nxstq210q.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended June 30, 2010
OR
|
¨
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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 BROADCASTING GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
|
Delaware
|
23-3083125
|
|
(State of Organization or Incorporation)
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(I.R.S. Employer Identification No.)
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| |
|
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5215 N. O’Connor Blvd., Suite 1400, Irving, Texas
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75057
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(Address of Principal Executive Offices)
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(Zip Code)
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(972) 373-8800
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|
(Registrant’s Telephone Number, Including Area Code)
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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 x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):
|
Large accelerated filer
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¨
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Accelerated filer
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¨
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| |
|
|
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Non-accelerated filer
|
x
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Smaller reporting company
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¨
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(Do not check if a smaller reporting company)
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|
|
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of July 31, 2010 the registrant had outstanding:
15,020,839 shares of Class A Common Stock
and 13,411,588 shares of Class B Common Stock
TABLE OF CONTENTS
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Page
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PART I
|
FINANCIAL INFORMATION
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|
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|
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ITEM 1.
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Financial Statements (Unaudited)
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|
| |
|
|
| |
Condensed Consolidated Balance Sheets at June 30, 2010 and December 31, 2009
|
1
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| |
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|
| |
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2010 and 2009
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2
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Condensed Consolidated Statement of Changes in Stockholders’ Deficit for the six months ended June 30, 2010
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3
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| |
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Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009
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4
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| |
|
|
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Notes to Condensed Consolidated Financial Statements
|
5
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ITEM 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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28
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ITEM 3.
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Quantitative and Qualitative Disclosures about Market Risk
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38
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ITEM 4.
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Controls and Procedures
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38
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PART II
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OTHER INFORMATION
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ITEM 1.
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Legal Proceedings
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39
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| |
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ITEM 1A.
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Risk Factors
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39
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ITEM 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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39
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ITEM 3.
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Defaults Upon Senior Securities
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39
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ITEM 4.
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Reserved
|
39
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ITEM 5.
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Other Information
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39
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ITEM 6.
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Exhibits
|
40
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| |
|
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EXHIBIT INDEX
|
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PART I. FINANCIAL INFORMATION
|
ITEM 1.
|
Financial Statements
|
NEXSTAR BROADCASTING GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
(Unaudited)
| |
|
June 30,
2010
|
|
|
December 31,
2009
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,773
|
|
|
$
|
12,752
|
|
|
Accounts receivable, net of allowance for doubtful accounts of $912 and $844, respectively
|
|
|
59,108
|
|
|
|
62,860
|
|
|
Current portion of broadcast rights
|
|
|
9,070
|
|
|
|
15,414
|
|
|
Prepaid expenses and other current assets
|
|
|
1,071
|
|
|
|
1,845
|
|
|
Deferred tax asset
|
|
|
15
|
|
|
|
15
|
|
| |
|
|
|
|
|
|
|
|
|
Total current
|
|
|
77,037
|
|
|
|
92,886
|
|
| |
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
142,082
|
|
|
|
144,281
|
|
|
Broadcast rights
|
|
|
6,688
|
|
|
|
10,701
|
|
|
Goodwill
|
|
|
109,059
|
|
|
|
109,059
|
|
|
FCC licenses
|
|
|
127,487
|
|
|
|
127,487
|
|
|
Other intangible assets, net
|
|
|
114,297
|
|
|
|
126,216
|
|
|
Other noncurrent assets
|
|
|
7,258
|
|
|
|
8,605
|
|
|
Deferred tax asset
|
|
|
584
|
|
|
|
591
|
|
| |
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
584,492
|
|
|
$
|
619,826
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Current portion of debt
|
|
$
|
1,000
|
|
|
$
|
7,085
|
|
|
Current portion of broadcast rights payable
|
|
|
10,034
|
|
|
|
16,447
|
|
|
Accounts payable
|
|
|
7,961
|
|
|
|
6,812
|
|
|
Accrued expenses
|
|
|
10,452
|
|
|
|
12,189
|
|
|
Taxes payable
|
|
|
198
|
|
|
|
363
|
|
|
Interest payable
|
|
|
9,489
|
|
|
|
4,625
|
|
|
Deferred revenue
|
|
|
3,796
|
|
|
|
7,424
|
|
|
Other liabilities
|
|
|
1,066
|
|
|
|
1,066
|
|
| |
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
43,996
|
|
|
|
56,011
|
|
| |
|
|
|
|
|
|
|
|
|
Debt
|
|
|
653,503
|
|
|
|
663,289
|
|
|
Broadcast rights payable
|
|
|
8,225
|
|
|
|
12,469
|
|
|
Deferred tax liabilities
|
|
|
41,397
|
|
|
|
38,433
|
|
|
Deferred revenue
|
|
|
1,620
|
|
|
|
1,999
|
|
|
Deferred gain on sale of assets
|
|
|
4,276
|
|
|
|
4,495
|
|
|
Deferred representation fee incentive
|
|
|
5,271
|
|
|
|
5,583
|
|
|
Other liabilities
|
|
|
13,377
|
|
|
|
13,810
|
|
| |
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
771,665
|
|
|
|
796,089
|
|
| |
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
|
|
|
Preferred stock - $0.01 par value, authorized 200,000 shares; no shares issued and outstanding at both June 30, 2010 and December 31, 2009
|
|
|
—
|
|
|
|
—
|
|
|
Common Stock:
|
|
|
|
|
|
|
|
|
|
Class A Common - $0.01 par value, authorized 100,000,000 shares; issued and outstanding 15,020,839 at June 30, 2010 and 15,018,839 at December 31, 2009
|
|
|
150
|
|
|
|
150
|
|
|
Class B Common - $0.01 par value, authorized 20,000,000 shares; issued and outstanding 13,411,588 at both June 30, 2010 and December 31, 2009
|
|
|
134
|
|
|
|
134
|
|
|
Class C Common - $0.01 par value, authorized 5,000,000 shares; none issued and outstanding at both June 30, 2010 and December 31, 2009
|
|
|
—
|
|
|
|
—
|
|
|
Additional paid-in capital
|
|
|
402,277
|
|
|
|
400,093
|
|
|
Accumulated deficit
|
|
|
(589,734
|
)
|
|
|
(576,640
|
)
|
|
Total stockholders’ deficit
|
|
|
(187,173
|
)
|
|
|
(176,263
|
)
|
| |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ deficit
|
|
$
|
584,492
|
|
|
$
|
619,826
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
NEXSTAR BROADCASTING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
| |
|
Three Months Ended
|
|
|
Six Months Ended
June 30,
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Net revenue
|
|
$
|
74,542
|
|
|
$
|
62,152
|
|
|
$
|
143,168
|
|
|
$
|
117,620
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses (exclusive of depreciation and amortization shown separately below)
|
|
|
19,580
|
|
|
|
19,086
|
|
|
|
38,563
|
|
|
|
38,141
|
|
|
Selling, general, and administrative expenses (exclusive of depreciation and amortization shown separately below and inclusive of $1,600 one-time non-cash stock-based compensation expense from May 2010 stock option repricing)
|
|
|
24,754
|
|
|
|
21,181
|
|
|
|
48,004
|
|
|
|
44,652
|
|
|
Restructure charge
|
|
|
—
|
|
|
|
314
|
|
|
|
—
|
|
|
|
670
|
|
|
Non-cash contract termination fees
|
|
|
—
|
|
|
|
191
|
|
|
|
—
|
|
|
|
191
|
|
|
Amortization of broadcast rights
|
|
|
4,996
|
|
|
|
5,665
|
|
|
|
10,307
|
|
|
|
10,725
|
|
|
Amortization of intangible assets
|
|
|
5,987
|
|
|
|
5,944
|
|
|
|
11,919
|
|
|
|
11,836
|
|
|
Depreciation
|
|
|
5,257
|
|
|
|
5,394
|
|
|
|
10,637
|
|
|
|
10,590
|
|
|
Gain on asset exchange
|
|
|
—
|
|
|
|
(2,438
|
)
|
|
|
(30
|
)
|
|
|
(4,098
|
)
|
|
Loss (gain) on asset disposal, net
|
|
|
11
|
|
|
|
(2,229
|
)
|
|
|
(14
|
)
|
|
|
(2,820
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
60,585
|
|
|
|
53,108
|
|
|
|
119,386
|
|
|
|
109,887
|
|
|
Income from operations
|
|
|
13,957
|
|
|
|
9,044
|
|
|
|
23,782
|
|
|
|
7,733
|
|
|
Interest expense, including amortization of debt financing costs
|
|
|
(13,884
|
)
|
|
|
(8,905
|
)
|
|
|
(25,848
|
)
|
|
|
(18,765
|
)
|
|
Gain (loss) on extinguishment of debt
|
|
|
(7,903
|
)
|
|
|
—
|
|
|
|
(7,809
|
)
|
|
|
18,567
|
|
|
Interest and other income
|
|
|
3
|
|
|
|
10
|
|
|
|
4
|
|
|
|
45
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(7,827
|
)
|
|
|
149
|
|
|
|
(9,871
|
)
|
|
|
7,580
|
|
|
Income tax expense
|
|
|
(1,595
|
)
|
|
|
(1,391
|
)
|
|
|
(3,223
|
