Total liabilities

 

$

55,330

 

 

$

45,136

 

 


6


Liquidity

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.

On July 3, 2019, Nexstar Escrow, Inc., a wholly-owned indirect subsidiary of Nexstar (“Nexstar Escrow”), completed the sale and issuance of its $1.120 billion 5.625% Senior Unsecured Notes due 2027 (the “5.625% Notes due 2027”) at par. The gross proceeds of the 5.625% Notes due 2027 were directly deposited in a segregated escrow account until its utilization to partially fund the completion of the Merger on September 19, 2019.  Immediately following the consummation of the Merger, Nexstar Escrow was merged with and into Nexstar Broadcasting, Inc. (“Nexstar Broadcasting”), with Nexstar Broadcasting surviving the merger (the “Escrow Merger”). Following the Escrow Merger, Nexstar, Mission Broadcasting, Inc. (“Mission”), Nexstar Broadcasting, certain restricted subsidiaries of Nexstar Broadcasting and the trustee entered into a supplement (the “Nexstar 2027 Notes Supplemental Indenture”) to an indenture, dated as of July 3, 2019 (the “5.625% Notes due 2027 Indenture”) , whereby Nexstar Broadcasting assumed the obligations of Nexstar Escrow under the 5.625% Notes due 2027 Indenture and the 5.625% Notes due 2027, and Nexstar, certain restricted subsidiaries of Nexstar Broadcasting and Mission provided guarantees of the 5.625% Notes due 2027 under the 5.625% Notes due 2027 Indenture.

On September 19, 2019, in connection with the Merger, Nexstar borrowed $3.065 billion in Term Loan B, issued at 99.21% and $675.0 million in Term Loan A, issued at 99.31%.

The proceeds from the above loans, together with the net proceeds from certain station divestitures (as further discussed in Note 3) and cash on hand of Nexstar and Tribune, were used to finance the cash consideration for the Merger and repay all existing debt of Tribune prior to the Merger, including premium and accrued interest and related fees and expenses.

See Notes 3 and 9 for additional information with respect to the merger and debt transactions, respectively.

 

Interim Financial Statements

The Condensed Consolidated Financial Statements as of September 30, 2019 and for the three and nine months ended September 30, 2019 and 2018 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 disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Results of operations for interim periods are not necessarily indicative of results for the full year. 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, 2018. The balance sheet as of December 31, 2018 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

 

The Company may determine that an entity is a VIE as a result of local service agreements entered into with an entity. The term local service agreement generally refers to a contract between two separately owned television stations serving the same market, whereby the owner-operator of one station contracts with the owner-operator of the other station 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 and responsibility for the operation of its station, including ultimate responsibility over all programming broadcast on its station. A local service agreement can be (1) 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, based on the station’s monthly operating expenses, (2) a shared services agreement (“SSA”) which allows the Nexstar station in the market to provide services including news production, technical maintenance and security, in exchange for Nexstar’s right to receive certain payments as described in the SSA, or (3) a joint sales agreement (“JSA”) which permits Nexstar to sell certain of the station’s advertising time and retain a percentage of the related revenue, as described in the JSA.

 

7


Consolidated VIEs

 

Nexstar consolidates entities in which Nexstar is deemed under U.S. GAAP to have controlling financial interests for financial reporting purposes as a result of (1) local service agreements Nexstar has with the stations owned by these entities, (2) Nexstar’s guarantees of the obligations incurred under certain VIEs’ senior secured credit facilities (see Note 9), (3) 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 (4) purchase options granted by each VIE, exclusive of Marshall Broadcasting Group, Inc. (“Marshall”), which permit Nexstar to acquire the assets and assume the liabilities of each of the VIEs’ stations, subject to FCC consent.

 

The following table summarizes the various local service agreements Nexstar had in effect as of September 30, 2019 with its consolidated VIEs:

 

Service Agreements

 

Owner

 

Full Power Stations

TBA Only

 

Mission

 

WFXP, KHMT and KFQX

LMA Only

 

WNAC, LLC

 

WNAC

 

 

54 Broadcasting, Inc. (“54 Broadcasting”)

 

KNVA

SSA & JSA

 

Mission

 

KJTL, KLRT, KASN, KOLR, KCIT, KAMC, KRBC, KSAN, WUTR, WAWV, WYOU, KODE, WTVO, KTVE, WTVW and WVNY

 

 

White Knight Broadcasting (“White Knight”)

 

WVLA, KFXK, KSHV

 

 

Shield Media, LLC (“Shield”)

 

WXXA and WLAJ

 

 

Vaughan Media, LLC (“Vaughan”)

 

WBDT, WYTV and KTKA

 

 

Marshall

 

KLJB, KPEJ and KMSS

SSA Only

 

Tamer Media, LLC (“Tamer”)

 

KWBQ, KASY and KRWB

Nexstar’s ability to receive cash from its 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.

 

Nexstar had a variable interest in HITV License Subsidiary, Inc., the owner of station KHII, upon execution of a TBA effective November 1, 2018 and a purchase agreement to acquire certain assets of the station. On December 17, 2018, the FCC approved Nexstar’s acquisition of the station. Nexstar evaluated its business arrangement with KHII and determined that it was the primary beneficiary of the variable interest because it had the ultimate power to direct the activities that most significantly impact the economic performance of the station including developing the annual operating budget, selling advertising, and oversight and control of sales management personnel. Thus, Nexstar consolidated KHII as of December 17, 2018 under authoritative guidance related to the consolidation of VIEs. The assets that were consolidated into Nexstar included the license assets and network affiliation agreement of KHII but were attributed to the owner of the station at the time (noncontrolling interest). On January 28, 2019, Nexstar paid the former owner the remaining purchase price, acquired the noncontrolling interest in full and completed the acquisition. As of this date, KHII is no longer a VIE. See Note 3 for additional information.

 

8


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 thousands):

 

 

September 30, 2019

 

 

December 31, 2018

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

16,206

 

 

$

19,060

 

Accounts receivable, net

 

 

23,942

 

 

 

22,725

 

Prepaid expenses and other current assets

 

 

2,554

 

 

 

4,423

 

Total current assets

 

 

42,702

 

 

 

46,208

 

Property and equipment, net

 

 

39,711

 

 

 

30,861

 

Goodwill

 

 

154,787

 

 

 

154,787

 

FCC licenses

 

 

151,808

 

 

 

157,658

 

Network affiliation agreements

 

 

81,809

 

 

 

87,821

 

Other intangible assets, net

 

 

675

 

 

 

1,404

 

Other noncurrent assets, net

 

 

21,672

 

 

 

8,073

 

Total assets

 

$

493,164

 

 

$

486,812

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of debt

 

$

52,886

 

 

$

54,616

 

Interest payable

 

 

977

 

 

 

345

 

Other current liabilities

 

 

19,072

 

 

 

17,594

 

Total current liabilities

 

 

72,935

 

 

 

72,555

 

Debt

 

 

241,826

 

 

 

243,717

 

Other noncurrent liabilities

 

 

36,258

 

 

 

27,542

 

Total liabilities

 

$

351,019

 

 

$

343,814

 

 

Non-Consolidated VIEs

 

Nexstar has an outsourcing agreement with Cunningham Broadcasting Corporation (“Cunningham”), which continues through December 31, 2020. 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.

 

Nexstar has determined that it has a variable interest in WYZZ. Nexstar has evaluated its arrangements with Cunningham and has determined that it is not the primary beneficiary of the variable interest in this station because it does not have the ultimate power to direct the activities that most significantly impact the station’s economic performance, including developing the annual operating budget, programming and oversight and control of sales management personnel. Therefore, Nexstar has not consolidated WYZZ under authoritative guidance related to the consolidation of VIEs. Under the local service agreement for WYZZ, Nexstar pays for certain operating expenses, and therefore may have unlimited exposure to any potential operating losses. Nexstar’s management believes that Nexstar’s minimum exposure to loss under the WYZZ agreement consists of the fees paid to Cunningham. Additionally, Nexstar indemnifies the owners of Cunningham from and against all liability and claims arising out of or resulting from its activities, acts or omissions in connection with the agreement. The maximum potential amount of future payments Nexstar could be required to make for such indemnification is undeterminable at this time. There were no significant transactions arising from Nexstar’s outsourcing agreement with Cunningham.

 

In connection with the Merger (See Note 3), Nexstar obtained an indirect variable interest in Topix, LLC (through its investment in TKG Holdings II, LLC) (“Topix”). Nexstar has determined that it is not the primary beneficiary of Topix and therefore has not consolidated it as of and for the periods presented in the unaudited condensed consolidated financial statements. Nexstar’s maximum loss exposure related to Topix is limited to its equity investment, which was $1.3 million at September 30, 2019.

 

 


9


Assets Held for Sale

 

We consider assets to be held for sale when management commits to a formal plan to actively market the assets for sale at a price reasonable in relation to fair value, the asset is available for immediate sale in its present condition, an active program to locate a buyer and other actions required to complete the sale have been initiated, the sale of the asset and the transfer is expected to be completed within one year and it is unlikely that significant changes will be made to the plan. Upon designation as held for sale, we record the carrying value of the assets at the lower of its carrying value or its estimated fair value, less costs to sell. In accordance with generally accepted accounting principles, assets held for sale are not depreciated or amortized. See Note 5.

 

Investments

 

We account for investments in which we own at least 20% of the voting securities or have significant influence under the equity method of accounting. We record equity method investments at cost, except for assets acquired using acquisition accounting, which are initially recorded at fair value and adjust for the appropriate share of the net earnings or losses of the investee. We record investee losses up to the amount of the investment plus advances and loans made to the investee, and financial guarantees made on behalf of the investee. We recognize our share in earnings and losses of the investee as “Income (loss) in equity investments, net” in the Condensed Consolidated Statements of Operations. We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. See Note 6.

 

Investments in non-public businesses that do not have readily determinable pricing, and for which we do not have control or do not exert significant influence, are carried at cost less impairments, if any, plus or minus changes in observable prices for those investments. Gains or losses resulting from changes in the carrying value of these investments are included as non-operating expense in the Condensed Consolidated Statements of Operations.

Leases

As discussed in the “Recent Accounting Pronouncements” section below, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) and all related amendments issued by the Financial Accounting Standards Board (“FASB”). Accounting Standards Codification (“ASC”) 842 establishes a comprehensive new lease accounting model that requires the recording of assets and liabilities arising from operating leases on the balance sheet accompanied by enhanced qualitative and quantitative disclosures in the notes to the financial statements. The standard was issued to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases.

The Company adopted this standard effective January 1, 2019 using the optional transition method. The most significant impact was the recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases, while the Company’s accounting for finance leases remained substantially unchanged. Financial information for reporting periods beginning after January 1, 2019 is presented under ASC 842, while comparative financial information has not been adjusted and continues to be reported in accordance with the Company’s historical accounting policy for lease contracts prior to the adoption of ASC 842.

The Company has elected the ‘package of practical expedients’ permitted under the transition guidance within ASC 842, which permits the Company to carry forward the historical lease classification and not reassess whether any expired or existing contracts are or contain leases. In addition, the Company is not required to reassess initial direct costs for any existing leases. The Company did not elect the land easements and the use of hindsight practical expedients in determining the lease term for existing leases. ASC 842 also provides practical expedients for an entity’s ongoing accounting. The Company has elected the short-term lease recognition exemption for all leases that qualify. As a result, for those leases with a term of less than 12 months, it will not recognize ROU assets or lease liabilities. The vast majority of the Company’s television station leases are comprised of fixed lease payments, with a small percentage of television station lease payments that are tied to a rate or index which may be subject to variability. For these leases, the calculation of the present value of future minimum lease payments is the base rate as of the later of (i) when the television station was acquired by the Company, or (ii) the commencement date of the lease agreement. Certain real estate leases also include executory costs such as common area maintenance (non-lease component), as well as property insurance and property taxes (non-components). These are not significant and the Company historically excluded these executory costs from its future minimum lease payments under its historical policy prior to the adoption of ASC 842. As such, the executory costs were excluded from the calculation of ROU assets and lease liabilities associated with operating leases upon transition. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. The discount rate represents a risk-adjusted rate on a secured basis, and is the rate at which the Company would borrow funds to satisfy the scheduled lease liability payment streams commensurate with the lease term. On January 1, 2019, the discount rate used on existing leases at adoption was determined based on the remaining lease term using available data as of that date.

 

10


The Company recognized operating lease ROU assets on its Condensed Consolidated Balance Sheet as of January 1, 2019 of $112.8 million, inclusive of the present value of remaining future operating lease payments of $98.9 million and reclassifications of certain operating lease related assets and liabilities under the Company’s historical accounting policy prior to the adoption of ASC 842 such as favorable (unfavorable) lease intangible assets, deferred rent, short-term and long-term prepaid expenses and other accruals. These are summarized in the table below (in thousands). The adoption did not result in a cumulative impact on retained earnings as of January 1, 2019.

 

 

 

 

 

 

 

ASC 842 Adoption Adjustments

 

 

 

 

 

 

 

 

 

 

 

Present Value of Remaining Operating Lease

 

 

Reclassifications of Operating Lease Related Balance Sheet Items to Operating Lease ROU Assets

 

 

 

 

 

 

 

 

 

Impact on Consolidated Balance Sheets

 

December 31, 2018

 

 

Payments as of January 1, 2019

 

 

Net Favorable

Leases

 

 

Deferred Rent

 

 

Other

 

 

Total

Adjustments

 

 

January 1, 2019

 

Prepaid expenses and other

    current assets

 

$

22,673

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

(270

)

 

$

(270

)

 

$

22,403

 

Other intangible assets, net

 

 

1,491,923

 

 

 

-

 

 

 

(24,181

)

 

 

-

 

 

 

-

 

 

 

(24,181

)

 

 

1,467,742

 

Other noncurrent assets, net

 

 

106,884

 

 

 

98,887

 

 

 

24,181

 

 

 

(9,781

)

 

 

(720

)

 

 

112,567

 

 

 

219,451

 

Total assets

 

 

7,062,030

 

 

 

98,887

 

 

 

-

 

 

 

(9,781

)

 

 

(990

)

 

 

88,116

 

 

 

7,150,146

 

Other current liabilities

 

 

12,352

 

 

 

17,399

 

 

 

-

 

 

 

(1,645

)

 

 

(423

)

 

 

15,331

 

 

 

27,683

 

Other noncurrent liabilities

 

 

270,084

 

 

 

81,488

 

 

 

-

 

 

 

(8,136

)

 

 

(567

)

 

 

72,785

 

 

 

342,869

 

Total liabilities

 

 

5,193,046

 

 

 

98,887

 

 

 

-

 

 

 

(9,781

)

 

 

(990

)

 

 

88,116

 

 

 

5,281,162

 

After transition to ASC 842, the Company determines if an arrangement is a lease at inception. The ROU assets arising from operating leases are included in other noncurrent assets, other current liabilities and other noncurrent liabilities in the accompanying Condensed Consolidated Balance Sheets. Operating lease ROU assets and operating lease liabilities that are recognized after the adoption of ASC 842 are based on the present value of the future minimum lease payments over the lease term at the commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and executory costs (not significant). The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. When determining if a renewal option is reasonably certain of being exercised, the Company considers several factors, including but not limited to, the significance of leasehold improvements incurred on the property, whether the asset is difficult to replace, or specific characteristics unique to the particular lease that would make it reasonably certain that the Company would exercise such option. In most cases, the Company has concluded that renewal and early termination options are not reasonably certain of being exercised by the Company (and thus not included in its ROU asset and lease liability) unless there is an economic, financial or business reason to do so. As most of the Company’s leases do not provide an implicit rate, the incremental borrowing rate was used based on the information available at the commencement date in determining the present value of future lease payments. The discount rate represents a risk-adjusted rate on a secured basis and is the rate at which the Company would borrow funds to satisfy the scheduled lease liability payment streams commensurate with the lease term. For new or renewed leases starting in 2019, the discount rate is determined using available data at lease commencement and based on the lease term including any reasonably certain renewal periods. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

In rare circumstances, the Company may enter into finance leases for specific equipment or real estate used in its operations, in which the lease term is for the major part of the remaining economic life of the underlying asset or the present value of the lease payments equals or exceeds substantially all of the estimated fair value of the underlying asset. The Company records its finance leases within property and equipment, other current liabilities and other noncurrent liabilities on the accompanying Condensed Consolidated Balance Sheets.

See Note 10 for additional disclosures on leases as of September 30, 2019.

11


Income Per Share

Basic income per share is computed by dividing the net income 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 the Company’s diluted shares (in thousands):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Weighted average shares outstanding - basic

 

 

46,114

 

 

 

45,552

 

 

 

45,997

 

 

 

45,751

 

Dilutive effect of equity incentive plan instruments

 

 

-

 

 

 

1,786

 

 

 

1,922

 

 

 

1,637

 

Weighted average shares outstanding - diluted

 

 

46,114

 

 

 

47,338

 

 

 

47,919

 

 

 

47,388

 

 

Because of their anti-dilutive effect, stock options and restricted stock units to acquire a weighted average of 2,700 and 10,900 shares of Class A common stock have been excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2019, respectively. Because of their anti-dilutive effect, stock options and restricted stock units to acquire a weighted average of 5,000 and 27,000 shares of Class A common stock have been excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2018, respectively.

Basis of Presentation

Certain prior year financial statement amounts have been reclassified to conform to the current year presentation. These reclassifications had no effect on net income or stockholders’ equity as previously reported.

Recent Accounting Pronouncements

 

New Accounting Standards Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The Company adopted this standard and all related amendments effective January 1, 2019 using the optional transition method. The standard had a material impact on the Company’s Condensed Consolidated Balance Sheets but did not impact its operating results, cash flows or equity. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while our accounting for finance leases remained substantially unchanged. The adoption did not result in a cumulative impact on retained earnings as of January 1, 2019. See Leases above for the Company’s updated accounting policy and Note 8 for expanded disclosures.

 

New Accounting Standards Not Yet Adopted

 

In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” which provided certain improvements to ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” and ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” As the Company has adopted ASU 2016-01 and ASU 2017-12, the improvements in ASU 2019-04 are effective for fiscal years beginning after December 15, 2019, and the interim periods within those fiscal years. Early adoption is permitted. The Company expects to adopt ASU 2016-13 in the first quarter of 2020, as described below, and the improvements in ASU 2019-04 will be adopted concurrently. The Company is currently evaluating the impact of adopting ASU 2019-04 on its Condensed Consolidated Financial Statements.

 

In March 2019, the FASB issued ASU 2019-02, “Entertainment-Films-Other Assets-Film Costs (Subtopic 926-20) and Entertainment-Broadcasters-Intangibles-Goodwill and Other (Subtopic 920-350).” The standard requires production costs of episodic television series to be capitalized as incurred, which aligns the guidance with the accounting for production costs of films. In addition, once ASU 2019-02 is effective, capitalized costs associated with films and license agreements will be tested for impairment based on the lower of unamortized cost or fair value, as opposed to the existing guidance where the impairment test is based on estimated net realizable value. The guidance also includes additional disclosure requirements. The standard is effective for fiscal years beginning after December 15, 2019, and the interim periods within those fiscal years. Early adoption is permitted. The amendments in ASU 2019-02 should be applied prospectively. The Company is currently evaluating the impact of adopting ASU 2019-02 on its Condensed Consolidated Financial Statements.

12


In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities (“ASU 2018-17”). The amendments in ASU 2018-17 for determining whether a decision-making fee is a variable interest require reporting entities to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required in GAAP). Therefore, these amendments likely will result in more decision makers not having a variable interest through their decision-making arrangements. The amendments in ASU 2018-17 are effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2018-17 on its Condensed Consolidated Financial Statements.

 

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) (“ASU 2018-13”), which modifies the disclosure requirements on fair value measurements. The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently evaluating the impact of adopting ASU 2018-13 on its Condensed Consolidated Financial Statements.

 

In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20) (“ASU 2018-14”). ASU 2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures. The amendments in ASU 2018-14 are effective for fiscal years ending after December 15, 2020, and early adoption is permitted. The updated standard should be applied on a retrospective basis. The Company is currently evaluating the impact of adopting ASU 2018-14 on its Condensed Consolidated Financial Statements.

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”). The standard requires entities to estimate loss of financial assets measured at amortized cost, including trade receivables, debt securities and loans, using an expected credit loss model. The expected credit loss model differs from the previous incurred losses model primarily in that the loss recognition threshold of “probable” has been eliminated and that expected loss should consider reasonable and supportable forecasts in addition to the previously considered past events and current conditions. Additionally, the guidance requires additional disclosures related to the further disaggregation of information related to the credit quality of financial assets by year of the asset’s origination for as many as five years. In November 2018, the FASB issued ASU No. 2018-19 to clarify the scope of the guidance in the amendments in ASU 2016-13. Entities must apply the standard provision as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting ASU 2016-13 on its Condensed Consolidated Financial Statements.

 


13


Note 3:  Acquisitions and Dispositions

 

Merger with Tribune

 

On September 19, 2019 (the “Closing Date”), Tribune became a wholly owned subsidiary of Nexstar as a result of the Merger, with Tribune surviving the Merger as a wholly owned subsidiary of Nexstar. The Merger was effected pursuant to the Merger Agreement, by and among Nexstar, Merger Sub and Tribune. The Merger created the nation’s largest pure-play local broadcast television and digital company, with national coverage and reach to approximately 39% of U.S. television households (applying the FCC’s UHF discount). As a result of the Merger, Nexstar acquired 31 full power stations and one AM radio station in 23 markets (net of divestitures of 13 full power television stations in 11 markets). Nexstar also acquired WGN America, a national general entertainment cable network, a 31.3% ownership stake in TV Food Network and a portfolio of real estate assets. The full power television stations and the radio station acquired by Nexstar as a result of the Merger, net of divestitures, are as follows:

 

Market Rank

at Acquisition

Market

Full Power Stations

Primary Affiliation

2

Los Angeles, CA

KTLA

The CW

3

Chicago, IL

WGN-TV

Independent

3

Chicago, IL

WGN(AM)

Independent

4

Philadelphia, PA

WPHL

MNTV

5

Dallas, TX

KDAF

The CW

7

Washington, DC

WDCW

The CW

8

Houston, TX

KIAH

The CW

13

Seattle, WA

KCPQ

FOX

13

Seattle, WA

KZJO

MNTV

17

Denver, CO

KDVR

FOX

17

Denver, CO

KWGN

The CW

17

Fort Collins, CO

KFCT

FOX

19

Cleveland, OH

WJW

FOX

20

Sacramento, CA

KTXL

FOX

22

Portland, OR

KRCW

The CW

23

St. Louis, MO

KTVI

FOX

23

St. Louis, MO

KPLR

The CW

25

Indianapolis, IN

WXIN

FOX

25

Kokomo, IN

WTTK

CBS

25

Indianapolis, IN

WTTV

CBS

29

San Diego, CA

KSWB

FOX

32

Kansas City, MO

WDAF

FOX

35

Milwaukee, WI

WITI

FOX

43

Oklahoma City, OK

KFOR

NBC

43

Oklahoma City, OK

KAUT

Independent

49

High Point, NC

WGHP

FOX

50

New Orleans, LA

WGNO

ABC

50

New Orleans, LA

WNOL

The CW

51

Memphis, TN

WREG

CBS

68

Des Moines, IA

WHO

NBC

78

Huntsville, AL

WHNT

CBS

197

Eureka Springs, AR

KXNW

MNTV

Pursuant to the terms of the Merger Agreement, upon completion of the Merger, each issued and outstanding share of Tribune Class A common stock, par value $0.001 per share (the “Tribune Class A Stock”) and Tribune Class B common stock, par value $0.001 per share (“Tribune Class B Stock,” and together with the Tribune Class A Stock, the “Tribune Stock”) immediately prior to the Closing Date of the Merger, other than shares or other securities representing capital stock in Tribune owned, directly or indirectly, by Nexstar or any of its subsidiaries or any subsidiary of Tribune, was converted into the right to receive $46.687397 in cash (the “Merger Consideration”).


14


Upon completion of the Merger, each option to purchase shares of Tribune Stock outstanding as of immediately prior to the Closing Date (a “Tribune Stock Option”), whether or not vested or exercisable, was cancelled and converted into the right to receive a cash payment equal to the excess, if any, of the value of the Merger Consideration over the exercise price per share of such Tribune Stock Option, without any interest and subject to all applicable withholding. Any Tribune Stock Option with an exercise price per share greater than or equal to the Merger Consideration was cancelled for no consideration or payment.

Upon completion of the Merger, each award of Tribune restricted stock units outstanding as of immediately prior to the Closing Date (“Tribune RSUs”), whether or not vested, immediately vested and was cancelled and converted into the right to receive a cash payment equal to the product of the total number of shares of Tribune Stock underlying such Tribune RSUs multiplied by the Merger Consideration, without any interest and subject to all applicable withholding (the “RSU Consideration”), except that each award of Tribune RSUs granted to an employee on or after December 1, 2018 (other than Tribune RSUs required to be granted pursuant to specified employment agreements or offer letters) (“Annual Tribune RSUs”) that had vested as of the Closing Date was cancelled and converted into the right to receive the RSU Consideration and any Annual Tribune RSUs that remained unvested as of the Closing Date were cancelled for no consideration or payment.

