Nexstar Media (NXST) 10-Q 2022 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2022

OR

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

For the transition period from to .

Commission File Number: 000-50478

NEXSTAR MEDIA GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	23-3083125
(State of Incorporation or Organization)	(I.R.S. Employer Identification No.)
545 E. John Carpenter Freeway, Suite 700, Irving, Texas	75062
(Address of Principal Executive Offices)	(Zip Code)

(972) 373-8800

(Registrant’s Telephone Number, Including Area Code)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	NXST	NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that it was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 7, 2022, the registrant had 37,708,443 shares of Common Stock outstanding.

TABLE OF CONTENTS

				Page
PART I		FINANCIAL INFORMATION
ITEM 1.		Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021		3
		Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2022 and 2021		4
		Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months ended September 30, 2022 and 2021		5
		Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2022 and 2021		7
		Notes to Unaudited Condensed Consolidated Financial Statements
	Note 1: Organization and Business Operations		8
	Note 2: Summary of Significant Accounting Policies		8
	Note 3: Acquisitions		13
	Note 4: Intangible Assets and Goodwill		15
	Note 5: Investments		15
	Note 6: Accrued Expenses		17
	Note 7: Retirement and Post Retirement Plans		17
	Note 8: Debt		18
	Note 9: Leases		20
	Note 10: Fair Value Measurements		21
	Note 11: Common Stock		21
	Note 12: Income Taxes		22
	Note 13: FCC Regulatory Matters		22
	Note 14: Commitments and Contingencies		24
	Note 15: Segment Data		26
	Note 16: Subsequent Events		28
ITEM 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
ITEM 3.		Quantitative and Qualitative Disclosures About Market Risk		43
ITEM 4.		Controls and Procedures		43
PART II		OTHER INFORMATION
ITEM 1.		Legal Proceedings		44
ITEM 1A.		Risk Factors		44
ITEM 2.		Unregistered Sales of Equity Securities and Use of Proceeds		44
ITEM 3.		Defaults Upon Senior Securities		44
ITEM 4.		Mine Safety Disclosures		44
ITEM 5.		Other Information		44
ITEM 6.		Exhibits		45

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

	September 30,			December 31,
	2022			2021
ASSETS
Current assets:
Cash and cash equivalents	$	346.6		$	190.9
Restricted cash and cash equivalents		15.6			15.6
Accounts receivable, net of allowance for doubtful accounts of $33.9 and $23.1, respectively		986.9			1,021.0
Broadcast rights		154.8			46.4
Prepaid expenses and other current assets		162.4			138.8
Total current assets		1,666.3			1,412.7
Property and equipment, net		1,491.0			1,512.5
Goodwill		3,051.6			3,051.6
FCC licenses		2,910.3			2,910.3
Network affiliation agreements, net		1,918.5			2,060.2
Other intangible assets, net		592.2			656.9
Investments		1,088.7			1,218.8
Assets held for sale, net		-			45.3
Other noncurrent assets, net		379.7			396.2
Total assets(1)	$	13,098.3		$	13,264.5
LIABILITIES AND STOCKHOLDERSʼ EQUITY
Current liabilities:
Current portion of debt	$	124.3		$	47.2
Accounts payable		166.1			248.2
Broadcast rights payable		151.6			76.9
Accrued expenses		344.5			315.9
Operating lease liabilities		46.5			42.8
Deferred revenue		70.2			22.6
Other current liabilities		11.9			33.7
Total current liabilities		915.1			787.3
Debt		7,052.9			7,367.9
Deferred tax liabilities		1,714.9			1,728.5
Other noncurrent liabilities		467.0			523.3
Total liabilities(1)		10,149.9			10,407.0
Commitments and contingencies (Note 14)
Stockholdersʼ equity:
Preferred stock - $0.01 par value, 200,000 shares authorized; none issued and outstanding at each of September 30, 2022 and December 31, 2021		-			-
Common stock - $0.01 par value, 100,000,000 shares authorized; 47,291,463 shares issued, 38,278,270 shares outstanding as of September 30, 2022 and 47,291,463 shares issued, 40,757,429 shares outstanding as of December 31, 2021		0.5			0.5
Additional paid-in capital		1,270.7			1,311.1
Accumulated other comprehensive income		141.3			141.6
Retained earnings		2,863.7			2,204.2
Treasury stock - at cost; 9,013,193 and 6,534,034 shares as of September 30, 2022 and December 31, 2021, respectively		(1,350.1	)		(807.0	)
Total Nexstar Media Group, Inc. stockholdersʼ equity		2,926.1			2,850.4
Noncontrolling interests		22.3			7.1
Total stockholdersʼ equity		2,948.4			2,857.5
Total liabilities and stockholdersʼ equity	$	13,098.3		$	13,264.5

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

(1)

The condensed consolidated total assets as of September 30, 2022 and December 31, 2021 include certain assets held by consolidated VIEs of $306.3 million and $309.7 million, respectively, which are not available to be used to settle the obligations of Nexstar. The condensed consolidated total liabilities as of September 30, 2022 and December 31, 2021 include certain liabilities of consolidated VIEs of $156.8 million and $168.0 million, respectively, for which the creditors of the VIEs have no recourse to the general credit of Nexstar. See Note 2 for additional information.

3

NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Net revenue	$	1,269.1		$	1,157.0		$	3,724.3		$	3,402.5
Operating expenses (income):
Direct operating expenses, excluding depreciation and amortization		511.1			480.1			1,502.7			1,391.8
Selling, general and administrative expenses, excluding depreciation and amortization		260.8			258.2			775.2			744.1
Amortization of broadcast rights		25.4			29.9			80.6			92.4
Amortization of intangible assets		76.8			75.7			231.9			223.2
Depreciation of property and equipment		40.2			41.3			118.6			120.7
Reimbursement from the FCC related to station repack		(0.5	)		(5.6	)		(2.8	)		(17.9	)
Other		-			-			-			(2.4	)
Total operating expenses		913.8			879.6			2,706.2			2,551.9
Income from operations		355.3			277.4			1,018.1			850.6
Gain on bargain purchase		54.1			-			54.1			-
Income from equity method investments, net		36.6			20.8			110.2			77.7
Interest expense, net		(88.6	)		(70.4	)		(233.2	)		(212.6	)
Pension and other postretirement plans credit, net		11.0			17.7			32.7			53.0
Other (expenses) income, net		1.0			(10.5	)		(10.5	)		(4.3	)
Income before income taxes		369.4			235.0			971.4			764.4
Income tax expense		(81.9	)		(65.9	)		(206.0	)		(196.3	)
Net income		287.5			169.1			765.4			568.1
Net loss attributable to noncontrolling interests		1.2			0.5			2.4			2.5
Net income attributable to Nexstar Media Group, Inc.	$	288.7		$	169.6		$	767.8		$	570.6
Net income per common share attributable to Nexstar Media Group, Inc.:
Basic	$	7.45		$	4.07		$	19.21		$	13.42
Diluted	$	7.30		$	3.90		$	18.81		$	12.84
Weighted average number of common shares outstanding:
Basic (in thousands)		38,767			41,676			39,964			42,520
Diluted (in thousands)		39,560			43,476			40,816			44,422

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

4

NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Three Months Ended September 30, 2022 and 2021

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

											Accumulated
					Additional						Other											Total
	Common Stock				Paid-In			Retained			Comprehensive		Treasury Stock						Noncontrolling			Stockholdersʼ
	Shares		Amount		Capital			Earnings			Income		Shares			Amount			interests			Equity
Balances as of June 30, 2022		47,291,463	$	0.5	$	1,257.9		$	2,609.9		$	141.3		(7,867,571	)	$	(1,139.9	)	$	(0.6	)	$	2,869.1
Purchase of treasury stock		-		-		-			-			-		(1,197,138	)		(215.2	)		-			(215.2	)
Stock-based compensation expense		-		-		17.2			-			-		-			-			-			17.2
Vesting of restricted stock units and exercise of stock options		-		-		(4.4	)		-			-		51,516			5.0			-			0.6
Dividends declared on common stock ($0.90 per share)		-		-		-			(34.9	)		-		-			-			-			(34.9	)
Noncontrolling interests from a business combination (see Note 3)		-		-		-			-			-		-			-			24.2			24.2
Distribution to a noncontrolling interest		-		-		-			-			-		-			-			(0.1	)		(0.1	)
Net income (loss)		-		-		-			288.7			-		-			-			(1.2	)		287.5
Balances as of September 30, 2022		47,291,463	$	0.5	$	1,270.7		$	2,863.7		$	141.3		(9,013,193	)	$	(1,350.1	)	$	22.3		$	2,948.4
Balances as of June 30, 2021		47,291,463	$	0.5	$	1,327.2		$	1,823.7		$	34.5		(5,135,854	)	$	(575.7	)	$	15.1		$	2,625.3
Purchase of treasury stock		-		-		-			-			-		(980,770	)		(144.3	)		-			(144.3	)
Stock-based compensation expense		-		-		12.3			-			-		-			-			-			12.3
Vesting of restricted stock units and exercise of stock options		-		-		(4.1	)		-			-		43,400			4.4			-			0.3
Dividends declared on common stock ($0.70 per share)		-		-		-			(29.3	)		-		-			-			-			(29.3	)
Net income (loss)		-		-		-			169.6			-		-			-			(0.5	)		169.1
Balances as of September 30, 2021		47,291,463	$	0.5	$	1,335.4		$	1,964.0		$	34.5		(6,073,224	)	$	(715.6	)	$	14.6		$	2,633.4

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

5

NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Nine Months Ended September 30, 2022 and 2021

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

											Accumulated
					Additional						Other												Total
	Common Stock				Paid-In			Retained			Comprehensive			Treasury Stock						Noncontrolling			Stockholdersʼ
	Shares		Amount		Capital			Earnings			Income			Shares			Amount			interests			Equity
Balances as of December 31, 2021		47,291,463	$	0.5	$	1,311.1		$	2,204.2		$	141.6			(6,534,034	)	$	(807.0	)	$	7.1		$	2,857.5
Purchase of treasury stock		-		-		-			-			-			(3,569,673	)		(621.3	)		-			(621.3	)
Stock-based compensation expense		-		-		43.4			-			-			-			-			-			43.4
Vesting of restricted stock units and exercise of stock options		-		-		(83.8	)		-			-			1,090,514			78.2			-			(5.6	)
Dividends declared on common stock ($2.70 per share)		-		-		-			(108.3	)		-			-			-			-			(108.3	)
Noncontrolling interests from a business combination (see Note 3)		-		-		-			-			-			-			-			24.2			24.2
Distribution to a noncontrolling interest		-		-		-			-			-			-			-			(6.6	)		(6.6	)
Other		-		-		-			-			(0.3	)		-			-			-			(0.3	)
Net income (loss)		-		-		-			767.8			-			-			-			(2.4	)		765.4
Balances as of September 30, 2022		47,291,463	$	0.5	$	1,270.7		$	2,863.7		$	141.3			(9,013,193	)	$	(1,350.1	)	$	22.3		$	2,948.4
Balances as of December 31, 2020		47,291,463	$	0.5	$	1,362.5		$	1,488.0		$	34.5			(4,034,635	)	$	(367.1	)	$	18.5		$	2,536.9
Purchase of treasury stock		-		-		-			-			-			(2,715,462	)		(403.2	)		-			(403.2	)
Stock-based compensation expense		-		-		34.3			-			-			-			-			-			34.3
Vesting of restricted stock units and exercise of stock options		-		-		(61.9	)		-			-			676,873			54.7			-			(7.2	)
Dividends declared on common stock ($2.10 per share)		-		-		-			(89.5	)		-			-			-			-			(89.5	)
Change in reporting entity resulting from common control transactions		-		-		0.5			(5.1	)		-									(1.8	)		(6.4	)
Other		-		-		-			-			-			-			-			0.4			0.4
Net income (loss)		-		-		-			570.6			-			-			-			(2.5	)		568.1
Balances as of September 30, 2021		47,291,463	$	0.5	$	1,335.4		$	1,964.0		$	34.5			(6,073,224	)	$	(715.6	)	$	14.6		$	2,633.4

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

6

NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions, unaudited)

