Annual Statements Open main menu

NEXSTAR MEDIA GROUP, INC. - Quarter Report: 2023 June (Form 10-Q)

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, 2023

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

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 7, 2023, the registrant had 35,082,594 shares of Common Stock outstanding.

 


 

TABLE OF CONTENTS

 

Page

PART I

FINANCIAL INFORMATION

 

 

 

 

 

ITEM 1.

Financial Statements (Unaudited)

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022

3

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2023 and 2022

4

 

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months ended June 30, 2023 and 2022

5

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2023 and 2022

 

7

 

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

 

 

Note 1: Organization and Business Operations

8

 

 

Note 2: Summary of Significant Accounting Policies

8

 

 

Note 3: Intangible Assets and Goodwill

11

 

 

Note 4: Investments

12

 

 

Note 5: Accrued Expenses

13

 

 

Note 6: Retirement and Postretirement Plans

14

 

 

Note 7: Debt

14

 

 

Note 8: Leases

16

 

 

Note 9: Fair Value Measurements

17

 

 

Note 10: Common Stock

17

 

 

Note 11: Income Taxes

18

 

 

Note 12: FCC Regulatory Matters

18

 

 

Note 13: Commitments and Contingencies

19

 

 

Note 14: Segment Data

22

 

 

Note 15: Subsequent Events

24

 

ITEM 2.

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

25

 

 

 

 

 

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

37

 

 

 

 

 

ITEM 4.

Controls and Procedures

37

 

 

 

 

 

PART II

OTHER INFORMATION

 

 

 

 

 

 

ITEM 1.

Legal Proceedings

38

 

 

 

 

 

ITEM 1A.

Risk Factors

38

 

 

 

 

 

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

 

 

 

 

 

ITEM 3.

Defaults Upon Senior Securities

38

 

 

 

 

 

ITEM 4.

Mine Safety Disclosures

38

 

 

 

 

 

ITEM 5.

Other Information

38

 

 

 

 

 

ITEM 6.

Exhibits

39

 

 

 


 

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

 

June 30,

 

 

December 31,

 

2023

 

 

2022

 

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

$

346

 

 

$

204

 

Restricted cash and cash equivalents

 

14

 

 

 

16

 

Accounts receivable, net of allowance for credit losses of $18 and $18, respectively

 

944

 

 

 

1,080

 

Broadcast rights

 

114

 

 

 

194

 

Prepaid expenses and other current assets

 

155

 

 

 

121

 

Total current assets

 

1,573

 

 

 

1,615

 

Property and equipment, net

 

1,267

 

 

 

1,262

 

Goodwill

 

2,961

 

 

 

2,961

 

FCC licenses

 

2,910

 

 

 

2,910

 

Network affiliation agreements, net

 

1,777

 

 

 

1,871

 

Other intangible assets, net

 

510

 

 

 

563

 

Investments

 

927

 

 

 

1,119

 

Other noncurrent assets, net

 

385

 

 

 

378

 

Total assets(1)

$

12,310

 

 

$

12,679

 

LIABILITIES AND STOCKHOLDERSʼ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Current portion of debt

$

124

 

 

$

124

 

Accounts payable

 

127

 

 

 

198

 

Broadcast rights payable

 

125

 

 

 

151

 

Accrued expenses

 

333

 

 

 

319

 

Operating lease liabilities

 

49

 

 

 

50

 

Other current liabilities

 

78

 

 

 

51

 

Total current liabilities

 

836

 

 

 

893

 

Debt

 

6,771

 

 

 

6,827

 

Deferred tax liabilities

 

1,586

 

 

 

1,606

 

Other noncurrent liabilities

 

554

 

 

 

584

 

Total liabilities(1)

 

9,747

 

 

 

9,910

 

Commitments and contingencies (Note 13)

 

 

 

 

Stockholdersʼ equity:

 

 

 

 

Preferred stock - $0.01 par value, 200,000 shares authorized; none issued and outstanding at each of June 30, 2023 and December 31, 2022

 

-

 

 

 

-

 

Common stock - $0.01 par value, 100,000,000 shares authorized; 47,282,823 shares issued, 35,381,400 shares outstanding as of June 30, 2023 and 47,282,823 shares issued, 36,810,186 shares outstanding as of December 31, 2022

 

-

 

 

 

-

 

Additional paid-in capital

 

1,263

 

 

 

1,288

 

Accumulated other comprehensive income

 

27

 

 

 

27

 

Retained earnings

 

3,142

 

 

 

3,033

 

Treasury stock - at cost; 11,901,423 and 10,472,637 shares as of June 30, 2023 and December 31, 2022, respectively

 

(1,889

)

 

 

(1,607

)

Total Nexstar Media Group, Inc. stockholdersʼ equity

 

2,543

 

 

 

2,741

 

Noncontrolling interests

 

20

 

 

 

28

 

Total stockholdersʼ equity

 

2,563

 

 

 

2,769

 

Total liabilities and stockholdersʼ equity

$

12,310

 

 

$

12,679

 

 

 

 

 

 

 

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

 

(1)
The condensed consolidated total assets as of June 30, 2023 and December 31, 2022 include certain assets held by consolidated VIEs of $304 million and $304 million, respectively, which are not available to be used to settle the obligations of Nexstar. The condensed consolidated total liabilities as of June 30, 2023 and December 31, 2022 include certain liabilities of consolidated VIEs of $148 million and $148 million, respectively, for which the creditors of the VIEs have no recourse to the general credit of Nexstar. See Note 2 for additional information.

3


 

NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share information, unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net revenue

 

$

1,240

 

 

$

1,245

 

 

$

2,497

 

 

$

2,455

 

Operating expenses (income):

 

 

 

 

 

 

 

 

Direct operating expenses, excluding depreciation and amortization

 

 

537

 

 

 

502

 

 

 

1,075

 

 

 

992

 

Selling, general and administrative expenses, excluding depreciation and amortization

 

 

262

 

 

 

266

 

 

 

528

 

 

 

514

 

Depreciation and amortization expense

 

 

262

 

 

 

143

 

 

 

511

 

 

 

288

 

Other

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2

)

Total operating expenses

 

 

1,061

 

 

 

911

 

 

 

2,114

 

 

 

1,792

 

Income from operations

 

 

179

 

 

 

334

 

 

 

383

 

 

 

663

 

Income from equity method investments, net

 

 

32

 

 

 

36

 

 

 

57

 

 

 

74

 

Interest expense, net

 

 

(111

)

 

 

(76

)

 

 

(218

)

 

 

(145

)

Pension and other postretirement plans credit, net

 

 

10

 

 

 

11

 

 

 

19

 

 

 

22

 

Other expenses, net

 

 

-

 

 

 

(7

)

 

 

(1

)

 

 

(12

)

Income before income taxes

 

 

110

 

 

 

298

 

 

 

240

 

 

 

602

 

Income tax expense

 

 

(35

)

 

 

(72

)

 

 

(77

)

 

 

(124

)

Net income

 

 

75

 

 

 

226

 

 

 

163

 

 

 

478

 

Net loss attributable to noncontrolling interests

 

 

21

 

 

 

1

 

 

 

44

 

 

 

1

 

Net income attributable to Nexstar Media Group, Inc.

 

$

96

 

 

$

227

 

 

$

207

 

 

$

479

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Basic

 

$

2.68

 

 

$

5.66

 

 

$

5.71

 

 

$

11.80

 

Diluted

 

$

2.64

 

 

$

5.56

 

 

$

5.61

 

 

$

11.54

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

Basic (in thousands)

 

 

35,788

 

 

 

40,203

 

 

 

36,250

 

 

 

40,572

 

Diluted (in thousands)

 

 

36,314

 

 

 

40,928

 

 

 

36,878

 

 

 

41,454

 

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

 

4


 

NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Three Months Ended June 30, 2023 and 2022

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Comprehensive

 

 

Treasury Stock

 

 

Noncontrolling

 

 

Stockholdersʼ

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Income

 

 

Shares

 

 

Amount

 

 

interests

 

 

Equity

 

Balances as of March 31, 2023

 

 

47,282,823

 

 

$

-

 

 

$

1,275

 

 

$

3,094

 

 

$

27

 

 

 

(11,299,262

)

 

$

(1,772

)

 

$

29

 

 

$

2,653

 

Purchase of treasury stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(857,843

)

 

 

(142

)

 

 

-

 

 

 

(142

)

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

13

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13

 

Vesting of restricted stock units and exercise of stock options

 

 

-

 

 

 

-

 

 

 

(25

)

 

 

-

 

 

 

-

 

 

 

255,682

 

 

 

25

 

 

 

-

 

 

 

-

 

Dividends declared on common stock ($1.35 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(48

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(48

)

Contribution from noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12

 

 

 

12

 

Net income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

96

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(21

)

 

 

75

 

Balances as of June 30, 2023

 

 

47,282,823

 

 

$

-

 

 

$

1,263

 

 

$

3,142

 

 

$

27

 

 

 

(11,901,423

)

 

$

(1,889

)

 

$

20

 

 

$

2,563

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of March 31, 2022

 

 

47,291,463

 

 

$

-

 

 

$

1,269

 

 

$

2,419

 

 

$

141

 

 

 

(6,655,759

)

 

$

(914

)

 

$

6

 

 

$

2,921

 

Purchase of treasury stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,454,612

)

 

 

(248

)

 

 

-

 

 

 

(248

)

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

13

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13

 

Vesting of restricted stock units and exercise of stock options

 

 

-

 

 

 

-

 

 

 

(24

)

 

 

-

 

 

 

-

 

 

 

242,800

 

 

 

22

 

 

 

-

 

 

 

(2

)

Dividends declared on common stock ($0.90 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(36

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(36

)

Distribution to a noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5

)

 

 

(5

)

Net income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

227

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1

)

 

 

226

 

Balances as of June 30, 2022

 

 

47,291,463

 

 

$

-

 

 

$

1,258

 

 

$

2,610

 

 

$

141

 

 

 

(7,867,571

)

 

$

(1,140

)

 

$

-

 

 

$

2,869

 

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

 

 

5


 

NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Six Months Ended June 30, 2023 and 2022

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Comprehensive

 

 

Treasury Stock

 

 

Noncontrolling

 

 

Stockholdersʼ

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Income

 

 

Shares

 

 

Amount

 

 

interests

 

 

Equity

 

Balances as of December 31, 2022

 

 

47,282,823

 

 

$

-

 

 

$

1,288

 

 

$

3,033

 

 

$

27

 

 

 

(10,472,637

)

 

$

(1,607

)

 

$

28

 

 

$

2,769

 

Purchase of treasury stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,877,783

)

 

 

(318

)

 

 

-

 

 

 

(318

)

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

27

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

27

 

Vesting of restricted stock units and exercise of stock options

 

 

-

 

 

 

-

 

 

 

(52

)

 

 

-

 

 

 

-

 

 

 

448,997

 

 

 

36

 

 

 

-

 

 

 

(16

)

Dividends declared on common stock ($2.70 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(98

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(98

)

Contribution from noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

-

 

 

 

36

 

 

 

36

 

Net income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

207

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(44

)

 

 

163

 

Balances as of June 30, 2023

 

 

47,282,823

 

 

$

-

 

 

$

1,263

 

 

$

3,142

 

 

$

27

 

 

 

(11,901,423

)

 

$

(1,889

)

 

$

20

 

 

$

2,563

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of December 31, 2021

 

 

47,291,463

 

 

$

-

 

 

$

1,311

 

 

$

2,204

 

 

$

141

 

 

 

(6,534,034

)

 

$

(807

)

 

$

7

 

 

$

2,856

 

Purchase of treasury stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,372,535

)

 

 

(406

)

 

 

-

 

 

 

(406

)

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

26

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

26

 

Vesting of restricted stock units and exercise of stock options

 

 

-

 

 

 

-

 

 

 

(79

)

 

 

-

 

 

 

-

 

 

 

1,038,998

 

 

 

73

 

 

 

-

 

 

 

(6

)

Dividends declared on common stock ($1.80 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(73

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(73

)

Distribution to a noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6

)

 

 

(6

)

Net income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

479

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1

)

 

 

478

 

Balances as of June 30, 2022

 

 

47,291,463

 

 

$

-

 

 

$

1,258

 

 

$

2,610

 

 

$

141

 

 

 

(7,867,571

)

 

$

(1,140

)

 

$

-

 

 

$

2,869

 

 

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

 

6


 

NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions, unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

163

 

 

$

478

 

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

 

 

 

 

Depreciation and amortization expense

 

 

511

 

 

 

288

 

Stock-based compensation expense

 

 

27

 

 

 

26

 

Deferred income taxes

 

 

(20

)

 

 

(14

)

Payments for broadcast rights

 

 

(218

)

 

 

(66

)

Income from equity method investments, net

 

 

(57

)

 

 

(74

)

Unrealized loss on equity investments measured at fair value

 

 

-

 

 

 

6

 

Distribution from equity method investments – return on capital

 

 

251

 

 

 

224

 

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

 

 

 

 

 

Accounts receivable

 

 

136

 

 

 

70

 

Prepaid and other current assets

 

 

(3

)

 

 

6

 

Other noncurrent assets

 

 

(24

)

 

 

-

 

Accounts payable

 

 

(63

)

 

 

(71

)

Accrued expenses and other current liabilities

 

 

27

 

 

 

(7

)

Income tax payable

 

 

(24

)

 

 

(41

)

Other noncurrent liabilities

 

 

(25

)

 

 

(26

)

Other

 

 

(2

)

 

 

10

 

Net cash provided by operating activities

 

