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, 20172018
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)
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 |
| ☐ |
|
(Do not check if a 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, 2017,8, 2018, the registrant had 46,218,12445,555,310 shares of Class A Common Stock outstanding.
|
|
|
| Page | |
PART I |
| FINANCIAL INFORMATION |
|
|
|
|
|
|
| ||
ITEM 1. |
|
|
|
| |
|
|
|
| ||
|
| Condensed Consolidated Balance Sheets as of June 30, |
| 1 |
|
|
|
|
| ||
|
|
| 2 |
| |
|
|
|
| ||
|
| Condensed Consolidated Statement of Changes in Stockholders’ Equity for the six months ended June 30, |
| 3 |
|
|
|
|
| ||
|
|
| 4 |
| |
|
|
|
| ||
|
|
| 5 |
| |
|
|
|
| ||
ITEM 2. |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
|
|
|
|
|
| ||
ITEM 3. |
| Quantitative and Qualitative Disclosures |
|
|
|
|
|
|
| ||
ITEM 4. |
|
|
|
| |
|
|
|
| ||
PART II |
| OTHER INFORMATION |
|
|
|
|
|
|
| ||
ITEM 1. |
|
|
|
| |
|
|
|
| ||
ITEM 1A. |
|
|
|
| |
|
|
|
| ||
ITEM 2. |
|
|
|
| |
|
|
|
| ||
ITEM 3. |
|
|
|
| |
|
|
|
| ||
ITEM 4. |
|
|
|
| |
|
|
|
| ||
ITEM 5. |
|
|
|
| |
|
|
|
| ||
ITEM 6. |
|
|
|
|
PARTPART I. FINANCIAL INFORMATION
NEXSTAR MEDIA GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share information, unaudited)
| June 30, |
|
| December 31, |
| June 30, |
|
| December 31, |
| |||||
| 2017 |
|
| 2016 |
| 2018 |
|
| 2017 |
| |||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 85,902 |
|
| $ | 87,680 |
| $ | 147,681 |
|
| $ | 115,652 |
|
Accounts receivable, net of allowance for doubtful accounts of $18,337 and $5,805, respectively |
|
| 503,119 |
|
|
| 218,058 |
| |||||||
Spectrum auction asset |
|
| 459,004 |
|
|
| - |
| |||||||
Restricted cash |
|
| - |
|
|
| 26,719 |
| |||||||
Accounts receivable, net of allowance for doubtful accounts of $14,635 and $13,358, respectively |
| 524,078 |
|
|
| 562,943 |
| ||||||||
Spectrum asset |
| - |
|
|
| 305,764 |
| ||||||||
Prepaid expenses and other current assets |
|
| 30,490 |
|
|
| 30,760 |
|
| 45,329 |
|
|
| 71,859 |
|
Total current assets |
|
| 1,078,515 |
|
|
| 363,217 |
|
| 717,088 |
|
|
| 1,056,218 |
|
Property and equipment, net |
|
| 738,727 |
|
|
| 276,153 |
|
| 720,464 |
|
|
| 734,138 |
|
Goodwill |
|
| 2,145,868 |
|
|
| 473,304 |
|
| 2,184,982 |
|
|
| 2,142,846 |
|
FCC licenses |
|
| 1,831,341 |
|
|
| 542,524 |
|
| 1,767,638 |
|
|
| 1,767,638 |
|
Other intangible assets, net |
|
| 1,606,025 |
|
|
| 324,737 |
|
| 1,557,277 |
|
|
| 1,581,626 |
|
Restricted cash |
|
| - |
|
|
| 901,080 |
| |||||||
Other noncurrent assets, net |
|
| 69,141 |
|
|
| 85,070 |
|
| 172,045 |
|
|
| 199,181 |
|
Total assets(1) |
| $ | 7,469,617 |
|
| $ | 2,966,085 |
| $ | 7,119,494 |
|
| $ | 7,481,647 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of debt |
| $ | 57,860 |
|
| $ | 28,093 |
| $ | 41,722 |
|
| $ | 92,808 |
|
Current portion of broadcast rights payable |
|
| 16,402 |
|
|
| 16,512 |
|
| 5,027 |
|
|
| 16,659 |
|
Accounts payable |
|
| 27,932 |
|
|
| 19,754 |
|
| 66,128 |
|
|
| 31,136 |
|
Accrued expenses |
|
| 200,319 |
|
|
| 71,315 |
|
| 126,352 |
|
|
| 159,281 |
|
Taxes payable |
|
| 171,635 |
|
|
| - |
| |||||||
Interest payable |
|
| 34,653 |
|
|
| 44,190 |
|
| 40,322 |
|
|
| 39,563 |
|
Contingent consideration liability |
|
| 275,352 |
|
|
| - |
| |||||||
Liability to surrender spectrum asset |
| - |
|
|
| 314,087 |
| ||||||||
Other current liabilities |
|
| 10,295 |
|
|
| 9,714 |
|
| 15,019 |
|
|
| 17,169 |
|
Total current liabilities |
|
| 794,448 |
|
|
| 189,578 |
|
| 294,570 |
|
|
| 670,703 |
|
Debt |
|
| 4,377,670 |
|
|
| 2,314,326 |
|
| 4,245,924 |
|
|
| 4,269,652 |
|
Deferred tax liabilities |
|
| 886,644 |
|
|
| 132,008 |
|
| 633,016 |
|
|
| 619,441 |
|
Other noncurrent liabilities |
|
| 207,309 |
|
|
| 45,819 |
|
| 303,530 |
|
|
| 340,541 |
|
Total liabilities(1) |
|
| 6,266,071 |
|
|
| 2,681,731 |
| $ | 5,477,040 |
|
| $ | 5,900,337 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
| |||||||
Commitments and contingencies (Note 12) |
|
|
|
|
|
|
| ||||||||
Stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock - $0.01 par value, 200,000 shares authorized; none issued and outstanding at each of June 30, 2017 and December 31, 2016 |
|
| - |
|
|
| - |
| |||||||
Class A Common stock - $0.01 par value, 100,000,000 shares authorized; 47,291,463 shares issued, 46,218,124 shares outstanding as of June 30, 2017 and 31,621,369 shares issued, 30,744,625 shares outstanding as of December 31, 2016 |
|
| 473 |
|
|
| 316 |
| |||||||
Class B Common stock - $0.01 par value, 20,000,000 shares authorized; none issued and outstanding at each of June 30, 2017 and December 31, 2016 |
|
| - |
|
|
| - |
| |||||||
Class C Common stock - $0.01 par value, 5,000,000 shares authorized; none issued and outstanding at each of June 30, 2017 and December 31, 2016 |
|
| - |
|
|
| - |
| |||||||
Preferred stock - $0.01 par value, 200,000 shares authorized; none issued and outstanding at each of June 30, 2018 and December 31, 2017 |
| - |
|
|
| - |
| ||||||||
Class A Common stock - $0.01 par value, 100,000,000 shares authorized; 47,291,463 shares issued, 45,522,035 shares outstanding as of June 30, 2018 and 47,291,463 shares issued, 45,966,414 shares outstanding as of December 31, 2017 |
| 473 |
|
|
| 473 |
| ||||||||
Class B Common stock - $0.01 par value, 20,000,000 shares authorized; none issued and outstanding at each of June 30, 2018 and December 31, 2017 |
| - |
|
|
| - |
| ||||||||
Class C Common stock - $0.01 par value, 5,000,000 shares authorized; none issued and outstanding at each of June 30, 2018 and December 31, 2017 |
| - |
|
|
| - |
| ||||||||
Additional paid-in capital |
|
| 1,380,035 |
|
|
| 386,921 |
|
| 1,337,738 |
|
|
| 1,342,541 |
|
Accumulated deficit |
|
| (125,433 | ) |
|
| (176,583 | ) | |||||||
Treasury stock - at cost; 1,073,339 and 876,744 shares at June 30, 2017 and December 31, 2016, respectively |
|
| (64,763 | ) |
|
| (41,513 | ) | |||||||
Accumulated other comprehensive income |
| 6,140 |
|
|
| 6,140 |
| ||||||||
Retained earnings |
| 400,934 |
|
|
| 299,523 |
| ||||||||
Treasury stock - at cost; 1,769,428 and 1,325,049 shares at June 30, 2018 and December 31, 2017, respectively |
| (111,846 | ) |
|
| (78,063 | ) | ||||||||
Total Nexstar Media Group, Inc. stockholders' equity |
|
| 1,190,312 |
|
|
| 169,141 |
|
| 1,633,439 |
|
|
| 1,570,614 |
|
Noncontrolling interests in consolidated variable interest entities |
|
| 13,234 |
|
|
| 115,213 |
|
| 9,015 |
|
|
| 10,696 |
|
Total stockholders' equity |
|
| 1,203,546 |
|
|
| 284,354 |
|
| 1,642,454 |
|
|
| 1,581,310 |
|
Total liabilities and stockholders' equity |
| $ | 7,469,617 |
|
| $ | 2,966,085 |
| $ | 7,119,494 |
|
| $ | 7,481,647 |
|
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
|
(1) | The consolidated total assets as of June 30, |
1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share information, unaudited)
Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| |||||||||||||||||||||
June 30, |
|
| June 30, |
|
| June 30, |
|
| June 30, |
| |||||||||||||||||||||
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
| ||||||||
Net revenue | $ | 626,115 |
|
| $ | 261,994 |
|
| $ | 1,166,432 |
|
| $ | 517,652 |
|
| $ | 660,323 |
|
| $ | 626,115 |
|
| $ | 1,275,659 |
|
| $ | 1,166,432 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Operating expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Direct operating expenses, excluding depreciation and amortization |
| 252,610 |
|
|
| 92,935 |
|
|
| 471,339 |
|
|
| 183,058 |
|
|
| 274,439 |
|
|
| 252,610 |
|
|
| 553,402 |
|
|
| 471,339 |
|
Selling, general, and administrative expenses, excluding depreciation and amortization |
| 144,285 |
|
|
| 65,772 |
|
|
| 318,587 |
|
|
| 133,937 |
| ||||||||||||||||
Selling, general and administrative expenses, excluding depreciation and amortization |
|
| 138,903 |
|
|
| 147,441 |
|
|
| 280,808 |
|
|
| 324,374 |
| |||||||||||||||
Amortization of broadcast rights |
| 25,686 |
|
|
| 15,222 |
|
|
| 50,153 |
|
|
| 30,026 |
|
|
| 15,913 |
|
|
| 25,686 |
|
|
| 32,013 |
|
|
| 50,153 |
|
Amortization of intangible assets |
| 38,557 |
|
|
| 11,319 |
|
|
| 86,715 |
|
|
| 23,398 |
|
|
| 37,181 |
|
|
| 38,557 |
|
|
| 73,483 |
|
|
| 86,715 |
|
Depreciation |
| 26,292 |
|
|
| 12,739 |
|
|
| 48,518 |
|
|
| 25,297 |
|
|
| 25,090 |
|
|
| 26,292 |
|
|
| 50,904 |
|
|
| 48,518 |
|
Reimbursement from the FCC related to station repack |
|
| (5,697 | ) |
|
| - |
|
|
| (7,061 | ) |
|
| - |
| |||||||||||||||
Gain on disposal of stations, net |
| - |
|
|
| - |
|
|
| (57,716 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (57,716 | ) |
Total operating expenses |
| 487,430 |
|
|
| 197,987 |
|
|
| 917,596 |
|
|
| 395,716 |
|
|
| 485,829 |
|
|
| 490,586 |
|
|
| 983,549 |
|
|
| 923,383 |
|
Income from operations |
| 138,685 |
|
|
| 64,007 |
|
|
| 248,836 |
|
|
| 121,936 |
|
|
| 174,494 |
|
|
| 135,529 |
|
|
| 292,110 |
|
|
| 243,049 |
|
Interest expense, net |
| (55,685 | ) |
|
| (20,577 | ) |
|
| (134,922 | ) |
|
| (41,231 | ) |
|
| (56,281 | ) |
|
| (55,685 | ) |
|
| (110,870 | ) |
|
| (134,922 | ) |
Loss on extinguishment of debt |
| (1,323 | ) |
|
| - |
|
|
| (33,127 | ) |
|
| - |
|
|
| (481 | ) |
|
| (1,323 | ) |
|
| (1,486 | ) |
|
| (33,127 | ) |
Pension and other postretirement plans credit, net |
|
| 2,950 |
|
|
| 3,156 |
|
|
| 5,900 |
|
|
| 5,787 |
| |||||||||||||||
Other expenses |
| (900 | ) |
|
| (147 | ) |
|
| (1,007 | ) |
|
| (283 | ) |
|
| (812 | ) |
|
| (900 | ) |
|
| (939 | ) |
|
| (1,007 | ) |
Income before income taxes |
| 80,777 |
|
|
| 43,283 |
|
|
| 79,780 |
|
|
| 80,422 |
|
|
| 119,870 |
|
|
| 80,777 |
|
|
| 184,715 |
|
|
| 79,780 |
|
Income tax expense |
| (32,322 | ) |
|
| (18,484 | ) |
|
| (26,381 | ) |
|
| (33,349 | ) |
|
| (33,264 | ) |
|
| (32,322 | ) |
|
| (50,768 | ) |
|
| (26,381 | ) |
Net income |
| 48,455 |
|
|
| 24,799 |
|
|
| 53,399 |
|
|
| 47,073 |
|
|
| 86,606 |
|
|
| 48,455 |
|
|
| 133,947 |
|
|
| 53,399 |
|
Net income attributable to noncontrolling interests |
| (4,463 | ) |
|
| (270 | ) |
|
| (3,358 | ) |
|
| (817 | ) | ||||||||||||||||
Net loss (income) attributable to noncontrolling interests |
|
| 1,126 |
|
|
| (4,463 | ) |
|
| 1,907 |
|
|
| (3,358 | ) | |||||||||||||||
Net income attributable to Nexstar Media Group, Inc. | $ | 43,992 |
|
| $ | 24,529 |
|
| $ | 50,041 |
|
| $ | 46,256 |
|
| $ | 87,732 |
|
| $ | 43,992 |
|
| $ | 135,854 |
|
| $ | 50,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net income per common share attributable to Nexstar Media Group, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic | $ | 0.94 |
|
| $ | 0.80 |
|
| $ | 1.10 |
|
| $ | 1.51 |
|
| $ | 1.92 |
|
| $ | 0.94 |
|
| $ | 2.96 |
|
| $ | 1.10 |
|
Diluted | $ | 0.91 |
|
| $ | 0.78 |
|
| $ | 1.07 |
|
| $ | 1.46 |
|
| $ | 1.86 |
|
| $ | 0.91 |
|
| $ | 2.87 |
|
| $ | 1.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| 46,931 |
|
|
| 30,680 |
|
|
| 45,573 |
|
|
| 30,669 |
|
|
| 45,631 |
|
|
| 46,931 |
|
|
| 45,852 |
|
|
| 45,573 |
|
Diluted |
| 48,195 |
|
|
| 31,620 |
|
|
| 46,815 |
|
|
| 31,579 |
|
|
| 47,147 |
|
|
| 48,195 |
|
|
| 47,414 |
|
|
| 46,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share | $ | 0.30 |
|
| $ | 0.24 |
|
| $ | 0.60 |
|
| $ | 0.48 |
|
| $ | 0.375 |
|
| $ | 0.30 |
|
| $ | 0.75 |
|
| $ | 0.60 |
|
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
2
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Six Months Ended June 30, 20172018
(in thousands, except share information, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Noncontrolling |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| interests in |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| Common Stock |
|
| Additional |
|
|
|
|
|
|
|
|
|
|
|
|
|
| consolidated |
|
| Total |
| ||||||||||||||||||||||||
|
| Preferred Stock |
|
| Class A |
|
| Class B |
|
| Class C |
|
| Paid-In |
|
| Accumulated |
|
| Treasury Stock |
|
| variable |
|
| Stockholders' |
| |||||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Shares |
|
| Amount |
|
| interest entities |
|
| Equity |
| ||||||||||||||
Balances as of December 31, 2016 |
|
| - |
|
| $ | - |
|
|
| 31,621,369 |
|
| $ | 316 |
|
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
| $ | 386,921 |
|
| $ | (176,583 | ) |
|
| (876,744 | ) |
| $ | (41,513 | ) |
| $ | 115,213 |
|
| $ | 284,354 |
|
Adjustment to adopt ASU 2016-16 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 764 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 764 |
|
Issuance/reissuance of stock in connection with the Merger |
|
| - |
|
|
| - |
|
|
| 15,670,094 |
|
|
| 157 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,007,956 |
|
|
| - |
|
|
| 560,316 |
|
|
| 23,330 |
|
|
| - |
|
|
| 1,031,443 |
|
Stock option replacement awards in connection with the Merger |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 10,702 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 10,702 |
|
Purchase of treasury stock |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,001,640 | ) |
|
| (58,294 | ) |
|
| - |
|
|
| (58,294 | ) |
Stock-based compensation expense |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 11,309 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 11,309 |
|
Vesting of restricted stock units and exercise of stock options |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (8,585 | ) |
|
| - |
|
|
| 244,729 |
|
|
| 11,714 |
|
|
| - |
|
|
| 3,129 |
|
Common stock dividends declared |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (28,268 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (28,268 | ) |
Purchase of noncontrolling interests from variable interest entities |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (108,694 | ) |
|
| (108,694 | ) |
Consolidation of variable interest entities |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 7,600 |
|
|
| 7,600 |
|
Deconsolidation of a variable interest entity |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 345 |
|
|
| - |
|
|
| - |
|
|
| (4,000 | ) |
|
| (3,655 | ) |
Distribution to a noncontrolling interest |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (243 | ) |
|
| (243 | ) |
Net income (loss) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 50,041 |
|
|
| - |
|
|
| - |
|
|
| 3,358 |
|
|
| 53,399 |
|
Balances as of June 30, 2017 |
|
| - |
|
| $ | - |
|
|
| 47,291,463 |
|
| $ | 473 |
|
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
| $ | 1,380,035 |
|
| $ | (125,433 | ) |
|
| (1,073,339 | ) |
| $ | (64,763 | ) |
| $ | 13,234 |
|
| $ | 1,203,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Class A |
|
| Additional |
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| ||||||||
|
| Common Stock |
|
| Paid-In |
|
| Retained |
|
| Comprehensive |
|
| Treasury Stock |
|
| Noncontrolling |
|
| Stockholders' |
| |||||||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Earnings |
|
| Income |
|
| Shares |
|
| Amount |
|
| interests |
|
| Equity |
| |||||||||
Balances as of December 31, 2017 |
|
| 47,291,463 |
|
| $ | 473 |
|
| $ | 1,342,541 |
|
| $ | 299,523 |
|
| $ | 6,140 |
|
|
| (1,325,049 | ) |
| $ | (78,063 | ) |
| $ | 10,696 |
|
| $ | 1,581,310 |
|
Purchase of treasury stock |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (751,920 | ) |
|
| (50,524 | ) |
|
| - |
|
|
| (50,524 | ) |
Stock-based compensation expense |
|
| - |
|
|
| - |
|
|
| 14,595 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 14,595 |
|
Vesting of restricted stock units and exercise of stock options |
|
| - |
|
|
| - |
|
|
| (19,398 | ) |
|
| - |
|
|
| - |
|
|
| 307,541 |
|
|
| 16,741 |
|
|
| - |
|
|
| (2,657 | ) |
Common stock dividends declared |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (34,443 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (34,443 | ) |
Contribution from a noncontrolling interest |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 226 |
|
|
| 226 |
|
Net income (loss) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 135,854 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,907 | ) |
|
| 133,947 |
|
Balances as of June 30, 2018 |
|
| 47,291,463 |
|
| $ | 473 |
|
| $ | 1,337,738 |
|
| $ | 400,934 |
|
| $ | 6,140 |
|
|
| (1,769,428 | ) |
| $ | (111,846 | ) |
| $ | 9,015 |
|
| $ | 1,642,454 |
|
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
|
| Six Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2018 |
|
| 2017 |
| ||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 53,399 |
|
| $ | 47,073 |
|
| $ | 133,947 |
|
| $ | 53,399 |
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
| ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
| ||||||||
Provision for bad debt |
|
| 4,081 |
|
|
| 1,394 |
|
|
| 6,344 |
|
|
| 4,081 |
|
Amortization of broadcast rights, excluding barter |
|
| 29,997 |
|
|
| 11,857 |
|
|
| 32,013 |
|
|
| 29,997 |
|
Depreciation of property and equipment |
|
| 48,518 |
|
|
| 25,297 |
|
|
| 50,904 |
|
|
| 48,518 |
|
Amortization of intangible assets |
|
| 86,715 |
|
|
| 23,398 |
|
|
| 73,483 |
|
|
| 86,715 |
|
Gain on asset disposal, net |
|
| (58,595 | ) |
|
| (269 | ) |
|
| (391 | ) |
|
| (58,595 | ) |
Amortization of debt financing costs and debt discounts |
|
| 5,157 |
|
|
| 1,900 |
|
|
| 5,236 |
|
|
| 5,157 |
|
Loss on extinguishment of debt |
|
| 33,127 |
|
|
| - |
|
|
| 1,486 |
|
|
| 33,127 |
|
Stock-based compensation expense |
|
| 11,309 |
|
|
| 6,089 |
|
|
| 14,595 |
|
|
| 11,309 |
|
Deferred income taxes |
|
| (185,535 | ) |
|
| 19,013 |
|
|
| 5,472 |
|
|
| (185,535 | ) |
Payments for broadcast rights |
|
| (29,479 | ) |
|
| (11,838 | ) |
|
| (32,787 | ) |
|
| (29,479 | ) |
Deferred gain recognition |
|
| (241 | ) |
|
| (218 | ) | ||||||||
Amortization of deferred representation fee incentive |
|
| (594 | ) |
|
| (583 | ) | ||||||||
Change in the fair value of contingent consideration |
|
| - |
|
|
| 2,091 |
| ||||||||
Non-cash compensation expense related to an acquisition's contingent consideration |
|
| 1,233 |
|
|
| - |
| ||||||||
Payments for contingent consideration in connection with an acquisition |
|
| - |
|
|
| (4,044 | ) | ||||||||
Other noncash credits, net |
|
| (1,249 | ) |
|
| (1,325 | ) | ||||||||
Changes in operating assets and liabilities, net of acquisitions and dispositions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 13,258 |
|
|
| (14,415 | ) |
|
| 56,939 |
|
|
| 13,005 |
|
Prepaid expenses and other current assets |
|
| 32,178 |
|
|
| (7,342 | ) |
|
| 1,504 |
|
|
| 10,522 |
|
Other noncurrent assets |
|
| (70 | ) |
|
| 174 |
|
|
| (719 | ) |
|
| (660 | ) |
Accounts payable, accrued expenses and other current liabilities |
|
| (29,685 | ) |
|
| 5,709 |
|
|
| (27,683 | ) |
|
| (29,685 | ) |
Taxes payable |
|
| 154,291 |
|
|
| 127 |
|
|
| 12,493 |
|
|
| 154,291 |
|
Interest payable |
|
| (22,331 | ) |
|
| 117 |
|
|
| 759 |
|
|
| (22,331 | ) |
Other noncurrent liabilities |
|
| (7,618 | ) |
|
| (189 | ) |
|
| (9,444 | ) |
|
| (7,618 | ) |
Net cash provided by operating activities |
|
| 137,882 |
|
|
| 109,385 |
|
|
| 324,135 |
|
|
| 110,849 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| (27,691 | ) |
|
| (15,035 | ) |
|
| (36,390 | ) |
|
| (27,691 | ) |
Payments for acquisitions, net of cash acquired |
|
| (2,971,194 | ) |
|
| (103,969 | ) |
|
| (85,867 | ) |
|
| (2,971,194 | ) |
Withdrawal of interest previously deposited in escrow |
|
| 5,063 |
|
|
| - |
| ||||||||
Proceeds from sale of stations |
|
| 481,944 |
|
|
| - |
|
|
| - |
|
|
| 481,944 |
|
Proceeds from disposals of property and equipment |
|
| 14,575 |
|
|
| 335 |
|
|
| 3,874 |
|
|
| 14,575 |
|
Proceeds received from settlement of corporate-owned life insurance policies |
|
| 387 |
|
|
| 253 |
| ||||||||
Net cash used in investing activities |
|
| (2,497,303 | ) |
|
| (118,669 | ) |
|
| (117,996 | ) |
|
| (2,502,113 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt |
|
| 3,981,861 |
|
|
| 58,000 |
| ||||||||
Proceeds from long-term debt, net of debt discounts |
|
| 95,759 |
|
|
| 3,081,861 |
| ||||||||
Repayments of long-term debt |
|
| (1,390,798 | ) |
|
| (48,076 | ) |
|
| (176,916 | ) |
|
| (1,390,798 | ) |
Premium paid on debt extinguishment |
|
| (18,050 | ) |
|
| - |
|
|
| - |
|
|
| (18,050 | ) |
Payments for debt financing costs |
|
| (51,357 | ) |
|
| (100 | ) |
|
| - |
|
|
| (51,357 | ) |
Contribution from (distributions to) a noncontrolling interest, net |
|
| 226 |
|
|
| (243 | ) | ||||||||
Purchase of treasury stock |
|
| (58,294 | ) |
|
| - |
|
|
| (50,524 | ) |
|
| (58,294 | ) |
Proceeds from exercise of stock options |
|
| 3,303 |
|
|
| 213 |
|
|
| 2,059 |
|
|
| 3,303 |
|
Common stock dividends paid |
|
| (28,268 | ) |
|
| (14,716 | ) |
|
| (34,443 | ) |
|
| (28,268 | ) |
Purchase of noncontrolling interests |
|
| (66,901 | ) |
|
| (100 | ) |
|
| - |
|
|
| (66,901 | ) |
Distribution to a noncontrolling interest |
|
| (243 | ) |
|
| - |
| ||||||||
Payments for contingent consideration in connection with an acquisition |
|
| (5,000 | ) |
|
| - |
|
|
| - |
|
|
| (956 | ) |
Cash paid for shares withheld for taxes |
|
| (4,032 | ) |
|
| - |
|
|
| (4,716 | ) |
|
| (4,032 | ) |
Payments for capital lease obligations |
|
| (4,578 | ) |
|
| (2,171 | ) |
|
| (5,555 | ) |
|
| (4,578 | ) |
Net cash provided by financing activities |
|
| 2,357,643 |
|
|
| (6,950 | ) | ||||||||
Net decrease in cash and cash equivalents |
|
| (1,778 | ) |
|
| (16,234 | ) | ||||||||
Cash and cash equivalents at beginning of period |
|
| 87,680 |
|
|
| 43,416 |
| ||||||||
Cash and cash equivalents at end of period |
| $ | 85,902 |
|
| $ | 27,182 |
| ||||||||
Net cash (used in) provided by financing activities |
|
| (174,110 | ) |
|
| 1,461,687 |
| ||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
| 32,029 |
|
|
| (929,577 | ) | ||||||||
Cash, cash equivalents and restricted cash at beginning of period |
|
| 115,652 |
|
|
| 1,015,479 |
| ||||||||
Cash, cash equivalents and restricted cash at end of period |
| $ | 147,681 |
|
| $ | 85,902 |
| ||||||||
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
| $ | 117,646 |
|
| $ | 39,214 |
|
| $ | 104,874 |
|
| $ | 143,521 |
|
Income taxes paid, net of refunds |
| $ | 51,972 |
|
| $ | 23,682 |
|
| $ | 32,781 |
|
| $ | 51,972 |
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued purchases of property and equipment |
| $ | 3,325 |
|
| $ | 2,161 |
|
| $ | 14,376 |
|
| $ | 3,325 |
|
Noncash purchases of property and equipment |
| $ | 9,937 |
|
| $ | 709 |
|
| $ | - |
|
| $ | 9,937 |
|
Accrued debt financing costs |
| $ | - |
|
| $ | 542 |
| ||||||||
Issuance/reissuance of Class A Common Stock in connection with the Merger |
| $ | 1,031,443 |
|
| $ | - |
| ||||||||
Stock option replacement awards in connection with the Merger |
| $ | 10,702 |
|
| $ | - |
| ||||||||
Contingent consideration payable in connection with the Merger |
| $ | 275,352 |
|
| $ | - |
| ||||||||
Debt assumed in connection with a merger |
| $ | - |
|
| $ | 434,269 |
| ||||||||
Issuance/reissuance of Class A Common Stock in connection with a merger |
| $ | - |
|
| $ | 1,031,443 |
| ||||||||
Stock option replacement awards in connection with a merger |
| $ | - |
|
| $ | 10,702 |
| ||||||||
Relinquishment of spectrum asset and derecognition of liability to surrender spectrum asset |
| $ | 314,086 |
|
| $ | - |
| ||||||||
Contingent consideration payable in connection with a merger |
| $ | - |
|
| $ | 275,352 |
|
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
4
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Business Operations
As of June 30, 2017,2018, Nexstar Media Group, Inc. and its wholly-owned subsidiaries (“Nexstar”) owned, operated, programmed or provided sales and other services to 170169 full power television stations, including those owned by variable interest entities (“VIEs”),VIEs, in 100 markets in the states of Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland,Massachusetts, Michigan, Mississippi, Missouri, Montana, Nevada, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia and Wisconsin. The stations are affiliates of ABC, NBC, FOX, CBS, The CW, MyNetworkTV,MNTV, and other broadcast television networks. Through various local service agreements, Nexstar provided sales, programming, and other services to 36 full power television stations owned and/or operated by independent third parties.
On January 17, 2017, Nexstar completed its merger (the “Merger”) with Media General, Inc., a Virginia corporation (“Media General”), whereby Nexstar acquired the latter’s outstanding equity in exchange for cash and stock, plus additional consideration in the form of a non-tradeable contingent value right (“CVR”). As a result of the Merger, Nexstar acquired 71 full power stations (net of seven stations divested) in 42 markets. See Note 3 for additional information.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The Condensed Consolidated Financial Statements include the accounts of Nexstar and the accounts of independently-owned VIEs for which Nexstar is the primary beneficiary (See Note 2—Variable Interest Entities). Nexstar and the consolidated VIEs are collectively referred to as the “Company.” Noncontrolling interests represent the VIE owners’ share of the equity in the consolidated VIEs and are presented as a component separate from Nexstar Media Group, Inc. stockholders’ equity. All intercompany account balances and transactions have been eliminated in consolidation. Nexstar management evaluates each arrangement that may include variable interests and determines the need to consolidate an entity where it determines Nexstar is the primary beneficiary of a VIE in accordance with related authoritative literature and interpretive guidance.
Effective January 17, 2017, Nexstar assumed local service agreements to provide sales, programming and other services to stations owned by VIEs with whom Media General had agreements. Nexstar became the primary beneficiaries of these VIEs and consolidated these entities as of this date. On August 2, 2016, Nexstar became the primary beneficiary of certain stations owned by West Virginia Media Holdings, LLC (“WVMH”) which were consolidated into Nexstar’s financial statements as of this date. Nexstar completed the acquisition of these stations on January 31, 2017 and they are no longer VIEs. See Note 2—Variable Interest Entities for additional information on these transactions.
The following are assets of consolidated VIEs that are not available to settle the obligations of Nexstar and the liabilities of consolidated VIEs for which their creditors do not have recourse to the general credit of Nexstar (in thousands):
| June 30, |
|
| December 31, |
| |||||||||||
|
| 2017 |
|
| 2016 |
|
| June 30, 2018 |
|
| December 31, 2017 |
| ||||
Current assets |
| $ | 52,540 |
|
| $ | 3,638 |
|
|
|
|
|
|
|
|
|
Spectrum asset |
| $ | - |
|
| $ | 26,695 |
| ||||||||
Other current assets |
|
| 17,304 |
|
|
| 22,038 |
| ||||||||
Total current assets |
|
| 17,304 |
|
|
| 48,733 |
| ||||||||
Property and equipment, net |
|
| 8,506 |
|
|
| 6,944 |
|
|
| 7,059 |
|
|
| 7,517 |
|
Goodwill |
|
| 144,479 |
|
|
| 46,465 |
|
|
| 121,601 |
|
|
| 130,362 |
|
FCC licenses |
|
| 177,311 |
|
|
| 114,791 |
|
|
| 151,808 |
|
|
| 151,808 |
|
Other intangible assets, net |
|
| 84,080 |
|
|
| 53,747 |
|
|
| 78,587 |
|
|
| 81,916 |
|
Other noncurrent assets, net |
|
| 3,931 |
|
|
| 613 |
|
|
| 1,647 |
|
|
| 6,543 |
|
Total assets |
|
| 470,847 |
|
|
| 226,198 |
|
| $ | 378,006 |
|
| $ | 426,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
| 23,173 |
|
|
| 12,606 |
| ||||||||
Current Liabilities |
|
|
|
|
|
|
|
| ||||||||
Liability to surrender spectrum asset |
| $ | - |
|
| $ | 27,347 |
| ||||||||
Other current liabilities |
|
| 13,402 |
|
|
| 24,146 |
| ||||||||
Total current liabilities |
|
| 13,402 |
|
|
| 51,493 |
| ||||||||
Noncurrent liabilities |
|
| 38,261 |
|
|
| 26,590 |
|
|
| 24,746 |
|
|
| 30,339 |
|
Total liabilities |
| $ | 61,434 |
|
| $ | 39,196 |
|
| $ | 38,148 |
|
| $ | 81,832 |
|
Liquidity
Nexstar is highly leveraged, which makes it vulnerable to changes in general economic conditions. Nexstar’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 Nexstar’s control.
5
Interim Financial Statements
The Condensed Consolidated Financial Statements as of June 30, 20172018 and for the three and six months ended June 30, 20172018 and 20162017 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 Securities and Exchange Commission (the “SEC”). The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Results of operations for interim periods are not necessarily indicative of results for the full year. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related Notes included in Nexstar’s Annual Report on Form 10-K for the year ended December 31, 2016.2017. The balance sheet as of December 31, 20162017 has been derived from the audited financial statements as of that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
Variable Interest Entities
The Company may determine that an entity is a VIE as a result of local service agreements entered into with an entity. The term local service agreement generally refers to a contract between two separately owned television stations serving the same market, whereby the owner-operator of one station contracts with the owner-operator of the other station to provide it with administrative, sales and other services required for the operation of its station. Nevertheless, the owner-operator of each station retains control and responsibility for the operation of its station, including ultimate responsibility over all programming broadcast on its station. A local service agreement can be (1) a time brokerage agreement (“TBA”) or a local marketing agreement (“LMA”) which allows Nexstar to program most of a station’s broadcast time, sell the station’s advertising time and retain the advertising revenue generated in exchange for monthly payments, based on the station’s monthly operating expenses, (2) a shared services agreement (“SSA”) which allows the Nexstar station in the market to provide services including news production, technical maintenance and security, in exchange for Nexstar’s right to receive certain payments as described in the SSA, or (3) a joint sales agreement (“JSA”) which permits Nexstar to sell certain of the station’s advertising time and retain a percentage of the related revenue, as described in the JSA.