Upon completion of the Merger, each award of Tribune performance stock units outstanding as of immediately prior to the Closing Date (“Tribune PSUs”), whether or not vested, immediately vested (with performance conditions for each open performance period as of the Closing Date deemed achieved at the applicable “target” level performance for such Tribune PSUs) and was cancelled and converted into the right to receive a cash payment equal to the product of the total number of shares of Tribune Stock underlying such Tribune PSUs multiplied by the Merger Consideration, without any interest and subject to all applicable withholding.

Upon completion of the Merger, each outstanding award of Tribune deferred stock units outstanding as of immediately prior to the Closing Date (“Tribune DSUs”) was cancelled and converted into the right to receive a cash payment equal to the product of the total number of shares of Tribune Stock underlying such Tribune DSUs multiplied by the Merger Consideration, without interest and subject to all applicable withholding.

Upon completion of the Merger, each unexercised warrant to purchase shares of Tribune Stock outstanding as of immediately prior to the Closing Date (a “Tribune Warrant”) was assumed by Nexstar and converted into a warrant exercisable for the Merger Consideration which the shares of Tribune Stock underlying such Tribune Warrant would have been entitled to receive upon consummation of the Merger and otherwise upon the same terms and conditions of such Tribune Warrant immediately prior to the Closing Date.

The following table summarizes the components of the total consideration paid or payable upon closing of the Merger (in thousands):

 

Cash consideration and related taxes

 

$

4,197,198

 

Warrants replacement awards

 

 

1,008

 

Repayment of Tribune debt, including premium and accrued interest

 

 

2,988,833

 

Gross purchase price

 

 

7,187,039

 

Less: Gross selling price of Tribune Divestitures, including preliminary

  working capital adjustments

 

 

(1,007,745

)

Net purchase price

 

$

6,179,294

 


15


Substantially concurrently with the Merger, Nexstar also completed the previously announced sale of the assets of 21 full power television stations in 16 markets to TEGNA, Inc., E.W. Scripps Company and Circle City Broadcasting I, Inc. The total consideration of these divestitures was approximately $1.36 billion (inclusive of preliminary working capital adjustments). These divestitures were previously agreed upon by Nexstar and Tribune to comply with the FCC’s local television ownership rule and the FCC’s national ownership cap and to facilitate Department of Justice (“DOJ”) approval of the Merger. Eight of the divested television stations were previously owned by Nexstar and were sold for an estimated $358.6 million in cash, including preliminary working capital adjustments (the “Nexstar Divestitures”). Nexstar recognized a $106.4 million gain on the Nexstar Divestitures. The other 13 television stations, which were previously owned or operated by Tribune were sold for an estimated $1.008 billion in cash, including preliminary working capital adjustments (the “Tribune Divestitures”). Nexstar recognized a $9.8 million loss on disposal on the Tribune Divestitures, representing selling costs incurred with their disposition which is recorded in the Gain on disposal of stations, net in the Condensed Consolidated Statements of Operations.

The cash consideration, the repayment of then-existing indebtedness of Tribune and the related fees and expenses were funded through a combination of proceeds from station divestitures, proceeds from the $1.120 billion 5.625% Notes due 2027 (See Note 9), new Term Loan A and Term Loan B borrowings (See Note 9) and cash on hand of Nexstar and Tribune.

Subject to final determination, which is expected to occur within twelve months of the acquisition date, the provisional fair values of the assets acquired, liabilities assumed, and noncontrolling interests (net of the effects of the Tribune Divestitures) are as follows (in thousands):

 

Assets acquired

 

 

 

 

Cash and cash equivalents

 

$

1,289,251

 

Restricted cash and cash equivalents

 

 

16,609

 

Accounts receivable, net

 

 

368,869

 

Prepaid expenses and other current assets

 

 

106,226

 

Property and equipment

 

 

520,290

 

Goodwill

 

 

1,057,551

 

FCC licenses

 

 

1,421,454

 

Network affiliation agreements

 

 

1,269,060

 

Other intangible assets

 

 

490,143

 

Equity investments

 

 

1,482,960

 

Assets held for sale

 

 

239,750

 

Other noncurrent assets

 

 

276,118

 

Total assets acquired

 

 

8,538,281

 

 

 

 

 

 

Liabilities assumed

 

 

 

 

Accounts payable

 

 

(41,233

)

Accrued expenses and other current liabilities

 

 

(362,953

)

Income taxes payable

 

 

(130,296

)

Deferred tax liabilities

 

 

(1,066,531

)

Other noncurrent liabilities

 

 

(751,773

)

Total liabilities assumed

 

 

(2,352,786

)

Noncontrolling interests

 

 

(6,201

)

Net assets acquired and consolidated

 

$

6,179,294

 

The provisional purchase price allocation presented above is based upon management’s estimate of the fair value of the acquired assets and assumed liabilities using valuation techniques including income, cost, and market approaches. The fair value estimates (subject to final determination) are based on, but not limited to, expected future revenue and cash flows, expected future growth rates, and estimated discount rates.

Restricted cash and cash equivalents primarily consist of funds held by Tribune to satisfy the remaining claim obligations pursuant to Tribune’s Chapter 11 reorganization (See Note 16).

Property and equipment are being depreciated over their estimated useful lives ranging from 3 years to 39 years.

16


The fair value assigned to goodwill is attributable to future expense reductions utilizing management’s leverage in operating costs. The intangible assets related to the primary and secondary network affiliation agreements are amortized over an estimated weighted average useful life of 14.9 years. Other definite-lived intangible assets are amortized over an estimated weighted average useful life of 7.5 years.

The equity investments primarily include Nexstar’s 31.3% ownership stake in TV Food Network with a provisional fair value of $1.469 billion. The remainder relates to various investments in private companies. See Note 6 for additional information.

The assets held for sale mainly consists of a real estate property located in Chicago.

The carryovers of the tax basis in goodwill ($634 million), FCC licenses ($60 million), network affiliation agreements ($102 million), other intangible assets ($288 million), equity investments ($379 million), and property and equipment, including assets held for sale ($246 million), are deductible for tax purposes.

Nexstar also assumed Tribune’s pension and other postretirement benefit obligations (mainly included in other noncurrent liabilities). See Note 8 for additional information.

The acquisition of a certain real estate property located in Chicago (included in property and equipment, net in the provisional allocation above) resulted in noncontrolling interest of $6.2 million, representing the ownership stake of a third party. The provisional fair value of the noncontrolling interest, is estimated by applying the market approach valuation technique.

In connection with the Merger, Nexstar assumed certain contingencies as described further in Notes 14 and 16.

Tribune’s net revenue of $55.1 million and operating loss of $7.9 million, inclusive of one-time charges of $17.4 million in connection with the Merger, from September 19, 2019 to September 30, 2019 have been included in the accompanying Condensed Consolidated Statements of Operations.

Transaction costs relating to the Merger, including legal and professional fees and severance costs of $31.0 million, were expensed as incurred during the three months ended September 30, 2019 and $38.3 million during the nine months ended September 30, 2019. These costs were included in selling, general and administrative expense, excluding depreciation and amortization in the accompanying Condensed Consolidated Statements of Operations. No costs were incurred during the three and nine months ended September 30, 2018.

 

KHII

 

KHII operated under a TBA with Nexstar that began on November 1, 2018. On December 17, 2018, Nexstar became the primary beneficiary of its variable interest in KHII and its satellite stations and consolidated the assets that Nexstar agreed to acquire as of this date, all of which were attributed to noncontrolling interest.

 

On January 28, 2019, Nexstar completed its acquisition of KHII and paid the remaining purchase price of $6.4 million, funded by cash on hand. Accordingly, this final payment and the previous deposit of $0.1 million were utilized by Nexstar to acquire in full the noncontrolling interest in KHII of $6.5 million. As of January 28, 2019, the TBA was terminated and KHII is no longer a VIE.

17


Unaudited Pro Forma Information

 

The following unaudited pro forma information (in thousands) has been presented for the periods indicated as if the Merger with Tribune had occurred on January 1, 2018. The unaudited pro forma information combined the historical results of Nexstar and Tribune, adjusted for business combination accounting effects including transaction costs attributable to the Merger, the net gain on disposal of television stations in connection with the Merger, the depreciation and amortization charges from acquired intangible assets, the interest on new debt and the related tax effects. The pro forma financial information as presented below is for informational purposes only and is not indicative of the results of operations that would have been achieved if the Merger had taken place at the beginning of fiscal year 2018.

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net revenue

 

$

961,395

 

 

$

1,061,752

 

 

$

2,923,988

 

 

$

3,030,272

 

Income before income taxes

 

 

38,205

 

 

 

120,270

 

 

 

350,155

 

 

 

444,671

 

Net income

 

 

1,112

 

 

 

119,571

 

 

 

236,214

 

 

 

385,668

 

Net income attributable to Nexstar

 

 

443

 

 

 

120,280

 

 

 

230,828

 

 

 

321,165

 

 

Note 4:  Intangible Assets and Goodwill

Intangible assets subject to amortization consisted of the following (in thousands):

 

 

 

Estimated

 

September 30, 2019

 

 

December 31, 2018

 

 

 

useful life,

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

in years

 

Gross

 

 

Amortization

 

 

Net

 

 

Gross

 

 

Amortization

 

 

Net

 

Network affiliation agreements

 

15

 

$

3,208,979

 

 

$

(648,676

)

 

$

2,560,303

 

 

$

1,977,825

 

 

$

(575,860

)

 

$

1,401,965

 

Other definite-lived intangible assets (1)

 

1-20

 

 

551,189

 

 

 

(200,138

)

 

 

351,051

 

 

 

246,137

 

 

 

(156,179

)

 

 

89,958

 

Other intangible assets

 

 

 

$

3,760,168

 

 

$

(848,814

)

 

$

2,911,354

 

 

$

2,223,962

 

 

$

(732,039

)

 

$

1,491,923

 

(1)

Other intangible assets, net in the Condensed Consolidated Balance Sheet as of September 30, 2019 of $509.9 million represents the total other definite-lived intangible assets of $351.1 million in the table above and other indefinite-lived intangible asset of $158.8 million as shown in the table below.

The increases in network affiliation agreements and other definite-lived intangible assets are primarily attributable to the Merger and the related divestitures as discussed in Note 3 above.

Due to the actual and projected decreases in operating results on one of the Company’s digital reporting units, management reviewed the recoverability of other definite-lived intangible assets as of September 30, 2019. The long-term projected effect of the deterioration in customer relationships, mainly driven by marketplace changes on select demand-side platform customers, led to the decrease in this business unit’s current operating results and forecasts. Based on the analysis of estimated undiscounted future pre-tax cash flows expected to result from the use of the intangible assets and eventual disposition, management determined that the carrying value of the long-lived assets is not recoverable and recorded a non-cash pre-tax impairment charge of $20.8 million. No material long-lived assets in this asset group are recorded as of September 30, 2019.

Upon adoption of ASC 842 on January 1, 2019, the Company’s other intangible assets amounting to $24.2 million representing favorable leases, net were reclassified to ROU assets which are included in the “other noncurrent assets, net” in the Condensed Consolidated Balance Sheets (see Note 2).

18


The following table presents the Company’s estimate of amortization expense for the remainder of 2019, each of the five succeeding years ended December 31 and thereafter for definite-lived intangible assets as of September 30, 2019 (in thousands):

Remainder of 2019

 

$

72,462

 

2020

 

 

243,112

 

2021

 

 

240,180

 

2022

 

 

237,603

 

2023

 

 

235,325

 

2024

 

 

233,935

 

Thereafter

 

 

1,648,737

 

 

 

$

2,911,354

 

 

The amounts recorded to goodwill, FCC licenses and other indefinite-lived intangible assets were as follows (in thousands):

 

 

 

Goodwill

 

 

FCC Licenses

 

 

Other Indefinite-Lived Intangible Assets

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Gross

 

 

Impairment

 

 

Net

 

 

Gross

 

 

Impairment

 

 

Net

 

 

Gross

 

 

Impairment

 

 

Net

 

Balances as of December 31, 2018

 

$

2,257,774

 

 

$

(89,820

)

 

$

2,167,954

 

 

$

1,825,678

 

 

$

(47,410

)

 

$

1,778,268

 

 

$

-

 

 

$

-

 

 

$

-

 

Acquisitions (See Note 3)

 

 

1,057,551

 

 

 

-

 

 

 

1,057,551

 

 

 

1,421,454

 

 

 

-

 

 

 

1,421,454

 

 

 

158,838

 

 

 

-

 

 

 

158,838

 

Nexstar Divestitures (See Note 3)

 

 

(98,834

)

 

 

-

 

 

 

(98,834

)

 

 

(92,763

)

 

 

-

 

 

 

(92,763

)

 

 

-

 

 

 

-

 

 

 

-

 

Impairment

 

 

-

 

 

 

(42,475

)

 

 

(42,475

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Measurement period adjustments

 

 

(1,544

)

 

 

-

 

 

 

(1,544

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Balances as of September 30, 2019

 

$

3,214,947

 

 

$

(132,295

)

 

$

3,082,652

 

 

$

3,154,369

 

 

$

(47,410

)

 

$

3,106,959

 

 

$

158,838

 

 

$

-

 

 

$

158,838

 

 

During 2019, Nexstar recorded measurement period adjustments related to a station acquired in 2018 and recognized a $1.5 million reduction to goodwill, representing working capital adjustments.

 

Due to the actual and projected decreases in operating results on one of the Company’s digital reporting units, management performed an interim quantitative impairment assessment as of September 30, 2019. The long-term projected effect of the deterioration in customer relationships, mainly driven by marketplace changes on select demand-side platform customers led to the decrease in this business unit’s current operating results and forecasts. The estimated fair value of the reporting unit was determined using a combination of an income approach and a market comparable method. The income approach utilizes the estimated discounted cash flows expected to be generated by the reporting unit assets. The market comparable method employs comparable company information, and where available, recent transaction information for similar assets. As a result of the interim impairment review, the estimated fair value of the reporting unit did not exceed the carrying amount and the Company recorded a non-cash pre-tax impairment charge of $42.4 million. As of September 30, 2019, the digital reporting unit has no remaining balance of goodwill. The Company did not identify any other events that would trigger impairment assessment for the remaining reporting units.

 

5.Assets Held for Sale

 

As of September 30, 2019, the Company had certain real estate properties held for sale which are included in the Company’s unaudited Condensed Consolidated Financial Statements (in thousands):

 

 

 

September 30, 2019

 

 

December 31, 2018

 

Real estate

 

$

242,999

 

 

$

4,417

 

 

 

The increase in assets held for sale is due to new assets acquired in connection with the Merger (See Note 3 above) and mainly consist of a real estate property located in Chicago.


19


 

6.Investments

 

Investments consist of the following (in thousands):

 

 

 

September 30, 2019

 

 

December 31, 2018

 

Equity method investments

 

$

1,493,604

 

 

$

13,666

 

Other equity investments

 

 

5,486

 

 

 

305

 

Total investments

 

$

1,499,090

 

 

$

13,971

 

 

Equity Method Investments

 

The Company’s equity method investments primarily included TV Food Network (in which Nexstar has an ownership stake of 31.3%) with a book value of $1.473 billion as of September 30, 2019.

 

TV Food Network owns and operates “The Food Network,” a 24-hour lifestyle cable television channel focusing on food and related topics. TV Food Network also owns and operates “The Cooking Channel,” a cable television channel primarily devoted to cooking instruction, food information and other related topics. TV Food Network’s programming is distributed by cable and satellite television systems.

 

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, 2020. The Company would be entitled to its proportionate share of distributions to partners in the event of a liquidation, 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.

 

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 measures its estimated share of the basis difference attributable to investees’ goodwill and other intangible assets that are not amortizable, including brand name. In connection with the Merger, Nexstar estimated a total of $601.3 million for its share of the basis difference attributable to investees’ amortizable intangible assets. Nexstar also estimated a basis difference of $865.2 million attributable to investees’ goodwill and brand name.

 

The Company amortizes the basis differences attributable to tangible assets and intangible assets subject to amortization and records the amortization (the “amortization of basis difference”) as a reduction of income on equity investments, net in the unaudited Condensed Consolidated Statements of Operations. As of September 30, 2019, the remaining identifiable assets subject to amortization of basis difference, including those related to legacy and newly acquired investments, totaled $603.1 million and have a weighted average remaining useful life of approximately 8.1 years.

 

Income on equity investments, net reported in the Company’s unaudited Condensed Consolidated Statements of Operations consisted of the following (in thousands):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Income on equity investments, net, before amortization of basis difference

 

$

7,255

 

 

$

(784

)

 

$

6,302

 

 

$

(1,506

)

Amortization of basis difference

 

 

(4,038

)

 

 

(103

)

 

 

(4,241

)

 

 

(307

)

Income on equity investments, net

 

$

3,217

 

 

$

(887

)

 

$

2,061

 

 

$

(1,813

)

 


20


Summarized financial information for TV Food Network is as follows (in thousands):

 

 

 

September 19, 2019 to

 

 

 

September 30, 2019

 

Net revenue

 

$

46,437

 

Costs and expenses

 

 

16,852

 

Income from operations

 

 

29,585

 

Net income

 

 

24,991

 

Net income attributable to Nexstar Media Group, Inc.

 

 

7,822

 

 

Other Equity Investments

 

Other equity investments are investments without readily determinable fair values. All of the Company’s other equity investments, including those acquired through the Merger, are ownership interests in private companies. These assets were recorded at cost, subject to periodic evaluation of the carrying values.

 

Note 7:  Accrued Expenses

Accrued expenses consisted of the following (in thousands):

 

 

September 30, 2019

 

 

December 31, 2018

 

Compensation and related taxes

 

$

98,108

 

 

$

44,269

 

Broadcast rights payable

 

 

133,099

 

 

 

8,340

 

Network affiliation fees

 

 

73,282

 

 

 

21,916

 

Interest payable

 

 

44,092

 

 

 

32,047

 

Capital expenditures

 

 

24,868

 

 

 

18,273

 

Other

 

 

123,752

 

 

 

48,293

 

 

 

$

497,201

 

 

$

173,138

 

 

The increases in accrued expenses are primarily attributable to liabilities assumed in connection with the Merger as discussed in Note 3 above.

 

Note 8:  Retirement and Postretirement Plans

 

The Company has an existing funded, qualified non-contributory defined benefit retirement plan which covers certain employees and former employees. Additionally, there are existing non-contributory unfunded supplemental executive retirement and ERISA excess plans which supplement the coverage available to certain executives. All of these existing retirement plans are frozen. The Company also has an existing retiree medical savings account plan which reimburses eligible retired employees for certain medical expenses and an unfunded plan that provides certain health and life insurance benefits to retired employees who were hired prior to 1992. Nexstar recognizes the underfunded status of these existing plan liabilities on its Condensed Consolidated Balance Sheets. The funded status of a plan represents the difference between the fair value of plan assets and the related plan projected benefit obligation. Changes in the funded status are recognized through comprehensive income in the year in which the changes occur.

 

In connection with the Merger, Nexstar assumed Tribune’s pension and postretirement obligations, including a qualified and non-contributory defined benefit retirement plan which covers certain of Tribune’s employees and former employees. This retirement plan is frozen in terms of pay and service. Nexstar also assumed three small defined benefit pension plans for Tribune’s other employees and former employees. Two of these small defined pension plans are frozen, and the other small defined benefit pension plan is not frozen and represents 2% of the total projected benefit obligation for all defined benefit retirement plans of Tribune.  Tribune also provides postretirement health care and life insurance benefits to eligible employees (who retired prior to January 1, 2016) under a variety of plans.

 

As of the Closing Date, the projected benefit obligation of the retirement plans was approximately $2.091 billion and the plan assets at fair value were approximately $1.673 billion resulting in a net liability for retirement plans of $418.2 million (included in other noncurrent liabilities).

 

The following table provides the components of net periodic benefit cost (credit) for the Company’s pension and other postretirement benefit plans (“OPEB”), including the plans assumed through the Merger (in thousands):

 

21


 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2019

 

 

September 30, 2019

 

 

 

Pension Benefits

 

 

OPEB

 

 

Pension Benefits

 

 

OPEB

 

Service Cost

 

$

32

 

 

$

-

 

 

$

32

 

 

$

-

 

Interest Cost

 

 

5,716

 

 

 

205

 

 

 

13,466

 

 

 

605

 

Expected return on plan assets

 

 

(8,499

)

 

 

-

 

 

 

(19,449

)

 

 

-

 

Net periodic benefit (credit) cost

 

$

(2,751

)

 

$

205

 

 

$

(5,951

)

 

$

605

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2018

 

 

September 30, 2018

 

 

 

Pension Benefits

 

 

OPEB

 

 

Pension Benefits

 

 

OPEB

 

Interest cost

 

$

3,350

 

 

$

150

 

 

$

10,050

 

 

$

450

 

Expected return on plan assets

 

 

(6,000

)

 

 

-

 

 

 

(18,900

)

 

 

-

 

Net periodic benefit (credit) cost

 

$

(2,650

)

 

$

150

 

 

$

(8,850

)

 

$

450

 

 

The Company has no required contributions to its qualified retirement plans in 2019. Total payments to fund the obligations under the existing plans and the plans assumed from Tribune are considered contributions and are expected to be less than $6.0 million for the remainder of 2019.

 

Note 9:  Debt

Long-term debt consisted of the following (in thousands):

 

 

 

September 30, 2019

 

 

December 31, 2018

 

Term loans, net of financing costs and discount of $108,645 and $37,679, respectively

 

$

5,861,112

 

 

$

2,407,490

 

Revolving loans

 

 

5,628

 

 

 

5,628

 

6.125% Senior unsecured notes due 2022, net of financing costs of $1,210 and $1,556,

  respectively

 

 

273,790

 

 

 

273,444

 

5.875% Senior unsecured notes due 2022, plus premium of $4,906 and $6,233, respectively

 

 

404,906

 

 

 

406,233

 

5.625% Senior unsecured notes due 2024, net of financing costs of $10,425 and $11,792,

  respectively

 

 

889,575

 

 

 

888,208

 

5.625% Senior unsecured notes due 2027, net of financing costs of $19,174

 

 

1,100,826

 

 

 

-

 

 

 

 

8,535,837

 

 

 

3,981,003

 

Less: current portion

 

 

(142,664

)

 

 

(96,093

)

 

 

$

8,393,173

 

 

$

3,884,910

 

 

2019 Transactions

On July 3, 2019, Nexstar Escrow completed the sale and issuance of $1.120 billion 5.625% Notes due 2027 at par. The gross proceeds of the 5.625% Notes due 2027 were initially deposited in a segregated escrow account. The escrow account has been subsequently released on September 19, 2019 upon completion of the Merger.  Immediately following the consummation of the Merger, Nexstar Escrow was merged with and into Nexstar Broadcasting, with Nexstar Broadcasting surviving the merger. Following the Escrow Merger, Nexstar, Mission, Nexstar Broadcasting, certain restricted subsidiaries of Nexstar Broadcasting and the trustee entered into the Nexstar 2027 Notes Supplemental Indenture, whereby Nexstar Broadcasting assumed the obligations of Nexstar Escrow under the 5.625% Notes due 2027 Indenture  and the 5.625% Notes due 2027, and Nexstar, certain restricted subsidiaries of Nexstar Broadcasting and Mission provided guarantees of the 5.625% Notes due 2027 under the 5.625% Notes due 2027 Indenture. 

The 5.625% Notes due 2027 will mature on July 15, 2027. Interest on the 5.625% Notes due 2027 is payable semiannually in arrears on January 15 and July 15 of each year. The 5.625% Notes due 2027 were issued pursuant to the 5.625% Notes due 2027 Indenture. The 5.625% Notes due 2027 are senior unsecured obligations of Nexstar Broadcasting and the guarantors, rank equal in right of payment with all the existing and future senior indebtedness of Nexstar Broadcasting and the guarantors and rank senior in right of payment to all of the future subordinated indebtedness of Nexstar Broadcasting and the guarantors but junior to the secured debt to the extent of the value of the assets securing such debt. The 5.625% Notes rank equal to the 5.875% senior unsecured notes due 2022 (the “5.875% Notes”), the 6.125% senior unsecured notes due 2022 (“6.125% Notes”) and the 5.625% senior unsecured notes due 2024 (the “5.625% Notes due 2024”).

22


Nexstar has the option to redeem all or a portion of the 5.625% Notes due 2027 at any time prior to July 15, 2022 at a price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to the redemption date plus applicable premium as of the date of redemption. At any time on or after July 15, 2022, Nexstar may redeem the 5.625% Notes due 2027, in whole or in part, at the redemption prices set forth in the 5.625% Notes due 2027 Indenture. At any time prior to July 15, 2022, Nexstar may also redeem up to 40% of the aggregate principal amount at a redemption price of 105.625%, plus accrued and unpaid interest, if any, to the date of redemption, with the net cash proceeds from equity offerings.

Upon the occurrence of a change in control (as defined in the 5.625% Notes due 2027 Indenture), each holder of the 5.625% Notes due 2027 may require Nexstar to repurchase all or a portion of the notes in cash at a price equal to 101.0% of the aggregate principal amount to be repurchased, plus accrued and unpaid interest, if any, thereon to the date of repurchase.