 

679

 

 

 

809

 

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

 

 

(77

)

 

 

(63

)

Proceeds from sale of real estate and other assets

 

 

-

 

 

 

45

 

Other investing activities, net

 

 

4

 

 

 

3

 

Net cash used in investing activities

 

 

(73

)

 

 

(15

)

Cash flows from financing activities:

 

 

 

 

Proceeds from debt issuance, net of debt discounts

 

 

-

 

 

 

2,480

 

Repayments of long-term debt

 

 

(62

)

 

 

(2,673

)

Purchase of treasury stock

 

 

(315

)

 

 

(406

)

Common stock dividends paid

 

 

(98

)

 

 

(73

)

Payments for capitalized software obligations

 

 

(12

)

 

 

(9

)

Contribution from noncontrolling interests

 

 

36

 

 

 

-

 

Cash paid for shares withheld for taxes

 

 

(17

)

 

 

(13

)

Proceeds from exercise of stock options

 

 

1

 

 

 

6

 

Payments for contingent consideration in connection with a past acquisition

 

 

-

 

 

 

(14

)

Distribution to a noncontrolling interest

 

 

-

 

 

 

(6

)

Other financing activities, net

 

 

1

 

 

 

(1

)

Net cash used in financing activities

 

 

(466

)

 

 

(709

)

Net increase in cash, cash equivalents and restricted cash

 

 

140

 

 

 

85

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

220

 

 

 

207

 

Cash, cash equivalents and restricted cash at end of period

 

$

360

 

 

$

292

 

Supplemental information:

 

 

 

 

 

 

Interest paid

 

$

214

 

 

$

144

 

Income taxes paid, net of refunds

 

$

121

 

 

$

178

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

Accrued and noncash purchases of property and equipment

 

$

27

 

 

$

7

 

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

 

$

25

 

 

$

23

 

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

7


 

NEXSTAR MEDIA GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1: Organization and Business Operations

As used in this Quarterly Report on Form 10-Q, “Nexstar” refers to Nexstar Media Group, Inc., a Delaware corporation, and its consolidated wholly-owned and majority-owned subsidiaries; the “Company” refers to Nexstar and the variable interest entities (“VIEs”) required to be consolidated in our financial statements under authoritative guidance related to the consolidation of VIEs; and all references to “we,” “our,” “ours,” and “us” refer to Nexstar.

Nexstar is a leading diversified media company with television broadcasting, television network and digital media assets operating in the United States. As of June 30, 2023, we owned, operated, programmed or provided sales and other services to 199 full power television stations and one AM radio station, including those television stations owned by VIEs, in 116 markets in 39 states and the District of Columbia. The stations are affiliates of CBS, FOX, NBC, ABC, The CW, MyNetworkTV, and other broadcast television networks. As of June 30, 2023, Nexstar’s stations reached approximately 39% of all U.S. television households (after applying the Federal Communications Commission’s (“FCC”) ultra-high frequency (“UHF”) discount). Through various local service agreements, we provided sales, programming, and other services to 35 television stations owned by consolidated VIEs and one television station owned by an unconsolidated VIE. Nexstar also owns a 75.0% interest in The CW Network, LLC, the fifth major broadcast network in the U.S. (“The CW”), NewsNation, a national cable news network, two digital multicast networks, Antenna TV and Rewind TV, multicast network services provided to third parties, and a 31.3% ownership stake in Television Food Network, G.P. (“TV Food Network”). Our digital assets include 140 local websites and 280 mobile applications, 25 connected television applications, six free ad-supported television channels representing products of our local television stations, The CW, NewsNationNow, The Hill and BestReviews, and a suite of advertiser solutions.

 

Note 2: Summary of Significant Accounting Policies

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts of Nexstar, subsidiaries consolidated through voting interests and VIEs for which we are the primary beneficiary (see “Variable Interest Entities” section below). Noncontrolling interests represent the minority owners’ share in profit or loss and equity of The CW and the VIE owners’ share in profit or loss and equity in the consolidated VIEs. Noncontrolling interests are presented as a component separate from Nexstar’s stockholders’ equity in the accompanying Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Changes in Stockholders’ Equity. All intercompany account balances and transactions have been eliminated in consolidation. Nexstar management evaluates each arrangement that may include variable interests and determines the need to consolidate an entity where it determines Nexstar is the primary beneficiary of a VIE in accordance with related authoritative literature and interpretive guidance.

Interim Financial Statements

The Condensed Consolidated Financial Statements as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022 are unaudited. However, in the opinion of management, such financial statements include all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement of the financial information included herein in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the period. Results of operations for interim periods are not necessarily indicative of results for the full year. Estimates are used for, but are not limited to, allowance for credit losses, valuation of assets acquired and liabilities assumed in business combinations, distribution revenue recognized, income taxes, the recoverability of goodwill, FCC licenses and long-lived assets, the recoverability of investments, the recoverability of broadcast rights and the useful lives of property and equipment and intangible assets. As of June 30, 2023, the Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or revision of the carrying value of its assets or liabilities. However, these estimates and judgments may change as new events occur and additional information is obtained, which may result in changes being recognized in the Company’s consolidated financial statements in future periods. Actual results could differ from those estimates and any such differences may have a material impact on the Company’s Condensed Consolidated Financial Statements.

 

8


 

These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related Notes included in Nexstar’s Annual Report on Form 10-K for the year ended December 31, 2022. The balance sheet as of December 31, 2022 has been derived from the audited financial statements as of that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

Variable Interest Entities

Nexstar may determine that an entity is a VIE as a result of local service agreements entered into with that entity. The term local service agreement generally refers to a contract whereby the owner-operator of a television station contracts with a third party (typically another television station owner-operator) to provide it with administrative, sales and other services required for the operation of its station. Nevertheless, the owner-operator of each station retains control of and responsibility for the operation of its station, including ultimate responsibility over all programming broadcast on its station. A local service agreement can be (i) a time brokerage agreement (“TBA”) or a local marketing agreement (“LMA”) which allows Nexstar to program most of a station’s broadcast time, sell the station’s advertising time and retain the advertising revenue generated in exchange for monthly payments, based on the station’s monthly operating expenses, (ii) a shared services agreement (“SSA”) which allows Nexstar to provide services to a station including news production, technical maintenance and security, in exchange for Nexstar’s right to receive certain payments as described in the SSA, or (iii) a joint sales agreement (“JSA”) which permits Nexstar to sell certain of a station’s advertising time and retain a percentage of the related revenue, as described in the JSA.

Consolidated VIEs

Nexstar consolidates entities in which it is deemed under U.S. GAAP to have controlling financial interests for financial reporting purposes as a result of (i) local service agreements Nexstar has with the stations owned by these entities, (ii) Nexstar’s (excluding The CW) guarantee of the obligations incurred under Mission Broadcasting, Inc.’s (“Mission”) senior secured credit facility (see Note 7), (iii) Nexstar having power over significant activities affecting these VIEs’ economic performance, including budgeting for advertising revenue, certain advertising sales and, in some cases, hiring and firing of sales force personnel and (iv) purchase options granted by each consolidated VIE which permit Nexstar to acquire the assets and assume the liabilities of these VIEs’ stations, subject to FCC consent.

The following table summarizes the various local service agreements Nexstar had in effect as of June 30, 2023 with its consolidated VIEs:

 

Owner

 

Service Agreements

 

Full Power Stations

Mission

 

TBA

 

WFXP, KHMT and KFQX

 

 

SSA & JSA

 

KJTL, KLRT, KASN, KOLR, KCIT, KAMC, KRBC, KSAN, WUTR, WAWV, WYOU, KODE, WTVO, KTVE, WTVW, WVNY, WXXA, WLAJ, KMSS, KPEJ, KLJB, KASY, KWBQ and KRWB

 

 

LMA

 

WNAC and WPIX

White Knight Broadcasting (“White Knight”)

 

SSA & JSA

 

WVLA and KFXK

Vaughan Media, LLC (“Vaughan”)

 

SSA & JSA

 

WBDT, WYTV and KTKA

 

 

LMA

 

KNVA

Nexstar’s ability to receive cash from the consolidated VIEs is governed by the local service agreements. Under these agreements, Nexstar has received substantially all of the consolidated VIEs’ available cash, after satisfaction of operating costs and debt obligations. Nexstar anticipates it will continue to receive substantially all of the consolidated VIEs’ available cash, after satisfaction of operating costs and debt obligations. In compliance with FCC regulations for all the parties, each VIE maintains complete responsibility for and control over programming, finances, personnel and operations of its stations.

 

9


 

The carrying amounts and classification of the assets and liabilities, excluding intercompany amounts, of the VIEs which have been included in the Condensed Consolidated Balance Sheets were as follows (in millions):

 

 

 

June 30, 2023

 

 

December 31, 2022

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

8

 

 

$

6

 

Accounts receivable, net

 

 

17

 

 

 

26

 

Prepaid expenses and other current assets

 

 

6

 

 

 

6

 

 Total current assets

 

 

31

 

 

 

38

 

Property and equipment, net

 

 

60

 

 

 

59

 

Goodwill

 

 

151

 

 

 

151

 

FCC licenses

 

 

200

 

 

 

200

 

Network affiliation agreements, net

 

 

73

 

 

 

76

 

Other noncurrent assets, net

 

 

72

 

 

 

80

 

 Total assets

 

$

587

 

 

$

604

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of debt

 

$

3

 

 

$

3

 

Other current liabilities

 

 

42

 

 

 

30

 

 Total current liabilities

 

 

45

 

 

 

33

 

Debt

 

 

352

 

 

 

353

 

Deferred tax liabilities

 

 

39

 

 

 

35

 

Other noncurrent liabilities

 

 

69

 

 

 

85

 

 Total liabilities

 

$

505

 

 

$

506

 

 

The following are assets of consolidated VIEs, excluding intercompany amounts, that are not available to settle the obligations of Nexstar and the liabilities of consolidated VIEs, excluding intercompany amounts, for which their creditors do not have recourse to the general credit of Nexstar (in millions):

 

 

 

June 30, 2023

 

 

December 31, 2022

 

Current assets

 

$

3

 

 

$

4

 

Property and equipment, net

 

 

11

 

 

 

11

 

Goodwill

 

 

62

 

 

 

62

 

FCC licenses

 

 

200

 

 

 

200

 

Network affiliation agreements, net

 

 

24

 

 

 

26

 

Other noncurrent assets, net

 

 

4

 

 

 

1

 

 Total assets

 

$

304

 

 

$

304

 

 

 

 

 

 

 

 

Current liabilities

 

$

40

 

 

$

28

 

Noncurrent liabilities

 

 

108

 

 

 

120

 

 Total liabilities

 

$

148

 

 

$

148

 

Non-Consolidated VIE

Nexstar has an outsourcing agreement with Cunningham Broadcasting Corporation (“Cunningham”) which continues through December 31, 2023. 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 also evaluated its arrangement 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. There were no significant transactions arising from Nexstar’s outsourcing agreement with Cunningham. Cunningham does not guarantee Nexstar’s debt.

 

10


 

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.

Income Per Share

Basic income per share is computed by dividing the net income attributable to Nexstar by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed using the weighted-average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares are calculated using the treasury stock method. They consist of stock options and restricted stock units outstanding during the period and reflect the potential dilution that could occur if common shares were issued upon exercise of stock options and vesting of restricted stock units. The following table shows the amounts used in computing Nexstar’s diluted shares (in thousands):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Weighted average shares outstanding – basic

 

 

35,788

 

 

 

40,203

 

 

 

36,250

 

 

 

40,572

 

Dilutive effect of equity incentive plan instruments

 

 

526

 

 

 

725

 

 

 

628

 

 

 

882

 

Weighted average shares outstanding – diluted

 

 

36,314

 

 

 

40,928

 

 

 

36,878

 

 

 

41,454

 

During the three and six months ended June 30, 2023, weighted average restricted stock units of 100,000 and 25,000, respectively, were excluded from the calculation of diluted income per share because their effect would have been anti-dilutive.

During the three and six months ended June 30, 2022, no equity incentives were excluded from the calculation of diluted earnings per share.

Recent Accounting Pronouncements

New Accounting Standards Adopted

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”). The amendments in ASU 2021-08 require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. The accounting update also provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted this accounting update for interim periods and fiscal years beginning on January 1, 2023 and the adoption did not impact its Condensed Consolidated Financial Statements.

 

Note 3: Intangible Assets and Goodwill

The Company’s definite-lived intangible assets consisted of the following (dollars in millions):

 

 

Estimated

 

June 30, 2023

 

 

December 31, 2022

 

 

 

useful life,

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

in years

 

Gross

 

 

Amortization

 

 

Net

 

 

Gross

 

 

Amortization

 

 

Net

 

Network affiliation agreements

 

15

 

$

3,125

 

 

$

(1,348

)

 

$

1,777

 

 

$

3,125

 

 

$

(1,254

)

 

$

1,871

 

Other definite-lived intangible assets

 

1-20

 

 

1,085

 

 

 

(575

)

 

 

510

 

 

 

1,077

 

 

 

(514

)

 

 

563

 

Definite-lived intangible assets

 

 

$

4,210

 

 

$

(1,923

)

 

$

2,287

 

 

$

4,202

 

 

$

(1,768

)

 

$

2,434

 

 

11


 

The following table presents the Company’s estimate of amortization expense for the remainder of 2023, each of the five succeeding years ended December 31 and thereafter for definite-lived intangible assets as of June 30, 2023 (in millions):

 

Remainder of 2023

 

$

151

 

2024

 

 

294

 

2025

 

 

289

 

2026

 

 

265

 

2027

 

 

253

 

2028

 

 

238

 

Thereafter

 

 

797

 

 

 

$

2,287

 

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

 

 

Goodwill

 

 

FCC Licenses

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Gross

 

 

Impairment

 

 

Net

 

 

Gross

 

 

Impairment

 

 

Net

 

Balances as of December 31, 2022

 

$

3,141

 

 

$

(180

)

 

$

2,961

 

 

$

2,958

 

 

$

(48

)

 

$

2,910

 

Balances as of June 30, 2023

 

$

3,141

 

 

$

(180

)

 

$

2,961

 

 

$

2,958

 

 

$

(48

)

 

$

2,910

 

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, 2023, the Company did not identify events that would trigger impairment assessments.

