nxsq21110q.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, 2011
OR
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from to .
Commission File Number: 000-50478
NEXSTAR BROADCASTING GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
|
Delaware
|
23-3083125
|
|
(State of Incorporation or Organization)
|
(I.R.S. Employer Identification No.)
|
| |
|
|
5215 N. O’Connor Blvd., Suite 1400, Irving, Texas
|
75039
|
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
| |
|
(972) 373-8800
|
|
(Registrant’s Telephone Number, Including Area Code)
|
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that it was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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 x 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
|
¨
|
Accelerated filer
|
¨
|
| |
|
|
|
|
Non-accelerated filer
|
x
|
Smaller reporting company
|
¨
|
|
(Do not check if a smaller reporting company)
|
|
|
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 August 4, 2011 the registrant had 15,387,131 shares of Class A Common Stock and 13,411,588 shares of Class B Common Stock outstanding.
TABLE OF CONTENTS
| |
|
|
|
PART I
|
FINANCIAL INFORMATION
|
|
| |
|
|
|
ITEM 1.
|
Financial Statements (Unaudited)
|
|
| |
|
|
| |
Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010
|
1
|
| |
|
|
| |
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010
|
2
|
| |
|
|
| |
Condensed Consolidated Statement of Changes in Stockholders’ Deficit for the six months ended June 30, 2011
|
3
|
| |
|
|
| |
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010
|
4
|
| |
|
|
| |
Notes to Condensed Consolidated Financial Statements
|
5
|
| |
|
|
|
ITEM 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
25
|
| |
|
|
|
ITEM 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
34
|
| |
|
|
|
ITEM 4.
|
Controls and Procedures
|
34
|
| |
|
|
|
PART II
|
OTHER INFORMATION
|
|
| |
|
|
|
ITEM 1.
|
Legal Proceedings
|
35
|
| |
|
|
|
ITEM 1A.
|
Risk Factors
|
35
|
| |
|
|
|
ITEM 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
35
|
| |
|
|
|
ITEM 3.
|
Defaults Upon Senior Securities
|
35
|
| |
|
|
|
ITEM 4.
|
Reserved
|
35
|
| |
|
|
|
ITEM 5.
|
Other Information
|
35
|
| |
|
|
|
ITEM 6.
|
Exhibits
|
35
|
| |
|
|
EXHIBIT INDEX
|
|
PART I. FINANCIAL INFORMATION
|
ITEM 1.
|
Financial Statements
|
NEXSTAR BROADCASTING GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share information, unaudited)
| |
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
12,533 |
|
|
$ |
23,658 |
|
|
Accounts receivable, net of allowance for doubtful accounts of $866 and $2,075, respectively
|
|
|
59,064 |
|
|
|
63,501 |
|
|
Current portion of broadcast rights
|
|
|
12,369 |
|
|
|
18,056 |
|
|
Prepaid expenses and other current assets
|
|
|
810 |
|
|
|
1,986 |
|
|
Deferred tax asset
|
|
|
15 |
|
|
|
15 |
|
|
Total current assets
|
|
|
84,791 |
|
|
|
107,216 |
|
|
Property and equipment, net
|
|
|
133,904 |
|
|
|
137,036 |
|
|
Broadcast rights
|
|
|
5,906 |
|
|
|
11,749 |
|
|
Goodwill
|
|
|
109,059 |
|
|
|
109,059 |
|
|
FCC licenses
|
|
|
106,789 |
|
|
|
106,789 |
|
|
FCC licenses of Mission
|
|
|
20,698 |
|
|
|
20,698 |
|
|
Other intangible assets, net
|
|
|
89,296 |
|
|
|
102,494 |
|
|
Other noncurrent assets
|
|
|
6,976 |
|
|
|
6,918 |
|
|
Deferred tax asset
|
|
|
569 |
|
|
|
577 |
|
|
Total assets
|
|
$ |
557,988 |
|
|
$ |
602,536 |
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Current portion of debt
|
|
$ |
1,500 |
|
|
$ |
1,000 |
|
|
Current portion of broadcast rights payable
|
|
|
10,567 |
|
|
|
15,290 |
|
|
Accounts payable
|
|
|
9,150 |
|
|
|
10,372 |
|
|
Accrued expenses
|
|
|
10,083 |
|
|
|
8,536 |
|
|
Taxes payable
|
|
|
175 |
|
|
|
380 |
|
|
Interest payable
|
|
|
10,843 |
|
|
|
9,270 |
|
|
Deferred revenue
|
|
|
2,320 |
|
|
|
2,803 |
|
|
Other liabilities of Mission
|
|
|
3,577 |
|
|
|
4,857 |
|
|
Other liabilities
|
|
|
1,131 |
|
|
|
1,086 |
|
|
Total current liabilities
|
|
|
49,346 |
|
|
|
53,594 |
|
|
Debt
|
|
|
614,629 |
|
|
|
642,100 |
|
|
Broadcast rights payable
|
|
|
6,148 |
|
|
|
10,884 |
|
|
Deferred tax liabilities
|
|
|
38,198 |
|
|
|
36,230 |
|
|
Deferred revenue
|
|
|
654 |
|
|
|
889 |
|
|
Deferred gain on sale of assets
|
|
|
2,364 |
|
|
|
2,495 |
|
|
Deferred representation fee incentive
|
|
|
4,654 |
|
|
|
4,963 |
|
|
Other liabilities of Mission
|
|
|
16,687 |
|
|
|
17,539 |
|
|
Other liabilities
|
|
|
8,729 |
|
|
|
9,007 |
|
|
Total liabilities
|
|
|
741,409 |
|
|
|
777,701 |
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
|
|
|
Preferred stock - $0.01 par value, 200,000 shares authorized; none issued and outstanding at each of June 30, 2011 and December 31, 2010
|
|
|
— |
|
|
|
— |
|
|
Class A Common stock - $0.01 par value, 100,000,000 shares authorized; 15,052,839 and 15,038,839 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively
|
|
|
151 |
|
|
|
150 |
|
|
Class B Common stock - $0.01 par value, 20,000,000 shares authorized; 13,411,588 shares issued and outstanding at each of June 30, 2011 and December 31, 2010
|
|
|
134 |
|
|
|
134 |
|
|
Class C Common stock - $0.01 par value, 5,000,000 shares authorized; none issued and outstanding at each of June 30, 2011 and December 31, 2010
|
|
|
— |
|
|
|
— |
|
|
Additional paid-in capital
|
|
|
403,645 |
|
|
|
403,006 |
|
|
Accumulated deficit
|
|
|
(587,351 |
) |
|
|
(578,455 |
) |
|
Total stockholders’ deficit
|
|
|
(183,421 |
) |
|
|
(175,165 |
) |
|
Total liabilities and stockholders’ deficit
|
|
$ |
557,988 |
|
|
$ |
602,536 |
|
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, unaudited)
| |
|
Three Months Ended
|
|
|
Six Months Ended
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$ |
75,505 |
|
|
$ |
74,542 |
|
|
$ |
145,450 |
|
|
$ |
143,168 |
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses, excluding depreciation and amortization
|
|
|
19,705 |
|
|
|
19,580 |
|
|
|
38,808 |
|
|
|
38,563 |
|
|
Selling, general, and administrative expenses, excluding depreciation and amortization
|
|
|
24,955 |
|
|
|
24,754 |
|
|
|
49,967 |
|
|
|
48,004 |
|
|
Amortization of broadcast rights
|
|
|
5,262 |
|
|
|
4,996 |
|
|
|
10,849 |
|
|
|
10,307 |
|
|
Amortization of intangible assets
|
|
|
7,359 |
|
|
|
5,987 |
|
|
|
13,198 |
|
|
|
11,919 |
|
|
Depreciation
|
|
|
5,205 |
|
|
|
5,257 |
|
|
|
10,435 |
|
|
|
10,637 |
|
|
Loss (gain) on asset disposal, net