	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net income	$	765.4		$	568.1
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible assets		231.9			223.2
Amortization of broadcast rights		80.6			92.4
Depreciation of property and equipment		118.6			120.7
Stock-based compensation expense		43.4			34.3
Amortization of debt financing costs, debt discounts and premium		10.0			11.2
Deferred income taxes		(32.1	)		5.9
Loss (gain) on disposal of assets		0.6			(8.8	)
Spectrum repack reimbursements		(2.8	)		(17.9	)
Payments for broadcast rights		(97.1	)		(133.0	)
Gain on bargain purchase		(54.1	)		-
Income from equity method investments, net		(110.2	)		(77.7	)
Distribution from equity method investments - return on capital		234.8			222.4
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable		80.9			(10.8	)
Prepaid expenses and other current assets		12.6			4.8
Accounts payable		(80.1	)		(32.5	)
Accrued expenses and other current liabilities		45.0			(6.4	)
Income tax payable		(36.0	)		(49.8	)
Other noncurrent liabilities		(37.2	)		(66.0	)
Other		10.8			1.5
Net cash provided by operating activities		1,185.0			881.6
Cash flows from investing activities:
Purchases of property and equipment		(100.0	)		(105.0	)
Proceeds from sale of real estate and other assets		45.0			16.6
Payments for acquisitions, net of cash acquired		-			(138.8	)
Cash acquired on business acquisition		28.9			-
Deposits received associated with the sale of real estate assets		13.0			10.0
Spectrum repack reimbursements		2.8			17.9
Other investing activities, net		(0.6	)		5.5
Net cash used in investing activities		(10.9	)		(193.8	)
Cash flows from financing activities:
Proceeds from debt issuance, net of debt discounts		2,480.4			321.0
Repayments of long-term debt		(2,730.3	)		(454.0	)
Purchase of treasury stock		(621.3	)		(403.2	)
Common stock dividends paid		(108.3	)		(89.5	)
Payments for capitalized software obligations		(11.4	)		(12.5	)
Cash paid for shares withheld for taxes		(12.6	)		(10.9	)
Payments for contingent consideration in connection with a past acquisition		(13.9	)		-
Other financing activities, net		(1.0	)		2.4
Net cash used in financing activities		(1,018.4	)		(646.7	)
Net increase in cash, cash equivalents and restricted cash		155.7			41.1
Cash, cash equivalents and restricted cash at beginning of period		206.5			169.3
Cash, cash equivalents and restricted cash at end of period	$	362.2		$	210.4
Supplemental information:
Interest paid	$	243.0		$	220.3
Income taxes paid, net of refunds	$	273.4		$	247.4
Non-cash investing and financing activities:
Accrued and noncash purchases of property and equipment	$	9.8		$	8.9
Right-of-use assets obtained in exchange for operating lease obligations	$	28.6		$	41.6

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

7

NEXSTAR MEDIA GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Organization and Business Operations

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

Nexstar is a leading diversified media company with television broadcasting, television network and digital media assets operating in the United States. As of September 30, 2022, we owned, operated, programmed or provided sales and other services to 199 full power television stations and one AM radio station, including those television stations owned by VIEs, in 116 markets in 39 states and the District of Columbia. The stations are affiliates of ABC, NBC, FOX, CBS, The CW, MyNetworkTV, and other broadcast television networks. As of September 30, 2022, Nexstar’s stations reached approximately 39% of all U.S. television households (after applying the Federal Communications Commission’s (“FCC”) ultra-high frequency discount). Through various local service agreements, we provide sales, programming, and other services to 35 television stations owned by consolidated VIEs and one television station owned by an unconsolidated VIE. Nexstar also owns NewsNation, a national news and general entertainment cable network, a recently acquired 75.0% ownership interest in The CW Network, LLC, the fifth major broadcast network in the U.S. (“The CW”) (see Note 3), two digital multicast networks and other multicast network services, and a 31.3% ownership stake in Television Food Network, G.P. (“TV Food Network”). Our digital assets include 120 local websites and 239 mobile applications, national digital properties including NewsNationNow, The Hill, BestReviews, and a suite of advertiser solutions.

Note 2: Summary of Significant Accounting Policies

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts of Nexstar and the accounts of VIEs for which we are the primary beneficiary (see “Variable Interest Entities” section below). Noncontrolling interests represent the minority owners’ share in the equity of our recently acquired The CW (see Note 3) and the VIE owners’ share in profit or loss and equity of the consolidated VIEs. Noncontrolling interests are presented as a component separate from Nexstar’s stockholders’ equity in the accompanying Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Changes in Stockholders’ Equity. All intercompany account balances and transactions have been eliminated in consolidation. Nexstar management evaluates each arrangement that may include variable interests and determines the need to consolidate an entity where it determines Nexstar is the primary beneficiary of a VIE in accordance with related authoritative literature and interpretive guidance.

Liquidity

The Company is leveraged, which makes it vulnerable to changes in general economic conditions. The Company’s ability to repay or refinance its debt will depend on, among other things, financial, business, market, competitive and other conditions, many of which are beyond the Company’s control. The Company believes it has sufficient unrestricted cash on hand, positive working capital, and availability to access additional cash under its revolving credit facilities (with a maturity date of June 2027) to meet its business operating requirements, its capital expenditures and to continue to service its debt for at least the next 12 months as of the filing date of this Quarterly Report on Form 10-Q. As of September 30, 2022, the Company was in compliance with the financial covenants contained in the amended credit agreements governing its senior secured credit facilities.

In 2022 and in 2021, the Company continued to recover from the ongoing effects of the COVID-19 pandemic since its adverse impact in 2020. However, the extent to which the COVID-19 pandemic impacts the Company’s business, results of operations, cash flows and financial condition will depend on future developments, which remain highly uncertain and cannot reasonably be predicted, including future surges in incidences of COVID-19 and the severity of any such resurgence, the rate and efficacy of vaccinations against COVID-19, the length of time that the COVID-19 pandemic continues, how fast economies will fully recover after the COVID-19 pandemic has passed, and the length of time needed to improve global disruptions and delays in the supply chain.

8

Interim Financial Statements

The Condensed Consolidated Financial Statements as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 are unaudited. However, in the opinion of management, such financial statements include all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement of the financial information included herein in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the period. Results of operations for interim periods are not necessarily indicative of results for the full year. Estimates are used for, but are not limited to, allowance for doubtful accounts, valuation of assets acquired and liabilities assumed in business combinations, distribution revenue recognized, income taxes, the recoverability of goodwill, FCC licenses and long-lived assets, the recoverability of investments, the recoverability of broadcast rights and the useful lives of property and equipment and intangible assets. As of September 30, 2022, the Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or revision of the carrying value of its assets or liabilities. However, these estimates and judgments may change as new events occur and additional information is obtained, which may result in changes being recognized in the Company’s consolidated financial statements in future periods. While the Company considered the effects of COVID-19 in its estimates and assumptions, due to the current level of uncertainty over the economic and operational impacts of COVID-19 on its business, there may be other judgments and assumptions that were not currently considered. Such judgments and assumptions could result in a meaningful impact on the Company’s consolidated financial statements in future periods. Actual results could differ from those estimates and any such differences may have a material impact on the Company’s condensed consolidated financial statements.

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, 2021. The balance sheet as of December 31, 2021 has been derived from the audited financial statements as of that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

Variable Interest Entities

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

Consolidated VIEs

Nexstar consolidates entities in which it is deemed under U.S. GAAP to have controlling financial interests for financial reporting purposes as a result of (i) local service agreements Nexstar has with the stations owned by these entities, (ii) Nexstar’s (excluding The CW) guarantee of the obligations incurred under Mission Broadcasting, Inc.’s (“Mission”) senior secured credit facility (see Note 8), (iii) Nexstar having power over significant activities affecting these VIEs’ economic performance, including budgeting for advertising revenue, certain advertising sales and hiring and firing of sales force personnel and (iv) purchase options granted by each consolidated VIE which permit Nexstar to acquire the assets and assume the liabilities of these VIEs’ stations, subject to FCC consent.

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The following table summarizes the various local service agreements Nexstar had in effect as of September 30, 2022 with its consolidated VIEs:

Owner	Service Agreements	Full Power Stations
Mission	TBA	WFXP, KHMT and KFQX
	SSA & JSA	KJTL, KLRT, KASN, KOLR, KCIT, KAMC, KRBC, KSAN, WUTR, WAWV, WYOU, KODE, WTVO, KTVE, WTVW, WVNY, WXXA, WLAJ, KMSS, KPEJ, KLJB, KASY, KWBQ and KRWB
	LMA	WNAC and WPIX
White Knight Broadcasting (“White Knight”)	SSA & JSA	WVLA and KFXK
Vaughan Media, LLC (“Vaughan”)	SSA & JSA	WBDT, WYTV and KTKA
	LMA	KNVA

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

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

	September 30, 2022		December 31, 2021
Current assets:
Cash and cash equivalents	$	5.8	$	9.2
Accounts receivable, net		28.9		21.1
Prepaid expenses and other current assets		6.4		10.3
Total current assets		41.1		40.6
Property and equipment, net		56.6		57.5
Goodwill		150.5		150.5
FCC licenses		200.4		200.4
Network affiliation agreements and other intangible assets, net		78.6		85.2
Other noncurrent assets, net		81.1		85.4
Total assets	$	608.3	$	619.6
Current liabilities:
Current portion of debt	$	3.0	$	3.0
Other current liabilities		33.1		34.4
Total current liabilities		36.1		37.4
Debt		353.5		355.5
Deferred tax liabilities		36.9		41.8
Other noncurrent liabilities		88.1		92.6
Total liabilities	$	514.6	$	527.3

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

	September 30, 2022		December 31, 2021
Current assets	$	5.2	$	5.1
Property and equipment, net		11.5		12.2
Goodwill		62.2		62.2
FCC licenses		200.4		200.4
Network affiliation agreements, net		26.1		28.5
Other noncurrent assets, net		0.9		1.3
Total assets	$	306.3	$	309.7
Current liabilities	$	31.8	$	33.7
Noncurrent liabilities		125.0		134.3
Total liabilities	$	156.8	$	168.0

Non-Consolidated VIE

Nexstar has an outsourcing agreement with Cunningham Broadcasting Corporation (“Cunningham”) which continues through December 31, 2023. Under the outsourcing agreement, Nexstar provides certain engineering, production, sales and administrative services for WYZZ, the FOX affiliate in the Peoria, Illinois market, through WMBD, the Nexstar television station in that market. During the term of the outsourcing agreement, Nexstar retains the broadcasting revenue and related expenses of WYZZ and is obligated to pay a monthly fee to Cunningham based on the combined operating cash flow of WMBD and WYZZ, as defined in the agreement.

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

Income Per Share

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Weighted average shares outstanding - basic		38,767		41,676		39,964		42,520
Dilutive effect of equity incentive plan instruments		793		1,800		852		1,902
Weighted average shares outstanding - diluted		39,560		43,476		40,816		44,422

During the three and nine months ended September 30, 2022, stock options and restricted stock units to acquire or receive a weighted average of 41,000 shares and 14,000 shares (actual figures), respectively, of common stock were excluded from the computation of diluted earnings per share because their impact would have been anti-dilutive.

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During the three and nine months ended September 30, 2021, there were no stock options and restricted stock units that were anti-dilutive.

Basis of Presentation

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

Assets Held for Sale, Net

On June 1, 2022, Nexstar completed the sale of a real estate asset located in Chicago for gross cash proceeds of $45.3 million.

Recent Accounting Pronouncements

New Accounting Standards Adopted

In July 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-05, “Leases (Topic 842): Lessors—Certain leases with variable payments” (“ASU 2021-05”). Under the ASU, a lessor would classify a lease with variable lease payments that do not depend on an index or rate as an operating lease at lease commencement if the lease would have been classified as a sales-type lease or direct financing lease under Accounting Standards Codification (“ASC”) 842 classification criteria and the lessor would have otherwise recognized a day one loss. The ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU 2021-05 effective January 1, 2022. The adoption did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848): Scope” (“ASU 2021-01”). Together, these accounting updates provide optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 provides, among other things, guidance that modifications of contracts within the scope of Topic 470, Debt, should be accounted for by prospectively adjusting the effective interest rate; modifications of contracts within the scope of Topic 842, Leases, should be accounted for as a continuation of the existing contract; and changes in the critical terms of hedging relationships caused by reference rate reform should not result in the de-designation of the instrument, provided certain criteria are met. ASU 2021-01 clarifies the scope and application of ASU 2020-04 and among other things, permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows. In June 2022, the Company applied the optional expedients provided by these accounting updates for contract modifications to the amendment of its senior credit facilities (see Note 8). The adoption of these accounting updates did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

New Accounting Standards Not Yet Adopted

In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”). The amendments in this ASU require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. This ASU also provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company will evaluate the potential impacts ASU 2021-08 may have on its Condensed Consolidated Financial Statements upon its adoption on effective date as it relates to future acquisitions.

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Note 3: Acquisitions

2022 Acquisition of The CW

On September 30, 2022, Nexstar completed its acquisition of a 75.0% ownership interest in The CW from affiliates of Paramount Global and Warner Bros. Discovery (collectively the “Sellers”) for no purchase consideration. Upon closing, each of the Sellers retained a 12.5% ownership interest and will continue to produce 12 original, scripted series for The CW primarily to air during the 2022 / 2023 broadcast season. The Sellers have granted Nexstar a call right and Nexstar has granted each of the Sellers a put right for the Seller’s ownership interests beginning in August 2024 and June 2026, respectively. The acquisition is expected to solidify Nexstar’s revenue opportunities as the largest CW affiliate, diversify its content outside of news, establish it as a participant in advertising video-on-demand services via The CW App and create value by improving The CW ratings, revenue, and profitability.

The transaction was accounted for under the acquisition method of accounting. Subject to final determination, which is expected to occur within twelve months of the acquisition date, the provisional fair values of the assets acquired, liabilities assumed and the noncontrolling interests at the acquisition date are as follows (in millions):

Assets acquired
Cash and cash equivalents	$	28.9
Accounts receivable		56.3
Broadcast rights		123.6
Intangible assets		16.6
Other noncurrent assets		6.7
Total assets acquired		232.1
Liabilities assumed:
Accounts payable and accrued expenses		(25.6	)
Broadcast rights payable		(96.9	)
Deferred tax liabilities		(18.5	)
Other liabilities		(12.8	)
Total liabilities assumed		(153.8	)
Net assets acquired		78.3
Consideration paid		-
Noncontrolling interests		(24.2	)
Gain on bargain purchase	$	54.1

Broadcast rights and broadcast rights payable (related party balances) pertains to The CW’s costs of acquiring programming from the Sellers and were valued using the replacement cost method as of Nexstar’s acquisition due to their short-term nature. Broadcast rights (of which majority are included in the current assets) will be amortized beginning in the fourth quarter of 2022.

