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NEXSTAR MEDIA GROUP, INC. - Quarter Report: 2019 June (Form 10-Q)

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 June 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 it 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, 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 August 5, 2019, the registrant had 46,109,235 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 June 30, 2019 and December 31, 2018

  

1

 

 

 

 

 

 

  

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018

  

2

 

 

 

 

 

 

 

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

  

3

 

 

 

 

 

 

 

 

 

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

 

4

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018

 

5

 

 

 

 

 

 

  

Notes to Condensed Consolidated Financial Statements

  

6

 

 

 

 

 

ITEM 2.

  

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

  

35

 

 

 

 

 

ITEM 3.

  

Quantitative and Qualitative Disclosures About Market Risk

  

48

 

 

 

 

 

ITEM 4.

  

Controls and Procedures

  

48

 

 

 

 

 

PART II

  

OTHER INFORMATION

  

 

 

 

 

 

 

ITEM 1.

  

Legal Proceedings

  

49

 

 

 

 

 

ITEM 1A.

  

Risk Factors

  

49

 

 

 

 

 

ITEM 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

  

49

 

 

 

 

 

ITEM 3.

  

Defaults Upon Senior Securities

  

49

 

 

 

 

 

ITEM 4.

  

Mine Safety Disclosures

  

49

 

 

 

 

 

ITEM 5.

  

Other Information

  

49

 

 

 

 

 

ITEM 6.

  

Exhibits

  

50

 

 

 

 

 


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)

 

 

 

June 30,

 

 

December 31,

 

 

2019

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

79,924

 

 

$

145,115

 

Accounts receivable, net of allowance for doubtful accounts of $14,079 and $13,158, respectively

 

542,610

 

 

 

547,285

 

Spectrum asset

 

118,969

 

 

 

52,002

 

Prepaid expenses and other current assets

 

34,445

 

 

 

22,673

 

Total current assets

 

775,948

 

 

 

767,075

 

Property and equipment, net

 

748,647

 

 

 

731,538

 

Goodwill

 

2,166,410

 

 

 

2,167,954

 

FCC licenses

 

1,778,268

 

 

 

1,778,268

 

Other intangible assets, net

 

1,396,858

 

 

 

1,491,923

 

Other noncurrent assets, net

 

165,404

 

 

 

125,272

 

Total assets(1)

$

7,031,535

 

 

$

7,062,030

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current portion of debt

$

94,940

 

 

$

96,093

 

Accounts payable

 

70,392

 

 

 

67,828

 

Accrued expenses

 

140,993

 

 

 

143,850

 

Interest payable

 

34,397

 

 

 

32,047

 

Liability to surrender spectrum asset

 

129,964

 

 

 

52,002

 

Other current liabilities

 

23,361

 

 

 

12,352

 

Total current liabilities

 

494,047

 

 

 

404,172

 

Debt

 

3,689,778

 

 

 

3,884,910

 

Deferred tax liabilities

 

642,525

 

 

 

633,880

 

Other noncurrent liabilities

 

246,968

 

 

 

270,084

 

Total liabilities(1)

 

5,073,318

 

 

 

5,193,046

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

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

 

-

 

 

 

-

 

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

46,103,110 shares outstanding as of June 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 June 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 June 30, 2019 and December 31, 2018

 

-

 

 

 

-

 

Additional paid-in capital

 

1,337,057

 

 

 

1,351,931

 

Accumulated other comprehensive loss

 

(14,316

)

 

 

(14,316

)

Retained earnings

 

701,946

 

 

 

620,371

 

Treasury stock - at cost; 1,188,353 and 1,665,217 shares as of June 30, 2019 and December 31, 2018, respectively

 

(81,381

)

 

 

(105,685

)

Total Nexstar Media Group, Inc. stockholders' equity

 

1,943,779

 

 

 

1,852,774

 

Noncontrolling interests in consolidated variable interest entities

 

14,438

 

 

 

16,210

 

Total stockholders' equity

 

1,958,217

 

 

 

1,868,984

 

Total liabilities and stockholders' equity

$

7,031,535

 

 

$

7,062,030

 

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

 

(1)

The consolidated total assets as of June 30, 2019 and December 31, 2018 include certain assets held by consolidated variable interest entities of $395.2 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 June 30, 2019 and December 31, 2018 include certain liabilities of consolidated variable interest entities of $55.9 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

 

 

Six Months Ended

 

 

 

 

June 30,

 

 

June 30,

 

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

Net revenue

 

$

649,012

 

 

$

660,323

 

 

$

1,275,659

 

 

$

1,275,659

 

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses, excluding depreciation and amortization

 

 

296,044

 

 

 

274,439

 

 

 

588,907

 

 

 

553,402

 

 

Selling, general and administrative expenses, excluding depreciation and amortization

 

 

144,058

 

 

 

138,903

 

 

 

286,418

 

 

 

280,808

 

 

Amortization of broadcast rights

 

 

13,935

 

 

 

15,913

 

 

 

28,297

 

 

 

32,013

 

 

Amortization of intangible assets

 

 

36,357

 

 

 

37,181

 

 

 

73,095

 

 

 

73,483

 

 

Depreciation

 

 

28,090

 

 

 

25,090

 

 

 

55,527

 

 

 

50,904

 

 

Reimbursement from the FCC related to station repack

 

 

(19,416

)

 

 

(5,697

)

 

 

(33,603

)

 

 

(7,061

)

 

Total operating expenses

 

 

499,068

 

 

 

485,829

 

 

 

998,641

 

 

 

983,549

 

 

Income from operations

 

 

149,944

 

 

 

174,494

 

 

 

277,018

 

 

 

292,110

 

 

Interest expense, net

 

 

(51,363

)

 

 

(56,281

)

 

 

(104,320

)

 

 

(110,870

)

 

Loss on extinguishment of debt

 

 

(2,026

)

 

 

(481

)

 

 

(3,724

)

 

 

(1,486

)

 

Pension and other postretirement plans credit, net

 

 

1,400

 

 

 

2,950

 

 

 

2,800

 

 

 

5,900

 

 

Other expenses, net

 

 

(574

)

 

 

(812

)

 

 

(1,065

)

 

 

(939

)

 

Income before income taxes

 

 

97,381

 

 

 

119,870

 

 

 

170,709

 

 

 

184,715

 

 

Income tax expense

 

 

(26,646

)

 

 

(33,264

)

 

 

(43,087

)

 

 

(50,768

)

 

Net income

 

 

70,735

 

 

 

86,606

 

 

 

127,622

 

 

 

133,947

 

 

Net (income) loss attributable to noncontrolling interests

 

 

(2,733

)

 

 

1,126

 

 

 

(4,728

)

 

 

1,907

 

 

Net income attributable to Nexstar Media Group, Inc.

 

$

68,002

 

 

$

87,732

 

 

$

122,894

 

 

$

135,854

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.48

 

 

$

1.92

 

 

$

2.68

 

 

$

2.96

 

 

Diluted

 

$

1.42

 

 

$

1.86

 

 

$

2.57

 

 

$

2.87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

46,090

 

 

 

45,631

 

 

 

45,938

 

 

 

45,852

 

 

Diluted

 

 

47,971

 

 

 

47,147

 

 

 

47,878

 

 

 

47,414

 

 

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 June 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 March 31, 2019

 

 

47,291,463

 

 

 

 

$

473

 

 

 

 

$

1,332,612

 

 

 

 

$

654,682

 

 

 

 

$

(14,316

)

 

 

 

 

(1,275,092

)

 

 

 

$

(86,146

)

 

 

 

$

11,705

 

 

 

 

$

1,899,010

 

Stock-based compensation expense

 

 

-

 

 

 

 

 

-

 

 

 

 

 

9,691

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

9,691

 

Vesting of restricted stock units and

  exercise of stock options

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(5,246

)

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

86,739

 

 

 

 

 

4,765

 

 

 

 

 

-

 

 

 

 

 

(481

)

Dividends declared on common stock ($0.45 per share)

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(20,738

)

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(20,738

)

Net income

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

68,002

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

2,733

 

 

 

 

 

70,735

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of March 31, 2018

 

 

47,291,463

 

 

 

 

$

473

 

 

 

 

$

1,331,683

 

 

 

 

$

330,357

 

 

 

 

$

6,140

 

 

 

 

 

(1,556,977

)

 

 

 

$

(97,290

)

 

 

 

$

10,141

 

 

 

 

$

1,581,504

 

Purchase of treasury stock

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(250,000

)

 

 

 

 

(16,704

)

 

 

 

 

-

 

 

 

 

 

(16,704

)

Stock-based compensation expense

 

 

-

 

 

 

 

 

-

 

 

 

 

 

8,195

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

8,195

 

Vesting of restricted stock units and

  exercise of stock options

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(2,140

)

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

37,549

 

 

 

 

 

2,148

 

 

 

 

 

-

 

 

 

 

 

8

 

Dividends declared on common stock ($0.375 per share)

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(17,155

)

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(17,155

)

Net income (loss)

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

87,732

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

(1,126

)

 

 

 

 

86,606

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 Six Months Ended June 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

 

 

-

 

 

 

-

 

 

 

17,760

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

17,760

 

Vesting of restricted stock units and

  exercise of stock options

 

 

-

 

 

 

-

 

 

 

(32,634

)

 

 

-

 

 

 

-

 

 

 

476,864

 

 

 

24,304

 

 

 

-

 

 

 

(8,330

)

Dividends declared on common stock ($0.90 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(41,319

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(41,319

)

Purchase of noncontrolling interest from a consolidated variable interest entity

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,500

)

 

 

(6,500

)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

122,894

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,728

 

 

 

127,622

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

-

 

 

 

-

 

 

 

14,595

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14,595

 

Vesting of restricted stock units and

  exercise of stock options

 

 

-

 

 

 

-

 

 

 

(19,398

)

 

 

-

 

 

 

-

 

 

 

307,541

 

 

 

16,741

 

 

 

-

 

 

 

(2,657

)

Dividends declared on common stock ($0.75 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(34,443

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(34,443

)

Contribution from a

  noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

226

 

 

 

226

 

Net income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

135,854

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,907

)

 

 

133,947

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

127,622

 

 

$

133,947

 

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

 

 

 

 

 

 

 

 

Provision for bad debt

 

 

4,185

 

 

 

6,344

 

Amortization of broadcast rights

 

 

28,297

 

 

 

32,013

 

Depreciation of property and equipment

 

 

55,527

 

 

 

50,904

 

Amortization of intangible assets

 

 

73,095

 

 

 

73,483

 

Gain on asset disposal, net

 

 

(156

)

 

 

(391

)

Amortization of debt financing costs and debt discounts

 

 

3,867

 

 

 

5,236

 

Loss on extinguishment of debt

 

 

3,724

 

 

 

1,486

 

Stock-based compensation expense

 

 

17,760

 

 

 

14,595

 

Deferred income taxes

 

 

6,063

 

 

 

5,472

 

Payments for broadcast rights

 

 

(28,300

)

 

 

(32,787

)

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

 

 

-

 

 

 

1,233

 

Other noncash credits, net

 

 

(876

)

 

 

(1,249

)

Spectrum repack reimbursements

 

 

(33,603

)

 

 

(7,061

)

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

 

 

 

 

 

 

 

 

Accounts receivable

 

 

330

 

 

 

56,939

 

Prepaid expenses and other current assets

 

 

(345

)

 

 

1,504

 

Other noncurrent assets

 

 

(1,650

)

 

 

(719

)

Accounts payable, accrued expenses and other current liabilities

 

 

(3,079

)

 

 

(27,683

)

Taxes payable

 

 

(15,395

)

 

 

12,493

 

Interest payable

 

 

2,350

 

 

 

759

 

Other noncurrent liabilities

 

 

(3,016

)

 

 

(9,444

)

Net cash provided by operating activities

 

 

236,400

 

 

 

317,074

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(71,468

)

 

 

(36,390

)

Payments for acquisitions, net of cash acquired

 

 

-

 

 

 

(85,867

)

Spectrum repack reimbursements from the FCC

 

 

33,603

 

 

 

7,061

 

Proceeds from disposals of property and equipment

 

 

849

 

 

 

3,874

 

Proceeds received from settlement of corporate-owned life insurance policies

 

 

160

 

 

 

387

 

Net cash used in investing activities

 

 

(36,856

)

 

 

(110,935

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from long-term debt, net of debt discounts

 

 

-

 

 

 

95,759

 

Repayments of long-term debt

 

 

(203,608

)

 

 

(176,916

)

Payments for debt financing costs

 

 

(78

)

 

 

-

 

Contributions from a noncontrolling interest

 

 

-

 

 

 

226

 

Purchase of treasury stock

 

 

-

 

 

 

(50,524

)

Proceeds from exercise of stock options

 

 

1,483

 

 

 

2,059

 

Common stock dividends paid

 

 

(41,319

)

 

 

(34,443

)

Purchase of noncontrolling interest from a consolidated variable interest entity

 

 

(6,393

)

 

 

-

 

Cash paid for shares withheld for taxes

 

 

(9,813

)

 

 

(4,716

)

Payments for capital lease and capitalized software obligations

 

 

(5,007

)

 

 

(5,555

)

Net cash used in financing activities

 

 

(264,735

)

 

 

(174,110

)

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(65,191

)

 

 

32,029

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

145,115

 

 

 

115,652

 

Cash, cash equivalents and restricted cash at end of period

 

$

79,924

 

 

$

147,681

 

Supplemental information:

 

 

 

 

 

 

 

 

Interest paid

 

$

98,103

 

 

$

104,874

 

Income taxes paid, net of refunds

 

$

52,419

 

 

$

32,781

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Accrued purchases of property and equipment

 

$

23,087

 

 

$

14,376

 

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

 

$

114,203

 

 

$

-

 

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 six months ended June 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

 

1.  Organization and Business Operations

As of June 30, 2019, Nexstar Media Group, Inc. and its wholly-owned subsidiaries (“Nexstar”) owned, operated, programmed or provided sales and other services to 174 full power television stations, including those owned by consolidated variable interest entities (“VIEs”), in 100 markets in the states of Alabama, Arizona, 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, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia and Wisconsin. The stations are affiliates of ABC, NBC, FOX, CBS, The CW, MNTV and other broadcast television networks. 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.