|
|
|
94 |
|
|
|
10 |
|
|
|
102 |
|
|
|
(44 |
) |
|
Total operating expenses
|
|
|
62,580 |
|
|
|
60,584 |
|
|
|
123,359 |
|
|
|
119,386 |
|
|
Income from operations
|
|
|
12,925 |
|
|
|
13,958 |
|
|
|
22,091 |
|
|
|
23,782 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(13,308 |
) |
|
|
(13,881 |
) |
|
|
(27,013 |
) |
|
|
(25,844 |
) |
|
Loss on extinguishment of debt
|
|
|
(808 |
) |
|
|
(7,903 |
) |
|
|
(1,155 |
) |
|
|
(7,809 |
) |
|
Loss before income taxes
|
|
|
(1,191 |
) |
|
|
(7,826 |
) |
|
|
(6,077 |
) |
|
|
(9,871 |
) |
|
Income tax expense
|
|
|
(1,393 |
) |
|
|
(1,595 |
) |
|
|
(2,819 |
) |
|
|
(3,223 |
) |
|
Net loss
|
|
$ |
(2,584 |
) |
|
$ |
(9,421 |
) |
|
$ |
(8,896 |
) |
|
$ |
(13,094 |
) |
|
Net loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$ |
(0.09 |
) |
|
$ |
(0.33 |
) |
|
$ |
(0.31 |
) |
|
$ |
(0.46 |
) |
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
28,452 |
|
|
|
28,431 |
|
|
|
28,451 |
|
|
|
28,431 |
|
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, 2011
(in thousands, except share information, unaudited)
| |
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
|
— |
|
|
$ |
— |
|
|
|
15,038,839 |
|
|
$ |
150 |
|
|
|
13,411,588 |
|
|
$ |
134 |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
403,006 |
|
|
$ |
(578,455 |
) |
|
$ |
(175,165 |
) |
|
Stock-based compensation expense
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
573 |
|
|
|
— |
|
|
|
573 |
|
|
Exercise of stock options
|
|
|
— |
|
|
|
— |
|
|
|
14,000 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
66 |
|
|
|
— |
|
|
|
67 |
|
|
Net loss
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,896 |
) |
|
|
(8,896 |
) |
|
Balance as of June 30, 2011
|
|
|
— |
|
|
$ |
— |
|
|
|
15,052,839 |
|
|
$ |
151 |
|
|
|
13,411,588 |
|
|
$ |
134 |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
403,645 |
|
|
$ |
(587,351 |
) |
|
$ |
(183,421 |
) |
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, unaudited)
| |
|
Six Months Ended
|
|
| |
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(8,896 |
) |
|
$ |
(13,094 |
) |
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
2,558 |
|
|
|
2,971 |
|
|
Provision for bad debts
|
|
|
1,155 |
|
|
|
680 |
|
|
Depreciation of property and equipment
|
|
|
10,435 |
|
|
|
10,637 |
|
|
Amortization of intangible assets
|
|
|
13,198 |
|
|
|
11,919 |
|
|
Amortization of debt financing costs
|
|
|
868 |
|
|
|
1,180 |
|
|
Amortization of broadcast rights, excluding barter
|
|
|
4,409 |
|
|
|
4,701 |
|
|
Payments for broadcast rights
|
|
|
(4,759 |
) |
|
|
(4,972 |
) |
|
Payment-in-kind interest accrued to debt
|
|
|
21 |
|
|
|
558 |
|
|
Loss (gain) on asset disposal, net
|
|
|
102 |
|
|
|
(44 |
) |
|
Loss on extinguishment of debt
|
|
|
1,155 |
|
|
|
7,809 |
|
|
Premium on debt extinguishment, net
|
|
|
(254 |
) |
|
|
(1,381 |
) |
|
PIK interest paid upon debt extinguishment
|
|
|
(215 |
) |
|
|
(6,146 |
) |
|
Issue discount paid upon debt extinguishment
|
|
|
(3,126 |
) |
|
|
(782 |
) |
|
Deferred gain recognition
|
|
|
(218 |
) |
|
|
(219 |
) |
|
Amortization of debt discount
|
|
|
1,059 |
|
|
|
4,748 |
|
|
Amortization of deferred representation fee incentive
|
|
|
(309 |
) |
|
|
(312 |
) |
|
Stock-based compensation expense
|
|
|
573 |
|
|
|
2,182 |
|
|
Changes in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
3,282 |
|
|
|
3,072 |
|
|
Prepaid expenses and other current assets
|
|
|
1,176 |
|
|
|
774 |
|
|
Other noncurrent assets
|
|
|
(18 |
) |
|
|
(67 |
) |
|
Accounts payable and accrued expenses
|
|
|
(143 |
) |
|
|
(621 |
) |
|
Taxes payable
|
|
|
(205 |
) |
|
|
(135 |
) |
|
Interest payable
|
|
|
1,573 |
|
|
|
4,864 |
|
|
Deferred revenue
|
|
|
(718 |
) |
|
|
(3,645 |
) |
|
Other liabilities of Mission
|
|
|
(205 |
) |
|
|
(379 |
) |
|
Other noncurrent liabilities
|
|
|
(278 |
) |
|
|
(518 |
) |
|
Net cash provided by operating activities
|
|
|
22,220 |
|
|
|
23,780 |
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(6,952 |
) |
|
|
(8,722 |
) |
|
Proceeds from insurance on casualty loss
|
|
|
30 |
|
|
|
459 |
|
|
Escrow payment on station acquisition
|
|
|
(1,000 |
) |
|
|
— |
|
|
Net cash used in investing activities
|
|
|
(7,922 |
) |
|
|
(8,263 |
) |
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Repayments of long-term debt
|
|
|
(74,957 |
) |
|
|
(331,088 |
) |
|
Payments for debt financing costs
|
|
|
(533 |
) |
|
|
(3,569 |
) |
|
Consideration paid for debt extinguishments
|
|
|
— |
|
|
|
(2,680 |
) |
|
Proceeds from issuance of long-term debt
|
|
|
50,000 |
|
|
|
316,839 |
|
|
Proceeds from exercise of stock options
|
|
|
67 |
|
|
|
2 |
|
|
Net cash used in financing activities
|
|
|
(25,423 |
) |
|
|
(20,496 |
) |
|
Net decrease in cash and cash equivalents
|
|
|
(11,125 |
) |
|
|
(4,979 |
) |
|
Cash and cash equivalents at beginning of period
|
|
|
23,658 |
|
|
|
12,752 |
|
|
Cash and cash equivalents at end of period
|
|
$ |
12,533 |
|
|
$ |
7,773 |
|
|
Supplemental information:
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$ |
26,736 |
|
|
$ |
21,324 |
|
|
Income taxes paid, net
|
|
$ |
499 |
|
|
$ |
416 |
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
Accrued debt financing costs
|
|
$ |
30 |
|
|
$ |
— |
|
|
Accrued purchases of property and equipment
|
|
$ |
1,143 |
|
|
$ |
131 |
|
|
Purchases of property and equipment through trade
|
|
$ |
290 |
|
|
$ |
— |
|
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, 2011, Nexstar Broadcasting Group, Inc. (“Nexstar”) owned, operated, programmed or provided sales and other services to 59 television stations and four digital multi-cast channels, including those owned by Mission Broadcasting, Inc. (“Mission”), in 34 markets in the states of Illinois, Indiana, Maryland, Missouri, Montana, Texas, Pennsylvania, Louisiana, Arkansas, Alabama, New York, Rhode Island, Utah and Florida. The stations are affiliates of NBC (12 stations), CBS (11 stations), ABC (9 stations), FOX (15 stations), MyNetworkTV (7 stations and one digital multi-cast channel), The CW (4 stations), LATV (2 digital multi-cast channels), Azteca America (1 station) and Telemundo (1 digital multi-cast channel). Through various local service agreements, Nexstar provided sales, programming and other services to 25 stations and four digital multi-cast channels 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.