As a result of the acquisition, Nexstar recognized a gain on bargain purchase of $54.1 million representing the excess of the fair value of the net assets acquired over the $0 purchase consideration paid and the fair value of the noncontrolling interests. This gain is presented as a separate line item in the accompanying Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022. Nexstar believes it was able to acquire The CW for $0 purchase consideration due to the recurring losses of The CW and its position as the largest affiliate of The CW which it believes limited the number of interested acquirers, Nexstar’s agreement to commit The CW to acquire additional programming from the Sellers for the 2022 / 2023 broadcast season, and Nexstar’s agreement to allow the Sellers to distribute certain short and long-term accounts receivables related to previously-aired programming to the Sellers prior to closing.

The intangible assets will be amortized over an estimated useful life of 4.5 years beginning in the fourth quarter of 2022.

During the three and nine months ended September 30, 2022, transaction costs related to this acquisition were not material. The CW’s operating results will be included in our consolidated statements of operations beginning in the fourth quarter of 2022.

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Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information has been presented for the periods indicated as if Nexstar’s acquisition of The CW had occurred on January 1, 2021 (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net revenue	$	1,370.6	$	1,261.1	$	4,026.8	$	3,691.6
Income before income taxes		248.0		157.9		642.5		483.6
Net income		178.9		106.5		488.4		350.6
Net income attributable to Nexstar		198.4		127.4		562.8		439.6

The unaudited pro forma financial information combines the historical results of operations, adjusted for business combination accounting effects including transaction costs, the gain on bargain purchase, the amortization charges from acquired intangible assets and the related tax effects.

The unaudited pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition of The CW had taken place on January 1, 2021, because the pro forma results do not reflect expected synergies.

2021 Acquisition of The Hill

On August 20, 2021, pursuant to a merger agreement, Nexstar acquired 100% of the outstanding equity of News Communications, Inc. (“NCI”), then a Nevada corporation, for a total cash consideration of approximately $137.7 million, including preliminary working capital adjustments, funded by cash on hand. NCI is the owner of “The Hill,” an independent, political digital media platform. On August 27, 2021, NCI received approval for its conversion from a Nevada corporation to a Delaware corporation. The acquisition marked the continuation of Nexstar’s content-first strategy designed to further leverage and monetize its expansive digital reach.

The fair values of the assets acquired and liabilities assumed are as follows (in millions):

Assets acquired
Cash and cash equivalents	$	7.7
Accounts receivable, net		8.2
Prepaid expenses and other current assets		0.3
Property and equipment		0.7
Goodwill		69.1
Other intangible assets		67.9
Other noncurrent assets		3.1
Total assets acquired		157.0
Accounts payable		(1.0	)
Accrued expenses		(2.2	)
Other current liabilities		(1.1	)
Deferred tax liabilities		(12.6	)
Other noncurrent liabilities		(2.4	)
Total net assets acquired	$	137.7

The fair value assigned to goodwill is attributable to operating expense reductions and revenue synergies. The carryover tax bases in goodwill, other intangible assets and property and equipment are deductible for tax purposes but are not significant. Other intangible assets are amortized over an estimated weighted average useful life of 6.7 years.

The net revenue, operating income and transaction costs from the acquisition date to September 30, 2021 have been included in the accompanying Condensed Consolidated Statements of Operations but were not significant.

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Note 4: Intangible Assets and Goodwill

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

	Estimated	September 30, 2022							December 31, 2021
	useful life,			Accumulated							Accumulated
	in years	Gross		Amortization			Net		Gross		Amortization			Net
Network affiliation agreements	15	$	3,125.2	$	(1,206.7	)	$	1,918.5	$	3,125.2	$	(1,065.0	)	$	2,060.2
Other definite-lived intangible assets	1-20		1,070.6		(478.4	)		592.2		1,045.0		(388.1	)		656.9
Other intangible assets		$	4,195.8	$	(1,685.1	)	$	2,510.7	$	4,170.2	$	(1,453.1	)	$	2,717.1

The decrease in definite-lived intangible assets was primarily due to amortization, partially offset by the acquisition of The CW (see Note 3).

The following table presents the Company’s estimate of amortization expense for the remainder of 2022, each of the five succeeding years ended December 31 and thereafter for definite-lived intangible assets as of September 30, 2022 (in millions):

Remainder of 2022	$	76.2
2023		297.3
2024		294.2
2025		289.9
2026		265.4
2027		252.6
Thereafter		1,035.1
	$	2,510.7

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

	Goodwill							FCC Licenses
			Accumulated							Accumulated
	Gross		Impairment			Net		Gross		Impairment			Net
Balances as of December 31, 2021	$	3,141.4	$	(89.8	)	$	3,051.6	$	2,957.7	$	(47.4	)	$	2,910.3
Balances as of September 30, 2022	$	3,141.4	$	(89.8	)	$	3,051.6	$	2,957.7	$	(47.4	)	$	2,910.3

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 nine months ended September 30, 2022, the Company did not identify events that would trigger impairment assessments.

Note 5: Investments

The Company’s investments and their book value balances consisted of the following (in millions):

	September 30, 2022		December 31, 2021
Equity method investments	$	1,086.5	$	1,208.9
Other equity investments		2.2		9.9
Total investments	$	1,088.7	$	1,218.8

Equity Method Investments

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

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During the three and nine months ended September 30, 2022 and 2021, the income from equity method investments, net reported in the Company’s unaudited Condensed Consolidated Statements of Operations consisted of the following (in millions):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Income from equity method investments, net, before amortization of basis difference	$	54.1		$	55.1		$	162.7		$	185.9
Amortization of basis difference		(17.5	)		(34.3	)		(52.5	)		(108.2	)
Income from equity method investments, net	$	36.6		$	20.8		$	110.2		$	77.7

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

Investment in TV Food Network

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

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

The partnership agreement governing TV Food Network provides that the partnership shall, unless certain actions are taken by the partners, dissolve and commence winding up and liquidating TV Food Network upon the first to occur of certain enumerated liquidating events, one of which is a specified date of December 31, 2022. Nexstar intends to renew its partnership agreement with WBD for TV Food Network before expiration. In the event of a liquidation, Nexstar would be entitled to its proportionate share of distributions to partners, which the partnership agreement provides would occur as promptly as is consistent with obtaining fair market value for the assets of TV Food Network. The partnership agreement also provides that the partnership may be continued or reconstituted in certain circumstances.

As of September 30, 2022, Nexstar’s investment in TV Food Network had a book value of $1.069 billion, compared to $1.191 billion as of December 31, 2021.

As of September 30, 2022, Nexstar had a remaining share in amortizable basis difference of $483.9 million related to its investment in TV Food Network. This remaining amortizable basis difference had a remaining useful life of approximately 7 years as of September 30, 2022. As of December 31, 2021, Nexstar had a remaining share in amortizable basis difference of $536.1 million related to its investment in TV Food Network.

During the three months ended September 30, 2022, the Company received cash distributions from TV Food Network of $10.7 million, recognized income on equity of this investment of $55.1 million, and recorded amortization of basis difference (expense) related to this investment of $17.4 million.

During the nine months ended September 30, 2022, the Company received cash distributions from TV Food Network of $234.5 million, recognized income on equity of this investment of $165.0 million, and recorded amortization of basis difference (expense) related to this investment of $52.2 million.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net revenue	$	309.8	$	310.2	$	976.4	$	980.0
Costs and expenses		130.9		132.4		448.6		384.0
Income from operations		178.9		177.8		527.9		595.9
Net income		176.0		178.4		527.1		601.7
Net income attributable to Nexstar Media Group, Inc.		55.1		55.8		165.0		188.3

During the three and nine months ended September 30, 2022, there were no events or changes in circumstance that triggered the Company for an evaluation of its equity method investments for other-than-temporary impairment.

Note 6: Accrued Expenses

Accrued expenses consisted of the following (in millions):

	September 30, 2022		December 31, 2021
Compensation and related taxes	$	111.2	$	120.2
Interest payable		42.5		62.3
Network affiliation fees		76.4		45.9
Other		114.4		87.5
	$	344.5	$	315.9

Note 7: Retirement and Postretirement Plans

Nexstar has various funded, qualified non-contributory defined benefit retirement plans which cover certain employees and former employees. All of these retirement plans are frozen in terms of pay and service, except for a small plan representing approximately 2% of the total pension benefit obligations. Nexstar also has various retiree medical savings account plans which reimburse eligible retired employees for certain medical expenses and unfunded plans that provide certain health and life insurance benefits to certain retired employees.

The following tables provide the components of net periodic benefit cost (credit) for Nexstar’s pension and other postretirement benefit plans (“OPEB”) (in millions):

	Pension Benefit Plans						OPEB
	Three Months Ended September 30,						Three Months Ended September 30,
	2022			2021			2022		2021
Service cost	$	0.3		$	0.3		$	-	$	-
Interest cost		11.6			9.9			0.1		0.1
Expected return on plan assets		(22.7	)		(28.0	)		-		-
Amortization of prior service costs		-			0.3			-		-
Amortization of net loss		0.1			-			0.1		0.1
Net periodic benefit cost (credit)	$	(10.7	)	$	(17.5	)	$	0.2	$	0.2

	Pension Benefit Plans						OPEB
	Nine Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022		2021
Service cost	$	0.8		$	0.9		$	0.1	$	-
Interest cost		34.8			29.7			0.3		0.3
Expected return on plan assets		(68.2	)		(84.0	)		-		-
Amortization of prior service costs		0.1			0.9			-		-
Amortization of net loss		0.2			-			0.3		0.3
Net periodic benefit cost (credit)	$	(32.3	)	$	(52.5	)	$	0.7	$	0.6

During the three and nine months ended September 30, 2022, Nexstar did not make contributions to its qualified pension benefit plans. Nexstar does not anticipate it will be required to make contributions to such pension benefit plans in 2022.

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Note 8: Debt

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

	September 30, 2022			December 31, 2021
Nexstar
Term Loan A, due October 2023	$	-		$	485.4
Term Loan A, due September 2024		-			604.4
Term Loan A, due June 2027		2,394.7			-
Term Loan B, due January 2024		-			595.0
Term Loan B, due September 2026		1,719.3			2,644.3
5.625% Notes, due July 2027		1,756.5			1,785.0
4.75% Notes, due November 2028		1,000.0			1,000.0
Mission
Term Loan B, due June 2028		297.0			299.3
Revolving loans, due June 2027		61.5			-
Revolving loans, due October 2023		-			61.5
Total outstanding principal		7,229.0			7,474.9
Less: unamortized financing costs and discount - Nexstar Term Loan A, due October 2023		-			(1.1	)
Less: unamortized financing costs and discount - Nexstar Term Loan A, due September 2024		-			(5.1	)
Less: unamortized financing costs and discount - Nexstar Term Loan A, due June 2027		(8.8	)		-
Less: unamortized financing costs and discount - Nexstar Term Loan B, due January 2024		-			(5.6	)
Less: unamortized financing costs and discount - Nexstar Term Loan B, due September 2026		(38.2	)		(42.8	)
Add: unamortized premium, net of financing costs - Nexstar 5.625% Notes, due July 2027		4.5			5.2
Less: unamortized financing costs and discount - Nexstar 4.75% Notes, due November 2028		(7.3	)		(8.1	)
Less: unamortized financing costs and discount - Mission Term Loan B, due June 2028		(2.0	)		(2.3	)
Total outstanding debt		7,177.2			7,415.1
Less: current portion		(124.3	)		(47.2	)
Long-term debt, net of current portion	$	7,052.9		$	7,367.9

2022 Transactions

On June 21, 2022, Nexstar and Mission, an independently owned VIE consolidated by Nexstar, amended their respective credit agreements (also herein referred to as senior secured credit facilities). The amendments provided for the following:

•

$2,425.0 million in Nexstar Term Loan A, due June 2027

•

$550.0 million in Nexstar revolving credit facility, due June 2027 (no amounts were drawn from this facility as of September 30, 2022)

•

$75.0 million in Mission revolving credit facility, due June 2027 (Mission borrowed $61.5 million from this facility on June 21, 2022)

The proceeds from the Nexstar Term Loan A, due June 2027 were used to repay the following on June 21, 2022:

•

$485.4 million of Nexstar Term Loan A, due October 2023

•

$583.9 million of Nexstar Term Loan A, due September 2024

•

$445.0 million of Nexstar Term Loan B, due January 2024

•

$900.0 million of Nexstar Term Loan B, due September 2026

On June 21, 2022, Mission repaid the outstanding principal under its revolving loans, due October 2023 of $61.5 million, funded by the amount borrowed from its revolving credit facility, due June 2027 described above.