 

Note 4: Investments

Investments in the Company’s Condensed Consolidated Balance Sheets consisted of the following (in millions):

 

 

 

June 30, 2023

 

 

December 31, 2022

 

Equity method investments

 

$

923

 

 

$

1,115

 

Other equity investments

 

 

4

 

 

 

4

 

Total investments

 

$

927

 

 

$

1,119

 

 

Equity Method Investments

During the three and six months ended June 30, 2023 and 2022, the Company received cash distributions from its equity method investments, primarily from its investment in TV Food Network, as discussed below.

During the three and six months ended June 30, 2023 and 2022, the income from equity method investments, net reported in the Company’s unaudited Condensed Consolidated Statements of Operations consisted of the following (in millions):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Income from equity method investments, net, before amortization of basis difference

 

$

49

 

 

$

53

 

 

$

92

 

 

$

109

 

Amortization of basis difference

 

 

(17

)

 

 

(17

)

 

 

(35

)

 

 

(35

)

Income from equity method investments, net

 

$

32

 

 

$

36

 

 

$

57

 

 

$

74

 

At acquisition date, the Company measured its estimated share of the differences between the estimated fair values and carrying values (the “basis difference”) of the investees’ tangible assets and amortizable intangible assets had the fair value of the investments been allocated to the identifiable assets of the investees in accordance with ASC Topic 805, “Business Combinations.” Additionally, the Company measured its estimated share of the basis difference attributable to investees’ goodwill. The Company amortizes its share of the basis differences attributable to tangible assets and intangible long-lived assets of investees, including TV Food Network, and records the amortization (the “amortization of basis difference”) as a reduction of income from equity method investments, net in the accompanying Condensed Consolidated Statements of Operations. The Company’s share in these basis differences and related amortization is primarily attributable to its investment in TV Food Network (discussed in more detail below).

12


 

Investment in TV Food Network

Nexstar acquired its 31.3% equity investment in TV Food Network through its acquisition of Tribune Media Company (“Tribune”) on September 19, 2019. Nexstar’s partner in TV Food Network is Warner Bros. Discovery, Inc. (“WBD”), which owns a 68.7% interest in TV Food Network and operates the network on behalf of the partnership.

TV Food Network operates two 24-hour television networks, Food Network and Cooking Channel, offering quality television, video, internet and mobile entertainment and information focusing on food and entertaining.

The partnership agreement governing TV Food Network provides that the partnership shall, unless certain actions are taken by the partners, dissolve and commence winding up and liquidating TV Food Network upon the first to occur of certain enumerated liquidating events, one of which is a specified date of December 31, 2023. Nexstar intends to renew its partnership agreement with WBD for TV Food Network before expiration. In the event of a liquidation, Nexstar would be entitled to its proportionate share of distributions to partners, which the partnership agreement provides would occur as promptly as is consistent with obtaining fair market value for the assets of TV Food Network. The partnership agreement also provides that the partnership may be continued or reconstituted in certain circumstances.

 

As of June 30, 2023, Nexstar’s investment in TV Food Network had a book value of $906 million, compared to $1,099 million as of December 31, 2022.

 

As of June 30, 2023 and December 31, 2022, Nexstar had a remaining share in amortizable basis difference of $432 million and $467 million, respectively, related to its investment in TV Food Network. The remaining amortizable basis difference as of June 30, 2023 had a remaining useful life of approximately 6.2 years. As of June 30, 2023, Nexstar’s share in the basis difference related to the TV Food Network’s goodwill was $500 million (no change in 2023).

Nexstar had the following transactions related to its investment in TV Food Network during the three and six months ended June 30, 2023 and 2022, respectively (in millions):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Cash distributions received

 

$

26

 

 

$

31

 

 

$

251

 

 

$

224

 

Recognized share in TV Food Networkʼs net income

 

 

50

 

 

 

54

 

 

 

93

 

 

 

110

 

Recorded amortization of basis difference (expense)

 

 

(17

)

 

 

(17

)

 

 

(35

)

 

 

(35

)

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

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net revenue

 

$

296

 

 

$

343

 

 

$

581

 

 

$

667

 

Costs and expenses

 

 

138

 

 

 

171

 

 

 

290

 

 

 

318

 

Income from operations

 

 

158

 

 

 

172

 

 

 

291

 

 

 

349

 

Net income

 

 

160

 

 

 

173

 

 

 

298

 

 

 

351

 

Net income attributable to Nexstar Media Group, Inc.

 

 

50

 

 

 

54

 

 

 

93

 

 

 

110

 

 

Note 5: Accrued Expenses

Accrued expenses consisted of the following (in millions):

 

 

 

June 30, 2023

 

 

December 31, 2022

 

Compensation and related taxes

 

$

97

 

 

$

113

 

Interest payable

 

 

55

 

 

 

56

 

Network affiliation fees

 

 

79

 

 

 

50

 

Other

 

 

102

 

 

 

100

 

 

 

$

333

 

 

$

319

 

 

13


 

Note 6: Retirement and Postretirement Plans

Nexstar has various funded, qualified non-contributory defined benefit retirement plans which cover certain employees and former employees. All of these retirement plans are frozen in terms of pay and service, except for a plan with immaterial pension benefit obligations.

The following tables provide the components of net periodic benefit cost (credit) for Nexstar’s pension benefit plans (in millions):

 

 

 

Pension Benefit Plans

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Service cost

 

$

-

 

 

$

-

 

 

$

-

 

 

$

1

 

Interest cost

 

 

21

 

 

 

12

 

 

 

42

 

 

 

23

 

Expected return on plan assets

 

 

(28

)

 

 

(23

)

 

 

(56

)

 

 

(46

)

Amortization of net gain

 

 

(2

)

 

 

-

 

 

 

(4

)

 

 

-

 

Net periodic benefit credit

 

$

(9

)

 

$

(11

)

 

$

(18

)

 

$

(22

)

 

During the three and six months ended June 30, 2023, Nexstar did not make contributions to its qualified pension benefit plans. Nexstar does not anticipate it will be required to make contributions to such pension benefit plans in 2023.

 

Nexstar also has various other postretirement benefit plans (“OPEB”), including retiree medical savings account plans which reimburse eligible retired employees for certain medical expenses and unfunded plans that provide certain health and life insurance benefits to certain retired employees. The periodic benefit cost (credit) related to OPEB is not significant.

 

Note 7: Debt

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

 

 

June 30, 2023

 

 

December 31, 2022

 

Nexstar

 

 

 

 

 

 

     Term Loan A, due June 2027

 

$

2,304

 

 

$

2,364

 

     Term Loan B, due September 2026

 

 

1,561

 

 

 

1,561

 

5.625% Notes, due July 2027

 

 

1,714

 

 

 

1,714

 

4.75% Notes, due November 2028

 

 

1,000

 

 

 

1,000

 

Mission

 

 

 

 

 

 

     Term Loan B, due June 2028

 

 

295

 

 

 

296

 

     Revolving loans, due June 2027

 

 

62

 

 

 

62

 

     Total outstanding principal

 

 

6,936

 

 

 

6,997

 

Less: unamortized financing costs and discount – Nexstar Term Loan A, due June 2027

 

 

(7

)

 

 

(8

)

Less: unamortized financing costs and discount – Nexstar Term Loan B, due September 2026

 

 

(29

)

 

 

(33

)

Add: unamortized premium, net of financing costs – Nexstar 5.625% Notes, due July 2027

 

 

4

 

 

 

4

 

Less: unamortized financing costs and discount – Nexstar 4.75% Notes, due November 2028

 

 

(7

)

 

 

(7

)

Less: unamortized financing costs and discount – Mission Term Loan B, due June 2028

 

 

(2

)

 

 

(2

)

     Total outstanding debt

 

 

6,895

 

 

 

6,951

 

Less: current portion

 

 

(124

)

 

 

(124

)

     Long-term debt, net of current portion

 

$

6,771

 

 

$

6,827

 

 

Nexstar’s outstanding term loans are governed by Nexstar’s credit agreement and Mission’s outstanding term loans and revolving loans are governed by Mission’s credit agreement. Each credit agreement is also herein referred to as a senior secured credit facility. Nexstar’s senior unsecured notes are governed by the indentures.

 

14


 

2023 Activities

On June 6, 2023, Nexstar and Mission, an independently owned VIE consolidated by Nexstar, amended their respective credit agreements. The amendments to the respective credit agreements pertain to replacement of the London Interbank Offered Rate (“LIBOR”)-based interest rate applicable to the Term Loan B, due September 2026 of Nexstar and Term Loan B, due June 2028 of Mission with the term Secured Overnight Financing Rate (“SOFR”)-based interest rate. Under each amendment, the term SOFR is defined to mean the sum of the term SOFR screen rate published by the CME Group Benchmark Administration Limited term SOFR administrator and a spread adjustment of 0.11448% for an interest period of one month’s duration, 0.26161% for an interest period of three months’ duration and 0.42826% for an interest period of six months’ duration. The term SOFR is subject to a floor of 0%.

In addition, during the six months ended June 30, 2023, the Company repaid scheduled principal maturities of $62 million of its term loans.

Unused Commitments and Borrowing Availability

The Company had $531 million (net of outstanding standby letters of credit of $19 million) and $14 million of unused revolving loan commitments under the respective Nexstar and Mission senior secured credit facilities, all of which were available for borrowing, based on the covenant calculations as of June 30, 2023. 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, 2023, the Company was in compliance with its financial covenants.

Collateralization and Guarantees of Debt

The Company’s senior secured credit facilities described above are collateralized by a security interest in substantially all the combined assets, excluding FCC licenses, the other assets of consolidated VIEs unavailable to creditors of Nexstar (see Note 2) and the assets of The CW. Nexstar (excluding The CW) guarantees full payment of all obligations incurred under the Mission senior secured credit facility in the event of Mission’s default. Mission is a guarantor of Nexstar’s senior secured credit facility, Nexstar’s 5.625% Notes, due July 2027 and Nexstar’s 4.75% Notes, due November 2028.

In consideration of Nexstar’s guarantee of the Mission senior secured credit facility, Mission has among other things 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 2023 and 2033, are freely exercisable or assignable by Nexstar without consent or approval by Mission. The Company expects these option agreements to be renewed upon expiration.

 

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, excluding the operating results of The CW, which Nexstar designated as an unrestricted subsidiary under its credit agreements and indentures. The Mission amended credit agreement does not contain financial covenant ratio requirements but does provide for default in the event Nexstar does not comply with all covenants contained in its credit agreement. As of June 30, 2023, Nexstar was in compliance with its financial covenants.

 

 

15


 

Note 8: Leases

The Company as a Lessee

The Company has operating leases for office spaces, tower facilities, antenna sites, studios and other real estate properties and equipment. The operating leases have remaining lease terms of one to 91 years, some of which may include options to extend the leases from one to 99 years, and some of which may include options to terminate the leases within one year. Lease contracts that the Company has executed but which have not yet commenced as of June 30, 2023 were not material.

Supplemental balance sheet information related to operating leases was as follows (in millions, except lease term and discount rate):

 

 

 

Balance Sheet Classification

 

June 30, 2023

 

 

December 31, 2022

 

Operating lease right-of-use assets, net

 

Other noncurrent assets, net

 

$

278

 

 

$

288

 

Current operating lease liabilities

 

Operating lease liabilities

 

$

49

 

 

$

50

 

Noncurrent operating lease liabilities

 

Other noncurrent liabilities

 

$

239

 

 

$

238

 

 

 

 

 

 

 

 

 

 

Weighted Average Remaining Lease Term of Operating leases

 

 

 

8 years

 

 

8 years

 

Weighted Average Discount Rate of Operating leases

 

 

 

 

5.1

%

 

 

5.1

%

 

Operating lease expense for the three months ended June 30, 2023 was $16 million, of which $7 million and $9 million were included in Direct operating and Selling, general and administrative expenses, respectively, excluding depreciation and amortization, in the accompanying Condensed Consolidated Statements of Operations. Operating lease expense for the three months ended June 30, 2022 was $15 million, of which $7 million and $8 million were included in Direct operating and Selling, general and administrative expenses, respectively, excluding depreciation and amortization, in the accompanying Condensed Consolidated Statements of Operations.

 

Operating lease expense for the six months ended June 30, 2023 was $33 million, of which $14 million and $19 million were included in Direct operating and Selling, general and administrative expenses, respectively, excluding depreciation and amortization, in the accompanying Condensed Consolidated Statements of Operations. Operating lease expense for the six months ended June 30, 2022 was $30 million, of which $14 million and $16 million were included in Direct operating and Selling, general and administrative expenses, respectively, excluding depreciation and amortization, in the accompanying Condensed Consolidated Statements of Operations.

Cash paid for operating leases included in the operating cash flows was $32 million and $29 million for the six months ended June 30, 2023 and 2022, respectively.