Consolidated VIEs
Mission Broadcasting, Inc. (“Mission”), Marshall Broadcasting Group, Inc. (“Marshall”) and White Knight Broadcasting (“White Knight”) are consolidated by Nexstar becauseconsolidates entities in which Nexstar is deemed under accounting principles generally accepted in the United States of America (“U.S. GAAP”)GAAP to have controlling financial interests in these entities for financial reporting purposes as a result of (1) local service agreements Nexstar has with the stations owned by these entities, (2) Nexstar’s guarantees of the obligations incurred under Mission’s and Marshall’scertain VIEs’ senior secured credit facilities (see Note 7), (3) Nexstar having power over significant activities affecting these entities’VIEs’ economic performance, including budgeting for advertising revenue, certain advertising sales and, for Mission and White Knight,in some cases, hiring and firing of sales force personnel and (4) purchase options granted by Mission and White Knighteach VIE, exclusive of Marshall Broadcasting Group, Inc. (“Marshall”), which permit Nexstar to acquire the assets and assume the liabilities of each Mission and White Knight station,of the VIEs’ stations, subject to Federal Communications Commission (“FCC”) consent.
In connection with Nexstar’s Merger with Media General consummated on January 17, 2017, Nexstar began to provide sales, programming and other services to stations owned by VIEs with whom Media General had agreements. These VIEs are Shield Media, LLC (“Shield”), Vaughan Media, LLC (“Vaughan”), Tamer Media, LLC (“Tamer”) and Super Towers, Inc. (“Super Towers”). Nexstar became the primary beneficiaries of these VIEs as of the closing date of the Merger because of (1) the local service agreements Nexstar assumed with these VIEs’ stations, (2) Nexstar’s guarantee of the outstanding obligations under Shield’s senior secured credit facility (Note 7), (3) Nexstar having power over significant activities affecting these entities’ economic performance, including budgeting for advertising revenue, advertising sales and hiring and firing of sales force personnel and (4) purchase options granted by Shield, Vaughan, Tamer and Super Towers that permit Nexstar to acquire the assets and assume the liabilities of each of these VIEs’ stations at any time, subject to FCC consent. Therefore, the financial results and financial position of these entities have been consolidated by Nexstar in accordance with the VIE accounting guidance as of January 17, 2017.
6
Nexstar had variable interests in the stations previously owned by WVMH as a result of TBAs effective December 1, 2015 and the agreement to acquire the assets of these stations dated November 16, 2015. On August 2, 2016, Nexstar received approval from the FCC to acquire these stations. Nexstar re-evaluated the business arrangements with these stations as of this date and determined that it was the primary beneficiary of the variable interests because it had the ultimate power to direct the activities that most significantly impact the economic performance of the stations including developing the annual operating budget, programming and oversight and control of sales management personnel. Therefore, Nexstar consolidated the WVMH stations as of August 2, 2016. The final closing of this acquisition completed on January 31, 2017. Thus, Nexstar no longer has variable interests in these stations. See Note 3 for additional information.
Nexstar had a variable interest in Parker Broadcasting of Colorado, LLC (“Parker”), the owner of station KFQX, pursuant to a TBA which Nexstar assumed effective June 13, 2014. Nexstar evaluated the business arrangement with Parker as of this date and determined that it was the primary beneficiary of the variable interest because it had the ultimate power to direct the activities that most significantly impact the economic performance of the station including developing the annual operating budget, programming and oversight and control of sales management personnel. Therefore, Nexstar consolidated Parker as of June 13, 2014. On March 31, 2017, Mission acquired the outstanding equity of Parker and effectively acquired Parker’s TBA with Nexstar. Thus, Nexstar no longer has a variable interest in Parker and deconsolidated its accounts. However, since Nexstar is the primary beneficiary of variable interests in Mission, it retained a controlling financial interest in KFQX and, therefore, continued to consolidate this station. See Note 3 for additional information.
The following table summarizes the various local service agreements Nexstar had in effect as of June 30, 20172018 with Mission, Marshall, White Knight, Shield, Vaughan, Tamer and Super Towers:its consolidated VIEs:
| Owner |
| Full Power Stations | |
| Mission Broadcasting, Inc. (“Mission”) |
| WFXP, KHMT and KFQX | |
LMA Only |
|
|
| WNAC |
|
|
|
| KNVA |
SSA & JSA |
| Mission |
| KJTL, KLRT, KASN, KOLR, KCIT, KAMC, KRBC, KSAN, WUTR, WAWV, WYOU, KODE, WTVO, KTVE, WTVW and WVNY |
|
|
|
| |
White Knight Broadcasting (“White Knight”) |
| WVLA, KFXK, KSHV | ||
|
| Shield Media, LLC (“Shield”) |
| WXXA and WLAJ |
|
| Vaughan Media, LLC (“Vaughan”) |
| WBDT, WYTV and KTKA |
| Marshall | KLJB, KPEJ and KMSS | ||
SSA Only |
| Tamer Media, LLC (“Tamer”) |
| KWBQ, KASY and KRWB |
Nexstar’s ability to receive cash from Mission, Marshall, White Knight, Shield, Vaughan, Tamer and Super Towersits 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, Mission, Marshall, White Knight, Shield, Vaughan, Tamer and Super Towers maintaineach VIE maintains complete responsibility for and control over programming, finances, personnel and operations of theirits stations.
76
The carrying amounts and classification of the assets and liabilities of the VIEs which have been included in the Condensed Consolidated Balance Sheets were as follows (in thousands):
| June 30, |
|
| December 31, |
| |||||||||||
|
| 2017 |
|
| 2016 |
|
| June 30, 2018 |
|
| December 31, 2017 |
| ||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 14,417 |
|
| $ | 7,302 |
|
| $ | 12,495 |
|
| $ | 17,180 |
|
Accounts receivable, net |
|
| 27,295 |
|
|
| 20,553 |
|
|
| 21,883 |
|
|
| 24,407 |
|
Spectrum asset |
|
| - |
|
|
| 26,695 |
| ||||||||
Prepaid expenses and other current assets |
|
| 31,003 |
|
|
| 3,353 |
|
|
| 3,645 |
|
|
| 6,762 |
|
Total current assets |
|
| 72,715 |
|
|
| 31,208 |
|
|
| 38,023 |
|
|
| 75,044 |
|
Property and equipment, net |
|
| 27,077 |
|
|
| 29,984 |
|
|
| 25,423 |
|
|
| 25,971 |
|
Goodwill |
|
| 177,666 |
|
|
| 98,107 |
|
|
| 154,788 |
|
|
| 163,549 |
|
FCC licenses |
|
| 177,311 |
|
|
| 114,791 |
|
|
| 151,808 |
|
|
| 151,808 |
|
Other intangible assets, net |
|
| 101,069 |
|
|
| 87,668 |
|
|
| 93,344 |
|
|
| 97,757 |
|
Other noncurrent assets, net |
|
| 7,455 |
|
|
| 13,233 |
|
|
| 5,216 |
|
|
| 9,443 |
|
Total assets |
| $ | 563,293 |
|
| $ | 374,991 |
|
| $ | 468,602 |
|
| $ | 523,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of debt |
| $ | 57,860 |
|
| $ | 8,334 |
|
| $ | 5,479 |
|
| $ | 56,565 |
|
Interest payable |
|
| 397 |
|
|
| 1,031 |
|
|
| 985 |
|
|
| 994 |
|
Liability to surrender spectrum asset |
|
| - |
|
|
| 27,347 |
| ||||||||
Other current liabilities |
|
| 23,173 |
|
|
| 12,606 |
|
|
| 13,402 |
|
|
| 24,146 |
|
Total current liabilities |
|
| 81,430 |
|
|
| 21,971 |
|
|
| 19,866 |
|
|
| 109,052 |
|
Debt |
|
| 246,784 |
|
|
| 268,499 |
|
|
| 294,415 |
|
|
| 245,523 |
|
Other noncurrent liabilities |
|
| 38,840 |
|
|
| 26,590 |
|
|
| 24,746 |
|
|
| 30,594 |
|
Total liabilities |
| $ | 367,054 |
|
| $ | 317,060 |
|
| $ | 339,027 |
|
| $ | 385,169 |
|
Non-Consolidated VIEs
Nexstar has an outsourcing agreement with Cunningham Broadcasting Corporation (“Cunningham”), which continues through December 31, 2017.30, 2020. Under the outsourcing agreement, Nexstar provides certain engineering, production, sales and administrative services for WYZZ, the FOX affiliate in the Peoria, Illinois market, through WMBD, the Nexstar television station in that market. During the term of the outsourcing agreement, Nexstar retains the broadcasting revenue and related expenses of WYZZ and is obligated to pay a monthly fee to Cunningham based on the combined operating cash flow of WMBD and WYZZ, as defined in the agreement.
Nexstar has determined that it has a variable interest in WYZZ. Nexstar has evaluated its arrangements with Cunningham and has determined that it is not the primary beneficiary of the variable interest in this station because it does not have the ultimate power to direct the activities that most significantly impact the station’s economic performance, including developing the annual operating budget, programming and oversight and control of sales management personnel. Therefore, Nexstar has not consolidated WYZZ under authoritative guidance related to the consolidation of VIEs. Under the local service agreement for WYZZ, Nexstar pays for certain operating expenses, and therefore may have unlimited exposure to any potential operating losses. Nexstar’s management believes that Nexstar’s minimum exposure to loss under the WYZZ agreement consists of the fees paid to Cunningham. Additionally, Nexstar indemnifies the owners of Cunningham from and against all liability and claims arising out of or resulting from itsNexstar’s activities, acts or omissions in connection with the agreement. The maximum potential amount of future payments Nexstar could be required to make for such indemnification is undeterminable at this time. There were no significant transactions that arisearising from Nexstar’s outsourcing agreement with Cunningham.
7
Revenue Recognition
As discussed in Recent Accounting Pronouncements below, the Company adopted the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) and all related amendments. ASC 606 establishes a comprehensive new revenue recognition model designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to be entitled to receive in exchange for those goods or services and requires significantly enhanced revenue disclosures. The Company adopted this standard effective January 1, 2018 using the modified retrospective method as applied to customer contracts that were not completed as of January 1, 2018. As a result, financial information for reporting periods beginning after January 1, 2018 is presented under ASC 606, while comparative financial information has not been adjusted and continues to be reported in accordance with the Company’s historical accounting policy for revenue recognition prior to the adoption of ASC 606.
The Company’s revenue is primarily derived from the sale of advertising and the compensation received from cable, satellite and other multichannel video programming distributors (“MVPDs”) in its markets in return for the Company’s consent to the retransmission of the signals of its television stations. Total revenue includes advertising revenue, retransmission compensation, digital revenue and other broadcast related revenues. The Company’s contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price, which is generally determined based on the price charged to customers. The Company also determines whether gross or net presentation is appropriate based on its relationship in the applicable transaction with its ultimate customer. Any amounts paid by customers but not earned as of the balance sheet date are recorded as a contract liability (deferred revenue). The lag between billing the customers and when the payment is due is not significant.
The stations’ advertising contracts are short-term in nature and include a number of spots that are delivered over the term of the arrangement. Advertising revenue is recognized, for the amount the Company is entitled to receive, when the advertisements are broadcast on its stations (local, national and political revenue) or delivered on the stations’ websites (digital revenue).
The Company’s retransmission consent agreements with MVPDs generally have a three-year term and provides revenue based on a monthly amount the Company is entitled to receive per subscriber. Under ASC 606, these revenues are considered arising from the licensing of functional intellectual property. As such, the Company applies the exception for sales- or usage- based royalty for the accounting of variable consideration and recognizes revenue (retransmission compensation) at the point in time the broadcast signal is delivered to the MVPDs. The MVPDs report their subscriber numbers to the Company on a 30- to 60-day lag, which coincides with their payment of the fees due to the Company. Prior to receiving the report from the MVPDs, the Company records revenue based on estimated number of subscribers and the monthly amount the Company is entitled to receive per subscriber. The impact of the lag in the number of subscribers is not significant.
Revenue from the Company’s other digital businesses includes revenue from digital publishing and content management platforms, digital video advertising platform, social media advertising platform and related services. Revenue is recognized at the time advertising is delivered or upon performance of services. The Company applies the right to invoice practical expedient to certain transactions where the invoice amount corresponds directly with the value to its customers. Most of the arrangements with customers are short-term in nature.
The Company trades certain advertising time for various goods and services. These transactions are short-term in nature and are recorded at the estimated fair value of the goods or services received. Revenue from trade transactions is recognized when the related advertisement spots are broadcast. The Company recorded $4.0 million and $6.9 million of trade revenue during the three and six months ended June 30, 2018 and $3.5 million and $5.7 million of trade revenue during the three and six months ended June 30, 2017.
The above revenue recognition policies are consistent with the Company’s historical accounting policies prior to the adoption of ASC 606.
Effective on January 1, 2018, the Company no longer recognizes barter revenue (and the related barter expense) resulting from the exchange of advertising time for certain program material. During the three months ended June 30, 2017, barter revenue (and the related barter expense) were $9.9 million. During the six months ended June 30, 2017, barter revenue (and the related barter expense) were $20.1 million. Barter expense was included in amortization of broadcast rights in the accompanying Condensed Consolidated Statement of Operations. As of December 31, 2017, the current barter assets (and the related current barter liabilities) were $9.7 million, and the noncurrent barter assets (and the related noncurrent barter liabilities) were $12.5 million. On January 1, 2018, the Company recorded an adjustment to remove the offsetting balances of barter assets and barter liabilities.
Under the Company’s historical accounting policy prior to the adoption of ASC 606, barter revenue (and the related barter expense) would have been $10.2 million during the three months ended June 30, 2018, and barter revenue (and the related barter expense) would have been $21.2 million during the six months then ended. In addition, the current barter assets (and the related current barter liabilities) would have been $8.1 million, and the noncurrent barter assets (and the related noncurrent barter liabilities) would have been $8.4 million as of June 30, 2018.
8
The Company elected to utilize the practical expedient around costs incurred to obtain contracts for television advertising and digital advertising due to their short-term nature. Additionally, the incremental benefit from efforts in acquiring these contracts is considered not significant. Thus, the Company continued to expense sales commissions when incurred.
The Company did not disclose the value of unsatisfied performance obligations on its contracts with customers because they are either (i) contracts with an original expected term of one year or less, (ii) contracts for which the sales- or usage- based royalty exception was applied, or (iii) contracts for which revenue is recognized in proportion to the amount the Company has the right to invoice for services performed.
The Company’s contract liabilities, which are reflected in its Consolidated Financial Statements as accrued expenses and other liabilities, consist primarily of customer payments for products or services received before the transfer of control to the customer occurs (deferred revenue). The Company’s performance obligations related to contract liabilities of $5.4 million as of January 1, 2018 were recognized as revenue during the first quarter of 2018. The Company’s performance obligations related to contract liabilities of $5.0 million as of June 30, 2018 are expected to be recognized as revenue in the third quarter of 2018.
See Note 13 for disaggregated revenue information.
Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable, broadcast rights, accounts payable, broadcast rights payable and accrued expenses approximate fair value due to their short-term nature.
See Note 3 for fair value disclosures of contingent consideration liability in connection with Nexstar’s merger withthe acquisition of Likqid Media General.Inc. (“LKQD”). See Note 7 for fair value disclosures related to the Company’s debt.
Pension plansPlans and postretirement benefitsPostretirement Benefits
A determination of the liabilities and cost of the Company’s pension and other postretirement plans requires the use of assumptions. The actuarial assumptions used in the Company’s pension and postretirement reporting are reviewed annually with independent actuaries and are compared with external benchmarks, historical trends and the Company’s own experience to determine that its assumptions are reasonable. The assumptions used in developing the required estimates include the following key factors: discount rates, expected return on plan assets, mortality rates, health care cost trends, retirement rates and expected contributions. The amount by which the projected benefit obligation exceeds the fair value of the pension plan assets is recorded in other noncurrent liabilities in the accompanying Condensed Consolidated Balance Sheet.
As discussed under Recent Accounting Pronouncements, as of January 1, 2018 the Company adopted ASU No. 2017-07 and ASU No. 2016-15. Under ASU No. 2017-07, entities are required to (1) disaggregate the current-service-cost component from the other components of net benefit cost (the “other components”) and present such current-service-costs in the same income statement line item as other compensation costs for services rendered by the pertinent employees during the period and (2) present the other components in the income statement separately from the service cost component and outside a subtotal of income from operations. The Company had no service costs during the three and six months ended June 30, 2018 and 2017. In accordance with this adoption, the net periodic benefit cost, which consists of interest costs and expected return on plan assets, is disclosed on a separate line below income from operations in the Condensed Consolidated Statements of Operations. Under ASU No. 2016-15, payments received for the settlement of corporate-owned life insurance claims are now required to be disclosed within investing activities. Accordingly, balances previously reported as a source of cash from operating activities have been reclassified to investing activities in the Condensed Consolidated Statements of Cash Flows.
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 stock were issued upon exercise of stock options and vesting of restricted stock units. The following table shows the amounts used in computing the Company’s diluted shares (in thousands):
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| |||||||||||||||||||||
| June 30, |
|
| June 30, |
|
| June 30, |
|
| June 30, |
| |||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
| ||||||||
Weighted average shares outstanding - basic |
|
| 46,931 |
|
|
| 30,680 |
|
|
| 45,573 |
|
|
| 30,669 |
|
|
| 45,631 |
|
|
| 46,931 |
|
|
| 45,852 |
|
|
| 45,573 |
|
Dilutive effect of equity incentive plan instruments |
|
| 1,264 |
|
|
| 940 |
|
|
| 1,242 |
|
|
| 910 |
|
|
| 1,516 |
|
|
| 1,264 |
|
|
| 1,562 |
|
|
| 1,242 |
|
Weighted average shares outstanding - diluted |
|
| 48,195 |
|
|
| 31,620 |
|
|
| 46,815 |
|
|
| 31,579 |
|
|
| 47,147 |
|
|
| 48,195 |
|
|
| 47,414 |
|
|
| 46,815 |
|
9
Stock options and restricted stock units to acquire a weighted average of 27,000 shares and 260,000 shares for the three months ended June 30, 2017 and 2016, respectively,38,000 and 289,000 shares and 590,000 shares during the six months ended June 30, 20172018 and 2016,2017, respectively, of Class A common stock were excluded from the computation of diluted earnings per share, because their impact would have been anti-dilutive. There were no anti-dilutive stock options or restricted stock units for the three months ended June 30, 2018.
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.
9
Recent Accounting Pronouncements
New Accounting Standards Adopted
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which updates. The Company adopted this standard and all related amendments effective January 1, 2018 using the modified retrospective method as applied to customer contracts that were not completed as of January 1, 2018. Upon adoption of this standard, the cumulative adjustment to the Company’s retained earnings as of January 1, 2018 for the cumulative effect of initially applying the new standard is not material. See Revenue Recognition above for the Company’s updated accounting guidance on revenue recognition. This standard is intended to provide a more robust frameworkpolicy and for addressing revenue issues, improve comparability of revenue recognition practices, and improve disclosure requirements. expanded disclosures.
In MarchAugust 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers2016-15, Statement of Cash Flows (Topic 606): Principal versus Agent Considerations (ASU 2016-08)230) Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) (“ASU 2016-15”). The purpose ofamendments in ASU 2016-08 is2016-15 address eight specific cash flow issues and apply to clarify the implementation of guidance on principal versus agent considerations. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (ASU 2016-10), which clarifies the implementation guidance in identifying performance obligations in a contract and determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients (ASU 2016-12). The standard amends guidance in the new revenue standard on collectibility, noncash consideration, presentation of sales tax, and transition and is intended to address implementation issues that were raised by stakeholders and provide additional practical expedients. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers (ASU 2016-20), which makes minor corrections or minor improvementsall entities that are not expectedrequired to havepresent a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments are intended to address implementation issues that were raised by stakeholders and provide additional practical expedients to reduce the cost and complexity of applying the new revenue standard. These updates are effective for interim and annual reporting periods beginning after December 15, 2017. The Company does not plan to early adopt, and accordingly, it will adopt these updates effective January 1, 2018. The Company is currently evaluating its adoption approach and its final determination will depend on a number of factors, including the significance of the impact of these updates on the Company’s financial results, the Company’s ability to accumulate and analyze the information necessary to assess the impact on prior period financial statements and its ability to maintain two sets of financial information under current and new standards if it were to adopt the full retrospective approach. The Company has also started allocating resources to analyze each of its revenue streams. The Company continues to assess the potential impacts of the new standard on its financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). The new guidance requires the recording of assets and liabilities arising from leases on the balance sheet accompanied by enhanced qualitative and quantitative disclosures in the notes to the financial statements. The new guidance is expected to provide transparency of information and comparability among organizations. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of the provisions of the accounting standard update.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures.under FASB Accounting Standards Codification 230, Statement of Cash Flows. The amendments in ASU 2016-09 is2016-15 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company has applied the change in accounting as of January 1, 2017 and excess tax benefits and tax deficiencies related to stock-based compensation are now recognized within income tax expense. Additionally, excess tax benefits are now classified along with other income tax cash flows as an operating activity in the condensed consolidated statements of cash flows. As such, the amounts previously reported as cash flows from operating activities were increased by $13.2 million and the amount previously reported as cash flows from financing activities were decreased by $13.2 million in the Condensed Consolidated Statement of Cash Flows during the six months ended June 30, 2016. The change in accounting principle did not impact the Company’s stockholders’ equity.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (ASU 2016-16). The amendments of ASU 2016-16 were issued to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. The current guidance prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party which has resulted in diversity in practice and increased complexity within financial reporting. The amendments of ASU 2016-16 would require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and do not require new disclosure requirements. The amendments of ASU 2016-16 are effective for annual reporting periods beginning after December 15, 2017. The Company has applied the change in accounting as of January 1, 2017 using the modified2018 on a retrospective approach. basis. This adoption impacted Nexstar’s previous treatmentfinancing activity classification of tax gain onpayments for contingent consideration in 2017 related to an acquisition. The payment was not made soon after the saleconsummation of WTVWa business combination and includes an amount that is more than the acquisition date fair value of the contingent consideration liability. Under ASU 2016-15, this portion of the transaction should be classified as an operating activity in the Condensed Consolidated Statement of Cash Flows. The adoption also impacted Nexstar’s disclosure of payments received for the settlement of corporate-owned life insurance claims within the Condensed Consolidated Statement of Cash Flows during the six months ended June 30, 2017. The payments were previously reported as a source of cash from operating activities and are now required to Mission in 2011.be disclosed within investing activities. As such, the amounts previously reported as other noncurrent assets, deferred tax liabilitiesnet cash provided by operating activities and accumulated deficitnet cash used in investing activities decreased, as indicated in the condensed consolidated balance sheet were decreased by $1.3 million, $2.1 million and $0.8 million, respectively.below table.
10
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, a consensus of the FASB Emerging Issues Task Force (ASU 2016-18)(“ASU 2016-18”), which provides guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company has applied the change in accounting as of January 1, 2018 on a retrospective basis. This adoption impacted the release of a restricted escrow deposit into Nexstar’s operating cash during the six months ended June 30, 2017. In July 2016, Nexstar issued its $900.0 million 5.625% Senior Unsecured Notes (the “5.625% Notes”) at par, the gross proceeds of which were directly deposited into a restricted escrow account. Interest on these notes is currently evaluatingpayable semiannually but Nexstar was required to pre-fund interest on such notes monthly from July 2016 to December 2016, all of which was also deposited in the impactrestricted escrow account. As of December 31, 2016, the restricted escrow account had a balance of $927.8 million. In January 2017, Nexstar completed its merger with Media General, Inc. (“Media General”). As a result, the funds previously deposited in the restricted escrow account, including the pre-funded interests, were released to Nexstar’s operating cash. On February 1, 2017, Nexstar paid the first interest due to the lenders of the 5.625% Notes of $25.9 million. During the six months ended June 30, 2017, Nexstar previously classified the effects of these updatestransactions in its Condensed Consolidated Statement of Cash Flows as follows: (i) $21.6 million source of cash from change in prepaid expenses and other current assets, (ii) $1.1 million source of cash from change in other noncurrent assets, (iii) $5.1 million source of cash from investing activities, (iv) $900.0 million proceeds from long-term debt, and (v) no cash flow reported in 2017 for the payment of interest on its financial statements.the 5.625% Notes as the cash flow impact was reported in 2016, when the pre-funding was made. Under ASU 2016-18, transfers between cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents are not part of an entity’s operating, investing, and financing activities, and details of those transfers are not reported as cash flow activities in the statement of cash flows. As such, the previous classifications in the 2017 Condensed Consolidated Statement of Cash Flows related to these transactions were reversed. Additionally, the cash, cash equivalents and restricted cash at the beginning of the period in 2017 increased and the supplemental cash flow information for interest paid also increased.
10
The following table summarizes the line items in the Condensed Consolidated Statement of Cash Flows that were impacted by the adoption of ASU 2016-15 and ASU 2016-18 along with reclassifications to conform with current year presentation (in thousands):
|
| Six Months Ended June 30, 2017 |
| |||||||||||||||||
|
| Previously |
|
| Adjustments for adoption of |
|
|
|
|
|
| Current |
| |||||||
|
| Reported |
|
| ASU 2016-15 |
|
| ASU 2016-18 |
|
| Reclassifications |
|
| Presentation |
| |||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments for contingent consideration in connection with an acquisition |
| $ | - |
|
| $ | (4,044 | ) |
| $ | - |
|
| $ | - |
|
| $ | (4,044 | ) |
Deferred gain recognition |
|
| (241 | ) |
|
| - |
|
|
| - |
|
|
| 241 |
|
|
| - |
|
Amortization of deferred representation fee incentive |
|
| (594 | ) |
|
| - |
|
|
| - |
|
|
| 594 |
|
|
| - |
|
Other non-cash credits |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,325 | ) |
|
| (1,325 | ) |
Prepaid expenses and other current assets |
|
| 32,178 |
|
|
| - |
|
|
| (21,656 | ) |
|
| - |
|
|
| 10,522 |
|
Accounts receivable |
|
| 13,258 |
|
|
| (253 | ) |
|
| - |
|
|
| - |
|
|
| 13,005 |
|
Other noncurrent assets |
|
| (70 | ) |
|
| - |
|
|
| (1,080 | ) |
|
| 490 |
|
|
| (660 | ) |
Net cash provided by operating activities |
|
| 137,882 |
|
|
| (4,297 | ) |
|
| (22,736 | ) |
|
| - |
|
|
| 110,849 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Withdrawal of interest previously deposited in escrow |
|
| 5,063 |
|
|
| - |
|
|
| (5,063 | ) |
|
| - |
|
|
| - |
|
Proceeds received from corporate-owned life insurance policies |
|
| - |
|
|
| 253 |
|
|
|
|
|
|
| - |
|
|
| 253 |
|
Net cash used in investing activities |
|
| (2,497,303 | ) |
|
| 253 |
|
|
| (5,063 | ) |
|
| - |
|
|
| (2,502,113 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt |
|
| 3,981,861 |
|
|
| - |
|
|
| (900,000 | ) |
|
| - |
|
|
| 3,081,861 |
|
Payments for contingent consideration in connection with an acquisition |
|
| (5,000 | ) |
|
| 4,044 |
|
|
| - |
|
|
| - |
|
|
| (956 | ) |
Net cash provided by financing activities |
|
| 2,357,643 |
|
|
| 4,044 |
|
|
| (900,000 | ) |
|
| - |
|
|
| 1,461,687 |
|
Net decrease in cash, cash equivalents and restricted cash |
|
| (1,778 | ) |
|
| - |
|
|
| (927,799 | ) |
|
| - |
|
|
| (929,577 | ) |
Cash, cash equivalents and restricted cash at beginning of period |
|
| 87,680 |
|
|
| - |
|
|
| 927,799 |
|
|
| - |
|
|
| 1,015,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
| $ | 117,646 |
|
| $ | - |
|
| $ | 25,875 |
|
| $ | - |
|
| $ | 143,521 |
|
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01)(“ASU 2017-01”). ASU 2017-01 provides clarification on the definition of a business and adds guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. To be considered a business under the new guidance, it must include an input and a substantive process that together significantly contribute to the ability to create output. The amendment removes the evaluation of whether a market participant could replace missing elements. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and will be applied prospectively. The potential impact of this new guidance will be assessed for future acquisitions or dispositions, but it is not expected to have a material impact onCompany has applied the Company's consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment (ASU 2017-04). The standard removes Step 2 of the goodwill impairment test, which requires a company to perform procedures to determine the fair value of a reporting unit's assets and liabilities following the procedure that would be requiredchange in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, a goodwill impairment charge will now be measured as the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU No. 2017-04 will be effective for fiscal years beginning on January 1, 2020, including interim periods within those fiscal years, and early adoptionaccounting as of January 1, 2017 is permitted. 2018. The new guidance is required to be applied on a prospective basis and as such,adoption of this ASU did not impact the Company will use the simplified test in its annual fourth fiscal quarter testing or more often if circumstances indicate a potential impairment may exist, or if events have affected the composition of reporting units. The new guidance is not expected to have a material impact on the Company’s consolidated financial statements.Company's Consolidated Financial Statements.
In March 2017, the FASB issued ASU No. 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07)(“ASU 2017-07”). ASU 2017-07 requires entities to (1) disaggregate the current-service-cost component from the other components of net benefit cost (the “other components”) and present it with other current compensation costs for related employees in the income statement and (2) present the other components elsewhere in the income statement and outside of income from operations if that subtotal is presented. In addition, ASU 2017-07 requires entities to disclose the income statement lines that contain the other components if they are not presented on appropriately described separate lines. The amendment should be applied retrospectively for the presentation of the service cost component and prospectively for the capitalization of the service cost component. ASU 2017-07 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted at the beginning of any annual period for which an entity’s financial statements have not been issued or made available for issuance. The Company is currently evaluatinghas applied the impactchange in accounting as of January 1, 2018. Accordingly, net periodic benefit income, excluding service costs, of $3.2million and $5.8 million for the provisionsthree and six months ended June 30, 2017, respectively, were adjusted out of this accounting standard update.selling, general, and administrative expenses and separately stated below income from operations.
In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718) – Scope of Modification Accounting (ASU 2017-09)(“ASU 2017-09”). ASU 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The new guidance will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications. Under ASU 2017-09, an entity will not apply modification accounting to a share-based payment award if the award’s fair value, vesting conditions and classification as an equity or liability instrument are the same immediately before and after the change. ASU 2017-09 will be applied prospectively to awards modified on or after the adoption date. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The effective date will beCompany has applied the first quarterchange in accounting as of fiscal yearJanuary 1, 2018. Early adoption is permitted. The adoption of this standard isASU did not expected to have a material impact on the Company’s consolidated financial statements.Company's Consolidated Financial Statements.
11
3. AcquisitionsIn February 2018, the FASB issued ASU No. 2018-02, Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). ASU 2018-02 provides the option to reclassify stranded tax effects related to the U.S. Tax Cuts and DispositionsJobs Act of 2017 (“Tax Act”) in accumulated other comprehensive income to retained earnings. The adjustment relates to the change in the U.S. corporate income tax rate. The adoption of this ASU did not impact the Company's Consolidated Financial Statements.
Merger with Media GeneralNew Accounting Standards Not Yet Adopted
On January 17, 2017 (the “Closing Date”In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), Nexstar completed its previously announced Merger with Media General. Prior. The new guidance requires the recording of assets and liabilities arising from leases on the balance sheet accompanied by enhanced qualitative and quantitative disclosures in the notes to the completionfinancial statements. The new guidance is expected to provide transparency of information and comparability among organizations. In January 2018, the FASB issued ASU No. 2018-01 to address the accounting treatment of land easements within the context of ASU No. 2016-02. ASU 2018-01 provides an optional transition practical expedient to not evaluate under Topic 842 existing or expired land easements that were not previously accounted for as leases under the current leases guidance in Topic 840. In July 2018, the FASB issued ASU No. 2018-10 to provide additional clarity on specific aspects of the Merger, Media General owned, operated, or serviced 78 full power television stationsnew lease guidance. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of the provisions of the accounting standard update.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”). The standard requires entities to estimate loss of financial assets measured at amortized cost, including trade receivables, debt securities and loans, using an expected credit loss model. The expected credit loss differs from the previous incurred losses model primarily in 48 markets. that the loss recognition threshold of “probable” has been eliminated and that expected loss should consider reasonable and supportable forecasts in addition to the previously considered past events and current conditions. Additionally, the guidance requires additional disclosures related to the further disaggregation of information related to the credit quality of financial assets by year of the asset’s origination for as many as five years. Entities must apply the standard provision as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting ASU 2016-13 on its consolidated financial statements.
In connectionJune 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). The standard aligns the accounting for share-based payment awards issued to employees and nonemployees. Changes to the accounting for nonemployee awards include: (1) equity-classified share-based payment awards issued to nonemployees will now be measured on the grant date, instead of the previous requirement to remeasure the awards through the performance completion date; (2) for performance conditions, compensation cost associated with the Merger, Nexstar sold the assets of seven of Media General’s full power television stations in seven markets. The full power television stations acquired and consolidated by Nexstar as a resultaward will be recognized when achievement of the Merger, netperformance condition is probable, rather than upon achievement of divestitures, arethe performance condition; and (3) the current requirement to reassess the classification (equity or liability) for nonemployee awards upon vesting will be eliminated, except for awards in the form of convertible instruments. The guidance should be applied to all new awards granted after the date of adoption. In addition, the modified retrospective approach should be used on all liability-classified awards that have not been settled and equity-classified awards for which a measurement date has not been established by the adoption date by remeasurement at fair value as follows:of the adoption date with a cumulative effect adjustment to opening retained earnings in the fiscal year of adoption. The standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than an entity’s adoption of ASC 606. The Company is currently evaluating the impact of adopting ASU 2018-07 on its consolidated financial statements.
|
|
|
|
| ||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
| ||||||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
|
As discussed in Note 2, Nexstar is the primary beneficiary of its variable interests in Shield, Tamer, Vaughan and Super Towers and has consolidated these entities, including the stations they own.
12
UponLKQD
On January 16, 2018, Nexstar Digital LLC (“Nexstar Digital”), a wholly-owned subsidiary of Nexstar, acquired the completionoutstanding equity of LKQD, a video advertising infrastructure company, for $97.0 million. In January 2018, $94.0 million of the Merger, each issuedpurchase price was paid, funded by a combination of borrowing under the revolving credit facility portion of Nexstar’s senior secured credit facility (Note 7) and outstanding sharecash on hand. The remaining purchase price of common stock, no par$3.0 million (working capital adjustment) was paid to the former owners on April 27, 2018, funded by cash on hand.
The sellers are also entitled to receive up to $35.0 million in additional cash payments if a certain earnings target is achieved during the fiscal year 2019 and if certain employees have continued their employment with Nexstar Digital on the date of payment (the “Earnout Payments”). The Earnout Payments are considered compensation to employees for their services and will be incurred from the acquisition date through December 31, 2019. As of June 30, 2018, Nexstar Digital accrued $1.2 million, representing the portion of the estimated fair value of Media General (“Media General Common Stock”) immediately prior to the effective time of the Merger, other than shares or other securities representing capital stock in Media General owned, directly or indirectly, by Nexstar or any subsidiary of Media General, was converted into the right to receive (i) $10.55 in cash, without interest (the “Cash Consideration”), (ii) 0.1249 of a share of Nexstar’s Class A Common Stock (the “Nexstar Common Stock”), par value $0.01 per share (the “Stock Consideration”), and (iii) one non-tradeable CVR representing the right to receive a pro rata share of the net proceeds from the disposition of Media General’s spectrum in the FCC’s recently concluded spectrum auction (the “FCC auction”), subject to and in accordance with the contingent value rights agreement governing the CVRs (the CVR, together with the Stock Consideration and the Cash Consideration, the “Merger Consideration”). The CVRs are not transferable, except in limited circumstances specified in the agreement governing the CVRs.