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Each of the above new loan and new revolving credit facilities has a five-year maturity and bears interest at a rate of term Secured Overnight Financing Rate (“SOFR”) for the applicable interest period plus a margin in the range of 1.25%–2.00% determined based on a leverage-based grid. The term SOFR for any interest period is the sum of the term SOFR screen rate published by the CME Group Benchmark Administration Limited (“CME”) term SOFR administrator plus a spread adjustment of 0.10%. The Nexstar Term Loan A, due June 21, 2027, has a 5% principal amortization each year, to be payable on a quarterly basis, with the remaining amount due at maturity. In connection with entry into the new loan and new revolving credit facilities, each of Nexstar and Mission also amended its respective credit agreement to, among others, streamline its notice obligations and update certain covenant terms, in each case, as set forth in such amended credit agreement. The remaining terms of each new loan and new revolving credit facilities are substantially the same as the existing terms in the Nexstar credit agreement in effect prior to the amendment and the Mission credit agreement in effect prior to the amendment, as applicable.

During the nine months ended September 30, 2022, Nexstar prepaid a total of $175.0 million in principal balance under its Term Loan B, repaid scheduled principal maturities of $53.1 million of its term loans, and repurchased and cancelled $28.5 million of its senior unsecured notes all funded by cash on hand.

As of September 30, 2022, the interest rates of the outstanding loans under the senior secured credit facilities were:

•

4.54% for Nexstar’s Term Loan A, due June 2027 (based on an applicable margin of 1.50%)

•

5.64% for Nexstar’s Term Loan B, due September 2026 (based on an applicable margin of 2.50%)

•

5.64% for Mission’s Term Loan B, due June 2028 (based on an applicable margin of 2.50%)

•

4.54% for Mission’s outstanding revolving loans, due June 2027 (based on an applicable margin of 1.50%)

Unused Commitments and Borrowing Availability

The Company had $529.1 million (net of outstanding standby letters of credit of $20.9 million) and $13.5 million of unused revolving loan commitments under the respective Nexstar and Mission senior secured credit facilities, all of which were available for borrowing, based on the covenant calculations as of September 30, 2022. The Company’s ability to access funds under its senior secured credit facilities depends, in part, on its compliance with certain financial covenants. As of September 30, 2022, the Company was in compliance with its financial covenants.

Collateralization and Guarantees of Debt

The Company’s credit facilities described above are collateralized by a security interest in substantially all the combined assets, excluding FCC licenses, the other assets of consolidated VIEs unavailable to creditors of Nexstar (See Note 2) and the assets of The CW. Nexstar (excluding The CW) guarantees full payment of all obligations incurred under the Mission senior secured credit facility in the event of its default. Mission is a guarantor of Nexstar’s senior secured credit facility, Nexstar’s 5.625% Notes due July 2027 and Nexstar’s 4.750% Notes due 2028.

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 2022 and 2031, are freely exercisable or assignable by Nexstar without consent or approval by Mission. The Company expects these option agreements to be renewed upon expiration.

Debt Covenants

The Nexstar credit agreement (senior secured credit facility) contains a covenant which requires Nexstar to comply with a maximum consolidated first lien net leverage ratio of 4.25 to 1.00. The financial covenant, which is formally calculated on a quarterly basis, is based on the combined results of the Company (excluding the operating results of The CW which Nexstar acquired the majority ownership interest on September 30, 2022). The Mission amended credit agreement does not contain financial covenant ratio requirements but does provide for default in the event Nexstar does not comply with all covenants contained in its credit agreement. As of September 30, 2022, Nexstar was in compliance with its financial covenants.

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Note 9: Leases

The Company as a Lessee

The Company has operating and finance leases for office space, tower facilities, antenna sites, studios and other real estate properties and equipment. The Company’s leases have remaining terms ranging from one month to 92 years, some of which may include options to extend the leases for periods ranging from two years to 99 years, and some of which may include options to terminate the leases within one year. The depreciable lives of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Lease contracts that the Company has executed but which had not yet commenced as of September 30, 2022 were not material. Finance lease contracts as of September 30, 2022 were also not material.

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

	Balance Sheet Classification	September 30, 2022			December 31, 2021
Operating lease right-of-use assets, net	Other noncurrent assets, net	$	281.9		$	288.3
Current operating lease liabilities	Operating lease liabilities	$	46.5		$	42.8
Noncurrent operating lease liabilities	Other noncurrent liabilities	$	233.6		$	237.9
Weighted Average Remaining Lease Term of Operating leases		8.2 years			8 years
Weighted Average Discount Rate of Operating leases			5.2	%		5.1	%

Operating lease expense for the three months ended September 30, 2022 was $14.9 million, of which $7.0 million and $7.9 million were included in Direct operating and Selling, general and administrative expenses, respectively, excluding depreciation and amortization, in the accompanying Condensed Consolidated Statements of Operations. Operating lease expense for the three months ended September 30, 2021 was $14.5 million, of which $6.9 million and $7.6 million were included in Direct operating and Selling, general and administrative expenses, respectively, excluding depreciation and amortization, in the accompanying Condensed Consolidated Statements of Operations.

Operating lease expense for the nine months ended September 30, 2022 was $44.7 million, of which $20.9 million and $23.8 million were included in Direct operating and Selling, general and administrative expenses, respectively, excluding depreciation and amortization, in the accompanying Condensed Consolidated Statements of Operations. Operating lease expense for the nine months ended September 30, 2021 was $42.2 million, of which $20.1 million and $22.1 million were included in Direct operating and Selling, general and administrative expenses, respectively, excluding depreciation and amortization, in the accompanying Condensed Consolidated Statements of Operations.

Cash paid for operating leases included in the operating cash flows was $43.2 million and $37.3 million for the nine months ended September 30, 2022 and 2021, respectively.

Future minimum lease payments under non-cancellable leases as of September 30, 2022 were as follows (in millions):

	Operating Leases
Remainder of 2022	$	15.5
2023		57.4
2024		54.1
2025		40.6
2026		34.1
2027		24.4
Thereafter		126.4
Total future minimum lease payments		352.5
Less: imputed interest		(72.4	)
Total	$	280.1

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Note 10: Fair Value Measurements

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

•

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

•

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

•

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

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

	September 30, 2022				December 31, 2021
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Nexstar
Term Loan A, due October 2023(1)	$	-	$	-	$	484.3	$	483.8
Term Loan A, due September 2024(1)		-		-		599.3		602.0
Term Loan A, due June 2027(1)		2,385.9		2,343.0		-		-
Term Loan B, due January 2024(1)		-		-		589.4		593.5
Term Loan B, due September 2026(1)		1,681.1		1,696.4		2,601.5		2,638.5
5.625% Notes, due July 2027(2)		1,761.0		1,611.6		1,790.2		1,880.4
4.75% Notes, due November 2028(2)		992.7		855.0		991.9		1,022.3
Mission
Term Loan B, due June 2028(1)		295.0		291.3		297.0		299.7
Revolving loans due June 2027(1)		61.5		58.4		-		-
Revolving loans due October 2023(1)		-		-		61.5		61.2

(1)

The fair value of senior secured and revolving credit facilities is computed based on borrowing rates currently available to the Company for bank loans with similar terms and average maturities. These fair value measurements are considered Level 3, as significant inputs to the fair value calculation are unobservable in the market. See Note 8 for information on changes in the carrying amounts of debt during 2022.

(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. See Note 8 for information on changes in the carrying amounts of debt during 2022.

During the three and nine months ended September 30, 2022, there were no events or changes in circumstance that triggered an impairment to the Company’s significant assets, including equity method investments, indefinite-lived intangible assets, long-lived assets and goodwill.

Note 11: Common Stock

On January 27, 2021, Nexstar’s Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $1.0 billion of its common stock, of which $638.2 million remained available as of December 31, 2021. On July 27, 2022, Nexstar’s Board of Directors approved a new share repurchase program authorizing the Company to repurchase up to an additional $1.5 billion of its common stock. During the three and nine months ended September 30, 2022, Nexstar repurchased a total of 1.2 million shares and 3.6 million shares of its common stock for $215.2 million and $621.3 million, respectively, funded by cash on hand, which were accounted for as treasury stock. As of September 30, 2022, the remaining available amount under the share repurchase authorization was $1.517 billion.

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

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On January 27, 2022, Nexstar’s Board of Directors approved a 29% increase in its quarterly cash dividend to $0.90 per share of outstanding common stock. During the three and nine months ended September 30, 2022, total dividend payments were $34.9 million and $108.3 million, respectively.

On June 13, 2022, Nexstar’s shareholders approved certain amendments to Nexstar’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) to eliminate Nexstar’s Class B common stock, par value $0.01 per share (the “Class B Common Stock”), and Class C common stock, par value $0.01 per share (the “Class C Common Stock”), which classes of common stock had no shares issued and outstanding prior to the date of shareholder approval of their elimination. The common stock (f/k/a Class A common stock) has been the only class of shares outstanding since 2013. On June 27, 2022, Nexstar filed a Certificate of Amendment No. 2 (the “Amendment”) to the Certificate of Incorporation with the Secretary of State of the State of Delaware to reflect the elimination of Nexstar’s Class B Common Stock and Class C Common Stock and make related changes. The Amendment became effective upon its filing with the Secretary of State of the State of Delaware on June 27, 2022.

Note 12: Income Taxes

Income tax expense was $81.9 million for the three months ended September 30, 2022 compared to $65.9 million for the same period in 2021. The effective tax rates were 22.2% and 28.0% for each of the respective periods. Changes in the valuation allowance resulted in an incremental income tax benefit of $5.1 million, or a 2.0% decrease to the effective tax rate in 2022. The gain on bargain purchase arising from the acquisition of The CW (see Note 3) resulted in a 3.1% decrease to the effective tax rate. Additionally, a provision to return adjustment in 2021 of $2.1 million resulted in a decrease to the effective tax rate of 0.9%.

Income tax expense was $206.0 million for the nine months ended September 30, 2022 compared to $196.3 million for the same period in 2021. The effective tax rates were 21.2% and 25.7% for each of the respective periods. In 2022, the income tax benefit attributable to excess benefit on stock options and restricted stock units increased by $23.0 million, or a 2.1% decrease to the effective tax rate. Changes in the valuation allowance also increased the income tax benefit in 2022 by $12.2 million, or a 1.5% decrease to the effective tax rate. The gain on bargain purchase arising from the acquisition of The CW (see Note 3) resulted in a 1.2% decrease to the effective tax rate. Additionally, certain state contingency reserves were reduced by $7.4 million in 2021 resulting in an increase of 1.0% to the effective rate between the two periods.

The Company calculates its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income or loss and adjusts the provision for discrete tax items recorded in the period. Future changes in the forecasted annual income projections, including changes due to the ongoing impact of the COVID-19 pandemic, could result in significant adjustments to quarterly income tax expense in future periods.

The Company also considered the ongoing impact of COVID-19 on its ability to realize deferred tax assets in the future and determined that such conditions did not change its overall valuation allowance positions.

Note 13: FCC Regulatory Matters

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

Media Ownership

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

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The FCC is required to review its media ownership rules every four years and to eliminate those rules it finds no longer “necessary in the public interest as a result of competition.” The FCC’s two most recent quadrennial reviews—those for 2010 and 2014—were eventually consolidated into a single proceeding that involved extensive litigation, an agency reconsideration and multiple court appeals, culminating in an April 1, 2021 decision by the U.S. Supreme Court which upheld the FCC’s elimination or relaxation of several rules. The 2018 quadrennial review, which the FCC commenced in December 2018, remains pending, and the FCC has solicited and received comments to update the record of that proceeding in the wake of the Supreme Court’s decision. Additionally, the FCC has an open proceeding to review the national television station ownership limit and has not yet opened its 2022 quadrennial review proceeding. Thus, the media ownership rules are subject to change as a result of current and future quadrennial reviews and in other proceedings.

Spectrum

The FCC has repurposed a portion of the broadcast television spectrum for wireless broadband use. Pursuant to federal legislation enacted in 2012, the FCC conducted an incentive auction in 2016-2017 for the purpose of making additional spectrum available to meet future wireless broadband needs. Under the auction statute and rules, certain television broadcasters accepted bids from the FCC to voluntarily relinquish their spectrum in exchange for consideration, and certain wireless broadband providers and other entities submitted successful bids to acquire the relinquished television spectrum. Television stations that did not relinquish their spectrum were “repacked” into the frequency band still remaining for television broadcast use.

In 2017, the Company received payment for eleven television stations that accepted bids and either moved to different channels or (in one case) discontinued operations. Seventy-four (74) full power stations owned by Nexstar and 17 full power stations owned by VIEs were assigned to new channels in the reduced post-auction television band. These stations have commenced operation on their new assigned channels and have ceased operating on their former channels. The Company is in the final stages of obtaining reimbursements for the costs of repacking these stations.

Retransmission Consent

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

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

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

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

Certain online video distributors (“OVDs”) have successfully or unsuccessfully sought to stream broadcast programming over the internet. In 2014, the U.S. Supreme Court held that an OVD’s retransmissions of broadcast television signals without the consent of the broadcast station violate federal copyright law. In December 2014, the FCC issued a Notice of Proposed Rulemaking proposing to interpret the term “MVPD” to encompass OVDs that make available for purchase multiple streams of video programming distributed at a prescheduled time and seeking comment on the effects of applying MVPD rules to such OVDs. The proceeding remains open. Although the FCC has not classified OVDs as MVPDs to date, several OVDs have signed agreements for retransmission of local stations within their markets, and others are actively seeking to negotiate such agreements.