 

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):

 

 

 

June 30, 2019

 

 

December 31, 2018

 

Current assets

 

$

24,375

 

 

$

20,898

 

Property and equipment, net

 

 

16,366

 

 

 

10,994

 

Goodwill

 

 

121,600

 

 

 

121,600

 

FCC licenses

 

 

151,808

 

 

 

157,658

 

Other intangible assets, net

 

 

71,936

 

 

 

75,513

 

Other noncurrent assets, net

 

 

9,121

 

 

 

3,652

 

Total assets

 

$

395,206

 

 

$

390,315

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

$

19,206

 

 

$

17,594

 

Noncurrent liabilities

 

 

36,741

 

 

 

27,542

 

Total liabilities

 

$

55,947

 

 

$

45,136

 

 

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 November 30, 2018, Nexstar entered into a definitive merger agreement with Tribune Media Company (“Tribune”) to acquire the latter’s outstanding equity and to settle the outstanding equity-based awards for $46.50 per share in a cash transaction. The estimated total purchase price is $7.165 billion, inclusive of the merger cash consideration, the refinancing of Tribune's outstanding debt and the assumption of outstanding warrants. The estimated purchase price amount does not take into account Tribune’s cash or pension liabilities to be acquired by Nexstar. The merger has been approved by the boards of directors of both companies and the stockholders of Tribune and is projected to close in the third quarter of 2019, subject to (i) Federal Communications Commission (the “FCC”) approval, (ii) other regulatory approvals (including expiration or termination of the waiting period applicable to the merger under the applicable Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) (the “HSR Approval”) and (iii) satisfaction of other customary closing conditions

6


On March 20, 2019, Nexstar entered into definitive asset purchase agreements to sell a total of nineteen stations in fifteen markets. Under the terms of the agreements, TEGNA Inc. (“TEGNA”) will acquire eleven stations in eight markets and The E.W. Scripps Company (“Scripps”) will acquire eight stations in seven markets. On April 8, 2019, Nexstar entered into a definitive asset purchase agreement to sell to Circle City Broadcasting I, Inc., a newly-formed minority-led broadcast company majority-owned by DuJuan McCoy, two stations in the Indianapolis, IN market. The total selling price of these proposed divestitures is $1.362 billion, subject to customary purchase price adjustments. The consummation of each divestiture transaction is subject to the satisfaction or waiver of certain customary conditions, including, among others, (i) the closing of the transactions contemplated by the merger agreement, (ii) FCC approval and HSR Approval and (iii) the absence of certain legal impediments to the consummation of such transaction. Nexstar intends to use the net proceeds from the divestitures to partially fund the merger, to refinance the existing indebtedness of Tribune, to pay related fees and expenses and for general corporate purposes.

On July 31, 2019, the Department of Justice (“DOJ”) provided its conditional approval of the proposed Nexstar and Tribune merger, but the FCC must still complete its public interest review of the transaction. See Note 3 for additional information on the proposed merger and divestitures and Note 16 for additional information on the DOJ conditional approval.

On November 30, 2018, Nexstar received committed financing up to a maximum of $6.4 billion from a group of commercial banks to provide the debt financing to consummate the merger and the refinancing of certain of the existing indebtedness of Tribune and related transactions.

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 deposited in a segregated escrow account and cannot be utilized until certain conditions are satisfied, including the completion of Nexstar’s merger with Tribune. See Note 16 for additional information.

The remainder of the committed financing includes $3.740 billion in term loans for which Nexstar recently completed the pricing. These term loans are projected to be issued simultaneously with the completion of Nexstar’s merger with Tribune.

 

Interim Financial Statements

The Condensed Consolidated Financial Statements as of June 30, 2019 and for the three and six months ended June 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 Condensed 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 7), (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 June 30, 2019 with its consolidated VIEs:

 

Service Agreements

 

Owner

 

Full Power Stations

TBA Only

 

Mission Broadcasting, Inc. (“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):

 

 

June 30, 2019

 

 

December 31, 2018

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,083

 

 

$

19,060

 

Accounts receivable, net

 

 

23,676

 

 

 

22,725

 

Prepaid expenses and other current assets

 

 

2,443

 

 

 

4,423

 

Total current assets

 

 

48,202

 

 

 

46,208

 

Property and equipment, net

 

 

38,533

 

 

 

30,861

 

Goodwill

 

 

154,787

 

 

 

154,787

 

FCC licenses

 

 

151,808

 

 

 

157,658

 

Other intangible assets, net

 

 

84,637

 

 

 

89,225

 

Other noncurrent assets, net

 

 

21,117

 

 

 

8,073

 

Total assets

 

$

499,084

 

 

$

486,812

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of debt

 

$

53,463

 

 

$

54,616

 

Interest payable

 

 

1,061

 

 

 

345

 

Other current liabilities

 

 

19,206

 

 

 

17,594

 

Total current liabilities

 

 

73,730

 

 

 

72,555

 

Debt

 

 

242,452

 

 

 

243,717

 

Other noncurrent liabilities

 

 

36,741

 

 

 

27,542

 

Total liabilities

 

$

352,923

 

 

$

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.

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.

9


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.

 

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

 

 

125,272

 

 

 

98,887

 

 

 

24,181

 

 

 

(9,781

)

 

 

(720

)

 

 

112,567

 

 

 

237,839

 

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

 

10


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, plant and equipment, other current liabilities and other noncurrent liabilities on the accompanying Condensed Consolidated Balance Sheets.

See Note 8 for additional disclosures on leases as of June 30, 2019.

Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, broadcast rights, accounts payable, broadcast rights payable and accrued expenses approximate fair value due to their short-term nature.

See Note 7 for fair value disclosures related to the Company’s debt.

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

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Weighted average shares outstanding - basic

 

 

46,090

 

 

 

45,631

 

 

 

45,938

 

 

 

45,852

 

Dilutive effect of equity incentive plan instruments

 

 

1,881

 

 

 

1,516

 

 

 

1,940

 

 

 

1,562

 

Weighted average shares outstanding - diluted

 

 

47,971

 

 

 

47,147

 

 

 

47,878

 

 

 

47,414

 

 

There were no anti-dilutive shares during each of the three months ended June 30, 2019 and 2018.

 

Stock options and restricted stock units to acquire a weighted average of 15,000 shares and 38,000 shares for the six months ended June 30, 2019 and 2018, respectively, of Class A common stock were excluded from the computation of diluted earnings per share because their impact would have been anti-dilutive.

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.

11


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 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.

 

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 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 Consolidated Financial Statements.


12


3.  Acquisitions and Dispositions

 

Merger Agreement with Tribune

 

On November 30, 2018, Nexstar entered into a definitive merger agreement with Tribune to acquire Tribune’s outstanding equity for $46.50 per share in a cash transaction. All equity-based awards of Tribune that are outstanding prior to the merger will vest in full and will be converted into the right to receive the same cash consideration. All outstanding warrants of Tribune will be assumed by Nexstar. The estimated total purchase price is $7.165 billion, inclusive of the merger cash consideration, the refinancing of Tribune's outstanding debt and the assumption of outstanding warrants. The estimated purchase price amount does not take into account Tribune’s cash or pension liabilities to be acquired by Nexstar. Tribune shareholders will be entitled to additional cash consideration of approximately $0.30 per share per month if the transaction has not closed by August 31, 2019, pro-rated for partial months and less an adjustment for any dividends declared on or after September 1, 2019. Transaction costs relating to this proposed acquisition, including legal and professional fees of $3.5 million, were expensed as incurred during the three months ended June 30, 2019 and $7.3 million during the six months ended June 30, 2019. No costs were incurred during the three and six months ended June 30, 2018.

 

The merger agreement contains certain termination rights for both Nexstar and Tribune. If the merger agreement is terminated in connection with Tribune entering into a definitive agreement with respect to a superior proposal, as well as under certain other circumstances, the termination fee payable by Tribune to Nexstar will be $135 million. Either party may terminate the merger agreement if the merger is not consummated on or before an end date of November 30, 2019, with an automatic extension to February 29, 2020, if necessary, to obtain regulatory approval under circumstances specified in the merger agreement.

 

The merger has been approved by the boards of directors of both companies and the stockholders of Tribune and is projected to close in the third quarter of 2019, subject to (i) FCC approval, (ii) other regulatory approvals (including HSR Approval) and (iii) satisfaction of other customary closing conditions. The merger does not require approval of our stockholders and is not subject to any financing contingency. On November 30, 2018, Nexstar received committed financing up to a maximum of $6.4 billion from a group of commercial banks to provide the debt financing to consummate the merger and the refinancing of certain of the existing indebtedness of Tribune and related transactions. 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 deposited in a segregated escrow account and cannot be utilized until certain conditions are satisfied, including the completion of Nexstar’s merger with Tribune. See Note 16 for additional information.

 

Tribune is a diversified media and entertainment business, which currently owns or provides certain services to 44 local television stations (including two satellite television stations) and one AM radio station.

 

In connection with obtaining the HSR Approval and the FCC approval, Nexstar agreed to divest one or more television stations in certain Designated Market Areas (“DMAs”). On March 20, 2019, Nexstar entered into definitive asset purchase agreements to sell a total of nineteen stations in fifteen markets. Under the terms of the agreements, TEGNA will acquire eleven stations in eight markets and Scripps will acquire eight stations in seven markets. Under the terms of the asset purchase agreement with TEGNA, TEGNA will acquire substantially all of the assets of television broadcast stations (i) WTIC and WCCT in Hartford-New Haven, CT; (ii) WPMT in Harrisburg-Lancaster-Lebanon-York, PA; (iii) WATN and WLMT in Memphis, TN; (iv) WNEP in Wilkes Barre-Scranton, PA; (v) WOI and KCWI in Des Moines-Ames, IA; (vi) WZDX in Huntsville-Decatur (Florence), AL; (vii) WQAD in Davenport, IA-Rock Island-Moline, IL; and (viii) KFSM in Ft. Smith-Fayetteville-Springdale-Rogers, AR for cash consideration of $740 million (subject to customary purchase price adjustments).

 

Under the terms of the asset purchase agreement with Scripps, Scripps will acquire substantially all of the assets of television broadcast stations (i) KASW in Phoenix (Prescott), AZ; (ii) WPIX in New York, NY, (iii) WSFL-TV in Miami-Ft. Lauderdale, FL, (iv) KSTU in Salt Lake City, UT, (v) WTKR and WGNT in Norfolk-Portsmouth-Newport News, VA, (vi) WXMI in Grand Rapids-Kalamazoo-Battle Creek, MI and (vii) WTVR-TV in Richmond-Petersburg, VA for cash consideration of $580 million (subject to customary purchase price adjustments). WPIX, WSFL and KASW are being divested in order to bring Nexstar into compliance with the FCC’s national ownership cap.

 

On April 8, 2019, Nexstar entered into a definitive asset purchase agreement to sell to Circle City Broadcasting I, Inc., a newly-formed minority-led broadcast company majority-owned by DuJuan McCoy, two stations in Indianapolis, IN -- WISH, the CW affiliate, and WNDY, the MyNetwork TV affiliate -- for $42.5 million in cash.

 

The consummation of each divestiture transaction is subject to the satisfaction or waiver of certain customary conditions, including, among others, (i) the closing of the transactions contemplated by the Tribune Merger Agreement, (ii) the receipt of approval from the FCC and the expiration or termination of any waiting period applicable to such transaction under the HSR Act, as amended, and (iii) the absence of certain legal impediments to the consummation of such transaction.

 

13


The consummation of each divestiture transaction is expected to occur simultaneously with the closing of the merger.

 

On July 31, 2019, the DOJ provided its conditional approval of the proposed Nexstar and Tribune merger, but the FCC must still complete its public interest review of the transaction. See Note 3 for additional information on the proposed merger and divestitures and Note 16 for additional information on the DOJ conditional approval.

 

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 at KHII of $6.5 million. As of January 28, 2019, the TBA was terminated and KHII is no longer a VIE.