The 5.625% Notes due 2027 Indenture contains covenants that limit, among other things, Nexstar’s ability to (1) incur additional debt, (2) pay dividends or make other distributions or repurchases or redeem its capital stock, (3) make certain investments, (4) create liens, (5) merge or consolidate with another person or transfer or sell assets, (6) enter into restrictions affecting the ability of Nexstar’s restricted subsidiaries to make distributions, loans or advances to it or other restricted subsidiaries, (7) prepay, redeem or repurchase certain indebtedness and (8) engage in transactions with affiliates.

The 5.625% Notes due 2027 Indenture provides for customary events of default (subject in certain cases to customary grace and cure periods), which include nonpayment, breach of covenants, payment defaults or acceleration of other indebtedness, a failure to pay certain judgments and certain events of bankruptcy and insolvency. Generally, if an event of default occurs, the Trustee or holders of at least 25% in principal amount of the then outstanding 5.625% Notes due 2027 may declare the principal of and accrued but unpaid interest, including additional interest, on all the 5.625% Notes due 2027 to be due and payable.

As of September 30, 2019, the Company recorded $19.7 million in legal, professional and underwriting fees related to the new 5.625% Notes due 2027. Debt financing costs are netted against the carrying amount of the related debt.

On September 19, 2019, Nexstar amended its senior secured credit facility. The main provisions of the amendment included the following:

 

$675.0 million in new Term Loan A borrowing, issued at 99.31%, maturing on September 19, 2024, with quarterly principal installment payments of $8.4 million through and including September 30, 2021, $11.8 million thereafter through and including September 30, 2022, $16.9 million thereafter through and including until July 1, 2024, with the remaining principal balance of $442.1 million payable on the maturity date.  

 

$3.065 billion in new Term Loan B, issued at 99.21%, maturing on September 18, 2026, with quarterly principal installment payments of $7.7 million with the remaining balance of $2.86 billion payable on the maturity date.

 

the financial covenant was reset, requiring quarterly compliance with a maximum consolidated first lien net leverage ratio of 4.25 to 1.00.

These Term Loans contain certain financial and non-financial covenants which the Company has satisfactorily complied with as of September 30, 2019.

On September 19, 2019, the Company recorded $45.6 million (Term Loan B) and $5.5 million (Term Loan A) in legal, professional and underwriting fees related to the new debt described above. Debt financing costs are netted against the carrying amount of the related debt.

The proceeds from the new Term Loans, together with proceeds from the previously issued $1.120 billion 5.625% senior unsecured notes due 2027 at par, the net proceeds from certain station divestitures (See Note 3) and cash on hand were used to finance the following:

 

$4.2 billion Cash Consideration of the Merger (See Note 3);

 

$2.99 billion repayment of Tribune debt, including premium and accrued interest (See Note 3); and

 

related transactions, fees and expenses

 


23


Nexstar prepaid a total of $180.0 million in principal balance under certain of its term loans, during the nine months ended September 30, 2019, funded by cash on hand. This resulted in loss on extinguishments of debt of $3.7 million for the nine months ended September 30, 2019, representing write-offs of unamortized debt financing costs and discounts. There were no prepayments of term loans during the three months ended September 30, 2019

During the nine months ended September 30, 2019, the Company also repaid scheduled maturities of $35.4 million of its term loans.

 

Unused Commitments and Borrowing Availability

The Company had $166.4 million of total unused revolving loan commitments under its senior secured credit facilities, all of which was available for borrowing, based on the covenant calculations as of September 30, 2019. The Company’s ability to access funds under its senior secured credit facilities depends, in part, on its compliance with certain financial covenants. As of September 30, 2019, the Company was in compliance with its financial covenants.

Collateralization and Guarantees of Debt

The Company’s credit facilities described above are collateralized by a security interest in substantially all the combined assets, excluding FCC licenses and the other assets of consolidated VIEs unavailable to creditors of Nexstar (See Note 2). Nexstar guarantees full payment of all obligations incurred under the Mission, Marshall and Shield senior secured credit facilities in the event of their default. Mission, a consolidated VIE, and Nexstar Digital LLC (“Nexstar Digital”), a wholly-owned subsidiary of Nexstar, are both guarantors of Nexstar’s senior secured credit facility. Mission is also a guarantor of the 6.125% Notes, the 5.625% Notes due 2024, and the 5.625% Notes due 2027 but does not guarantee Nexstar’s 5.875% Notes. Nexstar Digital does not guarantee any of the notes. Marshall and Shield are not guarantors of any debt within the group.

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 2021 and 2028) are freely exercisable or assignable by Nexstar without consent or approval by Mission. The Company expects these option agreements to be renewed upon expiration.

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 4.25 to 1.00. The financial covenant, which is formally calculated on a quarterly basis, is based on the combined results of the Company. The Mission, Marshall and Shield amended credit agreements do not contain financial covenant ratio requirements but do provide for default in the event Nexstar does not comply with all covenants contained in its credit agreement. As of September 30, 2019, the Company was in compliance with its financial covenants.

 

Note 10:  Leases

The Company as a Lessee

 

The Company has operating and finance leases for office space, vehicles, tower facilities, antenna sites, studio and other real estate properties and equipment. The Company’s leases have remaining lease terms of one month to 95 years, some of which may include options to extend the leases from two to 99 years, and some of which may include options to terminate the leases within two years. The depreciable lives of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Lease contracts that the Company has executed but which have not yet commenced as of September 30, 2019 were not material and are excluded.

 

(In thousands)

 

Balance Sheet Classification

 

September 30, 2019

 

Operating leases

 

 

 

 

 

 

Operating lease right-of-use assets, net

 

Other noncurrent assets, net

 

$

237,563

 

   Current lease liabilities

 

Other current liabilities

 

$

34,224

 

   Noncurrent lease liabilities

 

Other noncurrent liabilities

 

$

188,123

 

 

 

 

 

 

 

 

Finance leases

 

 

 

 

 

 

Finance lease right-of-use assets, net of accumulated depreciation of $2,438

 

Property, plant and equipment, net

 

$

8,551

 

   Current lease liabilities

 

Other current liabilities

 

$

864

 

   Noncurrent lease liabilities

 

Other noncurrent liabilities

 

$

15,427

 

 

24


On September 19, 2019, the Company recognized $142 million of ROU assets, $19 million in current lease liabilities and $123 million in noncurrent lease liabilities in connection with the Merger. See Note 3 for additional information about the Merger.

 

Operating lease expenses for the three and nine months ended September 30, 2019 were $5.4 million and $16.2 million, respectively, inclusive of immaterial short-term and variable lease costs. During the three and nine months ended September 30, 2019, $3.1 million and $9.3 million, respectively, of operating lease costs are included in direct operating expenses, excluding depreciation and amortization, and $2.3 million and $7.0 million, respectively, of operating lease costs are included in selling, general and administrative expenses, excluding depreciation and amortization, in the accompanying Condensed Consolidated Statements of Operations. The depreciation expense and interest expense associated with finance leases during the three and nine months ended September 30, 2019 were not material.

Other information related to leases as of September 30, 2019 was as follows (in thousands, except lease term and discount rate):

 

Supplemental Cash Flows Information

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

   Operating cash flows from operating leases

 

$

16,754

 

   Operating cash flows from finance leases

 

 

712

 

   Financing cash flows from finance leases

 

 

610

 

Weighted Average Remaining Lease Term

 

 

 

 

Operating leases

 

7.6 years

 

Finance leases

 

11.8 years

 

Weighted Average Discount Rate

 

 

 

 

Operating leases

 

 

5.3

%

Finance leases

 

 

5.7

%

Future minimum lease payments under non-cancellable leases as of September 30, 2019 were as follows (in thousands):

 

 

 

Operating Leases

 

 

Finance Leases

 

Remainder of 2019

 

$

9,443

 

 

$

444

 

2020

 

 

44,112

 

 

 

1,795

 

2021

 

 

37,799

 

 

 

1,843

 

2022

 

 

34,904

 

 

 

1,803

 

2023

 

 

31,277

 

 

 

1,818

 

Thereafter

 

 

114,049

 

 

 

15,202

 

   Total future minimum lease payments

 

 

271,584

 

 

 

22,905

 

Less: imputed interest

 

 

(51,351

)

 

 

(6,611

)

Total

 

$

220,233

 

 

$

16,294

 

The Company as a Lessor

 

The Company has various arrangements under which it is the lessor for the use of its tower space. These leases meet the criteria for operating lease classification, but the associated lease income is not material. As part of the adoption, the Company elected the practical expedient to combine lease and non-lease components in its lessor arrangements.


25


 

Note 11:  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:

 

Level 1 – Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market.

 

Level 2 – Assets and liabilities whose values are based on inputs other than those included in Level 1, including quoted market prices in markets that are not active; quoted prices of assets or liabilities with similar attributes in active markets; or valuation models whose inputs are observable or unobservable but corroborated by market data.

 

Level 3 – Assets and liabilities whose values are based on valuation models or pricing techniques that utilize unobservable inputs that are significant to the overall fair value measurement.

Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

The carrying values of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, broadcast rights, accounts payable, and accrued expenses approximate fair value due to their short term to maturity. Estimated fair values and carrying amounts of the Company’s financial instruments that are not measured at fair value on a recurring basis were as follows (in thousands):

 

 

 

September 30, 2019

 

 

December 31, 2018

 

 

 

Carrying

 

 

Fair

 

 

Carrying

 

 

Fair

 

 

 

Amount

 

 

Value

 

 

Amount

 

 

Value

 

Term loans(1)

 

$

5,861,112

 

 

$

5,973,312

 

 

$

2,407,490

 

 

$

2,389,439

 

Revolving loans(1)

 

 

5,628

 

 

 

5,436

 

 

 

5,628

 

 

 

5,528

 

6.125% Senior unsecured notes(2)

 

 

273,790

 

 

 

278,438

 

 

 

273,444

 

 

 

275,688

 

5.875% Senior unsecured notes(2)

 

 

404,906

 

 

 

409,000

 

 

 

406,233

 

 

 

397,000

 

5.625% Senior unsecured notes due 2024(2)

 

 

889,575

 

 

 

938,250

 

 

 

888,208

 

 

 

837,000

 

5.625% Senior unsecured notes due 2027(2)

 

 

1,100,826

 

 

 

1,170,400

 

 

 

-

 

 

 

-

 

 

(1) The fair value of senior secured credit facilities is computed based on borrowing rates currently available to the Company for bank loans with similar terms and average maturities. These fair value measurements are considered Level 3, as significant inputs to the fair value calculation are unobservable in the market

 

(2) The fair value of the Company’s fixed rate debt is estimated based on bid prices obtained from an investment banking firm that regularly makes a market for these financial instruments. These fair value measurements are considered Level 2, as quoted market prices are available for low volume trading of these securities

Other equity method investments in private companies (without readily determinable fair values) are recorded at cost, less impairments, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment, as further described in Note 6. During the nine months ended September 30, 2019, there were no events or changes in circumstance that suggested an impairment or an observable price change to any of these investments resulting from an orderly transaction for the identical or a similar investment. The non-equity method investments are classified in Level 3 of the fair value hierarchy.


26


 

Note 12:  Common Stock

 

On April 26, 2018, Nexstar’s Board of Directors approved a $200 million increase in Nexstar’s share repurchase authorization to repurchase its Class A common stock. As of September 30, 2019, the remaining available amount under the share repurchase authorization was $201.9 million, inclusive of the 2018 authorization and the remaining balance from prior authorization. There were no share repurchases of Nexstar’s Class A common stock during the three and nine months ended September 30, 2019.

 

Share repurchases may be made from time to time in open market transactions, block trades or in private transactions. There is no minimum number of shares that Nexstar is required to repurchase and the repurchase program may be suspended or discontinued at any time without prior notice.

 

Note 13:  Stock-Based Compensation Plans

 

During the three months ended September 30, 2019, Nexstar granted 22,500 time-based restricted stock units to employees with an estimated fair value of $2.2 million. During the nine months ended September 30, 2019, Nexstar granted 363,000 time-based restricted stock units and 113,334 performance-based restricted stock units to employees and non-employee directors with an estimated fair value of $35.2 million and $9.6 million, respectively. The time-based restricted stock units vest over four years from the date of the award. The performance-based restricted stock units vest over a range of two to four years from the date of the award, subject to the achievement of pre-established Company performance metrics.

There were no significant equity incentive grants during the third quarter of 2018. During the nine months ended September 30, 2018, Nexstar granted 667,500 restricted stock units to employees and non-employee directors with an estimated fair value of $43.4 million. The restricted stock units vest over a range of three to four years from the date of the award.

On September 5, 2019, a majority of Nexstar’s stockholders approved the 2019 Long-Term Equity Incentive Plan. A maximum of 3,100,000 shares of Nexstar’s Class A common stock may be issued under this plan, of which no stock-based awards were granted as of September 30, 2019.

 

 

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Note 14:  Income Taxes

 

Income tax expense was $39.5 million for the three months ended September 30, 2019, compared to $35.2 million for the same period in 2018. The effective tax rates were 115.1% and 26.1% for each of the respective periods. In 2019, the Company recognized the tax impact of the divested stations previously owned by Nexstar (See Note 3) including an income tax expense of $12.8 million attributable to nondeductible goodwill written off as a result of the sale, or a 37.3% increase to the effective tax rate. The Company also recognized an impairment loss on one of its reporting units’ goodwill and intangible assets (See Note 4). The impairment loss related to goodwill is not deductible for purposes of calculating the tax provision resulting in an income tax expense of $11.1 million, or a 32.3% increase to the effective tax rate. Additionally, certain current year transaction and severance costs that Nexstar incurred in connection with its Merger with Tribune were also determined to be nondeductible for tax purposes. This resulted in an income tax expense of $6.0 million, or a 17.6% increase in the effective tax rate.

 

Income tax expense was $82.6 million for the nine months ended September 30, 2019, compared to $86.0 million for the same period in 2018. The effective tax rates were 40.3% and 26.9% for each of the respective periods. In 2019, the Company recognized the tax impact of the divested stations previously owned by Nexstar (See Note 3) including an income tax expense of $12.8 million attributable to nondeductible goodwill written off as a result of the sale, or a 6.3% increase to the effective tax rate. The Company also recognized an impairment loss on one of its reporting units’ goodwill and intangible assets (See Note 4). The impairment loss related to goodwill is not deductible for purposes of calculating the tax provision resulting in an income tax expense of $11.1 million, or a 5.4% increase to the effective tax rate. Additionally, certain current year transaction and severance costs that Nexstar incurred in connection with its Merger with Tribune were also determined to be nondeductible for tax purposes. This resulted in an income tax expense of $6.0 million, or a 2.9% increase in the effective tax rate.

Chicago Cubs Transactions

 

On August 21, 2009, Tribune and Chicago Entertainment Ventures, 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 95% and Tribune owned 5% of the membership interests in CEV LLC. The fair market value of the contributed assets exceeded the tax basis and did not result in an immediate taxable gain as the transaction was structured to comply with the partnership provisions of the Internal Revenue Code (“IRC”) and related regulations.

 

On June 28, 2016, the IRS issued Tribune a Notice of Deficiency which presents the IRS’s position that the gain should have been included in Tribune’s 2009 taxable income. Accordingly, the IRS has proposed a $182 million tax and a $73 million gross valuation misstatement penalty. In addition, after-tax interest on the aforementioned proposed tax and penalty through September 30, 2019 would be approximately $96 million. During the third quarter of 2016, Tribune filed a petition in U.S. Tax Court to contest the IRS’s determination. The trial in U.S. Tax Court began on October 28, 2019.

 

On January 22, 2019, Tribune sold its 5% membership interest in CEV LLC and paid the federal and state taxes due on the deferred gain and the gain on sale of its ownership of CEV LLC through its regular tax reporting process. The sale of Tribune’s ownership interest in CEV LLC has no impact on Tribune’s ongoing dispute with the IRS. On September 19, 2019, Tribune became a wholly owned subsidiary of Nexstar pursuant to the Merger Agreement (See Note 3). Nexstar continues to disagree with the IRS’s position that the Chicago Cubs Transactions generated a 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 $225 million before interest and penalties. Any tax, interest and penalty due will be offset by tax payments made relating to this transaction subsequent to 2009. Tribune made approximately $147 million of tax payments prior to its merger with Nexstar. Tribune no longer own any portion of CEV LLC. The Company has not recorded any tax reserves related to the Chicago Cubs Transactions.


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Note 15:  FCC Regulatory Matters

 

Television broadcasting is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the “Communications Act”). The Communications Act prohibits the operation of television broadcasting stations except under a license issued by the FCC, and empowers the FCC, among other things, to issue, revoke and modify broadcasting licenses, determine the location of television stations, regulate the equipment used by television stations, adopt regulations to carry out the provisions of the Communications Act and impose penalties for the violation of such regulations. The FCC’s ongoing rule making proceedings could have a significant future impact on the television industry and on the operation of the Company’s stations and the stations to which it provides services. In addition, the U.S. Congress may act to amend the Communications Act or adopt other legislation in a manner that could impact the Company’s stations, the stations to which it provides services and the television broadcast industry in general.

 

The FCC has adopted rules with respect to the final conversion of existing low power and television translator stations to digital operation, which must be completed by July 2021.

 

Media Ownership

The FCC is required to review its media ownership rules every four years and to eliminate those rules it finds no longer serve the “public interest, convenience and necessity.”

 

In August 2016, the FCC adopted a Second Report and Order (the “2016 Ownership Order”) concluding the agency’s 2010 and 2014 quadrennial reviews. The 2016 Ownership Order (1) retained the then-existing local television ownership rule and radio/television cross-ownership rule with minor technical modifications, (2) extended the ban on common ownership of two top-four television stations in a market to network affiliation swaps, (3) retained the then-existing ban on newspaper/broadcast cross-ownership in local markets while considering waivers and providing an exception for failed or failing entities, (4) retained the dual network rule, (5) made JSA relationships attributable interests and (6) defined a category of sharing agreements designated as SSAs between stations and required public disclosure of those SSAs (while not considering them attributable).

The 2016 Ownership Order reinstated a previously adopted rule that attributed another in-market station toward the local television ownership limits when one station owner sells more than 15% of the second station’s weekly advertising inventory under a JSA. Parties to JSAs entered into prior to March 31, 2014 were permitted to continue to operate under those JSAs until September 30, 2025.

Nexstar and other parties filed petitions seeking reconsideration of various aspects of the 2016 Ownership Order. On November 16, 2017, the FCC adopted an order (the “Reconsideration Order”) addressing the petitions for reconsideration. The Reconsideration Order (1) eliminated the rules prohibiting newspaper/broadcast cross-ownership and limiting television/radio cross-ownership, (2) eliminated the requirement that eight or more independently-owned television stations remain in a local market for common ownership of two television stations in that market to be permissible, (3) retained the general prohibition on common ownership of two “top four” stations in a local market but provided for case-by-case review, (4) eliminated the television JSA attribution rule, and (5) retained the SSA definition and disclosure requirement for television stations. These rule modifications took effect on February 7, 2018, when the U.S. Court of Appeals for the Third Circuit (the “Third Circuit”) denied a mandamus petition which had sought to stay their effectiveness. On September 23, 2019, however, the Third Circuit issued an opinion vacating the Reconsideration Order on the ground that the FCC had failed to adequately analyze the effect of the Reconsideration Order’s deregulatory rule changes on minority and woman ownership of broadcast stations.  The Third Circuit’s opinion has not yet become effective and the FCC has stated its intention to seek further review of the decision.

In December 2018, the FCC initiated its 2018 quadrennial review with the issuance of a Notice of Proposed Rulemaking. Among other things, the FCC seeks comment on all aspects of the local television ownership rule’s implementation and whether the current version of the rule remains necessary in the public interest. Comments and reply comments in the 2018 quadrennial review were filed in the second quarter of 2019.

 

The FCC’s media ownership rules limit the percentage of U.S. television households which a party may reach through its attributable interests in television stations to 39% on a nationwide basis. Historically, the FCC has counted the ownership of an ultra-high frequency (“UHF”) station as reaching only 50% of a market’s percentage of total national audience. On August 24, 2016, the FCC adopted a Report and Order abolishing this “UHF discount,” and that rule change became effective in October 2016. On April 20, 2017, the FCC adopted an order on reconsideration that reinstated the UHF discount, which became effective again on September 15, 2017. A federal court of appeals dismissed a petition for review of the discount’s reinstatement in July 2018. In December 2017, the FCC initiated a comprehensive rulemaking to evaluate the UHF discount together with the national ownership limit. Comments and reply comments were filed in 2018, and the proceeding remains open. Nexstar is in compliance with the 39% national cap limitation.

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Spectrum

 

The FCC is in the process of repurposing a portion of the broadcast television spectrum for wireless broadband use. Pursuant to federal legislation enacted in 2012, the FCC conducted an incentive auction for the purpose of making additional spectrum available to meet future wireless broadband needs. Under the auction statute and rules, certain television broadcasters accepted bids from the FCC to voluntarily relinquish their spectrum in exchange for consideration, and certain wireless broadband providers and other entities submitted successful bids to acquire the relinquished television spectrum. Over the next several years, television stations that are not relinquishing their spectrum are being “repacked” into the frequency band still remaining for television broadcast use. The incentive auction commenced on March 29, 2016 and officially concluded on April 13, 2017. Ten of Nexstar’s stations and one station owned by Vaughan, a consolidated VIE, accepted bids to relinquish their spectrum. On July 21, 2017, the Company received $478.6 million of gross proceeds from the FCC related to the incentive auction. These were recorded as liability to surrender spectrum asset pending the relinquishment of spectrum assets or conversion from UHF to VHF. Of the 11 total stations that accepted bids, one station went off the air in November 2017. The associated spectrum asset and liability to surrender spectrum, both amounting to $34.6 million, were derecognized in the fourth quarter of 2017. The station that went off the air did not have a significant impact on the Company’s financial results because it was located in a remote rural area of the country and the Company has other stations which serve the same area. Of the remaining ten stations, eight have ceased broadcasting on their previous channels and implemented channel sharing agreements. As a result, the associated spectrum asset and liability to surrender spectrum, both amounting to $314.1 million, were derecognized in the second quarter of 2018. The remaining two stations will move to VHF channels and must vacate their current channels by March 2020 and May 2020, respectively.

 

The majority of the Company’s television stations did not accept bids to relinquish their television channels. Of those stations, 61 full power stations owned by Nexstar and 17 full power stations owned by VIEs were assigned to new channels in the reduced post-auction television band. These “repacked” stations are required to construct and license the necessary technical modifications to operate on their new assigned channels and must cease operating on their former channels on a rolling schedule ending in July 2020. Congress has allocated up to an industry-wide total of $2.75 billion to reimburse television broadcasters, multichannel video programming distributors (“MVPDs”) and other parties for costs reasonably incurred due to the repack. This allocation includes $1 billion added to the TV Broadcaster Relocation Fund as part of the Consolidated Appropriations Act, 2018. This fund is not available to reimburse repacking costs for stations which are surrendering their spectrum and entering into channel sharing relationships. Broadcasters and MVPDs have submitted estimates to the FCC of their reimbursable costs. As of February 6, 2019, these costs were approximately $1.9 billion, and the FCC has indicated that it expects those costs to rise. During the three and nine months ended September 30, 2019, the Company spent a total of $19.9 million and $56.3 million, respectively, in capital expenditures related to station repack which were recorded as assets under the property and equipment caption in the accompanying Condensed Consolidated Balance Sheets. During the three and nine months ended September 30, 2018, the Company spent a total of $6.6 million and $13.5 million, respectively, in capital expenditures related to station repack which were recorded as assets under the property and equipment caption in the accompanying Condensed Consolidated Balance Sheets. During the three and nine months ended September 30, 2019, the Company received $20.4 million and $54 million, respectively, in reimbursements from the FCC related to these expenditures which were recorded as operating income in the accompanying Condensed Consolidated Statements of Operations. During the three and nine months ended September 30, 2018, the Company received $5.4 million and $12.5 million, respectively, in reimbursements from the FCC related to these expenditures which were recorded as operating income in the accompanying Condensed Consolidated Statements of Operations. The Company cannot determine if the FCC will be able to fully reimburse its repacking costs as this is dependent on certain factors, including the Company’s ability to incur repacking costs that are equal to or less than the FCC’s allocation of funds to the Company and whether the FCC will have available funds to reimburse the Company for additional repacking costs that it previously may not have anticipated. Whether the FCC will have available funds for additional reimbursements will also depend on the repacking costs that will be incurred by other broadcasters, MVPDs and other parties that are also seeking reimbursements.

The reallocation of television spectrum to broadband use may be to the detriment of the Company’s investment in digital facilities, could require substantial additional investment to continue current operations, and may require viewers to invest in additional equipment or subscription services to continue receiving broadcast television signals. The Company cannot predict the impact of the incentive auction and subsequent repack on its business.

30


Exclusivity/Retransmission Consent

 

On March 3, 2011, the FCC initiated a Notice of Proposed Rulemaking which among other things asked for comment on eliminating the network non-duplication and syndicated exclusivity protection rules, which may permit MVPDs to import out-of-market television stations in certain circumstances. In March 2014, the FCC adopted a further notice of proposed rulemaking which sought additional comment on the elimination or modification of the network non-duplication and syndicated exclusivity rules. The FCC’s possible elimination or modification of the network non-duplication and syndicated exclusivity protection rules may affect the Company’s ability to sustain its current level of retransmission consent revenues or grow such revenues in the future and could have an adverse effect on the Company’s business, financial condition and results of operations. The Company cannot predict the resolution of the FCC’s network non-duplication and syndicated exclusivity proposals or the impact of these proposals if they are adopted.