Upon the completion of the Merger, each unvested Media General stock option outstanding immediately prior to the Effective Time became fully vested and was converted into an option to purchase Nexstar Common Stock at the same aggregate price as provided in the underlying Media General stock option, with the number of shares of Nexstar Common Stock adjusted to account for the Cash Consideration and the exchange ratio for the Stock Consideration. Additionally, the holders of Media General stock options received one CVR for each share subject to the Media General stock option immediately prior to the Effective Time. All other equity-based awards of Media General outstanding immediately prior to the Merger vested in full and were converted into the right to receive the Merger Consideration.
The following table summarizes the components of the total consideration paid, payable or issued on the Closing Date in connection with the Merger (in thousands):
Cash Consideration |
| $ | 1,376,108 |
|
|
| 995,835 |
| |
Reissued Nexstar Common Stock from treasury (560,316 shares) |
|
| 35,608 |
|
Stock option replacement awards (228,438 options) |
|
| 10,702 |
|
Repayment of Media General debt, including premium and accrued interest |
|
| 1,658,135 |
|
Contingent consideration liability (CVR) |
|
| 275,352 |
|
|
| $ | 4,351,740 |
|
On July 21, 2017, the Company received the $479 million of gross proceeds from the disposition of Media General’s spectrum in the recently concluded FCC auction. Nexstar did not dispose the spectrum of its legacy stations.
The estimated net proceeds from the disposition of Media General’s spectrum in the FCC auctionEarnout Payments that is $459.0 million which is calculated as gross proceeds, less estimated transaction expenses and repacking expenses as defined in the CVR agreement.incurred. The estimated fair value of the CVR is $275.4 million and is calculated as the estimated net proceeds, less taxes as defined in the CVR agreement. The first paymentsEarnout Payments was determined by applying a weighted probability of the CVRpotential outcomes to the holders, which represents majoritymaximum possible payout of $35.0 million. The calculation of these potential outcomes is dependent on past financial performance, management assumptions about future performance and industry trends and any changes to these assumptions could impact the estimatedfinal settlement. This fair value will be made at the end of August 2017.
The fair value measurements related to the disposition of Media General’s spectrum aremeasurement is considered Level 3 as significant inputs are unobservable to the market.
ConcurrentThe acquisition of LKQD broadens and diversifies Nexstar Digital’s portfolio with the closingtechnologies that are complementary to its current offerings of the Merger, Nexstar sold the assetsdigital solutions and services for media publishers, and multi-platform marketing solutions for local and national advertisers. Transaction costs relating to this acquisition, including legal and professional fees of 12 full power television stations in 12 markets, five of which$0.4 million, were previously owned by Nexstar and seven of which were previously owned by Media General. Nexstar sold the Media General stations for a total consideration of $427.6 million and recognized a loss on disposal of $4.7 million (the “Media General Divestitures”). Nexstar sold its stations for $114.4 million and recognized gain on disposal of $62.4 million (the “Nexstar Divestitures”). The gain and loss recognized from these divestitures were includedexpensed as a separate line item in the accompanying Condensed Consolidated Statements of Operations forincurred during the six months ended June 30, 2017.2018. No significant transaction costs were incurred during the three months ended June 30, 2018.
13
Subject to final determination, which is expected to occur within twelve12 months of the acquisition date, the provisional fair values of the assets acquired and liabilities assumed (net ofin the effects of the Media General Divestitures but including the consolidation of the assets and liabilities of Shield, Tamer, Vaughan and Super Towers)acquisition are as follows (in thousands):
| $ | 63,850 |
|
| $ | 11,167 |
| |
|
| 302,670 |
|
|
| 24,712 |
| |
Spectrum auction asset |
|
| 459,004 |
| ||||
Prepaid expenses and other current assets |
|
| 21,953 |
| ||||
Prepaids |
|
| 13 |
| ||||
Property and equipment |
|
| 483,785 |
|
|
| 210 |
|
FCC licenses |
|
| 1,306,550 |
| ||||
Network affiliation agreements |
|
| 1,243,300 |
| ||||
Other intangible assets |
|
| 130,347 |
|
|
| 45,320 |
|
Goodwill |
|
| 1,692,602 |
|
|
| 42,136 |
|
Other noncurrent assets |
|
| 50,949 |
| ||||
Total assets acquired and consolidated |
|
| 5,755,010 |
|
|
| 123,558 |
|
Less: Accounts payable and accrued expenses |
|
| (189,466 | ) |
|
| (18,816 | ) |
Less: Taxes payable |
|
| (17,344 | ) |
|
| (1,065 | ) |
Less: Interest payable |
|
| (12,794 | ) | ||||
Less: Debt |
|
| (434,270 | ) | ||||
Less: Deferred tax liabilities |
|
| (946,402 | ) |
|
| (6,645 | ) |
Less: Other noncurrent liabilities |
|
| (227,702 | ) | ||||
Less: Noncontrolling interests in consolidated VIEs |
|
| (7,600 | ) | ||||
Net assets acquired and consolidated |
| $ | 3,919,432 |
|
| $ | 97,032 |
|
The fair value assigned to goodwill is attributable to future expense reductions utilizing management’s leverage in operating costs. The goodwill and other intangible assets related to the network affiliation agreements are amortized over 15 years.not deductible for tax purposes. Other intangible assets are amortized over an estimated weighted average useful life of 18approximately three years. The carryover of the tax basis in goodwill, FCC licenses, network affiliation agreements, other intangible assets and property and equipment of $159.0 million, $294.3 million, $31.7 million, $40.4 million and $247.8 million, respectively, are deductible for tax purposes.
Nexstar assumed the $400.0 million 5.875% Senior Notes due 2022 (the “5.875% Notes”) previously issued by LIN Television Corporation, a Delaware corporation (“LIN TV”). Nexstar also consolidated Shield’s senior secured credit facility with an outstanding Term Loan A principal balance of $24.8 million. These debts were assumed at fair values on the Merger Closing Date. See Note 7 for additional information.
Nexstar also assumed Media General’s pension and postretirement obligations (included in other noncurrent liabilities). See Note 6 for additional information.
The consolidation of Shield, Tamer, Vaughan and Super Towers resulted in noncontrolling interests of $7.6 million, representing the residual fair value attributable to the owners of these entities as of January 17, 2017, estimated by applying the income approach valuation technique.
The Cash Consideration, the repayment of Media General debt, including premium and accrued interest, and the related fees and expenses were funded through a combination of cash on hand, proceeds from the Nexstar Divestitures and the Media General Divestitures and new borrowings discussed in Note 7.
During 2017,2018, Nexstar Digital recorded measurement period adjustments including (i) the resulta decrease in accounts receivable of our ongoing valuation procedures on acquired intangible assets which decreased the FCC licenses by $191.6$1.2 million, and increased the network affiliation agreements and other intangible assets by $174.6 million and $4.2 million, respectively, (ii) a change in the estimate of net proceedsresulting from the disposition of Media General’s spectrum which increased the spectrum auction asset by $17.4 million, (iii) changes in the estimate of collectability of accounts receivable and various fair value assumptions, which decreased the estimated fair value of accounts receivablereceivable. This adjustment increased goodwill by $22.3$1.0 million, (iv) increase in goodwill of $24.3 million and decrease in deferred tax liabilities of $4.0 million due to thealong with other measurement period adjustments discussed in (i) through (iii), and (v) reclassifications from other noncurrent assets to prepaid expenses and other current assets and reclassifications among accounts payable and accrued expenses, taxes payable and other noncurrent liabilities. None of these measurement period adjustments had a material impact on the Company’s results of operations.adjustments.
The acquisition’sLKQD’s net revenue of $652.5$15.9 million and operating incomeloss of $100.3$1.1 million from January 17, 2017the date of acquisition to June 30, 20172018 have been included in the accompanying Condensed Consolidated Statements of Operations.
14
Transaction costs relating to the Merger, including legalKRBK and professional fees and severance costs of $2.5 million and $1.9 million, were expensed as incurred during the three months ended June 30, 2017 and 2016, respectively, and $50.1 million and $6.3 million during the six months ended June 30, 2017 and 2016, respectively. These costs were included in selling, general and administrative expense, excluding depreciation and amortization in the accompanying Condensed Consolidated Statements of Operations.
WVMHWHDF
On November 16, 2015,July 15, 2018, Nexstar entered into a definitive agreement to acquire the assets of three CBS and one NBC full powerWHDF television stationsstation from WVMH for $130.0 million in cash, subject to adjustments for working capital. The stations affiliated with CBS are WOWK in the Charleston-Huntington, West Virginia market, WTRF in the Wheeling, West Virginia-Steubenville, Ohio market and WVNS in the Bluefield-Beckley-Oak Hill, West Virginia market. WBOY in the Clarksburg-Weston, West Virginia market is affiliated with NBC. The acquisition will allowHuntsville TV, LLC (“Huntsville TV”). On August 1, 2018, Nexstar entranceentered into these markets. Nexstar provided programming and sales services to these stations pursuant to a TBA from December 1, 2015 through the completion of the acquisition.
On January 4, 2016, Nexstar completed the first closing of the transaction and acquired the stations’ assets excluding certain transmission equipment, the FCC licenses and network affiliation agreements for $65.0 million, including a deposit paid upon signing the purchasedefinitive agreement of $6.5 million, all funded through a combination of cash on hand and borrowings under Nexstar’s revolving credit facility in 2016.
The fair values of the assets acquired and liabilities assumed in the first closing are as follows (in thousands):
| $ | 438 |
| |
Prepaid expenses and other current assets |
|
| 114 |
|
Property and equipment |
|
| 18,362 |
|
Other intangible assets |
|
| 3,402 |
|
Goodwill |
|
| 35 |
|
Total assets acquired at first closing |
|
| 22,351 |
|
Less: Accounts payable and accrued expenses |
|
| (623 | ) |
Less: Other noncurrent liabilities |
|
| (307 | ) |
Net assets acquired at first closing |
|
| 21,421 |
|
Deposit on second closing |
|
| 43,543 |
|
Total paid at first closing |
| $ | 64,964 |
|
Other intangible assets are amortized over an estimated weighted average useful life of three years.
As discussed in Note 2, Nexstar became the primary beneficiary of its variable interests in WVMH’s stations upon receiving FCC approval on August 2, 2016 to acquire the stations’ remaining assets. Therefore, Nexstar has consolidated these remaining assets under authoritative guidance related to the consolidation of VIEs as of this date. The fair values of the assets consolidated were as follows (in thousands):
| $ | 527 |
| |
Property and equipment |
|
| 3,489 |
|
FCC licenses |
|
| 41,230 |
|
Network affiliation agreements |
|
| 35,387 |
|
Goodwill |
|
| 28,588 |
|
Consolidated assets of VIEs |
|
| 109,221 |
|
Less: Broadcast rights payable |
|
| (527 | ) |
Consolidated net asset of VIEs |
| $ | 108,694 |
|
The fair value assigned to goodwill is attributable to future expense reductions utilizing management’s leverage in programming and other station operating costs. The goodwill and FCC licenses are deductible for tax purposes. The intangible assets related to the network affiliation agreements are amortized over 15 years.
On January 31, 2017, Nexstar completed its acquisition of the remaining assets of the WVMH stations. As such, Nexstar paid the owners the remaining purchase price of $66.9 million, funded by cash on hand, and utilized its $43.5 million balance of deposit previously paid to the owners to acquire the noncontrolling interest of $108.7 million.
15
The stations’ net revenue of $25.0 million and operating income of $5.3 million during the six months ended June 30, 2017 have been included in the accompanying Condensed Consolidated Statements of Operations. Transaction costs relating to this acquisition, including legal and professional fees of $0.1 million, were expensed as incurred during the six months ended June 30, 2016. No significant transaction costs were incurred during the six months ended June 30, 2017.
Parker
On May 27, 2014, Mission assumed the rights, title and interest to an existing purchase agreement to acquire Parker, the owner ofKRBK television station KFQX, the FOX affiliate in the Grand Junction, Colorado market, for $4.0 million in cash, subject to adjustments for working capital. In connection with this assumption, Mission paid a deposit of $3.2 million on June 13, 2014. The acquisition was approved by the FCC in February 2017 and met all other customary conditions in March 2017. On March 31, 2017, Mission completed this acquisition and paid the remaining purchase price of $0.8 million, funded by cash on hand. The acquisition allows Mission entrance into this market.
Subject to final determination, which is expected to occur within twelve months of the acquisition date, the provisional fair values of the assets acquired and liabilities assumed are as follows (in thousands):
| $ | 1,539 |
| |
Network affiliation agreements |
|
| 1,743 |
|
Other intangible assets |
|
| 20 |
|
Goodwill |
|
| 698 |
|
Total assets acquired |
| $ | 4,000 |
|
The fair value assigned to goodwill is attributable to future expense reductions utilizing management’s leverage in programming and other station operating costs. The goodwill and FCC licenses are deductible for tax purposes. The intangible assets related to the network affiliation agreements are amortized over 15 years.
As discussed in Note 2, Nexstar had a variable interest in Parker and had consolidated this entity until Mission acquired Parker’s outstanding equity. Since Nexstar no longer has variable interests in Parker, its accounts were deconsolidated from Nexstar’s financial statements. However, since Nexstar is the primary beneficiary of variable interests in Mission, it retained a controlling financial interest in KFQX and continued to consolidate this station.KRBK LLC. See Note 215 for more discussion on VIEs.
Unaudited Pro Forma Information
The acquisition of four full power television stations from WVMH is not significant for financial reporting purposes. Therefore, pro forma information has not been provided for this acquisition.
The following unaudited pro forma information (in thousands) has been presented for the periods indicated as if the Merger with Media General and the related consolidation of VIEs had occurred on January 1, 2016. The unaudited pro forma information combined the historical results of Nexstar and Media General, adjusted for business combination accounting effects including transaction costs attributable to the Merger, the net gain on disposal of television stations in connection with the Merger, the depreciation and amortization charges from acquired intangible assets, the interest on new debt and the related tax effects. The pro forma financial information as presented below is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of fiscal year 2016.
| Three Months Ended |
|
| Six Months Ended |
| |||||||||||
| June 30, |
|
| June 30, |
| |||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Net revenue |
| $ | 626,039 |
|
| $ | 591,663 |
|
| $ | 1,218,806 |
|
| $ | 1,157,207 |
|
Income before income taxes |
|
| 85,162 |
|
|
| 72,242 |
|
|
| 120,622 |
|
|
| 11,651 |
|
Net income |
|
| 51,098 |
|
|
| 42,260 |
|
|
| 78,013 |
|
|
| 29,748 |
|
Net income attributable to Nexstar |
|
| 46,635 |
|
|
| 41,260 |
|
|
| 74,655 |
|
|
| 27,724 |
|
Net income per common share attributable to Nexstar - basic |
| $ | 0.99 |
|
| $ | 0.88 |
|
| $ | 1.59 |
|
| $ | 0.59 |
|
Net income per common share attributable to Nexstar - diluted |
| $ | 0.97 |
|
| $ | 0.86 |
|
| $ | 1.55 |
|
| $ | 0.58 |
|
additional information.
16
4. Intangible Assets and Goodwill
Intangible assets subject to amortization consisted of the following (in thousands):
| Estimated |
| June 30, 2017 |
|
| December 31, 2016 |
|
| Estimated |
| June 30, 2018 |
|
| December 31, 2017 |
| |||||||||||||||||||||||||||||||||||||
| useful life, |
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
| useful life, |
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |||||
|
| in years |
| Gross |
|
| Amortization |
|
| Net |
|
| Gross |
|
| Amortization |
|
| Net |
|
| in years |
| Gross |
|
| Amortization |
|
| Net |
|
| Gross |
|
| Amortization |
|
| Net |
| ||||||||||||
Network affiliation agreements |
| 15 |
| $ | 1,888,753 |
|
| $ | (401,252 | ) |
| $ | 1,487,501 |
|
| $ | 659,054 |
|
| $ | (357,704 | ) |
| $ | 301,350 |
|
| 15 |
| $ | 1,971,170 |
|
| $ | (519,228 | ) |
| $ | 1,451,942 |
|
| $ | 1,971,170 |
|
| $ | (461,345 | ) |
| $ | 1,509,825 |
|
Other definite-lived intangible assets |
| 1-15 |
|
| 218,653 |
|
|
| (100,129 | ) |
|
| 118,524 |
|
|
| 89,404 |
|
|
| (66,017 | ) |
|
| 23,387 |
|
| 1-20 |
|
| 242,223 |
|
|
| (136,888 | ) |
|
| 105,335 |
|
|
| 193,089 |
|
|
| (121,288 | ) |
|
| 71,801 |
|
Other intangible assets |
|
|
| $ | 2,107,406 |
|
| $ | (501,381 | ) |
| $ | 1,606,025 |
|
| $ | 748,458 |
|
| $ | (423,721 | ) |
| $ | 324,737 |
|
|
|
| $ | 2,213,393 |
|
| $ | (656,116 | ) |
| $ | 1,557,277 |
|
| $ | 2,164,259 |
|
| $ | (582,633 | ) |
| $ | 1,581,626 |
|
The increases in network affiliation agreements and other definite-lived intangible assets relate to Nexstar’s acquisitions, net of dispositions, as discussed in Note 3.
The following table presents the Company’s estimate of amortization expense for the remainder of 2017,2018, each of the five succeeding years ended December 31 and thereafter for definite-lived intangible assets as of June 30, 20172018 (in thousands):
| $ | 67,798 |
| |||||
|
| 130,593 |
| |||||
Remainder of 2018 |
| $ | 73,211 |
| ||||
2019 |
|
| 126,919 |
|
|
| 139,335 |
|
2020 |
|
| 116,696 |
|
|
| 129,801 |
|
2021 |
|
| 112,383 |
|
|
| 119,048 |
|
2022 |
|
| 109,295 |
|
|
| 113,665 |
|
2023 |
|
| 112,464 |
| ||||
Thereafter |
|
| 942,341 |
|
|
| 869,753 |
|
|
| $ | 1,606,025 |
|
| $ | 1,557,277 |
|
The amounts recorded to goodwill and FCC licenses were as follows (in thousands):
| Goodwill |
|
| FCC Licenses |
| |||||||||||||||||||
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |||
|
| Gross |
|
| Impairment |
|
| Net |
|
| Gross |
|
| Impairment |
|
| Net |
| ||||||
Balances as of December 31, 2016 |
| $ | 534,557 |
|
| $ | (61,253 | ) |
| $ | 473,304 |
|
| $ | 591,945 |
|
| $ | (49,421 | ) |
| $ | 542,524 |
|
Acquisitions and consolidations of VIEs (See Notes 2 and 3) |
|
| 1,693,224 |
|
|
| - |
|
|
| 1,693,224 |
|
|
| 1,308,089 |
|
|
| - |
|
|
| 1,308,089 |
|
Nexstar Divestitures (See Note 3) |
|
| (22,823 | ) |
|
| 2,861 |
|
|
| (19,962 | ) |
|
| (19,744 | ) |
|
| 2,011 |
|
|
| (17,733 | ) |
Deconsolidation of a VIE |
|
| (698 | ) |
|
| - |
|
|
| (698 | ) |
|
| (1,539 | ) |
|
|
|
|
|
| (1,539 | ) |
Balances as of June 30, 2017 |
| $ | 2,204,260 |
|
| $ | (58,392 | ) |
| $ | 2,145,868 |
|
| $ | 1,878,751 |
|
| $ | (47,410 | ) |
| $ | 1,831,341 |
|
|
| Goodwill |
|
| FCC Licenses |
| ||||||||||||||||||
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| ||
|
| Gross |
|
| Impairment |
|
| Net |
|
| Gross |
|
| Impairment |
|
| Net |
| ||||||
Balances as of December 31, 2017 |
| $ | 2,212,755 |
|
| $ | (69,909 | ) |
| $ | 2,142,846 |
|
| $ | 1,815,048 |
|
| $ | (47,410 | ) |
| $ | 1,767,638 |
|
Acquisitions (See Note 3) |
|
| 42,136 |
|
|
| - |
|
|
| 42,136 |
|
|
| - |
|
|
| - |
|
|
| - |
|
Balances as of June 30, 2018 |
| $ | 2,254,891 |
|
| $ | (69,909 | ) |
| $ | 2,184,982 |
|
| $ | 1,815,048 |
|
| $ | (47,410 | ) |
| $ | 1,767,638 |
|
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, 2017,2018, the Company did not identify any events that would trigger impairment assessment.
5. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
| June 30, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
| |||||
| 2017 |
|
| 2016 |
|
| 2018 |
|
| 2017 |
| |||||
Compensation and related taxes |
| $ | 39,452 |
|
| $ | 20,713 |
|
| $ | 38,824 |
|
| $ | 44,775 |
|
Network affiliation fees |
|
| 89,484 |
|
|
| 30,153 |
|
|
| 32,666 |
|
|
| 68,197 |
|
Other |
|
| 71,383 |
|
|
| 20,449 |
|
|
| 54,862 |
|
|
| 46,309 |
|
|
| $ | 200,319 |
|
| $ | 71,315 |
|
| $ | 126,352 |
|
| $ | 159,281 |
|
The increases in accrued expenses relate to Nexstar’s acquisitions as discussed in Note 3.
17
6. Retirement and Postretirement Plans
As part of the Merger, Nexstar assumed Media General’s pension and postretirement obligations which were remeasured at fair value on the acquisition date.
As a result, Nexstar nowThe Company has a funded, qualified non-contributory defined benefit retirement plan which coveredcovers certain employees and former employees of Media General and its predecessors.employees. Additionally, there are non-contributory unfunded supplemental executive retirement and ERISA excess plans which supplement the coverage available to certain Media General executives. All of these retirement plans are frozen. Media GeneralThe Company also hadhas a retiree medical savings account plan which reimburses eligible retired employees for certain medical expenses and an unfunded plan that provides certain health and life insurance benefits to retired employees who were hired prior to 1992. Beginning with the acquisition, Nexstar recognizes the underfunded status of these plan liabilities on its Condensed Consolidated Balance Sheet. The funded status of a plan represents the difference between the fair value of plan assets and the related plan projected benefit obligation. Changes in the funded status are recognized through comprehensive income in the year in which the changes occur.
In conjunction with one of the divestitures concurrent with the Merger, the buyer assumed approximately $60 million of pension liability from the funded, qualified retirement plan. As of the Closing Date and following this transaction, the projected benefit obligation of the retirement plans was approximately $502 million and the plan assets at fair value were approximately $394 million resulting in a liability for retirement plans of $108 million (included in other noncurrent liabilities). In addition, the postretirement liabilities totaled approximately $23 million (included in other noncurrent liabilities).
The following table provides the components of net periodic benefit (income) cost (income) for the Company’s pension and other postretirement benefit plans in 2017:(“OPEB”) (in thousands):
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| |||||||||||||||||||||
|
| June 30, 2017 |
|
| June 30, 2017 |
|
| June 30, 2018 |
|
| June 30, 2018 |
| ||||||||||||||||||||
|
| Pension Benefits |
|
| Other Benefits |
|
| Pension Benefits |
|
| Other Benefits |
|
| Pension Benefits |
|
| OPEB |
|
| Pension Benefits |
|
| OPEB |
| ||||||||
Service cost |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
| ||||||||||||||||
Interest cost |
|
| 3,913 |
|
|
| 157 |
|
|
| 7,174 |
|
|
| 287 |
|
| $ | 3,350 |
|
| $ | 150 |
|
| $ | 6,700 |
|
| $ | 300 |
|
Expected return on plan assets |
|
| (7,226 | ) |
|
| - |
|
|
| (13,248 | ) |
|
| - |
|
|
| (6,450 | ) |
|
| - |
|
|
| (12,900 | ) |
|
| - |
|
Net periodic benefit (income) cost |
| $ | (3,313 | ) |
| $ | 157 |
|
| $ | (6,074 | ) |
| $ | 287 |
|
| $ | (3,100 | ) |
| $ | 150 |
|
| $ | (6,200 | ) |
| $ | 300 |
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, 2017 |
|
| June 30, 2017 |
| ||||||||||
|
| Pension Benefits |
|
| OPEB |
|
| Pension Benefits |
|
| OPEB |
| ||||
Interest cost |
| $ | 3,913 |
|
| $ | 157 |
|
| $ | 7,174 |
|
| $ | 287 |
|
Expected return on plan assets |
|
| (7,226 | ) |
|
| - |
|
|
| (13,248 | ) |
|
| - |
|
Net periodic benefit (income) cost |
| $ | (3,313 | ) |
| $ | 157 |
|
| $ | (6,074 | ) |
| $ | 287 |
|
The Company has no required contributions to its qualified retirement plan in 2017.2018. Payments to fund the obligations under the remaining plans are considered contributions and are expected to be less than $4$6.0 million in 2017.2018.
7. Debt
Long-term debt consisted of the following (in thousands):
| June 30, |
|
| December 31, |
| |||
|
| 2017 |
|
| 2016 |
| ||
Term loans, net of financing costs and discount of $59,997 and $6,592, respectively |
| $ | 2,865,003 |
|
| $ | 662,206 |
|
Revolving loans |
|
| 3,000 |
|
|
| 2,000 |
|
6.875% Senior unsecured notes due 2020, net of financing costs and discount of $4,295 |
|
| - |
|
|
| 520,705 |
|
6.125% Senior unsecured notes due 2022, net of financing costs of $2,200 and $2,402, respectively |
|
| 272,800 |
|
|
| 272,598 |
|
5.875% Senior unsecured notes due 2022, plus premium of $9,081 |
|
| 409,081 |
|
|
| - |
|
5.625% Senior unsecured notes due 2024, net of financing costs of $14,354 and $15,090, respectively |
|
| 885,646 |
|
|
| 884,910 |
|
|
|
| 4,435,530 |
|
|
| 2,342,419 |
|
Less: current portion |
|
| (57,860 | ) |
|
| (28,093 | ) |
|
| $ | 4,377,670 |
|
| $ | 2,314,326 |
|
|
| June 30, |
|
| December 31, |
| |||
|
| 2018 |
|
| 2017 |
| |||
Term loans, net of financing costs and discount of $51,323 and $57,547, respectively |
| $ | 2,719,941 |
|
| $ | 2,791,875 |
| |
Revolving loans |
|
| - |
|
|
| 3,000 |
| |
6.125% Senior unsecured notes due 2022, net of financing costs of $1,777 and $1,992, respectively |
|
| 273,223 |
|
|
| 273,008 |
| |
5.875% Senior unsecured notes due 2022, plus premium of $7,153 and $8,102, respectively |
|
| 407,153 |
|
|
| 408,102 |
| |
5.625% Senior unsecured notes due 2024, net of financing costs of $12,671 and $13,525, respectively |
|
| 887,329 |
|
|
| 886,475 |
| |
|
|
| 4,287,646 |
|
|
| 4,362,460 |
| |
Less: current portion |
|
| (41,722 | ) |
|
| (92,808 | ) | |
|
| $ | 4,245,924 |
|
| $ | 4,269,652 |
|
1815
In connection withOn January 16, 2018, Nexstar borrowed $44.0 million from its revolving credit facility to partially fund the Merger,acquisition of LKQD (See Note 3). Through June 2018, Nexstar assumedrepaid in full the $400.0 million 5.875% Notes due 2022 previously issued by LIN TV. Additionally, Nexstar consolidated Shield’s newoutstanding principal balance under its revolving loan for total payments of $44.0 million.
On June 28, 2018, Marshall amended its senior secured credit facility with a new Term Loan Afacility. The amendment refinanced the then outstanding principal balancebalances of $24.8 million due on January 17, 2022 and payable in quarterly installments that increase over time from 1.25% to 2.5% of the principal.
On January 17, 2017, the Company issued the following new term loans and new revolving loans under new senior secured credit facilities:
$2.75 billion in new senior secured Term Loan B, issued at 99.49%, due on January 17, 2024 and payable in consecutive quarterly installments of 0.25% of the principal, adjusted for any prepayments, with the remainder due at maturity;
$51.3 million in new senior secured Term Loan A, issued at 99.25%, due June 28, 2018 and $293.9 million in new senior secured Term Loan A, issued at 99.34%, due January 17, 2022 both payable in quarterly installments that increase over time from 1.25% to 2.5% of the principal; and
$175.0 million in total commitments under new senior secured revolving credit facilities, of which $3.0 million was drawn at closing and due June 28, 2018. The remaining $172.0 million in unused revolving credit facilities have a maturity date of January 17, 2022.
In January 2017, the Company recorded $48.3 million (Term Loan B) and $3.2 million (Term Loan A) in legal, professional and underwriting fees related to the new debt described above. Debt financing costs are netted against the carrying amount of the related debt.
The proceeds from the newMarshall’s term loans and revolving credit facility of $48.8 million and $3.0 million, respectively. The refinancing was funded by Marshall’s new term loan of $51.8 million which Nexstar continues to guarantee. The amendment also extended the maturity date of Marshall’s term loans together with Nexstar’s proceeds fromto December 1, 2019. There were no significant financing costs and lender fees incurred related to Marshall’s refinancing of its previously issued $900.0senior secured credit facility. As of June 30, 2018, Marshall’s term loans, net of financing costs, had a balance of $51.7 million, 5.625% senior unsecured notes due 2024 (the “5.625% Notes”) at par,of which $1.9 million is in current liabilities.
Nexstar prepaid a total of $20.0 million and $60.0 million in principal balance under its Term Loan B, during the net proceeds from certain station divestitures (See Note 3)three and six months ended June 30, 2018, respectively, funded by cash on hand were used to finance the following:
$1.376 billion Cash Consideration of the Merger (See Note 3);
$1.658 billion repayment of certain then-existing debt of Media General, including premium and accrued interest (See Note 3);
Refinancing of the Company’s then existing term loans and revolving loans with a principal balance of $668.8 million and $2.0 million, respectively; and
Related fees and expenses.
The refinancing of the Company’s then existing term loans and revolving loanshand. This resulted in losses on extinguishment of debt of $6.5$0.5 million and $0.3$1.5 million for the three and six months ended June 30, 2018, respectively, representing the write-off of unamortized debt financing costs and debt premium
On February 27, 2017, Nexstar called the entire $525.0 million principal amount of its 6.875% Notes at a redemption price equal to 103.438% of the principal plus any accrued and unpaid interest, also funded by new borrowings described above. This transaction resulted in a loss on extinguishment of debt of $22.2 million, representing premiums paid to retire the notes and write-off of unamortized debt financing costs and debt premium.
Through June 2017, Nexstar prepaid a total of $170.0 million in principal balance under its newly issued Term Loan B, funded by cash on hand. These resulted in loss on extinguishment of debt of $3.7 million, representing write-off of unamortized debt financing costs and discounts. In April 2017, Nexstar prepaid $25.0 million under its newly issued Term Loan A, funded by cash on hand. This resulted in loss on extinguishment of debt of $0.4 million, representing write-offwrite-offs of unamortized debt financing costs and discounts.
As discussed in Note 15,During the six months ended June 30, 2018, the Company amended certain termsrepaid scheduled maturities of $21.2 million of its senior securedterm loans.
On July 2, 2018, Nexstar prepaid $50.0 million of the outstanding principal under its term loans, funded by cash on hand.
On July 27, 2018, Nexstar reallocated $5.6 million of its unused revolving loan credit facilities, includingfacility to Marshall. On the same day, Marshall drew the full $5.6 million revolving loan facility reallocated from Nexstar and used the funds to partially repay its Term Loan A, Term Loan B and revolving credit facilities. The amendments are effective July 19, 2017.outstanding term loans.
On August 1, 2018, Nexstar prepaid $35.0 million of the outstanding principal under its term loans, funded by cash on hand.
Unused Commitments and Borrowing Availability
The Company had $172.0 million of total unused revolving loan commitments under its senior secured credit facilities, all of which was available for borrowing, based on the covenant calculations as of June 30, 2017.2018. 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, 2017, Nexstar2018, the Company was in compliance with its financial covenants. As discussed in Note 15, the Company amended certain terms of its senior secured credit facilities effective on July 19, 2017, including the extension of the maturity date of its revolving credit facilities.
19
On July 27, 2016, Nexstar Escrow Corporation, a wholly-owned subsidiary of Nexstar, completed the issuance and sale of $900.0 million of 5.625% Notes at par. The gross proceeds of the 5.625% Notes, plus Nexstar’s pre-funded interests were deposited in a segregated escrow account which could not be utilized until certain conditions were satisfied. On January 17, 2017, Nexstar completed its merger with Media General. Thus, the proceeds of the 5.625% Notes plus the pre-funded interests deposited therein were released to Nexstar. The 5.625% Notes also became the senior unsecured obligation of Nexstar, guaranteed by Mission and certain of Nexstar’s and Mission’s future wholly-owned subsidiaries, subject to certain customary release conditions.
The 5.625% Notes will mature on August 1, 2024. Interest on the 5.625% Notes is payable semiannually in arrears on February 1 and August 1 of each year. The 5.625% Notes were issued pursuant to an Indenture, dated as of July 27, 2016 (the “5.625% Indenture”). The 5.625% Notes are senior unsecured obligations of Nexstar and are guaranteed by Mission and certain of Nexstar’s and Mission’s future 100% owned subsidiaries, subject to certain customary release provisions.
The 5.625% Notes are senior obligations of Nexstar and Mission but junior to the secured debt to the extent of the value of the assets securing such debt. The 5.625% Notes rank equal to the 5.875% Notes and the 6.125% senior unsecured notes due 2022 (“6.125% Notes”).
Nexstar has the option to redeem all or a portion of the 5.625% Notes at any time prior to August 1, 2019 at a price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to the redemption date plus applicable premium as of the date of redemption. At any time on or after August 1, 2019, Nexstar may redeem the 5.625% Notes, in whole or in part, at the redemption prices set forth in the 5.625% Indenture. At any time prior to August 1, 2019, Nexstar may also redeem up to 40% of the aggregate principal amount at a redemption price of 105.625%, plus accrued and unpaid interest, if any, to the date of redemption, with the net cash proceeds from equity offerings.
Upon the occurrence of a change in control (as defined in the 5.625% Indenture), each holder of the 5.625% Notes may require Nexstar to repurchase all or a portion of the 5.625% Notes in cash at a price equal to 101.0% of the aggregate principal amount to be repurchased, plus accrued and unpaid interest, if any, thereon to the date of repurchase.
The 5.625% Indenture contains covenants that limit, among other things, Nexstar’s ability to (1) incur additional debt, (2) pay dividends or make other distributions or repurchases or redeem its capital stock, (3) make certain investments, (4) create liens, (5) merge or consolidate with another person or transfer or sell assets, (6) enter into restrictions affecting the ability of Nexstar’s restricted subsidiaries to make distributions, loans or advances to it or other restricted subsidiaries; prepay, redeem or repurchase certain indebtedness and (7) engage in transactions with affiliates.
The 5.625% Indenture provides for customary events of default (subject in certain cases to customary grace and cure periods), which include nonpayment, breach of covenants in the Indenture, payment defaults or acceleration of other indebtedness, a failure to pay certain judgments and certain events of bankruptcy and insolvency. Generally, if an event of default occurs, the Trustee or holders of at least 25% in principal amount of the then outstanding 5.625% Notes may declare the principal of and accrued but unpaid interest, including additional interest, on all the 5.625% Notes to be due and payable.