 

4.  Intangible Assets and Goodwill

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

 

 

 

Estimated

 

June 30, 2019

 

 

December 31, 2018

 

 

 

useful life,

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

in years

 

Gross

 

 

Amortization

 

 

Net

 

 

Gross

 

 

Amortization

 

 

Net

 

Network affiliation agreements

 

15

 

$

1,977,825

 

 

$

(632,497

)

 

$

1,345,328

 

 

$

1,977,825

 

 

$

(575,860

)

 

$

1,401,965

 

Other definite-lived intangible assets

 

1-20

 

 

222,767

 

 

 

(171,237

)

 

 

51,530

 

 

 

246,137

 

 

 

(156,179

)

 

 

89,958

 

Other intangible assets

 

 

 

$

2,200,592

 

 

$

(803,734

)

 

$

1,396,858

 

 

$

2,223,962

 

 

$

(732,039

)

 

$

1,491,923

 

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

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 June 30, 2019 (in thousands):

Remainder of 2019

 

$

71,470

 

2020

 

 

131,376

 

2021

 

 

116,075

 

2022

 

 

113,645

 

2023

 

 

112,353

 

2024

 

 

111,837

 

Thereafter

 

 

740,102

 

 

 

$

1,396,858

 

 

The amounts recorded to goodwill and FCC licenses were as follows (in thousands):

 

 

 

Goodwill

 

 

FCC Licenses

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

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

 

Measurement period adjustments

 

 

(1,544

)

 

 

-

 

 

 

(1,544

)

 

 

-

 

 

 

-

 

 

 

-

 

Balances as of June 30, 2019

 

$

2,256,230

 

 

$

(89,820

)

 

$

2,166,410

 

 

$

1,825,678

 

 

$

(47,410

)

 

$

1,778,268

 

 

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.

 

14


Indefinite-lived intangible assets are not subject to amortization but are tested for impairment annually or whenever events or changes in circumstances indicate that such assets might be impaired. During the three and six months ended June 30, 2019, the Company did not identify any events that would trigger impairment assessment.

 

5.  Accrued Expenses

Accrued expenses consisted of the following (in thousands):

 

 

June 30, 2019

 

 

December 31, 2018

 

Compensation and related taxes

 

$

46,369

 

 

$

44,269

 

Network affiliation fees

 

 

19,977

 

 

 

21,916

 

Capital expenditures

 

 

21,657

 

 

 

18,273

 

Other

 

 

52,990

 

 

 

59,392

 

 

 

$

140,993

 

 

$

143,850

 

 

 

6.  Retirement and Postretirement Plans

 

The Company has a funded, qualified non-contributory defined benefit retirement plan which covers certain employees and former employees. Additionally, there are non-contributory unfunded supplemental executive retirement and ERISA excess plans which supplement the coverage available to certain executives. All of these retirement plans are frozen. The Company also has a 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 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.

 

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

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2019

 

 

June 30, 2019

 

 

 

Pension Benefits

 

 

OPEB

 

 

Pension Benefits

 

 

OPEB

 

Interest cost

 

$

3,875

 

 

$

200

 

 

$

7,750

 

 

$

400

 

Expected return on plan assets

 

 

(5,475

)

 

 

-

 

 

 

(10,950

)

 

 

-

 

Net periodic benefit (income) cost

 

$

(1,600

)

 

$

200

 

 

$

(3,200

)

 

$

400

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2018

 

 

June 30, 2018

 

 

 

Pension Benefits

 

 

OPEB

 

 

Pension Benefits

 

 

OPEB

 

Interest cost

 

$

3,350

 

 

$

150

 

 

$

6,700

 

 

$

300

 

Expected return on plan assets

 

 

(6,450

)

 

 

-

 

 

 

(12,900

)

 

 

-

 

Net periodic benefit (income) cost

 

$

(3,100

)

 

$

150

 

 

$

(6,200

)

 

$

300

 

 

The Company has no required contributions to its qualified retirement plan in 2019. Payments to fund the obligations under the remaining plans are considered contributions and are expected to be less than $6.0 million in 2019.

15


 

7.  Debt

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

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Term loans, net of financing costs and discount of $30,598 and $37,679, respectively

 

$

2,210,962

 

 

$

2,407,490

 

Revolving loans

 

 

5,628

 

 

 

5,628

 

6.125% Senior unsecured notes due 2022, net of financing costs of $1,327 and $1,556,

  respectively

 

 

273,673

 

 

 

273,444

 

5.875% Senior unsecured notes due 2022, plus premium of $5,342 and $6,233, respectively

 

 

405,342

 

 

 

406,233

 

5.625% Senior unsecured notes due 2024, net of financing costs of $10,887 and $11,792,

  respectively

 

 

889,113

 

 

 

888,208

 

 

 

 

3,784,718

 

 

 

3,981,003

 

Less: current portion

 

 

(94,940

)

 

 

(96,093

)

 

 

$

3,689,778

 

 

$

3,884,910

 

 

2019 Transactions

Nexstar prepaid a total of $100.0 million and $180.0 million in principal balance under certain of its term loans, during the three and six months ended June 30, 2019, respectively, funded by cash on hand. This resulted in loss on extinguishments of debt of $2.0 million and $3.7 million for the three and six months ended June 30, 2019, respectively, representing write-offs of unamortized debt financing costs and discounts.

During the six months ended June 30, 2019, the Company also repaid scheduled maturities of $23.6 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 June 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 June 30, 2019, the Company was in compliance with its financial covenants.

On November 30, 2018, Nexstar received committed financing up to a maximum of $6.4 billion from a group of commercial banks to provide the debt financing to consummate its proposed merger with Tribune and the refinancing of certain of the existing indebtedness of Tribune and related transactions. The merger has been approved by the boards of directors of both companies and is projected to close in the third quarter of 2019, subject to FCC approval, other regulatory approvals and satisfaction of other customary closing conditions.

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 deposited in a segregated escrow account and cannot be utilized until certain conditions are satisfied, including the completion of Nexstar’s merger with Tribune. See Note 16 for additional information.

The remainder of the committed financing includes $3.740 billion in term loans for which Nexstar recently completed the pricing. These term loans are projected to be issued simultaneously with the completion of Nexstar’s merger with Tribune.

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% senior secured notes due 2022 (the “6.125% Notes”) and the 5.625% senior unsecured notes due 2024 (the “5.625% Notes due 2024”) but does not guarantee Nexstar’s 5.875% Senior Notes due 2022 (the “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.

16


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 June 30, 2019, the Company was in compliance with its financial covenants.

Fair Value of Debt

The aggregate carrying amounts and estimated fair values of the Company’s debt were as follows (in thousands):

 

 

 

June 30, 2019

 

 

December 31, 2018

 

 

 

Carrying

 

 

Fair

 

 

Carrying

 

 

Fair

 

 

 

Amount

 

 

Value

 

 

Amount

 

 

Value

 

Term loans(1)

 

$

2,210,962

 

 

$

2,215,451

 

 

$

2,407,490

 

 

$

2,389,439

 

Revolving loans(1)

 

 

5,628

 

 

 

5,593

 

 

 

5,628

 

 

 

5,528

 

6.125% Senior unsecured notes(2)

 

 

273,673

 

 

 

278,438

 

 

 

273,444

 

 

 

275,688

 

5.875% Senior unsecured notes(2)

 

 

405,342

 

 

 

409,000

 

 

 

406,233

 

 

 

397,000

 

5.625% Senior unsecured notes(2)

 

 

889,113

 

 

 

929,250

 

 

 

888,208

 

 

 

837,000

 

 

(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.

 

8.  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 year 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 June 30, 2019 were not material and are excluded.

 

(In thousands)

 

Balance Sheet Classification

 

June 30, 2019

 

Operating leases

 

 

 

 

 

 

Operating lease right-of-use assets, net

 

Other noncurrent assets, net

 

$

104,729

 

   Current lease liabilities

 

Other current liabilities

 

$

16,691

 

   Noncurrent lease liabilities

 

Other noncurrent liabilities

 

$

73,634

 

 

 

 

 

 

 

 

Finance leases

 

 

 

 

 

 

Finance lease right-of-use assets, net of accumulated depreciation of $4,332

 

Property, plant and equipment, net

 

$

8,733

 

   Current lease liabilities

 

Other current liabilities

 

$

852

 

   Noncurrent lease liabilities

 

Other noncurrent liabilities

 

$

15,647

 

 

Operating lease expenses for the three and six months ended June 30, 2019 were $5.3 million and $10.8 million, respectively, inclusive of immaterial short-term and variable lease costs. During the three and six months ended June 30, 2019, $3.1 million and  $6.2 million, respectively, of operating lease costs are included in direct operating expenses, excluding depreciation and amortization. $2.3 million and $4.7 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 six months ended June 30, 2019 were not material.

17


Other information related to leases as of June 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

 

$

11,232

 

   Operating cash flows from finance leases

 

 

478

 

   Financing cash flows from finance leases

 

 

404

 

Weighted Average Remaining Lease Term

 

 

 

 

Operating leases

 

7.1 years

 

Finance leases

 

12.0 years

 

Weighted Average Discount Rate

 

 

 

 

Operating leases

 

 

5.2

%

Finance leases

 

 

5.7

%

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

 

 

 

Operating Leases

 

 

Finance Leases

 

Remainder of 2019

 

$

10,771

 

 

$

884

 

2020

 

 

19,657

 

 

 

1,795

 

2021

 

 

16,682

 

 

 

1,843

 

2022

 

 

13,759

 

 

 

1,803

 

2023

 

 

11,203

 

 

 

1,818

 

Thereafter

 

 

37,677

 

 

 

15,202

 

   Total future minimum lease payments

 

 

109,749

 

 

 

23,345

 

Less imputed interest

 

 

(19,422

)

 

 

(6,846

)

Total

 

$

90,327

 

 

$

16,499

 

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.

 

9.  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 June 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 six months ended June 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.


18


 

10.  Stock-Based Compensation Plans

 

During the six months ended June 30, 2019, Nexstar granted 340,500 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 $33.0 million and $9.6 million, respectively. The time-based restricted stock units vest over a range of three to four years from the date of the award. The performance-based restricted stock units vest over a range of three to four years from the date of the award, subject to the achievement of pre-established Company performance metrics. There were no additional stock-based compensation awards granted during the three months ended June 30, 2019.

During the three months ended June 30, 2018, Nexstar granted 224,000 restricted stock units to employees with an estimated fair value of $13.6 million. During the six months ended June 30, 2018, Nexstar granted 651,500 restricted stock units to employees and non-employee directors with an estimated fair value of $42.2 million. The restricted stock units vest over a range of three to four years from the date of the award.

On June 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 June 30, 2019.

 

11.  Income Taxes

 

Income tax expense was $26.6 million for the three months ended June 30, 2019 compared to $33.3 million for the same period in 2018. The effective tax rates were consistent at 27.4% and 27.8% for each of the respective periods.

 

Income tax expense was $43.1 million for the six months ended June 30, 2019, compared to $50.8 million for the same period in 2018. The effective tax rates were 25.2% and 27.5% for each of the respective periods. The decrease in the effective tax rate between the two periods was primarily due to a $4.5 million increase in the deduction for excess tax benefits related to stock-based compensation, resulting in a decrease in the effective tax rate of 2.7%.

 

12.  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 operations, 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.

19


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 denied a mandamus petition which had sought to stay their effectiveness. The Reconsideration Order remains subject to appeals before that court.

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 June 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.

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 September 2019 and May 2020, respectively.

 

20


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 have been 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 newly 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 six months ended June 30, 2019, the Company spent a total of $22.6 million and $36.4 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 six months ended June 30, 2018, the Company spent a total of $1.5 million and $6.9 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 six months ended June 30, 2019, the Company received $19.4 million and $33.6 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 six months ended June 30, 2018, the Company received $5.7 million and $7.1 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 repacking on its business.

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 June 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.


21


 

13.  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 June 30, 2019, Mission had a maximum commitment of $226.9 million under its senior secured credit facility, of which $223.9 million of debt was outstanding, Marshall had used all of its commitment and had outstanding debt obligations of $50.0 million and Shield had also used all of its commitment and had outstanding obligations of $22.1 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.

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

On March 16, 2018, a group of companies including Nexstar (the “Defendants”) received a Civil Investigative Demand from the Antitrust Division of the DOJ regarding an investigation into the exchange of certain information related to the pacing of sales related to the same period in the prior year among broadcast stations in some DMAs in alleged violation of federal antitrust law. Other Defendants entered into a proposed consent decree (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 DOJ filed an amended complaint adding Nexstar to the consent decree on December 13, 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 any claims by the government of alleged violations of federal antitrust laws in connection with the alleged information sharing, does not include any financial penalty. Pursuant to the consent decree, Nexstar has 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.

On July 30, 2018, Clay, Massey & Associates, PC filed an antitrust class action complaint in the U.S. District Court for the Northern District of Illinois on behalf of itself and all others similarly situated against Gray Television, Inc., Hearst Communications, Nexstar Media Group, Inc., Tegna Inc., Tribune Media Company and Sinclair Broadcast Group, Inc. The lawsuit alleges unlawful coordination between broadcast television station owners to artificially increase prices of television spot advertisements in violation of Section 1 of the Sherman Act (15 U.S.C. §1). Nexstar has since been named in 15 similar complaints.       

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 June 5, 2019. Nexstar denies the allegations against it and will defend its advertising practices as necessary.

22


 

14.  Segment Data

 

The Company evaluates the performance of its operating segments based on net revenue and operating income. The Company’s broadcast segment includes 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. The other activities of the Company include corporate functions, digital businesses and eliminations.