On December 5, 2014, federal legislation directed the FCC to commence a rulemaking to “review its totality of the circumstances test for good faith [retransmission consent] negotiations.”  The FCC commenced this proceeding in September 2015 and comments and reply comments were submitted. In July 2016, the then-Chairman of the FCC publicly announced that the agency would not adopt additional rules in this proceeding. However, the proceeding remains open.

Further, online video distributors (“OVDs”) have begun streaming broadcast programming over the Internet. In September 2014, the U.S. Supreme Court held that an OVD’s retransmissions of broadcast television signals without the consent of the broadcast station violate copyright holders’ exclusive right to perform their works publicly as provided under the Copyright Act. In December 2014, the FCC issued a Notice of Proposed Rulemaking proposing to interpret the term “MVPD” to encompass OVDs that make available for purchase multiple streams of video programming distributed at a prescheduled time and seeking comment on the effects of applying MVPD rules to such OVDs. Comments and reply comments were filed in 2015. Although the FCC has not classified OVDs as MVPDs to date, several OVDs have signed agreements for retransmission of local stations within their markets and others are actively seeking to negotiate such agreements.


31


 

Note 16:  Commitments and Contingencies

Guarantees 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 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 these guarantees would be generally limited to the borrowings outstanding. As of September 30, 2019, Mission had a maximum commitment of $226.5 million under its senior secured credit facility, of which $223.5 million of debt was outstanding, Marshall had used all of its commitment and had outstanding debt obligations of $49.4 million and Shield had also used all of its commitment and had outstanding obligations of $21.8 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 Condensed Consolidated Balance Sheets. The other debts guaranteed by Nexstar are long-term debt obligations of Mission and Shield and are included within the long-term debt balance disclosed within the Condensed Consolidated Balance Sheet.

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 LitigationOn March 16, 2018, a group of companies including Nexstar and Tribune (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. 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 DMA except in certain cases, and to implement certain antitrust compliance measures and to monitor and report on compliance with the consent decree.

Starting in July 2018, a series of plaintiffs filed putative class action lawsuits against the Defendants alleging that the Defendants 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 April 3, 2019; Defendants filed a Motion to Dismiss on September 5, 2019. Before the Court ruled on that motion, the Plaintiffs filed their Second Amended Consolidated Complaint on September 9, 2019.   This complaint added additional defendants and allegations. The Defendants filed a Motion to Dismiss and Strike on October 8, 2019.  Nexstar and Tribune deny the allegations against them and will defend their advertising practices.

In connection with the Merger, Nexstar assumed contingencies from certain legal proceedings, as follows:

 


32


Tribune Chapter 11 Reorganization and Confirmation Order AppealsOn December 8, 2008 (the “Petition Date”), Tribune and 110 of its direct and indirect wholly-owned subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief under chapter 11 (“Chapter 11”) of title 11 of the United States Code (the “Bankruptcy Code”) in the U.S. Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). On April 12, 2012, the Debtors, Oaktree Capital Management, L.P. (“Oaktree”), Angelo, Gordon & Co. L.P. (“AG”), the Official Committee of Unsecured Creditors (the “Creditors’ Committee”), and JPMorgan Chase Bank, N.A. (“JPMorgan” and, together with the Debtors, Oaktree, AG and the Creditors’ Committee, the “Plan Proponents”) filed the Fourth Amended Joint Plan of Reorganization for Tribune and its Subsidiaries with the Bankruptcy Court (as subsequently modified by the Plan Proponents, the “Plan”).

 

On July 23, 2012, the Bankruptcy Court issued an order confirming the Plan (the “Confirmation Order”). The Plan became effective and the Debtors emerged from Chapter 11 on December 31, 2012 (the “Effective Date”). The Bankruptcy Court has entered final decrees that have collectively closed 106 of the Debtors’ Chapter 11 cases. The remaining Debtors’ Chapter 11 proceedings continue to be jointly administered under the caption In re Tribune Media Company, et al., Case No. 08-13141.

 

Notices of appeal of the Bankruptcy Court’s order confirming the Plan (the “Confirmation Order”) were filed by (i) Aurelius Capital Management, LP, on behalf of its managed entities that were holders of the Predecessor’s senior notes and Exchangeable Subordinated Debentures due 2029 (“PHONES”); (ii) Law Debenture Trust Company of New York (n/k/a Delaware Trust Company) (“Delaware Trust Company”) and Deutsche Bank Trust Company Americas (“Deutsche Bank”), each successor trustees under the respective indentures for the Predecessor’s senior notes; (iii) Wilmington Trust Company, as successor indenture trustee for the PHONES; and (iv) EGI-TRB, L.L.C., a Delaware limited liability company wholly-owned by Sam Investment Trust (a trust established for the benefit of Samuel Zell and his family) (the “Zell Entity”). The appellants sought, among other relief, to overturn the Confirmation Order and certain prior orders of the Bankruptcy Court embodied in the Plan, including the settlement of certain claims and causes of action related to the Leveraged ESOP Transactions) consummated by the Debtors, the Tribune employee stock ownership plan, the Zell Entity and Samuel Zell in 2007. Each of the Confirmation Order appeals has been dismissed or otherwise resolved by a final order, with the exception of the appeals of Delaware Trust Company and Deutsche Bank. On July 30, 2018, the United States District Court for the District of Delaware (the “District Court”) entered an order affirming (i) the Bankruptcy Court’s judgment overruling Delaware Trust Company’s and Deutsche Bank’s objections to confirmation of the Plan and (ii) the Bankruptcy Court’s order confirming the Plan. Delaware Trust Company and Deutsche Bank appealed the District Court’s order to the United States Court of Appeals for the Third Circuit (the “Third Circuit”) on August 27, 2018. That appeal remains pending before the Third Circuit. If the remaining appellants succeed on their appeals, the Tribune’s financial condition may be adversely affected.

 

As of the Effective Date, approximately 7,400 proofs of claim had been filed against the Debtors. Amounts and payment terms for these claims, if applicable, were established in the Plan. The Plan requires Tribune to reserve cash in amounts sufficient to make certain additional payments that may become due and owing pursuant to the Plan subsequent to the Effective Date. As of September 30, 2019, restricted cash and cash equivalents held by Tribune to satisfy the remaining claim obligations were $17 million and are estimated to be sufficient to satisfy such obligations.

 

As of September 30, 2019, all but 349 proofs of claim against the Debtors had been withdrawn, expunged, settled or otherwise satisfied. The majority of the remaining proofs of claim were filed by certain of Tribune’s former directors and officers, asserting indemnity and other related claims against Tribune for claims brought against them in lawsuits arising from the cancellation of all issued and outstanding shares of Tribune common stock as of December 20, 2007 and with Tribune becoming wholly-owned by the Tribune Company employee stock ownership plan (the “Leveraged ESOP Transactions”). Those lawsuits are pending in multidistrict litigation (“MDL”) before the U.S. District Court for the Southern District of New York in proceedings captioned In re Tribune Co. Fraudulent Conveyance Litigation. Under the Plan, the indemnity claims of Tribune’s former directors and officers must be set off against any recovery by the litigation trust formed pursuant to the Plan (the “Litigation Trust”) against any of those directors and officers, and the Litigation Trust is authorized to object to the allowance of any such indemnity-type claims.

 

The Debtors are continuing to evaluate the remaining proofs of claim. The ultimate amounts to be paid in resolutions of the remaining proofs of claim, including indemnity claims, continue to be subject to uncertainty. If the aggregate allowed amount of the remaining claims exceeds the restricted cash and cash equivalents held for satisfying such claims, Tribune would be required to satisfy the allowed claims from its cash on hand from operations.

 

 


33


Reorganization Items, NetReorganization items, net are included in the “Other expenses, net” in the Company’s unaudited Condensed Consolidated Statements of Operations and primarily include professional advisory fees and other costs related to the resolution of unresolved claims, such amounts were not significant from September 19, 2019 to September 30, 2019.  The Company expects to continue to incur certain expenses pertaining to the Chapter 11 proceedings throughout 2019 and potentially in future periods.

 

Termination of Tribune and Sinclair Merger Agreement—On August 9, 2018, Tribune provided notification to Sinclair Broadcast Group, Inc. (“Sinclair”) that it terminated, effective immediately, the Agreement and Plan of Merger, dated May 8, 2017, with Sinclair, which provided for the acquisition by Sinclair of all of the outstanding shares of Tribune’s common stock. Additionally, on August 9, 2018, Tribune filed a complaint in the Delaware Court of Chancery against Sinclair, alleging that Sinclair willfully and materially breached its obligations under the merger agreement. The lawsuit seeks damages for all losses incurred as a result of Sinclair’s breach of contract under the merger agreement. On August 29, 2018, Sinclair filed an answer to Tribune’s complaint and a counterclaim. On September 18, 2018, Tribune filed an answer to Sinclair’s counterclaim. The Company believes that Sinclair’s counterclaim is without merit and intends to defend it vigorously.

 

On September 10, 2018, The Arbitrage Event-Driven Fund filed a putative securities class action complaint (the “Securities Complaint”) against Tribune and members of its then senior management in the United States District Court for the Northern District of Illinois. The Securities Complaint alleges that Tribune and its then senior management violated Sections 10(b) and 20(a) of the Exchange Act by misrepresenting and omitting material facts concerning Sinclair’s conduct during the Sinclair and Tribune merger approval process (which has been terminated as discussed above). On December 18, 2018, the court appointed The Arbitrage Event-Driven Fund and related entities as Lead Plaintiffs. On January 31, 2019, Lead Plaintiffs and two other named plaintiffs filed an amended complaint (the “Amended Complaint”). The Amended Complaint eliminates the claim under Section 20(a) of the Exchange Act and adds a claim under Section 11 of the Securities Act related to a November 29, 2017 public offering of Tribune’s Class A Common Stock by Oaktree Tribune, L.P. (“Oaktree”). The Amended Complaint also names certain members of the then Board of Directors of Tribune as defendants. The Amended Complaint also includes claims against Oaktree, Oaktree Capital Management, L.P. and Morgan Stanley & Co. LLC. The lawsuit is purportedly brought on behalf of purchasers of Tribune Class A Common Stock between November 29, 2017 and July 16, 2018, contemporaneously with Oaktree’s sales in the November 29, 2017 public offering or pursuant or traceable to that offering. Plaintiffs seek damages in an amount to be determined at trial. On March 29, 2019, Tribune and the individual Tribune defendants filed a motion to dismiss the Amended Complaint, and that motion is now fully briefed before the Court. We believe this lawsuit is without merit and intend to defend it vigorously.


34


 

Note 17:  Segment Data

 

The Company evaluates the performance of its operating segments based on net revenue and operating income. The Company’s broadcast segment includes (i) television stations and related community-focused websites that Nexstar owns, operates, programs or provides sales and other services to in various markets across the United States, (ii) digital multicast network services, (iii) WGN America, a national general entertainment cable network, (iv) a sports betting information website, and (v) WGN-AM, a Chicago radio station. The other activities of the Company include (i) corporate functions, (ii) the management of certain real estate assets recently acquired through the Merger, including revenues from leasing certain owned office and production facilities, (iii) digital businesses and (iv) eliminations.

 

Segment financial information is included in the following tables for the periods presented (in thousands):

 

Three Months Ended September 30, 2019

 

Broadcast

 

 

Other

 

 

Consolidated

 

Net revenue

 

$

637,148

 

 

$

26,427

 

 

$

663,575

 

Depreciation

 

 

26,538

 

 

 

2,825

 

 

 

29,363

 

Amortization of intangible assets

 

 

37,215

 

 

 

5,228

 

 

 

42,443

 

Income (loss) from operations

 

 

189,408

 

 

 

(67,793

)

 

 

121,615

 

 

Three Months Ended September 30, 2018

 

Broadcast

 

 

Other

 

 

Consolidated

 

Net revenue

 

$

650,303

 

 

$

42,712

 

 

$

693,015

 

Depreciation

 

 

21,587

 

 

 

6,086

 

 

 

27,673

 

Amortization of intangible assets

 

 

31,447

 

 

 

5,710

 

 

 

37,157

 

Income (loss) from operations

 

 

227,602

 

 

 

(34,709

)

 

 

192,893

 

 

Nine Months Ended September 30, 2019

 

Broadcast

 

 

Other

 

 

Consolidated

 

Net revenue

 

$

1,858,226

 

 

$

81,008

 

 

$

1,939,234

 

Depreciation

 

 

75,587

 

 

 

9,303

 

 

 

84,890

 

Amortization of intangible assets

 

 

98,830

 

 

 

16,708

 

 

 

115,538

 

Income (loss) from operations

 

 

550,001

 

 

 

(151,368

)

 

 

398,633

 

 

Nine Months Ended September 30, 2018

 

Broadcast

 

 

Other

 

 

Consolidated

 

Net revenue

 

$

1,850,176

 

 

$

118,498

 

 

$

1,968,674

 

Depreciation

 

 

63,948

 

 

 

14,629

 

 

 

78,577

 

Amortization of intangible assets

 

 

95,376

 

 

 

15,264

 

 

 

110,640

 

Income (loss) from operations

 

 

587,712

 

 

 

(102,709

)

 

 

485,003

 

 

As of September 30, 2019

 

Broadcast

 

 

Other

 

 

Consolidated

 

Goodwill

 

$

3,082,652

 

 

$

-

 

 

$

3,082,652

 

Assets

 

 

12,931,202

 

 

 

1,172,173

 

 

 

14,103,375

 

 

As of December 31, 2018

 

Broadcast

 

 

Other

 

 

Consolidated

 

Goodwill

 

$

2,125,479

 

 

$

42,475

 

 

$

2,167,954

 

Assets

 

 

6,622,604

 

 

 

439,426

 

 

 

7,062,030

 

 


35


The following tables present the disaggregation of the Company’s revenue for the periods presented (in thousands):

Three Months Ended September 30, 2019

 

Broadcast

 

 

 

 

Other

 

 

Consolidated

 

Local

 

$

208,338

 

 

 

 

$

-

 

 

$

208,338

 

National

 

 

81,875

 

 

 

 

 

-

 

 

 

81,875

 

Political

 

 

10,899

 

 

 

 

 

-

 

 

 

10,899

 

Retransmission compensation

 

 

294,808

 

 

 

 

 

-

 

 

 

294,808

 

Digital

 

 

32,385

 

 

 

 

 

25,752

 

 

 

58,137

 

Other

 

 

4,995

 

 

 

 

 

675

 

 

 

5,670

 

Trade revenue

 

 

3,848

 

 

 

 

 

-

 

 

 

3,848

 

Total revenue

 

$

637,148

 

 

 

 

$

26,427

 

 

$

663,575

 

 

Three Months Ended September 30, 2018

 

Broadcast

 

 

 

 

Other

 

 

Consolidated

 

Local

 

$

189,423

 

 

 

 

$

-

 

 

$

189,423

 

National

 

 

71,623

 

 

 

 

 

-

 

 

 

71,623

 

Political

 

 

70,147

 

 

 

 

 

-

 

 

 

70,147

 

Retransmission compensation

 

 

284,319

 

 

 

 

 

-

 

 

 

284,319

 

Digital

 

 

26,615

 

 

 

 

 

42,697

 

 

 

69,312

 

Other

 

 

4,013

 

 

 

 

 

15

 

 

 

4,028

 

Trade revenue

 

 

4,163

 

 

 

 

 

-

 

 

 

4,163

 

Total revenue

 

$

650,303

 

 

 

 

$

42,712

 

 

$

693,015

 

 

Nine Months Ended September 30, 2019

 

Broadcast

 

 

Other

 

 

Consolidated

 

Local

 

$

595,783

 

 

$

-

 

 

$

595,783

 

National

 

 

213,885

 

 

 

-

 

 

 

213,885

 

Political

 

 

15,363

 

 

 

-

 

 

 

15,363

 

Retransmission compensation

 

 

923,050

 

 

 

-

 

 

 

923,050

 

Digital

 

 

86,906

 

 

 

80,303

 

 

 

167,209

 

Other

 

 

12,454

 

 

 

705

 

 

 

13,159

 

Trade revenue

 

 

10,785

 

 

 

-

 

 

 

10,785

 

Total revenue

 

$

1,858,226

 

 

$

81,008

 

 

$

1,939,234

 

 

Nine Months Ended September 30, 2018

 

Broadcast

 

 

 

 

Other

 

 

Consolidated

 

Local

 

$

581,251

 

 

 

 

$

-

 

 

$

581,251

 

National

 

 

210,301

 

 

 

 

 

-

 

 

 

210,301

 

Political

 

 

111,049

 

 

 

 

 

-

 

 

 

111,049

 

Retransmission compensation

 

 

836,533

 

 

 

 

 

-

 

 

 

836,533

 

Digital

 

 

77,661

 

 

 

 

 

118,454

 

 

 

196,115

 

Other

 

 

22,358

 

 

 

 

 

44

 

 

 

22,402

 

Trade revenue

 

 

11,023

 

 

 

 

 

-

 

 

 

11,023

 

Total revenue

 

$

1,850,176

 

 

 

 

$

118,498

 

 

$

1,968,674

 

 

The Company is a television broadcasting and digital media company focused on the acquisition, development and operation of television stations and interactive community websites and digital media services in medium-sized markets in the United States.

Advertising revenue (local, national, political and digital) is positively affected by national and regional political campaigns, and certain events such as the Olympic Games or the Super Bowl. Company stations’ 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. In addition, advertising revenue is generally higher during even-numbered years when congressional and presidential elections occur, and advertising is aired during the Olympic Games.

The Company receives compensation from MVPDs and OVDs in return for the consent to the retransmission of the signals of its television stations. Retransmission compensation is recognized at the point in time the broadcast signal is delivered to the distributors and is based on a price per subscriber.


36


 

Note 18:  Condensed Consolidating Financial Information

 

The following condensed consolidating financial information presents the financial position, results of operations and cash flows of the Company, including its wholly-owned subsidiaries and its consolidated VIEs. This information is presented in lieu of separate financial statements and other related disclosures pursuant to Regulation S-X Rule 3-10 of the Securities Exchange Act of 1934, as amended, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.”

 

The Nexstar column presents the parent company’s financial information, excluding consolidating entities. The Nexstar Broadcasting column presents the financial information of Nexstar Broadcasting, a wholly-owned subsidiary of Nexstar and issuer of the 5.625% Notes due 2027, the 5.625% Notes due 2024, the 6.125% Notes and the 5.875% Notes. The Mission column presents the financial information of Mission, an entity which Nexstar Broadcasting is required to consolidate as a VIE (See Note 2). The Non-Guarantors column presents the combined financial information of Nexstar Digital, a wholly-owned subsidiary of Nexstar, and other VIEs consolidated by Nexstar Broadcasting (See Note 2).

 

The outstanding 5.625% Notes due 2027, 5.625% Notes due 2024 and the 6.125% Notes are fully and unconditionally guaranteed, jointly and severally, by Nexstar, Mission and certain of Nexstar Broadcasting’s restricted subsidiaries, subject to certain customary release provisions. These notes are not guaranteed by any other entities.

 

The 5.875% Notes are fully and unconditionally guaranteed, jointly and severally, by Nexstar and certain of Nexstar Broadcasting’s restricted subsidiaries, subject to certain customary release provisions. These notes are not guaranteed by any other entities.

 

The indentures governing the 5.625% Notes due 2027, the 5.625% Notes due 2024 and the 6.125% Notes are not registered but require consolidating information that presents the guarantor information.

 

As discussed in Note 2, the Company adopted ASU No. 2016-02 Leases (Topic 842) and all related amendments using the optional transition method. As a result, financial information for reporting periods beginning after January 1, 2019 is presented under ASC 842, while comparative financial information has not been adjusted and continues to be reported in accordance with the Company’s historical accounting policy for lease contracts prior to the adoption of ASC 842. The standard had a material impact on the Company’s current year Condensed Consolidated Balance Sheets but did not have an impact on its Condensed Consolidated Statement of Operations. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while the accounting for finance leases remained substantially unchanged.

37


CONDENSED CONSOLIDATING BALANCE SHEET

As of September 30, 2019

(in thousands)

 

 

 

 

 

 

 

Nexstar

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Consolidated

 

 

 

Nexstar

 

 

Broadcasting

 

 

Mission

 

 

Guarantors

 

 

Eliminations

 

 

Company

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

-

 

 

$

290,336

 

 

$

3,254

 

 

$

23,830

 

 

$

-

 

 

$

317,420

 

Restricted cash and cash equivalents

 

 

-

 

 

 

16,609

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

16,609

 

Accounts receivable

 

 

12

 

 

 

800,110

 

 

 

14,728

 

 

 

45,944

 

 

 

-

 

 

 

860,794

 

Amounts due from consolidated entities

 

 

-

 

 

 

117,424

 

 

 

69,606

 

 

 

-

 

 

 

(187,030

)

 

 

-

 

Spectrum asset

 

 

-

 

 

 

119,047

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

119,047

 

Other current assets

 

 

-

 

 

 

118,094

 

 

 

622

 

 

 

3,031

 

 

 

-

 

 

 

121,747

 

Total current assets

 

 

12

 

 

 

1,461,620

 

 

 

88,210

 

 

 

72,805

 

 

 

(187,030

)

 

 

1,435,617

 

Investments in subsidiaries

 

 

1,255,566

 

 

 

108,885

 

 

 

-

 

 

 

-

 

 

 

(1,364,451

)

 

 

-

 

Amounts due from consolidated entities

 

 

737,537

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(737,537

)

 

 

-

 

Property and equipment, net

 

 

-

 

 

 

1,215,120

 

 

 

22,549

 

 

 

19,492

 

 

 

(75

)

 

 

1,257,086

 

Goodwill

 

 

-

 

 

 

2,927,865

 

 

 

33,187

 

 

 

121,600

 

 

 

-

 

 

 

3,082,652

 

FCC licenses

 

 

-

 

 

 

2,955,151

 

 

 

43,102

 

 

 

108,706

 

 

 

-

 

 

 

3,106,959

 

Network affiliation agreements, net

 

 

-

 

 

 

2,478,495

 

 

 

11,687

 

 

 

70,121

 

 

 

-

 

 

 

2,560,303

 

Other intangible assets, net

 

 

-

 

 

 

505,896

 

 

 

523

 

 

 

3,470

 

 

 

-

 

 

 

509,889

 

Investments

 

 

-

 

 

 

1,499,090

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,499,090

 

Assets held for sale

 

 

-

 

 

 

242,999

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

242,999

 

Other noncurrent assets

 

 

199

 

 

 

379,761

 

 

 

12,659

 

 

 

16,161

 

 

 

-

 

 

 

408,780

 

Total assets

 

$

1,993,314

 

 

$

13,774,882

 

 

$

211,917

 

 

$

412,355

 

 

$

(2,289,093

)

 

$

14,103,375

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of debt

 

$

-

 

 

$

89,778

 

 

$

2,285

 

 

$

50,601

 

 

$

-

 

 

$

142,664

 

Accounts payable

 

 

-

 

 

 

98,518

 

 

 

26

 

 

 

10,584

 

 

 

-

 

 

 

109,128

 

Amounts due to consolidated entities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

187,030

 

 

 

(187,030

)

 

 

-

 

Liability to surrender spectrum asset

 

 

-

 

 

 

129,964

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

129,964

 

Other current liabilities

 

 

589

 

 

 

675,122

 

 

 

7,791

 

 

 

29,039

 

 

 

-

 

 

 

712,541

 

Total current liabilities

 

 

589

 

 

 

993,382

 

 

 

10,102

 

 

 

277,254

 

 

 

(187,030

)

 

 

1,094,297

 

Debt

 

 

-

 

 

 

8,151,347

 

 

 

221,169

 

 

 

20,657

 

 

 

-

 

 

 

8,393,173

 

Amounts due to consolidated entities

 

 

-

 

 

 

536,541

 

 

 

-

 

 

 

201,206

 

 

 

(737,747

)

 

 

-

 

Deferred tax liabilities

 

 

-

 

 

 

1,685,628

 

 

 

-

 

 

 

2,962

 

 

 

-

 

 

 

1,688,590

 

Other noncurrent liabilities

 

 

-

 

 

 

949,105

 

 

 

10,334

 

 

 

17,843

 

 

 

-

 

 

 

977,282

 

Total liabilities

 

 

589

 

 

 

12,316,003

 

 

 

241,605

 

 

 

519,922

 

 

 

(924,777

)

 

 

12,153,342

 

Total Nexstar Media Group, Inc.

  stockholders’ equity (deficit)

 

 

1,992,725

 

 

 

1,452,678

 

 

 

(29,688

)

 

 

(122,674

)

 

 

(1,364,316

)

 

 

1,928,725

 

Noncontrolling interests in consolidated

  variable interest entities

 

 

-

 

 

 

6,201

 

 

 

-

 

 

 

15,107

 

 

 

-

 

 

 

21,308

 

Total liabilities and stockholders’ equity (deficit)

 

$

1,993,314

 

 

$

13,774,882

 

 