In 2016, Nexstar recorded $15.7 million in legal, professional and underwriting fees related to the issuance of the 5.625% Notes, which were recorded as debt finance costs and are being amortized over the term of the 5.625% Notes. Debt financing costs are netted against the carrying amount of the related debt.
5.875% Senior Notes
As part of the Company’s Merger with Media General on January 17, 2017, Nexstar assumed the $400.0 million 5.875% Senior Notes due 2022 previously issued by LIN TV.
The 5.875% Notes will mature on November 15, 2022. Interest on the 5.875% Notes is payable semiannually in arrears on May 15 and November 15 of each year. The 5.875% Notes were issued pursuant to an Indenture, dated as of November 5, 2014 (the “5.875% Indenture”). The 5.875% Notes are senior unsecured obligations of Nexstar and certain of Nexstar’s future 100% owned subsidiaries, subject to certain customary release provisions.
The 5.875% Notes are senior obligations of Nexstar but junior to the secured debt, to the extent of the value of the assets securing such debt. The 5.875% Notes rank equal to the 5.625% Notes and the 6.125% Notes.
20
Nexstar has the option to redeem all or a portion of the 5.875% Notes at any time prior to November 15, 2017 at a price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to the redemption date plus applicable premium as of the date of redemption. At any time on or after November 15, 2017, Nexstar may redeem the 5.875% Notes, in whole or in part, at the redemption prices set forth in the 5.875% Indenture. At any time before August 1, 2019, Nexstar may also redeem the 5.875% Notes at 105.875% of the aggregate principal amount at a redemption price, plus accrued and unpaid interest, if any, to the date of redemption, with the net cash proceeds from equity offerings, provided that (1) at least $200.0 million aggregate principal amount of 5.875% Notes issued under the 5.875% Indenture remains outstanding after each such redemption and (2) the redemption occurs within 90 days after the closing of the note offering.
Upon the occurrence of a change of control (as defined in the 5.875% Indenture), each holder of the 5.875% Notes may require Nexstar to repurchase all or a portion of the 5.875% Notes in cash at a price equal to 101.0% of the aggregate principal amount to be repurchased, plus accrued and unpaid interest, if any, thereon to the date of repurchase.
The 5.875% Indenture contains covenants that limit, among other things, Nexstar’s ability to (1) incur additional debt, (2) make certain restricted payments, (3) consummate specified asset sales, (4) enter into transactions with affiliates, (5) create liens, (6) pay dividends or make other distributions, (7) repurchase or redeem capital, (8) merge or consolidate with another person and (9) enter new lines of business.
The 5.875% Indenture provides for customary events of default (subject in certain cases to customary grace and cure periods), which include nonpayment, breach of covenants in the 5.875% Indenture, payment defaults or acceleration of other indebtedness, a failure to pay certain judgments, certain events of bankruptcy and insolvency and any guarantee of the 5.875% Notes that ceases to be in full force and effect with certain exceptions specified in the 5.875% Indenture. Generally, if an event of default occurs, the Trustee or holders of at least 25% in principal amount of the then outstanding notes may declare the principal of and accrued but unpaid interest, including additional interest, on all the notes to be due and payable.
Collateralization and Guarantees of Debt
The Company’s credit facilities described above are collateralized by a security interest in substantially all the combined assets, excluding FCC licenses and the other assets of consolidated VIEs unavailable to creditors of Nexstar (See Note 2). Nexstar guarantees full payment of all obligations incurred under the Mission, Marshall and Shield senior secured credit facilities in the event of their default. Mission and Nexstar Digital, LLC, a wholly-owned subsidiary of Nexstar, (formerly Enterprise Technology, LLC and herein referred to as “Nexstar Digital”), are guarantors of Nexstar’s senior secured credit facility. Mission is also a guarantor of Nexstar’s 6.125% Notessenior secured notes due 2022 (“6.125% Notes”) and the 5.625% Notes due 2024 but does not guarantee Nexstar’s 5.875% Notes.Senior Notes due 2022 (the “5.875% Notes”). Nexstar Digital does not guarantee any of the notes. Marshall and Shield are not guarantors of any debt within the group.
In consideration of Nexstar’s guarantee of the Mission senior secured credit facility, Mission has granted Nexstar purchase options to acquire the assets and assume the liabilities of each Mission station, subject to FCC consent. These option agreements (which expire on various dates between 20172018 and 2024)2027) 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 amended credit agreement (senior secured credit facility) contains a covenant which requires Nexstar to comply with a maximum consolidated first lien net leverage ratio of 4.50 to 1.00 beginning on June 30, 2017.1.00. The financial covenant, which is formally calculated on a quarterly basis, is based on the combined results of the Company. The Mission, Marshall and Shield amended credit agreements do not contain financial covenant ratio requirements but do provide for default in the event Nexstar does not comply with all covenants contained in its credit agreement. As of June 30, 2017,2018, the Company was in compliance with its financial covenant.
2116
The aggregate carrying amounts and estimated fair values of the Company’s debt were as follows (in thousands):
| June 30, 2017 |
|
| December 31, 2016 |
|
| June 30, 2018 |
|
| December 31, 2017 |
| |||||||||||||||||||||
|
| Carrying |
|
| Fair |
|
| Carrying |
|
| Fair |
|
| Carrying |
|
| Fair |
|
| Carrying |
|
| Fair |
| ||||||||
|
| Amount |
|
| Value |
|
| Amount |
|
| Value |
|
| Amount |
|
| Value |
|
| Amount |
|
| Value |
| ||||||||
Term loans(1) |
| $ | 2,865,003 |
|
| $ | 2,987,990 |
|
| $ | 662,206 |
|
| $ | 665,750 |
|
| $ | 2,719,941 |
|
| $ | 2,761,153 |
|
| $ | 2,791,875 |
|
| $ | 2,852,199 |
|
Revolving loans(1) |
|
| 3,000 |
|
|
| 2,979 |
|
|
| 2,000 |
|
|
| 1,969 |
|
|
| - |
|
|
| - |
|
|
| 3,000 |
|
|
| 2,985 |
|
6.875% Senior unsecured notes(2) |
|
| - |
|
|
| - |
|
|
| 520,705 |
|
|
| 543,375 |
| ||||||||||||||||
6.125% Senior unsecured notes(2) |
|
| 272,800 |
|
|
| 287,719 |
|
|
| 272,598 |
|
|
| 284,625 |
|
|
| 273,223 |
|
|
| 278,438 |
|
|
| 273,008 |
|
|
| 284,625 |
|
5.875% Senior unsecured notes(2) |
|
| 409,081 |
|
|
| 419,000 |
|
|
| - |
|
|
| - |
|
|
| 407,153 |
|
|
| 406,000 |
|
|
| 408,102 |
|
|
| 415,500 |
|
5.625% Senior unsecured notes(2) |
|
| 885,646 |
|
|
| 904,500 |
|
|
| 884,512 |
|
|
| 893,250 |
|
|
| 887,329 |
|
|
| 861,750 |
|
|
| 886,475 |
|
|
| 925,875 |
|
(1) | The fair value of senior secured credit facilities is computed based on borrowing rates currently available to the Company for bank loans with similar terms and average maturities. These fair value measurements are considered Level 3, as significant inputs to the fair value calculation are unobservable in the market. |
(2) | The fair value of the Company’s fixed rate debt is estimated based on bid prices obtained from an investment banking firm that regularly makes a market for these financial instruments. These fair value measurements are considered Level 2, as quoted market prices are available for low volume trading of these securities. |
8. Common Stock
As discussed in Note 3, Nexstar issued Common Stock in connection with its Merger with Media General consummated on January 17, 2017.
On June 12, 2017, Nexstar announced that itsApril 26, 2018, Nexstar’s Board of Directors has approved an additional $200 million increase in the Company’sNexstar’s share repurchase authorization to repurchase up to an additional $100 million of its Class A common stock. The Boardexpansion brought the total capacity under Nexstar’s share repurchase program to approximately $218.6 million when combined with the remaining balance under its prior authorization.
During the three and six months ended June 30, 2018, Nexstar repurchased a total of Directors’ prior authorization in August 2015 to repurchase the Company’s250,000 shares for $16.7 million and 751,920 shares for $50.5 million, respectively, of Class A common stock up to $100 millionfunded by cash on hand. As of June 30, 2018, the remaining available amount under the share repurchase authorization was depleted due to shares repurchased during the second quarter of 2017. $201.9 million.
Share repurchases may be made from time to time in open market transactions, block trades or in private transactions. There is no minimum number of shares that the CompanyNexstar is required to repurchase and the repurchase program may be suspended or discontinued at any time without prior notice. During the three months ended June 30, 2017, Nexstar repurchased a total of 1,001,640 shares of Class A common stock for $58.3 million, funded by cash on hand. There were no stock repurchases during the first quarter of 2017.
9. Stock-Based Compensation Plans
During the three months ended June 30, 2017,2018, Nexstar granted 110,000224,000 restricted stock units to employees with an estimated fair value of $7.2$13.6 million. During the six months ended June 30, 2017,2018, Nexstar granted 1,037,500651,500 restricted stock units to employees and non-employee directors with an estimated fair value of $66.7 million and 228,438 vested$42.2 million. The restricted stock options with an estimated fair valueunits vest over a range of $10.7 million.three to four years from the date of the award.
22
17
10. Income Taxes
Income tax expense was $32.3$33.3 million for the three months ended June 30, 2017,2018 compared to $18.5$32.3 million for the same period in 2016.2017. The effective tax rates were 40.0%27.8% and 42.7%40.0% for each of the respective periods.In December 2017, the Tax Act was signed into law, which reduced the federal corporate income tax rate from 35% to 21%, or a 14.0% decrease in the effective tax rate. A $1.5 million decrease in permanent differences between the two periods contributed an additional 2.3% decrease in the effective tax rate. These decreases were partially offset by a decrease in nontaxable earnings of $1.3 million, or a 1.6% increase in the effective tax rate. In 2017, the Company released an uncertain tax position resulting in an income tax benefit of $1.6 million, orcontributing a further 2.0% decrease to the effective tax rate, and had nontaxable transactions of $1.2 million, or a 1.4% decrease to the effective tax rate. These were partially offset by permanent differences in 2017 resulting in income tax expense of $2.5 million, or a 2.5% increase to the effective income tax rate. In 2016, a nondeductible change in contingent consideration fair value resulted in a 1.4% increase in the effective tax rate.rate between the two periods.
Income tax expense was $26.4$50.8 million for the six months ended June 30, 2017,2018 compared to $33.3$26.4 million for the same period in 2016.2017. The effective tax rates were 33.1%27.5% and 41.5%33.1% for each of the respective periods. InDecreases between the two periods were primarily attributable to (i) the Tax Act, effecting a 14.0% decrease in the effective tax rate, (ii) the liquidation of Media General legal entities that merged with Nexstar in 2017 the Company recognized the tax impact of the divested stations previously owned by Nexstar (See Note 3) whichand resulted in an income tax benefitexpense of $7.7$1.5 million in 2017, or a 9.6%1.9% decrease toin the 2018 effective tax rate. The income tax benefit was primarily the result of proceeds received which will not be subjectrate compared to taxation. The Company adopted ASU No. 2016-09 as of January 1, 2017 (See Recent Accounting Pronouncements below) which now requires excess tax benefits and tax deficiencies related to stock-based compensation to be recognized within income tax expense. As such, Nexstar recognized an income tax benefit related to stock option exercises and the vesting of restricted stock units of $1.1 million, or a 1.3% decrease to the effective rate. The Company also released an uncertain tax position resulting in an income tax benefit of $1.6 million, or a 2.0% decrease to the effective tax rate. Priorprior year, (iii) transaction costs attributable to the Merger (See Note 3)Nexstar’s merger with Media General that were determined to be nondeductible for tax purposes resultingand resulted in an income tax expense of $1.7 million in 2017, or a 2.1% increase todecrease in the 2018 effective tax rate. The Mergerrate compared to prior year, and (iv) a $1.0 million decrease in permanent differences, resulting in a 2.3% decrease in the subsequent liquidation of Media General legal entities increased the blended state2018 effective tax rate compared to prior year.
These decreases were partially offset by (i) a $7.7 million income tax benefit in 2017 resultingthat resulted from divestiture of stations previously owned by Nexstar, or a 9.6% increase in the 2018 effective tax rate compared to prior year, (ii) a release of an uncertain tax position in 2017 that resulted in an income tax expensebenefit of $1.5$1.6 million, or a 1.9%2.0% increase in the 2018 effective tax rate compared to prior year, (iii) a decrease in nontaxable earnings of $1.4 million that contributed a 1.6% increase in the 2018 effective tax rate compared to prior year, and (iv) higher excess tax benefits related to stock-based compensation in 2017 amounting to $0.3 million, or a 0.9% increase in the 2018 effective tax rate compared to prior year.
In December 2017, the Tax Act was signed into law which reduced the federal corporate income tax rate from 35% to 21%. The Tax Act requires complex computations not previously provided in U.S. tax law. As such, the application of accounting guidance for such items is currently uncertain. Further, compliance with the Tax Act and the accounting for such provisions require accumulation of information not previously required or regularly produced. As a result, we provided a provisional estimate on the effect of the Tax Act within the Consolidated Financial Statements and related Notes included in Nexstar’s Annual Report on Form 10-K for the year ended December 31, 2017. As additional regulatory guidance is issued by the applicable taxing authorities, as accounting treatment is clarified, as we perform additional analysis on the application of the law, and as we refine estimates in calculating the effect, our final analysis, which will be recorded in the period completed, may be different from our current provisional amounts, which could materially affect our tax obligations and effective tax rate. As of June 30, 2018, there has been no change to the effective tax rate.provisional estimates. The Company expects to complete its analysis of the provisional items during the second half of 2018.
18
11. FCC Regulatory Matters
Television broadcasting is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the “Communications Act”). The Communications Act prohibits the operation of television broadcasting stations except under a license issued by the FCC, and empowers the FCC, among other things, to issue, revoke and modify broadcasting licenses, determine the location of television stations, regulate the equipment used by television stations, adopt regulations to carry out the provisions of the Communications Act and impose penalties for the violation of such regulations. The FCC’s ongoing rule making proceedings could have a significant future impact on the television industry and on the operation of the Company’s stations and the stations to which it provides services. In addition, the U.S. Congress may act to amend the Communications Act or adopt other legislation in a manner that could impact the Company’s stations, the stations to which it provides services and the television broadcast industry in general.
The FCC has adopted rules with respect to the final conversion of existing low power and television translator stations to digital operations, which must be completed inby July 2021.
Media Ownership
The FCC is required to review its media ownership rules every four years and to eliminate those rules it finds no longer serve the “public interest, convenience and necessity.”
In August 2016, the FCC adopted a Second Report and Order (the “2016 Ownership Order”) concluding the agency’s 2010 and 2014 quadrennial reviews. The 2016 Ownership Order (1) retainsretained the existingthen-existing local television ownership rule and radio/television cross-ownership rule (withwith minor technical modifications, to address(2) extended the transition to digital television broadcasting), (2) extends the current ban on common ownership of two top-four television stations in a market to network affiliation swaps, (3) retainsretained the existingthen-existing ban on newspaper/broadcast cross-ownership in local markets while considering waivers and providing an exception for failed or failing entities, (4) retainsretained the existing dual network rule, (5) makesmade JSA relationships attributable interests and (6) definesdefined a category of sharing agreements designated as SSAs between stations and requiresrequired public disclosure of those SSAs (while not considering them attributable).
The 2016 Ownership Order reinstated a rule that attributesattributed another in-market station toward the local television ownership limits when one station owner sells more than 15% of the second station’s weekly advertising inventory under a joint sales agreementJSA (this rule had been previously adopted in 2014, but was vacated by the U.S. Court of Appeals for the Third Circuit). Parties to JSAs entered into prior to March 31, 2014 maywere permitted to continue to operate under those JSAs until September 30, 2025.
Nexstar has sought FCCand other parties filed petitions seeking reconsideration of various aspects of the 2016 Ownership Order. On November 16, 2017, the FCC adopted an order (the “Reconsideration Order”) addressing the petitions for reconsideration. The Reconsideration Order (1) eliminated the rules prohibiting newspaper/broadcast cross-ownership and limiting television/radio cross-ownership, (2) eliminated the requirement that eight or more independently-owned television stations remain in a local market for common ownership of two television stations in that market to be permissible, (3) retained the general prohibition on common ownership of two “top four” stations in a local market but provided for case-by-case review, (4) eliminated the television JSA attribution rule.
rule, and (5) retained the SSA definition and disclosure requirement for television stations. These rule modifications took effect on February 7, 2018, when the U.S. Court of Appeals for the Third Circuit denied a mandamus petition which had sought to stay their effectiveness. The Reconsideration Order remains subject to appeals before the Third Circuit.
On February 3, 2017, the FCC terminated in full its guidance (issued on March 12, 2014) requiring careful scrutiny of broadcast television applications which propose sharing arrangements and contingent interests. Accordingly, the FCC will no longer evaluate whether options, loan guarantees and similar otherwise non-attributable interests create undue financial influence in transactions which also include sharing arrangements between television stations.
23
The FCC’s media ownership rules limit the percentage of U.S. television households which a party may reach through its attributable interests in television stations to 39% on a nationwide basis. Historically, the FCC has counted the ownership of an ultra-high frequency (“UHF”) station as reaching only 50% of a market’s percentage of total national audience. On August 24, 2016, the FCC adopted a Report and Order abolishing the UHF discount for the purposes of a licensee’s determination of compliance with the 39% national cap. Thiscap, and that rule change became effective in October 24, 2016. On April 20, 2017, the FCC adopted an order on reconsideration that reinstatesreinstated the UHF discount. That order statesstated that the FCC willwould launch a comprehensive rulemaking later in 2017 to evaluate the UHF discount together with the national ownership limit. The FCC initiated that proceeding in December 2017, and comments and reply comments were filed in the first and second quarters of 2018. The FCC’s April 2017 reinstatement of the UHF discount became effective on June 15, 2017, when the U.S. Court of Appeals for the D.C. Circuit denied a request to stay the reinstatement.2017. A petition for review of the FCC’s order reinstating the UHF discount remainswas filed pending in thata federal appeals court, and Nexstar has intervened in the litigation in support of the FCC. On July 25, 2018, the federal court dismissed the appeal for lack of standing. Nexstar is in compliance with the 39% national cap limitation without the UHF discount and, therefore, with the UHF discount as well.
19
Spectrum
The FCC is in the process of repurposing a portion of the broadcast television spectrum for wireless broadband use. Pursuant to federal legislation enacted in 2012, the FCC has conducted an incentive auction for the purpose of making additional spectrum available to meet future wireless broadband needs. Under the auction statute and rules, certain television broadcasters accepted bids from the FCC to voluntarily relinquish all or part of their spectrum in exchange for consideration, and certain wireless broadband providers and other entities submitted successful bids to acquire the relinquished television spectrum. Over the next several years, television stations that are not relinquishing their spectrum will be “repacked” into the frequency band still remaining for television broadcast use.
The incentive auction commenced on March 29, 2016 and officially concluded on April 13, 2017. 10Ten of Nexstar’s stations and one station owned by Vaughan accepted bids to relinquish their spectrum. Of these 11 total stations, eight will share a channel with another station, two will move to a VHF channel and one station will discontinue its operation. went off the air in November 2017, resulting in the Company now owning 169 full power television stations. The one station that will discontinue its operationwent off the air is not expected to have a significant impact on ourthe Company’s future financial results because it is located in a remote rural area of the country and the Company has other stations which serve the same area. The 11Company derecognized the spectrum asset and liability to surrender spectrum of this station in the fourth quarter of 2017. Of the remaining ten stations, will be required to ceaseeight have ceased broadcasting on their current channels (and, if applicable, implementand implemented channel sharing arrangements) between August 26, 2017agreements. As a result, the associated spectrum asset and July 22,liability to surrender spectrum, both amounting to $314.1 million, were derecognized in the second quarter of 2018.
The remaining two stations will move to VHF channels and must vacate their current channels by September 2019 and May 2020, respectively.
The majority of the Company’s television stations did not accept bids to relinquish their television channels. Of those stations, 61 full power stations owned by Nexstar and 17 full power stations owned by VIEs have been assigned to new channels in the reduced post-auction television band. These “repacked” stations will beare required to construct and license the necessary technical modifications to operate on their new assigned channels and will need to cease operating on their existing channels by deadlines which the FCC has established and which are no later than July 13, 2020. Congress has allocated up to an industry-wide total of $1.75$2.75 billion to reimburse television broadcasters, multichannel video program distributors (“MVPDs”), and MVPDsother parties for costs reasonably incurred due to the repack. This allocation includes $1 billion added to the TV Broadcaster Relocation Fund as part of the Consolidated Appropriations Act, 2018. This fund is not available to reimburse repacking costs for stations which are surrendering their spectrum and entering into channel sharing relationships. Broadcasters and MVPDs were required to submithave submitted estimates to the FCC by July 12, 2017, of their reimbursable costs. As of July 14, 2017,March 7, 2018, these costs exceeded $2.1were approximately $1.95 billion, (over $350 million more thanand the amount authorized by Congress). WeFCC has indicated that it expects those costs to rise. The Company cannot determine if the FCC will be able to fully reimburse ourits repacking costs as this is dependent on certain factors, including ourthe Company’s ability to incur repacking costs that are equal to or less than the FCC’s initial allocation of funds to usthe Company and whether the FCC will have available funds to reimburse usthe Company for additional repacking costs that weit previously may not have anticipated. Whether the FCC will have available funds for additional reimbursements will also depend on the repacking costs that will be incurred by other broadcasters and MVPDs that are also seeking reimbursements.
The reallocation of television spectrum to broadband use may be to the detriment of the Company’s investment in digital facilities, could require substantial additional investment to continue current operations, and may require viewers to invest in additional equipment or subscription services to continue receiving broadcast television signals. The Company cannot predict the impact of the incentive auction and subsequent repacking on its business.
24
On March 3, 2011, the FCC initiated a Notice of Proposed Rulemaking to reexamine its rules (i) governing the requirements for good faith negotiations between multichannel video program distributors (“MVPDs”) and broadcasters, including implementing a prohibition on one station negotiating retransmission consent terms for another station under a local service agreement; (ii) for providing advance notice to consumers in the event of dispute; and (iii) to extend certain cable-only obligations to all MVPDs. The FCC alsowhich among other things asked for comment on eliminating the network non-duplication and syndicated exclusivity protection rules, which may permit MVPDs to import out-of-market television stations during a retransmission consent dispute.
in certain circumstances. In March 2014, the FCC adopted a rule that prohibits joint retransmission consent negotiation between television stations in the same market which are not commonly owned and which are ranked among the top four stations in the market in terms of audience share. On December 5, 2014, federal legislation extended the joint negotiation prohibition to all non-commonly owned television stations in a market. This rule requires the independent third parties with which Nexstar has local service agreements to separately negotiate their retransmission consent agreements. The December 2014 legislation also directed the FCC to commence a rulemaking to “review its totality of the circumstances test for good faith [retransmission consent] negotiations.” The FCC commenced this proceeding in September 2015 and comments and reply comments were submitted. In July 2016, the then-Chairman of the FCC publicly announced that the agency would not adopt additional rules in this proceeding, however, the proceeding remains open.
Concurrently with its adoption of the prohibition on certain joint retransmission consent negotiations, the FCC also adopted a further notice of proposed rulemaking which seekssought additional comment on the elimination or modification of the network non-duplication and syndicated exclusivity rules. The FCC’s prohibition on certain joint retransmission consent negotiations and its possible elimination or modification of the network non-duplication and syndicated exclusivity protection rules may affect the Company’s ability to sustain its current level of retransmission consent revenues or grow such revenues in the future and could have an adverse effect on the Company’s business, financial condition and results of operations. The Company cannot predict the resolution of the FCC’s network non-duplication and syndicated exclusivity proposals, or the impact of these proposals or the FCC’s prohibition on certain joint negotiations, on its business.proposals.
On December 5, 2014 federal legislation directed the FCC to commence a rulemaking to “review its totality of the circumstances test for good faith [retransmission consent] negotiations.” The FCC commenced this proceeding in September 2015 and comments and reply comments were submitted. In July 2016, the then-Chairman of the FCC publicly announced that the agency would not adopt additional rules in this proceeding. However, the proceeding remains open.
20
Further, certain online video distributors and other over-the-top video distributors (“OTTDs”) have begun streaming broadcast programming over the Internet. In June 2014, the U.S. Supreme Court held that an OTTD’s retransmissions of broadcast television signals without the consent of the broadcast station violate copyright holders’ exclusive right to perform their works publicly as provided under the Copyright Act. In December 2014, the FCC issued a Notice of Proposed Rulemaking proposing to interpret the term “MVPD” to encompass OTTDs 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 OTTDs. Comments and reply comments were filed in 2015. Although the FCC has not classified OTTDs as MVPDs to date, several OTTDs have signed agreements for retransmission of local stations within their markets and others are actively seeking to negotiate agreements for retransmission of local stations within their markets.such agreements.
25
12. Commitments and Contingencies
Guarantees of Mission, Marshall and Shield Debt
Nexstar and its subsidiaries guarantee full payment of all obligations incurred under the Mission, Marshall and Shield senior secured credit facilities. In the event that Mission, Marshall or Shield are unable to repay amounts due, Nexstar will be obligated to repay such amounts. The maximum potential amount of future payments that Nexstar would be required to make under these guarantees would be generally limited to the borrowings outstanding. As of June 30, 2017,2018, Mission had a maximum commitment of $229.8$228.0 million under its senior secured credit facility, of which $226.8$225.0 million of debt was outstanding, Marshall had used all of its commitment and had outstanding debt obligations of $53.5$51.7 million and Shield had also used all of its commitment and had outstanding obligations of $24.3$23.2 million. Marshall’sOn June 28, 2018, Marshall amended its senior secured credit facility which extended the maturity date of its outstanding debt is dueto December 1, 2019. As a result of the amendment, Marshall has $1.9 million of short-term debt in June 2018current liabilities and is$49.8 million of long-term debt included in the currentlong-term liabilities in the accompanying June 30, 20172018 condensed consolidated balance sheet. The other debtdebts guaranteed by Nexstar are long-term debt obligations of Mission and Shield.
Indemnification Obligations
In connection with certain agreements that the Company enters into in the normal course of its business, including local service agreements, business acquisitions and borrowing arrangements, the Company enters into contractual arrangements under which the Company agrees to indemnify the third partythird-party to such arrangement from losses, claims and damages incurred by the indemnified party for certain events as defined within the particular contract. Such indemnification obligations may not be subject to maximum loss clauses and the maximum potential amount of future payments the Company could be required to make under these indemnification arrangements may be unlimited. Historically, payments made related to these indemnifications have been insignificant and the Company has not incurred significant costs to defend lawsuits or settle claims related to these indemnification agreements.
Litigation
From time to time, the Company is involved with claims that arise out of the normal course of its business. In the opinion of management, any resulting liability with respect to these claims would not have a material adverse effect on the Company’s financial position or results of operations.
On July 30, 2018, Clay, Massey & Associates, PC filed an antitrust class action complaint in the U.S. District Court for the Northern District of Illinois on behalf of itself and all others similarly situated against Gray Television, Inc., Hearst Communications, Nexstar Media Group, Inc., Tegna Inc., Tribune Media Company and Sinclair Broadcast Group, Inc. The lawsuit alleges unlawful coordination between advertising sales teams of independent local television station owners to artificially inflate prices of local TV advertisements in violation of Section 1 of the Sherman Act (15 U.S.C. §1). The Company denies the allegations against it and will defend its advertising practices as necessary.
2621
13. Segment Data
The Company evaluates the performance of its operating segments based on net revenue and operating income. The Company’s broadcast segment includes television stations and related community focusedcommunity-focused websites that Nexstar owns, operates, programs or provides sales and other services to in various markets across the United States. The other activities of the Company include corporate functions, eliminations and other insignificant operations.
Segment financial information is included in the following tables for the periods presented (in thousands):
| Broadcasting |
|
| Other |
|
| Consolidated |
| ||||||||||||||||
Three Months Ended June 30, 2018 |
| Broadcast |
|
| Other |
|
| Consolidated |
| |||||||||||||||
| $ | 594,489 |
|
| $ | 31,626 |
|
| $ | 626,115 |
|
| $ | 622,888 |
|
| $ | 37,435 |
|
| $ | 660,323 |
| |
Depreciation |
|
| 24,702 |
|
|
| 1,590 |
|
|
| 26,292 |
|
|
| 20,961 |
|
|
| 4,129 |
|
|
| 25,090 |
|
Amortization of intangible assets |
|
| 33,274 |
|
|
| 5,283 |
|
|
| 38,557 |
|
|
| 31,876 |
|
|
| 5,305 |
|
|
| 37,181 |
|
Income (loss) from operations |
|
| 170,337 |
|
|
| (31,652 | ) |
|
| 138,685 |
|
|
| 207,543 |
|
|
| (33,049 | ) |
|
| 174,494 |
|
| Broadcasting |
|
| Other |
|
| Consolidated |
| ||||||||||||||||
Three Months Ended June 30, 2017 |
| Broadcast |
|
| Other |
|
| Consolidated |
| |||||||||||||||
| $ | 246,404 |
|
| $ | 15,590 |
|
| $ | 261,994 |
|
| $ | 594,489 |
|
| $ | 31,626 |
|
| $ | 626,115 |
| |
Depreciation |
|
| 11,172 |
|
|
| 1,567 |
|
|
| 12,739 |
|
|
| 24,702 |
|
|
| 1,590 |
|
|
| 26,292 |
|
Amortization of intangible assets |
|
| 7,952 |
|
|
| 3,367 |
|
|
| 11,319 |
|
|
| 33,274 |
|
|
| 5,283 |
|
|
| 38,557 |
|
Income (loss) from operations |
|
| 82,054 |
|
|
| (18,047 | ) |
|
| 64,007 |
|
|
| 167,181 |
|
|
| (31,652 | ) |
|
| 135,529 |
|
| Broadcasting |
|
| Other |
|
| Consolidated |
| ||||||||||||||||
Six Months Ended June 30, 2018 |
| Broadcast |
|
| Other |
|
| Consolidated |
| |||||||||||||||
| $ | 1,105,656 |
|
| $ | 60,776 |
|
| $ | 1,166,432 |
|
| $ | 1,199,873 |
|
| $ | 75,786 |
|
| $ | 1,275,659 |
| |
Depreciation |
|
| 41,644 |
|
|
| 6,874 |
|
|
| 48,518 |
|
|
| 42,361 |
|
|
| 8,543 |
|
|
| 50,904 |
|
Amortization of intangible assets |
|
| 79,207 |
|
|
| 7,508 |
|
|
| 86,715 |
|
|
| 63,929 |
|
|
| 9,554 |
|
|
| 73,483 |
|
Income (loss) from operations |
|
| 360,045 |
|
|
| (111,209 | ) |
|
| 248,836 |
|
|
| 360,110 |
|
|
| (68,000 | ) |
|
| 292,110 |
|
| Broadcasting |
|
| Other |
|
| Consolidated |
| ||||||||||||||||
Six Months Ended June 30, 2017 |
| Broadcast |
|
| Other |
|
| Consolidated |
| |||||||||||||||
Net revenue |
| $ | 487,492 |
|
| $ | 30,160 |
|
| $ | 517,652 |
|
| $ | 1,105,656 |
|
| $ | 60,776 |
|
| $ | 1,166,432 |
|
Depreciation |
|
| 22,159 |
|
|
| 3,138 |
|
|
| 25,297 |
|
|
| 41,644 |
|
|
| 6,874 |
|
|
| 48,518 |
|
Amortization of intangible assets |
|
| 16,663 |
|
|
| 6,735 |
|
|
| 23,398 |
|
|
| 79,207 |
|
|
| 7,508 |
|
|
| 86,715 |
|
Income (loss) from operations |
|
| 158,982 |
|
|
| (37,046 | ) |
|
| 121,936 |
|
|
| 354,258 |
|
|
| (111,209 | ) |
|
| 243,049 |
|
| Broadcasting |
|
| Other |
|
| Consolidated |
| ||||||||||||||||
As of June 30, 2018 |
| Broadcast |
|
| Other |
|
| Consolidated |
| |||||||||||||||
| $ | 2,005,396 |
|
| $ | 140,472 |
|
| $ | 2,145,868 |
|
| $ | 2,122,935 |
|
| $ | 62,047 |
|
| $ | 2,184,982 |
| |
Assets |
|
| 6,615,960 |
|
|
| 853,657 |
|
|
| 7,469,617 |
|
|
| 6,578,321 |
|
|
| 541,173 |
|
|
| 7,119,494 |
|
| Broadcasting |
|
| Other |
|
| Consolidated |
| ||||||||||||||||
As of December 31, 2017 |
| Broadcast |
|
| Other |
|
| Consolidated |
| |||||||||||||||
| $ | 449,682 |
|
| $ | 23,622 |
|
| $ | 473,304 |
|
| $ | 2,122,935 |
|
| $ | 19,911 |
|
| $ | 2,142,846 |
| |
Assets |
|
| 1,811,042 |
|
|
| 1,155,043 |
|
|
| 2,966,085 |
|
|
| 6,723,685 |
|
|
| 757,962 |
|
|
| 7,481,647 |
|
22
The following table presents the disaggregation of the Company’s revenue for the three and six months ended June 30, 2018 under ASC 606. Comparative 2017 revenues are presented in accordance with the Company’s historical accounting standard prior to the adoption of ASC 606 (in thousands):
Three Months Ended June 30, 2018 |
| Broadcast |
|
|
|
| Other |
|
|
|
| Consolidated |
| |||
Local |
| $ | 198,560 |
|
|
|
| $ | - |
|
|
|
| $ | 198,560 |
|
National |
|
| 71,633 |
|
|
|
|
| - |
|
|
|
|
| 71,633 |
|
Political |
|
| 31,636 |
|
|
|
|
| - |
|
|
|
|
| 31,636 |
|
Retransmission compensation |
|
| 276,273 |
|
|
|
|
| - |
|
|
|
|
| 276,273 |
|
Digital |
|
| 26,578 |
|
|
|
|
| 37,421 |
|
|
|
|
| 63,999 |
|
Other |
|
| 14,191 |
|
|
|
|
| 14 |
|
|
|
|
| 14,205 |
|
Trade revenue |
|
| 4,017 |
|
|
|
|
| - |
|
|
|
|
| 4,017 |
|
Net revenue |
| $ | 622,888 |
|
|
|
| $ | 37,435 |
|
|
|
| $ | 660,323 |
|
Three Months Ended June 30, 2017 |
| Broadcast |
|
| Other |
|
| Consolidated |
| |||
Local |
| $ | 209,594 |
|
| $ | - |
|
| $ | 209,594 |
|
National |
|
| 77,256 |
|
|
| - |
|
|
| 77,256 |
|
Political |
|
| 5,488 |
|
|
| - |
|
|
| 5,488 |
|
Retransmission compensation |
|
| 253,099 |
|
|
| - |
|
|
| 253,099 |
|
Digital |
|
| 30,753 |
|
|
| 32,292 |
|
|
| 63,045 |
|
Other |
|
| 4,938 |
|
|
| (666 | ) |
|
| 4,272 |
|
Trade and barter revenue |
|
| 13,361 |
|
|
| - |
|
|
| 13,361 |
|
Net revenue |
| $ | 594,489 |
|
| $ | 31,626 |
|
| $ | 626,115 |
|
Six Months Ended June 30, 2018 |
| Broadcast |
|
| Other |
|
| Consolidated |
| |||
Local |
| $ | 391,828 |
|
| $ | - |
|
| $ | 391,828 |
|
National |
|
| 138,678 |
|
|
| - |
|
|
| 138,678 |
|
Political |
|
| 40,902 |
|
|
| - |
|
|
| 40,902 |
|
Retransmission compensation |
|
| 552,214 |
|
|
| - |
|
|
| 552,214 |
|
Digital |
|
| 51,046 |
|
|
| 75,757 |
|
|
| 126,803 |
|
Other |
|
| 18,345 |
|
|
| 29 |
|
|
| 18,374 |
|
Trade revenue |
|
| 6,860 |
|
|
| - |
|
|
| 6,860 |
|
Net revenue |
| $ | 1,199,873 |
|
| $ | 75,786 |
|
| $ | 1,275,659 |
|
Six Months Ended June 30, 2017 |
| Broadcast |
|
|
|
| Other |
|
|
|
| Consolidated |
| |||
Local |
| $ | 388,070 |
|
|
|
| $ | - |
|
|
|
| $ | 388,070 |
|
National |
|
| 143,238 |
|
|
|
|
| - |
|
|
|
|
| 143,238 |
|
Political |
|
| 7,184 |
|
|
|
|
| - |
|
|
|
|
| 7,184 |
|
Retransmission compensation |
|
| 484,994 |
|
|
|
|
| - |
|
|
|
|
| 484,994 |
|
Digital |
|
| 47,702 |
|
|
|
|
| 60,708 |
|
|
|
|
| 108,410 |
|
Other |
|
| 8,665 |
|
|
|
|
| 68 |
|
|
|
|
| 8,733 |
|
Trade and barter revenue |
|
| 25,803 |
|
|
|
|
| - |
|
|
|
|
| 25,803 |
|
Net revenue |
| $ | 1,105,656 |
|
|
|
| $ | 60,776 |
|
|
|
| $ | 1,166,432 |
|
27
23
The Company is a television broadcasting and digital media company focused on the acquisition, development and operation of television stations and interactive community websites and digital media services in medium-sized markets in the United States.