In June 2011, Nexstar’s Board of Directors retained Moelis & Company as its financial advisor to assist with the exploration and evaluation of strategic alternatives intended to maximize stockholder value, including a possible sale of the Company. The Company has not made a decision to pursue any specific strategic transaction or other strategic alternative and there is no set timetable for the process, so there can be no assurance that the exploration of strategic alternatives will result in a sale of the Company or any other transaction. The Company does not intend to disclose developments with respect to the progress of its strategic review until such time as the Board has approved a transaction or otherwise deems disclosure appropriate.
|
2.
|
Summary of Significant Accounting Policies
|
Principles of Consolidation
The Condensed Consolidated Financial Statements include the accounts of Nexstar and its subsidiaries. Also included in the Condensed Consolidated Financial Statements are the accounts of the independently-owned variable interest entity (“VIE”), Mission (Nexstar and Mission are collectively referred to as the “Company”). Where the assets of Mission are not available to be used to settle the obligations of Nexstar, they are presented as the assets of Mission on the Condensed Consolidated Balance Sheets. Conversely, where the creditors of Mission do not have recourse to the general credit of Nexstar, the related liabilities are presented as the liabilities of Mission on the Condensed Consolidated Balance Sheets. Nexstar management evaluates each arrangement that may include variable interests and determines the need to consolidate an entity where it determines Nexstar is the primary beneficiary of a VIE in accordance with related authoritative literature and interpretive guidance.
All intercompany account balances and transactions have been eliminated in consolidation.
Liquidity
Nexstar is highly leveraged, which makes it vulnerable to changes in general economic conditions. Nexstar’s ability to repay or refinance its debt will depend on, among other things, financial, business, market, competitive and other conditions, many of which are beyond Nexstar’s control.
During 2011, Nexstar Finance Holdings, Inc. (“Nexstar Holdings”), a wholly-owned subsidiary of Nexstar, redeemed the balance of its 11.375% senior discount notes due 2013 (“11.375% Notes”) by a redemption of $12.5 million in January 2011, a repurchase of $0.2 million in January 2011 and a redemption of the remaining balance of $33.2 million in May 2011. Nexstar Broadcasting, Inc. (“Nexstar Broadcasting”), a wholly-owned indirect subsidiary of Nexstar, repurchased additional outstanding notes during the six months ended June 30, 2011, including $7.5 million of 7% senior subordinated notes due 2014 and $24.2 million of 7% senior subordinated PIK notes due 2014. The Company also repaid scheduled maturities on its senior secured credit facilities. See Note 7 for more details related to these transactions.
Additionally, in April 2011, Nexstar Broadcasting entered into an amendment to Nexstar’s senior secured credit facility. The amendment provided $50.0 million additional funding, which was used for the May redemption of the 11.375% Notes, repurchases of additional outstanding notes and general corporate purposes. See Note 7 for more details related to this amendment. Additionally, on July 1, 2011, Nexstar Broadcasting borrowed $19.3 million from its revolving loan in its senior secured credit facility in connection with the purchase of two stations. See Note 3 for more details related to this transaction.
Interim Financial Statements
The Condensed Consolidated Financial Statements as of June 30, 2011 and for the six months ended June 30, 2011 and 2010 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, 2010. The balance sheet at December 31, 2010 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.
Mission
Mission is included in these Condensed Consolidated Financial Statements because Nexstar is deemed to have a controlling financial interest in Mission as a VIE 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 (see Note 12), (c) Nexstar having power over significant activities affecting Mission’s economic performance, including budgeting for advertising revenue, advertising and hiring and firing of sales force personnel and (d) purchase options granted by Mission 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 for consideration equal to the greater of (1) seven times the station’s cash flow, as defined in the option agreement, less the amount of its indebtedness, as defined in the option agreement, or (2) the amount of its indebtedness. These option agreements expire on various dates between 2011 and 2018. The Company expects these option agreements, if unexercised, will be renewed upon expiration. As of June 30, 2011, the assets of Mission consisted of current assets of $6.6 million (excluding broadcast rights), broadcast rights of $2.9 million, FCC licenses of $20.7 million, goodwill of $18.7 million, other intangible assets of $17.8 million, property and equipment of $24.3 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 13 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, 2011:
|
|
|
|
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’s ability to receive cash from Mission is governed by these local service agreements. Under the local service agreements, Nexstar has received substantially all of Mission’s available cash, after satisfaction of operating costs and debt obligations. Nexstar anticipates it will continue to receive substantially all of Mission’s available cash, after satisfaction of its operating costs and debt obligations. In compliance with FCC regulations for both Nexstar and Mission, Mission maintains complete responsibility for and control over programming, finances, personnel and operations of 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. In addition to those with Mission, Nexstar has VIEs in connection with local service agreements entered into with stations as 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 it does 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 $1.6 million and $1.1 million for the three months ended June 30, 2011 and 2010, respectively and $2.7 million and $2.0 million for the six months then ended. Nexstar has a balance in accounts payable to Sinclair for fees under these arrangements in the amount of $0.4 million as of June 30, 2011. Nexstar also has receivables in the amount of $2.4 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. Nexstar has evaluated the business arrangement with Four Points and concluded that Nexstar is not the primary beneficiary of the variable interest because it does 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, Nexstar does not consolidate Four Points’ financial results into its own. As of June 30, 2011, Nexstar had a balance in accounts receivable from Four Points of $0.5 million, out of $1.0 million earned in the six months ended June 30, 2011. Nexstar must indemnify Four Points for any claim or liability that arises out of its acts or omissions related to the agreement. For this reason, the maximum exposure to loss as a result of this agreement with Four Points is not determinable.
Loss Per Share
Basic loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period. Diluted 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 outstanding. For the three and six months ended June 30, 2011 and 2010, the effect of potential common shares was anti-dilutive due to the net losses and were excluded from the computation of diluted net loss per share. Options were outstanding to purchase the following weighted-average shares of Nexstar’s Class A common stock:
| |
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Options with a potentially dilutive effect
|
|
|
1,530,107 |
|
|
|
945,537 |
|
|
|
1,297,904 |
|
|
|
673,441 |
|
|
Out-of-the-money and other anti-dilutive options
|
|
|
2,253,816 |
|
|
|
2,834,826 |
|
|
|
2,486,558 |
|
|
|
3,113,224 |
|
|
Total options
|
|
|
3,783,923 |
|
|
|
3,780,363 |
|
|
|
3,784,462 |
|
|
|
3,786,665 |
|
Basis of Presentation
Certain prior year amounts have been reclassified to conform to the current year presentation.