 

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

 

Three Months Ended June 30, 2019

 

Broadcast

 

 

Other

 

 

Consolidated

 

Net revenue

 

$

621,895

 

 

$

27,117

 

 

$

649,012

 

Depreciation

 

 

25,422

 

 

 

2,668

 

 

 

28,090

 

Amortization of intangible assets

 

 

30,770

 

 

 

5,587

 

 

 

36,357

 

Income (loss) from operations

 

 

192,093

 

 

 

(42,149

)

 

 

149,944

 

 

Three Months Ended June 30, 2018

 

Broadcast

 

 

Other

 

 

Consolidated

 

Net revenue

 

$

622,888

 

 

$

37,435

 

 

$

660,323

 

Depreciation

 

 

20,961

 

 

 

4,129

 

 

 

25,090

 

Amortization of intangible assets

 

 

31,876

 

 

 

5,305

 

 

 

37,181

 

Income (loss) from operations

 

 

207,543

 

 

 

(33,049

)

 

 

174,494

 

 

Six Months Ended June 30, 2019

 

Broadcast

 

 

Other

 

 

Consolidated

 

Net revenue

 

$

1,221,078

 

 

$

54,581

 

 

$

1,275,659

 

Depreciation

 

 

49,049

 

 

 

6,478

 

 

 

55,527

 

Amortization of intangible assets

 

 

61,615

 

 

 

11,480

 

 

 

73,095

 

Income (loss) from operations

 

 

360,593

 

 

 

(83,575

)

 

 

277,018

 

 

Six Months Ended June 30, 2018

 

Broadcast

 

 

Other

 

 

Consolidated

 

Net revenue

 

$

1,199,873

 

 

$

75,786

 

 

$

1,275,659

 

Depreciation

 

 

42,361

 

 

 

8,543

 

 

 

50,904

 

Amortization of intangible assets

 

 

63,929

 

 

 

9,554

 

 

 

73,483

 

Income (loss) from operations

 

 

360,110

 

 

 

(68,000

)

 

 

292,110

 

 

As of June 30, 2019

 

Broadcast

 

 

Other

 

 

Consolidated

 

Goodwill

 

$

2,123,935

 

 

$

42,475

 

 

$

2,166,410

 

Assets

 

 

6,673,782

 

 

 

357,753

 

 

 

7,031,535

 

 

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

 

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

Three Months Ended June 30, 2019

 

Broadcast

 

 

 

 

Other

 

 

Consolidated

 

Local

 

$

199,279

 

 

 

 

$

-

 

 

$

199,279

 

National

 

 

68,332

 

 

 

 

 

-

 

 

 

68,332

 

Political

 

 

3,157

 

 

 

 

 

-

 

 

 

3,157

 

Retransmission compensation

 

 

314,268

 

 

 

 

 

-

 

 

 

314,268

 

Digital

 

 

29,135

 

 

 

 

 

27,102

 

 

 

56,237

 

Other

 

 

3,610

 

 

 

 

 

15

 

 

 

3,625

 

Trade revenue

 

 

4,114

 

 

 

 

 

-

 

 

 

4,114

 

Total revenue

 

$

621,895

 

 

 

 

$

27,117

 

 

$

649,012

 

23


 

Three Months Ended June 30, 2018

 

Broadcast

 

 

Other

 

 

Consolidated

 

Local

 

$

198,560

 

 

$

-

 

 

$

198,560

 

National

 

 

71,633

 

 

 

-

 

 

 

71,633

 

Political

 

 

31,636

 

 

 

-

 

 

 

31,636

 

Retransmission compensation

 

 

276,273

 

 

 

-

 

 

 

276,273

 

Digital

 

 

26,578

 

 

 

37,421

 

 

 

63,999

 

Other

 

 

14,191

 

 

 

14

 

 

 

14,205

 

Trade revenue

 

 

4,017

 

 

 

-

 

 

 

4,017

 

Total revenue

 

$

622,888

 

 

$

37,435

 

 

$

660,323

 

 

Six Months Ended June 30, 2019

 

Broadcast

 

 

Other

 

 

Consolidated

 

Local

 

$

387,445

 

 

$

-

 

 

$

387,445

 

National

 

 

132,010

 

 

 

-

 

 

 

132,010

 

Political

 

 

4,464

 

 

 

-

 

 

 

4,464

 

Retransmission compensation

 

 

628,242

 

 

 

-

 

 

 

628,242

 

Digital

 

 

54,521

 

 

 

54,551

 

 

 

109,072

 

Other

 

 

7,459

 

 

 

30

 

 

 

7,489

 

Trade revenue

 

 

6,937

 

 

 

-

 

 

 

6,937

 

Total revenue

 

$

1,221,078

 

 

$

54,581

 

 

$

1,275,659

 

 

Six Months Ended June 30, 2018

 

Broadcast

 

 

 

 

Other

 

 

Consolidated

 

Local

 

$

391,828

 

 

 

 

$

-

 

 

$

391,828

 

National

 

 

138,678

 

 

 

 

 

-

 

 

 

138,678

 

Political

 

 

40,902

 

 

 

 

 

-

 

 

 

40,902

 

Retransmission compensation

 

 

552,214

 

 

 

 

 

-

 

 

 

552,214

 

Digital

 

 

51,046

 

 

 

 

 

75,757

 

 

 

126,803

 

Other

 

 

18,345

 

 

 

 

 

29

 

 

 

18,374

 

Trade revenue

 

 

6,860

 

 

 

 

 

-

 

 

 

6,860

 

Total revenue

 

$

1,199,873

 

 

 

 

$

75,786

 

 

$

1,275,659

 

 

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.


24


 

15.  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, Inc. (“Nexstar Broadcasting”), a wholly-owned subsidiary of Nexstar and issuer of 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 2024 and the 6.125% Notes are fully and unconditionally guaranteed, jointly and severally, by Nexstar and Mission, 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, subject to certain customary release provisions. These notes are not guaranteed by any other entities.

 

The indentures governing 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.

25


CONDENSED CONSOLIDATING BALANCE SHEET

As of June 30, 2019

(in thousands)

 

 

 

 

 

 

 

Nexstar

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Consolidated

 

 

 

Nexstar

 

 

Broadcasting

 

 

Mission

 

 

Guarantors

 

 

Eliminations

 

 

Company

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

-

 

 

$

51,415

 

 

$

8,970

 

 

$

19,539

 

 

$

-

 

 

$

79,924

 

Accounts receivable

 

 

-

 

 

 

477,869

 

 

 

14,236

 

 

 

50,505

 

 

 

-

 

 

 

542,610

 

Amounts due from consolidated entities

 

 

-

 

 

 

85,500

 

 

 

69,274

 

 

 

-

 

 

 

(154,774

)

 

 

-

 

Spectrum asset

 

 

-

 

 

 

118,969

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

118,969

 

Other current assets

 

 

-

 

 

 

30,961

 

 

 

621

 

 

 

2,863

 

 

 

-

 

 

 

34,445

 

Total current assets

 

 

-

 

 

 

764,714

 

 

 

93,101

 

 

 

72,907

 

 

 

(154,774

)

 

 

775,948

 

Investments in subsidiaries

 

 

1,254,638

 

 

 

108,884

 

 

 

-

 

 

 

-

 

 

 

(1,363,522

)

 

 

-

 

Amounts due from consolidated entities

 

 

747,610

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(747,610

)

 

 

-

 

Property and equipment, net

 

 

-

 

 

 

707,551

 

 

 

22,167

 

 

 

19,004

 

 

 

(75

)

 

 

748,647

 

Goodwill

 

 

-

 

 

 

1,969,148

 

 

 

33,187

 

 

 

164,075

 

 

 

-

 

 

 

2,166,410

 

FCC licenses

 

 

-

 

 

 

1,626,460

 

 

 

43,102

 

 

 

108,706

 

 

 

-

 

 

 

1,778,268

 

Other intangible assets, net

 

 

-

 

 

 

1,283,949

 

 

 

12,701

 

 

 

100,208

 

 

 

-

 

 

 

1,396,858

 

Other noncurrent assets

 

 

725

 

 

 

136,108

 

 

 

11,996

 

 

 

16,575

 

 

 

-

 

 

 

165,404

 

Total assets

 

$

2,002,973

 

 

$

6,596,814

 

 

$

216,254

 

 

$

481,475

 

 

$

(2,265,981

)

 

$

7,031,535

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of debt

 

$

-

 

 

$

41,477

 

 

$

2,285

 

 

$

51,178

 

 

$

-

 

 

$

94,940

 

Accounts payable

 

 

-

 

 

 

55,764

 

 

 

1,386

 

 

 

13,242

 

 

 

-

 

 

 

70,392

 

Amounts due to consolidated entities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

154,774

 

 

 

(154,774

)

 

 

-

 

Liability to surrender spectrum asset

 

 

-

 

 

 

129,964

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

129,964

 

Other current liabilities

 

 

258

 

 

 

163,542

 

 

 

6,766

 

 

 

28,185

 

 

 

-

 

 

 

198,751

 

Total current liabilities

 

 

258

 

 

 

390,747

 

 

 

10,437

 

 

 

247,379

 

 

 

(154,774

)

 

 

494,047

 

Debt

 

 

-

 

 

 

3,447,326

 

 

 

221,560

 

 

 

20,892

 

 

 

-

 

 

 

3,689,778

 

Amounts due to consolidated entities

 

 

-

 

 

 

522,075

 

 

 

-

 

 

 

225,745

 

 

 

(747,820

)

 

 

-

 

Deferred tax liabilities

 

 

-

 

 

 

634,624

 

 

 

-

 

 

 

7,901

 

 

 

-

 

 

 

642,525

 

Other noncurrent liabilities

 

 

-

 

 

 

217,855

 

 

 

10,842

 

 

 

18,271

 

 

 

-

 

 

 

246,968

 

Total liabilities

 

 

258

 

 

 

5,212,627

 

 

 

242,839

 

 

 

520,188

 

 

 

(902,594

)

 

 

5,073,318

 

Total Nexstar Media Group, Inc.

  stockholders' equity (deficit)

 

 

2,002,715

 

 

 

1,384,187

 

 

 

(26,585

)

 

 

(53,151

)

 

 

(1,363,387

)

 

 

1,943,779

 

Noncontrolling interests in consolidated

  variable interest entities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14,438

 

 

 

-

 

 

 

14,438

 

Total liabilities and stockholders' equity (deficit)

 

$

2,002,973

 

 

$

6,596,814

 

 

$

216,254

 

 

$

481,475

 

 

$

(2,265,981

)

 

$

7,031,535

 

 

26


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

 

Other intangible assets, net

 

 

-

 

 

 

1,365,159

 

 

 

13,712

 

 

 

113,052

 

 

 

-

 

 

 

1,491,923

 

Other noncurrent assets

 

 

-

 

 

 

116,660

 

 

 

4,421

 

 

 

4,191

 

 

 

-

 

 

 

125,272

 

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

 

 

27


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended June 30, 2019

(in thousands)

 

 

 

 

 

 

 

Nexstar

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Consolidated

 

 

 

Nexstar

 

 

Broadcasting

 

 

Mission

 

 

Guarantors

 

 

Eliminations

 

 

Company

 

Net broadcast revenue (including trade)

 

$

-

 

 

$

590,978

 

 

$

18,910

 

 

$

39,124

 

 

$

-

 

 

$

649,012

 

Revenue between consolidated entities

 

 

8,564

 

 

 

22,425

 

 

 

8,262

 

 

 

19,279

 

 

 

(58,530

)

 

 

-

 

Net revenue

 

 

8,564

 

 

 

613,403

 

 

 

27,172

 

 

 

58,403

 

 

 

(58,530

)

 

 

649,012

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses, excluding

  depreciation and amortization

 

 

-

 

 

 

240,974

 

 

 

11,995

 

 

 

45,042

 

 

 

(1,967

)

 

 

296,044

 

Selling, general, and administrative expenses,

  excluding depreciation and amortization

 

 

9,745

 

 

 

140,732

 

 

 

998

 

 

 

9,874

 

 

 

(17,291

)

 

 

144,058

 

Local service agreement fees between

  consolidated entities

 

 

-

 

 

 

16,848

 

 

 

14,575

 

 

 

7,849

 

 

 

(39,272

)

 

 

-

 

Amortization of broadcast rights

 

 

-

 

 

 

12,936

 

 

 

369

 

 

 

630

 

 

 

-

 

 

 

13,935

 

Amortization of intangible assets

 

 

-

 

 

 

28,615

 

 

 

491

 

 

 

7,251

 

 

 

-

 

 

 

36,357

 

Depreciation

 

 

-

 

 

 

26,678

 

 

 

620

 

 

 

792

 

 

 

-

 

 

 

28,090

 

Reimbursement from the FCC related to station repack

 

 

-

 

 

 

(14,546

)

 

 

(764

)

 

 

(4,106

)

 

 

-

 

 

 

(19,416

)

Total operating expenses

 

 

9,745

 

 

 

452,237

 

 

 

28,284

 

 

 

67,332

 

 

 

(58,530

)

 

 

499,068

 

(Loss) income from operations

 

 

(1,181

)

 

 

161,166

 

 

 

(1,112

)

 

 

(8,929

)

 

 

-

 

 

 

149,944

 

Interest expense, net

 

 

-

 

 

 

(47,640

)

 

 

(2,898

)

 

 

(825

)

 

 

-

 

 

 

(51,363

)

Loss on extinguishment of debt

 

 

-

 

 

 

(2,026

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,026

)

Pension and other postretirement plans credit, net

 

 

-

 

 

 

1,400

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,400

 

Other expenses

 

 

-

 

 

 

(562

)

 

 

-

 

 

 

(12

)

 

 

-

 

 

 

(574

)

Equity in income of subsidiaries

 

 

74,274

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(74,274

)

 

 

-

 

Income (loss) before income taxes

 

 

73,093

 

 

 

112,338

 

 

 

(4,010

)

 

 

(9,766

)

 

 

(74,274

)

 

 

97,381

 

Income tax benefit (expense)

 

 

161

 

 