Advertising revenue (local, national, political and digital) is positively affected by national and regional political campaigns, and certain events such as the Olympic Games or the Super Bowl. Company stations’ advertising revenue is generally highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to, and including, the holiday season. In addition, advertising revenue is generally higher during even-numbered years when congressional and presidential elections occur, and advertising is aired during the Olympic Games.
The Company receives compensation from MVPDs in return for the consent to the retransmission of the signals of its television stations. Retransmission compensation is recognized at the point in time the broadcast signal is delivered to the MVPDs and is based on a price per subscriber.
Beginning in 2018, the Company no longer recognizes barter revenue (and the related barter expense) resulting from the exchange of advertising time for certain program material. During the three months ended June 30, 2017, the Company recognized barter revenue (and barter expense) of $9.9 million. During the six months ended June 30, 2017, the Company recognized barter revenue (and barter expense) of $20.1 million. These are included in the trade and barter revenue line in the tables above.
14. Condensed Consolidating Financial Information
The following condensed consolidating financial information presents the financial position, results of operations and cash flows of the Company, including its wholly-owned subsidiaries and its consolidated VIEs. This information is presented in lieu of separate financial statements and other related disclosures pursuant to Regulation S-X Rule 3-10 of the Securities Exchange Act of 1934, as amended, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.”
The Nexstar column presents the parent company’s financial information, excluding consolidating entities. The Nexstar Broadcasting column presents the financial information of Nexstar Broadcasting, Inc. (“Nexstar Broadcasting”), a wholly-owned subsidiary of Nexstar and issuer of the 5.625% Notes, the 6.125% Notes and the 5.875% Notes. The Mission column presents the financial information of Mission, an entity which Nexstar Broadcasting is required to consolidate as a VIE (see(See Note 2). The Non-Guarantors column presents the combined financial information of Nexstar Digital, LLC, a wholly-owned subsidiary of Nexstar, and other VIEs consolidated by Nexstar Broadcasting (See Note 2).
Nexstar Broadcasting’s outstanding 5.625% Notes and 6.125% Notes are fully and unconditionally guaranteed, jointly and severally, by Nexstar and Mission, subject to certain customary release provisions. These notes are not guaranteed by any other entities.
Nexstar Broadcasting’s outstanding 5.875% Notes are fully and unconditionally guaranteed, jointly and severally, by Nexstar, subject to certain customary release provisions. These notes are not guaranteed by any other entities.
The 5.875% Notes are the only registered debt of Nexstar. However, the indentures governing the 5.625% Notes and the 6.125% Notes alsoare not registered but require consolidating information that presents the guarantor information.
As discussed in NotesNote 2, and 3, Nexstar Broadcasting completed its acquisitionthe Company adopted ASU No. 2016-15 on a retrospective basis which reclassified the cash flow classification of certain television stationspayments for contingent consideration related to an acquisition in 2017 from WVMHfinancing activities to operating activities and payments received for the settlement of corporate-owned life insurance claims from operating activities to investing activities. The Company also adopted ASU No. 2016-18 on a retrospective basis which impacted the cash flow treatment of transfers between cash, cash equivalents and restricted cash in January 2017. Additionally, Mission completed its acquisitionFurther, the Company adopted ASU No. 2017-07 on a retrospective basis which requires the presentation of Parker, the owner of KFQX, in March 2017. These acquisitions were deemed to be changesnet periodic benefit costs, other than the current service costs, in the reporting entities, thusincome statement separately from the following condensed consolidating financial informationservice cost component and outside the subtotal of income from operations. The effects of these adoptions were prepared as if Nexstar Broadcasting ownedreflected in the accompanying Condensed Consolidating Statement of Operations and operatedCondensed Consolidating Statement of Cash Flows during the WVMH stationsthree and Mission owned and operated Parker as of the earliest period presented.six months ended June 30, 2017.
28
24
CONDENSED CONSOLIDATING BALANCE SHEET
As of June 30, 2018
(in thousands)
|
|
|
|
|
| Nexstar |
|
|
|
|
|
| Non- |
|
|
|
|
|
| Consolidated |
| |||
|
| Nexstar |
|
| Broadcasting |
|
| Mission |
|
| Guarantors |
|
| Eliminations |
|
| Company |
| ||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | - |
|
| $ | 126,362 |
|
| $ | 6,557 |
|
| $ | 14,762 |
|
| $ | - |
|
| $ | 147,681 |
|
Accounts receivable |
|
| - |
|
|
| 435,598 |
|
|
| 12,943 |
|
|
| 75,537 |
|
|
| - |
|
|
| 524,078 |
|
Amounts due from consolidated entities |
|
| - |
|
|
| 74,146 |
|
|
| 84,872 |
|
|
| - |
|
|
| (159,018 | ) |
|
| - |
|
Other current assets |
|
| - |
|
|
| 39,570 |
|
|
| 1,219 |
|
|
| 4,996 |
|
|
| (456 | ) |
|
| 45,329 |
|
Total current assets |
|
| - |
|
|
| 675,676 |
|
|
| 105,591 |
|
|
| 95,295 |
|
|
| (159,474 | ) |
|
| 717,088 |
|
Investments in subsidiaries |
|
| 857,802 |
|
|
| 108,884 |
|
|
| - |
|
|
| - |
|
|
| (966,686 | ) |
|
| - |
|
Amounts due from consolidated entities |
|
| 800,691 |
|
|
| 13,218 |
|
|
| - |
|
|
| - |
|
|
| (813,909 | ) |
|
| - |
|
Property and equipment, net |
|
| - |
|
|
| 687,789 |
|
|
| 18,364 |
|
|
| 14,386 |
|
|
| (75 | ) |
|
| 720,464 |
|
Goodwill |
|
| - |
|
|
| 1,968,147 |
|
|
| 33,187 |
|
|
| 183,648 |
|
|
| - |
|
|
| 2,184,982 |
|
FCC licenses |
|
| - |
|
|
| 1,615,830 |
|
|
| 43,102 |
|
|
| 108,706 |
|
|
| - |
|
|
| 1,767,638 |
|
Other intangible assets, net |
|
| - |
|
|
| 1,416,778 |
|
|
| 14,757 |
|
|
| 125,742 |
|
|
| - |
|
|
| 1,557,277 |
|
Other noncurrent assets |
|
| - |
|
|
| 166,214 |
|
|
| 3,569 |
|
|
| 15,480 |
|
|
| (13,218 | ) |
|
| 172,045 |
|
Total assets |
| $ | 1,658,493 |
|
| $ | 6,652,536 |
|
| $ | 218,570 |
|
| $ | 543,257 |
|
| $ | (1,953,362 | ) |
| $ | 7,119,494 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of debt |
| $ | - |
|
| $ | 36,243 |
|
| $ | 2,314 |
|
| $ | 3,165 |
|
| $ | - |
|
| $ | 41,722 |
|
Accounts payable |
|
| - |
|
|
| 51,359 |
|
|
| 1,783 |
|
|
| 12,986 |
|
|
| - |
|
|
| 66,128 |
|
Amounts due to consolidated entities |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 159,018 |
|
|
| (159,018 | ) |
|
| - |
|
Other current liabilities |
|
| 213 |
|
|
| 155,618 |
|
|
| 4,776 |
|
|
| 26,569 |
|
|
| (456 | ) |
|
| 186,720 |
|
Total current liabilities |
|
| 213 |
|
|
| 243,220 |
|
|
| 8,873 |
|
|
| 201,738 |
|
|
| (159,474 | ) |
|
| 294,570 |
|
Debt |
|
| - |
|
|
| 3,951,509 |
|
|
| 222,651 |
|
|
| 71,764 |
|
|
| - |
|
|
| 4,245,924 |
|
Amounts due to consolidated entities |
|
| - |
|
|
| 567,341 |
|
|
| - |
|
|
| 246,778 |
|
|
| (814,119 | ) |
|
| - |
|
Deferred tax liabilities |
|
| - |
|
|
| 621,727 |
|
|
| - |
|
|
| 11,289 |
|
|
| - |
|
|
| 633,016 |
|
Other noncurrent liabilities |
|
| - |
|
|
| 302,898 |
|
|
| 6,773 |
|
|
| 7,077 |
|
|
| (13,218 | ) |
|
| 303,530 |
|
Total liabilities |
|
| 213 |
|
|
| 5,686,695 |
|
|
| 238,297 |
|
|
| 538,646 |
|
|
| (986,811 | ) |
|
| 5,477,040 |
|
Total Nexstar Media Group, Inc. stockholders' equity (deficit) |
|
| 1,658,280 |
|
|
| 965,841 |
|
|
| (19,727 | ) |
|
| (4,404 | ) |
|
| (966,551 | ) |
|
| 1,633,439 |
|
Noncontrolling interests in consolidated variable interest entities |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 9,015 |
|
|
| - |
|
|
| 9,015 |
|
Total liabilities and stockholders' equity (deficit) |
| $ | 1,658,493 |
|
| $ | 6,652,536 |
|
| $ | 218,570 |
|
| $ | 543,257 |
|
| $ | (1,953,362 | ) |
| $ | 7,119,494 |
|
25
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2017
(in thousands)
|
|
|
|
|
| Nexstar |
|
|
|
|
|
| Non- |
|
|
|
|
|
| Consolidated |
|
|
|
|
|
| Nexstar |
|
|
|
|
|
| Non- |
|
|
|
|
|
| Consolidated |
| ||||||
|
| Nexstar |
|
| Broadcasting |
|
| Mission |
|
| Guarantors |
|
| Eliminations |
|
| Company |
|
| Nexstar |
|
| Broadcasting |
|
| Mission |
|
| Guarantors |
|
| Eliminations |
|
| Company |
| ||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | - |
|
| $ | 67,795 |
|
| $ | 5,909 |
|
| $ | 12,198 |
|
| $ | - |
|
| $ | 85,902 |
|
| $ | - |
|
| $ | 90,860 |
|
| $ | 9,524 |
|
| $ | 15,268 |
|
| $ | - |
|
| $ | 115,652 |
|
Accounts receivable |
|
| - |
|
|
| 433,461 |
|
|
| 12,789 |
|
|
| 56,869 |
|
|
| - |
|
|
| 503,119 |
|
|
| - |
|
|
| 484,096 |
|
|
| 14,717 |
|
|
| 64,130 |
|
|
| - |
|
|
| 562,943 |
|
Amounts due from consolidated entities |
|
| - |
|
|
| 203,804 |
|
|
| 102,431 |
|
|
| - |
|
|
| (306,235 | ) |
|
| - |
|
|
| - |
|
|
| 55,417 |
|
|
| 92,923 |
|
|
| - |
|
|
| (148,340 | ) |
|
| - |
|
Spectrum auction asset |
|
| - |
|
|
| 432,777 |
|
|
| - |
|
|
| 26,227 |
|
|
| - |
|
|
| 459,004 |
| ||||||||||||||||||||||||
Spectrum asset |
|
| - |
|
|
| 279,069 |
|
|
| - |
|
|
| 26,695 |
|
|
| - |
|
|
| 305,764 |
| ||||||||||||||||||||||||
Other current assets |
|
| - |
|
|
| 23,328 |
|
|
| 1,477 |
|
|
| 5,685 |
|
|
| - |
|
|
| 30,490 |
|
|
| - |
|
|
| 64,256 |
|
|
| 2,070 |
|
|
| 5,533 |
|
|
| - |
|
|
| 71,859 |
|
Total current assets |
|
| - |
|
|
| 1,161,165 |
|
|
| 122,606 |
|
|
| 100,979 |
|
|
| (306,235 | ) |
|
| 1,078,515 |
|
|
| - |
|
|
| 973,698 |
|
|
| 119,234 |
|
|
| 111,626 |
|
|
| (148,340 | ) |
|
| 1,056,218 |
|
Investments in subsidiaries |
|
| 182,349 |
|
|
| 127,093 |
|
|
| - |
|
|
| - |
|
|
| (309,442 | ) |
|
| - |
|
|
| 617,297 |
|
|
| 109,354 |
|
|
| - |
|
|
| - |
|
|
| (726,651 | ) |
|
| - |
|
Amounts due from consolidated entities |
|
| 1,021,003 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,021,003 | ) |
|
| - |
|
|
| 970,207 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (970,207 | ) |
|
| - |
|
Property and equipment, net |
|
| - |
|
|
| 700,692 |
|
|
| 18,571 |
|
|
| 19,539 |
|
|
| (75 | ) |
|
| 738,727 |
|
|
| - |
|
|
| 697,898 |
|
|
| 18,454 |
|
|
| 17,861 |
|
|
| (75 | ) |
|
| 734,138 |
|
Goodwill |
|
| - |
|
|
| 1,827,730 |
|
|
| 33,187 |
|
|
| 284,951 |
|
|
| - |
|
|
| 2,145,868 |
|
|
| - |
|
|
| 1,959,386 |
|
|
| 33,187 |
|
|
| 150,273 |
|
|
| - |
|
|
| 2,142,846 |
|
FCC licenses |
|
| - |
|
|
| 1,654,030 |
|
|
| 43,102 |
|
|
| 134,209 |
|
|
| - |
|
|
| 1,831,341 |
|
|
| - |
|
|
| 1,615,830 |
|
|
| 43,102 |
|
|
| 108,706 |
|
|
| - |
|
|
| 1,767,638 |
|
Other intangible assets, net |
|
| - |
|
|
| 1,457,117 |
|
|
| 16,989 |
|
|
| 131,919 |
|
|
| - |
|
|
| 1,606,025 |
|
|
| - |
|
|
| 1,476,297 |
|
|
| 15,841 |
|
|
| 89,488 |
|
|
| - |
|
|
| 1,581,626 |
|
Other noncurrent assets |
|
| - |
|
|
| 61,427 |
|
|
| 2,945 |
|
|
| 4,769 |
|
|
| - |
|
|
| 69,141 |
|
|
| - |
|
|
| 189,303 |
|
|
| 2,645 |
|
|
| 7,233 |
|
|
| - |
|
|
| 199,181 |
|
Total assets |
| $ | 1,203,352 |
|
| $ | 6,989,254 |
|
| $ | 237,400 |
|
| $ | 676,366 |
|
| $ | (1,636,755 | ) |
| $ | 7,469,617 |
|
| $ | 1,587,504 |
|
| $ | 7,021,766 |
|
| $ | 232,463 |
|
| $ | 485,187 |
|
| $ | (1,845,273 | ) |
| $ | 7,481,647 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of debt |
| $ | - |
|
| $ | - |
|
| $ | 2,320 |
|
| $ | 55,540 |
|
| $ | - |
|
| $ | 57,860 |
|
| $ | - |
|
| $ | 36,243 |
|
| $ | 2,314 |
|
| $ | 54,251 |
|
| $ | - |
|
| $ | 92,808 |
|
Accounts payable |
|
| - |
|
|
| 22,918 |
|
|
| 1,110 |
|
|
| 3,904 |
|
|
| - |
|
|
| 27,932 |
|
|
| - |
|
|
| 24,293 |
|
|
| 1,090 |
|
|
| 5,753 |
|
|
| - |
|
|
| 31,136 |
|
Liability to surrender spectrum asset |
|
| - |
|
|
| 286,740 |
|
|
| - |
|
|
| 27,347 |
|
|
| - |
|
|
| 314,087 |
| ||||||||||||||||||||||||
Amounts due to consolidated entities |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 306,235 |
|
|
| (306,235 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 148,340 |
|
|
| (148,340 | ) |
|
| - |
|
Other current liabilities |
|
| - |
|
|
| 673,636 |
|
|
| 13,540 |
|
|
| 21,480 |
|
|
| - |
|
|
| 708,656 |
|
|
| - |
|
|
| 192,827 |
|
|
| 13,310 |
|
|
| 26,535 |
|
|
| - |
|
|
| 232,672 |
|
Total current liabilities |
|
| - |
|
|
| 696,554 |
|
|
| 16,970 |
|
|
| 387,159 |
|
|
| (306,235 | ) |
|
| 794,448 |
|
|
| - |
|
|
| 540,103 |
|
|
| 16,714 |
|
|
| 262,226 |
|
|
| (148,340 | ) |
|
| 670,703 |
|
Debt |
|
| - |
|
|
| 4,130,886 |
|
|
| 224,459 |
|
|
| 22,325 |
|
|
| - |
|
|
| 4,377,670 |
|
|
| - |
|
|
| 4,024,129 |
|
|
| 223,428 |
|
|
| 22,095 |
|
|
| - |
|
|
| 4,269,652 |
|
Amounts due to consolidated entities |
|
| - |
|
|
| 765,150 |
|
|
| - |
|
|
| 256,063 |
|
|
| (1,021,213 | ) |
|
| - |
|
|
|
|
|
|
| 714,408 |
|
|
| - |
|
|
| 256,010 |
|
|
| (970,418 | ) |
|
| - |
|
Deferred tax liabilities |
|
| - |
|
|
| 862,812 |
|
|
| - |
|
|
| 23,832 |
|
|
| - |
|
|
| 886,644 |
|
|
| - |
|
|
| 613,227 |
|
|
| - |
|
|
| 6,214 |
|
|
| - |
|
|
| 619,441 |
|
Other noncurrent liabilities |
|
| - |
|
|
| 189,836 |
|
|
| 9,358 |
|
|
| 8,115 |
|
|
| - |
|
|
| 207,309 |
|
|
| - |
|
|
| 322,572 |
|
|
| 7,626 |
|
|
| 10,343 |
|
|
| - |
|
|
| 340,541 |
|
Total liabilities |
|
| - |
|
|
| 6,645,238 |
|
|
| 250,787 |
|
|
| 697,494 |
|
|
| (1,327,448 | ) |
|
| 6,266,071 |
|
|
| - |
|
|
| 6,214,439 |
|
|
| 247,768 |
|
|
| 556,888 |
|
|
| (1,118,758 | ) |
|
| 5,900,337 |
|
Total Nexstar Media Group, Inc. stockholders' equity (deficit) |
|
| 1,203,352 |
|
|
| 344,016 |
|
|
| (13,387 | ) |
|
| (34,362 | ) |
|
| (309,307 | ) |
|
| 1,190,312 |
|
|
| 1,587,504 |
|
|
| 807,327 |
|
|
| (15,305 | ) |
|
| (82,397 | ) |
|
| (726,515 | ) |
|
| 1,570,614 |
|
Noncontrolling interests in consolidated variable interest entities |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 13,234 |
|
|
| - |
|
|
| 13,234 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 10,696 |
|
|
| - |
|
|
| 10,696 |
|
Total liabilities and stockholders' equity (deficit) |
| $ | 1,203,352 |
|
| $ | 6,989,254 |
|
| $ | 237,400 |
|
| $ | 676,366 |
|
| $ | (1,636,755 | ) |
| $ | 7,469,617 |
|
| $ | 1,587,504 |
|
| $ | 7,021,766 |
|
| $ | 232,463 |
|
| $ | 485,187 |
|
| $ | (1,845,273 | ) |
| $ | 7,481,647 |
|
2926
CONDENSED CONSOLIDATING BALANCE SHEETSTATEMENT OF OPERATIONS
As of December 31, 2016Three Months Ended June 30, 2018
(in thousands)
|
|
|
|
| Nexstar |
|
|
|
|
|
| Non- |
|
|
|
|
|
| Consolidated |
| ||||
| Nexstar |
|
| Broadcasting |
|
| Mission |
|
| Guarantors |
|
| Eliminations |
|
| Company |
| |||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | - |
|
| $ | 75,830 |
|
| $ | 6,478 |
|
| $ | 5,372 |
|
| $ | - |
|
| $ | 87,680 |
|
Accounts receivable |
|
| - |
|
|
| 184,921 |
|
|
| 12,332 |
|
|
| 20,805 |
|
|
| - |
|
|
| 218,058 |
|
Amounts due from consolidated entities |
|
| - |
|
|
| 5,623 |
|
|
| 80,815 |
|
|
| - |
|
|
| (86,438 | ) |
|
| - |
|
Other current assets |
|
| - |
|
|
| 53,762 |
|
|
| 1,337 |
|
|
| 2,380 |
|
|
| - |
|
|
| 57,479 |
|
Total current assets |
|
| - |
|
|
| 320,136 |
|
|
| 100,962 |
|
|
| 28,557 |
|
|
| (86,438 | ) |
|
| 363,217 |
|
Investments in subsidiaries |
|
| 256,391 |
|
|
| 38,259 |
|
|
| - |
|
|
| - |
|
|
| (294,650 | ) |
|
| - |
|
Amounts due from consolidated entities |
|
| - |
|
|
| 66,170 |
|
|
| - |
|
|
| - |
|
|
| (66,170 | ) |
|
| - |
|
Property and equipment, net |
|
| - |
|
|
| 244,623 |
|
|
| 19,564 |
|
|
| 12,041 |
|
|
| (75 | ) |
|
| 276,153 |
|
Goodwill |
|
| - |
|
|
| 380,164 |
|
|
| 33,187 |
|
|
| 59,953 |
|
|
| - |
|
|
| 473,304 |
|
FCC licenses |
|
| - |
|
|
| 468,963 |
|
|
| 43,102 |
|
|
| 30,459 |
|
|
| - |
|
|
| 542,524 |
|
Other intangible assets, net |
|
| - |
|
|
| 258,502 |
|
|
| 17,922 |
|
|
| 48,313 |
|
|
| - |
|
|
| 324,737 |
|
Restricted cash |
|
| - |
|
|
| 901,080 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 901,080 |
|
Other noncurrent assets |
|
| - |
|
|
| 72,070 |
|
|
| 11,144 |
|
|
| 1,856 |
|
|
| - |
|
|
| 85,070 |
|
Total assets |
| $ | 256,391 |
|
| $ | 2,749,967 |
|
| $ | 225,881 |
|
| $ | 181,179 |
|
| $ | (447,333 | ) |
| $ | 2,966,085 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of debt |
| $ | - |
|
| $ | 19,759 |
|
| $ | 2,334 |
|
| $ | 6,000 |
|
| $ | - |
|
| $ | 28,093 |
|
Accounts payable |
|
| - |
|
|
| 16,234 |
|
|
| 524 |
|
|
| 2,996 |
|
|
| - |
|
|
| 19,754 |
|
Amounts due to consolidated entities |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 86,438 |
|
|
| (86,438 | ) |
|
| - |
|
Other current liabilities |
|
| - |
|
|
| 118,049 |
|
|
| 9,017 |
|
|
| 14,665 |
|
|
| - |
|
|
| 141,731 |
|
Total current liabilities |
|
| - |
|
|
| 154,042 |
|
|
| 11,875 |
|
|
| 110,099 |
|
|
| (86,438 | ) |
|
| 189,578 |
|
Debt |
|
| - |
|
|
| 2,045,827 |
|
|
| 221,431 |
|
|
| 47,068 |
|
|
| - |
|
|
| 2,314,326 |
|
Amounts due to consolidated entities |
|
| 66,380 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (66,380 | ) |
|
| - |
|
Deferred tax liabilities |
|
| - |
|
|
| 118,155 |
|
|
| - |
|
|
| 13,853 |
|
|
| - |
|
|
| 132,008 |
|
Other noncurrent liabilities |
|
| - |
|
|
| 33,959 |
|
|
| 9,832 |
|
|
| 2,028 |
|
|
| - |
|
|
| 45,819 |
|
Total liabilities |
|
| 66,380 |
|
|
| 2,351,983 |
|
|
| 243,138 |
|
|
| 173,048 |
|
|
| (152,818 | ) |
|
| 2,681,731 |
|
Total Nexstar Media Group, Inc. stockholders' equity (deficit) |
|
| 190,011 |
|
|
| 289,290 |
|
|
| (21,257 | ) |
|
| 5,612 |
|
|
| (294,515 | ) |
|
| 169,141 |
|
Noncontrolling interest in a consolidated variable interest entity |
|
| - |
|
|
| 108,694 |
|
|
| 4,000 |
|
|
| 2,519 |
|
|
| - |
|
|
| 115,213 |
|
Total liabilities and stockholders' equity (deficit) |
| $ | 256,391 |
|
| $ | 2,749,967 |
|
| $ | 225,881 |
|
| $ | 181,179 |
|
| $ | (447,333 | ) |
| $ | 2,966,085 |
|
|
|
|
|
|
| Nexstar |
|
|
|
|
|
| Non- |
|
|
|
|
|
| Consolidated |
| |||
|
| Nexstar |
|
| Broadcasting |
|
| Mission |
|
| Guarantors |
|
| Eliminations |
|
| Company |
| ||||||
Net broadcast revenue (including trade) |
| $ | - |
|
| $ | 594,056 |
|
| $ | 17,606 |
|
| $ | 48,661 |
|
| $ | - |
|
| $ | 660,323 |
|
Revenue between consolidated entities |
|
| 13,205 |
|
|
| 22,447 |
|
|
| 9,058 |
|
|
| 18,439 |
|
|
| (63,149 | ) |
|
| - |
|
Net revenue |
|
| 13,205 |
|
|
| 616,503 |
|
|
| 26,664 |
|
|
| 67,100 |
|
|
| (63,149 | ) |
|
| 660,323 |
|
Operating expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses, excluding depreciation and amortization |
|
| - |
|
|
| 218,740 |
|
|
| 10,013 |
|
|
| 46,996 |
|
|
| (1,310 | ) |
|
| 274,439 |
|
Selling, general, and administrative expenses, excluding depreciation and amortization |
|
| 15,181 |
|
|
| 133,087 |
|
|
| 1,112 |
|
|
| 10,945 |
|
|
| (21,422 | ) |
|
| 138,903 |
|
Local service agreement fees between consolidated entities |
|
| - |
|
|
| 17,971 |
|
|
| 13,250 |
|
|
| 9,196 |
|
|
| (40,417 | ) |
|
| - |
|
Amortization of broadcast rights |
|
| - |
|
|
| 14,797 |
|
|
| 409 |
|
|
| 707 |
|
|
| - |
|
|
| 15,913 |
|
Amortization of intangible assets |
|
| - |
|
|
| 29,674 |
|
|
| 540 |
|
|
| 6,967 |
|
|
| - |
|
|
| 37,181 |
|
Depreciation |
|
| - |
|
|
| 22,885 |
|
|
| 504 |
|
|
| 1,701 |
|
|
| - |
|
|
| 25,090 |
|
Reimbursement from the FCC related to station repack |
|
| - |
|
|
| (5,510 | ) |
|
| (187 | ) |
|
| - |
|
|
| - |
|
|
| (5,697 | ) |
Total operating expenses |
|
| 15,181 |
|
|
| 431,644 |
|
|
| 25,641 |
|
|
| 76,512 |
|
|
| (63,149 | ) |
|
| 485,829 |
|
(Loss) income from operations |
|
| (1,976 | ) |
|
| 184,859 |
|
|
| 1,023 |
|
|
| (9,412 | ) |
|
| - |
|
|
| 174,494 |
|
Interest expense, net |
|
| - |
|
|
| (52,539 | ) |
|
| (2,739 | ) |
|
| (1,003 | ) |
|
| - |
|
|
| (56,281 | ) |
Loss on extinguishment of debt |
|
| - |
|
|
| (481 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (481 | ) |
Pension and other postretirement plans credit, net |
|
| - |
|
|
| 2,950 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,950 |
|
Other expenses |
|
| - |
|
|
| (812 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (812 | ) |
Equity in income of subsidiaries |
|
| 94,171 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (94,171 | ) |
|
| - |
|
Income (loss) before income taxes |
|
| 92,195 |
|
|
| 133,977 |
|
|
| (1,716 | ) |
|
| (10,415 | ) |
|
| (94,171 | ) |
|
| 119,870 |
|
Income tax (expense) benefit |
|
| (423 | ) |
|
| (34,455 | ) |
|
| 425 |
|
|
| 1,189 |
|
|
| - |
|
|
| (33,264 | ) |
Net income (loss) |
|
| 91,772 |
|
|
| 99,522 |
|
|
| (1,291 | ) |
|
| (9,226 | ) |
|
| (94,171 | ) |
|
| 86,606 |
|
Net loss attributable to noncontrolling interests |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,126 |
|
|
| - |
|
|
| 1,126 |
|
Net income (loss) attributable to Nexstar |
| $ | 91,772 |
|
| $ | 99,522 |
|
| $ | (1,291 | ) |
| $ | (8,100 | ) |
| $ | (94,171 | ) |
| $ | 87,732 |
|
3027
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended June 30, 2017
(in thousands)
|
|
|
|
| Nexstar |
|
|
|
|
|
| Non- |
|
|
|
|
|
| Consolidated |
|
|
|
|
|
| Nexstar |
|
|
|
|
|
| Non- |
|
|
|
|
|
| Consolidated |
| |||||||
| Nexstar |
|
| Broadcasting |
|
| Mission |
|
| Guarantors |
|
| Eliminations |
|
| Company |
|
| Nexstar |
|
| Broadcasting |
|
| Mission |
|
| Guarantors |
|
| Eliminations |
|
| Company |
| |||||||||||||
Net broadcast revenue (including trade and barter) |
| $ | - |
|
| $ | 544,266 |
|
| $ | 17,555 |
|
| $ | 64,294 |
|
| $ | - |
|
| $ | 626,115 |
|
| $ | - |
|
| $ | 544,266 |
|
| $ | 17,555 |
|
| $ | 64,294 |
|
| $ | - |
|
| $ | 626,115 |
|
Revenue between consolidated entities |
|
| - |
|
|
| 18,656 |
|
|
| 9,400 |
|
|
| 6,438 |
|
|
| (34,494 | ) |
|
| - |
|
|
| - |
|
|
| 18,656 |
|
|
| 9,400 |
|
|
| 6,438 |
|
|
| (34,494 | ) |
|
| - |
|
Net revenue |
|
| - |
|
|
| 562,922 |
|
|
| 26,955 |
|
|
| 70,732 |
|
|
| (34,494 | ) |
|
| 626,115 |
|
|
| - |
|
|
| 562,922 |
|
|
| 26,955 |
|
|
| 70,732 |
|
|
| (34,494 | ) |
|
| 626,115 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses, excluding depreciation and amortization |
|
| - |
|
|
| 200,039 |
|
|
| 8,892 |
|
|
| 44,705 |
|
|
| (1,026 | ) |
|
| 252,610 |
|
|
| - |
|
|
| 200,039 |
|
|
| 8,892 |
|
|
| 44,705 |
|
|
| (1,026 | ) |
|
| 252,610 |
|
Selling, general, and administrative expenses, excluding depreciation and amortization |
|
| - |
|
|
| 139,477 |
|
|
| 877 |
|
|
| 11,351 |
|
|
| (7,420 | ) |
|
| 144,285 |
|
|
| - |
|
|
| 142,633 |
|
|
| 877 |
|
|
| 11,351 |
|
|
| (7,420 | ) |
|
| 147,441 |
|
Local service agreement fees between consolidated entities |
|
| - |
|
|
| 15,577 |
|
|
| 4,500 |
|
|
| 5,971 |
|
|
| (26,048 | ) |
|
| - |
|
|
| - |
|
|
| 15,577 |
|
|
| 4,500 |
|
|
| 5,971 |
|
|
| (26,048 | ) |
|
| - |
|
Amortization of broadcast rights |
|
| - |
|
|
| 22,723 |
|
|
| 1,414 |
|
|
| 1,549 |
|
|
| - |
|
|
| 25,686 |
|
|
| - |
|
|
| 22,723 |
|
|
| 1,414 |
|
|
| 1,549 |
|
|
| - |
|
|
| 25,686 |
|
Amortization of intangible assets |
|
| - |
|
|
| 33,146 |
|
|
| 638 |
|
|
| 4,773 |
|
|
| - |
|
|
| 38,557 |
|
|
| - |
|
|
| 33,146 |
|
|
| 638 |
|
|
| 4,773 |
|
|
| - |
|
|
| 38,557 |
|
Depreciation |
|
| - |
|
|
| 24,120 |
|
|
| 587 |
|
|
| 1,585 |
|
|
| - |
|
|
| 26,292 |
|
|
| - |
|
|
| 24,120 |
|
|
| 587 |
|
|
| 1,585 |
|
|
| - |
|
|
| 26,292 |
|
Total operating expenses |
|
| - |
|
|
| 435,082 |
|
|
| 16,908 |
|
|
| 69,934 |
|
|
| (34,494 | ) |
|
| 487,430 |
|
|
| - |
|
|
| 438,238 |
|
|
| 16,908 |
|
|
| 69,934 |
|
|
| (34,494 | ) |
|
| 490,586 |
|
Income from operations |
|
| - |
|
|
| 127,840 |
|
|
| 10,047 |
|
|
| 798 |
|
|
| - |
|
|
| 138,685 |
|
|
| - |
|
|
| 124,684 |
|
|
| 10,047 |
|
|
| 798 |
|
|
| - |
|
|
| 135,529 |
|
Interest expense, net |
|
| - |
|
|
| (51,760 | ) |
|
| (2,556 | ) |
|
| (1,369 | ) |
|
| - |
|
|
| (55,685 | ) |
|
| - |
|
|
| (51,760 | ) |
|
| (2,556 | ) |
|
| (1,369 | ) |
|
| - |
|
|
| (55,685 | ) |
Loss on extinguishment of debt |
|
| - |
|
|
| (1,323 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,323 | ) |
|
| - |
|
|
| (1,323 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,323 | ) |
Pension and other postretirement plans credit, net |
|
| - |
|
|
| 3,156 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,156 |
| ||||||||||||||||||||||||
Other (expenses) income |
|
| - |
|
|
| (1,331 | ) |
|
| - |
|
|
| 431 |
|
|
| - |
|
|
| (900 | ) |
|
| - |
|
|
| (1,331 | ) |
|
| - |
|
|
| 431 |
|
|
| - |
|
|
| (900 | ) |
Equity in income of subsidiaries |
|
| 39,434 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (39,434 | ) |
|
| - |
|
|
| 39,434 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (39,434 | ) |
|
| - |
|
Income before income taxes |
|
| 39,434 |
|
|
| 73,426 |
|
|
| 7,491 |
|
|
| (140 | ) |
|
| (39,434 | ) |
|
| 80,777 |
| ||||||||||||||||||||||||
Income tax (expense) benefit |
|
| - |
|
|
| (28,850 | ) |
|
| (2,917 | ) |
|
| (555 | ) |
|
| - |
|
|
| (32,322 | ) | ||||||||||||||||||||||||
Net income |
|
| 39,434 |
|
|
| 44,576 |
|
|
| 4,574 |
|
|
| (695 | ) |
|
| (39,434 | ) |
|
| 48,455 |
| ||||||||||||||||||||||||
Income (loss) before income taxes |
|
| 39,434 |
|
|
| 73,426 |
|
|
| 7,491 |
|
|
| (140 | ) |
|
| (39,434 | ) |
|
| 80,777 |
| ||||||||||||||||||||||||
Income tax (expense) |
|
| - |
|
|
| (28,850 | ) |
|
| (2,917 | ) |
|
| (555 | ) |
|
| - |
|
|
| (32,322 | ) | ||||||||||||||||||||||||
Net income (loss) |
|
| 39,434 |
|
|
| 44,576 |
|
|
| 4,574 |
|
|
| (695 | ) |
|
| (39,434 | ) |
|
| 48,455 |
| ||||||||||||||||||||||||
Net income attributable to noncontrolling interests |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (4,463 | ) |