)
|
|
|
(2,770
|
)
|
|
Net income (loss)
|
|
$
|
(9,422
|
)
|
|
$
|
(1,242
|
)
|
|
$
|
(13,094
|
)
|
|
$
|
4,810
|
|
|
Net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.33
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.46
|
)
|
|
$
|
0.17
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
28,431
|
|
|
|
28,425
|
|
|
|
28,431
|
|
|
|
28,425
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
NEXSTAR BROADCASTING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
For the Six Months Ended June 30, 2010
(in thousands, except share information)
| |
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
| |
|
Class A
|
|
|
Class B
|
|
|
Class C
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
| |
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Stockholders’
Deficit
|
|
|
Balance at January 1, 2010 (unaudited)
|
|
|
15,018,839
|
|
|
$
|
150
|
|
|
|
13,411,588
|
|
|
$
|
134
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
400,093
|
|
|
$
|
(576,640
|
)
|
|
$
|
(176,263
|
)
|
|
Stock-based compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,182
|
|
|
|
—
|
|
|
|
2,182
|
|
|
Issuance of common shares related to exercise of stock options
|
|
|
2,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
2
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(13,094
|
)
|
|
|
(13,094
|
)
|
|
Balance at June 30, 2010 (unaudited)
|
|
|
15,020,839
|
|
|
$
|
150
|
|
|
|
13,411,588
|
|
|
$
|
134
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
402,277
|
|
|
$
|
(589,734
|
)
|
|
$
|
(187,173
|
)
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
NEXSTAR BROADCASTING GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
Six Months Ended
June 30,
|
|
| |
|
|
|
|
|
|
| |
|
(Unaudited)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(13,094
|
)
|
|
$
|
4,810
|
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
2,971
|
|
|
|
2,514
|
|
|
Provision for bad debts
|
|
|
680
|
|
|
|
464
|
|
|
Depreciation of property and equipment
|
|
|
10,637
|
|
|
|
10,590
|
|
|
Amortization of intangible assets
|
|
|
11,919
|
|
|
|
11,836
|
|
|
Amortization of debt financing costs
|
|
|
1,180
|
|
|
|
507
|
|
|
Amortization of broadcast rights, excluding barter
|
|
|
4,701
|
|
|
|
4,875
|
|
|
Payments for broadcast rights
|
|
|
(4,972
|
)
|
|
|
(4,432
|
)
|
|
Payment-in-kind interest on debt
|
|
|
558
|
|
|
|
2,445
|
|
|
Gain on asset exchange
|
|
|
(30
|
)
|
|
|
(4,098
|
)
|
|
Gain on asset disposal, net
|
|
|
(14
|
)
|
|
|
(2,820
|
)
|
|
Loss (gain) on extinguishment of debt
|
|
|
7,809
|
|
|
|
(18,567
|
)
|
|
Call premium to extinguish debt
|
|
|
(1,545
|
)
|
|
|
—
|
|
|
PIK interest paid upon debt repayment
|
|
|
(6,134
|
)
|
|
|
—
|
|
|
Deferred gain recognition
|
|
|
(219
|
)
|
|
|
(218
|
)
|
|
Amortization of debt discount
|
|
|
4,748
|
|
|
|
2,455
|
|
|
Amortization of deferred representation fee incentive
|
|
|
(312
|
)
|
|
|
(303
|
)
|
|
Stock-based compensation expense
|
|
|
2,182
|
|
|
|
735
|
|
|
Non-cash contract termination fee
|
|
|
—
|
|
|
|
191
|
|
|
Changes in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
3,072
|
|
|
|
857
|
|
|
Prepaid expenses and other current assets
|
|
|
774
|
|
|
|
(302
|
)
|
|
Taxes receivable
|
|
|
—
|
|
|
|
—
|
|
|
Other noncurrent assets
|
|
|
(67
|
)
|
|
|
287
|
|
|
Accounts payable and accrued expenses
|
|
|
(717
|
)
|
|
|
(3,438
|
)
|
|
Taxes payable
|
|
|
(165
|
)
|
|
|
(266
|
)
|
|
Interest payable
|
|
|
4,864
|
|
|
|
(4,562
|
)
|
|
Deferred revenue
|
|
|
(4,007
|
)
|
|
|
(1,971
|
)
|
|
Other noncurrent liabilities
|
|
|
(409
|
)
|
|
|
307
|
|
| |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
24,410
|
|
|
|
1,896
|
|
| |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Additions to property and equipment
|
|
|
(8,722
|
)
|
|
|
(9,401
|
)
|
|
Proceeds from sale of assets
|
|
|
—
|
|
|
|
85
|
|
|
Acquisition of broadcast properties and related transaction costs
|
|
|
—
|
|
|
|
(20,751
|
)
|
|
Proceeds from insurance on casualty loss
|
|
|
459
|
|
|
|
2,003
|
|
| |
|
|
|
|
|
|
|
|
|
Net cash used for investing activities
|
|
|
(8,263
|
)
|
|
|
(28,064
|
)
|
| |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Repayment of long-term debt and revolver loan
|
|
|
(331,718
|
)
|
|
|
(11,703
|
)
|
|
Consideration paid to bond holders for debt exchange
|
|
|
—
|
|
|
|
(17,677
|
)
|
|
Payment of debt finance cost
|
|
|
(3,569
|
)
|
|
|
—
|
|
|
Consideration paid for debt extinguishment
|
|
|
(2,680
|
)
|
|
|
—
|
|
|
Proceeds from issuance of debt and revolver draws
|
|
|
316,839
|
|
|
|
54,000
|
|
|
Proceeds from issuance of common shares related to exercise of stock options
|
|
|
2
|
|
|
|
—
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(21,126
|
)
|
|
|
24,620
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(4,979
|
)
|
|
|
(1,548
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
|
12,752
|
|
|
|
15,834
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
7,773
|
|
|
$
|
14,286
|
|
|
Supplemental schedule of cash flow information:
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
14,395
|
|
|
$
|
17,750
|
|
| |
|
|
|
|
|
|
|
|
|
Income taxes, net
|
|
$
|
416
|
|
|
$
|
523
|
|
| |
|
|
|
|
|
|
|
|
|
Non-cash activities:
|
|
|
|
|
|
|
|
|
|
Acquisition of equipment
|
|
$
|
131
|
|
|
$
|
—
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
NEXSTAR BROADCASTING GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
1.
|
Organization and Business Operations
|
As of June 30, 2010, Nexstar Broadcasting Group, Inc. (“Nexstar”) owned, operated, programmed or provided sales and other services to 59 television stations, all of which were affiliated with the NBC, ABC, CBS, Fox, MyNetworkTV, The CW, This TV, RTN, Azteca America or Telemundo television networks, in markets located in New York, Pennsylvania, Illinois, Indiana, Missouri, Texas, Louisiana, Arkansas, Alabama, Utah, Florida, Montana, Rhode Island and Maryland. Through various local service agreements, Nexstar provided sales, programming and other services to stations owned and/or operated by independent third parties. Nexstar operates in one reportable television broadcasting segment. The economic characteristics, services, production process, customer type and distribution methods for Nexstar’s operations are substantially similar and are therefore aggregated as a single reportable segment.
Nexstar is highly leveraged, which makes it vulnerable to changes in general economic conditions. Nexstar’s ability to repay or refinance its debt will depend on, among other things, financial, business, market, competitive and other conditions, many of which are beyond Nexstar’s control.
Disruptions in the capital and credit markets, as have been experienced in recent years, could adversely affect our ability to draw on our bank revolving credit facilities. Our access to funds under the revolving credit facilities is dependent on the ability of the banks that are parties to the facilities to meet their funding commitments. Those banks may not be able to meet their funding commitments to us if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests from us and other borrowers within a short period of time.
Unless the context indicates otherwise, “Nexstar” refers to Nexstar Broadcasting Group, Inc. and its consolidated subsidiaries Nexstar Finance Holdings, Inc. ("Nexstar Holdings") and Nexstar Broadcasting, Inc. ("Nexstar Broadcasting"), and “Mission” refers to Mission Broadcasting, Inc. All references to “we,” “our,” and “us” refer to Nexstar. All references to the “Company” refer to Nexstar and Mission collectively.
Liquidity
In April 2010, the Company completed the issuance and sale of $325.0 million aggregate principal amount of senior secured second lien notes due 2017 (the “Notes”). The net proceeds to Nexstar Broadcasting and Mission from the sale of the Notes were approximately $316.8 million, net of approximately $8.2 million original issuance discount. The Notes will mature on April 15, 2017. Interest on the Notes accrues at a rate of 8.875% per annum and is payable semiannually in arrears on April 15 and October 15 of each year, commencing on October 15, 2010. The Company also refinanced its bank credit facilities, among other things, extending maturities, reducing the aggregate principal amount available under the new bank credit facilities, amending the financial covenants and providing additional flexibility thereunder. As of June 30, 2010, we were in compliance with all covenants contained in the amended credit agreements governing our senior secured credit facility and the indentures governing the publicly-held notes.
Nexstar Broadcasting completed the cash tender offer to retire $34,337,174 (representing 82.47% of the outstanding aggregate principal amount) of aggregate principal amount of Senior Subordinated PIK Notes due 2014 at 104.5% on April 30, 2010. In connection with this tender offer, substantially all restrictive covenants and certain event of default provisions were eliminated. On May 25, 2010, Nexstar Broadcasting purchased an additional $2.0 million of aggregate principal amount of Senior Subordinated PIK Notes due 2014 at 106.5% plus accrued interest.
On June 30, 2010, Nexstar Broadcasting purchased $2.0 million of aggregate principal amount of the 7% Senior Subordinated PIK notes due 2014 at 90.25%.
See Note 7 for more details related to these transactions.
NEXSTAR BROADCASTING GROUP, INC.
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
|
2.
|
Summary of Significant Accounting Policies
|
Interim Financial Statements
The condensed consolidated financial statements as of June 30, 2010 and for the three and six months ended June 30, 2010 and 2009 are unaudited. However, in the opinion of management, such financial statements include all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement of the financial information included herein in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Results of operations for interim periods are not necessarily indicative of results for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in Nexstar’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009. The balance sheet at December 31, 2009 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
Basis of Presentation
Certain prior year amounts have been reclassified to conform to the current year presentation.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Nexstar and its subsidiaries. Also included in the financial statements are the accounts of independently-owned Mission and may include certain other entities where it is determined that the Company is the primary beneficiary of a variable interest entity (“VIE”) in accordance with interpretive guidance for the consolidation of variable interest entities.
All intercompany account balances and transactions have been eliminated in consolidation.