Future minimum lease payments under non-cancellable leases as of June 30, 2023 were as follows (in millions):

 

 

 

Operating Leases

 

Remainder of 2023

 

$

31

 

2024

 

 

60

 

2025

 

 

46

 

2026

 

 

36

 

2027

 

 

29

 

2028

 

 

26

 

Thereafter

 

 

134

 

   Total future minimum lease payments

 

 

362

 

Less: imputed interest

 

 

(74

)

Total

 

$

288

 

 

 

 

16


 

Note 9: Fair Value Measurements

The Company measures and records in its Condensed Consolidated Financial Statements certain assets and liabilities at fair value. ASC Topic 820, “Fair Value Measurement and Disclosures,” establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). This hierarchy consists of the following three levels:

Level 1 – Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market.
Level 2 – Assets and liabilities whose values are based on inputs other than those included in Level 1, including quoted market prices in markets that are not active; quoted prices of assets or liabilities with similar attributes in active markets; and valuation models whose inputs are observable or unobservable but corroborated by market data.
Level 3 – Assets and liabilities whose values are based on valuation models or pricing techniques that utilize unobservable inputs that are significant to the overall fair value measurement.

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

 

 

 

June 30, 2023

 

 

December 31, 2022

 

 

 

Carrying

 

 

Fair

 

 

Carrying

 

 

Fair

 

 

 

Amount

 

 

Value

 

 

Amount

 

 

Value

 

Nexstar

 

 

 

 

 

 

 

 

 

 

 

 

     Term Loan A, due June 2027(1)

 

$

2,297

 

 

$

2,265

 

 

$

2,356

 

 

$

2,275

 

     Term Loan B, due September 2026(1)

 

 

1,532

 

 

 

1,548

 

 

 

1,528

 

 

 

1,555

 

5.625% Notes, due July 2027(2)

 

 

1,718

 

 

 

1,594

 

 

 

1,718

 

 

 

1,620

 

4.75% Notes, due November 2028(2)

 

 

993

 

 

 

866

 

 

 

993

 

 

 

880

 

Mission

 

 

 

 

 

 

 

 

 

 

 

 

     Term Loan B, due June 2028(1)

 

 

293

 

 

 

288

 

 

 

294

 

 

 

291

 

     Revolving loans due June 2027(1)

 

 

62

 

 

 

60

 

 

 

62

 

 

 

60

 

 

(1)
The fair value of senior secured and revolving 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.

During the three and six months ended June 30, 2023, there were no events or changes in circumstance that triggered an impairment to the Company’s significant assets, including equity method investments, indefinite-lived intangible assets, long-lived assets and goodwill. See Notes 3 and 4 for additional information.

 

Note 10: Common Stock

On July 27, 2022, Nexstar’s board of directors approved a new share repurchase program authorizing Nexstar to repurchase up to an additional $1.5 billion of its common stock, of which $1.258 billion of capacity remained available as of December 31, 2022. During the six months ended June 30, 2023, Nexstar repurchased a total of 1,877,783 shares of its common stock for $315 million, funded by cash on hand, which were accounted for as treasury cost. As of June 30, 2023, the remaining available amount under the share repurchase authorization was $942 million.

Share repurchases may be made from time to time in open market transactions, block trades or 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 January 27, 2023, Nexstar’s board of directors approved a 50% increase in its quarterly cash dividend to $1.35 per share of outstanding common stock beginning with the first quarter of 2023.

 

 

17


 

Note 11: Income Taxes

Income tax expense was $35 million for the three months ended June 30, 2023 compared to $72 million for the same period in 2022. The effective tax rates were 32.0% and 24.0% for each of the respective periods.

Nexstar reported changes in the valuation allowance resulted in an incremental income tax expense for the three months ended June 30, 2023 of $7 million, or a 5.5% increase to the effective tax rate in 2023. Other permanent differences including an adjustment for losses related to the minority interest in The CW resulted in a 3.9% increase to the effective rate. This is partially offset by differences in excess benefit on stock options and restricted stock units exercised in 2023 compared to 2022 which resulted in a 1.2% decrease in the rate.

Income tax expense was $77 million for the six months ended June 30, 2023 compared to $124 million for the same period in 2022. The effective tax rates were 32.2% and 20.6% for each of the respective periods.

Nexstar reported a decrease in income tax benefit for the six months ended June 30, 2023 of $26 million attributable to excess benefit on stock options and restricted stock units exercised in 2022. This resulted in a 3.3% increase to the effective tax rate in 2023 compared to 2022. Changes in the valuation allowance resulted in an incremental income tax expense of $14 million, or a 4.9% increase to the effective tax rate in 2023. Other permanent differences including an adjustment for losses related to the minority interest in The CW resulted in a 3.1% increase to the effective rate.

The Company calculates its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income or loss and adjusts the provision for discrete tax items recorded in the period. Future changes in the forecasted annual income projections could result in significant adjustments to quarterly income tax expense in future periods.

 

Note 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.

Media Ownership

FCC rules limit the Company’s ownership of television stations in local markets and nationally and govern certain local service agreements between Nexstar and third parties. In general, FCC rules prohibit Nexstar from owning two of the top four stations in a market in terms of audience share (unless a case-by-case exception is granted) and from owning stations that reach more than 39% of U.S. television households (as calculated using a prescribed FCC methodology). Nexstar is also prohibited from providing more than 15 percent of the programming of a non-owned television station through a TBA or LMA if Nexstar also owns a station in the same market, unless the applicable TBA or LMA was entered into prior to November 5, 1996.

The FCC is required to review its media ownership rules every four years and to eliminate those rules it finds no longer “necessary in the public interest as a result of competition.” The FCC’s two most recent quadrennial reviews—those for 2010 and 2014—were eventually consolidated into a single proceeding that involved extensive litigation, an agency reconsideration and multiple court appeals, culminating in an April 1, 2021 decision by the U.S. Supreme Court which upheld the FCC’s elimination or relaxation of several rules. The 2018 quadrennial review, which the FCC commenced in December 2018, remains pending, and the FCC has solicited and received comments to update the record of that proceeding in the wake of the Supreme Court’s decision. Notwithstanding the pendency of the 2018 review, in December 2022 the FCC commenced its 2022 quadrennial review proceeding. Public comments in that proceeding were filed in March 2023. Additionally, the FCC has an open proceeding to review the national television station ownership limit. Thus, the media ownership rules are subject to change as a result of current and future quadrennial reviews and in other proceedings.

 

 

18


 

Retransmission Consent

Broadcasters may obtain carriage of their stations’ signals on cable, satellite and other multichannel video programming distributors (“MVPDs”) through either mandatory carriage or through “retransmission consent.” Every three years all stations must formally elect either mandatory carriage or retransmission consent. The next election must be made by October 1, 2023 and will be effective January 1, 2024. Must-carry elections require that the MVPD carry one station programming stream and related data in the station’s local market. However, MVPDs may decline a must-carry election in certain circumstances. MVPDs do not pay a fee to stations that elect mandatory carriage.

A broadcaster that elects retransmission consent waives its mandatory carriage rights, and the broadcaster and the MVPD must negotiate for carriage of the station’s signal. Negotiated terms may include channel position, service tier carriage, carriage of multiple program streams, compensation and other consideration. If a broadcaster elects to negotiate retransmission terms, it is possible that the broadcaster and the MVPD will not reach agreement and that the MVPD will not carry the station’s signal.

 

FCC rules and federal statutory law require retransmission consent negotiations to be conducted in “good faith.” It is a per se violation of the duty to negotiate in good faith for a television broadcast station to negotiate retransmission consent jointly with another station in the same market if the stations are not commonly owned. Accordingly, the VIEs with which we have sharing agreements must separately negotiate their retransmission consent agreements with MVPDs for stations in markets where we also own a station.

MVPD operators have actively sought to change the regulations under which retransmission consent is negotiated before both the U.S. Congress and the FCC in order to increase their bargaining leverage with television stations. There are still-open FCC proceedings to review the “totality of the circumstances” test for good faith retransmission consent negotiations, and to eliminate or modify the FCC’s non-duplication and syndicated exclusivity rules (which could permit MVPDs to import out-of-market television stations in certain circumstances).

Certain online video distributors (“OVDs”) have successfully or unsuccessfully sought to stream broadcast programming over the internet. In 2014, the U.S. Supreme Court held that an OVD’s retransmissions of broadcast television signals without the consent of the broadcast station violate federal copyright law. 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. The proceeding remains open. Although the FCC has not classified OVDs as MVPDs to date, various OVDs have signed agreements for retransmission of local stations within their markets, and others are actively seeking to negotiate such agreements.

 

Note 13: Commitments and Contingencies

Guarantee of Mission Debt

Nexstar (excluding The CW) guarantees full payment of all obligations incurred under the Mission senior secured credit facility. In the event that Mission is unable to repay amounts due, Nexstar will be obligated to repay such amounts. The maximum potential amount of future payments that Nexstar would be required to make under this guarantee would be generally limited to the outstanding principal amounts. As of June 30, 2023, Mission had a maximum commitment of $370 million under its amended credit agreement, of which $356 million principal balance of debt was outstanding.

 

Future Acquisitions

In May 2023, Nexstar entered into a definitive agreement to acquire the assets of KUSI-TV (independent television station) serving the San Diego, CA market from McKinnon Broadcasting Company and Channel 51 of San Diego, Inc. for $35 million in cash, subject to customary working capital adjustments. On August 3, 2023, Nexstar received preliminary approval for the acquisition from the FCC and is expected to close the transaction before the end of the year. The acquisition will strengthen Nexstar’s local television broadcasting, news, and digital media platforms in San Diego, will present numerous opportunities for operating efficiencies and is expected to be accretive to Nexstar’s operating results when The CW Network affiliation becomes available in the market.

On May 10, 2023, Mission entered into a definitive agreement to acquire the assets of WADL-TV serving the Detroit, Michigan market from Adell Broadcasting Corporation for $75 million in cash, subject to customary working capital adjustments. The proposed acquisition is subject to regulatory and other customary approvals, is expected to close once we receive regulatory approval, and would be Mission’s second entry into the state of Michigan.

 

 

19


 

Indemnification Obligations

In connection with certain agreements that the Company enters into in the normal course of its business, including local service agreements, business acquisitions and borrowing arrangements, the Company enters into contractual arrangements under which the Company agrees to indemnify the third party to such arrangement from losses, claims and damages incurred by the indemnified party for certain events as defined within the particular contract. Such indemnification obligations may not be subject to maximum loss clauses and the maximum potential amount of future payments the Company could be required to make under these indemnification arrangements may be unlimited. Historically, payments made related to these indemnifications have been insignificant and the Company has not incurred significant costs to defend lawsuits or settle claims related to these indemnification agreements.

 

Litigation

From time to time, the Company is involved in litigation that arises from the ordinary operations of business, such as contractual or employment disputes or other general actions. In the event of an adverse outcome of these proceedings, the Company believes the resulting liabilities would not have a material adverse effect on its financial condition or results of operations.

Local TV Advertising Antitrust Litigation—On March 16, 2018, a group of companies including Nexstar and Tribune (the “Defendants”) received a Civil Investigative Demand from the Antitrust Division of the Department of Justice (“DOJ”) regarding an investigation into the exchange of certain information related to the pacing of sales related to the same period in the prior year among broadcast stations in some DMAs in alleged violation of federal antitrust law. Without admitting any wrongdoing, some Defendants, including Tribune, entered into a proposed consent decree (referred to herein as the “consent decree”) with the DOJ on November 6, 2018. Without admitting any wrongdoing, Nexstar agreed to settle the matter with the DOJ on December 5, 2018. The consent decree was entered in final form by the U.S. District Court for the District of Columbia on May 22, 2019. The consent decree, which settles claims by the government of alleged violations of federal antitrust laws in connection with the alleged information sharing, does not include any financial penalty. Pursuant to the consent decree, Nexstar and Tribune agreed not to exchange certain non-public information with other stations operating in the same DMA except in certain cases, and to implement certain antitrust compliance measures and monitor and report on compliance with the consent decree.

 

Starting in July 2018, a series of plaintiffs filed putative class action lawsuits against the Defendants and others alleging that they coordinated their pricing of television advertising, thereby harming a proposed class of all buyers of television advertising time from one or more of the Defendants since at least January 1, 2014. The plaintiff in each lawsuit seeks injunctive relief and money damages caused by the alleged antitrust violations. On October 9, 2018, these cases were consolidated in a multi-district litigation in the District Court for the Northern District of Illinois captioned In Re: Local TV Advertising Antitrust Litigation, No. 1:18-cv-06785 (“MDL Litigation”). On January 23, 2019, the Court in the MDL Litigation appointed plaintiffs’ lead and liaison counsel.

The MDL Litigation is ongoing. The Plaintiffs’ Consolidated Complaint was filed on April 3, 2019; Defendants filed a Motion to Dismiss on September 5, 2019. Before the Court ruled on that motion, the Plaintiffs filed their Second Amended Consolidated Complaint on September 9, 2019. This complaint added additional defendants and allegations. The Defendants filed a Motion to Dismiss and Strike on October 8, 2019. The Court denied that motion on November 6, 2020. On March 16, 2022, the Plaintiffs filed their Third Amended Complaint. The Third Amended Complaint adds two additional plaintiffs and an additional defendant, but does not make material changes to the allegations.

The parties are in the discovery phase of litigation. The Court has not yet set a trial date. Nexstar and Tribune deny the allegations against them and will defend their advertising practices.