|
| - |
|
|
| (4,463 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (4,463 | ) |
|
| - |
|
|
| (4,463 | ) |
Net income (loss) attributable to Nexstar |
| $ | 39,434 |
|
| $ | 44,576 |
|
| $ | 4,574 |
|
| $ | (5,158 | ) |
| $ | (39,434 | ) |
| $ | 43,992 |
|
| $ | 39,434 |
|
| $ | 44,576 |
|
| $ | 4,574 |
|
| $ | (5,158 | ) |
| $ | (39,434 | ) |
| $ | 43,992 |
|
3128
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended June 30, 2016
(in thousands)
|
|
|
|
| Nexstar |
|
|
|
|
|
| Non- |
|
|
|
|
|
| Consolidated |
| ||||
|
| Nexstar |
|
| Broadcasting |
|
| Mission |
|
| Guarantors |
|
| Eliminations |
|
| Company |
| ||||||
Net broadcast revenue (including trade and barter) |
| $ | - |
|
| $ | 221,860 |
|
| $ | 15,085 |
|
| $ | 25,049 |
|
| $ | - |
|
| $ | 261,994 |
|
Revenue between consolidated entities |
|
| - |
|
|
| 8,567 |
|
|
| 9,659 |
|
|
| 2,829 |
|
|
| (21,055 | ) |
|
| - |
|
Net revenue |
|
| - |
|
|
| 230,427 |
|
|
| 24,744 |
|
|
| 27,878 |
|
|
| (21,055 | ) |
|
| 261,994 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses, excluding depreciation and amortization |
|
| - |
|
|
| 69,445 |
|
|
| 7,400 |
|
|
| 16,153 |
|
|
| (63 | ) |
|
| 92,935 |
|
Selling, general, and administrative expenses, excluding depreciation and amortization |
|
| - |
|
|
| 60,513 |
|
|
| 861 |
|
|
| 5,585 |
|
|
| (1,187 | ) |
|
| 65,772 |
|
Local service agreement fees between consolidated entities |
|
| - |
|
|
| 11,238 |
|
|
| 4,500 |
|
|
| 4,067 |
|
|
| (19,805 | ) |
|
| - |
|
Amortization of broadcast rights |
|
| - |
|
|
| 13,005 |
|
|
| 1,389 |
|
|
| 828 |
|
|
| - |
|
|
| 15,222 |
|
Amortization of intangible assets |
|
| - |
|
|
| 6,549 |
|
|
| 637 |
|
|
| 4,133 |
|
|
| - |
|
|
| 11,319 |
|
Depreciation |
|
| - |
|
|
| 11,236 |
|
|
| 600 |
|
|
| 903 |
|
|
| - |
|
|
| 12,739 |
|
Total operating expenses |
|
| - |
|
|
| 171,986 |
|
|
| 15,387 |
|
|
| 31,669 |
|
|
| (21,055 | ) |
|
| 197,987 |
|
Income (loss) from operations |
|
| - |
|
|
| 58,441 |
|
|
| 9,357 |
|
|
| (3,791 | ) |
|
| - |
|
|
| 64,007 |
|
Interest expense, net |
|
| - |
|
|
| (17,871 | ) |
|
| (2,309 | ) |
|
| (397 | ) |
|
| - |
|
|
| (20,577 | ) |
Other expenses |
|
| - |
|
|
| (147 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (147 | ) |
Equity in income of subsidiaries |
|
| 20,258 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (20,258 | ) |
|
| - |
|
Income (loss) before income taxes |
|
| 20,258 |
|
|
| 40,423 |
|
|
| 7,048 |
|
|
| (4,188 | ) |
|
| (20,258 | ) |
|
| 43,283 |
|
Income tax (expense) benefit |
|
| - |
|
|
| (16,188 | ) |
|
| (2,775 | ) |
|
| 479 |
|
|
| - |
|
|
| (18,484 | ) |
Net income (loss) |
|
| 20,258 |
|
|
| 24,235 |
|
|
| 4,273 |
|
|
| (3,709 | ) |
|
| (20,258 | ) |
|
| 24,799 |
|
Net income attributable to noncontrolling interests |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (270 | ) |
|
| - |
|
|
| (270 | ) |
Net income (loss) attributable to Nexstar |
| $ | 20,258 |
|
| $ | 24,235 |
|
| $ | 4,273 |
|
| $ | (3,979 | ) |
| $ | (20,258 | ) |
| $ | 24,529 |
|
32
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Six Months Ended June 30, 20172018
(in thousands)
|
|
|
|
| Nexstar |
|
|
|
|
|
| Non- |
|
|
|
|
|
| Consolidated |
|
|
|
|
|
| Nexstar |
|
|
|
|
|
| Non- |
|
|
|
|
|
| Consolidated |
| |||||||
| Nexstar |
|
| Broadcasting |
|
| Mission |
|
| Guarantors |
|
| Eliminations |
|
| Company |
|
| Nexstar |
|
| Broadcasting |
|
| Mission |
|
| Guarantors |
|
| Eliminations |
|
| Company |
| |||||||||||||
Net broadcast revenue (including trade and barter) |
| $ | - |
|
| $ | 1,018,412 |
|
| $ | 35,463 |
|
| $ | 112,557 |
|
| $ | - |
|
| $ | 1,166,432 |
|
| $ | - |
|
| $ | 1,143,737 |
|
| $ | 33,763 |
|
| $ | 98,159 |
|
| $ | - |
|
| $ | 1,275,659 |
|
Revenue between consolidated entities |
|
| - |
|
|
| 32,726 |
|
|
| 18,222 |
|
|
| 4,615 |
|
|
| (55,563 | ) |
|
| - |
|
|
| 13,205 |
|
|
| 42,703 |
|
|
| 17,486 |
|
|
| 35,144 |
|
|
| (108,538 | ) |
|
| - |
|
Net revenue |
|
| - |
|
|
| 1,051,138 |
|
|
| 53,685 |
|
|
| 117,172 |
|
|
| (55,563 | ) |
|
| 1,166,432 |
|
|
| 13,205 |
|
|
| 1,186,440 |
|
|
| 51,249 |
|
|
| 133,303 |
|
|
| (108,538 | ) |
|
| 1,275,659 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Operating expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Direct operating expenses, excluding depreciation and amortization |
|
| - |
|
|
| 378,796 |
|
|
| 17,912 |
|
|
| 75,696 |
|
|
| (1,065 | ) |
|
| 471,339 |
|
|
| - |
|
|
| 439,919 |
|
|
| 20,160 |
|
|
| 95,987 |
|
|
| (2,664 | ) |
|
| 553,402 |
|
Selling, general, and administrative expenses, excluding depreciation and amortization |
|
| - |
|
|
| 303,322 |
|
|
| 1,850 |
|
|
| 23,001 |
|
|
| (9,586 | ) |
|
| 318,587 |
|
|
| 15,181 |
|
|
| 269,272 |
|
|
| 2,328 |
|
|
| 22,251 |
|
|
| (28,224 | ) |
|
| 280,808 |
|
Local service agreement fees between consolidated entities |
|
| - |
|
|
| 25,783 |
|
|
| 9,000 |
|
|
| 10,129 |
|
|
| (44,912 | ) |
|
| - |
|
|
| - |
|
|
| 34,947 |
|
|
| 26,500 |
|
|
| 16,203 |
|
|
| (77,650 | ) |
|
| - |
|
Amortization of broadcast rights |
|
| - |
|
|
| 44,184 |
|
|
| 2,812 |
|
|
| 3,157 |
|
|
| - |
|
|
| 50,153 |
|
|
| - |
|
|
| 29,792 |
|
|
| 821 |
|
|
| 1,400 |
|
|
| - |
|
|
| 32,013 |
|
Amortization of intangible assets |
|
| - |
|
|
| 74,512 |
|
|
| 1,274 |
|
|
| 10,929 |
|
|
| - |
|
|
| 86,715 |
|
|
| - |
|
|
| 59,519 |
|
|
| 1,084 |
|
|
| 12,880 |
|
|
| - |
|
|
| 73,483 |
|
Depreciation |
|
| - |
|
|
| 44,190 |
|
|
| 1,175 |
|
|
| 3,153 |
|
|
| - |
|
|
| 48,518 |
|
|
| - |
|
|
| 46,346 |
|
|
| 1,021 |
|
|
| 3,537 |
|
|
| - |
|
|
| 50,904 |
|
Gain on disposal of stations, net |
|
| - |
|
|
| (57,716 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (57,716 | ) | ||||||||||||||||||||||||
Reimbursement from the FCC related to station repack |
|
| - |
|
|
| (6,874 | ) |
|
| (187 | ) |
|
| - |
|
|
| - |
|
|
| (7,061 | ) | ||||||||||||||||||||||||
Total operating expenses |
|
| - |
|
|
| 813,071 |
|
|
| 34,023 |
|
|
| 126,065 |
|
|
| (55,563 | ) |
|
| 917,596 |
|
|
| 15,181 |
|
|
| 872,921 |
|
|
| 51,727 |
|
|
| 152,258 |
|
|
| (108,538 | ) |
|
| 983,549 |
|
Income (loss) from operations |
|
| - |
|
|
| 238,067 |
|
|
| 19,662 |
|
|
| (8,893 | ) |
|
| - |
|
|
| 248,836 |
| ||||||||||||||||||||||||
(Loss) income from operations |
|
| (1,976 | ) |
|
| 313,519 |
|
|
| (478 | ) |
|
| (18,955 | ) |
|
| - |
|
|
| 292,110 |
| ||||||||||||||||||||||||
Interest expense, net |
|
| - |
|
|
| (127,340 | ) |
|
| (5,206 | ) |
|
| (2,376 | ) |
|
| - |
|
|
| (134,922 | ) |
|
| - |
|
|
| (103,573 | ) |
|
| (5,350 | ) |
|
| (1,947 | ) |
|
| - |
|
|
| (110,870 | ) |
Loss on extinguishment of debt |
|
| - |
|
|
| (30,768 | ) |
|
| (2,133 | ) |
|
| (226 | ) |
|
| - |
|
|
| (33,127 | ) |
|
| - |
|
|
| (1,486 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,486 | ) |
Pension and other postretirement plans credit, net |
|
| - |
|
|
| 5,900 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5,900 |
| ||||||||||||||||||||||||
Other expenses |
|
| - |
|
|
| (1,007 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,007 | ) |
|
| - |
|
|
| (941 | ) |
|
| - |
|
|
| 2 |
|
|
| - |
|
|
| (939 | ) |
Equity in income of subsidiaries |
|
| 42,558 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (42,558 | ) |
|
| - |
|
|
| 146,203 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (146,203 | ) |
|
| - |
|
Income (loss) before income taxes |
|
| 42,558 |
|
|
| 78,952 |
|
|
| 12,323 |
|
|
| (11,495 | ) |
|
| (42,558 | ) |
|
| 79,780 |
|
|
| 144,227 |
|
|
| 213,419 |
|
|
| (5,828 | ) |
|
| (20,900 | ) |
|
| (146,203 | ) |
|
| 184,715 |
|
Income tax (expense) benefit |
|
| - |
|
|
| (24,989 | ) |
|
| (4,798 | ) |
|
| 3,406 |
|
|
| - |
|
|
| (26,381 | ) |
|
| (423 | ) |
|
| (54,905 | ) |
|
| 1,406 |
|
|
| 3,154 |
|
|
| - |
|
|
| (50,768 | ) |
Net income (loss) |
|
| 42,558 |
|
|
| 53,963 |
|
|
| 7,525 |
|
|
| (8,089 | ) |
|
| (42,558 | ) |
|
| 53,399 |
|
|
| 143,804 |
|
|
| 158,514 |
|
|
| (4,422 | ) |
|
| (17,746 | ) |
|
| (146,203 | ) |
|
| 133,947 |
|
Net income attributable to noncontrolling interests |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,358 | ) |
|
| - |
|
|
| (3,358 | ) | ||||||||||||||||||||||||
Net loss attributable to noncontrolling interests |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,907 |
|
|
| - |
|
|
| 1,907 |
| ||||||||||||||||||||||||
Net income (loss) attributable to Nexstar |
| $ | 42,558 |
|
| $ | 53,963 |
|
| $ | 7,525 |
|
| $ | (11,447 | ) |
| $ | (42,558 | ) |
| $ | 50,041 |
|
| $ | 143,804 |
|
| $ | 158,514 |
|
| $ | (4,422 | ) |
| $ | (15,839 | ) |
| $ | (146,203 | ) |
| $ | 135,854 |
|
3329
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Six Months Ended June 30, 2016
(in thousands)
|
|
|
|
| Nexstar |
|
|
|
|
|
| Non- |
|
|
|
|
|
| Consolidated |
| ||||
|
| Nexstar |
|
| Broadcasting |
|
| Mission |
|
| Guarantors |
|
| Eliminations |
|
| Company |
| ||||||
Net broadcast revenue (including trade and barter) |
| $ | - |
|
| $ | 437,436 |
|
| $ | 30,245 |
|
| $ | 49,971 |
|
| $ | - |
|
| $ | 517,652 |
|
Revenue between consolidated entities |
|
| - |
|
|
| 17,172 |
|
|
| 18,894 |
|
|
| 5,494 |
|
|
| (41,560 | ) |
|
| - |
|
Net revenue |
|
| - |
|
|
| 454,608 |
|
|
| 49,139 |
|
|
| 55,465 |
|
|
| (41,560 | ) |
|
| 517,652 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses, excluding depreciation and amortization |
|
| - |
|
|
| 137,981 |
|
|
| 14,906 |
|
|
| 30,244 |
|
|
| (73 | ) |
|
| 183,058 |
|
Selling, general, and administrative expenses, excluding depreciation and amortization |
|
| - |
|
|
| 124,091 |
|
|
| 1,783 |
|
|
| 10,368 |
|
|
| (2,305 | ) |
|
| 133,937 |
|
Local service agreement fees between consolidated entities |
|
| - |
|
|
| 22,010 |
|
|
| 9,000 |
|
|
| 8,172 |
|
|
| (39,182 | ) |
|
| - |
|
Amortization of broadcast rights |
|
| - |
|
|
| 25,398 |
|
|
| 2,781 |
|
|
| 1,847 |
|
|
| - |
|
|
| 30,026 |
|
Amortization of intangible assets |
|
| - |
|
|
| 13,857 |
|
|
| 1,272 |
|
|
| 8,269 |
|
|
| - |
|
|
| 23,398 |
|
Depreciation |
|
| - |
|
|
| 22,420 |
|
|
| 1,207 |
|
|
| 1,670 |
|
|
| - |
|
|
| 25,297 |
|
Total operating expenses |
|
| - |
|
|
| 345,757 |
|
|
| 30,949 |
|
|
| 60,570 |
|
|
| (41,560 | ) |
|
| 395,716 |
|
Income (loss) from operations |
|
| - |
|
|
| 108,851 |
|
|
| 18,190 |
|
|
| (5,105 | ) |
|
| - |
|
|
| 121,936 |
|
Interest expense, net |
|
| - |
|
|
| (35,811 | ) |
|
| (4,622 | ) |
|
| (798 | ) |
|
| - |
|
|
| (41,231 | ) |
Other expenses |
|
| - |
|
|
| (283 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (283 | ) |
Equity in income of subsidiaries |
|
| 37,973 |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
| (37,973 | ) |
|
| - |
|
Income (loss) before income taxes |
|
| 37,973 |
|
|
| 72,757 |
|
|
| 13,568 |
|
|
| (5,903 | ) |
|
| (37,973 | ) |
|
| 80,422 |
|
Income tax (expense) benefit |
|
| - |
|
|
| (29,239 | ) |
|
| (5,283 | ) |
|
| 1,173 |
|
|
| - |
|
|
| (33,349 | ) |
Net income (loss) |
|
| 37,973 |
|
|
| 43,518 |
|
|
| 8,285 |
|
|
| (4,730 | ) |
|
| (37,973 | ) |
|
| 47,073 |
|
Net income attributable to noncontrolling interests |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (817 | ) |
|
| - |
|
|
| (817 | ) |
Net income (loss) attributable to Nexstar |
| $ | 37,973 |
|
| $ | 43,518 |
|
| $ | 8,285 |
|
| $ | (5,547 | ) |
| $ | (37,973 | ) |
| $ | 46,256 |
|
34
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2017
(in thousands)
|
|
|
|
|
| Nexstar |
|
|
|
|
|
| Non- |
|
|
|
|
|
| Consolidated |
| |||
| Nexstar |
|
| Broadcasting |
|
| Mission |
|
| Guarantors |
|
| Eliminations |
|
| Company |
| |||||||
Cash flows from operating activities |
| $ | - |
|
| $ | 122,635 |
|
| $ | (756 | ) |
| $ | 16,003 |
|
| $ | - |
|
| $ | 137,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| - |
|
|
| (23,525 | ) |
|
| (182 | ) |
|
| (3,984 | ) |
|
| - |
|
|
| (27,691 | ) |
Deposits and payments for acquisitions |
|
| - |
|
|
| (2,970,394 | ) |
|
| (800 | ) |
|
| - |
|
|
| - |
|
|
| (2,971,194 | ) |
Proceeds from sale of stations |
|
| - |
|
|
| 481,944 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 481,944 |
|
Other investing activities |
|
| - |
|
|
| 19,638 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 19,638 |
|
Net cash used in investing activities |
|
| - |
|
|
| (2,492,337 | ) |
|
| (982 | ) |
|
| (3,984 | ) |
|
| - |
|
|
| (2,497,303 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt |
|
| - |
|
|
| 3,697,106 |
|
|
| 230,840 |
|
|
| 53,915 |
|
|
| - |
|
|
| 3,981,861 |
|
Repayments of long-term debt |
|
| - |
|
|
| (1,111,606 | ) |
|
| (225,892 | ) |
|
| (53,300 | ) |
|
| - |
|
|
| (1,390,798 | ) |
Premium paid on debt extinguishment |
|
| - |
|
|
| (18,050 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (18,050 | ) |
Payments for debt financing costs |
|
| - |
|
|
| (47,578 | ) |
|
| (3,779 | ) |
|
| - |
|
|
| - |
|
|
| (51,357 | ) |
Purchase of noncontrolling interests |
|
| - |
|
|
| (66,901 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (66,901 | ) |
Common stock dividends paid |
|
| (28,268 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (28,268 | ) |
Purchse of treasury stock |
|
| (58,294 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (58,294 | ) |
Inter-company payments |
|
| 87,291 |
|
|
| (87,291 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Other financing activities |
|
| (729 | ) |
|
| (4,013 | ) |
|
| - |
|
|
| (5,808 | ) |
|
| - |
|
|
| (10,550 | ) |
Net cash provided by (used in) financing activities |
|
| - |
|
|
| 2,361,667 |
|
|
| 1,169 |
|
|
| (5,193 | ) |
|
| - |
|
|
| 2,357,643 |
|
Net (decrease) increase in cash and cash equivalents |
|
| - |
|
|
| (8,035 | ) |
|
| (569 | ) |
|
| 6,826 |
|
|
| - |
|
|
| (1,778 | ) |
Cash and cash equivalents at beginning of period |
|
| - |
|
|
| 75,830 |
|
|
| 6,478 |
|
|
| 5,372 |
|
|
| - |
|
|
| 87,680 |
|
Cash and cash equivalents at end of period |
| $ | - |
|
| $ | 67,795 |
|
| $ | 5,909 |
|
| $ | 12,198 |
|
| $ | - |
|
| $ | 85,902 |
|
35
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2016
(in thousands)
|
|
|
|
| Nexstar |
|
|
|
|
|
| Non- |
|
|
|
|
|
| Consolidated |
| ||||
|
| Nexstar |
|
| Broadcasting |
|
| Mission |
|
| Guarantors |
|
| Eliminations |
|
| Company |
| ||||||
Cash flows from operating activities |
| $ | - |
|
| $ | 109,517 |
|
| $ | (900 | ) |
| $ | 768 |
|
| $ | - |
|
| $ | 109,385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| - |
|
|
| (13,406 | ) |
|
| (110 | ) |
|
| (1,519 | ) |
|
| - |
|
|
| (15,035 | ) |
Deposits and payments for acquisitions |
|
| - |
|
|
| (103,969 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (103,969 | ) |
Other investing activities |
|
| - |
|
|
| 335 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 335 |
|
Net cash used in investing activities |
|
| - |
|
|
| (117,040 | ) |
|
| (110 | ) |
|
| (1,519 | ) |
|
| - |
|
|
| (118,669 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt |
|
| - |
|
|
| 58,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 58,000 |
|
Repayments of long-term debt |
|
| - |
|
|
| (44,809 | ) |
|
| (1,167 | ) |
|
| (2,100 | ) |
|
| - |
|
|
| (48,076 | ) |
Common stock dividends paid |
|
| (14,716 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (14,716 | ) |
Inter-company payments |
|
| 14,503 |
|
|
| (14,503 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Other financing activities |
|
| 213 |
|
|
| (2,371 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (2,158 | ) |
Net cash provided by (used in) financing activities |
|
| - |
|
|
| (3,683 | ) |
|
| (1,167 | ) |
|
| (2,100 | ) |
|
| - |
|
|
| (6,950 | ) |
Net decrease in cash and cash equivalents |
|
| - |
|
|
| (11,206 | ) |
|
| (2,177 | ) |
|
| (2,851 | ) |
|
| - |
|
|
| (16,234 | ) |
Cash and cash equivalents at beginning of period |
|
| - |
|
|
| 27,492 |
|
|
| 4,367 |
|
|
| 11,557 |
|
|
| - |
|
|
| 43,416 |
|
Cash and cash equivalents at end of period |
| $ | - |
|
| $ | 16,286 |
|
| $ | 2,190 |
|
| $ | 8,706 |
|
| $ | - |
|
| $ | 27,182 |
|
|
|
|
|
|
| Nexstar |
|
|
|
|
|
| Non- |
|
|
|
|
|
| Consolidated |
| |||
|
| Nexstar |
|
| Broadcasting |
|
| Mission |
|
| Guarantors |
|
| Eliminations |
|
| Company |
| ||||||
Net broadcast revenue (including trade and barter) |
| $ | - |
|
| $ | 1,018,412 |
|
| $ | 35,463 |
|
| $ | 112,557 |
|
| $ | - |
|
| $ | 1,166,432 |
|
Revenue between consolidated entities |
|
| - |
|
|
| 32,726 |
|
|
| 18,222 |
|
|
| 4,615 |
|
|
| (55,563 | ) |
|
| - |
|
Net revenue |
|
| - |
|
|
| 1,051,138 |
|
|
| 53,685 |
|
|
| 117,172 |
|
|
| (55,563 | ) |
|
| 1,166,432 |
|
Operating expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses, excluding depreciation and amortization |
|
| - |
|
|
| 378,796 |
|
|
| 17,912 |
|
|
| 75,696 |
|
|
| (1,065 | ) |
|
| 471,339 |
|
Selling, general, and administrative expenses, excluding depreciation and amortization |
|
| - |
|
|
| 309,109 |
|
|
| 1,850 |
|
|
| 23,001 |
|
|
| (9,586 | ) |
|
| 324,374 |
|
Local service agreement fees between consolidated entities |
|
| - |
|
|
| 25,783 |
|
|
| 9,000 |
|
|
| 10,129 |
|
|
| (44,912 | ) |
|
| - |
|
Amortization of broadcast rights |
|
| - |
|
|
| 44,184 |
|
|
| 2,812 |
|
|
| 3,157 |
|
|
| - |
|
|
| 50,153 |
|
Amortization of intangible assets |
|
| - |
|
|
| 74,512 |
|
|
| 1,274 |
|
|
| 10,929 |
|
|
| - |
|
|
| 86,715 |
|
Depreciation |
|
| - |
|
|
| 44,190 |
|
|
| 1,175 |
|
|
| 3,153 |
|
|
| - |
|
|
| 48,518 |
|
Gain on disposal of stations, net |
|
| - |
|
|
| (57,716 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (57,716 | ) |
Total operating expenses |
|
| - |
|
|
| 818,858 |
|
|
| 34,023 |
|
|
| 126,065 |
|
|
| (55,563 | ) |
|
| 923,383 |
|
(Loss) income from operations |
|
| - |
|
|
| 232,280 |
|
|
| 19,662 |
|
|
| (8,893 | ) |
|
| - |
|
|
| 243,049 |
|
Interest expense, net |
|
| - |
|
|
| (127,340 | ) |
|
| (5,206 | ) |
|
| (2,376 | ) |
|
| - |
|
|
| (134,922 | ) |
Loss on extinguishment of debt |
|
| - |
|
|
| (30,768 | ) |
|
| (2,133 | ) |
|
| (226 | ) |
|
| - |
|
|
| (33,127 | ) |
Pension and other postretirement plans credit, net |
|
| - |
|
|
| 5,787 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5,787 |
|
Other expenses |
|
| - |
|
|
| (1,007 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,007 | ) |
Equity in income of subsidiaries |
|
| 42,558 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (42,558 | ) |
|
| - |
|
Income (loss) before income taxes |
|
| 42,558 |
|
|
| 78,952 |
|
|
| 12,323 |
|
|
| (11,495 | ) |
|
| (42,558 | ) |
|
| 79,780 |
|
Income tax (expense) benefit |
|
| - |
|
|
| (24,989 | ) |
|
| (4,798 | ) |
|
| 3,406 |
|
|
| - |
|
|
| (26,381 | ) |
Net income (loss) |
|
| 42,558 |
|
|
| 53,963 |
|
|
| 7,525 |
|
|
| (8,089 | ) |
|
| (42,558 | ) |
|
| 53,399 |
|
Net income attributable to noncontrolling interests |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,358 | ) |
|
| - |
|
|
| (3,358 | ) |
Net income (loss) attributable to Nexstar |
| $ | 42,558 |
|
| $ | 53,963 |
|
| $ | 7,525 |
|
| $ | (11,447 | ) |
| $ | (42,558 | ) |
| $ | 50,041 |
|
36
30
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2018
(in thousands)
|
|
|
|
|
| Nexstar |
|
|
|
|
|
| Non- |
|
|
|
|
|
| Consolidated |
| |||
|
| Nexstar |
|
| Broadcasting |
|
| Mission |
|
| Guarantors |
|
| Eliminations |
|
| Company |
| ||||||
Cash flows from operating activities |
| $ | - |
|
| $ | 320,610 |
|
| $ | (1,298 | ) |
| $ | 4,823 |
|
| $ | - |
|
| $ | 324,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| - |
|
|
| (32,198 | ) |
|
| (512 | ) |
|
| (3,680 | ) |
|
| - |
|
|
| (36,390 | ) |
Deposits and payments for acquisitions |
|
| - |
|
|
| (85,867 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (85,867 | ) |
Other investing activities |
|
| - |
|
|
| 4,256 |
|
|
| - |
|
|
| 5 |
|
|
| - |
|
|
| 4,261 |
|
Net cash used in investing activities |
|
| - |
|
|
| (113,809 | ) |
|
| (512 | ) |
|
| (3,675 | ) |
|
| - |
|
|
| (117,996 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt |
|
| - |
|
|
| 44,000 |
|
|
| - |
|
|
| 51,759 |
|
|
| - |
|
|
| 95,759 |
|
Repayments of long-term debt |
|
| - |
|
|
| (122,120 | ) |
|
| (1,157 | ) |
|
| (53,639 | ) |
|
| - |
|
|
| (176,916 | ) |
Common stock dividends paid |
|
| (34,443 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (34,443 | ) |
Purchase of treasury stock |
|
| (50,524 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (50,524 | ) |
Inter-company payments |
|
| 87,624 |
|
|
| (87,624 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Other financing activities |
|
| (2,657 | ) |
|
| (5,555 | ) |
|
| - |
|
|
| 226 |
|
|
| - |
|
|
| (7,986 | ) |
Net cash used in financing activities |
|
| - |
|
|
| (171,299 | ) |
|
| (1,157 | ) |
|
| (1,654 | ) |
|
| - |
|
|
| (174,110 | ) |
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
| - |
|
|
| 35,502 |
|
|
| (2,967 | ) |
|
| (506 | ) |
|
| - |
|
|
| 32,029 |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
| - |
|
|
| 90,860 |
|
|
| 9,524 |
|
|
| 15,268 |
|
|
| - |
|
|
| 115,652 |
|
Cash, cash equivalents and restricted cash at end of period |
| $ | - |
|
| $ | 126,362 |
|
| $ | 6,557 |
|
| $ | 14,762 |
|
| $ | - |
|
| $ | 147,681 |
|
31
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2017
(in thousands)
|
|
|
|
|
| Nexstar |
|
|
|
|
|
| Non- |
|
|
|
|
|
| Consolidated |
| |||
|
| Nexstar |
|
| Broadcasting |
|
| Mission |
|
| Guarantors |
|
| Eliminations |
|
| Company |
| ||||||
Cash flows from operating activities |
| $ | - |
|
| $ | 99,646 |
|
| $ | (756 | ) |
| $ | 11,959 |
|
| $ | - |
|
| $ | 110,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| - |
|
|
| (23,525 | ) |
|
| (182 | ) |
|
| (3,984 | ) |
|
| - |
|
|
| (27,691 | ) |
Deposits and payments for acquisitions |
|
| - |
|
|
| (2,970,394 | ) |
|
| (800 | ) |
|
| - |
|
|
| - |
|
|
| (2,971,194 | ) |
Proceeds from sale of a station |
|
| - |
|
|
| 481,944 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 481,944 |
|
Other investing activities |
|
| - |
|
|
| 14,828 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 14,828 |
|
Net cash used in investing activities |
|
| - |
|
|
| (2,497,147 | ) |
|
| (982 | ) |
|
| (3,984 | ) |
|
| - |
|
|
| (2,502,113 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt |
|
| - |
|
|
| 2,797,106 |
|
|
| 230,840 |
|
|
| 53,915 |
|
|
| - |
|
|
| 3,081,861 |
|
Repayments of long-term debt |
|
| - |
|
|
| (1,111,606 | ) |
|
| (225,892 | ) |
|
| (53,300 | ) |
|
| - |
|
|
| (1,390,798 | ) |
Premium paid on debt extinguishment |
|
| - |
|
|
| (18,050 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (18,050 | ) |
Purchase of noncontrolling interests |
|
| - |
|
|
| (66,901 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (66,901 | ) |
Common stock dividends paid |
|
| (28,268 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
| (28,268 | ) |
Payments for debt financing costs |
|
| - |
|
|
| (47,578 | ) |
|
| (3,779 | ) |
|
| - |
|
|
| - |
|
|
| (51,357 | ) |
Purchase of treasury stock |
|
| (58,294 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (58,294 | ) |
Inter-company payments |
|
| 87,291 |
|
|
| (87,291 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Other financing activities |
|
| (729 | ) |
|
| (4,013 | ) |
|
| - |
|
|
| (1,764 | ) |
|
| - |
|
|
| (6,506 | ) |
Net cash provided by (used in) financing activities |
|
| - |
|
|
| 1,461,667 |
|
|
| 1,169 |
|
|
| (1,149 | ) |
|
| - |
|
|
| 1,461,687 |
|
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
| - |
|
|
| (935,834 | ) |
|
| (569 | ) |
|
| 6,826 |
|
|
| - |
|
|
| (929,577 | ) |
Cash, cash equivalents and restricted cash at beginning of period |
|
| - |
|
|
| 1,003,629 |
|
|
| 6,478 |
|
|
| 5,372 |
|
|
| - |
|
|
| 1,015,479 |
|
Cash, cash equivalents and restricted cash at end of period |
| $ | - |
|
| $ | 67,795 |
|
| $ | 5,909 |
|
| $ | 12,198 |
|
| $ | - |
|
| $ | 85,902 |
|
32
15. Subsequent Events
On July 19, 2017, the Company amended its senior secured credit facilities. The main provisions2, 2018, Nexstar prepaid $50.0 million of the amendments include: (i) an additional $456.0 million in Term Loan A borrowings, the proceeds of which were used to partially repay the outstanding principal balance of Term Loan B, (ii) a reduction in the applicable margin portion of interest ratesunder its term loans, funded by 50 basis points, (iii) an extension of the maturity date of Term Loan A with outstanding principal balance of $749.7 million to five years from July 19, 2017 and (iv) an extension of the maturity date of revolving credit facilities of $172.0 million to five years from July 19, 2017.
On July 21, 2017, the Company received the $479 million of gross proceeds from the disposition of Media General’s spectrum in the recently concluded FCC auction. Pursuant to the terms of the CVR agreement and the Merger agreement, these proceeds less estimated transaction expenses, repacking expenses and taxes, or an estimated fair value of $275.4 million, will be distributed to the holders of the CVR. The first payments to the CVR holders, which represents majority of the estimated fair value, will be made at the end of August 2017. See Note 3 for additional information.
cash on hand.
On July 27, 2017,15, 2018, Nexstar entered into a definitive agreement to acquire the assets of WHDF from Huntsville TV. WHDF is a full power television station in the Huntsville, Alabama market and an affiliate of CW. On August 1, 2018, Nexstar entered into a definitive agreement to acquire the assets of KRBK from KRBK LLC. KRBK is a full power television station in the Springfield, Missouri market and an affiliate of FOX. The aggregate purchase price is $19.45 million in cash, subject to adjustments for working capital.