Mission
Mission is included in these condensed consolidated financial statements because Nexstar is deemed to have a controlling financial interest in Mission for financial reporting purposes as a result of (a) local service agreements Nexstar has with the Mission stations, (b) Nexstar’s guarantee of the obligations incurred under Mission’s senior secured credit facility, (c) Nexstar having power over significant activities affecting Mission’s economic performance, including budgeting for Mission’s advertising revenue, advertising and hiring and firing of sales force personnel and (d) purchase options (which expire on various dates between 2011 and 2018) granted by Mission’s sole shareholder which will permit Nexstar to acquire the assets and assume the liabilities of each Mission station, subject to Federal Communications Commission (“FCC”) consent. The purchase options are freely exercisable or assignable by Nexstar without consent or approval by Mission's sole shareholder. The Company expects these option agreements, if unexercised, will be renewed upon expiration. As of June 30, 2010, the assets of Mission consisted of current assets of $2.5 million (excluding broadcast rights), broadcast rights of $2.6 million, FCC licenses of $20.7 million, goodwill of $18.7 million, other intangible assets of $22.9 million, property and equipment of $27.2 million and other noncurrent assets of $1.3 million. Substantially all of Mission’s assets, except for its FCC licenses, collateralize its secured debt obligation. See Note 15 for a presentation of condensed consolidating financial information of the Company, which includes the accounts of Mission.
Nexstar has entered into local service agreements with Mission to provide sales and/or operating services to the Mission stations. The following table summarizes the various local service agreements Nexstar had in effect with Mission as of June 30, 2010:
|
Service Agreements
|
Mission Stations
|
|
TBA Only(1)
|
WFXP and KHMT
|
| |
|
|
SSA & JSA (2)
|
KJTL, KJBO-LP, KOLR, KCIT, KCPN-LP, KAMC, KRBC, KSAN, WUTR, WFXW, WYOU, KODE, WTVO and KTVE
|
|
(1)
|
Nexstar has a time brokerage agreement (“TBA”) with each of these stations which allows Nexstar to program most of each station’s broadcast time, sell each station’s advertising time and retain the advertising revenue generated in exchange for monthly payments to Mission.
|
|
(2)
|
Nexstar has both a shared services agreement (“SSA”) and a joint sales agreement (“JSA”) with each of these stations. Each SSA allows the Nexstar station in the market to provide services including news production, technical maintenance and security, in exchange for Nexstar’s right to receive certain payments from Mission as described in the SSAs. Each JSA permits Nexstar to sell the station’s advertising time and retain a percentage of the net revenue from the station’s advertising time in return for monthly payments to Mission of the remaining percentage of net revenue as described in the JSAs.
|
|
|
NEXSTAR BROADCASTING GROUP, INC.
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
|
2.
|
Summary of Significant Accounting Policies—(Continued)
|
Nexstar does not own Mission or Mission’s television stations; however, Nexstar is deemed to have a controlling financial interest in them under U.S. GAAP while complying with the FCC’s rules regarding ownership limits in television markets. In order for both Nexstar and Mission to comply with FCC regulations, Mission maintains complete responsibility for and control over programming, finances and personnel for its stations.
Variable Interest Entities
The Company may determine that a station is a VIE as a result of local service agreements entered into with the owner-operator of stations in markets in which the Company owns and operates a station. The term local service agreements generally refers to a contract between two separately owned television stations serving the same market, whereby the owner-operator of one station contracts with the owner-operator of the other station to provide it with administrative, sales and other services required for the operation of its station. Nevertheless, the owner-operator of each station retains control and responsibility for the operation of its station, including ultimate responsibility over all programming broadcast on its station.
VIEs in connection with local service agreements entered into with stations in markets in which the Company owns and operates a station are discussed below.
Nexstar has determined that it has variable interests in WYZZ, the Fox affiliate in Peoria, Illinois and WUHF, the Fox affiliate in Rochester, New York, each owned by a subsidiary of Sinclair Broadcasting Group, Inc. (“Sinclair”), as a result of outsourcing agreements it has entered into with Sinclair. Nexstar also has determined that it has a variable interest in WHP, the CBS affiliate in Harrisburg, Pennsylvania, which is owned by Newport Television License, LLC (“Newport”), as a result of Nexstar becoming successor-in-interest to a TBA entered into by a former owner of WLYH. Nexstar has evaluated its arrangements with Sinclair and Newport and has determined that it is not the primary beneficiary of the variable interests because we do not have the ultimate power to direct the activities that most significantly impact the economic performance of the stations including developing the annual operating budget, programming and oversight and control of sales management personnel. Therefore Nexstar has not consolidated these stations under authoritative guidance related to the consolidation of variable interest entities. Under the outsourcing agreements with Sinclair, Nexstar pays for certain operating expenses of WYZZ and WUHF, and therefore may have unlimited exposure to any potential operating losses. Nexstar’s management believes that Nexstar’s minimum exposure to loss under the Sinclair outsourcing agreements consists of the fees paid to Sinclair. Additionally, Nexstar indemnifies the owners of WHP, WYZZ and WUHF from and against all liability and claims arising out of or resulting from its activities, acts or omissions in connection with the agreements. The maximum potential amount of future payments Nexstar could be required to make for such indemnification is undeterminable at this time. Nexstar made payments to Sinclair under the outsourcing agreements of $1.1 million and $1.0 million for the three months ended June 30, 2010 and 2009, respectively and $2.0 million and $1.4 million for the six months then ended. Nexstar has a balance payable to Sinclair for fees under these arrangements in the amount of $1.1 million as of June 30 2010, which is recorded as an accrued expense on Nexstar’s balance sheet. We also have receivables in the amount of $2.7 million for advertising aired on these two stations.
Nexstar has also determined that it has a variable interest in Four Points Media Group Holdings, LLC (“Four Points”) due to a management services agreement between the two companies. Four Points owns and operates seven individual stations in four markets. Under this agreement, Nexstar manages the stations for Four Points but does not have ultimate control over the policies or operations of the stations. We have evaluated the business arrangement with Four Points and concluded that Nexstar is not the primary beneficiary of the variable interest because we do not have the ultimate power to direct the activities that most significantly impact the economic performance of the stations including developing the annual operating budget, setting advertising rates, programming and oversight and control of employees responsible for carrying out business activities of the stations. Therefore, we do not consolidate Four Points’ financial results into our own. Nexstar has a receivable for management fees from Four Points in the amount of $0.7 million as of June 30, 2010, which is recorded in accounts receivable. We also have a liability owed to Four Points for retransmission revenue we collect on their behalf in the amount of $73 thousand as of June 30, 2010, which is recorded as an accrued expense. Nexstar must indemnify Four Points for any claim or liability that arises out of Nexstar’s acts or omissions related to the agreement. For this reason, the maximum exposure to loss as a result of our agreement with Four Points is not determinable.
|
|
NEXSTAR BROADCASTING GROUP, INC.
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
|
2.
|
Summary of Significant Accounting Policies—(Continued)
|
Stock-Based Compensation
The Company accounts for stock-based employee compensation plans in accordance with authoritative guidance related to share-based payment, which requires companies to expense the fair value of employee stock options and other forms of stock-based employee compensation in the financial statements over the period that an employee provides service in exchange for the award. Under this guidance, the Company measures compensation cost related to stock options based on the grant-date fair value of the award using the Black-Scholes option-pricing model and recognizes it ratably, less estimated forfeitures, over the vesting term of the award.
The Company recognized stock-based compensation expense of $1.9 million, of which $1.6 million related to the stock option repricing discussed below, and $0.3 million for the three months ended June 30, 2010 and 2009, respectively and $2.2 million and $0.7 million for the six months then ended, which was included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations. The Company does not currently recognize a tax benefit resulting from compensation costs expensed in the financial statements because the Company provides a valuation allowance against the deferred tax asset resulting from this type of temporary difference since it expects that it will not have sufficient future taxable income to realize such benefit. Accordingly, the accounting for share-based payments has had no impact on income tax expense reported in the financial statements.
On January 27, 2010, the Compensation Committee approved the repricing of certain stock options to set the new exercise price for the affected options equal to the closing price of the stock on that date (subject to shareholders’ approval). On May 27, 2010 (“the modification date”), the shareholders of Nexstar approved the repricing of certain stock options by lowering the exercise price to equal the closing price of Nexstar’s stock on January 27, 2010 (which was $4.56 per share). The repricing applied to any outstanding option with an original exercise price of $5.00 or more. The total incremental cost of the repricing was calculated to be approximately $1.8 million, which represents the incremental fair value of the modified awards. Of the $1.8 million total incremental cost, approximately $1.6 million has been recognized and included in selling, general & administration expense during the three months ended June 30, 2010. The remaining unrecognized incremental cost will be recognized in addition to the cost (fair value) of the original awards, which will continue to vest and amortize just as they did before the modification.
The weighted-average assumptions used in the Black-Scholes calculations for the before and after modification valuations on May 27, 2010 were as follows:
| |
Before Modification
|
After Modification
|
|
Expected volatility
|
129.48%
|
126.86%
|
|
Risk-free interest rates
|
1.17%
|
1.30%
|
|
Expected term
|
2.66 years
|
2.97 years
|
|
Dividend yields
|
0%
|
0%
|
|
Fair value per share
|
$4.36
|
$5.29
|
At June 30, 2010, there was approximately $2.7 million of total unrecognized compensation cost, net of estimated forfeitures, related to stock options that is expected to be recognized over a weighted-average period of 2.6 years. There were two thousand stock options exercised during the six months ended June 30, 2010 for a total intrinsic value and cash received of $10 thousand and $2 thousand, respectively.
Income (loss) Per Share
Basic income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted income (loss) per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period using the treasury stock method. Potential common shares consist of stock options and the unvested portion of restricted stock granted to employees. For the three and six months ended June 30, 2010 and 2009, there was no difference between basic and diluted net income (loss) per share since the effect of potential common shares were anti-dilutive, and therefore excluded from the computation of diluted net income (loss) per share.
NEXSTAR BROADCASTING GROUP, INC.