In connection with Nexstar’s acquisition of Tribune on September 19, 2019, Nexstar assumed contingencies from certain legal proceedings, as follows:

Tribune Chapter 11 Reorganization and Confirmation Order Appeals—On December 8, 2008, Tribune and 110 of its direct and indirect wholly-owned subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief under chapter 11 (“Chapter 11”) of title 11 of the United States Code in the U.S. Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). On July 23, 2012, the Bankruptcy Court issued an order confirming the Fourth Amended Joint Plan of Reorganization for Tribune and its Subsidiaries (as such plan was subsequently modified by its proponents, the “Plan”). The Plan became effective and the Debtors emerged from Chapter 11 on December 31, 2012 (the “Effective Date”).

As of July 11, 2023, the Bankruptcy Court has entered final decrees that have collectively closed all of the Debtors’ Chapter 11 cases. Tribune is in the process of making final distributions in connection with the Chapter 11 cases as well as the final distribution of reserve amounts and payment of fees in accordance with the Plan and applicable orders of the Bankruptcy Court, none of which are expected to be significant.

 

 

20


 

Chicago Cubs Transactions—On August 21, 2009, Tribune and Chicago Entertainment Ventures, LLC (formerly Chicago Baseball Holdings, LLC) (“CEV LLC”), and its subsidiaries (collectively, “New Cubs LLC”), among other parties, entered into an agreement (the “Cubs Formation Agreement”) governing the contribution of certain assets and liabilities related to the businesses of the Chicago Cubs Major League Baseball franchise then owned by Tribune and its subsidiaries to New Cubs LLC. The transactions contemplated by the Cubs Formation Agreement and the related agreements thereto (the “Chicago Cubs Transactions”) closed on October 27, 2009. As a result of these transactions, Northside Entertainment Holdings LLC (f/k/a Ricketts Acquisition LLC) (“NEH”) owned 95% and Tribune owned 5% of the membership interests in CEV LLC. The fair market value of the contributed assets exceeded the tax basis and did not result in an immediate taxable gain as the transaction was structured to comply with the partnership provisions of the Internal Revenue Code (“IRC”) and related regulations.

On June 28, 2016, the Internal Revenue Service (“IRS”) issued Tribune a Notice of Deficiency which presented the IRS’s position that the gain with respect to the Chicago Cubs Transactions should have been included in Tribune’s 2009 taxable income. Accordingly, the IRS proposed a $182 million tax and a $73 million gross valuation misstatement penalty. During the third quarter of 2016, Tribune filed a petition in the U.S. Tax Court to contest the IRS’s determination. After-tax interest on the aforementioned proposed tax and penalty through June 30, 2023 would be approximately $174 million. In addition, if the IRS prevails in its position, under the tax rules for determining tax basis upon emergence from bankruptcy, the Company would be required to reduce its tax basis in certain assets. The reduction in tax basis would be required to reflect the reduction in the amount of the Company’s guarantee of the New Cubs partnership debt which was included in the reported tax basis previously determined upon emergence from bankruptcy and subject to Tribune’s 2014 and 2015 federal income tax audits (described below).

On September 19, 2019, Tribune became a wholly owned subsidiary of Nexstar following Nexstar’s merger with Tribune. Nexstar disagrees with the IRS’s position that the Chicago Cubs Transactions generated taxable gain in 2009, the proposed penalty and the IRS’s calculation of the gain. If the IRS prevails in its position, the gain on the Chicago Cubs Transactions would be deemed to be taxable in 2009. Nexstar estimates that the federal and state income taxes would be approximately $225 million before interest and penalties. Any tax, interest and penalty due will be offset by tax payments made relating to this transaction subsequent to 2009. Tribune made approximately $154 million of tax payments prior to its merger with Nexstar.

A bench trial in the U.S. Tax Court took place between October 28, 2019 and November 8, 2019, and closing arguments took place on December 11, 2019. The Tax Court issued a separate opinion on January 6, 2020 holding that the IRS satisfied the procedural requirements for the imposition of the gross valuation misstatement penalty. The judge deferred any litigation of the penalty until a final determination was reached by the Tax Court or Court of Appeals.

On October 26, 2021, the Tax Court issued an opinion related to the Chicago Cubs Transactions, which held that Tribune’s structure was, in substantial part, in compliance with partnership provisions of the Code and, as a result, did not trigger the entire 2009 taxable gain proposed by the IRS. On October 19, 2022, the Tax Court entered the decision that there is no tax deficiency or penalty due in the 2009 tax year. On January 13, 2023, the IRS filed a notice of appeal to the U.S. Court of Appeals for the Seventh Circuit. On February 3, 2023, the Company filed a notice of cross-appeal.

As of June 30, 2023, Nexstar believes the tax impact of applying the Tax Court opinion to 2009 and its impact on subsequent years is not material to the Company’s accounting for uncertain tax positions or to its Condensed Consolidated Financial Statements. Although management believes its estimates and judgments are reasonable, the timing and ultimate resolution are unpredictable and could materially change.

Revenue Agent’s Report on Tribune’s 2014 to 2015 Federal Income Tax Audits— Prior to Nexstar’s merger with Tribune in September 2019, Tribune was undergoing federal income tax audits for taxable years 2014 and 2015. In the third quarter of 2020, the IRS completed its audits of Tribune and issued a Revenue Agent’s Report which disallows the reporting of certain assets and liabilities related to Tribune’s emergence from Chapter 11 bankruptcy on December 31, 2012. Nexstar disagrees with the IRS’s proposed adjustments to the tax basis of certain assets and the related taxable income impact, and Nexstar is contesting the adjustments through the IRS administrative appeal procedures. If the IRS prevails in its position and after taking into account the impact of the Tax Court opinion, Nexstar would be required to reduce its tax basis in certain assets resulting in a $16 million increase in its federal and state taxes payable and a $70 million increase in deferred income tax liability as of June 30, 2023. In accordance with ASC Topic 740, the Company has reflected $11 million for certain contested issues in its liability for uncertain tax positions at June 30, 2023 and December 31, 2022.

21


 

Note 14: Segment Data

The Company’s reportable broadcast segment includes (i) television stations and related local websites that Nexstar owns, operates, programs or provides sales and other services to in various markets across the United States, (ii) NewsNation, a national cable news network, (iii) two owned and operated digital multicast networks and other multicast network services, and (iv) WGN-AM, a Chicago radio station. The other activities of the Company include (i) The CW, (ii) digital businesses focused on the national marketplace, (iii) the management of certain real estate assets, including revenues from leasing certain owned office and production facilities, (iv) corporate functions, and (v) eliminations.

The Company evaluates the performance of its operating segments based on net revenue and segment profit. Segment profit (loss) excludes depreciation and amortization (but includes payments for broadcast rights), impairment charges, gain on disposal of assets and certain other items that are included in income from continuing operations determined in accordance with U.S. GAAP.

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

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

Net revenue

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Broadcast

 

$

1,145

 

 

$

1,216

 

 

$

2,324

 

 

$

2,399

 

Other

 

 

96

 

 

 

27

 

 

 

176

 

 

 

52

 

Corporate (unallocated)

 

 

(1

)

 

 

2

 

 

 

(3

)

 

 

4

 

Total net revenue

 

$

1,240

 

 

$

1,245

 

 

$

2,497

 

 

$

2,455

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

Operating income (loss)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Broadcast segment profit

 

$

414

 

 

$

491

 

 

$

861

 

 

$

973

 

Other segments (loss) profit

 

 

(57

)

 

 

2

 

 

 

(120

)

 

 

3

 

Corporate (unallocated)

 

 

(46

)

 

 

(48

)

 

 

(91

)

 

 

(93

)

Depreciation and amortization expense(1)

 

 

(142

)

 

 

(144

)

 

 

(284

)

 

 

(289

)

Payments for broadcast rights(2)

 

 

23

 

 

 

33

 

 

 

50

 

 

 

66

 

Loss attributable to noncontrolling owners of a segment

 

 

(19

)

 

 

-

 

 

 

(40

)

 

 

-

 

Miscellaneous, net

 

 

6

 

 

 

-

 

 

 

7

 

 

 

3

 

Income from operations

 

$

179

 

 

$

334

 

 

$

383

 

 

$

663

 

 

Assets

 

June 30, 2023

 

 

December 31, 2022

 

Broadcast(3)

 

$

11,141

 

 

$

11,635

 

Other

 

 

461

 

 

 

497

 

Corporate (unallocated)

 

 

708

 

 

 

547

 

 

 

$

12,310

 

 

$

12,679

 

 

Goodwill

 

June 30, 2023

 

 

December 31, 2022

 

Broadcast

 

$

2,873

 

 

$

2,873

 

Other

 

 

88

 

 

 

88

 

 

 

$

2,961

 

 

$

2,961

 

 

(1)
Excludes amortization of The CW’s programming costs of $120 million and $227 million for the three and six months ended June 30, 2023, respectively, which is included in “Other segments (loss) profit”.
(2)
Excludes payments for The CW’s broadcast rights of $53 million and $168 million for the three and six months ended June 30, 2023, respectively, which are not included in “Other segments (loss) or profit”.
(3)
While the Company’s investment in TV Food Network ($906 million at June 30, 2023 and $1,099 million at December 31, 2022) has not been allocated to a Company reporting unit or operating segment, such asset has been included in the Company’s disclosure of Broadcast segment assets given the similar nature of the investment to that segment. For additional information on equity investments, see Note 4.

 

22


 

The following tables present the disaggregation of the Company’s revenue under ASC 606 for the periods presented (in millions):

 

Three Months Ended June 30, 2023

 

Broadcast

 

 

Other

 

 

Corporate (unallocated)

 

 

Consolidated

 

Core advertising

 

$

379

 

 

$

25

 

 

$

-

 

 

$

404

 

Political advertising

 

 

9

 

 

 

-

 

 

 

-

 

 

 

9

 

Distribution

 

 

684

 

 

 

14

 

 

 

(2

)

 

 

696

 

Digital

 

 

63

 

 

 

35

 

 

 

-

 

 

 

98

 

Other

 

 

10

 

 

 

22

 

 

 

1

 

 

 

33

 

Total net revenue

 

$

1,145

 

 

$

96

 

 

$

(1

)

 

$

1,240

 

 

Six Months Ended June 30, 2023

 

Broadcast

 

 

Other

 

 

Corporate (unallocated)

 

 

Consolidated

 

Core advertising

 

$

770

 

 

$

51

 

 

$

-

 

 

$

821

 

Political advertising

 

 

17

 

 

 

-

 

 

 

-

 

 

 

17

 

Distribution

 

 

1,397

 

 

 

31

 

 

 

(4

)

 

 

1,424

 

Digital

 

 

120

 

 

 

70

 

 

 

-

 

 

 

190

 

Other

 

 

20

 

 

 

24

 

 

 

1

 

 

 

45

 

Total net revenue

 

$

2,324

 

 

$

176

 

 

$

(3

)

 

$

2,497

 

 

Three Months Ended June 30, 2022

 

Broadcast

 

 

Other

 

 

Corporate (unallocated)

 

 

Consolidated

 

Core advertising

 

$

413

 

 

$

-

 

 

$

-

 

 

$

413

 

Political advertising

 

 

87

 

 

 

-

 

 

 

-

 

 

 

87

 

Distribution

 

 

646

 

 

 

-

 

 

 

-

 

 

 

646

 

Digital

 

 

61

 

 

 

27

 

 

 

-

 

 

 

88

 

Other

 

 

9

 

 

 

-

 

 

 

2

 

 

 

11

 

Total net revenue

 

$

1,216

 

 

$

27

 

 

$

2

 

 

$

1,245

 

 

Six Months Ended June 30, 2022

 

Broadcast

 

 

Other

 

 

Corporate (unallocated)

 

 

Consolidated

 

Core advertising

 

$

841

 

 

$

-

 

 

$

-

 

 

$

841

 

Political advertising

 

 

110

 

 

 

-

 

 

 

-

 

 

 

110

 

Distribution

 

 

1,314

 

 

 

-

 

 

 

-

 

 

 

1,314

 

Digital

 

 

115

 

 

 

52

 

 

 

-

 

 

 

167

 

Other

 

 

19

 

 

 

-

 

 

 

4

 

 

 

23

 

Total net revenue

 

$

2,399

 

 

$

52

 

 

$

4

 

 

$

2,455

 

 

The Company primarily derives its revenues from television and digital advertising and from distribution of its stations’ signals and networks. During the three and six months ended June 30, 2023, revenues from these sources for two of the Company’s customers exceeded 10%. Each of these customers represented approximately 12% and 14% of the Company’s consolidated net revenues during three months ended June 30, 2023 and 13% and 14% of the Company’s consolidated net revenues during the six months ended June 30, 2023, respectively. During the three and six months ended June 30, 2022, revenues from these sources for two of the Company’s customers exceeded 10%. Each of these customers represented approximately 11% and 13% of the Company’s consolidated net revenues during the three and six months ended June 30, 2022, respectively.

Advertising revenue (core, political and digital) is positively affected by national and local 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/or 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 and the carriage of NewsNation. Distribution revenue is recognized at the point in time the broadcast signal is delivered to the distributors and is based on a price per subscriber.

 

23


 

Note 15: Subsequent Events

On July 27, 2023, Nexstar’s Board of Directors declared a quarterly cash dividend of $1.35 per share of its common stock. The dividend is payable on August 24, 2023 to stockholders of record on August 10, 2023.