On July 15, 2018 and August 1, 2018, Nexstar completed the first closing of these acquisitions and acquired the stations’ assets excluding certain transmission equipment, FCC licenses and network affiliation agreements for $16.25 million, plus working capital adjustments, funded by cash on hand. The acquisition is subject to FCC approval and other customary conditions. The remaining purchase price of $3.2 million is expected to be funded through cash generated from operations prior to the second closing which is projected to occur in the fourth quarter of 2018. Nexstar also began providing programming and sales services to these stations pursuant to TBAs, effective July 15, 2018 for WHDF and August 1, 2018 for KRBK, which will terminate upon completion of the acquisitions. If any of these transactions cannot be completed for reasons beyond the control of Nexstar and the sellers, the related TBA will terminate upon termination of the purchase agreement.
On July 26, 2018, Nexstar’s Board of Directors declared a quarterly cash dividend of $0.30$0.375 per share of its Class A common stock. The dividend is payable on August 25, 201724, 2018 to stockholders of record on August 11, 2017.10, 2018.
On July 27, 2018, Nexstar reallocated $5.6 million of its unused revolving loan credit facility to Marshall. On the same day, Marshall drew the full $5.6 million revolving loan facility reallocated from Nexstar and used the funds to partially repay its outstanding term loans.
On August 7, 2017,1, 2018, Nexstar prepaid $30.0$35.0 million of the outstanding principal balance under its Term Loan B,term loans, funded by cash on hand.
37
33
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, 2016.2017.
As used in this Quarterly Report on Form 10-Q and unless the context indicates otherwise, “Nexstar” refers to Nexstar Media Group, Inc. and its consolidated subsidiaries; “Nexstar Broadcasting” refers to Nexstar Broadcasting, Inc., our wholly-owned direct subsidiary; the “Company” refers to Nexstar and the variable interest entities (“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 Mission, White Knight, Marshall, Shield, Vaughan, Tamer and Super Towersthe consolidated VIEs in accordance with U.S. GAAP, we consolidate their financial position, results of operations and cash flows as if they were wholly-owned entities. We believe this presentation is meaningful for understanding our financial performance. Refer to Note 2 to our Condensed Consolidated Financial Statements for a discussion of our determinations of VIE consolidation under the related authoritative guidance. Therefore, the following discussion of our financial position and results of operations includes the consolidated VIEs’ financial position and results of operations.
Executive Summary
20172018 Highlights
| • |
|
| • | For each of the first two quarters |
| • |
|
Acquisitions and Dispositions
|
| ||
|
|
|
|
|
|
|
|
On January 17, 2017, we completed our previously announced Merger with Media General, which owned, operated, or serviced 78 full power television stations in 48 markets. Total consideration at closing included $1.376 billion in cash consideration to stockholders of Media General, $1.031 billion issuance of Nexstar Common Stock, $1.658 billion repayment of certain then-existing debt of Media General, including premium and accrued interest, $10.7 million in replacement stock options and the CVR of $275.4 million. Concurrent with the closing of the Merger, we sold the assets of 12 full power television stations in 12 markets, five of which were previously owned by us and seven of which were previously owned by Media General. We sold the Media General stations for a total consideration of $427.6 million. We sold our stations for $114.4 million. These divestitures resulted in a net gain on disposal of $57.7 million.
On July 21, 2017, the Company received the $479 million of gross proceeds from the disposition of Media General’s spectrum in the recently concluded FCC auction. Pursuant to the terms of the CVR agreement and the Merger agreement, these proceeds less estimated transaction expenses, repacking expenses and taxes, or an estimated fair value of $275.4 million, will be distributed to the holders of the CVR. The first payments to the CVR holders, which represents majority of the estimated fair value, will be made at the end of August 2017. See Note 3 for additional information.
38
The cash portion of the Merger, the repayment of Media General debt, including premium and accrued interest, and the related fees and expenses were funded through a combination of cash on hand, proceeds from the divestitures and new borrowings (see debt transactions below).
Debt transactions
| • |
|
| • |
|
See also Note 3 to our Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for additional information on the above acquisition.
34
Debt Transactions
• | On January 16, 2018, we borrowed $44.0 million |
| • |
|
| • | Through June |
| • |
|
| • | On |
• | On July 27, 2018, Nexstar reallocated $5.6 million of its unused revolving loan credit facility to Marshall. On the same day, Marshall drew the full $5.6 million revolving loan facility reallocated from Nexstar and used the funds to partially repay its outstanding term loans. |
• | On August 1, 2018, Nexstar prepaid $35.0 million of the outstanding principal under its term loans, funded by cash on hand. |
See also Notes 3 andNote 7 to our Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for additional information with respect toon the above debt transactions.
39
As of June 30, 2017,2018, we owned, operated, programmed or provided sales and other services to 170169 full power television stations, including those owned by VIEs, in 100 markets in the states of Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland,Massachusetts, Michigan, Mississippi, Missouri, Montana, Nevada, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia and Wisconsin. The stations are affiliates of ABC, NBC, FOX, CBS, The CW, MyNetworkTVMNTV and other broadcast television networks. Through various local service agreements, we provided sales, programming and other services to 36 full power television stations owned and/or operated by independent third parties including stations owned by Mission, Marshall, White Knight, Tamer, Vaughan, Shield and Super Towers.(VIEs). See Note 2—Variable Interest Entities to our Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for a discussion of the local service agreements we have with these independent third parties.
We also guarantee all obligations incurred under Mission’s, Marshall’s and Shield’s senior secured credit facilities. Similarly, Mission is a guarantorand Nexstar Digital are guarantors of our senior secured credit facility. Mission also guarantee our 6.125% Notes and our 5.625% Notes but does not guarantee our 5.875% Notes. Nexstar Digital does not guarantee any of our notes. Marshall and Shield doesdo not guarantee any debt within the group. In consideration of our guarantee of Mission’s senior secured credit facility, Mission has granted us purchase options to acquire the assets and assume the liabilities of each Mission station, subject to FCC consent. These option agreements (which expire on various dates between 20172018 and 2024) are freely exercisable or assignable by us without consent or approval by Mission or its shareholders.stockholders. We expect these option agreements to be renewed upon expiration.
We do not own Mission, Marshall, White Knight, Shield, Vaughan, Tamer and Super Towersthe consolidated VIEs or their television stations. However, we are deemed under U.S. GAAP to have controlling financial interests in these entities because of (1) the local service agreements Nexstar has with their stations, (2) our guarantees of the obligations incurred under Mission’s, Marshall’s and Shield’scertain VIEs’ senior secured credit facilities, (3) our power over significant activities affecting these entities’VIEs’ economic performance, including budgeting for advertising revenue, advertising sales and, for Mission, White Knight, Shield, Vaughan, Tamer and Super Towers,in some cases, hiring and firing of sales force personnel and (4) purchase options granted by Mission, White Knight, Tamer, Vaughan, Shield and Super Towerseach VIE, exclusive of Marshall, that permit Nexstar to acquire the assets and assume the liabilities of each these entities’of those VIEs’ stations, subject to FCC consent. In compliance with FCC regulations for all the parties, each of Mission, Marshall, White Knight, Shield, Vaughan, Tamer and Super TowersVIE maintains complete responsibility for and control over programming, finances and personnel for theirits stations.
4035
As a television broadcaster, the Company is highly regulated and its operations require that it retain or renew a variety of government approvals and comply with changing federal regulations. In 2016, the FCC reinstated a 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 Designated Market Area is deemed to have an attributable ownership interest in that station (this rule had been adopted in 2014 but was vacated by a federal court of appeals). Parties to existing JSAs that arewere deemed attributable interests and dodid not comply with the FCC’s local television ownership rule havewere given until September 30, 2025 to come into compliance. The Company expects ultimately to incur additional costs in complying with this new rule, although, given recent legislative and FCC actions extending the compliance deadline until September 30, 2025, the Company does not expect the rule change to impact its JSA revenue in the near term. The Company has filed a petition requestingIn November 2017, however, the FCC to reconsideradopted an order on reconsideration that eliminated the JSA attribution rule. That elimination became effective on February 7, 2018, although the FCC’s November 2017 order on reconsideration remains the subject of pending court appeals. If the Company is ultimately unable to obtain reversal of the JSA attribution decision or waivers from the FCC and is required to amend or terminate its existing agreements, however, the Company could have a reduction in revenue and increased costs if it is unable to successfully implement alternative arrangements that are as beneficial as the existing JSAs.
The FCC is in the process of repurposing a portion of the broadcast television spectrum for wireless broadband use. Under theIn an incentive auction statute and rules, which concluded in April 2017,certain television broadcasters accepted bids from the FCC to voluntarily relinquish all or part of their spectrum in exchange for consideration, and televisionconsideration. Television stations that are not relinquishing their spectrum will be “repacked” into the frequency band still remaining for television broadcast use. In July 2017, the Company received $479$478.6 million in gross proceeds from the FCC for eight stations that will share a channel with another station, two that will move to a VHF channel and one that will discontinue its operation.went off the air in November 2017. The one station that will discontinue its operationwent off the air is not expected to have a significant impact on our future financial results because it is located in a remote rural area of the country and the Company has other stations which serve the same area. Of the remaining ten stations, eight have ceased broadcasting on their current channels and implemented channel sharing agreements. The two stations moving to VHF channels must vacate their current channels by September 2019 and May 2020, respectively.
61 full power stations owned by Nexstar and 17 full power stations owned by VIEs have been assigned to new channels in the reduced post-auction television band and will be required to construct and license the necessary technical modifications to operate on their new assigned channels on a variable schedule ending in July 2020. Congress has allocated up to an industry-wide total of $1.75$2.75 billion to reimburse television broadcasters, MVPDs and MVPDsother parties for costs reasonably incurred due to the repack. The Company expects to incur costs between now and July 2020 in connection with the repack of $230.8 million, some or all of which will be reimbursable. If the FCC fails to fully reimburse the Company’s repacking costs, the Company could have increased costs related to the repacking.
In March 2014, the FCC amended its rule governing retransmission consent negotiations. The amended rule initially prohibited two non-commonly owned stations ranked in the top four in viewership in a market from negotiating jointly with MVPDs. On December 5, 2014, federal legislation extended the joint negotiation prohibition to all non-commonly owned television stations in a market. Our local service agreement partners are now required to separately negotiate their retransmission consent agreements with MVPDs for their stations. We cannot predict at this time the impact this amended rule will have on future negotiations with MVPDs and the impact, if any, it will have on the Company’s revenues and expenses.
Seasonality
Advertising revenue is positively affected by strong local economies, national and regional political election campaigns, and certain events such as the Olympic Games or the Super Bowl. The Company’s 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 state, congressional and presidential elections occur and advertising airs during the Olympic Games. As 20172018 is not an election year or anand Olympic year, we expect a decreasean increase in advertising revenues to be reported in 20172018 compared to 2016.
2017.
4136
Revenue
The following table sets forth the amounts of the Company’s principal types of revenue (in thousands) and each type of revenue (other than trade and barter) as a percentage of total grossnet revenue:
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
| ||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2018 |
|
| 2017 |
| ||||||||||||||||||||||||||||||||||||||
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Previously Reported |
|
| Reclassifications |
|
| Current Presentation |
|
| % |
| ||||||||||||||
Local |
| $ | 237,980 |
|
|
| 36.2 |
|
| $ | 97,608 |
|
|
| 36.3 |
|
| $ | 440,410 |
|
|
| 36.0 |
|
| $ | 191,375 |
|
|
| 36.0 |
|
| $ | 198,560 |
|
|
| 30.1 |
|
| $ | 237,980 |
|
| $ | (28,386 | ) |
| $ | 209,594 |
|
|
| 33.5 |
|
National |
|
| 91,063 |
|
|
| 13.9 |
|
|
| 35,877 |
|
|
| 13.3 |
|
|
| 168,774 |
|
|
| 13.8 |
|
|
| 71,327 |
|
|
| 13.4 |
|
|
| 71,633 |
|
|
| 10.8 |
|
|
| 91,063 |
|
|
| (13,807 | ) |
|
| 77,256 |
|
|
| 12.3 |
|
Political |
|
| 6,456 |
|
|
| 1.0 |
|
|
| 11,257 |
|
|
| 4.2 |
|
|
| 8,451 |
|
|
| 0.7 |
|
|
| 23,011 |
|
|
| 4.3 |
|
|
| 31,636 |
|
|
| 4.8 |
|
|
| 6,456 |
|
|
| (968 | ) |
|
| 5,488 |
|
|
| 0.9 |
|
Retransmission compensation |
|
| 253,099 |
|
|
| 38.5 |
|
|
| 98,137 |
|
|
| 36.5 |
|
|
| 484,994 |
|
|
| 39.7 |
|
|
| 195,450 |
|
|
| 36.8 |
|
|
| 276,273 |
|
|
| 41.8 |
|
|
| 253,099 |
|
|
| - |
|
|
| 253,099 |
|
|
| 40.4 |
|
Digital |
|
| 63,983 |
|
|
| 9.7 |
|
|
| 24,857 |
|
|
| 9.2 |
|
|
| 110,688 |
|
|
| 9.1 |
|
|
| 47,390 |
|
|
| 8.9 |
|
|
| 63,999 |
|
|
| 9.7 |
|
|
| 63,983 |
|
|
| (938 | ) |
|
| 63,045 |
|
|
| 10.1 |
|
Other |
|
| 4,272 |
|
|
| 0.7 |
|
|
| 1,455 |
|
|
| 0.5 |
|
|
| 8,733 |
|
|
| 0.7 |
|
|
| 3,060 |
|
|
| 0.6 |
|
|
| 14,205 |
|
|
| 2.2 |
|
|
| 4,272 |
|
|
| - |
|
|
| 4,272 |
|
|
| 0.7 |
|
Total gross revenue |
|
| 656,853 |
|
|
| 100.0 |
|
|
| 269,191 |
|
|
| 100.0 |
|
|
| 1,222,050 |
|
|
| 100.0 |
|
|
| 531,613 |
|
|
| 100.0 |
| ||||||||||||||||||||||||
Less: Agency commissions |
|
| (44,099 | ) |
|
|
|
|
|
| (18,941 | ) |
|
|
|
|
|
| (81,421 | ) |
|
|
|
|
|
| (37,122 | ) |
|
|
|
| ||||||||||||||||||||||||
Net broadcast revenue |
|
| 612,754 |
|
|
|
|
|
|
| 250,250 |
|
|
|
|
|
|
| 1,140,629 |
|
|
|
|
|
|
| 494,491 |
|
|
|
|
| ||||||||||||||||||||||||
Trade and barter revenue |
|
| 13,361 |
|
|
|
|
|
|
| 11,744 |
|
|
|
|
|
|
| 25,803 |
|
|
|
|
|
|
| 23,161 |
|
|
|
|
|
|
| 4,017 |
|
|
| 0.6 |
|
|
| 13,361 |
|
|
| - |
|
|
| 13,361 |
|
|
| 2.1 |
|
Net revenue |
| $ | 626,115 |
|
|
|
|
|
| $ | 261,994 |
|
|
|
|
|
| $ | 1,166,432 |
|
|
|
|
|
| $ | 517,652 |
|
|
|
|
| ||||||||||||||||||||||||
Total revenue |
|
| 660,323 |
|
|
| 100.0 |
|
|
| 670,214 |
|
|
| (44,099 | ) |
|
| 626,115 |
|
|
| 100.0 |
| ||||||||||||||||||||||||||||||||
Less: Agency Commissions |
|
| - |
|
|
|
|
|
|
| (44,099 | ) |
|
| 44,099 |
|
|
| - |
|
|
|
|
| ||||||||||||||||||||||||||||||||
Net Revenue |
| $ | 660,323 |
|
|
|
|
|
| $ | 626,115 |
|
|
|
|
|
| $ | 626,115 |
|
|
|
|
|
|
| Six Months Ended June 30, |
| |||||||||||||||||||||
|
| 2018 |
|
| 2017 |
| ||||||||||||||||||
|
| Amount |
|
| % |
|
| Previously Reported |
|
| Reclassifications |
|
| Current Presentation |
|
| % |
| ||||||
Local |
| $ | 391,828 |
|
|
| 30.7 |
|
| $ | 440,410 |
|
| $ | (52,340 | ) |
| $ | 388,070 |
|
|
| 33.3 |
|
National |
|
| 138,678 |
|
|
| 10.9 |
|
|
| 168,774 |
|
|
| (25,536 | ) |
|
| 143,238 |
|
|
| 12.3 |
|
Political |
|
| 40,902 |
|
|
| 3.2 |
|
|
| 8,451 |
|
|
| (1,267 | ) |
|
| 7,184 |
|
|
| 0.6 |
|
Retransmission compensation |
|
| 552,214 |
|
|
| 43.3 |
|
|
| 484,994 |
|
|
| - |
|
|
| 484,994 |
|
|
| 41.7 |
|
Digital |
|
| 126,803 |
|
|
| 9.9 |
|
|
| 110,688 |
|
|
| (2,278 | ) |
|
| 108,410 |
|
|
| 9.3 |
|
Other |
|
| 18,374 |
|
|
| 1.5 |
|
|
| 8,733 |
|
|
| - |
|
|
| 8,733 |
|
|
| 0.6 |
|
Trade and barter revenue |
|
| 6,860 |
|
|
| 0.5 |
|
|
| 25,803 |
|
|
| - |
|
|
| 25,803 |
|
|
| 2.2 |
|
Total revenue |
|
| 1,275,659 |
|
|
| 100.0 |
|
|
| 1,247,853 |
|
|
| (81,421 | ) |
|
| 1,166,432 |
|
|
| 100.0 |
|
Less: Agency Commissions |
|
| - |
|
|
|
|
|
|
| (81,421 | ) |
|
| 81,421 |
|
|
| - |
|
|
|
|
|
Net Revenue |
| $ | 1,275,659 |
|
|
|
|
|
| $ | 1,166,432 |
|
|
|
|
|
| $ | 1,166,432 |
|
|
|
|
|
On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, the new revenue accounting guidance issued by the Financial Accounting Standards Board. The adoption resulted in certain changes in our revenue recognition policies and the presentation of certain revenue sources. Beginning in the first quarter of 2018, we no longer recognize barter revenue (and related barter expense) resulting from the exchange of advertising time for certain program material. During the three and six months ended June 30, 2017, respectively, we recognized barter revenue (and barter expense) of $9.9 million and $20.1 million, included in the trade and barter revenue line in the table above. Additionally, the Company now presents local, national, political and digital revenues, exclusive of the related agency commission, as shown in the reclassifications column in the table above. The change in the presentation of local, national, political and digital revenues was prepared for comparative purposes and did not impact the Company’s past or future net revenue, income from operations or net income.
37
Results of Operations
The following table sets forth a summary of the Company’s operations (in thousands) and each component of operating expense as a percentage of net revenue:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
|
|
|
|
| 2017 |
|
|
|
|
| |||||||||||||||||||||||||||||||||
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
| ||||||||||||||||
Net revenue |
| $ | 626,115 |
|
|
| 100.0 |
|
| $ | 261,994 |
|
|
| 100.0 |
|
| $ | 1,166,432 |
|
|
| 100.0 |
|
| $ | 517,652 |
|
|
| 100.0 |
|
| $ | 660,323 |
|
|
| 100.0 |
|
| $ | 626,115 |
|
|
| 100.0 |
|
| $ | 1,275,659 |
|
|
| 100.0 |
|
| $ | 1,166,432 |
|
|
| 100.0 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses |
|
| 24,758 |
|
|
| 4.0 |
|
|
| 13,027 |
|
|
| 5.0 |
|
|
| 89,157 |
|
|
| 7.6 |
|
|
| 28,838 |
|
|
| 5.6 |
|
|
| 27,384 |
|
|
| 4.1 |
|
|
| 27,914 |
|
|
| 4.5 |
|
|
| 53,727 |
|
|
| 4.2 |
|
|
| 94,944 |
|
|
| 8.1 |
|
Direct operating expenses, net of trade |
|
| 248,880 |
|
|
| 39.7 |
|
|
| 90,025 |
|
|
| 34.4 |
|
|
| 464,940 |
|
|
| 39.9 |
|
|
| 177,971 |
|
|
| 34.4 |
|
|
| 270,200 |
|
|
| 40.9 |
|
|
| 248,880 |
|
|
| 39.7 |
|
|
| 545,679 |
|
|
| 42.8 |
|
|
| 464,940 |
|
|
| 39.9 |
|
Selling, general and administrative expenses, excluding corporate |
|
| 119,527 |
|
|
| 19.1 |
|
|
| 52,745 |
|
|
| 20.1 |
|
|
| 229,430 |
|
|
| 19.7 |
|
|
| 105,099 |
|
|
| 20.3 |
|
|
| 111,519 |
|
|
| 16.9 |
|
|
| 119,527 |
|
|
| 19.1 |
|
|
| 227,081 |
|
|
| 17.8 |
|
|
| 229,430 |
|
|
| 19.7 |
|
Trade and barter expense |
|
| 13,655 |
|
|
| 2.2 |
|
|
| 11,912 |
|
|
| 4.5 |
|
|
| 26,555 |
|
|
| 2.3 |
|
|
| 23,256 |
|
|
| 4.5 |
|
|
| 4,239 |
|
|
| 0.6 |
|
|
| 13,655 |
|
|
| 2.2 |
|
|
| 7,723 |
|
|
| 0.6 |
|
|
| 26,555 |
|
|
| 2.3 |
|
Depreciation |
|
| 26,292 |
|
|
| 4.2 |
|
|
| 12,739 |
|
|
| 4.9 |
|
|
| 48,518 |
|
|
| 4.2 |
|
|
| 25,297 |
|
|
| 4.9 |
|
|
| 25,090 |
|
|
| 3.8 |
|
|
| 26,292 |
|
|
| 4.2 |
|
|
| 50,904 |
|
|
| 4.0 |
|
|
| 48,518 |
|
|
| 4.2 |
|
Amortization of intangible assets |
|
| 38,557 |
|
|
| 6.2 |
|
|
| 11,319 |
|
|
| 4.3 |
|
|
| 86,715 |
|
|
| 7.4 |
|
|
| 23,398 |
|
|
| 4.5 |
|
|
| 37,181 |
|
|
| 5.6 |
|
|
| 38,557 |
|
|
| 6.2 |
|
|
| 73,483 |
|
|
| 5.8 |
|
|
| 86,715 |
|
|
| 7.4 |
|
Amortization of broadcast rights, excluding barter |
|
| 15,761 |
|
|
| 2.4 |
|
|
| 6,220 |
|
|
| 2.4 |
|
|
| 29,997 |
|
|
| 2.5 |
|
|
| 11,857 |
|
|
| 2.2 |
|
|
| 15,913 |
|
|
| 2.6 |
|
|
| 15,761 |
|
|
| 2.5 |
|
|
| 32,013 |
|
|
| 2.5 |
|
|
| 29,997 |
|
|
| 2.5 |
|
Gain on disposal of stations, net |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (57,716 | ) |
|
| (4.9 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (57,716 | ) |
|
| (4.9 | ) |
Reimbursement from the FCC related to station repack |
|
| (5,697 | ) |
|
| (0.9 | ) |
|
| - |
|
|
| - |
|
|
| (7,061 | ) |
|
| (0.6 | ) |
|
| - |
|
|
| - |
| ||||||||||||||||||||||||||||||||
Total operating expenses |
|
| 487,430 |
|
|
|
|
|
|
| 197,987 |
|
|
|
|
|
|
| 917,596 |
|
|
|
|
|
|
| 395,716 |
|
|
|
|
|
|
| 485,829 |
|
|
|
|
|
|
| 490,586 |
|
|
|
|
|
|
| 983,549 |
|
|
|
|
|
|
| 923,383 |
|
|
|
|
|
Income from operations |
| $ | 138,685 |
|
|
|
|
|
| $ | 64,007 |
|
|
|
|
|
| $ | 248,836 |
|
|
|
|
|
| $ | 121,936 |
|
|
|
|
|
| $ | 174,494 |
|
|
|
|
|
| $ | 135,529 |
|
|
|
|
|
| $ | 292,110 |
|
|
|
|
|
| $ | 243,049 |
|
|
|
|
|
4238
Three Months Ended June 30, 20172018 Compared to Three Months Ended June 30, 20162017
The period-to-period comparability of our consolidated operating results is affected by acquisitions. For each quarter we present, our legacy stations include those stations that we owned or provided services to for the complete quarter in the current and prior years. For our annual and year to date presentations, we combine the legacy stations’ amounts presented in each quarter.
Revenue
Gross localLocal advertising revenue was $238.0$198.6 million for the three months ended June 30, 2017,2018, compared to $97.6$209.6 million for the same period in 2016, an increase2017, a decrease of $140.4$11.0 million, or 143.8%5.3%. Gross nationalNational advertising revenue was $91.1$71.6 million for the three months ended June 30, 2017,2018, compared to $35.9$77.3 million for the same period in 2016, an increase2017, a decrease of $55.2$5.6 million, or 153.8%7.3%. The increasedecrease primarily reflects the changes in the mix between our local, national and nationalpolitical advertising revenue was primarily attributable to incremental revenue from our newly acquired stations of $202.9 million, less decreases in revenue resulting from station divestitures of $5.1 million. Our legacy stations’ local and national advertising revenue decreased by $2.2 million during the three months ended June 30, 2017 compared to the same period in 2016. an election year. Our largest advertiser category, automobile, represented approximately 25%23% and 24% of our local and national advertising revenue for each of the three months ended June 30, 20172018 and 2016,2017, respectively. Overall, including past results of our newly acquired stations, automobile revenues decreased by 3.6%11.9% during the quarter. The other categories representing our top five were attorneys and medical/healthcare, which increased in 2018, and fast food/restaurants and furniture, which decreased in 2017, and radio/TV/cable/newspaper and attorneys, which increased in 2017.2018.
Gross politicalPolitical advertising revenue was $6.5$31.6 million for the three months ended June 30, 2017,2018, compared to $11.3$5.5 million for the same period in 2016, a decrease2017, an increase of $4.8$26.1 million, as 20172018 is not an election year.
Retransmission compensation was $253.1$276.3 million for the three months ended June 30, 2017,2018, compared to $98.1$253.1 million for the same period in 2016,2017, an increase of $155.0$23.2 million, or 157.9%9.2%. The increase in retransmission compensation was attributable to incremental revenue from our newly acquired stations of $143.9 million, less decrease in revenue resulting from station divestitures of $3.7 million, and an increase on our legacy stations revenue of $14.8 million. The increase in revenue from our legacy stations was primarily due to scheduled annual escalation of rates per subscriber and the renewals of smaller contracts providing for higher rates per subscriber (contracts generally have a three-year term) and scheduled annual escalation of rates per subscriber. In 2016, we successfully renewed our legacy stations’ retransmission compensation agreements representing approximately 50% of our legacy stations’ subscriber base. There were no significant renewals of retransmission compensation agreements during the period in 2017.. Broadcasters currently deliver approximately 35% of all television viewing audiences but are paid approximately 12-14% of the total basic cable programming fees. We anticipate continued increase of retransmission fees until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers.
Digital revenue, representing advertising revenue on our stations’ web and mobile sites and other internet-based revenue, was $64.0 million for the three months ended June 30, 2017,2018, compared to $24.9$63.0 million for the same period in 2016,2017, an increase of $39.1$1.0 million, or 157.4%1.5%. This was primarily attributable to incremental revenue from our newly acquired stations and entitiesacquisition of $40.6$8.9 million and an increase in our social media platform revenue from our legacy stations of $3.1 million,$1.5 million. These increases were partially offset by a decrease in revenue as a result ofdue to rebranding and consolidation of our digital products and offerings of $4.3$9.9 million.
Operating Expenses
Corporate expenses, related to costs associated with the centralized management of our stations, were $24.8consistent at $27.4 million for the three months ended June 30, 2017,2018, compared to $13.0$27.9 million for the same period in 2016, an increase of $11.7 million, or 90.1%. This was primarily attributable to one-time transaction expenses, including legal and professional fees, severance and bonuses, associated with our acquisitions of $6.1 million, an increase in stock-based compensation resulting from new equity incentive awards of $3.5 million and a one-time contract termination fee of $1.0 million.2017.
Station direct operating expenses, consisting primarily of news, engineering, programming and station selling, general and administrative expenses (net of trade expense) were $368.4$381.7 million for the three months ended June 30, 2017,2018, compared to $142.8$368.4 million for the same period in 2016,2017, an increase of $225.6$13.3 million, or 158.0%3.6%. The increase This was primarily due to expenses of our newly acquired stations and entities of $231.1 million, and an increase in our stations’ programming costs for our legacy stations of $9.8$19.9 million, primarily related to recently enacted network affiliation agreements. Network affiliation fees have been increasing industry wideindustry-wide and will continue to increase over the next several years. Additionally, our recent acquisition resulted in incremental expenses of $5.6 million. These increasestransactions were partially offset by $4.0 milliona decrease in claims for health benefits of $2.7 million, and a decrease in expenses due to rebranding and consolidation of our direct operating expenses attributable to stations divested.digital products and offerings of $8.3 million.
Depreciation of property and equipment was $26.3$25.1 million for the three months ended June 30, 2017,2018, compared to $12.7$26.3 million for the same period in 2016, an increase2017, a decrease of $13.5$1.2 million, or 106.4%4.6%. The increaseThis was primarily due to the acquisition of new assets through our Merger with Media General.decreases in depreciation from fully depreciated assets.
Amortization of intangible assets was $38.6$37.2 million for the three months ended June 30, 2017,2018, compared to $11.3$38.6 million for the same period in 2016, an increase2017, a decrease of $27.2 million. The increase$1.4 million, or 3.6%. This was primarily dueattributable to the acquisition of new intangible assets through our Merger with Media General.decreases in amortization from certain fully amortized assets.
Amortization of broadcast rights, excluding barter was $15.8consistent at $15.9 million for the three months ended June 30, 2017,2018, compared to $6.2$15.8 million for the same period in 2016, an increase of $9.5 million, or 153.4%, primarily attributable to our acquisition of new broadcast rights through our Merger with Media General.2017.
43
Interest expense, net was $55.3consistent at $56.3 million for the three months ended June 30, 2017,2018, compared to $20.6$55.7 million for the same period in 2016, an increase of $34.7 million, primarily attributable to interest on new borrowings, net of decreases in interest resulting from redemptions.2017.
39
Loss on Extinguishment of Debt
During the second quarter of 2017, we prepaid a total of $70.0 million principal balance under our term loans. These resulted in lossLoss on debt extinguishment of $1.3 million, representing the write-off of unamortized debt financing costs and debt discounts associated with these debt extinguishments.
Income Taxes
Income tax expense was $32.3$0.5 million for the three months ended June 30, 2017,2018, compared to $18.5$1.3 million for the same period in 2016.2017, a decrease of $0.8 million, primarily due to a decrease in prepayments of our term loans in 2018 compared to prior year.
Income Taxes
Income tax expense was $33.3 million for the three months ended June 30, 2018, compared to $32.3 million for the same period in 2017. The effective tax rates were 40.0%27.8% and 42.7%40.0% for each of the respective periods.
In December 2017, the Tax Act was signed into law, which reduced the federal corporate income tax rate from 35% to 21%, or a 14.0% decrease in the effective tax rate. A $1.5 million decrease in permanent differences between the two periods contributed an additional 2.3% decrease in the effective tax rate. These decreases were partially offset by a decrease in nontaxable earnings of $1.3 million, or a 1.6% increase in the effective tax rate. In 2017, wethe Company released an uncertain tax position resulting in an income tax benefit of $1.6 million, orcontributing a further 2.0% decrease to the effective tax rate, and we had nontaxable transactions of $1.2 million, or a 1.4% decrease to the effective tax rate. These were partially offset by permanent differences in 2017 resulting in income tax expense of $2.5 million, or a 2.5% increase to the effective income tax rate. In 2016, a nondeductible change in contingent consideration fair value resulted in a 1.4% increase in the effective tax rate.rate between the two periods.
Six Months Ended June 30, 20172018 Compared to Six Months Ended June 30, 20162017
The period-to-period comparability of our consolidated operating results is affected by acquisitions. For each quarter we present, our legacy stations include those stations that we owned or provided services to for the complete quarter in the current and prior years. For our annual and year to date presentations, we combine the legacy stations’ amounts presented in each quarter.
Revenue
Gross localLocal advertising revenue was $440.4$391.8 million for the six months ended June 30, 2017,2018, compared to $191.4$388.1 million for the same period in 2016,2017, an increase of $249.0$3.8 million, or 130.1%1.0%. Gross nationalNational advertising revenue was $168.8$138.7 million for the six months ended June 30, 2017,2018, compared to $71.3$143.2 million for the same period in 2016, an increase2017, a decrease of $97.4$4.6 million, or 136.6%3.2%. The increase in local and national advertising revenue was primarily attributable to incremental revenue from our newly acquired stations of $363.2 million, less decreases in revenue resulting from station divestitures of $9.2 million. Our legacy stations’ local and national advertising revenue decreased by $7.5$21.7 million, which reflected the changes in the mix between our local, national, and political advertising revenue during an election year. Our station divestitures in 2017 also resulted in a decrease in revenue of $0.7 million. These decreases were offset by incremental revenue from our acquired stations in 2017 of $21.7 million and increases in advertising revenue from the six months ended June 30, 2017 compared toOlympics on our NBC affiliate stations in the same period in 2016.first quarter of 2018. Our largest advertiser category, automobile, represented approximately 23% and 25% of our local and national advertising revenue for each of the six months ended June 30, 20172018 and 2016,2017, respectively. Overall, including past results of our newly acquired stations, automobile revenues decreased by 3.6%11% during the period.quarter. The other categories representing our top five were attorneys, which increased in 2018, and fast food/restaurants, medical/healthcare and furniture, which decreased in 2017, and radio/TV/cable/newspaper and attorneys, which increased in 2017.2018.
Gross politicalPolitical advertising revenue was $8.4$40.9 million for the six months ended June 30, 2017,2018, compared to $23.0$7.2 million for the same period in 2016, a decrease2017, an increase of $14.6$33.7 million, as 20172018 is not an election year.
Retransmission compensation was $485.0$552.2 million for the six months ended June 30, 2017,2018, compared to $195.4$485.0 million for the same period in 2016,2017, an increase of $289.5$67.2 million, or 148.1%13.9%. The increase in retransmission compensation was attributable to incremental revenue from our legacy stations and newly acquired stations of $264.1$29.5 million lessand $38.5 million, respectively, partially offset by a decrease of $0.8 million in revenue resulting from station divestitures of $6.5 million, and an increase on our legacy stations revenue of $32.0 million.divestitures. The increase in revenue from our legacy stations was primarily due to scheduled annual escalation of rates per subscriber and the renewals of smaller contracts providing for higher rates per subscriber (contracts generally have a three-year term) and scheduled annual escalation of rates per subscriber. In 2016, we successfully renewed our legacy stations’ retransmission compensation agreements representing approximately 50% of our legacy stations’ subscriber base. There were no significant renewals of retransmission compensation agreements during the period in 2017.. Broadcasters currently deliver approximately 35% of all television viewing audiences but are paid approximately 12-14% of the total basic cable programming fees. We anticipate continued increase of retransmission fees until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers.
Digital revenue, representing advertising revenue on our stations’ web and mobile sites and other internet-based revenue, was $110.7$126.8 million for the six months ended June 30, 2017,2018, compared to $47.4$108.4 million for the same period in 2016,2017, an increase of $63.3$18.4 million, or 133.6%17.0%. This was primarily attributable to incremental revenue resulting from our newly acquired stations and entitiesacquisitions of $66.7$33.4 million and an increase in our social media platform revenue from our legacy stations of $4.1 million,$1.5 million. These increases were partially offset by a decrease in revenue as a result ofdue to rebranding and consolidation of our digital products and offerings of $7.0 million and a decrease in revenue resulting from station divestitures of $0.6$17.5 million.