 

(29,826

)

 

 

1,016

 

 

 

2,003

 

 

 

-

 

 

 

(26,646

)

Net income (loss)

 

 

73,254

 

 

 

82,512

 

 

 

(2,994

)

 

 

(7,763

)

 

 

(74,274

)

 

 

70,735

 

Net income attributable to noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,733

)

 

 

-

 

 

 

(2,733

)

Net income (loss) attributable to Nexstar

 

$

73,254

 

 

$

82,512

 

 

$

(2,994

)

 

$

(10,496

)

 

$

(74,274

)

 

$

68,002

 

 

28


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended June 30, 2018

(in thousands)

 

 

 

 

 

 

 

Nexstar

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Consolidated

 

 

 

Nexstar

 

 

Broadcasting

 

 

Mission

 

 

Guarantors

 

 

Eliminations

 

 

Company

 

Net broadcast revenue (including trade)

 

$

-

 

 

$

594,056

 

 

$

17,606

 

 

$

48,661

 

 

$

-

 

 

$

660,323

 

Revenue between consolidated entities

 

 

13,205

 

 

 

22,447

 

 

 

9,058

 

 

 

18,439

 

 

 

(63,149

)

 

 

-

 

Net revenue

 

 

13,205

 

 

 

616,503

 

 

 

26,664

 

 

 

67,100

 

 

 

(63,149

)

 

 

660,323

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses, excluding

   depreciation and amortization

 

 

-

 

 

 

218,740

 

 

 

10,013

 

 

 

46,996

 

 

 

(1,310

)

 

 

274,439

 

Selling, general, and administrative expenses,

  excluding depreciation and amortization

 

 

15,181

 

 

 

133,087

 

 

 

1,112

 

 

 

10,945

 

 

 

(21,422

)

 

 

138,903

 

Local service agreement fees between

   consolidated entities

 

 

-

 

 

 

17,971

 

 

 

13,250

 

 

 

9,196

 

 

 

(40,417

)

 

 

-

 

Amortization of broadcast rights

 

 

-

 

 

 

14,797

 

 

 

409

 

 

 

707

 

 

 

-

 

 

 

15,913

 

Amortization of intangible assets

 

 

-

 

 

 

29,674

 

 

 

540

 

 

 

6,967

 

 

 

-

 

 

 

37,181

 

Depreciation

 

 

-

 

 

 

22,885

 

 

 

504

 

 

 

1,701

 

 

 

-

 

 

 

25,090

 

Reimbursement from the FCC related to station repack

 

 

-

 

 

 

(5,510

)

 

 

(187

)

 

 

-

 

 

 

-

 

 

 

(5,697

)

Total operating expenses

 

 

15,181

 

 

 

431,644

 

 

 

25,641

 

 

 

76,512

 

 

 

(63,149

)

 

 

485,829

 

(Loss) income from operations

 

 

(1,976

)

 

 

184,859

 

 

 

1,023

 

 

 

(9,412

)

 

 

-

 

 

 

174,494

 

Interest expense, net

 

 

-

 

 

 

(52,539

)

 

 

(2,739

)

 

 

(1,003

)

 

 

-

 

 

 

(56,281

)

Loss on extinguishment of debt

 

 

-

 

 

 

(481

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(481

)

Pension and other postretirement plans credit, net

 

 

-

 

 

 

2,950

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,950

 

Other expenses

 

 

-

 

 

 

(812

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(812

)

Equity in income of subsidiaries

 

 

94,171

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(94,171

)

 

 

-

 

Income (loss) before income taxes

 

 

92,195

 

 

 

133,977

 

 

 

(1,716

)

 

 

(10,415

)

 

 

(94,171

)

 

 

119,870

 

Income tax (expense) benefit

 

 

(423

)

 

 

(34,455

)

 

 

425

 

 

 

1,189

 

 

 

-

 

 

 

(33,264

)

   Net income (loss)

 

 

91,772

 

 

 

99,522

 

 

 

(1,291

)

 

 

(9,226

)

 

 

(94,171

)

 

 

86,606

 

Net loss attributable to noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,126

 

 

 

-

 

 

 

1,126

 

Net income (loss) attributable to Nexstar

 

$

91,772

 

 

$

99,522

 

 

$

(1,291

)

 

$

(8,100

)

 

$

(94,171

)

 

$

87,732

 

 

 

 

 

 


29


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Six Months Ended June 30, 2019

(in thousands)

 

 

 

 

 

 

 

Nexstar

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Consolidated

 

 

 

Nexstar

 

 

Broadcasting

 

 

Mission

 

 

Guarantors

 

 

Eliminations

 

 

Company

 

Net broadcast revenue (including trade)

 

$

-

 

 

$

1,158,758

 

 

$

38,317

 

 

$

78,584

 

 

$

-

 

 

$

1,275,659

 

Revenue between consolidated entities

 

 

16,982

 

 

 

44,658

 

 

 

16,024

 

 

 

36,996

 

 

 

(114,660

)

 

 

-

 

Net revenue

 

 

16,982

 

 

 

1,203,416

 

 

 

54,341

 

 

 

115,580

 

 

 

(114,660

)

 

 

1,275,659

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses, excluding

  depreciation and amortization

 

 

-

 

 

 

481,169

 

 

 

24,031

 

 

 

87,541

 

 

 

(3,834

)

 

 

588,907

 

Selling, general, and administrative expenses,

  excluding depreciation and amortization

 

 

19,493

 

 

 

278,001

 

 

 

1,989

 

 

 

19,901

 

 

 

(32,966

)

 

 

286,418

 

Local service agreement fees between

  consolidated entities

 

 

-

 

 

 

33,202

 

 

 

29,150

 

 

 

15,508

 

 

 

(77,860

)

 

 

-

 

Amortization of broadcast rights

 

 

-

 

 

 

26,287

 

 

 

752

 

 

 

1,258

 

 

 

-

 

 

 

28,297

 

Amortization of intangible assets

 

 

-

 

 

 

57,278

 

 

 

1,010

 

 

 

14,807

 

 

 

-

 

 

 

73,095

 

Depreciation

 

 

-

 

 

 

51,905

 

 

 

1,228

 

 

 

2,394

 

 

 

-

 

 

 

55,527

 

Reimbursement from the FCC related to station repack

 

 

-

 

 

 

(24,231

)

 

 

(2,300

)

 

 

(7,072

)

 

 

-

 

 

 

(33,603

)

Total operating expenses

 

 

19,493

 

 

 

903,611

 

 

 

55,860

 

 

 

134,337

 

 

 

(114,660

)

 

 

998,641

 

(Loss) income from operations

 

 

(2,511

)

 

 

299,805

 

 

 

(1,519

)

 

 

(18,757

)

 

 

-

 

 

 

277,018

 

Interest expense, net

 

 

-

 

 

 

(96,848

)

 

 

(5,784

)

 

 

(1,688

)

 

 

-

 

 

 

(104,320

)

Loss on extinguishment of debt

 

 

-

 

 

 

(3,724

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,724

)

Pension and other postretirement plans credit, net

 

 

-

 

 

 

2,800

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,800

 

Other expenses

 

 

-

 

 

 

(1,037

)

 

 

-

 

 

 

(28

)

 

 

-

 

 

 

(1,065

)

Equity in income of subsidiaries

 

 

135,032

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(135,032

)

 

 

-

 

Income (loss) before income taxes

 

 

132,521

 

 

 

200,996

 

 

 

(7,303

)

 

 

(20,473

)

 

 

(135,032

)

 

 

170,709

 

Income tax benefit (expense)

 

 

473

 

 

 

(49,648

)

 

 

1,851

 

 

 

4,237

 

 

 

-

 

 

 

(43,087

)

Net income (loss)

 

 

132,994

 

 

 

151,348

 

 

 

(5,452

)

 

 

(16,236

)

 

 

(135,032

)

 

 

127,622

 

Net income attributable to noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,728

)

 

 

-

 

 

 

(4,728

)

Net income (loss) attributable to Nexstar

 

$

132,994

 

 

$

151,348

 

 

$

(5,452

)

 

$

(20,964

)

 

$

(135,032

)

 

$

122,894

 


30


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Six Months Ended June 30, 2018

(in thousands)

 

 

 

 

 

 

 

Nexstar

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Consolidated

 

 

 

Nexstar

 

 

Broadcasting

 

 

Mission

 

 

Guarantors

 

 

Eliminations

 

 

Company

 

Net broadcast revenue (including trade)

 

$

-

 

 

$

1,143,737

 

 

$

33,763

 

 

$

98,159

 

 

$

-

 

 

$

1,275,659

 

Revenue between consolidated entities

 

 

13,205

 

 

 

42,703

 

 

 

17,486

 

 

 

35,144

 

 

 

(108,538

)

 

 

-

 

Net revenue

 

 

13,205

 

 

 

1,186,440

 

 

 

51,249

 

 

 

133,303

 

 

 

(108,538

)

 

 

1,275,659

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses, excluding

   depreciation and amortization

 

 

-

 

 

 

439,919

 

 

 

20,160

 

 

 

95,987

 

 

 

(2,664

)

 

 

553,402

 

Selling, general, and administrative expenses,

  excluding depreciation and amortization

 

 

15,181

 

 

 

269,272

 

 

 

2,328

 

 

 

22,251

 

 

 

(28,224

)

 

 

280,808

 

Local service agreement fees between

   consolidated entities

 

 

-

 

 

 

34,947

 

 

 

26,500

 

 

 

16,203

 

 

 

(77,650

)

 

 

-

 

Amortization of broadcast rights

 

 

-

 

 

 

29,792

 

 

 

821

 

 

 

1,400

 

 

 

-

 

 

 

32,013

 

Amortization of intangible assets

 

 

-

 

 

 

59,519

 

 

 

1,084

 

 

 

12,880

 

 

 

-

 

 

 

73,483

 

Depreciation

 

 

-

 

 

 

46,346

 

 

 

1,021

 

 

 

3,537

 

 

 

-

 

 

 

50,904

 

Reimbursement from the FCC related to station repack

 

 

-

 

 

 

(6,874

)

 

 

(187

)

 

 

-

 

 

 

-

 

 

 

(7,061

)

Total operating expenses

 

 

15,181

 

 

 

872,921

 

 

 

51,727

 

 

 

152,258

 

 

 

(108,538

)

 

 

983,549

 

(Loss) income from operations

 

 

(1,976

)

 

 

313,519

 

 

 

(478

)

 

 

(18,955

)

 

 

-

 

 

 

292,110

 

Interest expense, net

 

 

-

 

 

 

(103,573

)

 

 

(5,350

)

 

 

(1,947

)

 

 

-

 

 

 

(110,870

)

Loss on extinguishment of debt

 

 

-

 

 

 

(1,486

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,486

)

Pension and other postretirement plans credit, net

 

 

-

 

 

 

5,900

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,900

 

Other expenses

 

 

-

 

 

 

(941

)

 

 

-

 

 

 

2

 

 

 

-

 

 

 

(939

)

Equity in income of subsidiaries

 

 

146,203

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(146,203

)

 

 

-

 

Income (loss) before income taxes

 

 

144,227

 

 

 

213,419

 

 

 

(5,828

)

 

 

(20,900

)

 

 

(146,203

)

 

 

184,715

 

Income tax (expense) benefit

 

 

(423

)

 

 

(54,905

)

 

 

1,406

 

 

 

3,154

 

 

 

-

 

 

 

(50,768

)

   Net income (loss)

 

 

143,804

 

 

 

158,514

 

 

 

(4,422

)

 

 

(17,746

)

 

 

(146,203

)

 

 

133,947

 

Net loss attributable to noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,907

 

 

 

-

 

 

 

1,907

 

Net income (loss) attributable to Nexstar

 

$

143,804

 

 

$

158,514

 

 

$

(4,422

)

 

$

(15,839

)

 

$

(146,203

)

 

$

135,854

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2019

(in thousands)

 

 

 

 

 

 

 

Nexstar

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Consolidated

 

 

 

Nexstar

 

 

Broadcasting

 

 

Mission

 

 

Guarantors

 

 

Eliminations

 

 

Company

 

Cash flows from operating activities

 

$

-

 

 

$

240,814

 

 

$

1,507

 

 

$

(5,921

)

 

$

-

 

 

$

236,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

-

 

 

 

(60,002

)

 

 

(2,956

)

 

 

(8,510

)

 

 

-

 

 

 

(71,468

)

Spectrum repack reimbursements from the FCC

 

 

-

 

 

 

25,767

 

 

 

764

 

 

 

7,072

 

 

 

-

 

 

 

33,603

 

Other investing activities

 

 

-

 

 

 

995

 

 

 

-

 

 

 

14

 

 

 

-

 

 

 

1,009

 

Net cash used in investing activities

 

 

-

 

 

 

(33,240

)

 

 

(2,192

)

 

 

(1,424

)

 

 

-

 

 

 

(36,856

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repayments of long-term debt

 

 

-

 

 

 

(200,738

)

 

 

(1,143

)

 

 

(1,727

)

 

 

-

 

 

 

(203,608

)

Common stock dividends paid

 

 

(41,319

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(41,319

)

Inter-company payments

 

 

49,649

 

 

 

(49,649

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

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

)

Other financing activities

 

 

1,483

 

 

 

(5,044

)

 

 

-

 

 

 

(41

)

 

 

-

 

 

 

(3,602

)

Net cash used in financing activities

 

 

-

 

 

 

(261,824

)

 

 

(1,143

)

 

 