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Note 14: Commitments and Contingencies

Guarantee of Mission Debt

Nexstar (excluding The CW) guarantees full payment of all obligations incurred under the Mission senior secured credit facility. In the event that Mission is unable to repay amounts due, Nexstar will be obligated to repay such amounts. The maximum potential amount of future payments that Nexstar would be required to make under this guarantee would be generally limited to the outstanding principal amounts. As of September 30, 2022, Mission had a maximum commitment of $372.0 million under its amended credit agreement, of which $358.5 million principal balance of debt was outstanding.

Indemnification Obligations

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

Litigation

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

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

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

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

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

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

Tribune Chapter 11 Reorganization and Confirmation Order Appeals— On December 8, 2008, Tribune and 110 of its direct and indirect wholly-owned subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief under chapter 11 (“Chapter 11”) of title 11 of the United States Code in the U.S. Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). On July 23, 2012, the Bankruptcy Court issued an order confirming the Fourth Amended Joint Plan of Reorganization for Tribune and its Subsidiaries (as such plan was subsequently modified by its proponents, the “Plan”). The Plan became effective and the Debtors emerged from Chapter 11 on December 31, 2012 (the “Effective Date”). The Bankruptcy Court has entered final decrees that have collectively closed all of the Debtors’ Chapter 11 cases except for Tribune’s Chapter 11 case, which continues to be administered under the caption In re Tribune Media Company Case No. 08-13141.

As of the Effective Date, approximately 7,400 proofs of claim had been filed against the Debtors. Amounts and payment terms for these claims, if applicable, were established in the Plan. The Plan requires Tribune to reserve cash in amounts sufficient to make certain additional payments that may become due and owing pursuant to the Plan subsequent to the Effective Date. As of September 30, 2022, restricted cash and cash equivalents held by Tribune to satisfy the remaining claim obligations were $15.6 million and are estimated to be sufficient to satisfy such obligations.

As of September 30, 2022, all but three proofs of claim against the Debtors had been withdrawn, expunged, settled or otherwise satisfied. The ultimate amounts to be paid in resolutions of the remaining proofs of claim continue to be subject to uncertainty. If the aggregate allowed amount of the remaining claims exceeds the restricted cash and cash equivalents held for satisfying such claims, Tribune would be required to satisfy the allowed claims from its cash on hand from operations.

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

On June 28, 2016, the Internal Revenue Service (“IRS”) issued Tribune a Notice of Deficiency which presented the IRS’s position that the gain with respect to the Chicago Cubs Transactions should have been included in Tribune’s 2009 taxable income. Accordingly, the IRS proposed a $182.0 million tax and a $73.0 million gross valuation misstatement penalty. During the third quarter of 2016, Tribune filed a petition in the U.S. Tax Court (the “Tax Court”) to contest the IRS’s determination. After-tax interest on the aforementioned proposed tax and penalty through September 30, 2022 would be approximately $150.0 million. In addition, if the IRS prevails with its position, under the tax rules for determining tax basis upon emergence from bankruptcy, the Company would be required to reduce its tax basis in certain assets. The reduction in tax basis would be required to reflect the reduction in the amount of the Company’s guarantee of the New Cubs partnership debt which was included in the reported tax basis previously determined upon emergence from bankruptcy and subject to Tribune’s 2014 and 2015 Federal Income Tax Audits (described below).

On September 19, 2019, Tribune became a wholly owned subsidiary of Nexstar following Nexstar’s merger with Tribune. Nexstar disagrees with the IRS’s position that the Chicago Cubs Transactions generated taxable gains in 2009, the proposed penalty and the IRS’s calculation of the taxable gains. If the IRS prevails in its position, the gain on the Chicago Cubs Transactions would be deemed to be taxable in 2009. Nexstar estimates that the federal and state income taxes would be approximately $225.0 million before interest and penalties. Any tax, interest and penalty due will be offset by tax payments made relating to this transaction subsequent to 2009. Tribune made approximately $154.0 million of tax payments prior to its merger with Nexstar.

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

On October 26, 2021, the Tax Court issued an opinion related to the Chicago Cubs Transactions, which held that Tribune’s structure was, in substantial part, in compliance with partnership provisions of the Code and, as a result, did not trigger the entire 2009 taxable gain proposed by the IRS. On October 19, 2022, the Tax Court entered the decision that there is no tax deficiency or penalty due in the 2009 tax year. Either party will have ninety days thereafter to file a notice of appeal to the Court of Appeals. The Company is currently evaluating an appeal for the holdings within the opinion which are unfavorable to the Company.

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As of September 30, 2022, Nexstar believes the tax impact of applying the Tax Court opinion to 2009 and its impact on subsequent tax years is not material to the Company’s accounting for uncertain tax positions or to its Consolidated Financial Statements. Although management believes its estimates and judgments are reasonable, the timing and ultimate resolution are unpredictable and could materially change.

Revenue Agent’s Report on Tribune’s 2014 to 2015 Federal Income Tax Audits— Prior to Nexstar’s merger with Tribune in September 2019, Tribune and a few of its subsidiaries were undergoing separate federal income tax audits for taxable years 2014 and 2015. In the third quarter of 2020, the IRS completed its audits of the acquired Tribune entities, and with the exception of Tribune, all other entity audits have been resolved and closed. For Tribune, the IRS issued a Revenue Agent’s Report which disallows the reporting of certain assets and liabilities related to Tribune’s emergence from Chapter 11 bankruptcy on December 31, 2012. Nexstar disagrees with the IRS’s proposed adjustments to the tax basis of certain assets and the related taxable income impact, and Nexstar is contesting the adjustments through the IRS administrative appeal procedures. If the IRS prevails with its position and after taking into account the impact of the Tax Court opinion, Nexstar would be required to reduce its tax basis in certain assets resulting in a $15.0 million increase in its federal and state taxes payable and a $71.0 million increase in deferred income tax liability as of September 30, 2022. In accordance with ASC Topic 740, the Company has appropriately reflected $11.0 million for certain contested issues in its liability for unrecognized tax positions at September 30, 2022 and December 31, 2021.

Note 15: Segment Data

The Company’s reportable broadcast segment includes (i) television stations and related community focused websites that Nexstar owns, operates, programs or provides sales and other services to in various markets across the United States, (ii) NewsNation, a national news and general entertainment cable network, (iii) two owned and operated digital multicast networks and other multicast network services, and (iv) WGN-AM, a Chicago radio station. The other activities of the Company include (i) corporate functions, (ii) The CW, in which Nexstar acquired a majority interest on September 30, 2022 (The CW’s assets of $232.1 million were included in our consolidated balance sheet and its operating results will be included in our consolidated statements of operations beginning in the fourth quarter of 2022; see Note 3 for additional information on this acquisition), (iii) the management of certain real estate assets, including revenues from leasing certain owned office and production facilities, (iv) digital businesses and (v) eliminations.

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

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

	Three Months Ended September 30,				Nine Months Ended September 30,
Net revenue	2022		2021		2022		2021
Broadcast	$	1,240.7	$	1,129.5	$	3,640.5	$	3,330.1
Other		28.4		27.5		83.8		72.4
Total net revenue	$	1,269.1	$	1,157.0	$	3,724.3	$	3,402.5

	Three Months Ended September 30,						Nine Months Ended September 30,
Operating income (loss)	2022			2021			2022			2021
Broadcast segment profit	$	514.3		$	421.2		$	1,487.5		$	1,244.2
Corporate (unallocated) and other		(47.3	)		(43.5	)		(137.2	)		(119.0	)
Depreciation and amortization		(117.0	)		(117.0	)		(350.5	)		(343.9	)
Payments for broadcast rights, net of amortization		5.6			10.9			16.5			40.6
Reimbursement from the FCC related to station repack		0.5			5.6			2.8			17.9
Miscellaneous, net		(0.8	)		0.2			(1.0	)		10.8
Income from operations	$	355.3		$	277.4		$	1,018.1		$	850.6

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Assets	September 30, 2022		December 31, 2021
Broadcast(1)	$	11,585.4	$	12,038.8
Corporate (unallocated) and other		1,512.9		1,225.7
	$	13,098.3	$	13,264.5

Goodwill	September 30, 2022		December 31, 2021
Broadcast	$	2,872.6	$	2,872.6
Other		179.0		179.0
	$	3,051.6	$	3,051.6

(1)

While the Company’s investment in TV Food Network ($1.069 billion at September 30, 2022 and $1.191 billion at December 31, 2021) has not been allocated to a Company reporting unit or operating segment, such asset has been included in the Company’s disclosure of Broadcast segment assets given the similar nature of the investment to that segment. For additional information on equity investments, see Note 5.

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

Three Months Ended September 30, 2022	Broadcast		Other		Consolidated
Core advertising	$	399.7	$	-	$	399.7
Political advertising		129.3		-		129.3
Distribution		641.2		0.5		641.7
Digital		59.6		26.1		85.7
Other		10.9		1.8		12.7
Total net revenue	$	1,240.7	$	28.4	$	1,269.1

Nine Months Ended September 30, 2022	Broadcast		Other		Consolidated
Core advertising (local and national)	$	1,240.8	$	-	$	1,240.8
Political advertising		239.7		-		239.7
Distribution		1,955.1		0.6		1,955.7
Digital		174.8		77.8		252.6
Other		30.1		5.4		35.5
Total net revenue	$	3,640.5	$	83.8	$	3,724.3

Three Months Ended September 30, 2021	Broadcast		Other		Consolidated
Core advertising	$	432.7	$	-	$	432.7
Political advertising		12.4		-		12.4
Distribution		618.7		0.1		618.8
Digital		55.5		25.6		81.1
Other		10.2		1.8		12.0
Total net revenue	$	1,129.5	$	27.5	$	1,157.0

Nine Months Ended September 30, 2021	Broadcast		Other		Consolidated
Core advertising (local and national)	$	1,267.9	$	-	$	1,267.9
Political advertising		26.3		-	$	26.3
Distribution		1,856.9		0.1	$	1,857.0
Digital		153.9		67.0	$	220.9
Other		25.1		5.3	$	30.4
Total net revenue	$	3,330.1	$	72.4	$	3,402.5

The Company primarily derives its revenues from television and digital advertising and from distribution of its stations’ signals and networks. During the three and nine months ended September 30, 2022, revenues from these sources for two of the Company’s customers exceeded 10%. Each of these customers represents approximately 11% and 12% of the Company’s consolidated net revenues during the three and nine months ended September 30, 2022. During the three and nine months ended September 30, 2021, revenues from these sources for two of the Company’s customers exceeded 10%. Each of these customers represents approximately 12% and 13% of the Company’s consolidated net revenues during the three and nine months ended September 30, 2021.

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Advertising revenue (core, 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/or presidential elections occur and advertising is aired during the Olympic Games.

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

Note 16: Subsequent Events

From October 1, 2022 to November 7, 2022, we repurchased 570,514 shares of our common stock for $100.0 million, funded by cash on hand. As of the date of filing this Quarterly Report on Form 10-Q, the total remaining available amount under the existing and new share repurchase authorizations was $1.417 billion.

On October 19, 2022, a buyer exercised an option to purchase certain real estate property from Nexstar for gross cash proceeds of $201.5 million. Subject to the completion of certain closing conditions, Nexstar anticipates completing the sale in the fourth quarter of 2022. Nexstar estimates a pre-tax loss on disposal of approximately $36.0 million which will be recorded should the sale close. In the accompanying condensed consolidated balance sheets, the real estate was not classified as held for sale given the uncertainty associated with the exercise of the option as of September 30, 2022.

On October 28, 2022, Nexstar’s Board of Directors declared a quarterly cash dividend of $0.90 per share of its common stock. The dividend is payable on November 28, 2022 to stockholders of record on November 14, 2022.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and related Notes included elsewhere in this Quarterly Report on Form 10-Q and the Consolidated Financial Statements and related Notes contained in our Annual Report on Form 10-K for the year ended December 31, 2021.

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 wholly-owned subsidiary Nexstar Media Inc. (formerly known as Nexstar Inc. and Nexstar Broadcasting, Inc.), a Delaware corporation; the “Company” refers to Nexstar and the variable interest entities (“VIE”) required to be consolidated in our financial statements; and all references to “we,” “our,” “ours,” and “us” refer to Nexstar.

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

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: the risks and uncertainties associated with the COVID-19 pandemic; general economic and market conditions, including inflation and increasing interest rates; any projections or expectations of earnings, revenue, financial performance, liquidity and capital resources or other financial items; any assumptions or projections about the television broadcasting industry; any statements of our plans, strategies and objectives for our future operations, performance, liquidity and capital resources or other financial items; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and other similar words.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ from a projection or assumption in any of our forward-looking statements. Our future financial position and results of operations, as well as any forward-looking statements, are subject to change and the inherent risks and uncertainties, including those described in our Annual Report on Form 10-K for the year ended December 31, 2021 and in our other filings with the United States Securities and Exchange Commission (“SEC”). The forward-looking statements made in this Quarterly Report on Form 10-Q are made only as of the date hereof, and we do not have or undertake any obligation to update any forward-looking statements to reflect subsequent events or circumstances.