4440
Corporate expenses, related to costs associated with the centralized management of our stations, were $89.2$53.7 million for the six months ended June 30, 2017,2018, compared to $28.8$94.9 million for the same period in 2016, an increase2017, a decrease of $60.3 million.$41.2 million, or 43.4%. This was primarily attributable to one-time transaction expenses, includinga decrease in legal and professional fees, severance and bonuses of $42.7 million associated with our acquisitions of $53.92017 acquisitions. This decrease was partially offset by a $3.3 million an increase in stock-based compensation resulting fromrelated to new equity incentive awards of $5.2 million and a one-time contract termination fee of $1.0 million.awards.
Station direct operating expenses, consisting primarily of news, engineering, programming and station selling, general and administrative expenses (net of trade expense) were $694.4$772.8 million for the six months ended June 30, 2017,2018 compared to $283.1$694.4 million for the same period in 2016,2017, an increase of $411.3$78.4 million, or 145.3%11.3%. The increase was primarily due to expenses of our newly acquired stations and entities of $411.9$74.8 million, and an increase inpartially offset by a decrease of $1.2 million related to our station divestitures. Additionally, our legacy stations’ programming costs for our legacy stations of $20.8increased by $26.1 million, primarily related to recently enacted network affiliation agreements. Network affiliation fees have been increasing industry wideindustry-wide and will continue to increase over the next several years. These increases were partially offset by $6.6a $2.7 million decrease in claims for health benefits and a decrease in expenses due to rebranding and consolidation of our direct operating expenses attributable to stations divested.digital products and offerings of $15.3 million.
Depreciation of property and equipment was $48.5$50.9 million for the six months ended June 30, 2017,2018, compared to $25.3$48.5 million for the same period in 2016,2017, an increase of $23.2$2.4 million, or 91.8%4.9%. The increase was primarily due to the acquisition of new assets through our Merger with Media General.incremental depreciation from newly capitalized assets.
Amortization of intangible assets was $86.7$73.5 million for the six months ended June 30, 2017,2018, compared to $23.4$86.7 million for the same period in 2016, an increase2017, a decrease of $63.3 million. The increase$13.2 million, or 15.3%. This was primarily dueattributable to thedecreases in amortization from certain fully amortized assets, partially offset by incremental amortization from our acquisition of new intangible assets through our Merger with Media General.in 2018.
Amortization of broadcast rights, excluding barter was $30.0$32.0 million for the six months ended June 30, 2017,2018, compared to $11.9$30.0 million for the same period in 2016,2017, an increase of $18.1$2.0 million, or 153.0%6.7%, primarily attributable to incremental amortization from our acquisition of new broadcast rights through our Merger with Media General.stations acquired in January 2017.
In connection with our Mergermerger with Media General in 2017, we sold the assets of 12 full power television stations in 12 markets, five of which were previously owned by us and seven of which were previously owned by Media General. We sold the Media General stations for a total consideration of $427.6 million and we sold our stations for $114.4 million. These divestitures resulted in a net gain on disposal of $57.7 million.million for the six months ended June 30, 2017.
Interest Expense, net
Interest expense, net was $134.9$110.9 million for the six months ended June 30, 2017,2018, compared to $41.2$134.9 million for the same period in 2016, an increase2017, a decrease of $93.7$24.1 million, or 17.8%. The decrease was primarily attributable to interest on new borrowings, net of decreases in interest resulting from redemptions, and one-time fees associated with the financing of our acquisitions.acquisitions in January 2017 and the redemption of our $525.0 million 6.875% Notes in February 2017.
Loss on Extinguishment of Debt
Loss on extinguishment of debt was $1.5 million for the six months ended June 30, 2018, compared to $33.1 million for the same period in 2017, a decrease of $31.6 million. In 2018, the loss on extinguishment of debt resulted from prepayments of our term loans, representing the write-off of unamortized debt financing costs and debt discounts/premiums. In 2017, we redeemed the entire $525.0 million principal balance under our 6.875% Notes at a redemption price equal to 103.438%,. We also refinanced $670.8 million of the Company’s term loans and revolving loans and prepaid $125.0$195.0 million principal balance under our new term loans. These transactions resulted in loss on debt extinguishment of $33.1 million, representing premiumpremiums paid to retire the 6.875% Notes and the write-off of unamortized debt financing costs and debt discounts/premiums associated with these debt extinguishments.
41
Income Taxes
Income tax expense was $26.4$50.8 million for the six months ended June 30, 2017,2018, compared to $33.3$26.4 million for the same period in 2016.2017. The effective tax rates were 33.1%27.5% and 41.5%33.1% for each of the respective periods. In
Decreases in the effective tax rate between the two periods were primarily attributable to (i) the Tax Act, effecting a 14.0% decrease in the effective tax rate, (ii) the liquidation of Media General legal entities that merged with us in 2017 we recognized the tax impact of the divested stations we previously owned whichand resulted in an income tax benefitexpense of $7.7$1.5 million in 2017, or a 9.6%1.9% decrease toin the 2018 effective tax rate. The income tax benefit was primarily the result of proceeds we received which will not be subjectrate compared to taxation. We adopted ASU No. 2016-09 as of January 1, 2017 which now requires excess tax benefits and tax deficiencies related to stock-based compensation to be recognized within income tax expense. As such, we recognized an income tax benefit related to stock option exercises and the vesting of restricted stock units of $1.1 million, or a 1.3% decrease to the effective rate. We also released an uncertain tax position resulting in an income tax benefit of $1.6 million, or a 2.0% decrease to the effective tax rate. Priorprior year, (iii) transaction costs attributable to our Mergermerger with Media General that were determined to be nondeductible for tax purposes resultingand resulted in an income tax expense of $1.7 million in 2017, or a 2.1% increase todecrease in the 2018 effective tax rate. Our acquisition of Media Generalrate compared to prior year, and (iv) a $1.0 million decrease in permanent differences, resulting in a 2.3% decrease in the subsequent liquidation of its legal entities increased our blended state2018 effective tax rate compared to prior year.
These decreases were partially offset by (i) a $7.7 million income tax benefit in 2017 resultingthat resulted from divestiture of stations we previously owned, or a 9.6% increase in the 2018 effective tax rate compared to prior year, (ii) a release of an uncertain tax position in 2017 that resulted in an income tax expensebenefit of $1.5$1.6 million, or a 1.9%2.0% increase toin the 2018 effective tax rate.rate compared to prior year, (iii) a decrease in nontaxable earnings of $1.4 million that contributed a 1.6% increase in the 2018 effective tax rate compared to prior year, and (iv) higher excess tax benefits related to stock-based compensation in 2017 amounting to $0.3 million, or a 0.9% increase in the 2018 effective tax rate compared to prior year.
45
Liquidity and Capital Resources
The Company is highly leveraged, which makes it vulnerable to changes in general economic conditions. The Company’s ability to meet the future cash requirements described below depends on its ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other conditions, many of which are beyond the Company’s control. Based on current operations and anticipated future growth, the Company believes that its available cash, anticipated cash flow from operations and available borrowings under the senior secured credit facilities will be sufficient to fund working capital, capital expenditure requirements, interest payments and scheduled debt principal payments for at least the next twelve12 months as of the filing date of this Quarterly Report on Form 10-Q. In order to meet future cash needs the Company may, from time to time, borrow under its existing senior secured credit facilities or issue other long- or short-term debt or equity, if the market and the terms of its existing debt arrangements permit. We will continue to evaluate the best use of our operating cash flow among our capital expenditures, acquisitions and debt reduction.
Overview
The following tables present summarized financial information management believes is helpful in evaluating the Company’s liquidity and capital resources (in thousands):
|
| Six Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
| 2017 |
|
| 2016 |
|
| 2018 |
|
| 2017 |
| |||||
Net cash provided by operating activities |
| $ | 137,882 |
|
| $ | 109,385 |
|
| $ | 324,135 |
|
| $ | 110,849 |
|
Net cash used in investing activities |
|
| (2,497,303 | ) |
|
| (118,669 | ) |
|
| (117,996 | ) |
|
| (2,502,113 | ) |
Net cash provided by financing activities |
|
| 2,357,643 |
|
|
| (6,950 | ) | ||||||||
Net decrease in cash and cash equivalents |
| $ | (1,778 | ) |
| $ | (16,234 | ) | ||||||||
Net cash (used in) provided by financing activities |
|
| (174,110 | ) |
|
| 1,461,687 |
| ||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
| $ | 32,029 |
|
| $ | (929,577 | ) | ||||||||
Cash paid for interest |
| $ | 117,646 |
|
| $ | 39,214 |
|
| $ | 104,874 |
|
| $ | 143,521 |
|
Cash paid for income taxes, net of refunds(1) |
| $ | 51,972 |
|
| $ | 23,682 |
| ||||||||
Income taxes paid, net of refunds |
| $ | 32,781 |
|
| $ | 51,972 |
|
As discussed in Note 2 to our Condensed Consolidated Financial Statements in Part I Item 1 of this Form 10-Q, we have adopted ASU No. 2016-15 and ASU 2016-18 effective on January 1, 2018. The adoption impacted our cash flow presentation in 2017, which resulted in a decrease in net cash provided by operating activities of $27.0 million, an increase in net cash used in investing activities of $4.8 million and a decrease in net cash provided by financing activities of $896.0 million. Additionally, the cash paid for interest increased by $25.9 million in 2017.
|
|
| As of |
|
| As of |
| |||||||||||
| June 30, |
|
| December 31, |
|
| As of |
|
| As of |
| |||||
|
| 2017 |
|
| 2016 |
|
| June 30, 2018 |
|
| December 31, 2017 |
| ||||
Cash and cash equivalents |
| $ | 85,902 |
|
| $ | 87,680 |
|
| $ | 147,681 |
|
| $ | 115,652 |
|
Long-term debt including current portion |
|
| 4,435,530 |
|
|
| 2,342,419 |
|
|
| 4,287,646 |
|
|
| 4,362,460 |
|
Unused revolving loan commitments under senior secured credit facilities(1) |
|
| 172,000 |
|
|
| 103,000 |
|
|
| 172,000 |
|
|
| 172,000 |
|
(1) | Based on covenant calculations as of June 30, |
Cash Flows – Operating Activities
Net cash flows provided by operating activities was $137.9increased by $213.3 million during the six months ended June 30, 2017,2018, compared to $109.4 million for the same period in 2016, an increase of $28.5 million.2017. This was primarily due to an increase in net revenue (excluding trade and barter) of $646.1$128.0 million less an increase in station and corporate operating expenses (excluding stock compensation and other non-cash station operating expenses)transactions) of $468.5$30.2 million,, and source of cash resulting from timing of accounts receivable collections of $27.7$43.9 million, a decrease in cash paid for interest of $38.6 million, a decrease in payments for tax liabilities of $19.2 million, source of cash from timing of payments to vendors of $2.0 million and a decrease in payments for contingent consideration related to a past acquisition of $4.0 million. These transactions were partially offset by an increase in cash paid for interest of $78.4 million, use of cash resulting from timing of payments to vendors of $35.4 million, an increase in payments for income taxes of $28.3 million and an increase in payments for broadcast rights of $17.6$3.3 million.
Cash paid for interest increased by $78.4 million during the six months ended June 30, 2017 compared to the same period in 2016, primarily due to interest on new borrowings (net of redemptions) and one-time fees associated with the financing of our acquisitions.
46
Cash Flows – Investing Activities
Net cash flows used in investing activities increaseddecreased by $2.379$2.384 billion during the six months ended June 30, 20172018, compared to the same period in 2016.2017. In 2018, we completed our acquisition of LKQD for a cash purchase price of $97.0 million, less $11.2 million of cash acquired. We also received $3.9 million in proceeds from disposal of assets. In 2017, we completed our Mergermerger with Media General and paid $1.376 billion in cash consideration to stockholders of Media General, less $63.8 million of cash acquired through the Merger.acquired. In connection with the Merger,merger, we also repaid $1.658 billion of Media General’s certain then existing indebtedness as part of the acquisition purchase price. These were partially offset by $481.9 million net proceeds from station divestitures. We also receiveddivestitures and $14.6 million in proceeds from disposal of assets, primarily the sale of a real estate property. In 2016, we acquired certain assets of four full power stations in four markets in West Virginia and paid $58.5 million. Additionally, we completed the acquisition of five full power stations for total payments of $45.5 million.
Capital expenditures during the six months ended June 30, 20172018 increased by $12.7$8.7 million compared to the same period in 2016,2017, primarily due to capital expenditures forincreased spending of $6.9 million related to station repacking costs, an increase of $1.3 million related to station relinquishment of spectrum and further increases due to acquired stations and entities.
Cash Flows – Financing Activities
Net cash flows provided by financing activities increaseddecreased by $2.365$1.636 billion during the six months ended June 30, 20172018, compared to the same period in 2016.2017.
In 2018, Marshall refinanced the outstanding principal balances under its term loan and revolving credit facility of $48.8 million and $3.0 million, respectively, funded by a new term loan of $51.8 million. We also borrowed $44.0 million under our revolving credit facility to partially fund our acquisition of LKQD and received $2.1 million proceeds from stock option exercises. These cash flow increases were partially offset by repayments of outstanding obligations under our revolving credit facility of $44.0 million, repayments of outstanding principal balance under the Company’s term loans of $81.2 million, purchases of treasury stock of $50.5 million, payments of dividends to our common stockholders of $34.4 million ($0.375 per share each quarter), payments for capital lease obligations of $5.6 million and cash payment for taxes in exchange for shares of common stock withheld of $4.7 million.
In 2017, the Company borrowed new term loans, net of debt discount, of $3.079 billion and drew $3.0 million under a new revolving loan and received the gross proceeds from our $900.0 million 5.625% Notes previously deposited in an escrow account.loan. We also received $3.3 million proceeds from stock option exercises. These cash flow increases were partially offset by repayments of certain then existing term loans and a revolving loan of Nexstar, Mission and Marshall with an aggregate principal of $670.8 million, our redemption of the entire $525.0 million principal amount of our 6.875% Notes at a redemption price equal to 103.438%, prepayment of $195.0 outstanding principal balances under our new term loans, payments for debt financing costs associated with our newrefinanced term loans and new revolving loan of $51.4 million, payments to acquire the remaining assets of stations previously owned by WVMHWest Virginia Media Holdings, LLC of $66.9 million, purchases of treasury stock of $58.3 million, payments of dividends to our common stockholders of $28.3 million ($0.30 per share each quarter), payments for contingent consideration related to an entity acquired in October 2015a past acquisition of $5.0$1.0 million, payments for capital lease obligations of $4.6 million and cash payment for taxes in exchange for shares of Nexstar Commoncommon stock withheld of $4.0 million.
In 2016, we borrowed a total of $58.0 million under our revolving credit facility to fund our acquisitions. These cash flow increases were partially offset by repayments of outstanding obligations under our revolving credit facility of $38.0 million, scheduled repayments of outstanding principal balance under our, Mission’s and Marshall’s term loans of $10.1 million, payments of dividends to our common stockholders of $14.7 million ($0.24 per share each quarter) and payments for capital lease obligations of $2.2 million.
Our senior secured credit facility may limit the amount of dividends we may pay to stockholders over the term of the agreement.
43
Future Sources of Financing and Debt Service Requirements
As of June 30, 2017,2018, we, Mission, Marshall and Shield had total combined debt of $4.4$4.3 billion, net of financing costs and discounts, which represented 78.8%72.4% of the Company’s combined capitalization. The Company’s high level of debt requires that a substantial portion of cash flow be dedicated to pay principal and interest on debt, which reduces the funds available for working capital, capital expenditures, acquisitions and other general corporate purposes.
The Company had $172.0 million of total unused revolving loan commitments under its senior secured credit facilities, all of which were available for borrowing, based on the covenant calculations as of June 30, 2017.2018. 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.
In June 2017,On April 26, 2018, our Boardboard of Directorsdirectors approved an increase in our share repurchase authorization to repurchase up to an additional $100 million of our Class A common stock. Our BoardDuring the six months ended June 30, 2018, we repurchased 751,920 shares of Directors’ prior authorization in August 2015 to repurchase our Class A common stock up to $100Common Stock for $50.5 million, was depleted due to shares repurchased during the second quarter of 2017.funded by cash on hand. As of June 30, 2017, there were $93.1 million2018, the remaining available amount under our share repurchase authorization.authorization was $201.9 million.
On July 19, 2017, the Company amended its senior secured credit facilities. The main provisions2, 2018, we prepaid $50.0 million of the amendments include: (i) an additional $456.0 million in Term Loan A borrowings, the proceeds of which were used to partially repay the outstanding principal balance of Term Loan B, (ii) a reduction in the applicable margin portion of interest ratesunder our term loans, funded by 50 basis points, (iii) an extension of the maturity date of Term Loan A with outstanding principal balance of $749.7 million to five years from July 19, 2017 and (iv) an extension of the maturity date of revolving credit facilities of $172.0 million to five years from July 19, 2017.
47
On July 21, 2017, the Company received the $479 million of gross proceeds from the disposition of Media General’s spectrum in the recently concluded FCC auction. Pursuant to the terms of the CVR agreement and the Merger agreement, these proceeds less estimated transaction expenses, repacking expenses and taxes, or an estimated fair value of $275.4 million, will be distributed to the holders of the CVR. The first payments to the CVR holders, which represents majority of the estimated fair value, will be made at the end of August 2017.cash on hand.
On July 27, 2017,15, 2018 and August 1, 2018, we acquired the assets, excluding certain transmission equipment, FCC licenses and network affiliation agreements, of WHDF from Huntsville TV and KRBK from KRBK LLC, respectively, for a total payment of $16.25 million, plus working capital adjustments, funded by cash on hand. These acquisitions are subject to FCC approval and other customary conditions. The remaining purchase price of $3.2 million is expected to be funded through cash generated from operations prior to the second closing which we project to occur in the fourth quarter of 2018.
On July 26, 2018, our Board of Directors declared a quarterly cash dividend of $0.30$0.375 per share of our Class A common stock. The dividend is payable on August 25, 201724, 2018 to stockholders of record on August 11, 2017.10, 2018 to be funded by cash on hand.
On July 27, 2018, Nexstar reallocated $5.6 million of its unused revolving loan credit facility to Marshall. On the same day, Marshall drew the full $5.6 million revolving loan facility reallocated from Nexstar and used the funds to partially repay its outstanding term loans.
On August 7, 2017,1, 2018, we prepaid $30.0$35.0 million of the outstanding principal balance under our Term Loan B,term loans, funded by cash on hand.
The following table summarizes the principal indebtedness scheduled to mature for the periods referenced as of June 30, 20172018 (in thousands):
| Total |
|
| Remainder of 2017 |
|
| 2018-2019 |
|
| 2020-2021 |
|
| Thereafter |
|
| Total |
|
| Remainder of 2018 |
|
| 2019-2020 |
|
| 2021-2022 |
|
| Thereafter |
| |||||||||||
| $ | 2,616,900 |
|
| $ | - |
|
| $ | 21,289 |
|
| $ | 51,433 |
|
| $ | 2,544,178 |
|
| $ | 2,466,250 |
|
| $ | 18,121 |
|
| $ | 96,043 |
|
| $ | 583,506 |
|
| $ | 1,768,580 |
| |
Mission senior secured credit facility |
|
| 232,000 |
|
|
| 1,740 |
|
|
| 4,640 |
|
|
| 4,640 |
|
|
| 220,980 |
|
|
| 229,683 |
|
|
| 1,157 |
|
|
| 4,628 |
|
|
| 4,628 |
|
|
| 219,270 |
|
Marshall senior secured credit facility |
|
| 54,300 |
|
|
| 1,924 |
|
|
| 52,376 |
|
|
| - |
|
|
| - |
|
|
| 51,759 |
|
|
| 647 |
|
|
| 51,112 |
|
|
| - |
|
|
| - |
|
Shield senior secured credit facility |
|
| 24,800 |
|
|
| 930 |
|
|
| 2,976 |
|
|
| 4,340 |
|
|
| 16,554 |
|
|
| 23,572 |
|
|
| 612 |
|
|
| 3,245 |
|
|
| 19,715 |
|
|
| - |
|
5.875% senior unsecured notes due 2022 |
|
| 400,000 |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
| 400,000 |
|
|
| 400,000 |
|
|
| - |
|
|
| - |
|
|
| 400,000 |
|
|
| - |
|
6.125% senior unsecured notes due 2022 |
|
| 275,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 275,000 |
|
|
| 275,000 |
|
|
| - |
|
|
| - |
|
|
| 275,000 |
|
|
| - |
|
5.625% senior unsecured notes due 2024 |
|
| 900,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 900,000 |
|
|
| 900,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 900,000 |
|
|
| $ | 4,503,000 |
|
| $ | 4,594 |
|
| $ | 81,281 |
|
| $ | 60,413 |
|
| $ | 4,356,712 |
|
| $ | 4,346,264 |
|
| $ | 20,537 |
|
| $ | 155,028 |
|
| $ | 1,282,849 |
|
| $ | 2,887,850 |
|
We make semiannual interest payments on our $275.0 millionthe 6.125% Notes on February 15 and August 15 of each year. We make semiannual interest payments on the 5.625% Notes on February 1 and August 1 of each year. We also make semiannual payments on the 5.875% Notes on May 15 and November 15 of each year. Interest payments on our, Mission’s, Marshall’s and Shield’s senior secured credit facilities are generally paid every one to three months and are payable based on the type of interest rate selected.
The terms of our, Mission’s, Marshall’s, and Shield’sthe Company’s senior secured credit facilities, as well as the indentures governing our 6.125% Notes, 5.625% Notes and the 5.875% Notes, limit, but do not prohibit us, Mission, Marshall, or Shield,the Company 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.
44
Debt Covenants
Our credit agreement contains a covenant which requires us to comply with a maximum consolidated first lien net leverage ratio of 4.50 to 1.00 beginning on June 30, 2017.1.00. The financial covenant, which is formally calculated on a quarterly basis, is based on ourthe Company’s combined results. The Mission, Marshall and Shield amended credit agreements do not contain financial covenant ratio requirements but do provide for default in the event we do not comply with all covenants contained in our credit agreement. As of June 30, 2017,2018, we were in compliance with our financial covenant. We believe Nexstar, Mission, Marshall and Shieldthe Company will be able to maintain compliance with all covenants contained in the credit agreements governing theits senior secured facilities and the indentures governing our 6.125% Notes, our 5.625% Notes and our 5.875% Notes for a period of at least the next twelve12 months from June 30, 2017.2018.
No Off-Balance Sheet Arrangements
As of June 30, 2017,2018, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities,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.
48
The following summarizes the Company’s contractual obligations as of June 30, 2017, and the effect such obligations are expected to have on the Company’s liquidity and cash flow in future periods (in thousands):
| Total |
|
| Remainder of 2017 |
|
| 2018-2019 |
|
| 2020-2021 |
|
| Thereafter |
| ||||||
| $ | 2,616,900 |
|
| $ | - |
|
| $ | 21,289 |
|
| $ | 51,433 |
|
| $ | 2,544,178 |
| |
Mission senior secured credit facility |
|
| 232,000 |
|
|
| 1,740 |
|
|
| 4,640 |
|
|
| 4,640 |
|
|
| 220,980 |
|
Marshall senior secured credit facility |
|
| 54,300 |
|
|
| 1,924 |
|
|
| 52,376 |
|
|
| - |
|
|
| - |
|
Shield senior secured credit facility |
|
| 24,800 |
|
|
| 930 |
|
|
| 2,976 |
|
|
| 4,340 |
|
|
| 16,554 |
|
5.875% senior unsecured notes due 2022 |
|
| 400,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 400,000 |
|
6.125% senior unsecured notes due 2022 |
|
| 275,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 275,000 |
|
5.625% senior unsecured notes due 2024 |
|
| 900,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 900,000 |
|
Cash interest on debt(1) |
|
| 1,342,492 |
|
|
| 108,428 |
|
|
| 427,831 |
|
|
| 423,261 |
|
|
| 382,972 |
|
Network affiliation agreements |
|
| 757,352 |
|
|
| 106,147 |
|
|
| 437,131 |
|
|
| 214,074 |
|
|
| - |
|
Broadcast rights current cash commitments(2) |
|
| 16,651 |
|
|
| 3,901 |
|
|
| 8,845 |
|
|
| 3,905 |
|
|
| - |
|
Broadcast rights future cash commitments |
|
| 100,050 |
|
|
| 27,279 |
|
|
| 61,301 |
|
|
| 11,254 |
|
|
| 216 |
|
Executive employee contracts(3) |
|
| 39,098 |
|
|
| 8,990 |
|
|
| 22,851 |
|
|
| 7,257 |
|
|
| - |
|
Estimated benefit payments from Company assets(4) |
|
| 53,033 |
|
|
| 2,933 |
|
|
| 11,700 |
|
|
| 11,400 |
|
|
| 27,000 |
|
Operating lease obligations |
|
| 120,012 |
|
|
| 10,367 |
|
|
| 34,179 |
|
|
| 26,125 |
|
|
| 49,341 |
|
Capital lease obligations |
|
| 27,016 |
|
|
| 899 |
|
|
| 3,543 |
|
|
| 3,596 |
|
|
| 18,978 |
|
Other |
|
| 45,495 |
|
|
| 17,690 |
|
|
| 26,707 |
|
|
| 1,098 |
|
|
| - |
|
|
| $ | 7,004,199 |
|
| $ | 291,228 |
|
| $ | 1,115,369 |
|
| $ | 762,383 |
|
| $ | 4,835,219 |
|
|
|
|
|
|
|
|
|
On July 19, 2017, the Company amended its senior secured credit facilities. The main provisions of the amendments include: (i) an additional $456.0 million in Term Loan A borrowings, the proceeds of which were used to partially repay the outstanding principal balance of Term Loan B, (ii) a reduction in the applicable margin portion of interest rates by 50 basis points, (iii) an extension of the maturity date of Term Loan A with outstanding principal balance of $749.7 million to five years from July 19, 2017 and (iv) an extension of the maturity date of revolving credit facilities of $172.0 million to five years from July 19, 2017.
Critical Accounting Policies and Estimates
Our Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements and reported amounts of revenue and expenses during the period. On an ongoing basis, we evaluate our estimates, including those related to business acquisitions, goodwill and intangible assets, property and equipment, bad debts, broadcast rights, retransmission revenue, trade and barter 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, 2016.2017. Management believes that as of June 30, 2017,2018, there has been no material change to this information.
Upon consummationRevenue Recognition
As discussed in Note 2, the Company adopted the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) and all the related amendments. ASC 606 establishes a comprehensive new revenue recognition model designed to depict the transfer of goods or services to a customer in an amount that reflects the Merger onconsideration the entity expects to be entitled to receive in exchange for those goods or services and requires significantly enhanced revenue disclosures. The Company adopted this standard effective January 17, 2017, Media General’s critical accounting policies1, 2018 using the modified retrospective method as applied to customer contracts that were conformednot completed as of January 1, 2018. As a result, financial information for reporting periods beginning after January 1, 2018 is presented under ASC 606, while comparative financial information has not been adjusted and continues to Nexstar’s critical accounting policies. However, Media General’sbe reported in accordance with the Company’s historical accounting policy relatedfor revenue recognition prior to pension plansthe adoption of ASC 606. Upon adoption of this standard, the cumulative adjustment to the Company’s retained earnings as of January 1, 2018 for the cumulative effect of initially applying the new standard is not material. Comparative information has not been restated and postretirement benefits has been adopted.continues to be reported under the accounting standards in effect for those periods. See Note 2 to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for the Company’s updated accounting policy on revenue recognition.
4945
Pension plans and postretirement benefits
A determination of the liabilities and cost of the Company’s pension and other postretirement plans requires the use of assumptions. The actuarial assumptions used in the Company’s pension and postretirement reporting are reviewed annually with independent actuaries and are compared with external benchmarks, historical trends and the Company’s own experience to determine that its assumptions are reasonable. The key assumptions used in developing the required estimates includes,include discount rates, expected return on plan assets, mortality rates, health care cost trends, retirement rates and expected contributions. The expected rate of return on plan assets is 7.25%.
As discussed under Recent Accounting Pronouncements, as of January 1, 2018 the Company has adopted ASU 2017-07 and ASU No. 2016-15. Under ASU No. 2017-17, entities are required to (1) disaggregate the current-service-cost component from the other components of net benefit cost (the “other components”) and present it with other current compensation costs for related employees in the income statement and (2) present the other components elsewhere in the income statement and outside of income from operations if that subtotal is presented. In accordance with this adoption, net periodic benefit cost, net of service costs, is disclosed on a separate line below income from operations in the Condensed Consolidated Statement of Operations. Under ASU No. 2016-15, payments received for the settlement of corporate-owned life insurance claims are required to be disclosed within investing activities. Accordingly, balances previously reported as a source of cash from operating activities have been reclassified to investing activities in the Condensed Consolidated Statements of Cash Flows.
Recent Accounting Pronouncements
Refer to Note 2 of our Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recently issued accounting pronouncements, including our expected date of adoption and effects on results of operations and financial position.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: any projections or expectations of earnings, revenue, financial performance, liquidity and capital resources or other financial items; any assumptions or projections about the television broadcasting industry; any statements of our plans, strategies and objectives for our future operations, performance, liquidity and capital resources or other financial items; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and other similar words.
Although we believe that the expectations reflected in any of 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, 20162017 and in our other filings with the Securities and Exchange Commission. The forward-looking statements made in this Quarterly Report on Form 10-Q are made only as of the date hereof, and we do not have or undertake any obligation to update any forward-looking statements to reflect subsequent events or circumstances unless otherwise required by law.
circumstances.
5046
Interest Rate Risk
The Company’s exposure to market risk for changes in interest rates relates primarily to its long-term debt obligations. The Company’s exposure to market risk did not change materially since December 31, 2017.
The term loan borrowings at June 30, 20172018 under the Company’s senior secured credit facilities bear interest rates ranging from 3.7%4.09% to 4.2%4.59%, which represented the base rate, or LIBOR, plus the applicable margin, as defined. The revolving loans bear interest at LIBOR plus the applicable margin, which totaled 3.7% at June 30, 2017. Interest is payable in accordance with the credit agreements.
If LIBOR were to increase by 100 basis points, or one percentage point, from its June 30, 20172018 level, the Company’s annual interest expense would increase and cash flow from operations would decrease by approximately $29.3$27.7 million, based on the outstanding balances of the Company’s senior secured credit facilities as of June 30, 2017.2018. An increase of 50 basis points in LIBOR would result in a $14.6$13.9 million increase in annual interest expense and decrease in cash flow from operations. If LIBOR were to decrease either by 100 basis points or 50 basis points, the Company’s annual interest would decrease and cash flow from operations would increase by $29.3$27.7 million and $14.6$13.9 million, respectively. Our 5.625% Notes, 6.125% Notes and 5.875% Notes are fixed rate debt obligations and therefore are not exposed to market interest rate changes. As of June 30, 2017,2018, the Company has no financial instruments in place to hedge against changes in the benchmark interest rates on its senior secured credit facilities.
Impact of Inflation
We believe that the Company’s results of operations are not affected by moderate changes in the inflation rate.
51
Evaluation of Disclosure Controls and Procedures
Nexstar’s management, with the participation of its President and Chief Executive Officer along with its Chief Financial Officer, conducted an evaluation as of the end of the period covered by this report of the effectiveness of the design and operation of Nexstar’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended.Act.
Based upon that evaluation, Nexstar’s President and Chief Executive Officer and its Chief Financial Officer concluded that as of the end of the period covered by this report, Nexstar’s disclosure controls and procedures were effective, at a reasonable assurance level, to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to Nexstar’s management, including its President and Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
As of the quarter ended June 30, 2017,2018, 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.
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.
On July 30, 2018, Clay, Massey & Associates, PC filed an antitrust class action complaint in the U.S. District Court for the Northern District of Illinois on behalf of itself and all others similarly situated against Gray Television, Inc., Hearst Communications, Nexstar Media Group, Inc., Tegna Inc., Tribune Media Company and Sinclair Broadcast Group, Inc. The lawsuit alleges unlawful coordination between advertising sales teams of independent local television station owners to artificially inflate prices of local TV advertisements in violation of Section 1 of the Sherman Act (15 U.S.C. §1). The Company denies the allegations against it and will defend its advertising practices as necessary.
There are no material changes from the risk factors previously disclosed in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2016.2017.
The following is a summary of Nexstar’s repurchases of its Class A common stock repurchases by month for the quarter ended June 30, 2017:2018:
|
|
|
|
|
|
|
|
| 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 |
| ||||
May 19-31, 2017 |
|
| 400,000 |
|
| $ | 57.61 |
|
|
| 400,000 |
|
|
| 128,315,605 |
|
June 1-30, 2017 |
|
| 601,640 |
|
|
| 58.56 |
|
|
| 601,640 |
|
|
| 93,085,233 |
|
|
|
| 1,001,640 |
|
| $ | 58.18 |
|
|
| 1,001,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
| ||||
May 11-17, 2018 |
| 250,000 |
|
| $ | 66.80 |
|
|
| 250,000 |
|
|
| 201,876,171 |
|
|
| 250,000 |
|
| $ | 66.80 |
|
|
| 250,000 |
|
|
|
|
|
On June 12, 2017, Nexstar announced that its Board of Directors has approved an increase in the Company’s share repurchase authorization to repurchase up to an additional $100 million of its Class A common stock. The Board of Directors’ prior authorization in August 2015 to repurchase the Company’s Class A common stock up to $100 million was depleted due to shares repurchased during the second quarter of 2017. Share repurchases may be made from time to time in open market transactions, block trades or in private transactions. There is no minimum number of shares that the Company is required to repurchase and the repurchase program may be suspended or discontinued at any time without prior notice.
None.
None.
52
The unaudited financial statements of Mission Broadcasting, Inc. as of June 30, 20172018 and December 31, 20162017 and for the three and six months ended June 30, 20172018 and 2016,2017, as filed in Mission Broadcasting, Inc.’s Quarterly Report on Form 10-Q, are incorporated herein by reference.
48
Exhibit No. |
| Description |
|
| |
10.1 |
| |
|
| |
|
| |
| Credit Agreement, dated as of | |
|
| |
|
| |
31.1 |
| Certification of Perry A. Sook pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
31.2 |
| Certification of Thomas E. Carter pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
32.1 |
| Certification of Perry A. Sook pursuant to 18 U.S.C. ss. 1350.* |
32.2 |
| Certification of Thomas E. Carter pursuant to 18 U.S.C. ss. 1350.* |
101 |
| The Company’s unaudited Condensed Consolidated Financial Statements and related Notes for the quarter ended June 30, |
* | Filed herewith |
5349
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NEXSTAR MEDIA GROUP, INC. | ||
|
| |
|
| /S/ PERRY A. SOOK |
By: |
| Perry A. Sook |
Its: |
| President and Chief Executive Officer (Principal Executive Officer) |
|
| |
|
| /S/ THOMAS E. CARTER |
By: |
| Thomas E. Carter |
Its: |
| Chief Financial Officer (Principal Accounting and Financial Officer) |
Dated: August 8, 20172018