(1,768

)

 

 

-

 

 

 

(264,735

)

Net increase in cash,

  cash equivalents and restricted cash

 

 

-

 

 

 

(54,250

)

 

 

(1,828

)

 

 

(9,113

)

 

 

-

 

 

 

(65,191

)

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

 

$

-

 

 

$

51,415

 

 

$

8,970

 

 

$

19,539

 

 

$

-

 

 

$

79,924

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2018

(in thousands)

 

 

 

 

 

 

 

Nexstar

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Consolidated

 

 

 

Nexstar

 

 

Broadcasting

 

 

Mission

 

 

Guarantors

 

 

Eliminations

 

 

Company

 

Cash flows from operating activities

 

$

-

 

 

$

313,735

 

 

$

(1,484

)

 

$

4,823

 

 

$

-

 

 

$

317,074

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

-

 

 

 

(32,198

)

 

 

(512

)

 

 

(3,680

)

 

 

-

 

 

 

(36,390

)

Payments for acquisitions

 

 

-

 

 

 

(85,867

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(85,867

)

Spectrum repack reimbursements from the FCC

 

 

-

 

 

 

6,875

 

 

 

186

 

 

 

-

 

 

 

-

 

 

 

7,061

 

Other investing activities

 

 

-

 

 

 

4,256

 

 

 

-

 

 

 

5

 

 

 

-

 

 

 

4,261

 

Net cash used in investing activities

 

 

-

 

 

 

(106,934

)

 

 

(326

)

 

 

(3,675

)

 

 

-

 

 

 

(110,935

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from long-term debt

 

 

-

 

 

 

44,000

 

 

 

-

 

 

 

51,759

 

 

 

-

 

 

 

95,759

 

Repayments of long-term debt

 

 

-

 

 

 

(122,120

)

 

 

(1,157

)

 

 

(53,639

)

 

 

-

 

 

 

(176,916

)

Common stock dividends paid

 

 

(34,443

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(34,443

)

Purchase of treasury stock

 

 

(50,524

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(50,524

)

Inter-company payments

 

 

87,624

 

 

 

(87,624

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Other financing activities

 

 

(2,657

)

 

 

(5,555

)

 

 

-

 

 

 

226

 

 

 

-

 

 

 

(7,986

)

Net cash used in

  financing activities

 

 

-

 

 

 

(171,299

)

 

 

(1,157

)

 

 

(1,654

)

 

 

-

 

 

 

(174,110

)

Net increase (decrease) in cash,

  cash equivalents and restricted cash

 

 

-

 

 

 

35,502

 

 

 

(2,967

)

 

 

(506

)

 

 

-

 

 

 

32,029

 

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

 

$

-

 

 

$

126,362

 

 

$

6,557

 

 

$

14,762

 

 

$

-

 

 

$

147,681

 

 

 

 

 

33


16.  Subsequent Events

 

On July 3, 2019, Nexstar Escrow completed the sale and issuance of the $1.120 billion 5.625% Notes due 2027 at par. The gross proceeds of the 5.625% Notes due 2027 were deposited into a segregated escrow account which cannot be utilized until certain conditions are satisfied or the escrowed funds are released in connection with a special mandatory redemption of the 5.625% Notes due 2027. Among other things, such conditions include the consummation of the merger (See Note 3) and the assumption by Nexstar of all of the obligations of Nexstar Escrow under the 5.625% Notes due 2027, which are all expected to occur in the third quarter of 2019. Following satisfaction of such conditions, the proceeds from the 5.625% Notes due 2027 will be used to finance a portion of the consideration of the merger, to partially fund the repayment of all of Tribune’s existing indebtedness, to pay related fees and expenses and for general corporate purposes. If the merger is not consummated on or prior to November 30, 2019, with an automatic extension to February 29, 2020 if necessary to obtain regulatory approval under circumstances specified in the merger agreement, or if the merger agreement is terminated, the 5.625% Notes due 2027 are subject to a special mandatory redemption equal to 100% of the initial issue price of the notes, plus accrued and unpaid interest, if any, from the issue date of the 5.625% Notes due 2027 up to, but not including, the date of such special mandatory redemption. Prior to the consummation of the merger, the 5.625% Notes due 2027 will not be guaranteed, but will be secured by a first priority security interest in the escrow account and all deposits and investment property therein. Following satisfaction of the escrow conditions, the 5.625% Notes due 2027 will be senior unsecured obligations of Nexstar and will be guaranteed by Nexstar, Mission and certain of Nexstar’s and Mission’s future wholly-owned subsidiaries, subject to certain customary release provisions. The 5.625% Notes due 2027 will be junior to the secured debt of the Company, including the senior secured credit facilities of Nexstar and certain VIEs, to the extent of the value of the assets securing such debt. The 5.625% Notes due 2027 will rank equal to the 6.125% Notes, the 5.875% Notes and the 5.625% Notes due 2024.

 

On July 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 August 23, 2019 to stockholders of record on August 9, 2019.

 

On July 31, 2019, the DOJ provided its conditional approval of the proposed Nexstar and Tribune merger (See Note 3) by simultaneously filing a pair of documents with the U.S. District Court of the District of Columbia: (i) a civil antitrust suit against the merger deal, and (ii) a proposed settlement that, if approved by the court, would resolve the complaints alleged in the antitrust suit through the divestiture of certain television stations and related conditions. The FCC must still complete its public interest review of the proposed merger.

 

 

34


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 second quarter of 2019, net revenue decreased by $11.3 million, or 1.7% compared to the same period in 2018, primarily due to a decrease in television advertising revenue of $31.1 million due to 2019 not being an election or Olympic year, a $10.0 million decline in other revenue related to a one-time incentive payment from a wireless carrier specific to the spectrum repack (revenue recognized in the second quarter of 2018), and a decrease in digital revenue of $7.8 million primarily due to marketplace changes which affected select demand-side platform customer buying, partially offset by 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 an increase in retransmission compensation of $38.0 million.

 

 

For each of the first two 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 $41.3 million.

Merger Agreement with Tribune

On November 30, 2018, we entered into a definitive merger agreement with Tribune to acquire Tribune’s outstanding equity for $46.50 per share in a cash transaction. All equity-based awards of Tribune that are outstanding prior to the merger will vest in full and will be converted into the right to receive the same cash consideration. The estimated total purchase price is $7.165 billion, inclusive of the merger cash consideration, the refinancing of Tribune's outstanding debt and the assumption of outstanding warrants. The estimated purchase price amount does not take into account Tribune’s cash or pension liabilities to be acquired by Nexstar. Tribune shareholders will be entitled to additional cash consideration of approximately $0.30 per share per month if the transaction has not closed by August 31, 2019, pro-rated for partial months and less an adjustment for any dividends declared on or after September 1, 2019. Tribune currently owns, operates or provides services to 44 television stations (including two satellite stations) and one AM radio station. We and Tribune plan to divest certain of our stations in connection with the proposed merger in order to comply with the FCC media ownership rules and obtain the HSR Approval.

 

The merger agreement contains certain termination rights for both us and Tribune. If the merger agreement is terminated in connection with Tribune entering into a definitive agreement with respect to a superior proposal, as well as under certain other circumstances, the termination fee payable by Tribune to us will be $135 million. Either party may terminate the merger agreement if the merger is not consummated on or before an end date of November 30, 2019, with an automatic extension to February 29, 2020, if necessary to obtain regulatory approval under circumstances specified in the merger agreement.

The merger has been approved by the boards of directors of both companies and the stockholders of Tribune and is projected to close in the third quarter of 2019, subject to (i) FCC approval, (ii) other regulatory approvals (including HSR Approval) and (iii) satisfaction of other customary closing conditions. The merger does not require approval of our stockholders and is not subject to any financing contingency. On November 30, 2018, we received committed financing up to a maximum of $6.4 billion from a group of commercial banks to provide the debt financing to consummate the merger and the refinancing of certain of the existing indebtedness of Tribune and related transactions.

35


As further discussed in Debt Transactions below, Nexstar Escrow, our wholly-owned indirect subsidiary, completed the sale and issuance of the $1.120 billion 5.625% Notes due 2027 at par on July 3, 2019. The remainder of the committed financing includes $3.740 billion in term loans for which we recently completed the pricing. We expect to issue these loans simultaneously with the completion of our merger with Tribune.

In connection with obtaining the HSR Approval and the FCC approval, we agreed to divest one or more television stations in certain DMAs. On March 20, 2019, we entered into definitive asset purchase agreements to sell a total of nineteen stations in fifteen markets. Under the terms of the agreements, TEGNA will acquire eleven stations in eight markets and Scripps will acquire eight stations in seven markets. Under the terms of the asset purchase agreement with TEGNA, TEGNA will acquire substantially all of the assets of television broadcast stations (i) WTIC and WCCT in Hartford-New Haven, CT; (ii) WPMT in Harrisburg-Lancaster-Lebanon-York, PA; (iii) WATN and WLMT in Memphis, TN; (iv) WNEP in Wilkes Barre-Scranton, PA; (v) WOI and KCWI in Des Moines-Ames, IA; (vi) WZDX in Huntsville-Decatur (Florence), AL; (vii) WQAD in Davenport, IA-Rock Island-Moline, IL; and (viii) KFSM in Ft. Smith-Fayetteville-Springdale-Rogers, AR for cash consideration of $740 million (subject to customary purchase price adjustments). Under the terms of the asset purchase agreement with Scripps, Scripps will acquire substantially all of the assets of television broadcast stations (i) KASW in Phoenix (Prescott), AZ; (ii) WPIX in New York, NY, (iii) WSFL-TV in Miami-Ft. Lauderdale, FL, (iv) KSTU in Salt Lake City, UT, (v) WTKR and WGNT in Norfolk-Portsmouth-Newport News, VA, (vi) WXMI in Grand Rapids-Kalamazoo-Battle Creek, MI and (vii) WTVR-TV in Richmond-Petersburg, VA for cash consideration of $580 million (subject to customary purchase price adjustments). On April 8, 2019, we entered into a definitive asset purchase agreement to sell to Circle City Broadcasting I, Inc., a newly-formed minority-led broadcast company majority-owned by DuJuan McCoy, two stations in Indianapolis, IN -- WISH, the CW affiliate, and WNDY, the MyNetwork TV affiliate -- for $42.5 million in cash.

The consummation of each divestiture transaction is subject to the satisfaction or waiver of certain customary conditions, including, among others, (i) the closing of the transactions contemplated by the merger agreement, (ii) the receipt of approval from the FCC and the expiration or termination of any waiting period applicable to such transaction under the HSR Act, as amended, and (iii) the absence of certain legal impediments to the consummation of such transaction.

The consummation of each divestiture transaction is expected to occur simultaneously with the closing of the Nexstar/ Tribune merger.

On July 31, 2019, the DOJ provided its conditional approval of the proposed Nexstar and Tribune merger by simultaneously filing a pair of documents with the U.S. District Court of the District of Columbia: (i) a civil antitrust suit against the merger deal, and (ii) a proposed settlement that, if approved by the court, would resolve the complaints alleged in the antitrust suit through the divestiture of certain television stations and related conditions. The FCC must still complete its public interest review of the proposed merger.

Debt Transactions

 

 

During the six months ended June 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 six months ended June 30, 2019, the Company repaid scheduled maturities of $23.6 million under its term loans.

 

 

On July 3, 2019, Nexstar Escrow completed the sale and issuance of its $1.120 billion 5.625% Notes due 2027 at par. The gross proceeds of the 5.625% Notes due 2027 were deposited into a segregated escrow account which cannot be utilized until certain conditions are satisfied or the escrowed funds are released in connection with a special mandatory redemption of the 5.625% Notes due 2027. Among other things, such conditions include the consummation of the merger discussed above and our assumption of all of the obligations of Nexstar Escrow under the 5.625% Notes due 2027, which are all expected to occur in the third quarter of 2019. Following satisfaction of such conditions, the proceeds from the 5.625% Notes due 2027 will be used to finance a portion of the consideration of the merger, to partially fund the repayment of all of Tribune’s existing indebtedness, to pay related fees and expenses and for general corporate purposes. If the merger is not consummated on or prior to November 30, 2019, with an automatic extension to February 29, 2020 if necessary to obtain regulatory approval under circumstances specified in the merger agreement, or if the merger agreement is terminated, the 5.625% Notes due 2027 are subject to a special mandatory redemption equal to 100% of the initial issue price of the notes, plus accrued and unpaid interest, if any, from the issue date of the 5.625% Notes due 2027 up to, but not including, the date of such special mandatory redemption. Prior to the consummation of the merger, the 5.625% Notes due 2027 will not be guaranteed, but will be secured by a first priority security interest in the escrow account and all deposits and investment property therein. Following satisfaction of the escrow conditions, the 5.625% Notes due 2027 will be senior unsecured obligations of Nexstar and will be guaranteed by Nexstar, Mission and certain of Nexstar’s and Mission’s future wholly-owned subsidiaries, subject to certain customary release provisions. The 5.625% Notes due 2027 will be junior to the secured debt of the Company, including the senior secured credit facilities of Nexstar and certain VIEs, to the extent of the value of the assets securing such debt. The 5.625% Notes due 2027 will rank equal to the 6.125% Notes, the 5.875% Notes and the 5.625% Notes due 2024.

 


36


Overview of Operations

As of June 30, 2019, we owned, operated, programmed or provided sales and other services to 174 full power television stations, including those owned by VIEs, in 100 markets in the states of Alabama, Arizona, 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, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia and Wisconsin. The stations are affiliates of ABC, NBC, FOX, CBS, The CW, MNTV and other broadcast television networks. 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 and the 5.625% Notes due 2024 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.