 

From July 1, 2023 to August 7, 2023, we repurchased 337,587 shares of our common stock for $60 million, funded by cash on hand. As of the date of filing this Quarterly Report on Form 10-Q, the remaining available amount under the share repurchase authorization was $882 million.

From July 1, 2023 to August 7, 2023, in connection with stock option exercises and vesting of restricted stock units, Nexstar issued 38,781 shares of its common stock, net of any shares withheld for taxes.

24


 

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, 2022.

As used in this Quarterly Report on Form 10-Q and unless the context indicates otherwise, “Nexstar” refers to Nexstar Media Group, Inc., a Delaware corporation, and its consolidated wholly owned and majority owned subsidiaries, the “Company” refers to Nexstar and the variable interest entities (“VIEs”) required to be consolidated in our financial statements; and all references to “we,” “our,” “ours,” and “us” refer to Nexstar.

As a result of our deemed controlling financial interests in the consolidated VIEs in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), we consolidate the financial position, results of operations and cash flows of these VIEs as if they were wholly-owned entities. We believe this presentation is meaningful for understanding our financial performance. Refer to Note 2 to our Condensed Consolidated Financial Statements for a discussion of our determinations of VIE consolidation under the related authoritative guidance. The following discussion of our financial position and results of operations includes the consolidated VIEs’ financial position and results of operations.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: the risks and uncertainties of current economic factors that are beyond our control, such as inflation, rising interest rates and supply chain disruptions; any projections or expectations of earnings, revenue, financial performance, liquidity and capital resources or other financial items; any assumptions or projections about the television broadcasting industry; any statements of our plans, strategies and objectives for our future operations, performance, liquidity and capital resources or other financial items; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and other similar words.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ from a projection or assumption in any of our forward-looking statements. Our future financial position and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties, including those described in our Annual Report on Form 10-K for the year ended December 31, 2022 and in our other filings with the United States Securities and Exchange Commission (“SEC”). The forward-looking statements made in this Quarterly Report on Form 10-Q are made only as of the date hereof, and we do not have or undertake any obligation to update any forward-looking statements to reflect subsequent events or circumstances.

 

Executive Summary

 

Six Months Ended June 2023 Highlights

Net revenue was flat at $1.24 billion during each of the three months ended June 30, 2023 and 2022.
During the three and six months ended June 30, 2023, we returned approximately $189 million and $413 million of capital to stockholders through repurchases of common stock and dividends, funded by cash on hand.
During the six months ended June 30, 2023, the Company repaid scheduled principal maturities of $62 million under its term loans.
In June 2023, Nexstar filed an amendment to its certificate of incorporation, approved by its shareholders at the 2023 annual meeting, to declassify its Board of Directors beginning at the 2024 annual meeting.
In May 2023, Nexstar entered into a definitive agreement to acquire the assets of KUSI-TV (independent television station) serving the San Diego, CA market from McKinnon Broadcasting Company and Channel 51 of San Diego, Inc. for $35 million in cash, subject to customary working capital adjustments. On August 3, 2023, Nexstar received preliminary approval for the acquisition from the FCC and is expected to close the transaction before the end of the year. The acquisition will strengthen Nexstar’s local television broadcasting, news, and digital media platforms in San Diego, will present numerous opportunities for operating efficiencies and is expected to be accretive to Nexstar’s operating results when The CW Network affiliation becomes available in the market.

 

25


 

On May 10, 2023, Mission entered into a definitive agreement to acquire the assets of WADL-TV serving the Detroit, Michigan market from Adell Broadcasting Corporation for $75 million in cash, subject to customary working capital adjustments. The proposed acquisition is subject to regulatory and other customary approvals, is expected to close once we receive regulatory approval, and would be Mission’s second entry into the state of Michigan.
In April 2023, NewsNation, America’s fastest growing cable news network, expanded its news programming to 24 hours per weekday of national news, analysis and talk.
During the first quarter of 2023, Nexstar created a new advertising sales structure and hired a new leadership team led by Chief Revenue Officer Michael Strober to implement Nexstar’s new data and technology-driven, multi-platform strategy and accelerate the monetization of the Company’s platforms.

 

Overview of Operations

As of June 30, 2023, we owned, operated, programmed or provided sales and other services to 199 full power television stations and one AM radio station, including those owned by VIEs, in 116 markets in 39 states and the District of Columbia. The stations are affiliates of ABC, NBC, FOX, CBS, The CW, MyNetworkTV and other broadcast television networks. Through various local service agreements, we provided sales, programming and other services to 36 full power television stations owned by independent third parties, of which 35 full power television stations are VIEs that are consolidated into our financial statements. We also own a 75.0% interest in The CW, the fifth major broadcast network in the U.S., NewsNation, a national cable news network, two digital multicast networks, Antenna TV and Rewind TV, multicast network services provided to third parties, and a 31.3% ownership stake in TV Food Network. Our digital assets include 140 local websites, 280 mobile applications, 25 connected television applications, and six free ad-supported television channels representing products of our local television stations, The CW, NewsNation, The Hill, and BestReviews, and a suite of advertising solutions.

 

We (excluding The CW) guarantee full payment of all obligations incurred under Mission Broadcasting, Inc.’s (“Mission”) senior secured credit facility in the event of its default. Mission is a guarantor of our senior secured credit facility, our 5.625% Notes, due July 2027 and our 4.75% Notes, due November 2028. In consideration of our guarantee of Mission’s senior secured credit facility, Mission has among other things 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 2023 and 2033) are freely exercisable or assignable by us without consent or approval by Mission or its shareholders. We expect these option agreements to be renewed upon expiration.

We do not own the consolidated VIEs or their television stations. However, we are deemed under U.S. GAAP to have controlling financial interests for financial reporting purposes in these entities because of (i) the local service agreements we have with their stations, (ii) our (excluding The CW) guarantee of the obligations incurred under Mission’s senior secured credit facility, (iii) our power over significant activities affecting the VIEs’ economic performance, including budgeting for advertising revenue, certain advertising sales and, in some cases, hiring and firing of sales force personnel and (iv) purchase options granted by each consolidated VIE which permit us to acquire the assets and assume the liabilities of each of these VIEs’ stations at any time, subject to FCC consent. In compliance with FCC regulations for all the parties, each of the consolidated VIEs maintains complete responsibility for and control over programming, finances and personnel for its stations.

See Note 2, “Variable Interest Entities” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for additional information on VIEs, including a discussion of the local service agreements we have with these independent third parties.

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. On April 1, 2021, the U.S. Supreme Court issued a decision that reversed a lower court of appeals ruling and upheld the FCC’s elimination or modification of certain of its media ownership rules in the agency’s 2010/2014 quadrennial review of those rules. Among the regulations eliminated in 2021 as a result of the Supreme Court ruling was a 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 market under a JSA is deemed to have an attributable ownership interest in that station, as well as a requirement that at least eight independently owned television stations remain in a local television market for a party to acquire a second station in that market. While these restrictions are no longer in effect, the FCC’s 2018 quadrennial media ownership review is currently pending and the 2022 quadrennial review has also commenced. An FCC proceeding is also pending to review the current national limit on television station ownership. The FCC could reinstitute its earlier restrictions or impose other limitations in these or any future reviews.

 

26


 

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 congressional and/or presidential elections occur and from advertising aired during the Olympic Games. As 2023 is not an election year, we expect a decrease in political advertising revenue to be reported in 2023 compared to 2022.

 

Historical Performance

Revenue

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

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

Core advertising

 

$

404

 

 

 

32.6

 

 

$

413

 

 

 

33.2

 

 

$

821

 

 

 

32.9

 

 

$

841

 

 

 

34.3

 

Political advertising

 

 

9

 

 

 

0.7

 

 

 

87

 

 

 

7.0

 

 

 

17

 

 

 

0.7

 

 

 

110

 

 

 

4.5

 

Distribution

 

 

696

 

 

 

56.1

 

 

 

646

 

 

 

51.9

 

 

 

1,424

 

 

 

57.0

 

 

 

1,314

 

 

 

53.5

 

Digital

 

 

98

 

 

 

7.9

 

 

 

88

 

 

 

7.1

 

 

 

190

 

 

 

7.6

 

 

 

167

 

 

 

6.8

 

Other

 

 

33

 

 

 

2.7

 

 

 

11

 

 

 

0.8

 

 

 

45

 

 

 

1.8

 

 

 

23

 

 

 

0.9

 

Total net revenue

 

$

1,240

 

 

 

100.0

 

 

$

1,245

 

 

 

100.0

 

 

$

2,497

 

 

 

100.0

 

 

$

2,455

 

 

 

100.0

 

Results of Operations

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

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

Net revenue

 

$

1,240

 

 

 

100.0

 

 

$

1,245

 

 

 

100.0

 

 

$

2,497

 

 

 

100.0

 

 

$

2,455

 

 

 

100.0

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses

 

 

537

 

 

 

43.3

 

 

 

502

 

 

 

40.3

 

 

 

1,075

 

 

 

43.1

 

 

 

992

 

 

 

40.4

 

Selling, general and administrative expenses, excluding corporate

 

 

213

 

 

 

17.2

 

 

 

216

 

 

 

17.3

 

 

 

431

 

 

 

17.3

 

 

 

417

 

 

 

17.0

 

Corporate expenses

 

 

49

 

 

 

4.0

 

 

 

50

 

 

 

4.0

 

 

 

97

 

 

 

3.9

 

 

 

97

 

 

 

4.0

 

Depreciation and amortization expense

 

 

262

 

 

 

21.1

 

 

 

143

 

 

 

11.6

 

 

 

511

 

 

 

20.4

 

 

 

288

 

 

 

11.7

 

Other

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2

)

 

 

(0.1

)

Total operating expenses

 

 

1,061

 

 

 

 

 

 

911

 

 

 

 

 

 

2,114

 

 

 

 

 

 

1,792

 

 

 

 

Income from operations

 

$

179

 

 

 

 

 

$

334

 

 

 

 

 

$

383

 

 

 

 

 

$

663

 

 

 

 

 

 

27


 

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

 

The period-to-period comparability of our consolidated operating results is affected by acquisitions. For each quarter we present, our legacy business units include those business units 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 business unit amounts presented in each quarter.

Revenue

Core advertising revenue was $404 million for the three months ended June 30, 2023, compared to $413 million for the same period in 2022, a decrease of $9 million, or 2.2%, primarily due to a weaker national advertising market, partially offset by incremental revenue from our acquisition of The CW (acquired on September 30, 2022) of $25 million. Excluding the impact of The CW, key advertising categories driving the decrease were radio/tv/cable/newspaper, medical/healthcare, gaming/sports betting, banks/savings/investments, and fast foods/restaurants partially offset by increases in automotive, home repair/manufacturing, attorneys, air conditioning/heating, and telecom. Automotive, our largest advertiser category, represented approximately 16% and 14% of our core advertising revenue for the three months ended June 30, 2023 and 2022, respectively. Excluding The CW, automotive advertising revenues increased by approximately 10% during the quarter compared to 2022, primarily due to an increase in advertising spending as automobile inventory available to be sold to consumers has increased.

Political advertising revenue was $9 million for the three months ended June 30, 2023, compared to $87 million for the same period in 2022, a decrease of $78 million, as 2023 is not an election year.

Distribution revenue was $696 million for the three months ended June 30, 2023, compared to $646 million for the same period in 2022, an increase of $50 million, or 7.7%. The increase was primarily due to renewals of contracts in 2022 providing for higher rates per subscriber, scheduled annual escalation of rates per subscriber, and the acquisition of The CW (acquired on September 30, 2022), partially offset by continued MVPD subscriber attrition and the impact of the removal of partner stations from certain MVPDs related to continued negotiation. 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 2, 2023, our retransmission consent agreements in 113 of our station markets with 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 $98 million for the three months ended June 30, 2023, compared to $88 million for the same period in 2022, an increase of $10 million, or 11.4%, primarily due to incremental revenue from our acquisition of The CW (acquired on September 30, 2022).

Operating Expenses

Direct operating expenses, consisting primarily of programming, news and technical expenses, and selling, general and administrative expenses were $750 million for the three months ended June 30, 2023, compared to $718 million for the same period in 2022, an increase of $32 million, or 4.5%. This was primarily due to an increase in cost related to incremental operating expenses from our acquisition of The CW (acquired on September 30, 2022), an increase in station programming costs primarily from annual increases in network affiliation fees, and increased news programming at NewsNation and our local stations.

 

Corporate expenses, related to costs associated with the centralized management of our stations, were flat at $49 million for the three months ended June 30, 2023 compared to $50 million for the same period in 2022.

 

Depreciation and amortization expense was $262 million for the three months ended June 30, 2023 compared to $143 million for the same period in 2022, an increase of $119 million, or 83.2%. Depreciation and amortization expense consisted of the following:

Amortization of broadcast rights was $140 million for the three months ended June 30, 2023, compared to $27 million for the same period in 2022, an increase of $113 million, primarily due to an increase in cost related to incremental programming expenses from our acquisition of The CW (acquired on September 30, 2022) of $120 million.
Depreciation of property and equipment was $44 million for the three months ended June 30, 2023, compared to $39 million for the same period in 2022, an increase of $5 million (no significant change).
Amortization of intangible assets was $78 million for the three months ended June 30, 2023, compared to $77 million for the same period in 2022, an increase of $1 million (no significant change).

 

28


 

Income from Equity Method Investments, net

Income from equity method investments, net was $32 million for the three months ended June 30, 2023, compared to $36 million for the same period in 2022, a decrease of $4 million (no significant change).