Recent Accounting Pronouncements
In October 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (“ASU 2009-13”). ASU 2009-13 allows the use of companies’ estimated selling prices as the value for deliverable elements under certain circumstances and eliminates the use of the residual method for allocation of deliverable elements. The Company adopted this guidance effective January 1, 2011, and the adoption had no impact to the Company’s financial position or results of operations.
In May 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 clarifies certain topics regarding fair value measurement and adds some disclosures for fair value measurements. The update is effective for the Company beginning on January 1, 2012. The Company does not expect the implementation of this standard to have a material impact on its financial position or results of operations.
On April 7, 2011, Nexstar Broadcasting entered into a definitive agreement to acquire the assets of WFRV and WJMN, the CBS affiliates serving the Green Bay, Wisconsin and Marquette, Michigan markets, respectively, from an affiliate of Liberty Media Corporation for $21.5 million. This acquisition allows the Company entrance into these markets. The purchase consideration is comprised of $19.1 million of cash, to be borrowed under Nexstar Broadcasting’s senior secured credit facility, and the issuance of 334,292 unregistered shares of Nexstar Class A common stock, valued at $2.4 million. The transaction was approved by the FCC and closed on July 1, 2011. The accounting for this transaction has not yet been completed, as management is currently evaluating the factors necessary to assess the fair values of the assets acquired and any liabilities assumed.
|
4.
|
Fair Value Measurements
|
In accordance with authoritative literature pertaining to fair value measurements for financial assets and financial liabilities measured on a recurring basis the Company utilizes the following categories of methodology for valuation of such financial assets and liabilities:
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. The Company does not enter into investments for trading or speculative purposes. As of June 30, 2011 and December 31, 2010, the Company had $2.8 million and $17.2 million, respectively, invested in money market investments, which are carried at fair value. The Company has determined that the fair value of the money market investment is defined as Level 1 in the fair value hierarchy. See Note 7 for fair value disclosures related to the Company’s debt.
|
5.
|
Intangible Assets and Goodwill
|
Intangible assets subject to amortization consisted of the following (in thousands):
| |
|
Estimated
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network affiliation agreements
|
|
|
15 |
|
|
$ |
344,662 |
|
|
$ |
(257,468 |
) |
|
$ |
87,194 |
|
|
$ |
344,662 |
|
|
$ |
(244,712 |
) |
|
$ |
99,950 |
|
|
Other definite-lived intangible assets
|
|
|
1-15 |
|
|
|
13,464 |
|
|
|
(11,362 |
) |
|
|
2,102 |
|
|
|
13,464 |
|
|
|
(10,920 |
) |
|
|
2,544 |
|
|
Other intangible assets
|
|
|
|
|
|
$ |
358,126 |
|
|
$ |
(268,830 |
) |
|
$ |
89,296 |
|
|
$ |
358,126 |
|
|
$ |
(255,632 |
) |
|
$ |
102,494 |
|
Total amortization expense from definite-lived intangibles was $7.4 million and $6.0 million for the three months ended June 30, 2011 and 2010, respectively, and $13.2 million and $11.9 million for the six months then ended. During the six months ended June 30, 2011, the Company was notified by FOX Broadcasting Company that the affiliation agreement with three of its stations would be terminated. WTVW in Evansville, Indiana terminated effective June 30, 2011, WFFT in Ft. Wayne, Indiana terminates effective July 31, 2011 and KSFX in Springfield, Missouri terminates August 31, 2011. The intangible assets related to these affiliation agreements are being amortized through the date of their terminations, resulting in incremental amortization expense of $1.5 million for the six months ended June 30, 2011.
The following table presents the Company’s estimate of amortization expense for the remainder of 2011, each of the five succeeding years ended December 31 and thereafter for definite-lived intangibles assets as of June 30, 2011 (in thousands):
|
Remainder of 2011
|
|
$ |
12,582 |
|
|
2012
|
|
|
21,524 |
|
|
2013
|
|
|
16,425 |
|
|
2014
|
|
|
10,389 |
|
|
2015
|
|
|
9,011 |
|
|
2016
|
|
|
5,331 |
|
|
Thereafter
|
|
|
14,034 |
|
The carrying amounts of goodwill and FCC licenses were as follows (in thousands):
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
$ |
155,275 |
|
|
$ |
(46,216 |
) |
|
$ |
109,059 |
|
|
$ |
177,689 |
|
|
$ |
(50,202 |
) |
|
$ |
127,487 |
|
|
Balance as of June 30, 2011
|
|
|
155,275 |
|
|
|
(46,216 |
) |
|
|
109,059 |
|
|
|
177,689 |
|
|
|
(50,202 |
) |
|
|
127,487 |
|
There were no changes recorded to goodwill or FCC licenses during the six months ended June 30, 2011 or the year ended December 31, 2010. 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, 2011, the Company did not identify any events that would trigger an impairment assessment.
Accrued expenses consisted of the following (in thousands):
| |
|
|
|
|
|
|
|
Compensation and related taxes
|
|
$ |
4,889 |
|
|
$ |
3,195 |
|
|
Sales commissions
|
|
|
1,461 |
|
|
|
1,426 |
|
|
Employee benefits
|
|
|
777 |
|
|
|
719 |
|
|
Property taxes
|
|
|
676 |
|
|
|
344 |
|
|
Other accruals related to operating expenses
|
|
|
2,280 |
|
|
|
2,852 |
|
| |
|
$ |
10,083 |
|
|
$ |
8,536 |
|
7. Debt
Long-term debt consisted of the following (in thousands):
| |
|
|
|
|
|
|
|
Term loans
|
|
$ |
148,875 |
|
|
$ |
99,500 |
|
|
Revolving credit facilities
|
|
|
— |
|
|
|
— |
|
|
8.875% Senior secured second lien notes due 2017, net of discount of $7,112 and $7,564
|
|
|
317,888 |
|
|
|
317,436 |
|
|
7% Senior subordinated notes due 2014, net of discount of $485 and $684
|
|
|
37,427 |
|
|
|
44,761 |
|
|
7% Senior subordinated PIK notes due 2014, net of discount of $654 and $1,310
|
|
|
111,939 |
|
|
|
135,496 |
|
|
11.375% Senior discount notes due 2013
|
|
|
— |
|
|
|
45,907 |
|
| |
|
|
616,129 |
|
|
|
643,100 |
|
|
Less: current portion
|
|
|
(1,500 |
) |
|
|
(1,000 |
) |
| |
|
$ |
614,629 |
|
|
$ |
642,100 |
|
2011 Transactions
On April 15, 2011, Nexstar Broadcasting entered into an amendment to its senior secured credit facility. The amendment expands Nexstar Broadcasting’s Term Loan B by $50.0 million to $149.5 million, allows the proceeds of the credit facility to be used to refinance the existing notes held by Nexstar Broadcasting and Nexstar Holdings and retains its incremental term loan capacity of $100.0 million. The amendment also provides for payment of normal and customary fees and expenses. The net proceeds of the additional Term Loan B funding were used to redeem the remaining balance of the 11.375% senior discount notes due 2013 (“11.375% Notes”), for additional repurchases of outstanding notes and for general corporate purposes. The additional $50.0 million Term Loan B was funded on May 15, 2011.