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
|
2.
|
Summary of Significant Accounting Policies—(Continued)
|
The following table summarizes information about anti-dilutive potential common shares (not presented in thousands):
| |
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
| |
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
| |
|
(weighted-average shares outstanding)
|
|
|
(weighted-average shares outstanding)
|
|
|
Stock options excluded as the exercise price of the options was greater than the average market price of the common stock
|
|
|
—
|
|
|
|
3,616,478
|
|
|
|
—
|
|
|
|
3,665,739
|
|
|
In-the-money stock options excluded as the Company had a net loss during the period
|
|
|
945,537
|
|
|
|
—
|
|
|
|
673,441
|
|
|
|
—
|
|
Recent Accounting Pronouncements
In January 2010, the FASB issued authoritative guidance which requires additional disclosures about transfers between Levels 1 and 2 of the fair value hierarchy and disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. This guidance was effective for the Company January 1, 2010, except for the Level 3 activity disclosures, which are effective for fiscal years beginning after December 15, 2010. The adoption of this guidance, which is related to disclosure only, did not have a material impact on the Company’s financial position or results of operations.
In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for the consolidation of VIEs. This amendment requires an analysis to determine whether a variable interest gives the entity a controlling financial interest in a variable interest entity for financial reporting purposes. The amendment requires an ongoing reassessment and eliminates the quantitative approach previously required for determining whether an entity is the primary beneficiary. This amendment is effective for our fiscal year beginning January 1, 2010. We adopted the amendment January 1, 2010 and it did not have any impact on the Company’s financial position or results of operations.
|
3.
|
Fair Value Measurements
|
The Company adopted, effective January 1, 2008, the FASB’s accounting and disclosure requirements pertaining to fair value measurements for financial assets and financial liabilities measured on a recurring basis and January 1, 2009, we adopted this standard for non-financial assets and non-financial liabilities. The requirements apply to all financial and non-financial assets and financial and non-financial liabilities that are being measured and reported on a fair value basis. There was no impact for adoption of this standard to the unaudited condensed consolidated financial statements as it relates to financial position or results of operations. This standard requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. The standard requires fair value measurement be classified and disclosed in one of the following three categories:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
The Company invests in short-term interest bearing obligations with original maturities less than 90 days, primarily money market funds. We do not enter into investments for trading or speculative purposes. As of June 30, 2010 and December 31, 2009, there were no investments in marketable securities.
As of June 30, 2010 and December 31, 2009, the Company had $4.4 million and $7.4 million, respectively invested in money market investments. These investments are required to be measured at fair value on a recurring basis. The Company has determined that the money market investment is defined as Level 1 in the fair value hierarchy. As of June 30, 2010 and December 31, 2009, the fair value of the money market investment was an asset of $4.4 million and $7.4 million, respectively.
|
|
NEXSTAR BROADCASTING GROUP, INC.
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
|
4.
|
Transaction with Mission
|
On April 11, 2006, Nexstar and Mission filed an application with the FCC for consent to assignment of the license of KFTA Channel 24 (Ft. Smith, Arkansas) from Nexstar to Mission. Consideration for this transaction was set at $5.6 million. On August 28, 2006, Nexstar and Mission entered into a local service agreement whereby (a) Mission pays Nexstar $5 thousand per month for the right to broadcast Fox programming on KFTA during the Fox network programming time periods and (b) Nexstar pays Mission $20 thousand per month for the right to sell all advertising time on KFTA within the Fox network programming time periods. Also in 2006, Mission entered into an affiliation agreement with the Fox network which provides Fox programming to KFTA. In March 2008, the FCC granted the application to assign the license for KFTA from Nexstar to Mission. On March 9, 2010, Nexstar and Mission notified the FCC that the transaction would not be consummated. The TBA terminated on May 1, 2010 and the Fox Affiliation agreement was assigned to Nexstar.
|
5.
|
Intangible Assets and Goodwill
|
Intangible assets subject to amortization consisted of the following:
| |
|
|
|
|
June 30, 2010
|
|
|
December 31, 2009
|
|
| |
|
Estimated
useful life
(years)
|
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
| |
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
Network affiliation agreements
|
|
|
15
|
|
|
$
|
344,662
|
|
|
$
|
(233,359
|
)
|
|
$
|
111,303
|
|
|
$
|
344,662
|
|
|
$
|
(221,945
|
)
|
|
$
|
122,717
|
|
|
Other definite-lived intangible assets
|
|
|
1-15
|
|
|
|
13,455
|
|
|
|
(10,461
|
)
|
|
|
2,994
|
|
|
|
13,455
|
|
|
|
(9,956
|
)
|
|
|
3,499
|
|
|
Total intangible assets subject to amortization
|
|
|
|
|
|
$
|
358,117
|
|
|
$
|
(243,820
|
)
|
|
$
|
114,297
|
|
|
$
|
358,117
|
|
|
$
|
(231,901
|
)
|
|
$
|
126,216
|
|
Total amortization expense from definite-lived intangibles was $5.9 million for each of the three months ended June 30, 2010 and 2009 and $11.9 million and $11.8 million for the six months then ended. The Company’s estimate of amortization expense for definite-lived intangible assets as of June 30, 2010 is approximately $23.7 million for 2010; $23.3 million for 2011; $23.0 million for 2012; $17.4 million for 2013; and $10.4 million for 2014.
The aggregate carrying value of indefinite-lived intangible assets, consisting of FCC licenses and goodwill, was $236.5 million at both June 30, 2010 and December 31, 2009. The Company expenses as incurred, any costs to renew or extend its FCC licenses. 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. As of June 30, 2010, the Company did not identify any events that would trigger an impairment assessment.
The changes in the carrying amount of goodwill for the six months and year ended June 30, 2010 and December 31, 2009, respectively are as follows:
| |
|
2010
|
|
|
2009
|
|
| |
|
|
(in thousands)
|
|
|
Goodwill
|
|
$
|
155,275
|
|
|
$
|
154,488
|
|
|
Accumulated impairment losses
|
|
|
(46,216
|
)
|
|
|
(38,856
|
)
|
|
Balance as of January 1
|
|
$
|
109,059
|
|
|
$
|
115,632
|
|
|
Acquisitions
|
|
|
—
|
|
|
|
431
|
|
|
Impairment
|
|
|
—
|
|
|
|
(7,360
|
)
|
|
Reclassification of asset
|
|
|
—
|
|
|
|
356
|
|
|
Goodwill
|
|
$
|
155,275
|
|
|
$
|
155,275
|
|
|
Accumulated impairment losses
|
|
|
(46,216
|
)
|
|
|
(46,216
|
)
|
|
Balance as of June 30, 2010 and December 31, 2009
|
|
$
|
109,059
|
|
|
$
|
109,059
|
|
|
|
NEXSTAR BROADCASTING GROUP, INC.
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
|
5.
|
Intangible Assets and Goodwill—(Continued)
|
The changes in the carrying amount of FCC licenses for the six months and year ended June 30, 2010 and December 31, 2009, respectively are as follows:
| |
|
2010
|
|
|
2009
|
|
| |
|
|
(in thousands)
|
|
|
FCC licenses
|
|
$
|
177,689
|
|
|
$
|
166,455
|
|
|
Accumulated impairment losses
|
|
|
(50,202
|
)
|
|
|
(41,398
|
)
|
|
Balance as of January 1
|
|
$
|
127,487
|
|
|
$
|
125,057
|
|
|
Acquisitions
|
|
|
—
|
|
|
|
11,234
|
|
|
Impairment
|
|
|
—
|
|
|
|
(8,804
|
)
|
|
FCC licenses
|
|
$
|
177,689
|
|
|
$
|
177,689
|
|
|
Accumulated impairment losses
|
|
|
(50,202
|
)
|
|
|
(50,202
|
)
|
|
Balance as of June 30, 2010 and December 31, 2009
|
|
$
|
127,487
|
|
|
$
|
127,487
|
|
Accrued expenses consisted of the following:
| |
|
June 30,
|
|
|
December 31,
|
|
| |
|
2010
|
|
|
2009
|
|
| |
|
(in thousands)
|
|
|
Compensation and related taxes
|
|
$
|
4,384
|
|
|
$
|
2,716
|
|
|
Sales commissions
|
|
|
1,326
|
|
|
|
1,338
|
|
|
Employee benefits
|
|
|
801
|
|
|
|
897
|
|
|
Property taxes
|
|
|
575
|
|
|
|
362
|
|
|
Other accruals related to operating expenses
|
|
|
3,366
|
|
|
|
6,876
|
|
| |
|
$
|
10,452
|
|
|
$
|
12,189
|
|
Long-term debt consisted of the following:
| |
|
June 30,
|
|
|
December 31,
|
|
| |
|
2010
|
|
|
2009
|
|
| |
|
(in thousands)
|
|
|
Term loans
|
|
$
|
100,000
|
|
|
$
|
321,689
|
|
|
Revolving credit facilities
|
|
|
—
|
|
|
|
77,000
|
|
|
8.875% senior secured second lien notes due 2017, net of discount of $7,996
|
|
|
317,004
|
|
|
|
—
|
|
|
7% senior subordinated notes due 2014, net of discount of $829 and $929
|
|
|
47,081
|
|
|
|
46,981
|
|
|
7% senior subordinated PIK notes due 2014, net of discount of $6,075 and $10,559
|
|
|
135,137
|
|
|
|
132,296
|
|
|
11.375% senior discount notes due 2013
|
|
|
49,981
|
|
|
|
49,981
|
|
|
Senior subordinated PIK notes due 2014
|
|
|
5,300
|
|
|
|
42,427
|
|
| |
|
|
654,503
|
|
|
|
670,374
|
|
|
Less: current portion
|
|
|
(1,000)
|
|
|
|
(7,085
|
)
|
| |
|
$
|
653,503
|
|
|
$
|
663,289
|
|
On April 19, 2010, the Third Amendment to Nexstar Broadcasting’s Fourth Amended and Restated Credit Agreement dated, as of April 1, 2005 (as amended, the “Nexstar Credit Agreement”), among Nexstar Broadcasting, Nexstar, the several financial institutions from time to time parties thereto and Bank of America, N.A., as administrative agent and syndication agent became effective. Under the terms of the Nexstar Credit Agreement, the principal amount available under the revolving credit facility was reduced to $65.0 million, and the Term Loan B was reduced to $61.0 million.