$

211,917

 

 

$

412,355

 

 

$

(2,289,093

)

 

$

14,103,375

 

38


CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2018

(in thousands)

 

 

 

 

 

 

 

Nexstar

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Consolidated

 

 

 

Nexstar

 

 

Broadcasting

 

 

Mission

 

 

Guarantors

 

 

Eliminations

 

 

Company

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

-

 

 

$

105,665

 

 

$

10,798

 

 

$

28,652

 

 

$

-

 

 

$

145,115

 

Accounts receivable

 

 

-

 

 

 

466,270

 

 

 

12,857

 

 

 

68,158

 

 

 

-

 

 

 

547,285

 

Amounts due from consolidated entities

 

 

-

 

 

 

88,987

 

 

 

77,521

 

 

 

-

 

 

 

(166,508

)

 

 

-

 

Spectrum asset

 

 

-

 

 

 

52,002

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

52,002

 

Other current assets

 

 

-

 

 

 

17,420

 

 

 

1,655

 

 

 

3,598

 

 

 

-

 

 

 

22,673

 

Total current assets

 

 

-

 

 

 

730,344

 

 

 

102,831

 

 

 

100,408

 

 

 

(166,508

)

 

 

767,075

 

Investments in subsidiaries

 

 

1,119,605

 

 

 

108,884

 

 

 

-

 

 

 

-

 

 

 

(1,228,489

)

 

 

-

 

Amounts due from consolidated entities

 

 

782,365

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(782,365

)

 

 

-

 

Property and equipment, net

 

 

-

 

 

 

696,910

 

 

 

19,867

 

 

 

14,833

 

 

 

(72

)

 

 

731,538

 

Goodwill

 

 

-

 

 

 

1,970,692

 

 

 

33,187

 

 

 

164,075

 

 

 

-

 

 

 

2,167,954

 

FCC licenses

 

 

-

 

 

 

1,620,610

 

 

 

43,102

 

 

 

114,556

 

 

 

-

 

 

 

1,778,268

 

Network affiliation agreements, net

 

 

-

 

 

 

1,313,894

 

 

 

13,095

 

 

 

74,976

 

 

 

-

 

 

 

1,401,965

 

Other intangible assets, net

 

 

-

 

 

 

51,265

 

 

 

617

 

 

 

38,076

 

 

 

-

 

 

 

89,958

 

Assets held for sale

 

 

-

 

 

 

4,417

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,417

 

Investments

 

 

-

 

 

 

13,971

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13,971

 

Other noncurrent assets

 

 

-

 

 

 

98,272

 

 

 

4,421

 

 

 

4,191

 

 

 

-

 

 

 

106,884

 

Total assets

 

$

1,901,970

 

 

$

6,609,259

 

 

$

217,120

 

 

$

511,115

 

 

$

(2,177,434

)

 

$

7,062,030

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of debt

 

$

-

 

 

$

41,477

 

 

$

2,285

 

 

$

52,331

 

 

$

-

 

 

$

96,093

 

Accounts payable

 

 

-

 

 

 

47,574

 

 

 

2,357

 

 

 

17,897

 

 

 

-

 

 

 

67,828

 

Liability to surrender spectrum asset

 

 

-

 

 

 

52,002

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

52,002

 

Amounts due to consolidated entities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

166,508

 

 

 

(166,508

)

 

 

-

 

Other current liabilities

 

 

299

 

 

 

155,023

 

 

 

4,441

 

 

 

28,486

 

 

 

-

 

 

 

188,249

 

Total current liabilities

 

 

299

 

 

 

296,076

 

 

 

9,083

 

 

 

265,222

 

 

 

(166,508

)

 

 

404,172

 

Debt

 

 

-

 

 

 

3,641,193

 

 

 

222,354

 

 

 

21,363

 

 

 

-

 

 

 

3,884,910

 

Amounts due to consolidated entities

 

 

 

 

 

 

559,057

 

 

 

-

 

 

 

223,519

 

 

 

(782,576

)

 

 

-

 

Deferred tax liabilities

 

 

62

 

 

 

624,869

 

 

 

-

 

 

 

8,949

 

 

 

-

 

 

 

633,880

 

Other noncurrent liabilities

 

 

-

 

 

 

255,228

 

 

 

6,820

 

 

 

8,036

 

 

 

-

 

 

 

270,084

 

Total liabilities

 

 

361

 

 

 

5,376,423

 

 

 

238,257

 

 

 

527,089

 

 

 

(949,084

)

 

 

5,193,046

 

Total Nexstar Media Group, Inc.

  stockholders’ equity (deficit)

 

 

1,901,609

 

 

 

1,232,836

 

 

 

(21,137

)

 

 

(32,184

)

 

 

(1,228,350

)

 

 

1,852,774

 

Noncontrolling interests in consolidated

  variable interest entities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

16,210

 

 

 

-

 

 

 

16,210

 

Total liabilities and stockholders’ equity (deficit)

 

$

1,901,970

 

 

$

6,609,259

 

 

$

217,120

 

 

$

511,115

 

 

$

(2,177,434

)

 

$

7,062,030

 

 

 

39


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended September 30, 2019

(in thousands)

 

 

 

 

 

 

 

Nexstar

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Consolidated

 

 

 

Nexstar

 

 

Broadcasting

 

 

Mission

 

 

Guarantors

 

 

Eliminations

 

 

Company

 

Net broadcast revenue (including trade)

 

$

-

 

 

$

606,964

 

 

$

18,802

 

 

$

37,809

 

 

$

-

 

 

$

663,575

 

Revenue between consolidated entities

 

 

8,848

 

 

 

24,558

 

 

 

8,231

 

 

 

20,619

 

 

 

(62,256

)

 

 

-

 

Net revenue

 

 

8,848

 

 

 

631,522

 

 

 

27,033

 

 

 

58,428

 

 

 

(62,256

)

 

 

663,575

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses, excluding

  depreciation and amortization

 

 

-

 

 

 

263,863

 

 

 

12,312

 

 

 

46,152

 

 

 

-

 

 

 

322,327

 

Selling, general, and administrative expenses,

  excluding depreciation and amortization

 

 

10,095

 

 

 

182,302

 

 

 

1,195

 

 

 

9,649

 

 

 

(20,158

)

 

 

183,083

 

Local service agreement fees between

  consolidated entities

 

 

-

 

 

 

17,539

 

 

 

16,032

 

 

 

8,525

 

 

 

(42,096

)

 

 

-

 

Amortization of broadcast rights

 

 

-

 

 

 

17,487

 

 

 

367

 

 

 

598

 

 

 

-

 

 

 

18,452

 

Amortization of intangible assets

 

 

-

 

 

 

35,061

 

 

 

491

 

 

 

6,891

 

 

 

-

 

 

 

42,443

 

Depreciation

 

 

-

 

 

 

27,756

 

 

 

645

 

 

 

962

 

 

 

-

 

 

 

29,363

 

Reimbursement from the FCC related to station repack

 

 

-

 

 

 

(15,809

)

 

 

(2,677

)

 

 

(1,931

)

 

 

-

 

 

 

(20,417

)

Goodwill and intangible assets impairment

 

 

-

 

 

 

(2

)

 

 

-

 

 

 

63,319

 

 

 

-

 

 

 

63,317

 

Gain on disposal of stations, net

 

 

-

 

 

 

(96,608

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(96,608

)

Total operating expenses

 

 

10,095

 

 

 

431,589

 

 

 

28,365

 

 

 

134,165

 

 

 

(62,254

)

 

 

541,960

 

(Loss) income from operations

 

 

(1,247

)

 

 

199,933

 

 

 

(1,332

)

 

 

(75,737

)

 

 

(2

)

 

 

121,615

 

Income (loss) from equity investment, net

 

 

-

 

 

 

3,229

 

 

 

-

 

 

 

(12

)

 

 

-

 

 

 

3,217

 

Interest expense, net

 

 

-

 

 

 

(89,634

)

 

 

(2,794

)

 

 

(771

)

 

 

-

 

 

 

(93,199

)

Pension and other postretirement plans credit, net

 

 

-

 

 

 

2,578

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,578

 

Other income (expenses)

 

 

(1

)

 

 

119

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

118

 

Equity in income of consolidated subsidiaries

 

 

928

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(928

)

 

 

-

 

Income (loss) before income taxes

 

 

(320

)

 

 

116,225

 

 

 

(4,126

)

 

 

(76,520

)

 

 

(930

)

 

 

34,329

 

Income tax benefit (expense)

 

 

(463

)

 

 

(47,733

)

 

 

1,026

 

 

 

7,663

 

 

 

-

 

 

 

(39,507

)

Net income (loss)

 

 

(783

)

 

 

68,492

 

 

 

(3,100

)

 

 

(68,857

)

 

 

(930

)

 

 

(5,178

)

Net income attributable to noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(669

)

 

 

-

 

 

 

(669

)

Net income (loss) attributable to Nexstar

 

$

(783

)

 

$

68,492

 

 

$

(3,100

)

 

$

(69,526

)

 

$

(930

)

 

$

(5,847

)

 

40


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended September 30, 2018

(in thousands)

 

 

 

 

 

 

 

Nexstar

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Consolidated

 

 

 

Nexstar

 

 

Broadcasting

 

 

Mission

 

 

Guarantors

 

 

Eliminations

 

 

Company

 

Net broadcast revenue (including trade)

 

$

-

 

 

$

620,385

 

 

$

17,838

 

 

$

54,792

 

 

$

-

 

 

$

693,015

 

Revenue between consolidated entities

 

 

7,948

 

 

 

23,657

 

 

 

10,018

 

 

 

18,452

 

 

 

(60,075

)

 

 

-

 

Net revenue

 

 

7,948

 

 

 

644,042

 

 

 

27,856

 

 

 

73,244

 

 

 

(60,075

)

 

 

693,015

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses, excluding

   depreciation and amortization

 

 

-

 

 

 

224,798

 

 

 

10,426

 

 

 

51,320

 

 

 

(1,181

)

 

 

285,363

 

Selling, general, and administrative expenses,

  excluding depreciation and amortization

 

 

10,080

 

 

 

133,794

 

 

 

1,108

 

 

 

11,255

 

 

 

(15,940

)

 

 

140,297

 

Local service agreement fees between

   consolidated entities

 

 

-

 

 

 

19,297

 

 

 

14,575

 

 

 

9,082

 

 

 

(42,954

)

 

 

-

 

Amortization of broadcast rights

 

 

-

 

 

 

13,949

 

 

 

383

 

 

 

689

 

 

 

-

 

 

 

15,021

 

Amortization of intangible assets

 

 

-

 

 

 

29,261

 

 

 

522

 

 

 

7,374

 

 

 

-

 

 

 

37,157

 

Depreciation

 

 

-

 

 

 

25,545

 

 

 

508

 

 

 

1,620

 

 

 

-

 

 

 

27,673

 

Reimbursement from the FCC related to station repack

 

 

-

 

 

 

(4,809

)

 

 

(580

)

 

 

-

 

 

 

-

 

 

 

(5,389

)

Total operating expenses

 

 

10,080

 

 

 

441,835

 

 

 

26,942

 

 

 

81,340

 

 

 

(60,075

)

 

 

500,122

 

(Loss) income from operations

 

 

(2,132

)

 

 

202,207

 

 

 

914

 

 

 

(8,096

)

 

 

-

 

 

 

192,893

 

Loss from equity investment, net

 

 

-

 

 

 

(887

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(887

)

Interest expense, net

 

 

-

 

 

 

(52,551

)

 

 

(2,864

)

 

 

(822

)

 

 

-

 

 

 

(56,237

)

Loss on extinguishment of debt

 

 

-

 

 

 

(3,159

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,159

)

Pension and other postretirement plans credit, net

 

 

-

 

 

 

2,458

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,458

 

Other income (expenses)

 

 

-

 

 

 

5

 

 

 

-

 

 

 

(2

)

 

 

-

 

 

 

3

 

Equity in income of consolidated subsidiaries

 

 

106,440

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(106,440

)

 

 

-

 

Income (loss) before income taxes

 

 

104,308

 

 

 

148,073

 

 

 

(1,950

)

 

 

(8,920

)

 

 

(106,440

)

 

 

135,071

 

Income tax (expense) benefit

 

 

(410

)

 

 

(36,796

)

 

 

268

 

 

 

1,695

 

 

 

-

 

 

 

(35,243

)

   Net income (loss)

 

 

103,898

 

 

 

111,277

 

 

 

(1,682

)

 

 

(7,225

)

 

 

(106,440

)

 

 

99,828

 

Net loss attributable to noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

686

 

 

 

-

 

 

 

686

 

Net income (loss) attributable to Nexstar

 

$

103,898

 

 

$

111,277

 

 

$

(1,682

)

 

$

(6,539

)

 

$

(106,440

)

 

$

100,514

 

 

 

 

 


41


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Nine Months Ended September 30, 2019

(in thousands)

 

 

 

 

 

 

Nexstar

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Consolidated

 

 

 

Nexstar

 

 

Broadcasting

 

 

Mission

 

 

Guarantors

 

 

Eliminations

 

 

Company

 

Net broadcast revenue (including trade)

 

$

-

 

 

$

1,765,722

 

 

$

57,119

 

 

$

116,393

 

 

$

-

 

 

$

1,939,234

 

Revenue between consolidated entities

 

 

25,830

 

 

 

69,216

 

 

 

24,255

 

 

 

57,615

 

 

 

(176,916

)

 

 

-

 

Net revenue

 

 

25,830

 

 

 

1,834,938

 

 

 

81,374

 

 

 

174,008

 

 

 

(176,916

)

 

 

1,939,234

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses, excluding

  depreciation and amortization

 

 

-

 

 

 

745,032

 

 

 

36,343

 

 

 

133,693

 

 

 

(3,834

)

 

 

911,234

 

Selling, general, and administrative expenses,

  excluding depreciation and amortization

 

 

29,588

 

 

 

460,303

 

 

 

3,184

 

 

 

29,550

 

 

 

(53,124

)

 

 

469,501

 

Local service agreement fees between

  consolidated entities

 

 

-

 

 

 

50,741

 

 

 

45,182

 

 

 

24,033

 

 

 

(119,956

)

 

 

-

 

Amortization of broadcast rights

 

 

-

 

 

 

43,774

 

 

 

1,119

 

 

 

1,856

 

 

 

-

 

 

 

46,749

 

Amortization of intangible assets

 

 

-

 

 

 

92,339

 

 

 

1,501

 

 

 

21,698

 

 

 

-

 

 

 

115,538

 

Depreciation

 

 

-

 

 

 

79,661

 

 

 

1,873

 

 

 

3,356

 

 

 

-

 

 

 

84,890

 

Reimbursement from the FCC related to station repack

 

 

-

 

 

 

(40,040

)

 

 

(4,977

)

 

 

(9,003

)

 

 

-

 

 

 

(54,020

)

Goodwill and intangible assets impairment

 

 

-

 

 

 

(2

)

 

 

-

 

 

 

63,319

 

 

 

-

 

 

 

63,317

 

Gain on disposal of stations, net

 

 

-

 

 

 

(96,608

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(96,608

)

Total operating expenses

 

 

29,588

 

 

 

1,335,200

 

 

 

84,225

 

 

 

268,502

 

 

 

(176,914

)

 

 

1,540,601

 

(Loss) income from operations

 

 

(3,758

)

 

 

499,738

 

 

 

(2,851

)

 

 

(94,494

)

 

 

(2

)

 

 

398,633

 

Income (loss) from equity investment, net

 

 

-

 

 

 

2,101

 

 

 

-

 

 

 

(40

)

 

 

-

 

 

 

2,061

 

Interest expense, net

 

 

-

 

 

 

(186,482

)

 

 

(8,578

)

 

 

(2,459

)

 

 

-

 

 

 

(197,519

)

Loss on extinguishment of debt

 

 

-

 

 

 

(3,724

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,724

)

Pension and other postretirement plans credit, net

 

 

-

 

 

 

5,378

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,378

 

Other income (expenses)

 

 

(1

)

 

 

210

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

209

 

Equity in income of consolidated subsidiaries

 

 

135,960

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(135,960

)

 

 

-

 

Income (loss) before income taxes

 

 

132,201

 

 

 

317,221

 

 

 

(11,429

)

 

 

(96,993

)

 

 

(135,962

)

 

 

205,038

 

Income tax benefit (expense)

 

 

10

 

 

 

(97,381

)

 

 

2,877

 

 

 

11,900

 

 

 

-

 

 

 

(82,594

)

Net income (loss)

 

 

132,211

 

 

 

219,840

 

 

 

(8,552

)

 

 

(85,093

)

 

 

(135,962

)

 

 

122,444

 

Net income attributable to noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,397

)

 

 

-

 

 

 

(5,397

)

Net income (loss) attributable to Nexstar

 

$

132,211

 

 

$

219,840

 

 

$

(8,552

)

 

$

(90,490

)

 

$

(135,962

)

 

$

117,047

 

42


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Nine Months Ended September 30, 2018

(in thousands)

 

 

 

 

 

 

 

Nexstar

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Consolidated

 

 

 

Nexstar

 

 

Broadcasting

 

 

Mission

 

 

Guarantors

 

 

Eliminations

 

 

Company

 

Net broadcast revenue (including trade)

 

$

-

 

 

$

1,764,122

 

 

$

51,601

 

 

$

152,951

 

 

$

-

 

 

$

1,968,674

 

Revenue between consolidated entities

 

 

21,153

 

 

 

66,360

 

 

 

27,504

 

 

 

53,596

 

 

 

(168,613

)

 

 

-

 

Net revenue

 

 

21,153

 

 

 

1,830,482

 

 

 

79,105

 

 

 

206,547

 

 

 

(168,613

)

 

 

1,968,674

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses, excluding

   depreciation and amortization

 

 

-

 

 

 

664,717

 

 

 

30,586

 

 

 

147,307

 

 

 

(3,845

)

 

 

838,765

 

Selling, general, and administrative expenses,

  excluding depreciation and amortization

 

 

25,261

 

 

 

403,066

 

 

 

3,436

 

 

 

33,506

 

 

 

(44,164

)

 

 

421,105

 

Local service agreement fees between

   consolidated entities

 

 

-

 

 

 

54,244

 

 

 

41,075

 

 

 

25,285

 

 

 

(120,604

)

 

 

-

 

Amortization of broadcast rights

 

 

-

 

 

 

43,741

 

 

 

1,204

 

 

 

2,089

 

 

 

-

 

 

 

47,034

 

Amortization of intangible assets

 

 

-

 

 

 

88,780

 

 

 

1,606

 

 

 

20,254

 

 

 

-

 

 

 

110,640

 

Depreciation

 

 

-

 

 

 

71,891

 

 

 

1,529

 

 

 

5,157

 

 

 

-

 

 

 

78,577

 

Reimbursement from the FCC related to station repack

 

 

-

 

 

 

(11,683

)

 

 

(767

)

 

 

-

 

 

 

-

 

 

 

(12,450

)

Total operating expenses

 

 

25,261

 

 

 

1,314,756

 

 

 

78,669

 

 

 

233,598

 

 

 

(168,613

)

 

 

1,483,671

 

(Loss) income from operations

 

 

(4,108

)

 

 

515,726

 

 

 

436

 

 

 

(27,051

)

 

 

-

 

 

 

485,003

 

Loss from equity investment, net

 

 

-

 

 

 

(1,813

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,813

)

Interest expense, net

 

 

-

 

 

 

(156,124

)

 

 

(8,214

)

 

 

(2,769

)

 

 

-

 

 

 

(167,107

)

Loss on extinguishment of debt

 

 

-

 

 

 

(4,645

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,645

)

Pension and other postretirement plans credit, net

 

 

-

 

 

 

8,358

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,358

 

Other expenses

 

 

-

 

 

 

(10

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(10

)

Equity in income of consolidated subsidiaries

 

 

252,643

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(252,643

)

 

 

-

 

Income (loss) before income taxes

 

 

248,535

 

 

 

361,492

 

 

 

(7,778

)

 

 

(29,820

)

 

 

(252,643

)

 

 

319,786

 

Income tax (expense) benefit

 

 

(833

)

 

 

(91,701

)

 

 

1,674

 

 

 

4,849

 

 

 

-

 

 

 

(86,011

)

   Net income (loss)

 

 

247,702

 

 

 

269,791

 

 

 

(6,104

)

 

 

(24,971

)

 

 

(252,643

)

 

 

233,775

 

Net loss attributable to noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,593

 

 

 

-

 

 

 

2,593

 

Net income (loss) attributable to Nexstar

 

$

247,702

 

 

$

269,791

 

 

$

(6,104

)

 

$

(22,378

)

 

$

(252,643

)

 

$

236,368

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Nine Months Ended September 30, 2019

(in thousands)

 

 

 

 

 

 

 

Nexstar

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Consolidated

 

 

 

Nexstar

 

 

Broadcasting

 

 

Mission

 

 

Guarantors

 

 

Eliminations

 

 

Company

 

Cash flows from operating activities

 

$

-

 

 

$

322,622

 

 

$

(6,421

)

 

$

(219

)

 

$

-

 

 

$

315,982

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments for acquisitions, net of cash acquired

 

 

-

 

 

 

(5,881,179

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,881,179

)

Proceeds from sale of stations

 

 

-

 

 

 

1,352,958

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,352,958

 

Purchases of property and equipment

 

 

-

 

 

 

(94,870

)

 

 

(4,386

)

 

 

(10,969

)

 

 

-

 

 

 

(110,225

)

Spectrum repack reimbursements from the FCC

 

 

-

 

 

 

40,040

 

 

 

4,977

 

 

 

9,003

 

 

 

-

 

 

 

54,020

 

Proceeds from disposals of property and equipment

 

 

-

 

 

 

2,012

 

 

 

-

 

 

 

14

 

 

 

-

 

 

 

2,026

 

Distribution from an equity investment

 

 

-

 

 

 

1,557

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,557

 

Other investing activities

 

 

-

 

 

 

(1,310

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,310

)

Net cash provided by (used in) investing activities

 

 

-

 

 

 

(4,580,792

)

 

 

591

 

 

 

(1,952

)

 

 

-

 

 

 

(4,582,153

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from long-term debt

 

 

-

 

 

 

4,831,050

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,831,050

 

Payments for debt financing costs

 

 

-

 

 

 

(70,717

)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

(70,717

)

Repayments of long-term debt

 

 

-

 

 

 

(211,108

)

 

 

(1,714

)

 

 

(2,591

)

 

 

-

 

 

 

(215,413

)

Common stock dividends paid

 

 

(62,062

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(62,062

)

Inter-company payments

 

 

70,126

 

 

 

(70,126

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Purchase of noncontrolling interest from a

  consolidated variable interest entity

 

 

-

 

 

 

(6,393

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,393

)

Cash paid for shares withheld for taxes

 

 

(9,813

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(9,813

)

Payments for capital lease and capitalized software obligations

 

 

-

 

 

 

(6,359

)

 

 

-

 

 

 

(60

)

 

 

-

 

 

 

(6,419

)

Proceeds from exercise of stock options

 

 

1,749

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,749

 

Other financing activities

 

 

-

 

 

 

(6,897

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,897

)

Net cash provided by (used in) financing activities

 

 

-

 

 

 

4,459,450

 

 

 

(1,714

)

 

 

(2,651

)

 

 

-

 

 

 

4,455,085

 

Net increase (decrease) in cash,

  cash equivalents and restricted cash

 

 

-

 

 

 

201,280

 

 

 

(7,544

)

 

 

(4,822

)

 

 

-

 

 

 

188,914

 

Cash, cash equivalents and restricted

  cash at beginning of period

 

 

-

 

 

 

105,665

 

 

 

10,798

 

 

 

28,652

 

 

 

-

 

 

 

145,115

 

Cash, cash equivalents and restricted

  cash at end of period

 

$

-

 

 

$

306,945

 

 

$

3,254

 

 

$

23,830

 

 

$

-

 

 

$

334,029

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

44


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Nine Months Ended September 30, 2018

(in thousands)

 

 

 

 

 

 

 

Nexstar

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Consolidated

 

 

 

Nexstar

 

 

Broadcasting

 

 

Mission

 

 

Guarantors

 

 

Eliminations

 

 

Company

 

Cash flows from operating activities

 

$

-

 

 

$

482,985

 

 

$

(2,063

)

 

$

6,292

 

 

$

-

 

 

$

487,214

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

-

 

 

 

(56,944

)

 

 

(1,356

)

 

 

(5,286

)

 

 

-

 

 

 

(63,586

)

Deposits and payments for acquisitions

 

 

-

 

 

 

(103,246

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(103,246

)

Spectrum repack reimbursements from the FCC

 

 

-

 

 

 

11,683

 

 

 

767

 

 

 

-

 

 

 

-

 

 

 

12,450

 

Proceeds from disposals of property and equipment

 

 

-

 

 

 

4,277

 

 

 

-

 

 

 

5

 

 

 

-

 

 

 

4,282

 

Other investing activities

 

 

-

 

 

 

812

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

812

 

Net cash used in investing activities

 

 

-

 

 

 

(143,418

)

 

 

(589

)

 

 

(5,281

)

 

 

-

 

 

 

(149,288

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from long-term debt

 

 

-

 

 

 

44,000

 

 

 

-

 

 

 

57,387

 

 

 

-

 

 

 

101,387

 

Repayments of long-term debt

 

 

-

 

 

 

(266,182

)

 

 

(1,735

)

 

 

(59,572

)

 

 

-

 

 

 

(327,489

)

Common stock dividends paid

 

 

(51,524

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(51,524

)

Purchase of treasury stock

 

 

(50,524

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(50,524

)

Inter-company payments

 

 

101,716

 

 

 

(101,716

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Proceeds from exercise of stock options

 

 

5,184

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,184

 

Cash paid for shares withheld for taxes

 

 

(4,852

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,852

)

Payments for capital lease obligations

 

 

-

 

 

 

(7,426

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,426

)

Other financing activities

 

 

-

 

 

 

(137

)

 

 

-

 

 

 

226

 

 

 

-

 

 

 

89

 

Net cash used in

  financing activities

 

 

-

 

 

 

(331,461

)

 

 

(1,735

)

 

 

(1,959

)

 

 

-

 

 

 

(335,155

)

Net increase (decrease) in cash,

  cash equivalents and restricted cash

 

 

-

 

 

 

8,106

 

 

 

(4,387

)

 

 

(948

)

 

 

-

 

 

 

2,771

 

Cash, cash equivalents and restricted

  cash at beginning of period

 

 

-

 

 

 

90,860

 

 

 

9,524

 

 

 

15,268

 

 

 

-

 

 

 

115,652

 

Cash, cash equivalents and restricted

  cash at end of period

 

$

-

 

 

$

98,966

 

 

$

5,137

 

 

$

14,320

 

 

$

-

 

 

$

118,423

 

 

 

 

 

45


Note 19:  Subsequent Events

Dividends

 

On October 25, 2019, Nexstar’s Board of Directors declared a quarterly cash dividend of $0.45 per share of its Class A common stock. The dividend is payable on November 22, 2019 to stockholders of record on November 8, 2019.