On January 15, 2011, Nexstar Holdings redeemed, on a pro rata basis, $12.5 million of its 11.375% senior discount notes due 2013 (“11.375% Notes”). Nexstar Holdings also repurchased $0.2 million outstanding 11.375% Notes in January 2011. Both transactions were priced at approximately 102%. On May 16, 2011, Nexstar Holdings redeemed the remaining $33.2 million balance of its 11.375% Notes at the redemption price of 100.0%. These transactions resulted in a loss on extinguishment of debt of $0.7 million.
In the six months ended June 30, 2011, Nexstar Broadcasting repurchased an aggregate of $24.2 million of its outstanding 7% senior subordinated PIK notes due 2014 (“7% PIK Notes”) at prices from 97.75% to 100.5%. These repurchases resulted in a loss on extinguishment of debt of $0.3 million.
In the six months ended June 30, 2011, Nexstar Broadcasting repurchased an aggregate of $7.5 million of its outstanding 7% senior subordinated notes due 2014 (“7% Notes”) at prices from 98.25% to 100.5%. These repurchases resulted in a loss on extinguishment of debt of $0.2 million.
In March and June 2011, Nexstar Broadcasting and Mission each paid the contractual maturities under their senior secured credit facilities, for a total payment of $0.6 million.
Unused Commitments and Borrowing Availability
Nexstar Broadcasting and Mission had $75.0 million of total unused revolving loan commitments under their respective senior secured credit facilities, all of which was available for borrowing, based on the covenant calculations as of June 30, 2011. On July 1, 2011, Nexstar borrowed $19.3 million of its revolving loan in connection with the acquisition of two stations, as discussed in Note 3.
Debt Covenants
The Nexstar Broadcasting senior secured credit facility agreement 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 8.50 to 1.00 at June 30, 2011, (2) a maximum consolidated first lien indebtedness ratio of 2.50 to 1.00 at any time and (3) a minimum 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 senior secured credit agreement does not contain financial covenant ratio requirements, but does provide for default in the event Nexstar does not comply with all covenants contained in its senior secured credit facility agreement. As of June 30, 2011, the Company was in compliance with all of its covenants.
Collateralization and Guarantees of Debt
Nexstar Broadcasting’s and Mission’s senior secured credit facilities 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 Broadcasting senior secured credit facility and the senior subordinated notes issued by Nexstar Broadcasting.
Fair Value of Debt
The aggregate carrying amounts and estimated fair values of the Company’s debt were as follows (in thousands):
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loans(1)
|
|
$ |
148,875 |
|
|
$ |
147,746 |
|
|
$ |
99,500 |
|
|
$ |
99,500 |
|
|
Revolving credit facilities(1)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
8.875% Senior secured second lien notes(2)
|
|
|
317,888 |
|
|
|
345,313 |
|
|
|
317,436 |
|
|
|
345,313 |
|
|
7% Senior subordinated notes(2)
|
|
|
37,427 |
|
|
|
37,580 |
|
|
|
44,761 |
|
|
|
44,309 |
|
|
7% Senior subordinated PIK notes(2)
|
|
|
111,939 |
|
|
|
111,608 |
|
|
|
135,496 |
|
|
|
129,966 |
|
|
11.375% Senior discount notes(2)
|
|
|
— |
|
|
|
— |
|
|
|
45,907 |
|
|
|
46,538 |
|
|
(1)
|
The fair value of senior secured credit facilities is computed based on borrowing rates currently available to Nexstar and Mission for bank loans with similar terms and average maturities. These fair value measurements are considered Level 3 (significant and unobservable).
|
|
(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. These fair value measurements are considered Level 2 (significant and observable).
|
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. Katz is making the payments on behalf of Nexstar as an inducement for Nexstar to enter into the long-term contract with Katz. A liability of $7.2 million, representing the present value of the payments Katz is making to Blair, was recorded and is being recognized as a non-cash reduction to operating expenses over the term of the agreement with Katz. Effective May 1, 2009, Nexstar signed another agreement to transfer the remaining Nexstar stations to Katz and its related companies. Moving these contracts resulted in Nexstar cancelling multiple contracts with Blair. As a result, Blair sued the Company for additional termination fees. Katz indemnified the Company for all expenses related to the settlement and defense of this lawsuit. The lawsuit was settled effective May 7, 2010. Termination of these contracts resulted in an additional liability of $0.2 million, which is being recognized over the remaining contract term with Katz.
As of June 30, 2011, $0.7 million of this liability was included in other current liabilities and $4.7 million was included in deferred representation fee incentive in the accompanying Condensed Consolidated 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, 2011 and 2010 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 (in thousands):
| |
|
|
|
|
|
|
|
Deferred rent
|
|
$ |
4,489 |
|
|
$ |
4,405 |
|
|
Software agreement obligation
|
|
|
3,449 |
|
|
|
3,698 |
|
|
Other
|
|
|
791 |
|
|
|
904 |
|
| |
|
$ |
8,729 |
|
|
$ |
9,007 |
|
10. Income Taxes
The Company’s provision for income taxes is primarily comprised of deferred income taxes resulting from the amortization of goodwill and other indefinite-lived intangible assets for income tax purposes which are not amortized for financial reporting purposes. No tax benefit has been recognized on the Company’s taxable losses for the three and six months ended June 30, 2011 and 2010 as the utilization of such losses is not more likely than not to be realized in the foreseeable future.
The deferred tax liabilities related to goodwill and other indefinite-lived intangible assets 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 before valuation allowance 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 does not believe they are more likely than not to be realized through future taxable earnings.
|
11.
|
FCC Regulatory Matters
|
Television broadcasting is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the “Communications Act”). The Communications Act prohibits the operation of television broadcasting stations except under a license issued by the FCC, and empowers the FCC, among other things, to issue, revoke, and modify broadcasting licenses, determine the location of television stations, regulate the equipment used by television stations, adopt regulations to carry out the provisions of the Communications Act and impose penalties for the violation of such regulations. The FCC’s ongoing rule making proceedings could have a significant future impact on the television industry and on the operation of the Company’s stations and the stations 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.
The FCC has adopted rules with respect to the final conversion of existing low power and television translator stations to digital operations. The FCC has established a September 1, 2015 deadline by which such analog low power and television translator stations must cease analog operations, with low power and television translator stations operating on channels 52-69 being required to cease operation on those channels by December 31, 2011. The Company holds three low power analog station licenses and 13 analog television translator station licenses, three of which will need to transition to digital operations by December 31, 2011 with the remainder to transition to digital operations by September 1, 2015.
Media Ownership
In 2006, the FCC initiated a rulemaking proceeding to review 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. On July 7, 2011, the U.S. Court of Appeals for the Third Circuit vacated the FCC’s changes to its newspaper/broadcast cross-ownership rule while upholding the FCC’s retention of its other media ownership rules.