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Executive Summary

2022 Highlights

•

During the third quarter of 2022, net revenue increased by $112.1 million, or 9.7%, compared to the same period in 2021. The increase was primarily due to an increase in political advertising revenue of our stations of $116.9 million, as 2022 is a Congressional election year, and an increase in distribution revenue of Company stations of $22.9 million. These increases were partially offset by a decrease in revenue from core advertising of $33.0 million.

•

On June 13, 2022, Nexstar’s shareholders approved an amendment to Nexstar’s certificate of incorporation to eliminate Nexstar’s Class B common stock and Class C common stock, which classes of common stock had no shares issued and outstanding. The common stock (f/k/a Class A common stock) has been the only class of shares outstanding since 2013. The elimination of Class B common stock and Class C common stock became effective upon the filing of the certificate of amendment to certificate of incorporation with the Secretary of State of the State of Delaware on June 27, 2022.

•

In June 2022, Nexstar’s NewsNation network expanded its morning news programming with the addition of “Early Morning,” a new one-hour cable news program. Following the addition of this new program, NewsNation currently offers a total of 86 hours of live national news, analysis, and talk every week, which is more than four times the number of news hours on the network at its launch in September 2020.

•

In June 2022, Nexstar completed the sale of a real estate asset located in Chicago for gross cash proceeds of $45.3 million.

•

On July 27, 2022, Nexstar’s Board of Directors approved a new share repurchase program authorizing the Company to repurchase up to an additional $1.5 billion of its common stock. During the three and nine months ended September 30, 2022, we repurchased a total of 1,197,138 shares and 3,569,673 shares, respectively, of our common stock for $215.2 million and $621.3 million, respectively, funded by cash on hand. From October 1, 2022 to November 7, 2022, we repurchased 570,514 shares of our common stock for $100.0 million, funded by cash on hand. As of the date of filing this Quarterly Report on Form 10-Q, the total remaining available amount under the existing and new share repurchase authorizations was $1.417 billion.
 

•

For each of the three quarters of 2022, our Board of Directors declared and paid cash dividends of $0.90 per share of our outstanding common stock, or total dividend payments of $108.3 million.

•

During the three and nine months ended September 30, 2022, we received $10.7 million and $234.5 million, respectively, in cash distribution from our 31.3% equity method investment in TV Food Network.

•

Nexstar-owned and partner stations and NewsNation delivered mid-term election coverage, hosting 50 local and statewide candidate debates and forums from the primaries through Election Day.

•

On October 19, 2022, a buyer exercised its option to purchase certain of our real estate property for gross cash proceeds of $201.5 million. Subject to the completion of certain closing conditions, we anticipate completing the sale in the fourth quarter of 2022. We estimate a pre-tax loss on disposal of approximately $36.0 million which will be recorded should the sale close.

2022 Acquisition of The CW

•

On September 30, 2022, Nexstar acquired a 75.0% ownership interest in The CW Network, LLC (“The CW”) from affiliates of Paramount Global and Warner Bros. Discovery (collectively the “Sellers”) for no purchase consideration. Upon closing, each of the Sellers retained a 12.5% ownership interest and will continue to produce 12 original, scripted series for The CW primarily to air during the 2022 / 2023 broadcast season. The Sellers have granted Nexstar a call right and Nexstar has granted each of the Sellers a put right for the Seller’s ownership interests beginning in August 2024 and June 2026, respectively. The acquisition is expected to solidify Nexstar’s revenue opportunities as the largest CW affiliate, diversify its content outside of news, establish it as a participant in advertising video-on-demand services via The CW App and create value by improving The CW ratings, revenue, and profitability. As a result of the acquisition, Nexstar recognized a gain on bargain purchase of $54.1 million in the third quarter of 2022 representing the excess of the fair value of the net assets acquired over the $0 purchase consideration and the fair value of noncontrolling interests. The CW’s operating results will be included in our consolidated statements of operations beginning in the fourth quarter of 2022. For additional information on this acquisition, see Note 3, “Acquisitions” to our Condensed Consolidated Financial Statements.

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Debt Transactions

•

On June 21, 2022, Nexstar and Mission Broadcasting, Inc. (“Mission”), an independently owned VIE consolidated by Nexstar, amended their respective credit agreements (also herein referred to as senior secured credit facilities). The amendments provided for (i) a $2,425.0 million Nexstar Term Loan A, due June 2027, the proceeds of which were used to repay various Nexstar term loans with a total outstanding principal balance of $2,414.3 million, (ii) a $550.0 million Nexstar revolving credit facility, due June 2027, of which no amount was drawn as of September 30, 2022, (iii) a $75.0 million Mission revolving credit facility, of which $61.5 million was drawn and the proceeds used to repay the outstanding Mission revolving loan of $61.5 million.

•

During the nine months ended September 30, 2022, Nexstar prepaid a total of $175.0 million in principal balance under its Term Loan B, repaid scheduled principal maturities of $53.1 million of its term loans, and repurchased and cancelled $28.5 million of its senior unsecured notes all funded by cash on hand.

Overview of Operations

As of September 30, 2022, we owned, operated, programmed or provided sales and other services to 199 full power television stations and one AM radio station, including those owned by VIEs, in 116 markets in 39 states and the District of Columbia. The stations are affiliates of ABC, NBC, FOX, CBS, The CW, MyNetworkTV (“MNTV”) and other broadcast television networks. Through various local service agreements, we provided sales, programming and other services to 36 full power television stations owned by independent third parties, of which 35 full power television stations are VIEs that are consolidated into our financial statements. We also own NewsNation, a national news and general entertainment cable network, a recently acquired 75.0% ownership interest in The CW, the fifth major broadcast network in the U.S., two digital multicast networks and other multicast network services, and a 31.3% ownership stake in Television Food Network, G.P. (“TV Food Network”). Our digital assets include 120 local websites and 239 mobile applications, national digital properties including NewsNationNow, The Hill, BestReviews, and a suite of advertiser solutions.

Nexstar (excluding The CW) guarantees full payment of all obligations incurred under Mission’s senior secured credit facility in the event of its default. Mission is a guarantor of our senior secured credit facility, our 5.625% Notes due July 2027 and our 4.75% Notes due November 2028. 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 2022 and 2031) are freely exercisable or assignable by us without consent or approval by Mission or its shareholders. We expect these option agreements to be renewed upon expiration.

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

See Note 2, “Variable Interest Entities” to our unaudited Condensed Consolidated Financial Statements for additional information on VIEs, including a discussion of the local service agreements we have with these independent third parties.

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Regulatory Developments

As a television broadcaster, the Company is highly regulated, and its operations require that it retain or renew a variety of government approvals and comply with changing federal regulations. On April 1, 2021, the U.S. Supreme Court issued a decision that reversed a lower court of appeals ruling and upheld the FCC’s elimination of certain of its media ownership rules in the agency’s 2010/2014 quadrennial review of those rules. Among the regulations eliminated in 2021 as a result of the Supreme Court ruling was a rule providing that a television station licensee which sells more than 15 percent of the weekly advertising inventory of another television station in the same market under a JSA is deemed to have an attributable ownership interest in that station, as well as a requirement that at least eight independently owned television stations remain in a local television market for a party to acquire a second station in that market. While these restrictions are no longer in effect, the FCC’s 2018 quadrennial media ownership review is currently pending and the 2022 quadrennial review has not yet commenced. An FCC proceeding is also pending to review the current national limit on television station ownership. The FCC could reinstitute its earlier restrictions or impose other limitations in these or any future reviews.

The FCC has repurposed a portion of the broadcast television spectrum for wireless broadband use. In an incentive auction which concluded in April 2017, certain television broadcasters accepted bids from the FCC to voluntarily relinquish their spectrum in exchange for consideration. Television stations that did not relinquish their spectrum were “repacked” into the frequency band still remaining for television broadcast use. The Company has received payment for eleven television stations that accepted bids and either moved to different channels or (in one case) discontinued operations. Seventy-four (74) full power stations owned by Nexstar and 17 full power stations owned by VIEs were assigned to new channels in the reduced post-auction television band. These stations have commenced operation on their new assigned channels and have ceased operating on their former channels. The Company is in the final stages of obtaining reimbursements for the costs of repacking these stations.

Seasonality

Advertising revenue is positively affected by national and regional political election campaigns and certain events such as the Olympic Games or the Super Bowl. Advertising revenue is generally highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to, and including, the holiday season. In addition, advertising revenue is generally higher during even-numbered years, when congressional and/or presidential elections occur and from advertising aired during the Olympic Games. As 2022 is a mid-term election year, we expect an increase in political advertising revenue to be reported in 2022 compared to 2021.

Historical Performance

Revenue

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

	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
	Amount		%		Amount		%		Amount		%		Amount		%
Core advertising	$	399.7		31.4	$	432.7		37.4	$	1,240.8		33.3	$	1,267.9		37.3
Political advertising		129.3		10.2		12.4		1.1		239.7		6.4		26.3		0.8
Distribution		641.7		50.6		618.8		53.5		1,955.7		52.5		1,857.0		54.6
Digital		85.7		6.8		81.1		7.0		252.6		6.8		220.9		6.5
Other		12.7		1.0		12.0		1.0		35.5		1.0		30.4		0.8
Total net revenue	$	1,269.1		100.0	$	1,157.0		100.0	$	3,724.3		100.0	$	3,402.5		100.0

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Results of Operations

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

	Three Months Ended September 30,											Nine Months Ended September 30,
	2022					2021						2022						2021
	Amount			%		Amount			%			Amount			%			Amount			%
Net revenue	$	1,269.1			100.0	$	1,157.0			100.0		$	3,724.3			100.0		$	3,402.5			100.0
Operating expenses (income):
Direct operating expenses		511.1			40.3		480.1			41.5			1,502.7			40.3			1,391.8			40.9
Selling, general and administrative expenses, excluding corporate		208.3			16.4		211.4			18.3			626.0			16.8			611.9			18.0
Corporate expenses		52.5			4.1		46.8			4.0			149.2			4.0			132.2			3.9
Amortization of broadcast rights		25.4			2.0		29.9			2.6			80.6			2.3			92.4			2.7
Amortization of intangible assets		76.8			6.0		75.7			6.5			231.9			6.2			223.2			6.6
Depreciation of property and equipment		40.2			3.2		41.3			3.6			118.6			3.2			120.7			3.5
Reimbursement from the FCC related to station repack		(0.5	)		-		(5.6	)		(0.5	)		(2.8	)		(0.1	)		(17.9	)		(0.5	)
Other		-			-		-			-			-			-			(2.4	)		(0.1	)
Total operating expenses		913.8					879.6						2,706.2						2,551.9
Income from operations	$	355.3				$	277.4					$	1,018.1					$	850.6

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Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

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

Revenue

Core advertising revenue was $399.7 million for the three months ended September 30, 2022, compared to $432.7 million for the same period in 2021, a decrease of $33.0 million, or 7.6%, primarily due to a weaker national advertising market, the absence of advertising revenue from Olympics on our NBC affiliate stations and changes in the mix between our core and political advertising revenues. Key categories responsible for the decline were gaming/sports betting, government services, insurance, direct response, and medical/healthcare, partially offset by increases in drug stores/medication, automotive, home repair/manufacturing, attorneys and entertainment. Automotive, our largest advertiser category, represented approximately 16% and 14% of our core advertising revenue for the three months ended September 30, 2022 and 2021, respectively. Overall, automotive advertising revenues increased by approximately 5% during the quarter compared to 2021. To the extent that the COVID-19 pandemic continues to have a negative impact on the U.S. economy, our results will be affected.

Political advertising revenue was $129.3 million for the three months ended September 30, 2022, compared to $12.4 million for the same period in 2021, an increase of $116.9 million, as 2022 is a mid-term election year.

Distribution revenue was $641.7 million for the three months ended September 30, 2022, compared to $618.8 million for the same period in 2021, an increase of $22.9 million, or 3.7%. The increase was reflective of scheduled annual escalation of rates per subscriber and renewals of contracts in 2021 providing for higher rates per subscriber, partially offset by MVPD subscriber attrition. We anticipate continued increase of retransmission fees until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers.

Digital revenue, representing advertising revenue on our stations’ web and mobile sites and other internet-based revenue, was $85.7 million for the three months ended September 30, 2022, compared to $81.1 million for the same period in 2021, an increase of $4.6 million, or 5.7% (no significant change).

Operating Expenses

Station direct operating expenses, consisting primarily of news, engineering, programming and station selling, general and administrative expenses, were $719.4 million for the three months ended September 30, 2022, compared to $691.5 million for the same period in 2021, an increase of $27.9 million, or 4.0%, primarily due to an increase in costs related to NewsNation’s shift from syndicated programming to national news programming, an increase in variable costs associated with the increase in net revenue and a full quarter of expenses related to the digital acquisition we completed in the third quarter of 2021.

Corporate expenses, related to costs associated with the centralized management of our stations, were $52.5 million for the three months ended September 30, 2022, compared to $46.8 million for the same period in 2021, an increase of $5.7 million (no significant change).

The following operating expenses did not significantly change during the three months ended September 30, 2022, compared to the same period in 2021:

•

Amortization of broadcast rights was $25.4 million for the three months ended September 30, 2022, compared to $29.9 million for the same period in 2021, a decrease of $4.5 million.