 

Acquisitions and Divestitures

 

On November 5, 2019, Nexstar entered into purchase and sale agreements with Fox Television Stations, LLC, a Delaware limited liability company and subsidiary of Fox Corporation (“Fox”), whereby Nexstar will purchase the Charlotte Fox Affiliate WJZY and MyNetworkTV Affiliate WMYT from Fox for approximately $45 million in cash, and will sell to Fox the Seattle Fox Affiliate KCPQ and MyNetworkTV Affiliate KZJO and the Milwaukee Fox Affiliate WITI for approximately $350 million in cash, subject to customary adjustments. The transaction is subject to FCC approval and other customary approvals and is expected to close in the first half of calendar year 2020.

 

 

 

46


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, 2018.

 

As used in this Quarterly Report on Form 10-Q and unless the context indicates otherwise, “Nexstar” refers to Nexstar Media Group, Inc. and its consolidated subsidiaries; “Nexstar Broadcasting” refers to Nexstar Broadcasting, Inc., our wholly-owned direct subsidiary; the “Company” refers to Nexstar and the variable interest entities 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 U.S. GAAP, we consolidate their financial position, results of operations and cash flows 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. Therefore, the following discussion of our financial position and results of operations includes the consolidated VIEs’ financial position and results of operations.

Executive Summary

2019 Highlights

 

 

During the third quarter of 2019, net revenue decreased by $29.4 million, or 4.2% compared to the same period in 2018. This was primarily due to a decrease in television advertising revenue from our legacy stations of $60.5 million primarily due to 2019 not being an election year, a $5.0 million decrease in the retransmission compensation of our legacy stations which includes the combined effect of the expiration of distribution agreements with AT&T/DirecTV on July 2, 2019 (and later renewed on August 29, 2019 at higher rates), contributions from other distribution contracts’ scheduled annual rate increases per subscriber and contributions from OVDs, a $13.4 million decrease in digital revenue of our legacy stations and entities primarily due to the combined effect of a decline in revenue from our social media advertising platform, marketplace changes which decreased select demand-side platform customer buying and organic growth in our local customer buying trends (increase in local revenue from our stations’ web and mobile sites and from other internet-based revenue). These decreases were partially offset by incremental revenue from acquisitions of $57.2 million, less decreases in revenue resulting from station divestitures of $8.2 million.

 

 

For each of the first three quarters of 2019, our Board of Directors declared and paid cash dividends of $0.45 per share of our outstanding Class A common stock, or total dividend payments of $62.1 million.

Acquisition and Dispositions

On September 19, 2019, we completed our previously announced Merger with Tribune. The Merger created the nation’s largest pure-play local broadcast television and digital company, with national coverage and reach to approximately 39% of U.S. television households (applying the FCC’s UHF discount). We believe the completion of the Merger is a significant step in our pursuit of strategic growth through accretive acquisition opportunities. As a result of the Merger, we acquired Tribune’s 31 full power television stations, net of divestitures, and one AM radio station in 23 markets. We also acquired WGN America, a national general entertainment cable network, a 31.3% ownership stake in TV Food Network and a portfolio of real estate assets.  Total considerations at closing included $4.2 billion in cash payments to stockholders of Tribune, $2.99 billion repayment of certain then-existing debt of Tribune, including premium and accrued interest, and $1.0 million in replacement awards of warrants. Substantially concurrently with the closing of the Merger, we sold the assets of 21 full power television stations in 16 markets to TEGNA, Inc., E.W. Scripps Company and Circle City Broadcasting I, Inc. The total consideration of these divestitures was approximately $1.36 billion (inclusive of preliminary working capital adjustments). These divestitures were previously agreed upon by Nexstar and Tribune to comply with the FCC’s local television ownership rule and the FCC’s national ownership cap and to facilitate DOJ approval of the Merger. Eight of the divested stations were previously owned by us and the remaining 13 were previously owned or operated by Tribune. We sold the stations previously owned or operated by Tribune for $1.008 billion in cash, including preliminary working capital adjustments. We sold the stations that we previously owned for $358.6 million in cash, including preliminary working capital adjustments. These divestitures resulted in a net gain on disposal of $96.6 million.

The cash consideration, the repayment of Tribune debt, including premium and accrued interest, and the related fees and expenses were funded through a combination of cash on hand of Nexstar and Tribune, proceeds from the divestitures, and new borrowings (see “Debt Transactions” below). See Note 3 – Acquisitions and Dispositions and Note 9 – Debt to our Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for additional information about the Merger and recently issued debt.

47


On November 5, 2019, we entered into purchase and sale agreements with Fox whereby Nexstar will purchase the Charlotte Fox Affiliate WJZY and MyNetworkTV Affiliate WMYT from Fox for approximately $45 million in cash, and will sell to Fox the Seattle Fox Affiliate KCPQ and MyNetworkTV Affiliate KZJO and the Milwaukee Fox Affiliate WITI for approximately $350 million in cash, subject to customary adjustments. The transaction is subject to FCC approval and other customary approvals and is expected to close in the first half of calendar year 2020.

 

Debt Transactions

 

Simultaneously with the closing of the Merger on September 19, 2019, the Company issued new term loans under new senior secured credit facilities, including (i) $675.0 million in new senior secured Term Loan A, issued at 99.31%, due 2024, (ii) $3.065 billion in new senior secured Term Loan B, issued at 99.21%, due 2026. The proceeds from these new term loans, together with Nexstar’s proceeds from the $1.120 billion 5.625% Notes due 2027, issued on July 3, 2019 at par, the net proceeds from certain station divestitures and cash on hand, were used to fund the Merger described above and the repayment of all then-existing Tribune debt, including premium and accrued interest, and to pay for related fees and expenses.

 

During the nine months ended September 30, 2019, we prepaid a total of $180.0 million in principal balance under certain of our term loans, funded by cash on hand.

 

 

During the nine months ended September 30, 2019, the Company repaid scheduled maturities of $35.4 million under its term loans.

 

Overview of Operations

As of September 30, 2019, we owned, operated, programmed or provided sales and other services to 197 full power television stations, including those owned by VIEs, and one AM radio station in 115 markets in the states of Alabama, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nevada, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, and Wisconsin. The stations are affiliates of ABC, NBC, FOX, CBS, The CW, MNTV, MY and other broadcast television networks. We also own WGN America, a national general entertainment cable network, a 31.3% ownership stake in TV Food Network and a portfolio of real estate assets. Through various local service agreements, we provided sales, programming and other services to 36 full power television stations owned by independent third parties (VIEs). See Note 2 - Variable Interest Entities to our Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for a discussion of the local service agreements we have with these independent third parties.  

We guarantee full payment of all obligations incurred under Mission’s, Marshall’s and Shield’s senior secured credit facilities in the event of their default. Mission is a guarantor of our senior secured credit facility, the 6.125% Notes, the 5.625% Notes due 2024, and the 5.625% Notes due 2027 but does not guarantee the 5.875% Notes. Marshall and Shield do not guarantee any debt within the group. 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 2021 and 2028) 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 in these entities because of (1) the local service agreements Nexstar has with their stations, (2) our guarantees of the obligations incurred under Mission’s, Marshall’s and Shield’s senior secured credit facilities, (3) our power over significant activities affecting the VIEs’ economic performance, including budgeting for advertising revenue, advertising sales and, in some cases, hiring and firing of sales force personnel and (4) purchase options granted by each VIE, exclusive of Marshall, which permit Nexstar to acquire the assets and assume the liabilities of each of the 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. Refer to Note 2 – Variable Interest Entities to our Condensed Consolidated Financial Statements in Part IV, Item 5(a) of this Annual Report on Form 10-K for additional information with respect to consolidated VIEs.

 


48


Regulatory Developments

As a television broadcaster, the Company is highly regulated, and its operations require that it retain or renew a variety of government approvals and comply with changing federal regulations. In 2016, the FCC reinstated a previously adopted rule providing that a television station licensee which sells more than 15 percent of the weekly advertising inventory of another television station in the same DMA is deemed to have an attributable ownership interest in that station. Parties to existing JSAs that were deemed attributable interests and did not comply with the FCC’s local television ownership rule were given until September 30, 2025 to come into compliance. In November 2017, the FCC adopted an order on reconsideration that eliminated the rule. That elimination became effective on February 7, 2018. On September 23, 2019, a federal court of appeals vacated the FCC’s November 2017 order on reconsideration, although the court’s opinion has not become effective and the FCC has stated its intention to seek further review of the decision. If the Company is ultimately required to amend or terminate its existing JSAs, the Company could have a reduction in revenue and increased costs if it is unable to successfully implement alternative arrangements that are as beneficial as the existing JSAs.

 

The FCC is in the process of repurposing a portion of the broadcast television spectrum for wireless broadband use. In an incentive auction which concluded in April 2017, certain television broadcasters accepted bids from the FCC to voluntarily relinquish their spectrum in exchange for consideration. Television stations that are not relinquishing their spectrum are being “repacked” into the frequency band still remaining for television broadcast use. In July 2017, the Company received $478.6 million in gross proceeds from the FCC for eight stations that now share a channel with another station, two that will move to a VHF channel and one that went off the air in November 2017. The station that went off the air is not expected to have a significant impact on our future financial results because it was located in a remote rural area of the country and the Company has other stations which serve the same area. The two stations moving to VHF channels must vacate their current channels by March 2020 and May 2020, respectively.

 

Sixty one (61) full power stations owned by Nexstar and 17 full power stations owned by VIEs have been assigned to new channels in the reduced post-auction television band and are required to construct and license the necessary technical modifications to operate on their new assigned channels on a rolling schedule ending in July 2020. Congress has allocated up to an industry-wide total of $2.75 billion to reimburse television broadcasters, MVPDs and other parties for costs reasonably incurred due to the repack. During the three and nine months ended September 30, 2019, the Company spent a total of $19.9 million and $56.3 million, respectively, in capital expenditures related to station repack which were recorded as assets under the property and equipment caption in the accompanying Condensed Consolidated Balance Sheets. During the three and nine months ended September 30, 2018, the Company spent a total of $6.6 million and $13.5 million, respectively, in capital expenditures related to station repack which were recorded as assets under the property and equipment caption in the accompanying Condensed Consolidated Balance Sheets. During the three and nine months ended September 30, 2019, the Company received $20.4 million and $54.0 million, respectively, in reimbursements from the FCC related to these expenditures which were recorded as operating income in the accompanying Condensed Consolidated Statements of Operations. During the three and nine months ended September 30, 2018, the Company received $5.4 million and $12.5 million, respectively, in reimbursements from the FCC related to these expenditures which were recorded as operating income in the accompanying Condensed Consolidated Statements of Operations. As of September 30, 2019, approximately $106.3 million of estimated remaining costs in connection with the station repack are expected to be incurred by the Company, some or all of which will be reimbursable. If the FCC fails to fully reimburse the Company’s repacking costs, the Company could have increased costs related to the repacking.

Seasonality

Advertising revenue is positively affected by national and regional political election campaigns and 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. In addition, advertising revenue is generally higher during even-numbered years, when state, congressional and presidential elections occur and when advertising airs during the Olympic Games. As 2019 is neither an election year nor an Olympic year, we expect a decrease in advertising revenues to be reported in 2019 compared to 2018.


49


Historical Performance

Revenue

The following table sets forth the amounts of the Company’s principal types of revenue (dollars in thousands) and each type of revenue as a percentage of total net revenue:

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

Local

 

$

208,338

 

 

 

31.4

 

 

$

189,423

 

 

 

27.3

 

 

$

595,783

 

 

 

30.7

 

 

$

581,251

 

 

 

29.5

 

National

 

 

81,875

 

 

 

12.3

 

 

 

71,623

 

 

 

10.3

 

 

 

213,885

 

 

 

11.0

 

 

 

210,301

 

 

 

10.7

 

Political

 

 

10,899

 

 

 

1.6

 

 

 

70,147

 

 

 

10.1

 

 

 

15,363

 

 

 

0.8

 

 

 

111,049

 

 

 

5.6

 

Retransmission compensation

 

 

294,808

 

 

 

44.4

 

 

 

284,319

 

 

 

41.0

 

 

 

923,050

 

 

 

47.6

 

 

 

836,533

 

 

 

42.5

 

Digital

 

 

58,137

 

 

 

8.8

 

 

 

69,312

 

 

 

10.0

 

 

 

167,209

 

 

 

8.6

 

 

 

196,115

 

 

 

10.0

 

Other

 

 

5,670

 

 

 

0.9

 

 

 

4,028

 

 

 

0.7

 

 

 

13,159

 

 

 

0.7

 

 

 

22,402

 

 

 

1.1

 

Trade revenue

 

 

3,848

 

 

 

0.6

 

 

 

4,163

 

 

 

0.6

 

 

 

10,785

 

 

 

0.6

 

 

 

11,023

 

 

 

0.6

 

Total net revenue

 

$

663,575

 

 

 

100.0

 

 

$

693,015

 

 

 

100.0

 

 

$

1,939,234

 

 

 

100.0

 

 

$

1,968,674

 

 

 

100.0

 

 

Results of Operations

The following table sets forth a summary of the Company’s operations (dollars in thousands) and each component of operating expense as a percentage of net revenue:

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Net revenue

 

$

663,575

 

 

 

100.0

 

 

$

693,015

 

 

 

100.0

 

 

$

1,939,234

 

 

 

100.0

 

 

$

1,968,674

 

 

 

100.0

 

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate expenses

 

 

63,252

 

 

 

9.5

 

 

 

27,734

 

 

 

4.0

 

 

 

125,838

 

 

 

6.5

 

 

 

81,461

 

 

 

4.1

 

 

Direct operating expenses,

  net of trade

 

 

318,043

 

 

 

47.9

 

 

 

281,318

 

 

 

40.6

 

 

 

899,637

 

 

 

46.4

 

 

 

826,997

 

 

 

42.0

 

 

Selling, general and administrative expenses, excluding corporate

 

 

119,831

 

 

 

18.1

 

 

 

112,563

 

 

 

16.2

 

 

 

343,663

 

 

 

17.7

 

 

 

339,644

 

 

 

17.3

 

 

Depreciation

 

 

29,363

 

 

 

4.4

 

 

 

27,673

 

 

 

4.0

 

 

 

84,890

 

 

 

4.4

 

 

 

78,577

 

 

 

4.0

 

 

Amortization of intangible assets

 

 

42,443

 

 

 

6.4

 

 

 

37,157

 

 

 

5.4

 

 

 

115,538

 

 

 

6.0

 

 

 

110,640

 

 

 

5.6

 

 

Amortization of broadcast rights

 

 

18,452

 

 

 

3.0

 

 

 

15,021

 

 

 

2.2

 

 

 

46,749

 

 

 

2.3

 

 

 

47,034

 

 

 

2.4

 

 

Trade expense

 

 

4,284

 

 

 

0.6

 

 

 

4,045

 

 

 

0.6

 

 

 

11,597

 

 

 

0.6

 

 

 

11,768

 

 

 

0.6

 

 

Reimbursement from the FCC related to station repack

 

 

(20,417

)

 

 

(3.1

)

 

 

(5,389

)

 

 

(0.8

)

 

 

(54,020

)

 

 

(2.8

)

 

 

(12,450

)

 

 

(0.6

)

 

Goodwill and intangible assets impairment

 

 

63,317

 

 

 

9.5

 

 

 

-

 

 

 

-

 

 

 

63,317

 

 

 

3.3

 

 

 

-

 

 

 

-

 

 

Gain on disposal of stations, net

 

 

(96,608

)

 

 

(14.6

)

 

 

-

 

 

 

-

 

 

 

(96,608

)

 

 

(5.0

)

 

 

-

 

 

 

-

 

 

Total operating expenses

 

 

541,960

 

 

 

 

 

 

 

500,122

 

 

 

 

 

 

 

1,540,601

 

 

 

 

 

 

 

1,483,671

 

 

 

 

 

 

Income from operations

 

$

121,615

 

 

 

 

 

 

$

192,893

 

 

 

 

 

 

$

398,633

 

 

 

 

 

 

$

485,003

 

 

 

 

 

 

50


Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

 

The period-to-period comparability of our consolidated operating results is affected by acquisitions. For each quarter we present, our legacy stations include those stations that we owned or provided services to for the complete quarter in the current and prior years. For our annual and year to date presentations, we combine the legacy stations’ amounts presented in each quarter.

 

Revenue

 

Local advertising revenue was $208.3 million for the three months ended September 30, 2019, compared to $189.4 million for the same period in 2018, an increase of $18.9 million, or 10.0%. National advertising revenue was $81.9 million for the three months ended September 30, 2019, compared to $71.6 million for the same period in 2018, an increase of $10.3 million, or 14.3%. These increases were primarily attributable to incremental revenue from our acquisitions, mainly Tribune, of $33.7 million, partially offset by a decrease in revenue resulting from station divestitures of $2.7 million, and a decrease in our legacy stations’ local and national advertising revenue of $1.9 million. Our largest advertiser category, automobile, represented approximately 23% and 24% of our local and national advertising revenue for the three months ended September 30, 2019 and 2018, respectively. Overall, including the past results of acquired stations, automobile revenues decreased by 2% during the quarter. The other categories representing our top five were attorneys, which increased in 2019, and furniture, fast food/restaurants and medical/healthcare, which decreased in 2019.

Political advertising revenue was $10.9 million for the three months ended September 30, 2019, compared to $70.1 million for the same period in 2018, a decrease of $59.2 million, as 2019 is not an election year.

Retransmission compensation was $294.8 million for the three months ended September 30, 2019, compared to $284.3 million for the same period in 2018, an increase of $10.5 million, or 3.7%, primarily due to incremental revenue from our acquisitions, mainly Tribune, of $19.3 million, less decreases in revenue resulting from station divestitures of $3.8 million and a decrease in revenue of our legacy stations of $5.0 million taking into account the combined effect of the expiration of distribution agreements with AT&T/DirecTV on July 2, 2019 (and later renewed on August 29, 2019 at higher rates), contributions from other distribution contracts’ scheduled annual rate increases per subscriber and contributions from OVDs. Broadcasters currently deliver more than 30% of all television viewing audiences in a pay television household but are paid approximately 12-14% of the total cable programming fees. We anticipate continued increase of retransmission fees until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers.

Digital revenue, representing advertising revenue on our stations’ web and mobile sites and other internet-based revenue, was $58.1 million for the three months ended September 30, 2019, compared to $69.3 million for the same period in 2018, a decrease of $11.2 million, or 16.1%, primarily due to the combined effect of a decline in revenue from our social media advertising platform, decrease in revenue due to marketplace changes which affected select demand-side platform customer buying, and organic growth in our local customer buying trends (increase in local revenue from our stations’ web and mobile sites and from other internet-based revenue) of $13.4 million. This was partially offset by incremental revenue from our acquisitions of $2.5 million.

Operating Expenses

Corporate expenses, related to costs associated with the centralized management of our stations, were $63.3 million for the three months ended September 30, 2019, compared to $27.7 million for the same period in 2018, an increase of $35.5 million, or 128.1%. This was primarily attributable to an increase in legal and professional fees, severance, bonuses and other compensation costs of $33.8 million primarily associated with our acquisition of Tribune, and an increase in stock-based compensation related to new equity incentive awards of $3.1 million.

 

Direct operating expenses, consisting primarily of news, engineering, programming and station selling, general and administrative expenses (net of trade expense) were $437.9 million for the three months ended September 30, 2019, compared to $393.9 million for the same period in 2018, an increase of $44.0 million, or 11.2%. The increase was primarily due to expenses of acquired stations and entities, mainly Tribune, of $30.2 million, and an increase in our legacy stations’ programming costs of $20.5 million, primarily due to network affiliation renewals and annual increases in our network affiliation costs. These increases were partially offset by a decrease in operating expenses on a few of our digital products of $5.9 million due to marketplace changes and challenges that led to lower revenue. Additionally, our station divestitures decreased our expenses by $2.1 million.

Depreciation of property and equipment was $29.4 million for the three months ended September 30, 2019, compared to $27.7 million for the same period in 2018, an increase of $1.7 million, or 6.1%. The increase is primarily due to incremental depreciation related to assets acquired in the Merger of $1.0 million and increased depreciation from related station repacking activities.

Amortization of intangible assets was $42.4 million for the three months ended September 30, 2019, compared to $37.2 million for the same period in 2018, an increase of $5.3 million, or 14.2%. This was primarily due to increased amortization related to intangible assets acquired in the Merger of $6.5 million, partially offset by decreases in amortization from certain fully amortized assets.

51


Amortization of broadcast rights was $18.5 million for the three months ended September 30, 2019, compared to $15.0 million for the same period in 2018, an increase of $3.4 million, or 22.8%, primarily attributable to incremental amortization resulting from new broadcast rights acquired through the Merger of $4.8 million. Increase were partially offset by a reduction in amortization costs on our legacy stations due to renegotiation of certain film contracts which resulted in reduced distribution rates.

Certain of the Company’s stations were assigned to new channels (“repack”) in connection with the FCC’s process of repurposing a portion of the broadcast television spectrum for wireless broadband use. The Company’s stations are currently spending costs, mainly capital expenditures, to construct and license the necessary technical modifications to operate on their newly assigned channels and to vacate their former channels no later than July 13, 2020. Subject to fund limitations, the FCC reimburses television broadcasters, MVPDs and other parties for costs reasonably incurred due to the repack. During the three months ended September 30, 2019 and 2018, the Company received $20.4 million and $5.4 million, respectively, in reimbursements from the FCC which it recognized as operating income in the Condensed Consolidated Statements of Operations.

In the third quarter of 2019, we recorded a $63.3 million goodwill and intangible assets impairment on one of our digital reporting units due to deterioration in customer relationships, mainly driven by marketplace changes on select demand-side platform customers, that led to a long-term projected decrease in operating results.

In connection with the Merger, we sold the assets of 21 full power television stations in 16 markets, eight of which were previously owned by us and 13 of which were previously owned and operated by Tribune. We sold the Tribune stations for $1.008 billion in cash, including preliminary working capital adjustments, and we sold our stations for $358.6 million in cash, including preliminary working capital adjustments. These divestitures resulted in a net gain on disposal of $96.6 million.

Interest Expense, net

 

Interest expense, net was $93.2 million for the three months ended September 30, 2019, compared to $56.2 million for the same period in 2018, an increase of $37.0 million, or 65.7%, primarily due to interest on new borrowings of $22.2 million and one time fees associated with the financing of our merger with Tribune of $26.6 million. These increases were partially offset by interest income we earned from an escrow deposit during the third quarter of 2019 of $4.9 million and reduction in interest from our existing term loans due to principal prepayments and scheduled principal repayments.

Income Taxes

 

Income tax expense was $39.5 million for the three months ended September 30, 2019, compared to $35.2 million for the same period in 2018. The effective tax rates were 115.1% and 26.1% for each of the respective periods. In 2019, we recognized the tax impact of the divested stations previously owned by us (See Note 3) including an income tax expense of $12.8 million attributable to nondeductible goodwill written off as a result of the sale, or a 37.3% increase to the effective tax rate. The Company also recognized an impairment loss on one of its reporting units’ goodwill and intangible assets (See Note 4). The impairment loss related to goodwill is not deductible for purposes of calculating the tax provision resulting in an income tax expense of $11.1 million, or a 32.3% increase to the effective tax rate. Additionally, certain current year transaction and severance costs that we incurred in connection with our Merger with Tribune were also determined to be nondeductible for tax purposes. This resulted in an income tax expense of $6.0 million, or a 17.6% increase in the effective tax rate.