 

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, however, the FCC adopted an order on reconsideration that eliminated the rule. That elimination became effective on February 7, 2018, although the FCC’s November 2017 order on reconsideration remains the subject of pending court appeals. 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 September 2019 and May 2020, respectively.

 


37


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 six months ended June 30, 2019, the Company spent a total of $22.6 million and $36.4 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 six months ended June 30, 2018, the Company spent a total of $1.5 million and $6.9 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 six months ended June 30, 2019, the Company received $19.4 million and $33.6 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 six months ended June 30, 2018, the Company received $5.7 million and $7.1 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 June 30, 2019, approximately $146.6 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.


38


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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

Local

 

$

199,279

 

 

 

30.7

 

 

$

198,560

 

 

 

30.1

 

 

$

387,445

 

 

 

30.4

 

 

$

391,828

 

 

 

30.7

 

National

 

 

68,332

 

 

 

10.5

 

 

 

71,633

 

 

 

10.8

 

 

 

132,010

 

 

 

10.4

 

 

 

138,678

 

 

 

10.9

 

Political

 

 

3,157

 

 

 

0.5

 

 

 

31,636

 

 

 

4.8

 

 

 

4,464

 

 

 

0.3

 

 

 

40,902

 

 

 

3.2

 

Retransmission compensation

 

 

314,268

 

 

 

48.4

 

 

 

276,273

 

 

 

41.8

 

 

 

628,242

 

 

 

49.2

 

 

 

552,214

 

 

 

43.3

 

Digital

 

 

56,237

 

 

 

8.7

 

 

 

63,999

 

 

 

9.7

 

 

 

109,072

 

 

 

8.6

 

 

 

126,803

 

 

 

9.9

 

Other

 

 

3,625

 

 

 

0.6

 

 

 

14,205

 

 

 

2.2

 

 

 

7,489

 

 

 

0.6

 

 

 

18,374

 

 

 

1.5

 

Trade revenue

 

 

4,114

 

 

 

0.6

 

 

 

4,017

 

 

 

0.6

 

 

 

6,937

 

 

 

0.5

 

 

 

6,860

 

 

 

0.5

 

Total net revenue

 

$

649,012

 

 

 

100.0

 

 

$

660,323

 

 

 

100.0

 

 

$

1,275,659

 

 

 

100.0

 

 

$

1,275,659

 

 

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Net revenue

 

$

649,012

 

 

 

100.0

 

 

$

660,323

 

 

 

100.0

 

 

$

1,275,659

 

 

 

100.0

 

 

$

1,275,659

 

 

 

100.0

 

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate expenses

 

 

31,821

 

 

 

4.9

 

 

 

27,384

 

 

 

4.1

 

 

 

62,586

 

 

 

4.9

 

 

 

53,727

 

 

 

4.2

 

 

Direct operating expenses,

  net of trade

 

 

292,162

 

 

 

45.0

 

 

 

270,200

 

 

 

40.9

 

 

 

581,594

 

 

 

45.6

 

 

 

545,679

 

 

 

42.8

 

 

Selling, general and administrative expenses, excluding corporate

 

 

112,237

 

 

 

17.3

 

 

 

111,519

 

 

 

16.9

 

 

 

223,832

 

 

 

17.5

 

 

 

227,081

 

 

 

17.8

 

 

Depreciation

 

 

28,090

 

 

 

4.3

 

 

 

25,090

 

 

 

3.8

 

 

 

55,527

 

 

 

4.4

 

 

 

50,904

 

 

 

4.0

 

 

Amortization of intangible assets

 

 

36,357

 

 

 

5.6

 

 

 

37,181

 

 

 

5.6

 

 

 

73,095

 

 

 

5.7

 

 

 

73,483

 

 

 

5.8

 

 

Amortization of broadcast rights

 

 

13,935

 

 

 

2.1

 

 

 

15,913

 

 

 

2.3

 

 

 

28,297

 

 

 

2.2

 

 

 

32,013

 

 

 

2.5

 

 

Trade expense

 

 

3,882

 

 

 

0.6

 

 

 

4,239

 

 

 

0.6

 

 

 

7,313

 

 

 

0.6

 

 

 

7,723

 

 

 

0.6

 

 

Reimbursement from the FCC related to station repack

 

 

(19,416

)

 

 

(3.0

)

 

 

(5,697

)

 

 

(0.9

)

 

 

(33,603

)

 

 

(2.6

)

 

 

(7,061

)

 

 

(0.6

)

 

Total operating expenses

 

 

499,068

 

 

 

 

 

 

 

485,829

 

 

 

 

 

 

 

998,641

 

 

 

 

 

 

 

983,549

 

 

 

 

 

 

Income from operations

 

$

149,944

 

 

 

 

 

 

$

174,494

 

 

 

 

 

 

$

277,018

 

 

 

 

 

 

$

292,110

 

 

 

 

 

 

39


Three Months Ended June 30, 2019 Compared to Three Months Ended June 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 $199.3 million for the three months ended June 30, 2019, compared to $198.6 million for the same period in 2018, an increase of $0.7 million, or 0.4%. National advertising revenue was $68.3 million for the three months ended June 30, 2019, compared to $71.6 million for the same period in 2018, a decrease of $3.3 million, or 4.6%. Our largest advertiser category, automobile, represented approximately 22% and 23% of our local and national advertising revenue for the three months ended June 30, 2019 and 2018, respectively. Overall, including the past results of our stations acquired in 2018, automobile revenues decreased by 4.5% during the quarter. The other categories representing our top five were attorneys and medical/healthcare which increased in 2019 and furniture and fast food/restaurants, which decreased in 2019.

Political advertising revenue was $3.2 million for the three months ended June 30, 2019, compared to $31.6 million for the same period in 2018, a decrease of $28.4 million, as 2019 is not an election year.

Retransmission compensation was $314.3 million for the three months ended June 30, 2019, compared to $276.3 million for the same period in 2018, an increase of $38.0 million, or 13.8%. Our legacy stations’ revenue increased by $34.4 million, primarily due to scheduled annual escalation of rates per subscriber, renewals of smaller contracts providing for higher rates per subscriber (contracts generally have a three-year term) and contributions from distribution agreements with OVDs. Additionally, our stations acquired in 2018 increased our revenue by $3.6 million. 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.

On July 3, 2019, our retransmission consent agreements in 97 of our station markets with AT&T/DirecTV expired. We are currently not providing services to this customer pending the negotiation of the renewal terms.

Digital revenue, representing advertising revenue on our stations’ web and mobile sites and other internet-based revenue, was $56.2 million for the three months ended June 30, 2019, compared to $64.0 million for the same period in 2018, a decrease of $7.8 million, or 12.1%, primarily due to marketplace changes which affected select demand-side platform customer buying, partially offset by 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).

Other revenue was $3.6 million for the three months ended June 30, 2019, compared to $14.2 million for the same period in 2018, a decrease of $10.6 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 $31.8 million for the three months ended June 30, 2019, compared to $27.4 million for the same period in 2018, an increase of $4.4 million, or 16.2%. This was primarily attributable to a $4.1 million increase in legal and professional fees primarily associated with our proposed acquisition of Tribune and an increase in stock-based compensation related to new equity incentive awards of $1.5 million. These increases were partially offset by a decrease in payroll expense of $0.3 million.

 

Direct operating expenses, consisting primarily of news, engineering, programming and station selling, general and administrative expenses (net of trade expense) were $404.4 million for the three months ended June 30, 2019, compared to $381.7 million for the same period in 2018, an increase of $22.7 million, or 5.9%. This was primarily due to an increase in our stations’ programming costs of $25.4 million, primarily due to network affiliation renewals and annual increases in our network affiliation costs, partially offset by a decrease in operating expenses on a few of our digital products of $3.1 million due to marketplace changes and challenges that led to lower revenue.

Depreciation of property and equipment was $28.1 million for the three months ended June 30, 2019, compared to $25.1 million for the same period in 2018, an increase of $3.0 million, or 12.0%, primarily due to newly capitalized assets related to station repacking activities.

Amortization of intangible assets was flat at $36.4 million for the three months ended June 30, 2019, compared to $37.2 million for the same period in 2018.

40


Amortization of broadcast rights was $13.9 million for the three months ended June 30, 2019, compared to $15.9 million for the same period in 2018, a decrease of $2.0 million, or 12.4%, primarily attributable 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 June 30, 2019 and 2018, the Company received $19.4 million and $5.7 million, respectively, in reimbursements from the FCC which it recognized as operating income.

Interest Expense, net

 

Interest expense, net was $51.4 million for the three months ended June 30, 2019, compared to $56.3 million for the same period in 2018, a decrease of $4.9 million, or 8.7%, primarily due to the refinancing of certain of our senior secured credit facilities in October 2018, which reduced the applicable margin portion of the interest rates by 25 basis points, and principal prepayments of certain of our term loans in 2018 and 2019. These were partially offset by the effects of an increasing trend in the London Interbank Offered Rate (“LIBOR”).

Loss on Extinguishment of Debt

Loss on extinguishment of debt was $2.0 million for the three months ended June 30, 2019, compared to $0.5 million for the same period in 2018, an increase of $1.5 million, primarily due to an increase in prepayments of principal balance on our term loans of $80.0 million for the three months ending June 30, 2019 compared to the same period in 2018.

Income Taxes

Income tax expense was $26.6 million for the three months ended June 30, 2019, compared to $33.3 million for the same period in 2018. The effective tax rates were consistent at 27.4% and 27.8% for each of the respective periods.

 

Six Months Ended June 30, 2019 Compared to Six Months Ended June 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 $387.4 million for the six months ended June 30, 2019, compared to $391.8 million for the same period in 2018, a decrease of $4.4 million, or 1.1%. National advertising revenue was $132.0 million for the six months ended June 30, 2019, compared to $138.7 million for the same period in 2018, a decrease of $6.7 million, or 4.8%. The decrease in our stations’ local and national advertising revenue was primarily due to 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 six months ended June 30, 2019 and 2018, respectively. Overall, including the past results of our stations acquired in 2018, automobile revenues decreased by 6.7% in 2019. The other categories representing our top five were furniture and fast food/restaurants, which decreased in 2019, attorneys which increased in 2019, and medical/healthcare which stayed consistent in 2019.

Political advertising revenue was $4.5 million for the six months ended June 30, 2019, compared to $40.9 million for the same period in 2018, a decrease of $36.4 million, as 2019 is not an election year.

Retransmission compensation was $628.2 million for the six months ended June 30, 2019, compared to $552.2 million for the same period in 2018, an increase of $76.0 million, or 13.8%. Our legacy stations’ revenue increased by $68.8 million, primarily due to scheduled annual escalation of rates per subscriber, renewals of smaller contracts providing for higher rates per subscriber (contracts generally have a three-year term) and contributions from distribution agreements with OVDs. Additionally, our stations acquired in 2018 increased our revenue by $7.2 million. 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.

41


On July 3, 2019, our retransmission consent agreements in 97 of our station markets with AT&T/DirecTV expired. We are currently not providing services to this customer pending the negotiation of the renewal terms.

Digital revenue, representing advertising revenue on our stations’ web and mobile sites and other internet-based revenue, was $109.1 million for the six months ended June 30, 2019, compared to $126.8 million for the same period in 2018, a decrease of $17.7 million, or 14.0%,  primarily due to marketplace changes which affected select demand-side platform customer buying, partially offset by 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).

Other revenue was $7.5 million for the six months ended June 30, 2019, compared to $18.4 million for the same period in 2018, a decrease of $10.9 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 $62.6 million for the six months ended June 30, 2019, compared to $53.7 million for the same period in 2018, an increase of $8.9 million, or 16.5%. This was primarily attributable to a $8.7 million increase in legal and professional fees primarily associated with our proposed acquisition of Tribune and an increase in stock-based compensation related to new equity incentive awards of $3.2 million. These increases were partially offset by a decrease in payroll expense of $0.9 million and a decrease in facility rental expenses of $0.8 million.

 

42


Station direct operating expenses, consisting primarily of news, engineering, programming and station selling, general and administrative expenses (net of trade expense) were $805.4 million for the six months ended June 30, 2019 compared to $772.8 million for the same period in 2018, an increase of $32.6 million, or 4.2%. This was primarily due to an increase in our stations’ programming costs of $49.2 million, primarily due to network affiliation renewals and annual increases in our network affiliation costs, partially offset by a decrease of $2.7 million in variable costs in our stations, largely news and sales related, and a decrease in operating expenses on a few of our digital products of $12.7 million due to marketplace changes and challenges that led to lower revenue.

 

Depreciation of property and equipment was $55.5 million for the six months ended June 30, 2019, compared to $50.9 million for the same period in 2018, an increase of $4.6 million, or 9.1%. The increase was primarily due to newly capitalized assets related to station repacking activities.

 

Amortization of intangible assets was flat at $73.1 million for the six months ended June 30, 2019, compared to $73.5 million for the same period in 2018.

 

Amortization of broadcast rights was $28.3 million for the six months ended June 30, 2019, compared to $32.0 million for the same period in 2018, a decrease of $3.7 million, or 11.6%, primarily attributable to renegotiation of certain film contracts which resulted in reduced distribution rates.

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 six months ended June 30, 2019 and 2018, the Company received $33.6 million and $7.1 million, respectively, in reimbursements from the FCC which it recognized as operating income.

