Edgar Filing: NEXSTAR MEDIA GROUP, INC.

nxst-10q_20180930.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 September 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

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

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

As of November 8, 2018, the registrant had 45,612,436 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 September 30, 2018 and December 31, 2017	1

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

	Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three months ended September 30, 2018 and 2017	3

	Condensed Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2018 and 2017	4

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017	5

	Notes to Condensed Consolidated Financial Statements	6

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	50

ITEM 4.	Controls and Procedures	50

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	51

ITEM 1A.	Risk Factors	51

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51

ITEM 3.	Defaults Upon Senior Securities	51

ITEM 4.	Mine Safety Disclosures	51

ITEM 5.	Other Information	51

ITEM 6.	Exhibits	52

PART I. FINANCIAL INFORMATION

ITEM 1.

Financial Statements

NEXSTAR MEDIA GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share information, unaudited)

	September 30,			December 31,
	2018			2017
ASSETS
Current assets:
Cash and cash equivalents	$	118,423		$	115,652
Accounts receivable, net of allowance for doubtful accounts of $15,101 and $13,358, respectively		551,728			562,943
Spectrum asset		52,002			305,764
Prepaid expenses and other current assets		44,334			71,859
Total current assets		766,487			1,056,218
Property and equipment, net		723,869			734,138
Goodwill		2,187,338			2,142,846
FCC licenses		1,772,039			1,767,638
Other intangible assets, net		1,527,699			1,581,626
Other noncurrent assets, net		141,684			199,181
Total assets⁽¹⁾	$	7,119,116		$	7,481,647
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt	$	42,089		$	92,808
Accounts payable		74,234			31,136
Accrued expenses		150,973			175,940
Interest payable		28,217			39,563
Liability to surrender spectrum asset		52,002			314,087
Other current liabilities		19,774			17,169
Total current liabilities		367,289			670,703
Debt		4,105,922			4,269,652
Deferred tax liabilities		639,827			619,441
Other noncurrent liabilities		254,102			340,541
Total liabilities⁽¹⁾	$	5,367,140		$	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 September 30, 2018 and December 31, 2017		-			-
Class A Common stock - $0.01 par value, 100,000,000 shares authorized; 47,291,463 shares issued, 45,603,310 shares outstanding as of September 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 September 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 September 30, 2018 and December 31, 2017		-			-
Additional paid-in capital		1,344,130			1,342,541
Accumulated other comprehensive income		6,140			6,140
Retained earnings		484,367			299,523
Treasury stock - at cost; 1,688,153 and 1,325,049 shares at September 30, 2018 and December 31, 2017, respectively		(107,037	)		(78,063	)
Total Nexstar Media Group, Inc. stockholders' equity		1,728,073			1,570,614
Noncontrolling interests in consolidated variable interest entities		23,903			10,696
Total stockholders' equity		1,751,976			1,581,310
Total liabilities and stockholders' equity	$	7,119,116		$	7,481,647

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

(1)

The consolidated total assets as of September 30, 2018 and December 31, 2017 include certain assets held by consolidated variable interest entities (“VIEs”) of $396.0 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 September 30, 2018 and December 31, 2017 include certain liabilities of consolidated VIEs of $43.6 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						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Net revenue	$	693,015		$	611,870		$	1,968,674		$	1,778,302
Operating expenses (income):
Direct operating expenses, excluding depreciation and amortization		285,363			257,656			838,765			728,995
Selling, general and administrative expenses, excluding depreciation and amortization		140,297			140,464			421,105			464,838
Amortization of broadcast rights		15,021			27,869			47,034			78,022
Amortization of intangible assets		37,157			33,986			110,640			120,701
Depreciation		27,673			25,979			78,577			74,497
Reimbursement from the FCC related to station repack		(5,389	)		-			(12,450	)		-
Gain on disposal of stations, net		-			-			-			(57,716	)
Total operating expenses		500,122			485,954			1,483,671			1,409,337
Income from operations		192,893			125,916			485,003			368,965
Interest expense, net		(56,237	)		(53,605	)		(167,107	)		(188,527	)
Loss on extinguishment of debt		(3,159	)		(1,221	)		(4,645	)		(34,348	)
Pension and other postretirement plans credit, net		2,458			3,156			8,358			8,943
Other expenses		(884	)		(161	)		(1,823	)		(1,168	)
Income before income taxes		135,071			74,085			319,786			153,865
Income tax expense		(35,243	)		(32,013	)		(86,011	)		(58,394	)
Net income		99,828			42,072			233,775			95,471
Net loss attributable to noncontrolling interests		686			4,403			2,593			1,045
Net income attributable to Nexstar Media Group, Inc.	$	100,514		$	46,475		$	236,368		$	96,516

Net income per common share attributable to Nexstar Media Group, Inc.:
Basic	$	2.21		$	1.01		$	5.17		$	2.11
Diluted	$	2.12		$	0.98		$	4.99		$	2.05

Weighted average number of common shares outstanding:
Basic		45,552			46,107			45,751			45,753
Diluted		47,338			47,452			47,388			47,029

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 Three Months Ended September 30, 2018 and 2017

(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 June 30, 2018		47,291,463	$	473	$	1,337,738		$	400,934		$	6,140		(1,769,428	)	$	(111,846	)	$	9,015		$	1,642,454
Stock-based compensation expense		-		-		8,212			-			-		-			-			-			8,212
Vesting of restricted stock units and exercise of stock options		-		-		(1,820	)		-			-		81,275			4,809			-			2,989
Common stock dividends declared		-		-		-			(17,081	)		-		-			-			-			(17,081	)
Consolidation of a variable interest entity		-		-		-			-			-		-			-			15,574			15,574
Net income (loss)		-		-		-			100,514			-		-			-			(686	)		99,828
Balances as of September 30, 2018		47,291,463	$	473	$	1,344,130		$	484,367		$	6,140		(1,688,153	)	$	(107,037	)	$	23,903		$	1,751,976

Balances as of June 30, 2017	47,291,463	$	473	$	1,380,035		$	(125,433	)		-	(1,073,339	)	$	(64,763	)	$	13,234		$	1,203,546
Purchase of treasury stock	-		-		-			-			-	(687,492	)		(40,714	)		-			(40,714	)
Stock-based compensation expense	-		-		6,203			-			-	-			-			-			6,203
Vesting of restricted stock units and exercise of stock options	-		-		(1,688	)		-			-	25,495			2,249			-			561
Common stock dividends declared	-		-		(13,864	)		-			-	-			-			-			(13,864	)
Contribution from a noncontrolling interest	-		-		-			-			-	-			-			659			659
Net income (loss)	-		-		-			46,475			-	-			-			(4,403	)		42,072
Balances as of September 30, 2017	47,291,463	$	473	$	1,370,686		$	(78,958	)	$	-	(1,735,336	)	$	(103,228	)	$	9,490		$	1,198,463

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 Nine Months Ended September 30, 2018 and 2017

(in thousands, except share information, unaudited)

Accumulated

Class A

Additional

Other