On April 19, 2010, the Second Amendment to Mission’s Third Amended and Restated Credit Agreement, dated as of April 1, 2005 (as amended, the “Mission Credit Agreement” and together with the Nexstar Credit Agreement, the “Credit Agreements”), among Mission, the several financial institutions from time to time parties thereto and Bank of America, N.A., as administrative agent and syndication agent became effective. Under the terms of the Mission Credit Agreement, the principal amount available under the revolving credit facility was reduced to $10.0 million, and the Term Loan B was reduced to $39.0 million.
NEXSTAR BROADCASTING GROUP, INC.
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
The Credit Agreements were amended to, among other things, (i) extend the revolving loan commitments to December 31, 2013 (subject to earlier springing maturity dates), (ii) extend the maturity date of the Term Loan B to September 30, 2016 (subject to earlier springing maturity dates), (iii) amend the financial covenants and provide additional flexibility thereunder, (iv) permit the incurrence of incremental Term Loan B facilities of up to an aggregate amount equal to $100.0 million, (v) permit Nexstar Broadcasting and Mission, under certain circumstances to incur indebtedness and make restricted payments, in each case, in part, to repurchase or extinguish existing indebtedness, (vi) provide additional flexibility under the covenants and (vii) relieve the respective borrowers from their obligation to make mandatory prepayments under certain circumstances.
The Nexstar Credit Agreement (i) eliminates the requirement that Nexstar Broadcasting maintain a consolidated minimum interest coverage ratio and a consolidated maximum senior leverage ratio and institutes the requirement to maintain a consolidated maximum first lien indebtedness ratio, based on the aggregate first-lien indebtedness maintained by Nexstar and Mission, and (ii) changes the maximum and minimum covenant levels applicable to such financial ratios. Additionally, the Credit Agreement removes mandatory quarterly repayments based on a computation of excess cash flow for the preceding fiscal year.
On April 19, 2010, Nexstar Broadcasting and Mission, as co-issuers, also completed the issuance and sale of $325.0 million aggregate principal amount of 8.875% senior secured second lien notes due 2017.
On April 19, 2010, Nexstar Broadcasting and Mission used the net proceeds of the offering, which was approximately $316.8 million, and cash on hand to pay off $218.3 million of the outstanding term loans and $53.3 million of the outstanding revolving loans borrowed under the previous Nexstar and Mission Credit Agreements. Further, Nexstar Broadcasting and Mission used the net proceeds and cash on hand, to repurchase $34.3 million of Nexstar Broadcasting’s outstanding Senior Subordinated PIK Notes due 2014 and to pay related fees and expenses and for general corporate purposes.
In conjunction with the amendments to the credit agreements, approximately $2.5 million related to professional and legal fees were capitalized as debt finance cost and are being amortized over the term of the credit facility. These transactions resulted in a loss on debt extinguishment of approximately $6.0 million for the six months ended June 30, 2010, including approximately $2.5 million Nexstar Broadcasting and Mission paid to the creditors related to debt amendments.
The Nexstar Broadcasting Senior Secured Credit Facility
The Nexstar Broadcasting senior secured credit facility consists of a Term Loan B and a $65.0 million revolving loan. As of June 30, 2010 and December 31, 2009, Nexstar Broadcasting had $61.0 million and $156.3 million, respectively, outstanding under its Term Loan B and zero and $70.0 million, respectively, outstanding under its revolving loan.
The Term Loan B, which matures in September 2016, is payable in consecutive quarterly installments amortized at 0.25% quarterly, with the remaining 94% due at maturity. The first installment will commence with the third quarter of 2010 as required under the terms of the credit facility. On April 19, 2010, Nexstar Broadcasting repaid $92.4 million of Term Loan B leaving $61.0 million outstanding under the new amended credit facility. During the six months ended June 30, 2010, repayments of Nexstar Broadcasting’s Term Loan B totaled $95.3 million, $2.9 million of which were scheduled maturities and a mandatory excess cash flow payment in the first quarter of 2010 as required under the terms of the previous credit facilities.
The revolving loan is not subject to incremental reduction and matures in December 2013. On April 19, 2010, Nexstar Broadcasting repaid $50.0 million of revolving loan leaving $12.0 million outstanding under the new amended credit facility. The remaining $12.0 million was repaid in the second quarter of 2010. During the six months ended June 30, 2010, repayments of Nexstar Broadcasting’s revolving loan totaled $70.0 million, $8.0 million of which were paid in the first quarter of 2010, including a $1.0 mandatory excess cash flow payment as required under the terms of the previous revolving credit facility. There was no outstanding revolving loan balance at June 30, 2010.
The total weighted-average interest rate of the Nexstar Broadcasting senior secured credit facility was 5.0% and 5.02% at June 30, 2010 and December 31, 2009, respectively. Interest is payable periodically based on the type of interest rate selected. Additionally, Nexstar Broadcasting is required to pay quarterly commitment fees on the unused portion of its revolving loan commitment of 0.75% per annum for that particular quarter.
NEXSTAR BROADCASTING GROUP, INC.
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
The Mission Senior Secured Credit Facility
The Mission senior secured credit facility consists of a Term Loan B and a $10.0 million revolving loan. As of June 30, 2010 and December 31, 2009, Mission had $39.0 million and $165.4 million, respectively, outstanding under its Term Loan B and zero and $7.0 million, respectively, outstanding under its revolving loan.
Terms of the Mission senior secured credit facility, including repayment, maturity and interest rates, are the same as the terms of the Nexstar senior secured credit facility described above. The total weighted average interest rate of the Mission senior secured credit facility was 5.0% at June 30, 2010 and December 31, 2009. Additionally, Mission is required to pay quarterly commitment fees on the unused portion of its revolving loan commitment of 0.75% per annum for that particular quarter.
On April 19, 2010, Mission repaid $125.9 million of Term Loan B leaving $39.0 million outstanding under the new amended credit facility. During the six months ended June 30, 2010, repayments of Mission’s Term Loan B totaled $126.4 million, $0.5 million of which were scheduled maturities in the first quarter of 2010 as required under the terms of the previous credit facilities.
The revolving loan is not subject to incremental reduction and matures in December 2013. On April 19, 2010, Mission repaid $3.3 million of revolving loan leaving $3.7 million outstanding under the new amended credit facility. The remaining $3.7 million was repaid in the second quarter of 2010. During the six months ended June 30, 2010, repayments of Mission’s revolving loan totaled $7.0 million. There was no outstanding revolving loan balance at June 30, 2010.
Unused Commitments and Borrowing Availability
Nexstar and Mission had $75.0 million of total unused revolving loan commitments under their respective credit facilities, all of which was available for borrowing, based on the covenant calculations as of June 30, 2010.
Debt Covenants
The Nexstar senior secured credit facility contains covenants which require the Company to comply with certain financial covenant ratios, including (1) a maximum consolidated total leverage ratio of Nexstar Broadcasting and Mission of 9.5 to 1.00 at June 30, 2010, (2) a minimum consolidated first lien indebtedness ratio of 2.50 to 1.00 at any time, (3) a maximum consolidated fixed charge coverage ratio of 1.10 to 1.00 at any time. The covenants, which are formally calculated on a quarterly basis, are based on the combined results of Nexstar Broadcasting and Mission. Mission’s bank credit facility agreement does not contain financial covenant ratio requirements, but does provide for default in the event Nexstar does not comply with all covenants contained in its credit agreement. As of June 30, 2010, we are in compliance with all of our covenants.
Collateralization and Guarantees of Debt
The bank credit facilities described above are collateralized by a security interest in substantially all the combined assets, excluding FCC licenses, of Nexstar and Mission. Nexstar and its subsidiaries guarantee full payment of all obligations incurred under the Mission senior secured credit facility in the event of Mission’s default. Similarly, Mission is a guarantor of the Nexstar senior secured credit facility and the senior subordinated notes issued by Nexstar Broadcasting.
In consideration of Nexstar’s guarantee of Mission’s senior secured credit facility, the sole shareholder of Mission has granted Nexstar a purchase option 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 2011 and 2018) are freely exercisable or assignable by Nexstar without consent or approval by the sole shareholder of Mission. The Company expects these option agreements, if unexercised, will be renewed upon expiration.
8.875% Senior Secured Second Lien Notes
On April 19, 2010, Nexstar Broadcasting and Mission, as co-issuers, completed the issuance and sale of $325.0 million aggregate principal amount of senior secured second lien notes due 2017. The Notes will mature on April 15, 2017. Interest on the Notes accrues at a rate of 8.875% per annum and is payable semiannually in arrears on April 15 and October 15 of each year, commencing on October 15, 2010.
NEXSTAR BROADCASTING GROUP, INC.
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
The Notes were issued pursuant to an Indenture, dated as of April 19, 2010 (the “Indenture”), by and among Nexstar Broadcasting and Mission, as co-issuers, Nexstar, as guarantor, and The Bank of New York Mellon, as trustee and collateral agent. Nexstar Broadcasting’s and Mission’s obligations under the Notes are jointly and severally, fully and unconditionally guaranteed by Nexstar and all of Nexstar Broadcasting’s and Mission’s future 100% owned domestic subsidiaries.
The net proceeds to Nexstar Broadcasting and Mission from the sale of the Notes were approximately $316.8 million, net of approximately $8.2 million original issuance discount. Nexstar Broadcasting and Mission used the net proceeds of the offering, together with borrowings under Nexstar Broadcasting and Mission’s amended senior secured credit facilities and cash on hand, to repurchase $34.3 million of Nexstar Broadcasting’s outstanding Senior Subordinated PIK Notes due 2014, to refinance Nexstar Broadcasting and Mission’s old senior secured credit facilities, pay related fees and expenses and for general corporate purposes.
