Edgar Filing: NEXSTAR MEDIA GROUP, INC.

nxst-10q_20180630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2018

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

For the transition period from to .

Commission File Number: 000-50478

NEXSTAR MEDIA GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		23-3083125
(State of Incorporation or Organization)		(I.R.S. Employer Identification No.)

545 E. John Carpenter Freeway, Suite 700, Irving, Texas		75062
(Address of Principal Executive Offices)		(Zip Code)

(972) 373-8800

(Registrant’s Telephone Number, Including Area Code)

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

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

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

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐
(Do not check if a smaller reporting company)

Emerging growth company	☐

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

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

As of August 8, 2018, the registrant had 45,555,310 shares of Class A Common Stock outstanding.

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017	1

	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017	2

	Condensed Consolidated Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2018	3

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017	4

	Notes to Condensed Consolidated Financial Statements	5

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	47

ITEM 4.	Controls and Procedures	47

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	48

ITEM 1A.	Risk Factors	48

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48

ITEM 3.	Defaults Upon Senior Securities	48

ITEM 4.	Mine Safety Disclosures	48

ITEM 5.	Other Information	48

ITEM 6.	Exhibits	49

PART I. FINANCIAL INFORMATION

ITEM 1.

Financial Statements

NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share information, unaudited)

	June 30,			December 31,
	2018			2017
ASSETS
Current assets:
Cash and cash equivalents	$	147,681		$	115,652
Accounts receivable, net of allowance for doubtful accounts of $14,635 and $13,358, respectively		524,078			562,943
Spectrum asset		-			305,764
Prepaid expenses and other current assets		45,329			71,859
Total current assets		717,088			1,056,218
Property and equipment, net		720,464			734,138
Goodwill		2,184,982			2,142,846
FCC licenses		1,767,638			1,767,638
Other intangible assets, net		1,557,277			1,581,626
Other noncurrent assets, net		172,045			199,181
Total assets⁽¹⁾	$	7,119,494		$	7,481,647
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt	$	41,722		$	92,808
Current portion of broadcast rights payable		5,027			16,659
Accounts payable		66,128			31,136
Accrued expenses		126,352			159,281
Interest payable		40,322			39,563
Liability to surrender spectrum asset		-			314,087
Other current liabilities		15,019			17,169
Total current liabilities		294,570			670,703
Debt		4,245,924			4,269,652
Deferred tax liabilities		633,016			619,441
Other noncurrent liabilities		303,530			340,541
Total liabilities⁽¹⁾	$	5,477,040		$	5,900,337
Commitments and contingencies (Note 12)
Stockholders' equity:
Preferred stock - $0.01 par value, 200,000 shares authorized; none issued and outstanding at each of June 30, 2018 and December 31, 2017		-			-
Class A Common stock - $0.01 par value, 100,000,000 shares authorized; 47,291,463 shares issued, 45,522,035 shares outstanding as of June 30, 2018 and 47,291,463 shares issued, 45,966,414 shares outstanding as of December 31, 2017		473			473
Class B Common stock - $0.01 par value, 20,000,000 shares authorized; none issued and outstanding at each of June 30, 2018 and December 31, 2017		-			-
Class C Common stock - $0.01 par value, 5,000,000 shares authorized; none issued and outstanding at each of June 30, 2018 and December 31, 2017		-			-
Additional paid-in capital		1,337,738			1,342,541
Accumulated other comprehensive income		6,140			6,140
Retained earnings		400,934			299,523
Treasury stock - at cost; 1,769,428 and 1,325,049 shares at June 30, 2018 and December 31, 2017, respectively		(111,846	)		(78,063	)
Total Nexstar Media Group, Inc. stockholders' equity		1,633,439			1,570,614
Noncontrolling interests in consolidated variable interest entities		9,015			10,696
Total stockholders' equity		1,642,454			1,581,310
Total liabilities and stockholders' equity	$	7,119,494		$	7,481,647

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

(1)

The consolidated total assets as of June 30, 2018 and December 31, 2017 include certain assets held by consolidated variable interest entities (“VIEs”) of $378.0 million and $426.9 million, respectively, which are not available to be used to settle the obligations of Nexstar. The consolidated total liabilities as of June 30, 2018 and December 31, 2017 include certain liabilities of consolidated VIEs of $38.1 million and $81.8 million, respectively, for which the creditors of the VIEs have no recourse to the general credit of Nexstar. See Note 2 for additional information.

NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information, unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Net revenue	$	660,323		$	626,115		$	1,275,659		$	1,166,432
Operating expenses (income):
Direct operating expenses, excluding depreciation and amortization		274,439			252,610			553,402			471,339
Selling, general and administrative expenses, excluding depreciation and amortization		138,903			147,441			280,808			324,374
Amortization of broadcast rights		15,913			25,686			32,013			50,153
Amortization of intangible assets		37,181			38,557			73,483			86,715
Depreciation		25,090			26,292			50,904			48,518
Reimbursement from the FCC related to station repack		(5,697	)		-			(7,061	)		-
Gain on disposal of stations, net		-			-			-			(57,716	)
Total operating expenses		485,829			490,586			983,549			923,383
Income from operations		174,494			135,529			292,110			243,049
Interest expense, net		(56,281	)		(55,685	)		(110,870	)		(134,922	)
Loss on extinguishment of debt		(481	)		(1,323	)		(1,486	)		(33,127	)
Pension and other postretirement plans credit, net		2,950			3,156			5,900			5,787
Other expenses		(812	)		(900	)		(939	)		(1,007	)
Income before income taxes		119,870			80,777			184,715			79,780
Income tax expense		(33,264	)		(32,322	)		(50,768	)		(26,381	)
Net income		86,606			48,455			133,947			53,399
Net loss (income) attributable to noncontrolling interests		1,126			(4,463	)		1,907			(3,358	)
Net income attributable to Nexstar Media Group, Inc.	$	87,732		$	43,992		$	135,854		$	50,041

Net income per common share attributable to Nexstar Media Group, Inc.:
Basic	$	1.92		$	0.94		$	2.96		$	1.10
Diluted	$	1.86		$	0.91		$	2.87		$	1.07

Weighted average number of common shares outstanding:
Basic		45,631			46,931			45,852			45,573
Diluted		47,147			48,195			47,414			46,815

Dividends declared per common share	$	0.375		$	0.30		$	0.75		$	0.60

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

NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Six Months Ended June 30, 2018

(in thousands, except share information, unaudited)

											Accumulated
	Class A				Additional						Other											Total
	Common Stock				Paid-In			Retained			Comprehensive		Treasury Stock						Noncontrolling			Stockholders'
	Shares		Amount		Capital			Earnings			Income		Shares			Amount			interests			Equity
Balances as of December 31, 2017		47,291,463	$	473	$	1,342,541		$	299,523		$	6,140		(1,325,049	)	$	(78,063	)	$	10,696		$	1,581,310
Purchase of treasury stock		-		-		-			-			-		(751,920	)		(50,524	)		-			(50,524	)
Stock-based compensation expense		-		-		14,595			-			-		-			-			-			14,595
Vesting of restricted stock units and exercise of stock options		-		-		(19,398	)		-			-		307,541			16,741			-			(2,657	)
Common stock dividends declared		-		-		-			(34,443	)		-		-			-			-			(34,443	)
Contribution from a noncontrolling interest		-		-		-			-			-		-			-			226			226
Net income (loss)		-		-		-			135,854			-		-			-			(1,907	)		133,947
Balances as of June 30, 2018		47,291,463	$	473	$	1,337,738		$	400,934		$	6,140		(1,769,428	)	$	(111,846	)	$	9,015		$	1,642,454

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

NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

	Six Months Ended
	June 30,
	2018			2017
Cash flows from operating activities:
Net income	$	133,947		$	53,399
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for bad debt		6,344			4,081
Amortization of broadcast rights, excluding barter		32,013			29,997
Depreciation of property and equipment		50,904			48,518
Amortization of intangible assets		73,483			86,715
Gain on asset disposal, net		(391	)		(58,595	)
Amortization of debt financing costs and debt discounts		5,236			5,157
Loss on extinguishment of debt		1,486			33,127
Stock-based compensation expense		14,595			11,309
Deferred income taxes		5,472			(185,535	)
Payments for broadcast rights		(32,787	)		(29,479	)
Non-cash compensation expense related to an acquisition's contingent consideration		1,233			-
Payments for contingent consideration in connection with an acquisition		-			(4,044	)
Other noncash credits, net		(1,249	)		(1,325	)
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable		56,939			13,005
Prepaid expenses and other current assets		1,504			10,522
Other noncurrent assets		(719	)		(660	)
Accounts payable, accrued expenses and other current liabilities		(27,683	)		(29,685	)
Taxes payable		12,493			154,291
Interest payable		759			(22,331	)
Other noncurrent liabilities		(9,444	)		(7,618	)
Net cash provided by operating activities		324,135			110,849
Cash flows from investing activities:
Purchases of property and equipment		(36,390	)		(27,691	)
Payments for acquisitions, net of cash acquired		(85,867	)		(2,971,194	)
Proceeds from sale of stations		-			481,944
Proceeds from disposals of property and equipment		3,874			14,575
Proceeds received from settlement of corporate-owned life insurance policies		387			253
Net cash used in investing activities		(117,996	)		(2,502,113	)
Cash flows from financing activities:
Proceeds from long-term debt, net of debt discounts		95,759			3,081,861
Repayments of long-term debt		(176,916	)		(1,390,798	)
Premium paid on debt extinguishment		-			(18,050	)
Payments for debt financing costs		-			(51,357	)
Contribution from (distributions to) a noncontrolling interest, net		226			(243	)
Purchase of treasury stock		(50,524	)		(58,294	)
Proceeds from exercise of stock options		2,059			3,303
Common stock dividends paid		(34,443	)		(28,268	)
Purchase of noncontrolling interests		-			(66,901	)
Payments for contingent consideration in connection with an acquisition		-			(956	)
Cash paid for shares withheld for taxes		(4,716	)		(4,032