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. In June and July 2011, the FCC released to the public eleven economic studies related to its media ownership rules. The Company believes that the next step will be for the FCC to issue a Notice of Proposed Rulemaking (NPRM) to seek comment on specific proposed changes to its ownership rules. The Company cannot predict when the FCC will issue this NPRM.
Spectrum
The FCC has initiated various proceedings to assess the availability of spectrum to meet future wireless broadband needs. The FCC’s March 2010 “National Broadband Plan” recommends the reallocation of 120 megahertz of the spectrum currently used for broadcast television for wireless broadband use. The FCC has thus far requested comment on proposals that include, among other things, whether to add new frequency allocations in the television bands for licensed fixed and mobile wireless uses, whether to permit two television stations to share a single 6 megahertz channel and whether to implement technical rule modifications to improve the viability of certain channels that are underutilized by digital television stations. At the same time, Congress is considering legislation that would authorize the FCC to conduct incentive auctions whereby spectrum holders, including television broadcasters, could voluntarily relinquish all or part of their spectrum in exchange for consideration. A reallocation of television spectrum for wireless broadband use would likely involve a “repacking” of the television broadcast band, which would require some television stations to change channel or otherwise modify their technical facilities. If Congress or the FCC determines to move forward with one or more of these proposals, it may be to the detriment of the Company’s investment in digital facilities, could require substantial additional investment to continue current operations, and may require viewers to invest in additional equipment or subscription services to continue receiving broadcast television signals. The Company cannot predict the resolution of the proposals or their impact to its business.
Retransmission Consent
On March 3, 2011, the FCC initiated a Notice of Proposed Rulemaking to reexamine its rules (i) governing the requirements for good faith negotiations between MVPDs and broadcasters, including implementing a prohibition on one station negotiating retransmission consent terms for another station under a local service agreement; (ii) for providing advance notice to consumers in the event of dispute; and (iii) to extend certain cable-only obligations to all MVPDs. The FCC has also asked for comment on eliminating the network non-duplication and syndicated exclusivity protection rules, which may permit MVPDs to import out-of-market television stations during a retransmission consent dispute. If the FCC prohibits joint negotiations or modifies the network non-duplication and syndicated exclusivity protection rules, such changes likely would affect the Company’s ability to sustain its current level of retransmission consent revenues or grow such revenues in the future and could have an adverse effect on the Company’s business, financial condition and results of operations. The Company cannot predict the resolution of the proposals or their impact to its business.
|
12.
|
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. 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. As of June 30, 2011, Mission had a maximum commitment of $48.6 million under its senior secured credit facility, of which $38.6 million of debt was outstanding.
Indemnification Obligations
In connection with certain agreements that the Company enters into in the normal course of its business, including local service agreements, business acquisitions and borrowing arrangements, the Company enters into contractual arrangements under which the Company agrees to indemnify the third party to such arrangement from losses, claims and damages incurred by the indemnified party for certain events as defined within the particular contract. Such indemnification obligations may not be subject to maximum loss clauses and the maximum potential amount of future payments the Company could be required to make under these indemnification arrangements may be unlimited. Historically, payments made related to these indemnifications have been 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, results of operations or cash flows.
|
13.
|
Condensed Consolidating Financial Information
|
The following condensed consolidating financial information presents the financial position, results of operations and cash flows of the Company, including 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 its financial information. 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). Neither Mission nor Nexstar Broadcasting has any subsidiaries.
Prior periods have been reclassified to conform to current presentation.
The Company and its subsidiaries have the following notes outstanding:
|
|
1.
|
Nexstar Holdings had the 11.375% Notes outstanding as of December 31, 2010. The 11.375% Notes were fully and unconditionally guaranteed by Nexstar but not guaranteed by any other entities. The 11.375% Notes were redeemed in full in May 2011.
|
|
|
2.
|
Nexstar Broadcasting has the following notes outstanding:
|
|
|
(a)
|
7% Notes. The 7% Notes are fully and unconditionally guaranteed by Nexstar and Mission. These notes are not guaranteed by any other entities.
|
|
|
(b)
|
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)
|
8.875% Notes. The 8.875% Notes are co-issued by Nexstar Broadcasting and Mission, jointly and severally, and fully and unconditionally guaranteed by Nexstar and all of Nexstar Broadcasting’s and Mission’s future 100% owned domestic subsidiaries. The net proceeds to Mission and Nexstar from the sale of the 8.875% Notes were $316.8 million, net of $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 8.875% Notes are joint and several to Nexstar Broadcasting and Mission, each entity reflects the full amount of the 8.875% 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 contractual relationships between the entities.