The Notes are secured by second-priority liens, subject to certain exceptions and permitted liens, on all of the assets that secure Nexstar Broadcasting’s and Mission’s senior secured credit facilities on a first-priority lien basis. The Notes and the guarantees are Nexstar Broadcasting’s, Mission’s and the guarantors’ senior secured obligations, rank equal in right of payment with all of Nexstar Broadcasting’s, Mission’s and the guarantors’ existing and future senior indebtedness and rank senior in right of payment to all of Nexstar Broadcasting’s, Mission’s and the guarantors’ future subordinated indebtedness. The Notes and the guarantees are effectively junior to Nexstar Broadcasting’s, Mission’s and the guarantors’ obligations which are either secured by assets that are not collateral or which are secured on a first priority basis, including borrowings under Nexstar Broadcasting’s and Mission’s senior secured credit facilities, in each case, to the extent of the value of the assets securing such obligations.
Nexstar Broadcasting and Mission have the option to redeem all or a portion of the Notes at any time prior to April 15, 2014 at a price equal to 100% of the principal amount of the Notes redeemed plus accrued and unpaid interest to the redemption date plus applicable premium as of the date of redemption. At any time on or after April 15, 2014, Nexstar Broadcasting and Mission may redeem the Notes, in whole or in part, at the redemption prices set forth in the Indenture. At any time before April 15, 2013, Nexstar Broadcasting and Mission may also redeem up to 35% of the aggregate principal amount of the Notes at a redemption price of 108.875% of the principal amount, plus accrued and unpaid interest, if any, to the date of redemption, with the proceeds of certain equity offerings.
Upon the occurrence of a change of control (as defined in the Indenture), each holder of the Notes may require Nexstar Broadcasting and Mission to repurchase all or a portion of the Notes in cash at a price equal to 101% of the aggregate principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, thereon to the date of repurchase.
The Indenture contains covenants that limit, among other things, Nexstar Broadcasting’s and Mission’s ability to (1) incur additional debt and issue preferred stock, (2) make certain restricted payments, (3) consummate specified asset sales, (4) enter into transactions with affiliates, (5) create liens, (6) pay dividends or make other distributions, (7) make certain investments, (8) merge or consolidate with another person and (9) enter new lines of business.
The Indenture provides for customary events of default (subject in certain cases to customary grace and cure periods), which include nonpayment, breach of covenants in the Indenture, payment defaults or acceleration of other indebtedness, a failure to pay certain judgments and certain events of bankruptcy and insolvency. The Indenture also provides for events of default with respect to the collateral, which include (i) default in the performance of the security documents which adversely affects the enforceability, validity, perfection or priority of the second priority liens on any collateral, individually or in the aggregate, having a fair market value in excess of $10.0 million, (ii) repudiation or disaffirmation by Nexstar Broadcasting, Mission or any guarantor of material obligations under the security documents, and (iii) the determination in a judicial proceeding that the security documents are unenforceable or invalid against Nexstar Broadcasting, Mission or any guarantor for any reason with respect to any collateral, individually or in the aggregate, having a fair market value in excess of $10.0 million. Generally, if an event of default occurs, the Trustee or holders of at least 25% in principal amount of the then outstanding Notes may declare the principal of and accrued but unpaid interest, including additional interest, on all the Notes to be due and payable.
|
|
NEXSTAR BROADCASTING GROUP, INC.
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
In connection with the offering of the Notes, Nexstar Broadcasting and Mission have agreed, pursuant to a Registration Rights Agreement, dated April 19, 2010 (the “Registration Rights Agreement”), by and among Nexstar Broadcasting, Mission, Nexstar and Banc of America Securities LLC, UBS Securities LLC, Deutsche Bank Securities Inc. and RBC Capital Markets Corporation, to (i) cause to be filed with the SEC no later than 270 days after the date of issuance of the Notes, a registration statement under the Securities Act, relating to an offer to exchange the Notes for new notes (the “Exchange Notes”), evidencing the same continuing indebtedness as the Notes and with terms substantially identical to the Notes except that the Exchange Notes will not be subject to restrictions on transfer in the United States, (ii) use their reasonable best efforts to cause such registration statement to become effective no later than 365 days after the date of issuance of the Notes, (iii) in connection with the foregoing, (A) file all pre-effective amendments to such registration statement as may be necessary in order to cause such registration statement to become effective, (B) if applicable, file a post-effective amendment to such registration statement and (C) cause all necessary filings in connection with the registration and qualification of the Exchange Notes to be made under the state securities or blue sky laws of such jurisdictions as are necessary to permit consummation of the exchange offer, and (iv) upon the effectiveness of such registration statement, commence the exchange offer and issue Exchange Notes in exchange for all Notes tendered pursuant to the exchange offer. In certain circumstances, Nexstar Broadcasting and Mission will file and cause to become effective a shelf registration statement relating to resales of any Notes and use their reasonable best efforts to maintain the effectiveness of the shelf registration statement for at least one year or such lesser period after which all of the notes registered therein have been sold. If Nexstar Broadcasting and Mission fail to satisfy these obligations as set forth in the Registration Rights Agreement, they will be required to pay additional interest to the holders of the Notes. The rate of the additional interest will be 0.25% per annum for the first 90-day period immediately following the occurrence of a Registration Default (as defined in the Registration Rights Agreement), and such rate will increase by an additional 0.25% per annum with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum additional interest rate of 1.0% per annum. Nexstar Broadcasting and Mission will pay such additional interest on regular interest payment dates until the cure of all the Registration Defaults relating to the Notes at which time the interest rate on the Notes will revert to the original interest rate on the Notes. Such additional interest will be in addition to any other interest payable from time to time with respect to Notes.
Nexstar incurred approximately $1.1 million in professional fees related to the transaction, which were capitalized as debt finance cost and being amortized over the term of the Notes.
Senior Subordinated PIK Notes
On March 31, 2010, Nexstar Broadcasting purchased approximately $1.0 million of aggregate principal amount of the Senior Subordinated PIK Notes due 2014 at 90%. On April 30, 2010, Nexstar Broadcasting completed the cash tender offer to repurchase $34,337,174 of aggregate principal amount of the Senior Subordinated PIK Notes at 104.5%. On May 25, 2010, Nexstar Broadcasting repurchased approximately $2.0 million of aggregate principal amount of the Senior Subordinated PIK Notes due 2014 at 106.5%. These transactions resulted in a loss of approximately $2.0 million.
7% Senior Subordinated PIK Notes
On June 30, 2010, Nexstar Broadcasting purchased approximately $2.0 million of aggregate principal amount of the 7% Senior Subordinated PIK notes due 2014 at 90.25%. The transaction resulted in a gain of approximately $181 thousand.
|
|
NEXSTAR BROADCASTING GROUP, INC.
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
Fair Value of Debt
The aggregate carrying amounts and estimated fair value of Nexstar’s and Mission’s debt were as follows:
| |
|
June 30, 2010
|
|
|
December 31, 2009
|
|
| |
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
| |
|
(in thousands)
|
|
|
Term loans(1)
|
|
$
|
100,000
|
|
|
$
|
98,434
|
|
|
$
|
321,689
|
|
|
$
|
301,254
|
|
|
Revolving credit facilities(1)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
77,000
|
|
|
$
|
72,865
|
|
|
8.875% senior secured second lien notes (2)
|
|
$
|
317,004
|
|
|
$
|
318.589
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
7% senior subordinated notes(2)
|
|
$
|
47,081
|
|
|
$
|
37,670
|
|
|
$
|
46,981
|
|
|
$
|
36,645
|
|
|
7% senior subordinated PIK notes(2)
|
|
$
|
135,137
|
|
|
$
|
121,960
|
|
|
$
|
132,296
|
|
|
$
|
103,191
|
|
|
11.375% senior discount notes(2)
|
|
$
|
49,981
|
|
|
$
|
48,856
|
|
|
$
|
49,981
|
|
|
$
|
41,734
|
|
|
Senior subordinated PIK notes(2)
|
|
$
|
5,300
|
|
|
$
|
5,592
|
|
|
$
|
42,427
|
|
|
$
|
28,214
|
|
|
(1)
|
The fair value of bank credit facilities is computed based on borrowing rates currently available to Nexstar and Mission for bank loans with similar terms and average maturities.
|
|
(2)
|
The fair value of Nexstar’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.
|
On March 31, 2008, Nexstar signed a ten year agreement for national sales representation with two units of Katz Television Group, a subsidiary of Katz Media Group (“Katz”), transferring 24 stations in 14 of its markets from Petry Television Inc. (“Petry”) and Blair Television Inc. (“Blair”). Nexstar, Blair, Petry and Katz entered into a termination and mutual release agreement under which Blair agreed to release Nexstar from its future contractual obligations in exchange for payments totaling $8.0 million. The payments will be paid by Katz on behalf of Nexstar as an inducement for Nexstar to enter into the new long-term contract with Katz. The liability established as a result of the termination represents an incentive received from Katz that will be accounted for as a termination obligation, and will be recognized as a non-cash reduction to operating expenses over the term of the agreement with Katz. As of June 30, 2010, the current portion of this deferred amount of approximately $0.7 million was included in other current liabilities and the long-term portion in the amount of approximately $5.3 million was included in deferred representation fee incentive in the accompanying condensed balance sheet. The Company recognized $0.2 million of these incentives as a reduction in selling, general, and administrative expense for each of the three months ended June 30, 2010 and 2009 and $0.4 million for each of the six months then ended.
|
9.
|
Other Non-Current Liabilities
|
Other non-current liabilities consist of the following:
| |
|
June 30,
|
|
|
December 31,
|
|
| |
|
2010
|
|
|
2009
|
|
| |
|
(in thousands)
|
|
|
Deferred rent
|
|
$
|
7,859
|
|
|
$
|
7,679
|
|
|
Software agreement obligation
|
|
|
3,748
|
|
|
|
3,931
|
|
|
Other
|
|
|
1,770
|
|
|
|
2,200
|
|
| |
|
$
|
13,377
|
|
|
$
|
13,810
|
|
|
10.
|
Stock-Based Compensation Plans
|
Nexstar’s employee compensation plans (the “Equity Plans”) provide for the granting of stock options, stock appreciation rights, restricted stock and performance awards to directors, employees of Nexstar or consultants. A maximum of 4,500,000 shares of Nexstar’s Class A common stock can be issued under the Equity Plans and as of June 30, 2010, a total of 654,000 shares were available for future grant. Employee stock options are granted with an exercise price at least equal to the fair market value of the underlying shares of common stock on the date of the grant, vest over five years and expire ten years from the date of grant.
|
|
NEXSTAR BROADCASTING GROUP, INC.