•

Amortization of intangible assets was $76.8 million for the three months ended September 30, 2022, compared to $75.7 million for the same period in 2021, an increase of $1.1 million.

•

Depreciation of property and equipment was $40.2 million for the three months ended September 30, 2022, compared to $41.3 million for the same period in 2021, a decrease of $1.1 million.

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Gain on bargain purchase

Gain on bargain purchase of $54.1 million for the three months ended September 30, 2022 pertains to our acquisition of The CW representing the excess of the fair value of the net assets acquired over the $0 purchase consideration and the fair value of noncontrolling interests. For additional information on this acquisition, see Note 3, “Acquisitions” to our Condensed Consolidated Financial Statements.

Income from Equity Method Investments, net

Income from equity method investments, net was $36.6 million for the three months ended September 30, 2022, compared to $20.8 million for the same period in 2021, an increase of $15.8 million primarily due to a decrease in the amortization of basis difference associated with our investment in TV Food Network of $16.8 million. For additional information on basis difference in our investment in TV Food Network, refer to Note 5 to our Condensed Consolidated Financial Statements.

Interest Expense, net

Interest expense, net was $88.6 million for the three months ended September 30, 2022, compared to $70.4 million for the same period in 2021, an increase of $18.2 million primarily due to increases in interest rates in the Company’s outstanding loans under its senior secured credit facilities, partially offset by decreases in interest expense from debt repayments and lower interest rates obtained in connection with the refinancing of our certain term loans in June 2022. Interest rates on outstanding loans under the Company’s senior secured credit facilities ranged from 4.54% to 5.64% as of September 30, 2022, compared to interest rates ranging from 1.58% to 2.58% as of September 30, 2021. These interest rates were a mixture of SOFR plus applicable margin and U.S. LIBOR plus applicable margin in 2022 compared to U.S. LIBOR plus applicable margin only in 2021.

Pension and Oher Postretirement Plans Credit, net

Pension and other postretirement plans credit, net was $11.0 million for the three months ended September 30, 2022, compared to $17.7 million for the same period in 2021, a decrease of $6.7 million.

Income Taxes

Income tax expense was $81.9 million for the three months ended September 30, 2022 compared to $65.9 million for the same period in 2021. The effective tax rates were 22.2% and 28.0% for each of the respective periods. Changes in the valuation allowance resulted in an incremental income tax benefit of $5.1 million, or a 2.0% decrease to the effective tax rate in 2022. The gain on bargain purchase arising from the acquisition of The CW (see Note 3) resulted in a 3.1% decrease to the effective tax rate. Additionally, a provision to return adjustment in 2021 of $2.1 million resulted in a decrease to the effective tax rate of 0.9%.

The Company calculates its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income or loss and adjusts the provision for discrete tax items recorded in the period. Future changes in the forecasted annual income projections, including changes due to the impact of the COVID-19 pandemic, could result in significant adjustments to quarterly income tax expense in future periods.

On August 16, 2022, the U.S. President signed the Inflation Reduction Act of 2022 (“IRA”) into law. The IRA contains a number of revisions to the Internal Revenue Code, including a 15% corporate minimum income tax and a 1% excise tax on corporate stock repurchases in tax years beginning January 1, 2023. While these tax law changes have no immediate effect and are not expected to have a material impact on our future results of operations, we will continue to evaluate the provisions of the IRA.

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Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

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

Revenue

Core advertising revenue was $1,240.8 million for the nine months ended September 30, 2022, compared to $1,267.9 million for the same period in 2021, a decrease of $27.1 million, or 2.1%, primarily due to a weaker national advertising market, the absence of third quarter advertising revenue from the Olympics on our NBC affiliate stations and changes in the mix between our core and political advertising revenues. Key categories driving the decrease were automotive, direct response, insurance, government services and gaming/sports betting partially offset by increases in entertainment, travel, home repair/manufacturing, telecom, and attorneys. Automotive, our largest advertiser category, represented approximately 15% and 16% of our core advertising revenue for the nine months ended September 30, 2022 and 2021, respectively. Overall, automotive advertising revenues decreased by approximately 10% during the period compared to 2021, primarily due to the current shortage in supply of chips and semiconductors which impacted the availability of automobiles for sale and the need by automotive dealers to advertise. To the extent that the COVID-19 pandemic continues to have a negative impact on the U.S. economy, our results will be affected.

Political advertising revenue was $239.7 million for the nine months ended September 30, 2022, compared to $26.3 million for the same period in 2021, an increase of $213.4 million, as 2022 is a mid-term election year.

Distribution revenue was $1,955.7 million for the nine months ended September 30, 2022, compared to $1,857.0 million for the same period in 2021, an increase of $98.7 million, or 5.3%. The increase was reflective of scheduled annual escalation of rates per subscriber and renewals of contracts in 2021 providing for higher rates per subscriber, partially offset by MVPD subscriber attrition. We anticipate continued increase of retransmission fees until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers.

Digital revenue, representing advertising revenue on our stations’ web and mobile sites and other internet-based revenue, was $252.6 million for the nine months ended September 30, 2022, compared to $220.9 million for the same period in 2021, an increase of $31.7 million, or 14.4%. The increase was primarily due to incremental revenue from a digital business we acquired in 2021 of $22.1 million and a net increase in revenue from our stations and other digital businesses of $9.6 million.

Operating Expenses

Station direct operating expenses, consisting primarily of news, engineering, programming and station selling, general and administrative expenses, were $2,128.7 million for the nine months ended September 30, 2022, compared to $2,003.7 million for the same period in 2021, an increase of $125.0 million, or 6.2%, primarily due to an increase in costs related to NewsNation’s shift from syndicated programming to national news programming, an increase in variable costs associated with the increase in net revenue, an increase in station programming costs due to network affiliation renewals and annual increases in network affiliation costs, and incremental operating expenses related to the digital acquisition we completed in the third quarter of 2021.

Corporate expenses, related to costs associated with the centralized management of our stations, were $149.2 million for the nine months ended September 30, 2022, compared to $132.2 million for the same period in 2021, an increase of $17.0 million primarily due to an increase in stock-based compensation of $9.1 million related to new equity incentive awards.

Amortization of broadcast rights was $80.6 million for the nine months ended September 30, 2022, compared to $92.4 million for the same period in 2021, a decrease of $11.8 million, or 12.8%, primarily due to reduction in amortization costs on our legacy stations due to renegotiation of certain film contracts which resulted in reduced distribution rates.

The following operating expenses did not significantly change during the nine months ended September 30, 2022, compared to the same period in 2021:

•

Amortization of intangible assets was $231.9 million for the nine months ended September 30, 2022, compared to $223.2 million for the same period in 2021, an increase of $8.7 million.

•

Depreciation of property and equipment was $118.6 million for the nine months ended September 30, 2022, compared to $120.7 million for the same period in 2021, a decrease of $2.1 million.

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Certain of the Company’s stations were repacked in connection with the FCC’s process of repurposing a portion of the broadcast television spectrum for wireless broadband use. These stations have vacated their former channels and spent costs, mainly capital expenditures, to construct and license the necessary technical modifications to permanently operate on their newly assigned channels. Subject to fund limitations, the FCC reimburses television broadcasters, MVPDs and other parties for costs reasonably incurred due to the repack. In the nine months ended September 30, 2022 and 2021, the Company received $2.8 million and $17.9 million, respectively, in reimbursements from the FCC which it recognized as operating income. The Company is in the final stages of obtaining reimbursements for the costs of repacking these stations.

Gain on bargain purchase

Gain on bargain purchase of $54.1 million for the nine months ended September 30, 2022 pertains to our acquisition of The CW representing the excess of the fair value of the net assets acquired over the $0 purchase consideration and the fair value of noncontrolling interests. For additional information on this acquisition, see Note 3, “Acquisitions” to our Condensed Consolidated Financial Statements.

Income from Equity Method Investments, net

Income from equity method investments, net was $110.2 million for the nine months ended September 30, 2022, compared to $77.7 million for the same period in 2021, an increase of $32.5 million primarily due to a decrease in the amortization of basis difference associated with our investment in TV Food Network of $55.7 million, partially offset by lower equity in income from this investment of $23.2 million. For additional information on basis difference in our investment in TV Food Network, refer to Note 5 to our Condensed Consolidated Financial Statements.

Interest Expense, net

Interest expense, net was $233.2 million for the nine months ended September 30, 2022, compared to $212.6 million for the same period in 2021, an increase of $20.6 million primarily due to increases in interest rates in the Company’s outstanding loans under its senior secured credit facilities, partially offset by decreases in interest expense from debt repayments and lower interest rates obtained in connection with the refinancing of our certain term loans in June 2022. Interest rates on outstanding loans under the Company’s senior secured credit facilities ranged from 4.54% to 5.64% as of September 30, 2022, compared to interest rates ranging from 1.58% to 2.58% as of September 30, 2021. These interest rates were a mixture of SOFR plus applicable margin and U.S. LIBOR plus applicable margin in 2022 compared to U.S. LIBOR plus applicable margin only in 2021.

Pension and Oher Postretirement Plans Credit, net

Pension and other postretirement plans credit, net was $32.7 million for the nine months ended September 30, 2022, compared to $53.0 million for the same period in 2021, a decrease of $20.3 million primarily due to lower estimated expected return on plan assets of $15.9 million and higher estimated interest cost of $5.0 million.

Income Taxes

Income tax expense was $206.0 million for the nine months ended September 30, 2022 compared to $196.3 million for the same period in 2021. The effective tax rates were 21.2% and 25.7% for each of the respective periods. In 2022, the income tax benefit attributable to excess benefit on stock options and restricted stock units increased by $23.0 million, or a 2.1% decrease to the effective tax rate. Changes in the valuation allowance also increased the income tax benefit in 2022 by $12.2 million, or a 1.5% decrease to the effective tax rate. The gain on bargain purchase arising from the acquisition of The CW (see Note 3) resulted in a 1.2% decrease to the effective tax rate. Additionally, certain state contingency reserves were reduced by $7.4 million in 2021 resulting in an increase of 1.0% to the effective rate between the two periods.

The Company calculates its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income or loss and adjusts the provision for discrete tax items recorded in the period. Future changes in the forecasted annual income projections, including changes due to the impact of the COVID-19 pandemic, could result in significant adjustments to quarterly income tax expense in future periods.

On August 16, 2022, the U.S. President signed the Inflation Reduction Act of 2022 (“IRA”) into law. The IRA contains a number of revisions to the Internal Revenue Code, including a 15% corporate minimum income tax and a 1% excise tax on corporate stock repurchases in tax years beginning January 1, 2023. While these tax law changes have no immediate effect and are not expected to have a material impact on our future results of operations, we will continue to evaluate the provisions of the IRA.

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Liquidity and Capital Resources

The Company is leveraged, which makes it vulnerable to changes in general economic conditions. The Company’s ability to repay or refinance its debt will depend on, among other things, financial, business, market, competitive and other conditions, many of which are beyond the Company’s control. The Company believes it has sufficient unrestricted cash on hand, positive working capital, and availability to access additional cash under its revolving credit facilities (with a maturity date of June 2027) to meet its business operating requirements, its capital expenditures and to continue to service its debt for at least the next 12 months as of the filing date of this Quarterly Report on Form 10-Q. As of September 30, 2022, the Company was in compliance with the financial covenants contained in the amended credit agreements governing its senior secured credit facilities.

In 2022 and in 2021, the Company continued to recover from the ongoing effects of the COVID-19 pandemic since its adverse impact in 2020. However, the extent to which the COVID-19 pandemic impacts the Company’s business, results of operations, cash flows and financial condition will depend on future developments, which remain highly uncertain and cannot reasonably be predicted, including future surges in incidences of COVID-19 and the severity of any such resurgence, the rate and efficacy of vaccinations against COVID-19, the length of time that the COVID-19 pandemic continues, how fast economies will fully recover after the COVID-19 pandemic has passed, and the length of time needed to improve global disruptions and delays in the supply chain. Any future adverse economic conditions, including those resulting from heightened and sustained inflation and higher interest rates, could also adversely affect our future operating results, cash flows and financial condition.

Cash Flow Summary

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

	Nine Months Ended September 30,
	2022			2021
Net cash provided by operating activities	$	1,185.0		$	881.6
Net cash used in investing activities		(10.9	)		(193.8	)
Net cash used in financing activities		(1,018.4	)		(646.7	)
Net increase in cash, cash equivalents and restricted cash	$	155.7		$	41.1
Cash paid for interest	$	243.0		$	220.3
Income taxes paid, net of refunds	$	273.4		$	247.4

	As of September 30,		As of December 31,
	2022		2021
Cash, cash equivalents and restricted cash	$	362.2	$	206.5

Cash Flows – Operating Activities

Net cash flows provided by operating activities increased by $303.4 million during the nine months ended September 30, 2022, compared to the same period in 2021. This was primarily due to an increase in operating income (excluding non-cash transactions) of $207.5 million, sources of cash resulting from timing of accounts receivable collections of $82.5 million, lower payments for broadcast rights of $35.9 million and an increase in distribution from our equity investment in TV Food Network of $12.4 million. These increases were partially offset by an increase in payments for income taxes of $26.0 million and an increase in cash paid for interest of $22.7 million.