 


52


Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

 

The period-to-period comparability of our consolidated operating results is affected by acquisitions. For each quarter we present, our legacy stations include those stations that we owned or provided services to for the complete quarter in the current and prior years. For our annual and year to date presentations, we combine the legacy stations’ amounts presented in each quarter.

Revenue

Local advertising revenue was $595.8 million for the nine months ended September 30, 2019, compared to $581.3 million for the same period in 2018, an increase of $14.5 million, or 2.5%. National advertising revenue was $213.9 million for the nine months ended September 30, 2019, compared to $210.3 million for the same period in 2018, an increase of $3.6 million, or 1.7%. These increases were primarily attributable to incremental revenue from our acquisitions, mainly Tribune, of $36.3 million, less decreases in revenue resulting from station divestitures of $2.7 million. This was partially offset by a decrease in our legacy stations’ local and national advertising revenue of $15.5 million, including the impact of prior year revenue from the Olympics on our NBC affiliate stations. Our largest advertiser category, automobile, represented approximately 22% and 23% of our local and national advertising revenue for the nine months ended September 30, 2019 and 2018, respectively. Overall, including the past results of acquired stations, automobile revenues decreased by 3% in 2019. The other categories representing our top five were attorneys, which increased in 2019, and medical/healthcare, furniture and fast food/restaurants, which decreased in 2019.

Political advertising revenue was $15.4 million for the nine months ended September 30, 2019, compared to $111.0 million for the same period in 2018, a decrease of $95.7 million, as 2019 is not an election year.

Retransmission compensation was $923.1 million for the nine months ended September 30, 2019, compared to $836.5 million for the same period in 2018, an increase of $86.5 million, or 10.3%, primarily due to incremental revenue from our acquisitions, mainly Tribune, of $26.5 million, less decreases in revenue resulting from station divestitures of $3.8 million, and an increase in revenue from our legacy stations of $63.9 million taking into account the combined effect of scheduled annual escalation of rates per subscriber, the contributions from distribution agreements with OVDs and the expiration of distribution agreements with AT&T/DirecTV on July 2, 2019 which was later renewed on August 29, 2019 at higher rates. Broadcasters currently deliver more than 30% of all television viewing audiences in a pay television household but are paid approximately 12-14% of the total cable programming fees. We anticipate continued increase of retransmission fees until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers.

Digital revenue, representing advertising revenue on our stations’ web and mobile sites and other internet-based revenue, was $167.2 million for the nine months ended September 30, 2019, compared to $196.1 million for the same period in 2018, a decrease of $28.9 million, or 14.7%,  primarily due to the combined effect of a decline in revenue from our social media advertising platform, a decrease in revenue due to marketplace changes which affected select demand-side platform customer buying, and organic growth in our local customer buying trends (increase in local revenue from our stations’ web and mobile sites and from other internet-based revenue) of $31.2 million. This was partially offset by incremental revenue from our acquisitions of $2.5 million.

Other revenue was $13.2 million for the nine months ended September 30, 2019, compared to $22.4 million for the same period in 2018, a decrease of $9.2 million, primarily due to a $10.0 million one-time incentive payment from a wireless carrier specific to the spectrum repack (revenue recognized in the second quarter of 2018).

Operating Expenses

Corporate expenses, related to costs associated with the centralized management of our stations, were $125.8 million for the nine months ended September 30, 2019, compared to $81.5 million for the same period in 2018, an increase of $44.4 million, or 54.5%. This was primarily attributable to an increase in legal and professional fees, severance, bonuses and other compensation costs of $42.5 million primarily associated with the Merger, and an increase in stock-based compensation related to new equity incentive awards of $6.2 million. These increases were partially offset by a decrease in payroll expense of $1.1 million and a decrease in facility rental expenses of $1.3 million.

Direct operating expenses, consisting primarily of news, engineering, programming and station selling, general and administrative expenses (net of trade expense) were $1,243.3 million for the nine months ended September 30, 2019 compared to $1,166.6 million for the same period in 2018, an increase of $76.7 million, or 6.6%. The increase was primarily due to expenses of our acquired stations and entities, mainly Tribune, of $32.4 million, and an increase in our legacy stations’ programming costs of $67.8 million, primarily due to network affiliation renewals and annual increases in our network affiliation costs. These increases were partially offset by a decrease in operating expenses on a few of our digital products of $18.6 million due to marketplace changes and challenges that led to lower revenue. Additionally, our station divestitures decreased our expenses by $2.1 million.

53


Depreciation of property and equipment was $84.9 million for the nine months ended September 30, 2019, compared to $78.6 million for the same period in 2018, an increase of $6.3 million, or 8.0%. The increase was primarily due to station repacking activities and incremental depreciation from the Merger.

Amortization of intangible assets was flat at $115.5 million for the nine months ended September 30, 2019, compared to $110.6 million for the same period in 2018, an increase of $4.9 million, or 4.4%. This was primarily due to increased amortization related to intangible assets acquired in the Merger of $6.5 million, partially offset by decreases in amortization from certain fully amortized assets.

 

Amortization of broadcast rights was $46.7 million for the nine months ended September 30, 2019, compared to $47.0 million for the same period in 2018, a decrease of $0.3 million, or 0.6%, primarily attributable to renegotiation of certain film contracts which resulted in reduced distribution rates, partially offset by incremental amortization resulting from new broadcast rights acquired through our merger with Tribune.

Certain of the Company’s stations were repacked in connection with the FCC’s process of repurposing a portion of the broadcast television spectrum for wireless broadband use. The Company’s stations are currently spending costs, mainly capital expenditures, to construct and license the necessary technical modifications to operate on their newly assigned channels and to vacate their former channels no later than July 13, 2020. Subject to fund limitations, the FCC reimburses television broadcasters, MVPDs and other parties for costs reasonably incurred due to the repack. During the nine months ended September 30, 2019 and 2018, the Company received $54.0 million and $12.5 million, respectively, in reimbursements from the FCC which it recognized as operating income.

In the third quarter of 2019, we recorded a $63.3 million goodwill and intangible assets impairment on one of our digital reporting units due to deterioration in customer relationships, mainly driven by marketplace changes on select demand-side platform customers, that led to a long-term projected decrease in operating results.

In connection with the Merger, we sold the assets of 21 full power television stations in 16 markets, eight of which were previously owned by us and 13 of which were previously owned and operated by Tribune. We sold the Tribune stations for $1.008 billion in cash, including preliminary working capital adjustments, and we sold our stations for $358.6 million in cash, including preliminary working capital adjustments. These divestitures resulted in a net gain on disposal of $96.6 million.

Interest Expense, net

Interest expense, net was $197.5 million for the nine months ended September 30, 2019, compared to $167.1 million for the same period in 2018, an increase of $30.4 million, or 18.2%, primarily due to interest on new borrowings of $22.2 million and one time fees associated with the financing of our merger with Tribune of $26.6 million. These increases were partially offset by interest income we earned from an escrow deposit during the third quarter of 2019 of $4.9 million and reduction in interest from our existing term loans due to principal prepayments and scheduled prepayments.

Loss on Extinguishment of Debt

 

Loss on extinguishment of debt was $3.7 million for the nine months ended September 30, 2019, compared to $4.6 million for the same period in 2018, a decrease of $0.9 million, primarily due to the decrease in prepayments of principal balance on our term loans of $180.0 million for the nine months ending September 30, 2019 compared to $195.0 million in the same period in 2018.

 

Income Taxes

 

Income tax expense was $82.6 million for the nine months ended September 30, 2019, compared to $86.0 million for the same period in 2018. The effective tax rates were 40.3% and 26.9% for each of the respective periods. In 2019, we recognized the tax impact of the divested stations previously owned by us (See Note 3) including an income tax expense of $12.8 million attributable to nondeductible goodwill written off as a result of the sale, or a 6.3% increase to the effective tax rate. The Company also recognized an impairment loss on one of its reporting units’ goodwill and intangible assets (See Note 4). The impairment loss related to goodwill is not deductible for purposes of calculating the tax provision resulting in an income tax expense of $11.1 million, or a 5.4% increase to the effective tax rate. Additionally, certain current year transaction and severance costs that we incurred in connection with our Merger with Tribune were also determined to be nondeductible for tax purposes. This resulted in an income tax expense of $6.0 million, or a 2.9% increase in the effective tax rate.

 


54


Liquidity and Capital Resources

The Company is leveraged, which makes it vulnerable to changes in general economic conditions. The Company’s ability to meet the future cash requirements described below depends on its ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other conditions, many of which are beyond the Company’s control. Based on current operations and anticipated future growth, the Company believes that its available cash, anticipated cash flow from operations and available borrowings under the senior secured credit facilities will be sufficient to fund working capital, capital expenditure requirements, interest payments and scheduled debt principal payments for at least the next 12 months as of the filing date of this Quarterly Report on Form 10-Q. In order to meet future cash needs the Company may, from time to time, borrow under its existing senior secured credit facilities or issue other long- or short-term debt or equity, if the market and the terms of its existing debt arrangements permit. We will continue to evaluate the best use of our operating cash flow among our capital expenditures, acquisitions and debt reduction.

Overview

The following tables present summarized financial information management believes is helpful in evaluating the Company’s liquidity and capital resources (in thousands):

  

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

Net cash provided by operating activities

 

$

315,982

 

 

$

487,214

 

Net cash used in investing activities

 

 

(4,582,153

)

 

 

(149,288

)

Net cash provided by (used in) financing activities

 

 

4,455,085

 

 

 

(335,155

)

Net increase in cash, cash equivalents and restricted cash

 

$

188,914

 

 

$

2,771

 

Cash paid for interest

 

$

178,882

 

 

$

170,790

 

Income taxes paid, net of refunds

 

$

68,627

 

 

$

59,082

 

 

 

 

As of September 30,

 

 

As of December 31,

 

 

 

2019

 

 

2018

 

Cash, cash equivalents and restricted cash

 

$

334,029

 

 

$

145,115

 

Long-term debt, including current portion

 

 

8,535,837

 

 

 

3,981,003

 

Unused revolving loan commitments under senior secured credit facilities (1)

 

 

166,372

 

 

 

166,372

 

 

(1)

Based on covenant calculations as of September 30, 2019, all of the $166.4 million unused revolving loan commitments under the Company’s senior secured credit facilities were available for borrowing.

Cash Flows – Operating Activities

Net cash flows provided by operating activities decreased by $171.2 million during the nine months ended September 30, 2019, compared to the same period in 2018. This was primarily due to a decrease in revenue (excluding trade) of $29.2 million, our corporate, direct operating and selling, general and administrative expenses (excluding non-cash transactions) of $117.4 million, a use of cash from timing of payments to vendors of $12.1 million, an increase in cash paid for interest of $8.1 million and an increase in payments for income taxes of $9.5 million. These were partially offset by a source of cash resulting from timing of accounts receivable collections of $25.5 million.

Cash Flows – Investing Activities

Net cash flows used in investing activities increased by $4.433 billion during the nine months ended September 30, 2019, compared to the same period in 2018. In September 2019, we completed our acquisition of Tribune for a total cash purchase price of $7.187 billion, less $1.289 billion of cash acquired. Substantially concurrently with our Merger with Tribune, we sold the assets of 21 full power television stations in 16 markets for a cash consideration of $1.353 billion, including preliminary working capital adjustments and net of related fees. We also received $1.2 million in proceeds from disposal of assets.

In 2018, we completed an acquisition of a digital business for a cash purchase price of $97.0 million, less $11.2 million of cash acquired, and the first closing payments to acquire two new stations of $17.4 million. We also received $2.3 million in proceeds from disposal of assets.

Capital expenditures during the nine months ended September 30, 2019 increased by $46.6 million compared to the same period in 2018, primarily due to increased spending related to station repacking costs. These were partially offset by an increase in reimbursements from the FCC for station repack costs of $41.6 million.


55


Cash Flows – Financing Activities

Net cash flows provided by financing activities increased by $4.831 billion during the nine months ended September 30, 2019, compared to the same period in 2018.

 

In 2019, we issued $1.120 billion new 5.625% Notes due 2027, $670.4 million new Term Loan A (net of lender fees), and $3.041 billion new Term Loan B (net of lender fees) which were all used to partially fund the acquisition of Tribune and received $1.75 million in proceeds from exercise of stock options. The cash flows increases were partially offset by the repayment of term loan of $215.4 million, payments for debt financing costs of $70.7 million, payments of dividend to our common stockholders of $62.1 million ($0.45 per share each quarter), cash payment for taxes in exchange for shares of common stock withheld of $9.8 million, payment for noncontrolling interest of KHII of $6.4 million, payment for capital lease of $6.4 million and uses of cash from other financing activities of $6.9 million.

 

In 2018, we borrowed $44.0 million under our revolving credit facility to partially fund an acquisition of a digital business and received $5.2 million in proceeds from stock option exercises. Marshall also refinanced the outstanding principal balances under its term loan and revolving credit facility of $48.8 million and $3.0 million, respectively, funded by a new term loan of $51.8 million. Additionally, Marshall also borrowed a $5.6 million revolving loan. These cash flow increases were partially offset by repayments of outstanding obligations under our revolving credit facility of $44.0 million, repayments of outstanding principal balance under the Company’s term loans of $231.7 million, purchases of treasury stock of $50.5 million, payments of dividends to our common stockholders of $51.5 million ($0.375 per share each quarter), payments for capital lease obligations of $7.4 million and cash payment for taxes in exchange for shares of common stock withheld of $4.8 million.

Future Sources of Financing and Debt Service Requirements

 

As of September 30, 2019, the Company had total combined debt of $8.5 billion, net of financing costs and discounts, which represented 81.6% 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.

 

The following table summarizes the principal indebtedness scheduled to mature for the periods referenced as of September 30, 2019 (in thousands):

 

 

 

Total

 

 

Remainder of 2019

 

 

2020-2021

 

 

2022-2023

 

 

Thereafter

 

Nexstar senior secured credit facility

 

$

5,677,021

 

 

$

10,369

 

 

$

228,346

 

 

$

866,717

 

 

$

4,571,589

 

Mission senior secured credit facility

 

 

226,813

 

 

 

571

 

 

 

4,571

 

 

 

4,571

 

 

 

217,100

 

Marshall senior secured credit facility

 

 

49,453

 

 

 

49,453

 

 

 

-

 

 

 

-

 

 

 

-

 

Shield senior secured credit facility

 

 

22,098

 

 

 

287

 

 

 

2,755

 

 

 

19,056

 

 

 

-

 

5.875% senior unsecured notes due 2022

 

 

400,000

 

 

 

-

 

 

 

-

 

 

 

400,000

 

 

 

-

 

6.125% senior unsecured notes due 2022

 

 

275,000

 

 

 

-

 

 

 

-

 

 

 

275,000

 

 

 

-

 

5.625% senior unsecured notes due 2024

 

 

900,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

900,000

 

5.625% senior unsecured notes due 2027

 

 

1,120,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,120,000

 

 

 

$

8,670,385

 

 

$

60,680

 

 

$

235,672

 

 

$

1,565,344

 

 

$

6,808,689

 

 

The Company’s indebtedness includes term loans and revolving loans of Marshall (a consolidated VIE) with an aggregate principal balance of $50.0 million as of September 30, 2019. The Marshall debt is due in December of 2019 and is included in the current liabilities in the accompanying Condensed Consolidated Balance Sheets.

 

We make semiannual interest payments on the 6.125% Notes on February 15 and August 15 of each year. We make semiannual interest payments on the 5.625% Notes due 2024 on February 1 and August 1 of each year. We will make semiannual interest payments on the 5.625% Notes due 2027 on January 15 and July 15 of each year, commencing on January 15, 2020. We also make semiannual payments on the 5.875% Notes on May 15 and November 15 of each year. Interest payments on our, Mission’s, Marshall’s and Shield’s senior secured credit facilities are generally paid every one to three months and are payable based on the type of interest rate selected.

 


56


The terms of our, Mission’s, Marshall’s and Shield’s senior secured credit facilities, as well as the indentures governing the 6.125% Notes, the 5.625% Notes due 2024, the 5.625% Notes due 2027, and the 5.875% Notes, limit, but do not prohibit us, Mission, Marshall, or Shield, from incurring substantial amounts of additional debt in the future.

The Company does not have any rating downgrade triggers that would accelerate the maturity date of any 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 had $166.4 million of total unused revolving loan commitments under the senior secured credit facilities, all of which were available for borrowing, based on the covenant calculations as of September 30, 2019. The Company’s ability to access funds under its senior secured credit facilities depends, in part, on our 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.

 

On April 26, 2018, our Board of Directors approved a $200 million increase in our share repurchase authorization to repurchase our Class A common stock. As of September 30, 2019, the remaining available amount under the share repurchase authorization was $201.9 million, inclusive of the 2018 authorization and the remaining balance from prior authorization. There were no share repurchases of Nexstar’s Class A common stock during the three and nine months ended September 30, 2019. Share repurchases may be made from time to time in open market transactions, block trades or in private transactions. There is no minimum number of shares that Nexstar is required to repurchase and the repurchase program may be suspended or discontinued at any time without prior notice.

 

On October 25, 2019, Nexstar’s Board of Directors declared a quarterly cash dividend of $0.45 per share of its Class A common stock. The dividend is payable on November 22, 2019 to stockholders of record on November 8, 2019.

 

On November 5, 2019, the Company entered into purchase and sale agreements with Fox whereby Nexstar will purchase the Charlotte Fox Affiliate WJZY and MyNetworkTV Affiliate WMYT from Fox for approximately $45 million in cash, and will sell to Fox the Seattle Fox Affiliate KCPQ and MyNetworkTV Affiliate KZJO and the Milwaukee Fox Affiliate WITI for approximately $350 million in cash, subject to customary adjustments. The transaction is subject to FCC approval and other customary approvals and is expected to close in the first half of calendar year 2020. Nexstar intends to use the net cash proceeds from the transactions to reduce borrowings under its credit facilities.

Debt Covenants

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 our combined results. The Mission, Marshall and Shield amended credit agreements do not contain financial covenant ratio requirements but do provide for default in the event we do not comply with all covenants contained in our credit agreement. As of September 30, 2019, we were in compliance with our financial covenant. We believe Nexstar, Mission, Marshall, and Shield will be able to maintain compliance with all covenants contained in the credit agreements governing their senior secured facilities and the indentures governing the 6.125% Notes, the 5.625%, the Notes due 2024, the 5.625% Notes due 2027 and the 5.875% Notes for a period of at least the next 12 months from September 30, 2019.


57


Contractual Obligations

The following summarizes the Company’s contractual obligations as of September 30, 2019, and the effect such obligations are expected to have on the Company’s liquidity and cash flow in future periods (in thousands):

 

 

 

Total

 

 

Remainder of 2019

 

 

2020-2021

 

 

2022-2023

 

 

Thereafter

 

Recorded contractual obligations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nexstar senior secured credit facility

 

$

5,677,021

 

 

$

10,369

 

 

$

228,346

 

 

$

866,717

 

 

$

4,571,589

 

Mission senior secured credit facility

 

 

226,813

 

 

 

571

 

 

 

4,571

 

 

 

4,571

 

 

 

217,100

 

Marshall senior secured credit facility

 

 

49,453

 

 

 

49,453

 

 

 

-

 

 

 

-

 

 

 

-

 

Shield senior secured credit facility

 

 

22,098

 

 

 

287

 

 

 

2,755

 

 

 

19,056

 

 

 

-

 

5.875% senior unsecured notes due 2022

 

 

400,000

 

 

 

-

 

 

 

-

 

 

 

400,000

 

 

 

-

 

6.125% senior unsecured notes due 2022

 

 

275,000

 

 

 

-

 

 

 

-

 

 

 

275,000

 

 

 

-

 

5.625% senior unsecured notes due 2024

 

 

900,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

900,000

 

5.625% senior unsecured notes due 2027

 

 

1,120,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,120,000

 

Operating lease obligations

 

 

271,584

 

 

 

9,443

 

 

 

81,911

 

 

 

66,181

 

 

 

114,049

 

Finance lease obligations

 

 

22,905

 

 

 

444

 

 

 

3,638

 

 

 

3,621

 

 

 

15,202

 

Broadcast rights current cash commitments(1)

 

 

93,714

 

 

 

11,711

 

 

 

69,187

 

 

 

12,574

 

 

 

242

 

Other(2)(3)(4)

 

 

32,835

 

 

 

2,360

 

 

 

12,541

 

 

 

17,934

 

 

 

-

 

Unrecorded contractual obligations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network affiliation agreements

 

 

3,440,746

 

 

 

196,904

 

 

 

1,918,239

 

 

 

1,325,603

 

 

 

-

 

Cash interest on debt(5)

 

 

2,122,778

 

 

 

79,771

 

 

 

835,397

 

 

 

752,459

 

 

 

455,151

 

Executive employee contracts(6)

 

 

41,933

 

 

 

7,803

 

 

 

28,429

 

 

 

5,701

 

 

 

-

 

Broadcast rights future cash commitments(7)

 

 

117,869

 

 

 

15,326

 

 

 

75,719

 

 

 

24,607

 

 

 

2,217

 

Other

 

 

63,841

 

 

 

15,935

 

 

 

38,323

 

 

 

7,363

 

 

 

2,220

 

 

 

$

14,878,590

 

 

$

400,377

 

 

$

3,299,056

 

 

$

3,781,387

 

 

$

7,397,770

 

 

(1)

Future minimum payments for license agreements for which the license period has begun.

(2)

Excludes our liabilities, as of September 30, 2019, to surrender spectrum pursuant to the FCC’s incentive auction of $130.0 million. These liabilities represent our obligations to move two of our stations from UHF channels to VHF channels. Upon completion, the liabilities and the related spectrum assets will be derecognized with no expected cash flow impact.

(3)

As of September 30, 2019, we had $37.6 million of gross unrecognized tax benefits. This liability represents an estimate of tax positions that the Company has taken in its tax returns, which may ultimately not be sustained upon examination by the tax authorities. The resolution of these tax positions may not require cash settlement due to the existence of federal and state NOLs. As such, our contractual obligations table above excludes this liability.

(4)

As of September 30, 2019, we had $505.1 million and $27.3 million of funding obligations with respect to our pension benefit plans and other postretirement benefit plans, respectively, which are not included in the table above. See Note 8 to our Consolidated Financial Statements for further information regarding our funding obligations for these benefit plans.

(5)

Estimated interest payments due as if all debt outstanding as of September 30, 2019 remained outstanding until maturity, based on interest rates in effect at December 31, 2018.

(6)

Includes the employment contracts for all corporate executive employees and general managers of our stations and entities. We expect our contracts will be renewed or replaced with similar agreements upon their expiration. Amounts included in the table above assumed that contracts are not terminated prior to their expiration.

(7)

Future minimum payments for license agreements for which the license period has not commenced and no liability has been recorded.

No Off-Balance Sheet Arrangements

As of September 30, 2019, 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.

 

58


Critical Accounting Policies and 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 and the disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements and reported amounts of revenue and expenses during the period. On an ongoing basis, we evaluate our estimates, including those related to business acquisitions, goodwill and intangible assets, property and equipment, broadcast rights, retransmission compensation, pension and postretirement benefits, trade and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates.

 

Information with respect to the Company’s critical accounting policies 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, 2018. Management believes that as of September 30, 2019, there has been no material change to this information.

 

Leases

As discussed in Note 2, the Company adopted the FASB issued ASU No. 2016-02, Leases (Topic 842) and all related amendments. ASC 842 establishes a comprehensive new lease accounting model that requires the recording of assets and liabilities arising from leases on the balance sheet accompanied by enhanced qualitative and quantitative disclosures in the notes to the financial statements. The Company adopted this standard effective January 1, 2019 using the optional transition method. As a result, financial information for reporting periods beginning after January 1, 2019 is presented under ASC 842, while comparative financial information has not been adjusted and continues to be reported in accordance with the Company’s historical accounting policy for revenue recognition prior to the adoption of ASC 842. The standard had a material impact on the Company’s Condensed Consolidated Balance Sheets but did not impact its operating results, cash flows or equity. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while the accounting for finance leases remained substantially unchanged. Comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. See Note 2 to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for the Company’s updated accounting policy on leases.

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.

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: 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, 2018 and in our other filings with the Securities and Exchange Commission. 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.

59


 

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 Company’s exposure to market risk did not change materially since December 31, 2018.

The term loan borrowings at September 30, 2019 under the Company’s senior secured credit facilities bear interest rates ranging from 3.52% to 4.77%, which represented the base rate, or the LIBOR plus the applicable margin, as defined. Interest is payable in accordance with the credit agreements.

If LIBOR were to increase by 100 basis points, or one percentage point, from its September 30, 2019 level, the Company’s annual interest expense would increase and cash flow from operations would decrease by approximately $56.3 million, based on the outstanding balances of the Company’s senior secured credit facilities as of September 30, 2019. An increase of 50 basis points in LIBOR would result in a $28.1 million increase in annual interest expense and decrease in cash flow from operations. If LIBOR were to decrease either by 100 basis points or 50 basis points, the Company’s annual interest would decrease and cash flow from operations would increase by $56.3 million and $28.1 million, respectively. The 5.625% Notes due 2024, the 6.125% Notes, the 5.625% Notes due 2027 and the 5.875% Notes are fixed rate debt obligations and therefore are not exposed to market interest rate changes. As of September 30, 2019, the Company has no financial instruments in place to hedge against changes in the benchmark interest rates on its senior secured credit facilities.