|
CONDENSED CONSOLIDATING BALANCE SHEET
As of June 30, 2011
(in thousands)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
— |
|
|
$ |
7,946 |
|
|
$ |
4,587 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
12,533 |
|
|
Due from Mission
|
|
|
— |
|
|
|
9,763 |
|
|
|
— |
|
|
|
— |
|
|
|
(9,763 |
) |
|
|
— |
|
|
Other current assets
|
|
|
— |
|
|
|
68,134 |
|
|
|
4,124 |
|
|
|
— |
|
|
|
— |
|
|
|
72,258 |
|
|
Total current assets
|
|
|
— |
|
|
|
85,843 |
|
|
|
8,711 |
|
|
|
— |
|
|
|
(9,763 |
) |
|
|
84,791 |
|
|
Amounts due from subsidiary eliminated upon consolidation
|
|
|
7,065 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7,065 |
) |
|
|
— |
|
|
Amounts due from parents eliminated upon consolidation
|
|
|
— |
|
|
|
8,175 |
|
|
|
— |
|
|
|
— |
|
|
|
(8,175 |
) |
|
|
— |
|
|
Property and equipment, net
|
|
|
— |
|
|
|
109,635 |
|
|
|
24,269 |
|
|
|
— |
|
|
|
— |
|
|
|
133,904 |
|
|
Goodwill
|
|
|
— |
|
|
|
90,330 |
|
|
|
18,729 |
|
|
|
— |
|
|
|
— |
|
|
|
109,059 |
|
|
FCC licenses
|
|
|
— |
|
|
|
106,789 |
|
|
|
20,698 |
|
|
|
— |
|
|
|
— |
|
|
|
127,487 |
|
|
Other intangible assets, net
|
|
|
— |
|
|
|
71,479 |
|
|
|
17,817 |
|
|
|
— |
|
|
|
— |
|
|
|
89,296 |
|
|
Other noncurrent assets
|
|
|
— |
|
|
|
11,348 |
|
|
|
2,103 |
|
|
|
— |
|
|
|
— |
|
|
|
13,451 |
|
|
Total assets
|
|
$ |
7,065 |
|
|
$ |
483,599 |
|
|
$ |
92,327 |
|
|
$ |
— |
|
|
$ |
(25,003 |
) |
|
$ |
557,988 |
|
|
LIABILITIES AND
STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of debt
|
|
$ |
— |
|
|
$ |
1,110 |
|
|
$ |
390 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,500 |
|
|
Due to Nexstar Broadcasting
|
|
|
— |
|
|
|
— |
|
|
|
9,763 |
|
|
|
— |
|
|
|
(9,763 |
) |
|
|
— |
|
|
Other current liabilities
|
|
|
— |
|
|
|
44,263 |
|
|
|
9,592 |
|
|
|
— |
|
|
|
(6,009 |
) |
|
|
47,846 |
|
|
Total current liabilities
|
|
|
— |
|
|
|
45,373 |
|
|
|
19,745 |
|
|
|
— |
|
|
|
(15,772 |
) |
|
|
49,346 |
|
|
Debt
|
|
|
— |
|
|
|
576,409 |
|
|
|
356,108 |
|
|
|
— |
|
|
|
(317,888 |
) |
|
|
614,629 |
|
|
Deficiencies in subsidiaries eliminated upon consolidation
|
|
|
214,173 |
|
|
|
— |
|
|
|
— |
|
|
|
198,931 |
|
|
|
(413,104 |
) |
|
|
— |
|
|
Amounts due to subsidiary eliminated upon consolidation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,240 |
|
|
|
(15,240 |
) |
|
|
— |
|
|
Other noncurrent liabilities
|
|
|
(3 |
) |
|
|
60,748 |
|
|
|
16,687 |
|
|
|
2 |
|
|
|
— |
|
|
|
77,434 |
|
|
Total liabilities
|
|
|
214,170 |
|
|
|
682,530 |
|
|
|
392,540 |
|
|
|
214,173 |
|
|
|
(762,004 |
) |
|
|
741,409 |
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
285 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
285 |
|
|
Other stockholders’ deficit
|
|
|
(207,390 |
) |
|
|
(198,931 |
) |
|
|
(300,213 |
) |
|
|
(214,173 |
) |
|
|
737,001 |
|
|
|
(183,706 |
) |
|
Total stockholders’ deficit
|
|
|
(207,105 |
) |
|
|
(198,931 |
) |
|
|
(300,213 |
) |
|
|
(214,173 |
) |
|
|
737,001 |
|
|
|
(183,421 |
) |
|
Total liabilities and stockholders’ deficit
|
|
$ |
7,065 |
|
|
$ |
483,599 |
|
|
$ |
92,327 |
|
|
$ |
— |
|
|
$ |
(25,003 |
) |
|
$ |
557,988 |
|
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2010
(in thousands)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
— |
|
|
$ |
22,409 |
|
|
$ |
1,249 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
23,658 |
|
|
Due from Mission
|
|
|
— |
|
|
|
8,423 |
|
|
|
— |
|
|
|
— |
|
|
|
(8,423 |
) |
|
|
— |
|
|
Other current assets
|
|
|
— |
|
|
|
78,613 |
|
|
|
4,945 |
|
|
|
— |
|
|
|
— |
|
|
|
83,558 |
|
|
Total current assets
|
|
|
— |
|
|
|
109,445 |
|
|
|
6,194 |
|
|
|
— |
|
|
|
(8,423 |
) |
|
|
107,216 |
|
|
Amounts due from subsidiary eliminated upon consolidation
|
|
|
6,425 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,425 |
) |
|
|
— |
|
|
Amounts due from parents eliminated upon consolidation
|
|
|
— |
|
|
|
6,929 |
|
|
|
— |
|
|
|
— |
|
|
|
(6,929 |
) |
|
|
— |
|
|
Property and equipment, net
|
|
|
— |
|
|
|
111,368 |
|
|
|
25,668 |
|
|
|
— |
|
|
|
— |
|
|
|
137,036 |
|
|
Goodwill
|
|
|
— |
|
|
|
90,330 |
|
|
|
18,729 |
|
|
|
— |
|
|
|
— |
|
|
|
109,059 |
|
|
FCC licenses
|
|
|
— |
|
|
|
106,789 |
|
|
|
20,698 |
|
|
|
— |
|
|
|
— |
|
|
|
127,487 |
|
|
Other intangible assets, net
|
|
|
— |
|
|
|
82,125 |
|
|
|
20,369 |
|
|
|
— |
|
|
|
— |
|
|
|
102,494 |
|
|
Other noncurrent assets
|
|
|
— |
|
|
|
15,395 |
|
|
|
3,340 |
|
|
|
509 |
|
|
|
— |
|
|
|
19,244 |
|
|
Total assets
|
|
$ |
6,425 |
|
|
$ |
522,381 |
|
|
$ |
94,998 |
|
|
$ |
509 |
|
|
$ |
(21,777 |
) |
|
$ |
602,536 |
|
|
LIABILITIES AND
STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of debt
|
|
$ |
— |
|
|
$ |
610 |
|
|
$ |
390 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,000 |
|
|
Due to Nexstar Broadcasting
|
|
|
— |
|
|
|
— |
|
|
|
8,423 |
|
|
|
— |
|
|
|
(8,423 |
) |
|
|
— |
|
|
Other current liabilities
|
|
|
— |
|
|
|
46,425 |
|
|
|
10,872 |
|
|
|
1,306 |
|
|
|
(6,009 |
) |
|
|
52,594 |
|
|
Total current liabilities
|
|
|
— |
|
|
|
47,035 |
|
|
|
19,685 |
|
|
|
1,306 |
|
|
|
(14,432 |
) |
|
|
53,594 |
|
|
Debt
|
|
|
— |
|
|
|
557,778 |
|
|
|
355,851 |
|
|
|
45,907 |
|
|
|
(317,436 |
) |
|
|
642,100 |
|
|
Deficiencies in subsidiaries eliminated upon consolidation
|
|
|
206,961 |
|
|
|
— |
|
|
|
— |
|
|
|
146,901 |
|
|
|
(353,862 |
) |
|
|
— |
|
|
Amounts due to subsidiary eliminated upon consolidation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13,354 |
|
|
|
(13,354 |
) |
|
|
— |
|
|
Other noncurrent liabilities
|
|
|
(3 |
) |
|
|
64,469 |
|
|
|
17,539 |
|
|
|
2 |
|
|
|
— |
|
|
|
82,007 |
|
|
Total liabilities
|
|
|
206,958 |
|
|
|
669,282 |
|
|
|
393,075 |
|
|
|
207,470 |
|
|
|