Interest Expense, net

Interest expense, net was $111 million for the three months ended June 30, 2023, compared to $76 million for the same period in 2022, an increase of $35 million, primarily due to increases in interest rates in the Company’s outstanding loans under its senior secured credit facilities, partially offset by decreases in interest expense from debt repayments and lower interest rates obtained in connection with the refinancing of certain of our term loans in June 2022. Interest rates on outstanding loans under the Company’s senior secured credit facilities ranged from 7.05% to 8.05% as of June 30, 2023, compared to interest rates ranging from 3.19% to 4.29% as of June 30, 2022. These interest rates were a mixture of SOFR plus CSA, or credit spread adjustment used to account for the difference between SOFR and LIBOR, plus applicable margin and U.S. LIBOR plus applicable margin for the second quarter of 2023 compared to U.S. LIBOR plus applicable margin only in 2022.

Pension and Other Postretirement Plans Credit, net

Pension and other postretirement plans credit, net was $10 million for the three months ended June 30, 2023, compared to $11 million for the same period in 2022, a decrease of $1 million (no significant change).

Income Taxes

Income tax expense was $35 million for the three months ended June 30, 2023 compared to $72 million for the same period in 2022. The effective tax rates were 32.0% and 24.0% for each of the respective periods.

Nexstar reported changes in the valuation allowance resulted in an incremental income tax expense for the three months ended June 30, 2023 of $7 million, or a 5.5% increase to the effective tax rate in 2023. Other permanent differences including an adjustment for losses related to the minority interest in The CW resulted in a 3.9% increase to the effective rate. This is partially offset by differences in excess benefit on stock options and restricted stock units exercised in 2023 compared to 2022 which resulted in a 1.2% decrease in the rate.

The Company calculates its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income or loss and adjusts the provision for discrete tax items recorded in the period. Future changes in the forecasted annual income projections could result in significant adjustments to quarterly income tax expense in future periods.

 

 

29


 

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

 

The period-to-period comparability of our consolidated operating results is affected by acquisitions. For each quarter we present, our legacy business units include those business units 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 business unit amounts presented in each quarter.

Revenue

Core advertising revenue was $821 million for the six months ended June 30, 2023, compared to $841 million for the same period in 2022, a decrease of $20 million, or 2.4%, primarily due to a weaker national advertising market and the absence of first quarter advertising revenue from the Olympics on our NBC affiliate stations, partially offset by an increase in advertising revenue from the Super Bowl airing on FOX where we have more FOX-affiliated stations versus NBC in the prior year. This decrease was also partially offset by incremental revenue from our acquisition of The CW (acquired on September 30, 2022) of $50 million. Excluding the impact of The CW, key advertising categories driving the decrease were radio/tv/cable/newspaper, gaming/sports betting, medical/healthcare, insurance, and fast food/restaurant partially offset by increases in automotive, home repair/manufacturing, attorneys, air conditioning/heating, and entertainment. Automotive, our largest advertiser category, represented approximately 16% and 14% of our core advertising revenue for the six months ended June 30, 2023 and 2022, respectively. Excluding The CW, automotive advertising revenues increased by approximately 11% during the quarter compared to 2022, primarily due to an increase in advertising spending as automobile inventory available to be sold to consumers has increased.

Political advertising revenue was $17 million for the six months ended June 30, 2023, compared to $110 million for the same period in 2022, a decrease of $93 million, as 2023 is not an election year.

Distribution revenue was $1,424 million for the six months ended June 30, 2023, compared to $1,314 million for the same period in 2022, an increase of $110 million, or 8.4%. The increase was primarily due to renewals of contracts in 2022 providing for higher rates per subscriber, scheduled annual escalation of rates per subscriber, and the acquisition of The CW (acquired on September 30, 2022), partially offset by continued MVPD subscriber attrition. 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 2, 2023, our retransmission consent agreements in 113 of our station markets with 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 $190 million for the six months ended June 30, 2023, compared to $167 million for the same period in 2022, an increase of $23 million, or 13.8%, primarily due to incremental revenue from our acquisition of The CW (acquired on September 30, 2022).

Operating Expenses

Direct operating expenses, consisting primarily of news, engineering and programming, and selling, general and administrative expenses were $1,506 million for the six months ended June 30, 2023, compared to $1,409 million for the same period in 2022, an increase of $97 million, or 6.9%. This was primarily due to an increase in cost related to incremental operating expenses from our acquisition of The CW (acquired on September 30, 2022), an increase in station programming costs due to network affiliation renewals and annual increases in network affiliation costs, and increased news programming at NewsNation and our local stations.

 

Corporate expenses, related to costs associated with the centralized management of our stations, were flat at $97 million for the six months ended June 30, 2023 compared to $97 million for the same period in 2022.

 

Depreciation and amortization expense was $511 million for the six months ended June 30, 2023 compared to $288 million for the same period in 2022, an increase of $223 million, or 77.4%. Depreciation and amortization expense consisted of the following:

Amortization of broadcast rights was $269 million for the six months ended June 30, 2023, compared to $55 million for the same period in 2022, an increase of $214 million, primarily due to an increase in cost related to incremental operating expenses from our acquisition of The CW (acquired on September 30, 2022) of $227 million.
Depreciation of property and equipment was $87 million for the six months ended June 30, 2023, compared to $78 million for the same period in 2022, an increase of $9 million (no significant change).
Amortization of intangible assets was flat at $155 million for each of the six months ended June 30, 2023 and 2022 (no significant change).

 

 

30


 

Income from Equity Method Investments, net

Income from equity method investments, net was $57 million for the six months ended June 30, 2023, compared to $74 million for the same period in 2022, a decrease of $17 million, primarily due to a lower equity in TV Food Network’s net income of $17 million.

Interest Expense, net

Interest expense, net was $218 million for the six months ended June 30, 2023, compared to $145 million for the same period in 2022, an increase of $73 million, primarily due to increases in interest rates in the Company’s outstanding loans under its senior secured credit facilities, partially offset by decreases in interest expense from debt repayments and lower interest rates obtained in connection with the refinancing of certain of our term loans in June 2022. Interest rates on outstanding loans under the Company’s senior secured credit facilities ranged from 7.05% to 8.05% as of June 30, 2023, compared to interest rates ranging from 3.19% to 4.29% as of June 30, 2022. These interest rates were a mixture of SOFR plus CSA, or credit spread adjustment used to account for the difference between SOFR and LIBOR, plus applicable margin and U.S. LIBOR plus applicable margin for the most part of 2023 compared to U.S. LIBOR plus applicable margin only in 2022.

Pension and Other Postretirement Plans Credit, net

Pension and other postretirement plans credit, net was $19 million for the six months ended June 30, 2023, compared to $22 million for the same period in 2022, a decrease of $3 million (no significant change).

Income Taxes

Income tax expense was $77 million for the six months ended June 30, 2023 compared to $124 million for the same period in 2022. The effective tax rates were 32.2% and 20.6% for each of the respective periods.

Nexstar reported a decrease in income tax benefit for the six months ended June 30, 2023 of $26 million attributable to excess benefit on stock options and restricted stock units exercised in 2022. This resulted in a 3.3% increase to the effective tax rate in 2023 compared to 2022. Changes in the valuation allowance resulted in an incremental income tax expense of $14 million, or a 4.9% increase to the effective tax rate in 2023. Other permanent differences including an adjustment for losses related to the minority interest in The CW resulted in a 3.1% increase to the effective rate.

The Company calculates its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income or loss and adjusts the provision for discrete tax items recorded in the period. Future changes in the forecasted annual income projections could result in significant adjustments to quarterly income tax expense in future periods.

 

 

31


 

Liquidity and Capital Resources

The Company is leveraged, which makes it vulnerable to changes in general economic conditions. The Company’s ability to repay or refinance its debt will depend on, among other things, financial, business, market, competitive and other conditions, many of which are beyond the Company’s control. The Company believes it has sufficient unrestricted cash on hand, positive working capital, and availability to access additional cash under its revolving credit facilities (with a maturity date of June 2027) to meet its business operating requirements and capital expenditures and to continue to service its debt for at least the next 12 months as of the filing date of this Quarterly Report on Form 10-Q. As of June 30, 2023, the Company was in compliance with the financial covenants contained in the amended credit agreements governing its senior secured credit facilities.

Any future adverse economic conditions, including those resulting from the COVID-19 pandemic, heightened and sustained inflation and higher interest rates, could adversely affect the Company’s future operating results, cash flows and financial condition.

Cash Flow Summary

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

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

Net cash provided by operating activities

 

$

679

 

 

$

809

 

Net cash used in investing activities

 

 

(73

)

 

 

(15

)

Net cash used in financing activities

 

 

(466

)

 

 

(709

)

Net increase in cash, cash equivalents and restricted cash

 

$

140

 

 

$

85

 

Cash paid for interest

 

$

214

 

 

$

144

 

Income taxes paid, net of refunds

 

$

121

 

 

$

178

 

 

 

 

As of June 30,

 

 

As of December 31,

 

 

 

2023

 

 

2022

 

Cash, cash equivalents and restricted cash

 

$

360

 

 

$

220

 

Cash Flows – Operating Activities

Net cash flows provided by operating activities decreased by $130 million during the six months ended June 30, 2023, compared to the same period in 2022. This was primarily due to a decrease in operating income (excluding non-cash transactions) of $66 million, an increase in payments for broadcast rights of $152 million and higher interest payments of $70 million. These decreases were partially offset by sources of cash resulting from timing of accounts receivable collections of $43 million, timing of payments to our vendors of $37 million, lower income tax payments of $57 million and an increase in distribution from our equity investment in TV Food Network of $27 million. The increase in payments for broadcast rights was due to incremental payments from our acquisition of The CW (acquired on September 30, 2022) of $168 million, partially offset by a decrease in payments for our syndicated programming of $16 million. The increase in interest payments was primarily due to higher interest rates, partially offset by decreases in interest expense from debt repayments and lower interest rates obtained in connection with the refinancing of certain of our term loans in June 2022.

Cash Flows – Investing Activities

Net cash flows used in investing activities were $73 million and $15 million during the six months ended June 30, 2023 and 2022, respectively. During the six months ended June 30, 2023, we spent a total of $77 million in capital expenditures compared to $63 million in the same period in the prior year, partially offset by the proceeds from the sale of real estate of $45 million.

Cash Flows – Financing Activities

Net cash flows used in financing activities were $466 million and $709 million during the six months ended June 30, 2023 and 2022, respectively.

In 2023, we repaid scheduled principal maturities of $62 million of our term loans, paid dividends to our common stockholders of $98 million ($1.35 per share per quarter), repurchased common shares of $315 million, paid cash for taxes in exchange for shares of common stock withheld of $17 million resulting from net share settlements of certain stock-based compensation and payment for capitalized software of $12 million. These outflows were partially offset by a contribution from noncontrolling interests amounting to $36 million.

 

32


 

In 2022, we received $2,420 million of proceeds (net of capitalized lenders’ fees of $5 million) from the issuance of a Term Loan A due 2027 and used $2,414 million to repay our then outstanding Term Loan A due 2023, Term Loan A due 2024, Term Loan B due 2024 and a portion of Term Loan B due 2026. We prepaid a portion of the outstanding principal balance of our Term Loan B due 2024 of $175 million and made scheduled principal payments on Company term loans of $22 million, paid dividends to our common stockholders of $73 million ($0.90 per share per quarter), repurchased common shares of $406 million, paid cash for taxes in exchange for shares of common stock withheld of $13 million resulting from net share settlements of certain stock-based compensation, and paid contingent consideration in connection with a past acquisition of $14 million. Mission also drew $62 million under its 2022 Mission Revolving Credit Facility and utilized the proceeds to repay all of its $62 million of outstanding borrowings under its then outstanding 2018 revolving loan.

 

Subsequent Investing and Financing Activities

In May 2023, Nexstar entered into a definitive agreement to acquire the assets of KUSI-TV (independent television station) serving the San Diego, CA market from McKinnon Broadcasting Company and Channel 51 of San Diego, Inc. for $35 million in cash, subject to customary working capital adjustments. On August 3, 2023, Nexstar received preliminary approval for the acquisition from the FCC and is expected to close the transaction before the end of the year. The acquisition will strengthen Nexstar’s local television broadcasting, news, and digital media platforms in San Diego, will present numerous opportunities for operating efficiencies and is expected to be accretive to Nexstar’s operating results when The CW Network affiliation becomes available in the market.

On May 10, 2023, Mission entered into a definitive agreement to acquire the assets of WADL-TV serving the Detroit, Michigan market from Adell Broadcasting Corporation for $75 million in cash, subject to customary working capital adjustments. The proposed acquisition is subject to regulatory and other customary approvals, is expected to close once we receive regulatory approval, and would be Mission’s second entry into the state of Michigan.

From July 1, 2023 to August 7, 2023, we repurchased 337,587 shares of our common stock for $60 million, funded by cash on hand. As of the date of filing this Quarterly Report on Form 10-Q, the remaining available amount under the share repurchase authorization was $882 million.

On July 27, 2023, Nexstar’s Board of Directors declared a quarterly cash dividend of $1.35 per share of its common stock. The dividend is payable on August 24, 2023 to stockholders of record on August 10, 2023.

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

Long-term debt

As of June 30, 2023, the Company had total outstanding debt of $6.895 billion, net of unamortized financing costs, discounts and premium, which represented 73.1% 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.