Cash Flows – Investing Activities

Net cash flows used in investing activities were $10.9 million and $193.8 million during the nine months ended September 30, 2022 and 2021, respectively.

In 2022, we spent a total of $100.0 million in capital expenditures, partially offset by the proceeds from a sale of real estate of $44.8 million, cash acquired from The CW acquisition of $28.9 million and deposits received associated with the sale of real estate assets of $13.0 million.

In 2021, we spent a total of $105.0 million in capital expenditures and $138.8 million to acquire a television station, a digital business and certain license assets. These expenditures were partially offset by the proceeds from the sale of stations and business units and asset disposals of $19.1 million, reimbursements from the FCC related to station repack of $17.9 million and deposits received associated with the sale of real estate assets of $10.0 million.

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Cash Flows – Financing Activities

Net cash flows used in financing activities were $1,018.4 million and $646.7 million during the nine months ended September 30, 2022 and 2021, respectively.

In 2022, we received $2,420.2 million (net of $4.8 million discount) from our new Term Loan A due 2027 and utilized $2,414.3 million to repay outstanding principal balances of our Term Loan A due 2023, Term Loan A due 2024, Term Loan B due 2024 and a portion of Term Loan B due 2026. Nexstar prepaid a total of $175.0 million in principal balance under its Term Loan B, repaid scheduled principal maturities of $53.1 million of its term loans, and repurchased and cancelled $28.5 million of its senior unsecured notes all funded by cash on hand. We paid dividends to our common stockholders of $108.3 million ($0.90 per share per quarter), repurchased common shares of $621.3 million, paid cash for taxes in exchange for shares of common stock withheld of $12.6 million resulting from net share settlements of certain stock-based compensation, paid contingent consideration in connection with a past acquisition of $13.9 million, and paid for software obligations of $11.4 million. Mission borrowed $61.5 million in revolving, due June 2027 and utilized the proceeds to repay all of its outstanding borrowings under its revolving loan, due October 2023 of $61.5 million.

In 2021, we prepaid a portion of the outstanding principal balance of our Term Loan B, due January 2024 of $150.0 million and made scheduled principal payments on our Term Loan A, due September 2024 of $16.1 million, paid dividends to our common stockholders of $89.5 million ($0.70 per share during each quarter), repurchased common shares of $403.2 million, paid cash for taxes in exchange for shares of common stock withheld of $10.9 million resulting from net share settlements of certain stock-based compensation, and paid for software obligations of $12.5 million. Mission also received $298.5 million (net of $1.5 million discount) from the issuance of its Term Loan B, due June 2028 and utilized $268.0 million to repay a portion of its revolving loans. We also borrowed $20.0 million under our revolving credit facilities which was repaid in full during the quarter.

Subsequent Operating, Investing and Financing Activities

The operating results of The CW (which Nexstar acquired a majority ownership interest on September 30, 2022) will be included in our consolidated statements of operations beginning in the fourth quarter of 2022. For additional information on this acquisition, see Note 3, “Acquisitions” to our Condensed Consolidated Financial Statements.

From October 1, 2022 to November 7, 2022, we repurchased 570,514 shares of our common stock for $100.0 million, funded by cash on hand. As of the date of filing this Quarterly Report on Form 10-Q, the total remaining available amount under the existing and new share repurchase authorizations was $1.417 billion.

On October 19, 2022, a buyer exercised its option to purchase certain of our real estate property for gross cash proceeds of $201.5 million. Subject to the completion of certain closing conditions, we anticipate completing the sale in the fourth quarter of 2022. We estimate a pre-tax loss on disposal of approximately $36.0 million which will be recorded should the sale close.

On October 28, 2022, Nexstar’s Board of Directors declared a quarterly cash dividend of $0.90 per share of its common stock. The dividend is payable on November 28, 2022 to stockholders of record on November 14, 2022.

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

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Long-term debt

As of September 30, 2022, the Company had total outstanding debt of $7.177 billion, net of unamortized financing costs, discounts and premium, which represented 71.0% of the Company’s combined capitalization. The Company’s high level of debt requires that a substantial portion of cash flow be dedicated to pay principal and interest on debt, which reduces the funds available for working capital, capital expenditures, acquisitions and other general corporate purposes.

	As of September 30,			As of December 31,
	2022			2021
Nexstar senior secured credit facility	$	4,114.0		$	4,329.1
Mission senior secured credit facility		358.5			360.8
5.625% Notes, due July 2027		1,756.5			1,785.0
4.75% Notes, due November 2028		1,000.0			1,000.0
		7,229.0			7,474.9
Less: Unamortized financing costs, discounts and premium, net		(51.8	)		(59.8	)
Total outstanding debt	$	7,177.2		$	7,415.1
Unused revolving loan commitments under senior secured credit facilities (1)	$	542.6		$	363.2

(1)

Based on covenant calculations as of September 30, 2022, all of the $529.1 million (net of outstanding standby letters of credit of $20.9 million) and $13.5 million unused revolving loan commitments under the respective Nexstar and Mission senior secured credit facilities were available for borrowing.

The following table summarizes the principal indebtedness scheduled to mature for the periods referenced as of September 30, 2022 (in millions):

	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
Nexstar senior secured credit facility	$	4,114.0	$	121.3	$	242.5	$	3,750.2	$	-
Mission senior secured credit facility		358.5		3.0		6.0		67.5		282.0
5.625% Notes, due July 2027		1,756.5		-		-		1,756.5		-
4.75% Notes, due November 2028		1,000.0		-		-		-		1,000.0
	$	7,229.0	$	124.3	$	248.5	$	5,574.2	$	1,282.0

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

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

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

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

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

Debt Covenants

Our credit agreement contains a covenant which requires us to comply with a maximum consolidated first lien net leverage ratio of 4.25 to 1.00. The financial covenant, which is formally calculated on a quarterly basis, is based on the Company’s combined results (excluding the operating results of The CW which Nexstar acquired the majority ownership interest on September 30, 2022). The Mission amended credit agreement does not contain financial covenant ratio requirements but does provide for default in the event we do not comply with all covenants contained in our credit agreement. As of September 30, 2022, we were in compliance with our financial covenant. We believe Nexstar and Mission will be able to maintain compliance with all covenants contained in the credit agreements governing their senior secured facilities and the indentures governing our 5.625% Notes due July 2027 and 4.75% Notes due November 2028 for a period of at least the next 12 months from September 30, 2022.

Off-Balance Sheet Arrangements

As of September 30, 2022, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or VIEs, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. All of our arrangements with our VIEs in which we are the primary beneficiary are on-balance sheet arrangements. Our variable interests in other entities are obtained through local service agreements, which have valid business purposes and transfer certain station activities from the station owners to us. We are, therefore, not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

As of September 30, 2022, we had outstanding standby letters of credit with various financial institutions amounting to $20.2 million, of which $16.7 million was in support of certain worker’s compensation insurance programs. The outstanding balance of standby letters of credit is deducted against our unused revolving loan commitment under our senior secured credit facility and would not be available for withdrawal.

Issuer and Guarantor Summarized Financial Information

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

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

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

	September 30, 2022		December 31, 2021
Current assets - external(1)	$	1,468.9	$	1,407.6
Current assets - due from consolidated entities outside of Obligor Group		37.3		37.2
Total current assets	$	1,506.2	$	1,444.8
Noncurrent assets - external(2)		10,155.7		10,479.5
Noncurrent assets - due from consolidated entities outside of Obligor Group		55.9		55.8
Total noncurrent assets	$	10,211.6	$	10,535.3
Total current liabilities(1)	$	785.1	$	783.8
Total noncurrent liabilities(1)	$	9,201.4	$	9,610.2
Noncontrolling interests	$	-	$	6.5

(1)

Excludes the assets and liabilities of The CW as it is not a guarantor of the 4.75% Notes due November 2028 and 5.625% Notes due July 2027. On September 30, 2022, Nexstar acquired a 75.0% ownership interest in The CW (see Note 3, “Acquisitions” to our Condensed Consolidated Financial Statements for additional information).

(2)

Excludes Issuer’s equity investments of $1.089 billion and $1.219 billion as of September 30, 2022 and December 31, 2021, respectively, in unconsolidated investees. These unconsolidated investees do not guarantee the 4.75% Notes due November 2028 and 5.625% Notes due July 2027. For additional information on equity investments, refer to Note 5 to our Condensed Consolidated Financial Statements.

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

	Nine Months Ended
	September 30, 2022
Net revenue - external	$	3,711.7
Net revenue - from consolidated entities outside of Obligor Group		12.5
Total net revenue		3,724.2
Costs and expenses - external		2,688.6
Costs and expenses - to consolidated entities outside of Obligor Group		14.5
Total costs and expenses		2,703.1
Income from operations	$	1,021.1
Net income	$	603.5
Net income attributable to Obligor Group	$	603.5
Income from equity method investments, net	$	110.2

Critical Accounting Policies and Estimates

Our Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements and reported amounts of revenue and expenses during the period. On an ongoing basis, we evaluate our estimates, including those related to business acquisitions, goodwill and intangible assets, property and equipment, broadcast rights, retransmission compensation, pension and postretirement benefits, and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, including the effects of the COVID-19 pandemic on our estimates and assumptions, 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, 2021. Management believes that as of September 30, 2022, there has been no material change to this information.

Recent Accounting Pronouncements

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

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

The Company’s exposure to market risk for changes in interest rates relates primarily to its long-term debt obligations. The Company’s exposure to market risk did not change materially since December 31, 2021.

The term loan borrowings at September 30, 2022 under the Company’s senior secured credit facilities bear interest rates ranging from 4.54% to 5.64%, which represent (i) the base rate, the SOFR or the US LIBOR plus (ii) the applicable margin, as defined. Interest is payable in accordance with the credit agreements.

Based on the outstanding balances of the Company’s senior secured credit facilities (term loans and revolving loans) as of September 30, 2022, an increase in each of SOFR and US LIBOR by 100 basis points would increase our annual interest expense and decrease our cash flow from operations by $44.7 million (excluding tax effects). A decrease in each of SOFR and US LIBOR by 100 basis points would decrease our annual interest expense and increase our cash flow from operations by $44.7 million (excluding tax effects). Our 5.625% Notes due July 2027 and 4.75% Notes due November 2028 are fixed rate debt obligations and therefore are not exposed to market interest rate changes. As of September 30, 2022, the Company has no financial instruments in place to hedge against changes in the benchmark interest rates on its senior secured credit facilities.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

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

Changes in Internal Control over Financial Reporting

As of the quarter ended September 30, 2022, 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.

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PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

From time to time, the Company is involved in litigation that arises from the ordinary operations of business, such as contractual or employment disputes or other general actions. In the event of an adverse outcome of these proceedings, the Company believes the resulting liabilities would not have a material adverse effect on its financial condition or results of operations. See Part I, Item 1, Note 14, “Commitments and Contingencies” for detailed discussion of ongoing litigation.

ITEM 1A. Risk Factors

There have been no material changes to the risk factors that were previously disclosed in Item 1A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 28, 2022.

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

On January 27, 2021, Nexstar’s Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $1.0 billion of its common stock, of which $638.2 million remained available as of December 31, 2021. On July 27, 2022, Nexstar’s Board of Directors approved a new share repurchase program authorizing the Company to repurchase up to an additional $1.5 billion of its common stock. During the nine months ended September 30, 2022, Nexstar repurchased a total of 3.6 million shares of its common stock for $621.3 million, funded by cash on hand, which were accounted for as treasury stock. As of September 30, 2022, the remaining available amount under the share repurchase authorizations was $1.517 billion.

The following is a summary of Nexstar’s repurchases of its common stock by month during the quarter ended September 30, 2022 (in millions, except for share and per share information):

					Total Number of Shares		Approximate Dollar Value
					Purchased as Part of		of Shares That May Yet Be
	Total Number		Average Price		Publicly Announced		Purchased Under the
	of Shares Purchased		Paid per Share		Plans or Programs		Plans or Programs
July 6 - 29, 2022		606,194	$	169.46		606,194	$	1,629.4
August 1 - 31, 2022		231,906	$	195.44		231,906	$	1,584.1
September 1 - 30, 2022		359,038	$	187.06		359,038	$	1,517.0
		1,197,138	$	179.77		1,197,138

From October 1, 2022 to November 7, 2022, we repurchased 570,514 shares of our common stock for $100.0 million, funded by cash on hand. As of the date of filing this Quarterly Report on Form 10-Q, the total remaining available amount under the existing and new share repurchase authorizations was $1.417 billion.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

None.

ITEM 5. Other Information

None.

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ITEM 6. Exhibits

Exhibit No.	Description
31.1	Certification of Perry A. Sook pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of Lee Ann Gliha pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of Perry A. Sook pursuant to 18 U.S.C. ss. 1350.*
32.2	Certification of Lee Ann Gliha pursuant to 18 U.S.C. ss. 1350.*
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith

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SIGNATURES

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

NEXSTAR MEDIA GROUP, INC.
	/S/ PERRY A. SOOK
By:	Perry A. Sook
Its:	Chairman and Chief Executive Officer (Principal Executive Officer)
	/S/ LEE ANN GLIHA
By:	Lee Ann Gliha
Its:	Chief Financial Officer (Principal Accounting and Financial Officer)

Dated: November 8, 2022

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