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
|
11.
|
Gain on Asset Exchange
|
In 2004, the FCC approved a spectrum allocation exchange between Sprint Nextel Corporation (“Nextel”) and public safety entities to eliminate interference being caused to public safety radio licensees by Nextel’s operations. As part of this spectrum exchange, the FCC granted Nextel the right to certain spectrum within the 1.9 GHz band that is currently used by television broadcasters. In order to utilize this spectrum, Nextel is required to relocate the broadcasters to new spectrum by replacing all analog equipment currently used by broadcasters with comparable digital equipment. The Company has agreed to accept the substitute equipment that Nextel will provide and in turn must relinquish its existing equipment back to Nextel. This transition began on a market by market basis beginning in the second quarter of 2007. The equipment the Company receives under this arrangement is recorded at their estimated fair market value and depreciated over estimated useful lives ranging from 5 to 15 years. Management’s determination of the fair market value is derived from the most recent prices paid to manufacturers and vendors for the specific equipment acquired. As equipment is exchanged, the Company records a gain to the extent that the fair market value of the equipment received exceeds the carrying amount of the equipment relinquished. As of March 31, 2010, the transaction was complete. For the three months ended June 30, 2010 and 2009, the Company recognized gains of zero and $2.4 million, respectively, and $30 thousand and $4.1 million, respectively for the six months then ended from the exchange of this equipment.
The Company’s provision for income taxes is primarily comprised of deferred income taxes created by an increase in the deferred tax liabilities position during the year resulting from the amortization of goodwill and other indefinite-lived intangible assets for income tax purposes which are not amortized for financial reporting purposes. These deferred tax liabilities do not reverse on a scheduled basis and are not used to support the realization of deferred tax assets. The Company’s deferred tax assets primarily result from federal and state net operating loss carryforwards (“NOLs”). The Company’s NOLs are available to reduce future taxable income if utilized before their expiration. The Company has provided a valuation allowance for certain deferred tax assets as it believes they may not be realized through future taxable earnings.
As of January 1, 2010, the Company had gross unrecognized tax benefits of approximately $3.7 million, which did not materially change as of June 30, 2010. If recognized, this amount would result in a favorable effect on the Company’s effective tax rate excluding the impact on the Company’s valuation allowance. As of June 30, 2010, the Company has not accrued interest on the unrecognized tax benefits as an unfavorable outcome upon examination would not result in a cash outlay but would reduce NOLs subject to a valuation allowance. The Company does not expect the amount of unrecognized tax benefits to significantly change in the next twelve months.
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is subject to U.S. federal tax examinations for years after 2005. Additionally, any NOLs that were generated in prior years and will be utilized in the future may also be subject to examination by the Internal Revenue Service. State jurisdictions that remain subject to examination are not considered significant.
|
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 it provides services to. In addition, the U.S. Congress may act to amend the Communications Act in a manner that could impact the Company’s stations, the stations it provides services to and the television broadcast industry in general.
Media Ownership
In 2006, the FCC initiated a rulemaking proceeding which provides for a comprehensive review of all of its media ownership rules, as required by the Communications Act. The Commission considered rules relating to ownership of two or more TV stations in a market, ownership of local TV and radio stations by daily newspapers in the same market, cross-ownership of local TV and radio stations, and changes to how the national TV ownership limits are calculated. In February 2008, the FCC adopted modest changes to its newspaper broadcast cross-ownership rule while retaining the rest of its ownership rules then currently in effect. Multiple challenges to this proceeding were filed with the U.S. Courts of Appeal. The court proceedings remain pending.
NEXSTAR BROADCASTING GROUP, INC.
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
|
13.
|
FCC Regulatory Matters—(Continued)
|
The FCC is required by statute to review its media ownership rules every four years and to eliminate those rules it finds no longer serve the “public interest, convenience and necessity”. During 2009, the FCC held a series of hearings designed to evaluate possible changes to its rules. In May 2010, the FCC formally initiated its 2010 review of its media ownership rules with the issuance of a Notice of Inquiry (NOI). The NOI is intended to assist the Commission in establishing a framework within which to analyze whether its media ownership rules remain “necessary in the public interest as a result of competition,” due to the dramatic changes occurring in the media marketplace. Numerous parties have filed comments and reply comments in response to the NOI. We anticipate the FCC will issue a Notice of Proposed Rulemaking seeking comment on specific proposed rule changes in late 2010.
|
14.
|
Commitments and Contingencies
|
Guarantee of Mission Debt
Nexstar and its subsidiaries guarantee full payment of all obligations incurred under Mission’s senior secured credit facility agreement and 8.875% senior secured second lien notes due 2017. 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 amount of borrowings outstanding. At June 30, 2010, Mission had $39.0 million outstanding under its senior secured credit facility and $132.0 million outstanding 8.875% senior secured second lien notes.
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 immaterial and the Company has not incurred significant costs to defend lawsuits or settle claims related to these indemnification agreements.
Litigation
From time to time, the Company is involved with claims that arise out of the normal course of its business. In the opinion of management, any resulting liability with respect to these claims would not have a material adverse effect on the Company’s financial position or results of operations.
|
15.
|
Condensed Consolidating Financial Information
|
The following condensed consolidating financial information presents the financial position, results of operations and cash flows of the Company, each of its 100%, directly or indirectly, owned subsidiaries. This information is presented in lieu of separate financial statements and other related disclosures pursuant to Regulation S-X Rule 3-10 of the Securities Exchange Act of 1934, as amended, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or being Registered.”
The Nexstar column presents the parent company’s financial information (not including any subsidiaries). The Nexstar Holdings column presents its financial information (not including any subsidiaries). The Nexstar Broadcasting column presents the financial information of Nexstar Broadcasting. The Mission column presents the financial information of Mission, an entity which Nexstar Broadcasting is required to consolidate as a variable interest entity (see Note 2).
|
|
NEXSTAR BROADCASTING GROUP, INC.
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
|
15.
|
Condensed Consolidating Financial Information—(Continued)
|
The Company and its subsidiaries have the following notes outstanding:
1. Nexstar Holdings, which is a wholly-owned subsidiary of Nexstar, has 11.375% senior discount notes (“11.375% Notes”) due in 2013. The 11.375% Notes are fully and unconditionally guaranteed by Nexstar but not guaranteed by any other entities.
2. Nexstar Broadcasting, which is a wholly-owned subsidiary of Nexstar Holdings, has the following notes outstanding:
|
|
(a) 7% Senior Subordinated Notes (“7% Notes”) due 2014. The 7% Notes are fully and unconditionally guaranteed by Nexstar and Mission. These notes are not guaranteed by any other entities.
|
|
|
(b) 7% Senior Subordinated PIK Notes due 2014 (“7% PIK Notes”). The 7% PIK Notes are fully and unconditionally guaranteed by Nexstar and Mission. These notes are not guaranteed by any other entities.
|
|
|
(c) Senior Subordinated PIK Notes due 2014 (“Senior Subordinated PIK Notes”). The Senior Subordinated PIK Notes currently bear interest at 13% subject to increases over time. The Senior Subordinated PIK Notes are fully and unconditionally guaranteed by Nexstar. The Senior Subordinated PIK Notes are not guaranteed by Mission or any other entity.
|
|
|
(d) 8.875% Senior Secured Second Lien Notes due 2017 (“8.875% Senior Secured Second Lien Notes”). The 8.875% Senior Secured Second Lien Notes are co-issued by Nexstar Broadcasting and Mission, jointly and severally, and fully and unconditionally guaranteed by Nexstar and Mission. The net proceeds to Mission and Nexstar from the sale of the Notes were approximately $316.8 million, net of approximately $8.2 million original issuance discount. Mission received $131.9 million of the net proceeds and $184.9 million was received by Nexstar Broadcasting. As the obligations under the Notes are joint and several to Nexstar Broadcasting and Mission, each entity reflects the full amount of the Notes and related accrued interest in their separate financial statements. Further, the portions of the net proceeds and related accrued interest attributable to the respective co-issuer are reflected as a reduction to equity (due from affiliate) in their separate financial statements given the common control nature of the entities.
|
Neither Mission nor Nexstar Broadcasting has any subsidiaries.
|
|
NEXSTAR BROADCASTING GROUP, INC.
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
|
15.