Interest Expense, net

Interest expense, net was $104.3 million for the six months ended June 30, 2019, compared to $110.9 million for the same period in 2018, a decrease of $6.6 million, or 5.9% primarily due to the refinancing of certain of our senior secured credit facilities in October 2018, which reduced the applicable margin portion of the interest rates by 25 basis points, and principal prepayments of certain of our term loans in 2018 and 2019.

Loss on Extinguishment of Debt

 

Loss on extinguishment of debt was $3.7 million for the six months ended June 30, 2019, compared to $1.5 million for the same period in 2018, an increase of $2.2 million, primarily due to the increase in prepayments of principal balance on our term loans of $120.0 million for the six months ending June 30, 2019 compared to the same period in 2018.

 


43


Income Taxes

 

Income tax expense was $43.1 million for the six months ended June 30, 2019, compared to $50.8 million for the same period in 2018. The effective tax rates were 25.2% and 27.5% for each of the respective periods. The decrease in the effective tax rate between the two periods was primarily due to a $4.5 million increase in the deduction for excess tax benefits related to stock-based compensation, resulting in a decrease in the effective tax rate of 2.7%.

 

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):

  

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

Net cash provided by operating activities

 

$

236,400

 

 

$

317,074

 

Net cash used in investing activities

 

 

(36,856

)

 

 

(110,935

)

Net cash used in financing activities

 

 

(264,735

)

 

 

(174,110

)

Net (decrease) increase in cash, cash equivalents and restricted cash

 

$

(65,191

)

 

$

32,029

 

Cash paid for interest

 

$

98,103

 

 

$

104,874

 

Income taxes paid, net of refunds

 

$

52,419

 

 

$

32,781

 

 

 

 

As of June 30,

 

 

As of December 31,

 

 

 

2019

 

 

2018

 

Cash and cash equivalents

 

$

79,924

 

 

$

145,115

 

Long-term debt, including current portion

 

 

3,784,718

 

 

 

3,981,003

 

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

 

 

166,372

 

 

 

166,372

 

 

(1)

Based on covenant calculations as of June 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 $80.7 million during the six months ended June 30, 2019, compared to the same period in 2018. This was primarily due to a decrease in source of cash resulting from timing of accounts receivable collections of $56.6 million, and an increase in payments for income taxes of $19.6 million. Additionally, our corporate, direct operating and selling, general and administrative expenses (excluding non-cash transactions) increased by $41.0 million during the period compared to the same period in the prior year, while our net revenue (excluding trade) remained consistent in both periods. These transactions were partially offset by a decrease in the use of cash resulting from timing of payments to vendors of $24.6 million, a decrease in payments for interest on debt of $6.8 million, and a decrease in payments for broadcast rights of $4.5 million.

Cash Flows – Investing Activities

Net cash flows used in investing activities decreased by $74.1 million during the six months ended June 30, 2019, compared to the same period in 2018. In 2018, we completed our acquisition of Likqid Media Inc. (“LKQD”) for a cash purchase price of $97.0 million, less $11.2 million of cash acquired. Capital expenditures increased during the six months ended June 30, 2019 by $35.1 million compared to the same period in 2018, primarily due to increased spending related to station repacking costs. Other activity included an increase in reimbursements from the FCC for station repack costs of $26.5 million and a decrease in proceeds from disposal of assets of $3.0 million between the two periods.

44


Cash Flows – Financing Activities

Net cash flows used in financing activities increased by $90.6 million during the six months ended June 30, 2019, compared to the same period in 2018.

In 2019, we made payments on the outstanding principal balance of our term loans of $203.6 million, paid dividends to our common stockholders of $41.3 million ($0.45 per share each quarter), paid cash for taxes in exchange for shares of common stock withheld of $9.8 million resulting from net share settlements of certain stock-based compensation, completed our acquisition of the noncontrolling interest of KHII for a cash payment of $6.4 million, paid for finance lease and capitalized software obligations of $5.0 million and received proceeds from the exercise of stock options of $1.5 million.

In 2018, Marshall refinanced the then 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. We also borrowed $44.0 million under our revolving credit facility to partially fund our acquisition of LKQD and received $2.1 million proceeds from stock option exercises. 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 $81.2 million, purchases of treasury stock of $50.5 million, payments of dividends to our common stockholders of $34.4 million ($0.375 per share each quarter), payments for capital lease obligations of $5.6 million and cash payment for taxes in exchange for shares of common stock withheld of $4.7 million.

Our senior secured credit facility may limit the amount of dividends we may pay to stockholders over the term of the agreement.

Future Sources of Financing and Debt Service Requirements

 

As of June 30, 2019, the Company had total combined debt of $3.8 billion, net of financing costs and discounts, which represented 66.1% 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 June 30, 2019 (in thousands):

 

 

 

Total

 

 

2019

 

 

2020-2021

 

 

2022-2023

 

 

Thereafter

 

Nexstar senior secured credit facility

 

$

1,947,389

 

 

$

20,739

 

 

$

99,546

 

 

$

688,524

 

 

$

1,138,580

 

Mission senior secured credit facility

 

 

227,384

 

 

 

1,141

 

 

 

4,571

 

 

 

4,571

 

 

 

217,101

 

Marshall senior secured credit facility

 

 

50,030

 

 

 

50,030

 

 

 

-

 

 

 

-

 

 

 

-

 

Shield senior secured credit facility

 

 

22,385

 

 

 

574

 

 

 

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

 

 

 

$

3,822,188

 

 

$

72,484

 

 

$

106,872

 

 

$

1,387,151

 

 

$

2,255,681

 

 

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 June 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 on February 1 and August 1 of each year. 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.

 

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 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.

 

45


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 June 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 June 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 six months ended June 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 November 30, 2018, we entered into a definitive merger agreement with Tribune to acquire Tribune’s outstanding equity for $46.50 per share in a cash transaction. The estimated total purchase price is $7.165 billion, inclusive of the merger cash consideration, the refinancing of Tribune's outstanding debt and the assumption of outstanding warrants. The estimated purchase price amount does not take into account Tribune’s cash or pension liabilities to be acquired by Nexstar. Tribune shareholders will be entitled to additional cash consideration of approximately $0.30 per share per month if the transaction has not closed by August 31, 2019, pro-rated for partial months and less an adjustment for any dividends declared on or after September 1, 2019. The merger has been approved by the boards of directors of both companies and the stockholders of Tribune and is projected to close in the third quarter of 2019, subject to FCC approval, other regulatory approvals and satisfaction of other customary closing conditions.

 

The merger agreement contains certain termination rights for both us and Tribune. If the merger agreement is terminated in connection with Tribune entering into a definitive agreement with respect to a superior proposal, as well as under certain other circumstances, the termination fee payable by Tribune to us will be $135 million. Either party may terminate the merger agreement if the merger is not consummated on or before an end date of November 30, 2019, with an automatic extension to February 29, 2020, if necessary, to obtain regulatory approval under circumstances specified in the merger agreement.

 

In connection with obtaining the HSR Approval and the FCC approval, we agreed to divest one or more television stations in certain DMAs. On March 20, 2019, we entered into definitive asset purchase agreements to sell a total of nineteen stations in fifteen markets. Under the terms of the agreements, TEGNA. will acquire eleven stations in eight markets for cash consideration of $740 million (subject to customary purchase price adjustments) and Scripps will acquire eight stations in seven markets for cash consideration of $580 million (subject to customary purchase price adjustments). On April 8, 2019, we entered into a definitive asset purchase agreement to sell to Circle City Broadcasting I, Inc., a newly-formed minority-led broadcast company majority-owned by DuJuan McCoy, two stations in Indianapolis, IN -- WISH, the CW affiliate, and WNDY, the MyNetwork TV affiliate -- for $42.5 million in cash. The consummation of each divestiture transaction is subject to the satisfaction or waiver of certain customary conditions, including, among others, (i) the closing of the transactions contemplated by the merger agreement, (ii) FCC approval and HSR Approval, and (iii) the absence of certain legal impediments to the consummation of such transaction. The consummation of each divestiture transaction is expected to occur simultaneously with the closing of the merger.

 

The merger is not subject to any financing condition and we received committed financing up to a maximum of $6.4 billion from a group of commercial banks to provide the debt financing to consummate the merger and the refinancing of certain of the existing indebtedness of Tribune and related transactions.

 

On July 3, 2019, Nexstar Escrow completed the sale and issuance of its $1.120 billion 5.625% Notes due 2027 at par. Refer to Executive Summary—Debt Transactions above for additional information.

 

The remainder of the committed financing includes $3.740 billion in term loans for which we recently completed the pricing. We project to issue these loans simultaneously with the completion of our merger with Tribune.

 

On July 3, 2019, our retransmission consent agreements in 97 of our station markets with AT&T/DirecTV expired. We are currently not providing services to this customer pending the negotiation of the renewal terms.

 

On July 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 August 23, 2019 to stockholders of record on August 9, 2019.

 

On July 31, 2019, the DOJ provided its conditional approval of the proposed Nexstar and Tribune merger by simultaneously filing a pair of documents with the U.S. District Court of the District of Columbia: (i) a civil antitrust suit against the merger deal, and (ii) a proposed settlement that, if approved by the court, would resolve the complaints alleged in the antitrust suit through the divestiture of certain television stations and related conditions. The FCC must still complete its public interest review of the proposed merger.

46


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 June 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% Notes due 2024 and the 5.875% Notes for a period of at least the next 12 months from June 30, 2019.

No Off-Balance Sheet Arrangements

As of June 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.

 

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 June 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.

47


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.

 

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 June 30, 2019 under the Company’s senior secured credit facilities bear interest rates ranging from 3.90% to 4.65%, 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 June 30, 2019 level, the Company’s annual interest expense would increase and cash flow from operations would decrease by approximately $22.4 million, based on the outstanding balances of the Company’s senior secured credit facilities as of June 30, 2019. An increase of 50 basis points in LIBOR would result in a $11.2 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 $22.4 million and $11.2 million, respectively. The 5.625% Notes due 2024, the 6.125% Notes and the 5.875% Notes are fixed rate debt obligations and therefore are not exposed to market interest rate changes. As of June 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 June 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.

48


 

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 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.

On March 16, 2018, a group of companies including Nexstar (the “Defendants”) received a Civil Investigative Demand from the Antitrust Division of the DOJ regarding an investigation into the exchange of certain information related to the pacing of sales related to the same period in the prior year among broadcast stations in some DMAs in alleged violation of federal antitrust law. Other Defendants entered into a proposed consent decree (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 DOJ filed an amended complaint adding Nexstar to the consent decree on December 13, 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 any claims by the government of alleged violations of federal antitrust laws in connection with the alleged information sharing, does not include any financial penalty. Pursuant to the consent decree, Nexstar has 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.

On July 30, 2018, Clay, Massey & Associates, PC filed an antitrust class action complaint in the U.S. District Court for the Northern District of Illinois on behalf of itself and all others similarly situated against Gray Television, Inc., Hearst Communications, Nexstar Media Group, Inc., Tegna Inc., Tribune Media Company and Sinclair Broadcast Group, Inc. The lawsuit alleges unlawful coordination between broadcast television station owners to artificially increase prices of television spot advertisements in violation of Section 1 of the Sherman Act (15 U.S.C. §1). Nexstar has since been named in 15 similar complaints.

 

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 June 5, 2019. Nexstar denies the allegations against it and will defend its advertising practices as necessary.

 

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.

 

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 June 30, 2019 and December 31, 2018 and for the three and six months ended June 30, 2019 and 2018, as filed in Mission Broadcasting, Inc.’s Quarterly Report on Form 10-Q, are incorporated herein by reference.


49


ITEM  6.

Exhibits

 

Exhibit No.

 

Description

  1.1

 

Purchase Agreement, by and among Nexstar Escrow, Inc. and BofA Securities, Inc., acting on behalf of itself and the several initial purchasers named in Schedule I-A thereto, dated June 19, 2019 (Incorporated by reference to Exhibit 1.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Media Group, Inc. on June 20, 2019).

  2.1

 

Asset Purchase Agreement, dated as of March 20, 2019, by and among Nexstar Media Group, Inc., Belo Holdings, Inc. and TEGNA Inc. (Incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Media Group, Inc. on March 26, 2019).

  2.2

 

Asset Purchase Agreement, dated as of March 20, 2019, by and among Nexstar Media Group, Inc., Scripps Media, Inc. and Scripps Broadcasting Holdings, LLC. (Incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Media Group, Inc. on March 26, 2019).

  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)

10.1

 

Amendment to Executive Employment Agreement, dated as of January 15, 2019 between Perry A. Sook and Nexstar Broadcasting, Inc. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Media Group, Inc. on January 22, 2019).

10.2

 

Nexstar Media Group, Inc. 2019 Long-Term Equity Incentive Plan (included as Annex A to Nexstar Media Group, Inc.’s Definitive Proxy Statement on Schedule 14A filed with the SEC on April 26, 2019 and incorporated herein by reference).

10.3

 

KJTL Amendment to Agreement for Sale of Commercial Time between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (May 31, 2019)*

10.4

 

KCIT Amendment to Agreement for Sale of Commercial Time between Nexstar Broadcasting, Inc. and Mission Broadcasting, Inc. (April 30, 2019)*

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 June 30, 2019 from this Quarterly Report on Form 10-Q, formatted in iXBRL (Inline eXtensible Business Reporting Language).*

 

*

Filed herewith

50


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: August 7, 2019