 

 

 

As of June 30,

 

 

As of December 31,

 

 

 

2023

 

 

2022

 

Nexstar senior secured credit facility

 

$

3,865

 

 

$

3,925

 

Mission senior secured credit facility

 

 

357

 

 

 

358

 

5.625% Notes, due July 2027

 

 

1,714

 

 

 

1,714

 

4.75% Notes, due November 2028

 

 

1,000

 

 

 

1,000

 

 

 

 

6,936

 

 

 

6,997

 

Less: Unamortized financing costs, discounts and premium, net

 

 

(41

)

 

 

(46

)

Total outstanding debt

 

$

6,895

 

 

$

6,951

 

 

 

 

 

 

 

 

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

 

$

544

 

 

$

543

 

 

(1)
Based on covenant calculations as of June 30, 2023, all of the $531 million and $14 million unused revolving loan commitments under the respective Nexstar and Mission senior secured credit facilities were available for borrowing.

 

 

33


 

The following table summarizes the principal indebtedness scheduled to mature for the periods referenced as of June 30, 2023 (in millions):

 

 

 

Total

 

 

Less than 1 year

 

 

1 to 3 years

 

 

3 to 5 years

 

 

More than 5 years

 

Nexstar senior secured credit facility

 

$

3,865

 

 

$

91

 

 

$

242

 

 

$

3,532

 

 

$

-

 

Mission senior secured credit facility

 

 

357

 

 

 

2

 

 

 

6

 

 

 

349

 

 

 

-

 

5.625% Notes, due July 2027

 

 

1,714

 

 

 

-

 

 

 

-

 

 

 

1,714

 

 

 

-

 

4.75% Notes, due November 2028

 

 

1,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,000

 

 

 

$

6,936

 

 

$

93

 

 

$

248

 

 

$

5,595

 

 

$

1,000

 

 

We (excluding The CW) guarantee full payment of all obligations incurred under Mission’s senior secured credit facility in the event of its default. Mission is a guarantor of our senior secured credit facility, our 5.625% Notes, due July 2027 and our 4.75% Notes, due November 2028.

 

We make semiannual interest payments on the 5.625% Notes, due July 2027 on January 15 and July 15 of each year. We make semiannual interest payments on our 4.75% Notes, due November 2028 on May 1 and November 1 of each year. Interest payments on our and Mission’s senior secured credit facilities are generally paid every one to three months and are payable based on the type of interest rate selected.

 

The terms of our and Mission’s senior secured credit facilities, as well as the indentures governing our 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028, limit, but do not prohibit us or Mission, from incurring substantial amounts of additional debt in the future.

The Company does not have any rating downgrade triggers that would accelerate the maturity dates of its debt. However, a downgrade in the Company’s credit rating could adversely affect its ability to renew the existing credit facilities, obtain access to new credit facilities or otherwise issue debt in the future and could increase the cost of such debt.

The Company’s ability to access funds under its senior secured credit facilities depends, in part, on its compliance with certain financial covenants. Any additional drawings under the senior secured credit facilities will reduce the Company’s future borrowing capacity and the amount of total unused revolving loan commitments. Any adverse impact of the COVID-19 pandemic or any future adverse economic conditions, including those resulting from heightened and sustained inflation and higher interest rates, could adversely affect our future operating results and cash flows and may cause us to seek alternative sources of funding, including accessing capital markets, subject to market conditions. Such alternative sources of funding may not be available on commercially reasonable terms or at all.

Our credit agreement contains a covenant which requires us to comply with a maximum consolidated first lien net leverage ratio of 4.25 to 1.00. The financial covenant, which is formally calculated on a quarterly basis, is based on the Company’s combined results, excluding the operating results of The CW, which Nexstar designated as an unrestricted subsidiary under its credit agreements and indentures. The Mission amended credit agreement does not contain financial covenant ratio requirements but does provide for default in the event we do not comply with all covenants contained in our credit agreement. As of June 30, 2023, we were in compliance with our financial covenant. We believe the Company will be able to maintain compliance with all covenants contained in the credit agreements governing its senior secured facilities and the indentures governing Nexstar’s 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028 for a period of at least the next 12 months from June 30, 2023.

Off-Balance Sheet Arrangements

As of June 30, 2023, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or VIEs, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. All of our arrangements with our VIEs in which we are the primary beneficiary are on-balance sheet arrangements. Our variable interests in other entities are obtained through local service agreements, which have valid business purposes and transfer certain station activities from the station owners to us. We are, therefore, not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

As of June 30, 2023, we had outstanding standby letters of credit with various financial institutions amounting to $20 million, of which $16 million was in support of the worker’s compensation insurance programs. The outstanding balance of standby letters of credit is deducted against our unused revolving loan commitment under our senior secured credit facility and would not be available for withdrawal.

 

34


 

Issuer and Guarantor Summarized Financial Information

Nexstar Media Inc. (the “Issuer”) is the issuer of 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028. These notes are fully and unconditionally guaranteed, jointly and severally, by Nexstar Media Group, Inc. (“Parent”), Mission (a consolidated VIE) and the Subsidiary Guarantors (as defined below). The Issuer, Subsidiary Guarantors, Parent and Mission are collectively referred to as the “Obligor Group” for the 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028. “Subsidiary Guarantors” refers to certain of the Issuer’s restricted subsidiaries (excluding The CW) that guarantee these notes. The guarantees of the notes are subject to release in limited circumstances upon the occurrence of certain customary conditions set forth in the indentures governing the 5.625% Notes, due July 2027 and the 4.75% Notes, due November 2028. The 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028 are not registered with the SEC.

 

The following combined summarized financial information is presented for the Obligor Group after elimination of intercompany transactions between Parent, Issuer, Subsidiary Guarantors and Mission in the Obligor Group and amounts related to investments in any subsidiary that is a non-guarantor. This information is not intended to present the financial position or results of operations of the consolidated group of companies in accordance with U.S. GAAP.

Summarized Balance Sheet Information for the Obligor Group (in millions):

 

 

June 30, 2023

 

 

December 31, 2022

 

Current assets – external(1)

$

1,349

 

 

$

1,358

 

Current assets – due from consolidated entities outside of Obligor Group

 

6

 

 

 

39

 

     Total current assets

$

1,355

 

 

$

1,397

 

Noncurrent assets – external(1)(2)

 

9,597

 

 

 

9,748

 

Noncurrent assets – due from consolidated entities outside of Obligor Group

 

75

 

 

 

74

 

     Total noncurrent assets

$

9,672

 

 

$

9,822

 

Total current liabilities(1)

$

700

 

 

$

742

 

Total noncurrent liabilities(1)

$

8,902

 

 

$

8,994

 

Noncontrolling interests

$

-

 

 

$

-

 

 

(1)
Excludes the assets and liabilities of The CW as it is not a guarantor of the 4.75% Notes, due November 2028 and 5.625% Notes, due July 2027. On September 30, 2022, Nexstar acquired a 75.0% ownership interest in The CW.
(2)
Excludes Issuer’s equity investments of $927 million and $1,119 million as of June 30, 2023 and December 31, 2022, respectively, in unconsolidated investees. These unconsolidated investees do not guarantee the 4.75% Notes, due November 2028 and 5.625% Notes, due July 2027. For additional information on equity investments, refer to Note 4 to our Condensed Consolidated Financial Statements.

 

Summarized Statements of Operations Information for the Obligor Group (in millions):

 

 

Six Months Ended

 

 

June 30, 2023

 

Net revenue – external

$

2,362

 

Net revenue – from consolidated entities outside of Obligor Group

 

10

 

     Total net revenue

 

2,372

 

Costs and expenses – external

 

1,808

 

Costs and expenses – to consolidated entities outside of Obligor Group

 

15

 

     Total costs and expenses

 

1,823

 

Income from operations

$

549

 

Net income

$

270

 

Net income attributable to Obligor Group

$

270

 

Income from equity method investments, net

$

57

 

 

35


 

Critical Accounting Estimates

Our Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities 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, indefinite-lived intangible assets, definite-lived intangible assets and other long-lived assets, equity investments, distribution revenue, pension and postretirement benefit plans 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, 2022. Management believes that as of June 30, 2023, there has been no material change to this information.

Recent Accounting Pronouncements

Refer to Note 2 of our Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recently issued accounting pronouncements, including our expected date of adoption and effects on results of operations and financial position.

36


 

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

The Company’s exposure to market risk for changes in interest rates relates primarily to its long-term debt obligations.

The term loan borrowings under the Company’s senior secured credit facilities bear interest at rates ranging from 7.05% to 8.05% as of June 30, 2023, which represent (i) the base rate, the SOFR or the US LIBOR plus (ii) a credit spread adjustment in the case of SOFR-based loans, and (iii) the applicable margin, as defined. Interest is payable in accordance with the credit agreements.

Based on the outstanding balances of the Company’s senior secured credit facilities (term loans and revolving loans) as of June 30, 2023, an increase in each of SOFR and US LIBOR by 100 basis points would increase our annual interest expense and decrease our cash flow from operations by $42 million (excluding tax effects). A decrease in each of SOFR and US LIBOR by 100 basis points would decrease our annual interest expense and increase our cash flow from operations by $42 million (excluding tax effects). Our 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028 are fixed rate debt obligations and therefore are not exposed to market interest rate changes. As of June 30, 2023, the Company has no financial instruments in place to hedge against changes in the benchmark interest rates on its senior secured credit facilities.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Nexstar’s management, with the participation of its Chairman and Chief Executive Officer along with its Chief Financial Officer, conducted an evaluation as of the end of the period covered by this report of the effectiveness of the design and operation of Nexstar’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.

Based upon that evaluation, Nexstar’s Chairman and Chief Executive Officer and its Chief Financial Officer concluded that as of the end of the period covered by this report, Nexstar’s disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed in the reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to Nexstar’s management, including its Chairman and Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

As of the quarter ended June 30, 2023, 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.

 

37


 

PART II. OTHER INFORMATION

 

From time to time, the Company is involved in litigation that arises from the ordinary operations of business, such as contractual or employment disputes or other general actions. In the event of an adverse outcome of these proceedings, the Company believes the resulting liabilities would not have a material adverse effect on its financial condition or results of operations. See Part I, Item 1, Note 13, “Commitments and Contingencies” for detailed discussion of ongoing litigation.

ITEM 1A. Risk Factors

There have been no material changes to the risk factors that were previously disclosed in Item 1A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 28, 2023.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

On July 27, 2022, Nexstar’s board of directors approved a new share repurchase program authorizing Nexstar to repurchase up to an additional $1.5 billion of its common stock, of which $1.258 billion of capacity remained available as of December 31, 2022. During the six months ended June 30, 2023, Nexstar repurchased a total of 1,877,783 shares of its common stock for $315 million, funded by cash on hand, which were accounted for as treasury cost. As of June 30, 2023, the remaining available amount under the share repurchase authorization was $942 million.

The following is a summary of Nexstar’s repurchases of its common stock by month during the quarter ended June 30, 2023 (in millions, except for share and per share information):

 

 

 

 

 

 

 

 

 

Total Number of Shares

 

 

Approximate Dollar Value

 

 

 

 

 

 

 

 

 

Purchased as Part of

 

 

of Shares That May Yet Be

 

 

 

Total Number

 

 

Average Price

 

 

Publicly Announced

 

 

Purchased Under the

 

 

 

of Shares Purchased

 

 

Paid per Share

 

 

Plans or Programs

 

 

Plans or Programs

 

April 5 to 28, 2023

 

 

147,788

 

 

$

174.59

 

 

 

147,788

 

 

$

1,057

 

May 1 to 31, 2023

 

 

275,565

 

 

$

160.91

 

 

 

275,565

 

 

 

1,013

 

June 1 to 30, 2023

 

 

434,490

 

 

$

161.91

 

 

 

434,490

 

 

 

942

 

 

 

 

857,843

 

 

$

163.77

 

 

 

857,843

 

 

 

 

From July 1, 2023 to August 7, 2023, we repurchased 337,587 shares of our common stock for $60 million, funded by cash on hand. As of the date of filing this Quarterly Report on Form 10-Q, the remaining available amount under the share repurchase authorization was $882 million.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

None.

ITEM 5. Other Information

(a)
None.
(b)
None.
(c)
Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements

None of the Company’s directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended June 30, 2023.

 

 

38


 

ITEM 6. Exhibits

 

Exhibit No.

Description

3.1

 

Certificate of Amended and Restated Certificate of Incorporation of Nexstar Media Group, Inc. (Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Media Group, Inc. on June 21, 2023).

10.1

 

Credit Agreement, dated as of January 17, 2017, by and among Nexstar Media Inc., Nexstar Media Group, Inc., Bank of America, N.A. and the several lenders party thereto, as amended by that Amendment No. 6 dated as of June 6, 2023.*

10.2

 

Credit Agreement, dated as of January 17, 2017, by among Mission Broadcasting, Inc., Bank of America, N.A. and the several lenders party thereto, as amended by the Amendment No. 7 dated June 6, 2023.*

21.1

 

Subsidiaries of the Registrant.*

31.1

 

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

31.2

 

Certification of Lee Ann Gliha pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1

 

Certification of Perry A. Sook pursuant to 18 U.S.C. ss. 1350.*

32.2

 

Certification of Lee Ann Gliha pursuant to 18 U.S.C. ss. 1350.*

101.INS

 

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

 

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

 

* Filed herewith

39


 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NEXSTAR MEDIA GROUP, INC.

 

 

/S/ PERRY A. SOOK

By:

Perry A. Sook

Its:

Chairman and Chief Executive Officer (Principal Executive Officer)

 

 

/S/ LEE ANN GLIHA

By:

Lee Ann Gliha

Its:

Chief Financial Officer (Principal Accounting and Financial Officer)

Dated: August 8, 2023

40