Impact of Inflation

We believe that the Company’s results of operations are not affected by moderate changes in the inflation rate.

 

ITEM 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Nexstar’s management, with the participation of its President 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 President 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, at a reasonable assurance level, to ensure 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 President 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 September 30, 2019, 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.


60


 

PART II. OTHER INFORMATION

ITEM 1.

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 addition, our operations are involved from time to time as parties in various regulatory, environmental and other proceedings with governmental authorities and administrative agencies.

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 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. 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 DMA except in certain cases, and to implement certain antitrust compliance measures and to monitor and report on compliance with the consent decree.

Starting in July 2018, a series of plaintiffs filed putative class action lawsuits against the Defendants alleging that the Defendants 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 April 3, 2019; Defendants’ filed a Motion to Dismiss on September 5, 2019. Before the Court ruled on that motion, the Plaintiffs filed their Second Amended Consolidated Complaint on September 9, 2019. This complaint added additional defendants and allegations. The Defendants’ filed a Motion to Dismiss and Strike on October 8, 2019.  Nexstar and Tribune deny the allegations against them and will defend their advertising practices.

In connection with the Merger that was consummated on September 19, 2019, Nexstar assumed contingencies from certain legal proceedings, as follows:

Tribune Chapter 11 Reorganization and Confirmation Order Appeals

On December 31, 2012, the Debtors (including Tribune and certain of its direct and indirect subsidiaries) that had filed voluntary petitions for relief under Chapter 11 in the Bankruptcy Court on December 8, 2008 (or on October 12, 2009, in the case of Tribune CNLBC, LLC) emerged from Chapter 11. The Bankruptcy Court has entered final decrees that have collectively closed 106 of the Debtors’ Chapter 11 cases. The remaining Debtors’ Chapter 11 cases have not yet been closed by the Bankruptcy Court, and certain claims asserted against the Debtors in the Chapter 11 cases remain unresolved. As a result, we expect to continue to incur certain expenses pertaining to the Chapter 11 proceedings in future periods, which may be material. See Note 16 to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information.


61


Chicago Cubs Transactions

As further described in Note 14 to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q, on June 28, 2016, the IRS issued Tribune a Notice of Deficiency which presents the IRS’s position that the gain on the Chicago Cubs Transactions should have been included in Tribune’s 2009 taxable income. Accordingly, the IRS has proposed a $182 million tax and a $73 million gross valuation misstatement penalty. After-tax interest on the proposed tax and penalty through September 30, 2019 would be approximately $96 million. We continue to disagree with the IRS’s position that the transaction generated a taxable gain in 2009, the proposed penalty and the IRS’s calculation of the gain. During the third quarter of 2016, Tribune filed a petition in U.S. Tax Court to contest the IRS’s determination. The trial in U.S. Tax Court began on October 28, 2019. We continue to pursue resolution of this disputed tax matter with the IRS. If the gain on the Chicago Cubs Transactions is deemed to be taxable in 2009, we estimate that the federal and state income taxes, net of payments made prior to Tribune’s merger with Nexstar, would be approximately $225 million before interest and penalties. Any tax, interest and penalty due will be offset by tax payments made relating to this transaction subsequent to 2009. Tribune made approximately $147 million of tax payments prior to its merger with Nexstar. Tribune no longer owns any portion of CEV LLC. The Company has not recorded any tax reserves related to the Chicago Cubs Transactions.

Termination of Tribune and Sinclair Merger Agreement

On August 9, 2018, Tribune provided notification to Sinclair that it terminated, effective immediately, the Agreement and Plan of Merger, dated May 8, 2017, with Sinclair, which provided for the acquisition by Sinclair of all of the outstanding shares of the Tribune’s common stock. Additionally, on August 9, 2018, Tribune filed a complaint in the Delaware Court of Chancery against Sinclair, alleging that Sinclair willfully and materially breached its obligations under the merger agreement. The lawsuit seeks damages for all losses incurred as a result of Sinclair’s breach of contract under the merger agreement. On August 29, 2018, Sinclair filed an answer to Tribune’s complaint and a counterclaim. On September 18, 2018, Tribune filed an answer to Sinclair’s counterclaim. The Company believes that Sinclair’s counterclaim is without merit and intends to defend it vigorously.

On September 10, 2018, The Arbitrage Event-Driven Fund filed a putative securities class action complaint against Tribune and members of its then senior management in the United States District Court for the Northern District of Illinois. The putative securities class action complaint alleges that Tribune and its then senior management violated Sections 10(b) and 20(a) of the Exchange Act by misrepresenting and omitting material facts concerning Sinclair’s conduct during the Sinclair and Tribune merger approval process (as discussed above, the merger agreement has been terminated). On December 18, 2018, the court appointed The Arbitrage Event-Driven Fund and related entities as Lead Plaintiffs. On January 31, 2019, Lead Plaintiffs and two other named plaintiffs filed an amended complaint. The amended complaint eliminates the claim under Section 20(a) of the Exchange Act and adds a claim under Section 11 of the Securities Act related to a November 29, 2017 public offering of Tribune’s Class A Common Stock by Oaktree Tribune, L.P. The amended complaint also names certain members of the then Board of Directors of Tribune as defendants. The amended complaint also includes claims against Oaktree Tribune, L.P., Oaktree Capital Management, L.P. and Morgan Stanley & Co. LLC. The lawsuit is purportedly brought on behalf of purchasers of Tribune Class A Common Stock between November 29, 2017 and July 16, 2018, contemporaneously with Oaktree Tribune, L.P.’s sales in the November 29, 2017 public offering or pursuant or traceable to that offering. Plaintiffs seek damages in an amount to be determined at trial. On March 29, 2019, Tribune and the individual Tribune defendants filed a motion to dismiss the amended complaint, and that motion is now fully briefed before the Court. We believe this lawsuit is without merit and intend to defend it vigorously.

We do not believe that any other matters or proceedings presently pending will have a material adverse effect, individually or in the aggregate, on our consolidated financial position, results of operations or liquidity. However, legal matters and proceedings are inherently unpredictable and subject to significant uncertainties, some of which are beyond our control. As such, there can be no assurance that the final outcome of these matters and proceedings will not materially and adversely affect our consolidated financial position, results of operations or liquidity.

 


62


ITEM  1A.

Risk Factors

There are no material changes from the risk factors previously disclosed in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2018, except the following risk factors are added due to the Merger. As a result of the Merger, Tribune became a wholly owned subsidiary of Nexstar.

Risks Related to Our Operations

We may not be able to adequately protect the intellectual property and other proprietary rights we acquired through our merger with Tribune that are material to our business, or to defend successfully against intellectual property infringement claims by third parties.

Tribune’s business relies on a combination of patented and patent-pending technology, trademarks, trade names, copyrights, and other proprietary rights, as well as contractual arrangements, including licenses, to establish and protect its technology, intellectual property and brand names. We believe Tribune’s proprietary technology, trademarks and other intellectual property rights are important to our continued success and our competitive position. Any impairment of any such intellectual property or brands could adversely impact the results of our operations or financial condition.

We seek to limit the threat of content piracy; however, policing unauthorized use of our broadcasts, products and services and related intellectual property is often difficult and the steps taken by us may not in every case prevent infringement by unauthorized third parties. Developments in technology increase the threat of content piracy by making it easier to duplicate and widely distribute pirated material. Our use of contractual provisions, confidentiality procedures and agreements, and trademark, copyright, unfair competition, trade secret and other laws to protect our intellectual property rights and proprietary technology may not be adequate. Litigation may be necessary to enforce our intellectual property rights and protect our proprietary technology, or to defend against claims by third parties that the conduct of our businesses or our use of intellectual property infringes upon such third party’s intellectual property rights. Protection of our intellectual property rights is dependent on the scope and duration of our rights as defined by applicable laws in the U.S. and abroad and the manner in which those laws are construed. If those laws are drafted or interpreted in ways that limit the extent or duration of our rights, or if existing laws are changed, our ability to generate revenue from intellectual property may decrease, or the cost of obtaining and maintaining rights may increase. There can be no assurance that our efforts to enforce our rights and protect our products, services and intellectual property will be successful in preventing content piracy.

Furthermore, any intellectual property litigation or claims brought against us, whether or not meritorious, could result in substantial costs and diversion of our resources, and there can be no assurances that favorable final outcomes will be obtained in all cases. The terms of any settlement or judgment may require us to pay substantial amounts to the other party or cease exercising our rights in such intellectual property. In addition, we may have to seek a license to continue practices found to be in violation of a third party’s rights, which may not be available on reasonable terms, or at all. Our business, financial condition or results of operations may be adversely affected as a result.

We could be faced with additional tax-related liabilities if the IRS prevails on a proposed income tax audit adjustment related to Tribune’s past transaction. We may also face additional tax liabilities stemming from an ongoing tax audit of Tribune.

While we believe Tribune’s tax positions and reserves are reasonable, the resolutions of Tribune’s tax issues are unpredictable and could negatively impact our effective tax rate, net income or cash flows for the period or periods in question. Specifically, we may be faced with additional tax liabilities for the transactions contemplated by the agreement, dated August 21, 2009, between Tribune and CEV LLC, and its subsidiaries (collectively, “New Cubs LLC”), governing the contribution of certain assets and liabilities related to the business of the Chicago Cubs Major League Baseball franchise then owned by Tribune and its subsidiaries to New Cubs LLC, and related agreements thereto (the “Chicago Cubs Transactions”).

On June 28, 2016, the IRS issued to Tribune a Notice of Deficiency which presents the IRS’s position that the gain on the Chicago Cubs Transactions should have been included in Tribune’s 2009 taxable income. Accordingly, the IRS has proposed a $182 million tax and a $73 million gross valuation misstatement penalty. After-tax interest on the proposed tax and penalty through September 30, 2019 would be approximately $96 million. During the third quarter of 2016, Tribune filed a petition in U.S. Tax Court to contest the IRS’s determination. The trial in U.S. Tax Court began on October 28, 2019. We continue to pursue resolution of this disputed tax matter with the IRS and we continue to disagree with the IRS’s position that the transaction generated a taxable gain in 2009, the proposed penalty and the IRS’s calculation of the gain. The case went on trial on October 28, 2019. If the gain on the Chicago Cubs Transactions is deemed to be taxable in 2009, we estimate that the federal and state income taxes, net of payments made prior to the Merger, would be approximately $225 million before interest and penalties.

We did not recognize any tax reserves related to the Chicago Cubs Transactions upon the Merger on September 19, 2019.

63


We may incur significant costs to address contamination issues at sites owned, operated or used by Tribune.

We may incur costs in connection with the investigation or remediation of contamination at sites currently or formerly owned or operated by Tribune. Historical operations at these sites may have resulted in releases of hazardous materials to soil or groundwater. In addition, we could be required to contribute to cleanup costs at third-party waste disposal facilities at which wastes were disposed. In connection with Tribune’s spin-off of the assets (other than owned real estate and certain other assets) and certain liabilities related to Tribune’s then principal publishing operations to Tribune Publishing Company (“Tribune Publishing”), Tribune Publishing agreed to indemnify Tribune for costs related to certain identified contamination issues at sites owned, operated or used by Tribune Publishing. In turn, Tribune agreed to indemnify Tribune Publishing for certain other environmental liabilities. Environmental liabilities, including investigation and remediation obligations, could adversely affect our operating results or financial condition.

Adverse results from litigation or governmental investigations involving Tribune can impact our business practices and operating results.

Tribune is a party to various ongoing proceedings relating to Tribune’s merger agreement with Sinclair (which was terminated on August 9, 2018). Adverse outcomes in lawsuits or investigations may result in significant monetary damages or injunctive relief that may adversely affect our operating results or financial condition as well as our ability to conduct our businesses as they are presently being conducted.

The financial performance of equity method investments that we acquired through the Merger could adversely impact our results of operations.

We now have significant investments in businesses (primarily TV Food Network) that we account for under the equity method of accounting. Under the equity method, we report our proportionate share of the net earnings or losses of our equity affiliates in our Condensed Consolidated Statement of Operations under “Income (loss) on equity investments, net,” which contributes to our income from continuing operations before income taxes. From September 19, 2019 to September 30, 2019, our income from equity investments, net was $3.9 million. During this period, we have not received cash distribution from TV Food Network but we received cash distributions from our other equity investments of $1.6 million. If the earnings or losses of our equity investments are material in any year, those earnings or losses may have a material effect on our net income and financial condition and liquidity. We do not control the day-to-day operations of our equity method investments, nor have the ability to cause them to pay dividends or make other payments or advances to their stockholders, including us, and thus the management of these businesses could impact our results of operations. Additionally, these businesses are subject to laws, regulations, market conditions and other risks inherent in their operations. Any of these factors could adversely impact our results of operations and the value of our investment.

Adverse conditions in the capital markets and/or lower long-term interest rates, changes in actuarial assumptions and legislative or other regulatory actions could substantially increase our pension costs, placing greater liquidity needs upon our operations.

Tribune maintains four single-employer defined benefit plans, three of which are frozen and represents 98% of the total projected benefit obligation of Tribune defined benefit plans. These plans were underfunded by $418 million as of September 19, 2019, as measured in accordance with generally accepted accounting standards and using a discount rate of 3.12%.

The excess of benefit obligations over pension assets related to Tribune defined benefit plans is expected to give rise to required pension contributions over the next several years. Legislation enacted in 2012 and 2014 provided for changes in the discount rates used to calculate the projected benefit obligations for purposes of funding pension plans, which have an impact of applying a higher discount rate to determine the projected benefit obligations for funding than current long-term interest rates. Also, the earlier Pension Relief Act of 2010 provided relief in the funding requirements of such plans. However, even with the relief provided by these legislative rules, we expect future contributions to be required under these qualified pension plans. In addition, adverse conditions in the capital markets and/or lower long-term interest rates may result in greater annual contribution requirements, placing greater liquidity needs upon our operations.


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Risks Related to Tribune’s Emergence from Bankruptcy

We may not be able to settle, on a favorable basis or at all, unresolved claims filed in connection with Tribune’s Chapter 11 proceedings and resolve the appeals seeking to overturn the order confirming the Plan.

On December 31, 2012, the Debtors (including Tribune and certain of its direct and indirect subsidiaries) that had filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court on December 8, 2008 (or on October 12, 2009, in the case of Tribune CNLBC, LLC) emerged from Chapter 11. Certain of the Debtors’ Chapter 11 cases have not yet been closed by the Bankruptcy Court, and certain claims asserted against the Debtors in the Chapter 11 cases remain unresolved. As a result, we expect to continue to incur certain expenses pertaining to the Chapter 11 proceedings in future periods, which may be material.

On April 12, 2012, the Debtors, the official committee of unsecured creditors, and creditors under certain prepetition debt facilities filed the Plan with the Bankruptcy Court. On July 23, 2012, the Bankruptcy Court issued an order confirming the Plan (the “Confirmation Order”).

Several notices of appeal of the Confirmation Order were filed. The appellants sought, among other relief, to overturn the Confirmation Order and certain prior orders of the Bankruptcy Court, in whole or in part, including the settlement of certain causes of action relating to the Leveraged ESOP Transactions consummated by Tribune and the ESOP, EGI-TRB, L.L.C., a Delaware limited liability company wholly-owned by Sam Investment Trust (a trust established for the benefit of Samuel Zell and his family) (the “Zell Entity”) and Samuel Zell in 2007, that was embodied in the Plan. See Note 16 to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information.

More specifically, notices of appeal were filed on August 2, 2012 by Wilmington Trust Company (“WTC”), as successor indenture trustee for the Predecessor’s Exchangeable Subordinated Debentures due 2029 (“PHONES”), and on August 3, 2012 by the Zell Entity, Aurelius Capital Management LP, Law Debenture Trust Company of New York (n/k/a Delaware Trust Company) (“Delaware Trust Company”), successor trustee under the indenture for the Predecessor’s prepetition 6.61% debentures due 2027 and the 7.25% debentures due 2096, and Deutsche Bank Trust Company Americas, successor trustee under the indentures for the Predecessor’s prepetition medium-term notes due 2008, 4.875% notes due 2010, 5.25% notes due 2015, 7.25% debentures due 2013 and 7.5% debentures due 2023. WTC and the Zell Entity also sought to overturn determinations made by the Bankruptcy Court concerning the priority in right of payment of the PHONES and the subordinated promissory notes held by the Zell Entity and its permitted assignees, respectively.

As of September 30, 2019, each of the Confirmation Order appeals have been dismissed or otherwise resolved by a final order, with the exception of the appeals of Delaware Trust Company and Deutsche Bank. On July 30, 2018, the United States District Court for the District of Delaware (the “District Court”) entered an order affirming (i) the Bankruptcy Court’s judgment overruling Delaware Trust Company’s and Deutsche Bank’s objections to confirmation of the Plan and (ii) the Bankruptcy Court’s order confirming the Plan. Delaware Trust Company and Deutsche Bank appealed the District Court’s order to the United States Court of Appeals for the Third Circuit (the “Third Circuit”) on August 27, 2018. That appeal remains pending before the Third Circuit. If the remaining appellants succeed on their appeals, our financial condition may be adversely affected.

Risks Related to Tribune Publishing’s Spin-Off

If the Tribune Publishing spin-off does not qualify as a tax-free distribution under Section 355 of the IRC, including as a result of subsequent acquisitions of stock of Tribune or Tribune Publishing, then Tribune may be required to pay substantial U.S. federal income taxes.

On August 4, 2014, Tribune completed a separation transaction, resulting in the spin-off of the assets (other than owned real estate and certain other assets) and certain liabilities of the businesses primarily related to Tribune’s then principal publishing operations through a tax-free, pro rata dividend to its stockholders and warrantholders of 98.5% of the shares of common stock of Tribune Publishing. At that time, Tribune retained 1.5% of the outstanding common stock of Tribune Publishing. The publishing operations consisted of newspaper publishing and local news and information gathering functions that operated daily newspapers and related websites, as well as a number of ancillary businesses that leveraged certain of the assets of those businesses. As a result of the completion of the spin-off, Tribune Publishing operates the Publishing Business as an independent, publicly-traded company. On January 31, 2017, Tribune sold its remaining Tribune Publishing shares.


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In connection with the Tribune Publishing spin-off, Tribune received a private letter ruling (the “IRS Ruling”) from the IRS to the effect that the distribution and certain related transactions qualified as tax-free to Tribune, its then stockholders and warrantholders and Tribune Publishing for U.S. federal income tax purposes. Although a private letter ruling from the IRS generally is binding on the IRS, the IRS Ruling did not rule that the distribution satisfies every requirement for a tax-free distribution, and the parties have relied on the opinion of a special tax counsel, Debevoise & Plimpton LLP, to the effect that the distribution and certain related transactions qualified as tax-free to Tribune and its then stockholders and warrantholders. The opinion of the special tax counsel relied on the IRS Ruling as to matters covered by it.

The IRS Ruling and the opinion of the special tax counsel was based on, among other things, certain representations and assumptions as to factual matters made by Tribune and certain of its then stockholders. The failure of any factual representation or assumption to be true, correct and complete in all material respects could adversely affect the validity of the IRS Ruling or the opinion of the special tax counsel. An opinion of counsel represents counsel’s best legal judgment, is not binding on the IRS or the courts, and the IRS or the courts may not agree with the opinion. In addition, the IRS Ruling and the opinion of the special tax counsel were based on the current law then in effect, and cannot be relied upon if current law changes with retroactive effect.

If the Tribune Publishing spin-off is ultimately determined not to be tax free, we could be liable for the U.S. federal and state income taxes imposed as a result of the transaction. Furthermore, events subsequent to the distribution could cause us to recognize a taxable gain in connection therewith. Although Tribune Publishing is required to indemnify us against taxes on the distribution that arise after the distribution as a result of actions or failures to act by Tribune Publishing or any member thereof, Tribune Publishing’s failure to meet such obligations and our administrative and legal costs in enforcing such obligations may have a material adverse effect on our financial condition.

Federal and state fraudulent transfer laws and Delaware corporate law may permit a court to void the Tribune Publishing spin-off, which would adversely affect our financial condition and our results of operations.

In connection with the Tribune Publishing spin-off, Tribune undertook several corporate reorganization transactions which, along with the contribution of the Tribune Publishing business, the distribution of Tribune Publishing shares and the cash dividend that was paid to Tribune, may be subject to challenge under federal and state fraudulent conveyance and transfer laws as well as under Delaware corporate law, even though the Tribune Publishing spin-off has been completed. Under applicable laws, any transaction, contribution or distribution contemplated as part of the Tribune Publishing spin-off could be voided as a fraudulent transfer or conveyance if, among other things, the transferor received less than reasonably equivalent value or fair consideration in return for, and was insolvent or rendered insolvent by reason of, the transfer.

We cannot be certain as to the standards a court would use to determine whether or not any entity involved in the Tribune Publishing spin-off was insolvent at the relevant time. In general, however, a court would look at various facts and circumstances related to the entity in question, including evaluation of whether or not:

• the sum of its debts, including contingent and unliquidated liabilities, was greater than the fair market value of all of its assets;

• the present fair market value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

• it could pay its debts as they become due.

If a court were to find that any transaction, contribution or distribution involved in the Tribune Publishing spin-off was a fraudulent transfer or conveyance, the court could void the transaction, contribution or distribution. In addition, the distribution could also be voided if a court were to find that it is not a legal distribution or dividend under Delaware corporate law. The resulting complications, costs and expenses of either finding would materially adversely affect our financial condition and results of operations.


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We may be exposed to additional liabilities as a result of the Tribune Publishing spin-off.

The separation and distribution agreement Tribune entered into in connection with the Tribune Publishing spin-off sets forth the distribution of assets, liabilities, rights and obligations of Tribune and Tribune Publishing following the spin-off, and includes indemnification obligations for such liabilities and obligations. In addition, pursuant to the tax matters agreement, certain income tax liabilities and related responsibilities are allocated between, and indemnification obligations have been assumed by, each of Tribune and Tribune Publishing. In connection with the Tribune Publishing spin-off, Tribune also entered into an employee matters agreement, pursuant to which certain obligations with respect to employee benefit plans were allocated to Tribune Publishing. Each company will rely on the other company to satisfy its performance and payment obligations under these agreements. Certain of the liabilities to be assumed or indemnified by Tribune or Tribune Publishing under these agreements are legal or contractual liabilities of the other company. However, it could be later determined that Tribune must retain certain of the liabilities allocated to Tribune Publishing pursuant to these agreements, including with respect to certain multiemployer benefit plans, which amounts could be material. Furthermore, if Tribune Publishing were to breach or be unable to satisfy its material obligations under these agreements, including a failure to satisfy its indemnification obligations, Tribune could suffer operational difficulties or significant losses.

ITEM  2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

 

ITEM 3.

Defaults Upon Senior Securities

None.

 

ITEM  4.

Mine Safety Disclosures

None.

 

ITEM 5.

Other Information

The unaudited financial statements of Mission Broadcasting, Inc. as of September 30, 2019 and December 31, 2018 and for the three and nine months ended September 30, 2019 and 2018, as filed in Mission Broadcasting, Inc.’s Quarterly Report on Form 10-Q, are incorporated herein by reference.

 


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ITEM  6.

Exhibits

 

Exhibit No.

 

Description

4.1

 

Indenture, dated as of July 3, 2019, between Nexstar Escrow, Inc., as issuer, and Citibank, N.A., as trustee (Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Media Group, Inc. on July 3, 2019).

4.2

 

Form of Senior Note (included in Exhibit 4.1)

4.3

 

First Supplemental Indenture, dated as of September 19, 2019, by and among Nexstar Broadcasting, Inc., as issuer, the guarantors party thereto, and Citibank, N.A., as trustee (Incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Media Group, Inc. on September 19, 2019).

4.4

 

First Supplemental Indenture, dated as of September 19, 2019, by and among Nexstar Broadcasting, Inc., as issuer, the guarantors party thereto, and Wells Fargo, National Association, as trustee.*

4.5

 

Second Supplemental Indenture, dated as of September 19, 2019, by and among Nexstar Broadcasting, Inc., as issuer, the guarantors party thereto, and Wells Fargo, National Association, as trustee.*

4.6

 

Fifth Supplemental Indenture, dated as of September 19, 2019, by and among Nexstar Broadcasting, Inc., as issuer (as successor to LIN Television Corporation), the guarantors party thereto, and The Bank of New York Mellon, as trustee.*

31.1

  

Certification of Perry A. Sook pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2

  

Certification of Thomas E. Carter 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 Thomas E. Carter pursuant to 18 U.S.C. ss. 1350.*

101

 

The Company’s unaudited Condensed Consolidated Financial Statements and related Notes for the quarter ended September 30, 2019 from this Quarterly Report on Form 10-Q, formatted in iXBRL (Inline eXtensible Business Reporting Language).*

104

 

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

 

 

*

Filed herewith

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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:

 

President and Chief Executive Officer (Principal Executive Officer)

 

 

 

 

/S/ THOMAS E. CARTER

By:

 

Thomas E. Carter

Its:

 

Chief Financial Officer (Principal Accounting and Financial Officer)

Dated: November 8, 2019