|
Condensed Consolidating Financial Information—(Continued)
|
Balance Sheet
June 30, 2010
(in thousands)
| |
|
Nexstar
|
|
|
Nexstar
Broadcasting
|
|
|
Mission
|
|
|
Nexstar
Holdings
|
|
|
Eliminations
|
|
|
Consolidated
Company
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
—
|
|
|
$
|
7,049
|
|
|
$
|
724
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,773
|
|
|
Due from Mission
|
|
|
—
|
|
|
|
11,581
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(11,581
|
)
|
|
|
—
|
|
|
Other current assets
|
|
|
—
|
|
|
|
65,899
|
|
|
|
3,365
|
|
|
|
—
|
|
|
|
—
|
|
|
|
69,264
|
|
|
Total current assets
|
|
|
—
|
|
|
|
84,529
|
|
|
|
4,089
|
|
|
|
—
|
|
|
|
(11,581
|
)
|
|
|
77,037
|
|
|
Amounts due from subsidiary eliminated upon consolidation
|
|
|
5,697
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,697
|
)
|
|
|
—
|
|
|
Amounts due from parents eliminated upon consolidation
|
|
|
—
|
|
|
|
4,814
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,814
|
)
|
|
|
—
|
|
|
Property and equipment, net
|
|
|
—
|
|
|
|
114,912
|
|
|
|
27,170
|
|
|
|
—
|
|
|
|
—
|
|
|
|
142,082
|
|
|
Goodwill
|
|
|
—
|
|
|
|
90,329
|
|
|
|
18,730
|
|
|
|
—
|
|
|
|
—
|
|
|
|
109,059
|
|
|
FCC licenses
|
|
|
—
|
|
|
|
106,789
|
|
|
|
20,698
|
|
|
|
—
|
|
|
|
—
|
|
|
|
127,487
|
|
|
Other intangible assets, net
|
|
|
—
|
|
|
|
91,354
|
|
|
|
22,943
|
|
|
|
—
|
|
|
|
—
|
|
|
|
114,297
|
|
|
Other noncurrent assets
|
|
|
—
|
|
|
|
11,533
|
|
|
|
2,322
|
|
|
|
675
|
|
|
|
—
|
|
|
|
14,530
|
|
|
Total assets
|
|
$
|
5,697
|
|
|
$
|
504,260
|
|
|
$
|
95,952
|
|
|
$
|
675
|
|
|
$
|
(22,092
|
)
|
|
$
|
584,492
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of debt
|
|
|
—
|
|
|
|
610
|
|
|
|
390
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,000
|
|
|
Due to Nexstar Broadcasting
|
|
|
—
|
|
|
|
—
|
|
|
|
11,581
|
|
|
|
—
|
|
|
|
(11,581
|
)
|
|
|
—
|
|
|
Other current liabilities
|
|
|
—
|
|
|
|
38,145
|
|
|
|
9,119
|
|
|
|
1,421
|
|
|
|
(5,689
|
)
|
|
|
42,996
|
|
|
Total current liabilities
|
|
|
—
|
|
|
|
38,755
|
|
|
|
21,090
|
|
|
|
1,421
|
|
|
|
(17,270
|
)
|
|
|
43,996
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
564,912
|
|
|
|
355,614
|
|
|
|
49,981
|
|
|
|
(317,004
|
)
|
|
|
653,503
|
|
|
Investments in subsidiaries eliminated upon consolidation
|
|
|
218,613
|
|
|
|
—
|
|
|
|
—
|
|
|
|
157,373
|
|
|
|
(375,986
|
)
|
|
|
—
|
|
|
Amounts due to subsidiary eliminated upon consolidation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,511
|
|
|
|
(10,511
|
)
|
|
|
—
|
|
|
Other noncurrent liabilities
|
|
|
(3
|
)
|
|
|
57,966
|
|
|
|
16,201
|
|
|
|
2
|
|
|
|
—
|
|
|
|
74,166
|
|
|
Total liabilities
|
|
|
218,610
|
|
|
|
661,633
|
|
|
|
392,905
|
|
|
|
219,288
|
|
|
|
(720,771
|
)
|
|
|
771,665
|
|
|
Stockholders’ equity (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
284
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
284
|
|
|
Other stockholders’ equity (deficit)
|
|
|
(213,197
|
)
|
|
|
(157,373
|
)
|
|
|
(296,953
|
)
|
|
|
(218,613
|
)
|
|
|
698,679
|
|
|
|
(187,457
|
)
|
|
Total stockholders’ equity (deficit)
|
|
|
(212,913
|
)
|
|
|
(157,373
|
)
|
|
|
(296,953
|
)
|
|
|
(218,613
|
)
|
|
|
698,679
|
|
|
|
(187,173
|
)
|
|
Total liabilities and stockholders’ equity (deficit)
|
|
$
|
5,697
|
|
|
$
|
504,260
|
|
|
$
|
95,952
|
|
|
$
|
675
|
|
|
$
|
(22,092
|
) |
|
$
|
584,492
|
|
|
|
NEXSTAR BROADCASTING GROUP, INC.
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
|
15.
|
Condensed Consolidating Financial Information—(Continued)
|
BALANCE SHEET
December 31, 2009
(in thousands)
| |
|
Nexstar
|
|
|
Nexstar
Broadcasting
|
|
|
Mission
|
|
|
Nexstar
Holdings
|
|
|
Eliminations
|
|
|
Consolidated
Company
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
—
|
|
|
$
|
11,849
|
|
|
$
|
903
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,752
|
|
|
Due from Mission
|
|
|
—
|
|
|
|
13,370
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(13,370
|
)
|
|
|
—
|
|
|
Other current assets
|
|
|
—
|
|
|
|
75,466
|
|
|
|
4,668
|
|
|
|
—
|
|
|
|
—
|
|
|
|
80,134
|
|
|
Total current assets
|
|
|
—
|
|
|
|
100,685
|
|
|
|
5,571
|
|
|
|
—
|
|
|
|
(13,370
|
)
|
|
|
92,886
|
|
|
Amounts due from subsidiary eliminated upon consolidation
|
|
|
3,513
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,513
|
)
|
|
|
—
|
|
|
Amounts due from parents eliminated upon consolidation
|
|
|
—
|
|
|
|
4,146
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,146
|
)
|
|
|
—
|
|
|
Property and equipment, net
|
|
|
—
|
|
|
|
115,671
|
|
|
|
28,610
|
|
|
|
—
|
|
|
|
—
|
|
|
|
144,281
|
|
|
Goodwill
|
|
|
—
|
|
|
|
90,330
|
|
|
|
18,729
|
|
|
|
—
|
|
|
|
—
|
|
|
|
109,059
|
|
|
FCC licenses
|
|
|
—
|
|
|
|
106,789
|
|
|
|
20,698
|
|
|
|
—
|
|
|
|
—
|
|
|
|
127,487
|
|
|
Other intangible assets, net
|
|
|
—
|
|
|
|
100,699
|
|
|
|
25,517
|
|
|
|
—
|
|
|
|
—
|
|
|
|
126,216
|
|
|
Other noncurrent assets
|
|
|
—
|
|
|
|
15,197
|
|
|
|
3,906
|
|
|
|
794
|
|
|
|
—
|
|
|
|
19,897
|
|
|
Total assets
|
|
$
|
3,513
|
|
|
$
|
533,517
|
|
|
$
|
103,031
|
|
|
$
|
794
|
|
|
$
|
(21,029
|
)
|
|
$
|
619,826
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of debt
|
|
$
|
—
|
|
|
$
|
5,358
|
|
|
$
|
1,727
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,085
|
|
|
Due to Nexstar Broadcasting
|
|
|
—
|
|
|
|
—
|
|
|
|
13,370
|
|
|
|
—
|
|
|
|
(13,370
|
)
|
|
|
—
|
|
|
Other current liabilities
|
|
|
—
|
|
|
|
42,331
|
|
|
|
5,174
|
|
|
|
1,421
|
|
|
|
—
|
|
|
|
48,926
|
|
|
Total current liabilities
|
|
|
—
|
|
|
|
47,689
|
|
|
|
20,271
|
|
|
|
1,421
|
|
|
|
(13,370
|
)
|
|
|
56,011
|
|
|
Debt
|
|
|
—
|
|
|
|
442,675
|
|
|
|
170,633
|
|
|
|
49,981
|
|
|
|
—
|
|
|
|
663,289
|
|
|
Investments in subsidiaries eliminated upon consolidation
|
|
|
75,125
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,856
|
|
|
|
(91,981
|
)
|
|
|
—
|
|
|
Amounts due to subsidiary eliminated upon consolidation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,659
|
|
|
|
(7,659
|
)
|
|
|
—
|
|
|
Other noncurrent liabilities
|
|
|
(3
|
)
|
|
|
60,009
|
|
|
|
16,781
|
|
|
|
2
|
|
|
|
—
|
|
|
|
76,789
|
|
|
Total liabilities
|
|
|
75,122
|
|
|
|
550,373
|
|
|
|
207,685
|
|
|
|
75,919
|
|
|
|
(113,010
|
)
|
|
|
796,089
|
|
|
Stockholders’ equity (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
284
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
284
|
|
|
Other stockholders’ equity (deficit)
|
|
|
(71,893
|
)
|
|
|
(16,856
|
)
|
|
|
(104,654
|
)
|
|
|
(75,125
|
)
|
|
|
91,981
|
|
|
|
(176,547
|
)
|
|
Total stockholders’ equity (deficit)
|
|
|
(71,609
|
)
|
|
|
(16,856
|
)
|
|
|
(104,654
|
)
|
|
|
(75,125
|
)
|
|
|
91,981
|
|
|
|
(176,263
|
)
|
|
Total liabilities and stockholders’ equity (deficit)
|
|
$
|
3,513
|
|
|
$
|
533,517
|
|
|
$
|
103,031
|
|
|
$
|
794
|
|
|
$
|
(21,029
|
)
|
|
$
|
619,826
|
|
|
|
NEXSTAR BROADCASTING GROUP, INC.
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
|
|
15.
|
Condensed Consolidating Financial Information—(Continued)
|
Statement of Operations
For the Three Months Ended June 30, 2010
(in thousands)
| |
|
Nexstar
|
|
|
Nexstar
Broadcasting
|
|
|
Mission
|
|
|
Nexstar
Holdings
|
|
|
Eliminations
|
|
|
Consolidated
Company
|
|
|
Net broadcast revenue (including trade and barter)
|
|
$
|
—
|
|
|
$
|
72,178
|
|
|
$
|
2,364
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
74,542
|
|
|
Revenue between consolidated entities
|
|
|
—
|
|
|
|
1,790
|
|
|
|
7,005
|
|
|
|
—
|
|
|
|
(8,795
|
)
|
|
|
—
|
|
|
Net revenue
|
|
|
—
|
|
|
|
73,968
|
|
|
|
9,369
|
|
|
|
—
|
|
|
|
(8,795
|
)
|
|
|
74,542
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses (exclusive of depreciation and amortization shown separately below)
|
|
|
—
|
|
|
|
18,098
|
|
|
|
1,482
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,580
|
|
|
Selling, general, and administrative expenses (exclusive of depreciation and amortization shown separately below and inclusive of $1,600 one-time non-cash stock-based compensation expense from May 2010 stock option repricing)
|
|
|
(175
|
)
|
|
|
24,401
|
|
|
|
528
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24,754
|
|
|
Local service agreement fees between consolidated entities
|
|
|
—
|
|
|
|
7,005
|
|
|
|
1,790
|
|
|
|
—
|
|
|
|
(8,795
|
)
|
|
|
—
|
|
|
Amortization of broadcast rights
|
|
|
—
|
|
|
|
4,127
|
|
|
|
869
|
|
|
|