(699,084 |
) |
|
|
777,701 |
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
284 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
284 |
|
|
Other stockholders’ deficit
|
|
|
(200,817 |
) |
|
|
(146,901 |
) |
|
|
(298,077 |
) |
|
|
(206,961 |
) |
|
|
677,307 |
|
|
|
(175,449 |
) |
|
Total stockholders’ deficit
|
|
|
(200,533 |
) |
|
|
(146,901 |
) |
|
|
(298,077 |
) |
|
|
(206,961 |
) |
|
|
677,307 |
|
|
|
(175,165 |
) |
|
Total liabilities and stockholders’ deficit
|
|
$ |
6,425 |
|
|
$ |
522,381 |
|
|
$ |
94,998 |
|
|
$ |
509 |
|
|
$ |
(21,777 |
) |
|
$ |
602,536 |
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended June 30, 2011
(in thousands)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net broadcast revenue (including trade and barter)
|
|
$ |
— |
|
|
$ |
72,656 |
|
|
$ |
2,849 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
75,505 |
|
|
Revenue between consolidated entities
|
|
|
— |
|
|
|
1,785 |
|
|
|
7,007 |
|
|
|
— |
|
|
|
(8,792 |
) |
|
|
— |
|
|
Net revenue
|
|
|
— |
|
|
|
74,441 |
|
|
|
9,856 |
|
|
|
— |
|
|
|
(8,792 |
) |
|
|
75,505 |
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses, excluding depreciation and amortization
|
|
|
— |
|
|
|
18,487 |
|
|
|
1,218 |
|
|
|
— |
|
|
|
— |
|
|
|
19,705 |
|
|
Selling, general, and administrative expenses, excluding depreciation and amortization
|
|
|
— |
|
|
|
24,427 |
|
|
|
528 |
|
|
|
— |
|
|
|
— |
|
|
|
24,955 |
|
|
Local service agreement fees between consolidated entities
|
|
|
— |
|
|
|
7,007 |
|
|
|
1,785 |
|
|
|
— |
|
|
|
(8,792 |
) |
|
|
— |
|
|
Amortization of broadcast rights
|
|
|
— |
|
|
|
4,324 |
|
|
|
938 |
|
|
|
— |
|
|
|
— |
|
|
|
5,262 |
|
|
Amortization of intangible assets
|
|
|
— |
|
|
|
6,089 |
|
|
|
1,270 |
|
|
|
— |
|
|
|
— |
|
|
|
7,359 |
|
|
Depreciation
|
|
|
— |
|
|
|
4,513 |
|
|
|
692 |
|
|
|
— |
|
|
|
— |
|
|
|
5,205 |
|
|
(Gain) loss on asset disposal, net
|
|
|
— |
|
|
|
(3 |
) |
|
|
97 |
|
|
|
— |
|
|
|
— |
|
|
|
94 |
|
|
Total operating expenses
|
|
|
— |
|
|
|
64,844 |
|
|
|
6,528 |
|
|
|
— |
|
|
|
(8,792 |
) |
|
|
62,580 |
|
|
Income from operations
|
|
|
— |
|
|
|
9,597 |
|
|
|
3,328 |
|
|
|
— |
|
|
|
— |
|
|
|
12,925 |
|
|
Interest expense, net
|
|
|
— |
|
|
|
(9,165 |
) |
|
|
(3,669 |
) |
|
|
(474 |
) |
|
|
— |
|
|
|
(13,308 |
) |
|
Loss on extinguishment of debt
|
|
|
— |
|
|
|
(494 |
) |
|
|
— |
|
|
|
(314 |
) |
|
|
— |
|
|
|
(808 |
) |
|
Equity in loss of subsidiaries
|
|
|
(1,932 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,144 |
) |
|
|
3,076 |
|
|
|
— |
|
|
Loss before income taxes
|
|
|
(1,932 |
) |
|
|
(62 |
) |
|
|
(341 |
) |
|
|
(1,932 |
) |
|
|
3,076 |
|
|
|
(1,191 |
) |
|
Income tax expense
|
|
|
— |
|
|
|
(1,082 |
) |
|
|
(311 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,393 |
) |
|
Net loss
|
|
$ |
(1,932 |
) |
|
$ |
(1,144 |
) |
|
$ |
(652 |
) |
|
$ |
(1,932 |
) |
|
$ |
3,076 |
|
|
$ |
(2,584 |
) |
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended June 30, 2010
(in thousands)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, excluding depreciation and amortization
|
|
|
— |
|
|
|
18,098 |
|
|
|
1,482 |
|
|
|
— |
|
|
|
— |
|
|
|
19,580 |
|
|
Selling, general, and administrative expenses, excluding depreciation and amortization
|
|
|
— |
|
|
|
24,226 |
|
|
|
528 |
|
|
|
— |
|
|
|
— |
|
|
|
24,754 |
|
|
Local service agreement fees between consolidated entities
|
|
|
— |
|
|
|
7,005 |
|
|
|
1,790 |
|
|
|
— |
|
|
|
(8,795 |
) |
|
|
— |
|
|
Amortization of broadcast rights
|
|
|
— |
|
|
|
4,127 |
|
|
|
869 |
|
|
|
— |
|
|
|
— |
|
|
|
4,996 |
|
|
Amortization of intangible assets
|
|
|
— |
|
|
|
4,700 |
|
|
|
1,287 |
|
|
|
— |
|
|
|
— |
|
|
|
5,987 |
|
|
Depreciation
|
|
|
— |
|
|
|
4,525 |
|
|
|
732 |
|
|
|
— |
|
|
|
— |
|
|
|
5,257 |
|
|
Loss (gain) on asset disposal, net
|
|
|
— |
|
|
|
13 |
|
|
|
(3 |
) |
|
|
— |
|
|
|
— |
|
|
|
10 |
|
|
Total operating expenses
|
|
|
— |
|
|
|
62,694 |
|
|
|
6,685 |
|
|
|
— |
|
|
|
(8,795 |
) |
|
|
60,584 |
|
|
Income from operations
|
|
|
— |
|
|
|
11,274 |
|
|
|
2,684 |
|
|
|
— |
|
|
|
— |
|
|
|
13,958 |
|
|
Interest expense, net
|
|
|
— |
|
|
|
(9,041 |
) |
|
|
(3,349 |
) |
|
|
(1,491 |
) |
|
|
— |
|
|
|
(13,881 |
) |
|
Loss on extinguishment of debt
|
|
|
— |
|
|
|
(5,472 |
) |
|
|
(2,431 |
) |
|
|
— |
|
|
|
— |
|
|
|
(7,903 |
) |
|
Equity in loss of subsidiaries
|
|
|
(6,021 |
) |
|
|
— |
|
|
|
— |
|
|
|
(4,530 |
) |
|
|
10,551 |
|
|
|
— |
|
|
Loss before income taxes
|
|
|
(6,021 |
) |
|
|
(3,239 |
) |
|
|
(3,096 |
) |
|
|
(6,021 |
) |
|
|
10,551 |
|
|
|
(7,826 |
) |
|
Income tax expense
|
|
|
— |
|
|
|
(1,291 |
) |
|
|
(304 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,595 |
) |
|
Net loss
|
|
$ |
(6,021 |
) |
|
$ |
(4,530 |
) |
|
$ |
(3,400 |
) |
|
$ |
(6,021 |
) |
|
$ |
10,551 |
|
|
$ |
(9,421 |
) |
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Six Months Ended June 30, 2011
(in thousands)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net broadcast revenue (including trade and barter)
|
|
$ |
— |
|
|
$ |
139,779 |
|
|
$ |
5,671 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
145,450 |
|
|
Revenue between consolidated entities
|
|
|
— |
|
|
|
3,570 |
|
|
|
13,516 |
|
|
|
— |
|
|
|
(17,086 |
) |
|
|
— |
|
|
Net revenue
|
|
|
— |
|
|
|
143,349 |
|
|
|
19,187 |
|
|
|
— |
|
|
|
(17,086 |
) |
|
|
145,450 |
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses, excluding depreciation and amortization
|
|
|
— |
|
|
|
36,337 |
|
|
|
2,471 |
|
|
|
— |
|
|
|
— |
|
|
|
38,808 |
|
|
Selling, general, and administrative expenses, excluding depreciation and amortization
|
|
|
— |
|
|
|
48,841 |
|
|
|
1,126 |
|
|
|
— |
|
|
|
— |
|
|
|
49,967 |
|
|
Local service agreement fees between consolidated entities
|
|
|
— |
|
|
|
13,516 |
|
|
|
3,570 |
|
|
|
— |
|
|
|
(17,086 |
) |
|
|
— |
|
|
Amortization of broadcast rights
|
|
|
— |
|
|
|
8,909 |
|
|
|
1,940 |
|
|
|
— |
|
|
|
— |
|
|