Market
Station
Affiliation
Market
Rank
Market
Station
Affiliation
Market
Rank
Market
Station
Affiliation
Nexstar Media Group Stations(1)
Market
Rank
6
8
11
12
22
25
27
28
DC(2)/Hagerstown, MD
San Francisco, CA
Tampa, FL
Phoenix, AZ
Portland, OR
Raleigh, NC
Nashville, TN
Indianapolis, IN
30
Salt Lake City, UT
33
New Haven, CT
34
38
39
40
41
43
44
47
49
51
Columbus, OH
Spartanburg, SC
Las Vegas, NV
Austin, TX
Harrisburg, PA
Birmingham, AL
Portsmouth, VA
Albuquerque, NM
Grand Rapids, MI
Memphis, TN
52
Buffalo, NY
53
Providence, RI
54
Fresno, CA
56
57
Richmond, VA
Little Rock, AR
58
Mobile, AL
59
Albany, NY
Knoxville, TN
60
62 Wilkes Barre, PA
64
Dayton, OH
WDVM Independent
KRON MNTV
NBC
WFLA
WTTA
MNTV
KASW The CW
KOIN
WNCN
WKRN
WISH
WNDY
KTVX
KUCW
WTNH
WCTX
WCMH
WSPA
WYCW
KLAS
KXAN
KBVO
KNVA
WHTM
WIAT
WAVY
WVBT
KRQE
KREZ
KBIM
KASY
KRWB
KWBQ
WOOD
WOTV
WATN
WLMT
WIVB
WNLO
WPRI
WNAC
KSEE
KGPE
WRIC
KARK
KARZ
KLRT
KASN
WKRG
WFNA
WTEN
WXXA
WATE
WBRE
WYOU
WDTN
WBDT
CBS
CBS
ABC
The CW
MNTV
ABC
The CW
ABC
MNTV
NBC
CBS
The CW
CBS
NBC
MNTV
The CW
ABC
CBS
NBC
FOX
CBS
CBS
CBS
MNTV
The CW
The CW
NBC
ABC
ABC
The CW
CBS
The CW
CBS
FOX
NBC
CBS
ABC
NBC
MNTV
FOX
The CW
CBS
The CW
ABC
FOX
ABC
NBC
CBS
NBC
The CW
66
Honolulu, HI
67
68
70
72
Green Bay, WI
Roanoke, VA
Charleston, WV
Springfield, MO
75
Des Moines, IA
76 Wichita, KS
78
79
80
81
82
Brownsville, TX
Huntsville, AL
Rochester, NY
Syracuse, NY
Champaign, IL
El Paso, TX
85
89 Waco-Bryan, TX
90
Shreveport, LA
91
92
93
94
95
96
97
98
Colorado Springs, CO
Jackson, MS
Savannah, GA
Charleston, SC
Florence, SC
Burlington, VT
Baton Rouge, LA
Quad Cities, IL
101
Fayetteville, AR
102
103
Tri-Cities, TN-VA
Evansville, IN
Ft. Wayne, IN
Augusta, GA
Altoona, PA
104
105
106
107 Greenville, NC
108
Springfield, MA
110
Lansing, MI
113
Peoria, IL
114
Tyler-Longview, TX
KHON
KHAW
KAII
KGMD
KGMV
KHII
WFRV
WFXR
WWCW
WOWK
KOLR
KOZL
KRBK
WOI
KCWI
KSNW
KSNC
KSNG
KSNK
KVEO
WZDX
WHDF
WROC
WSYR
WCIA
WCIX
KTSM
KWKT
KYLE
KTAL
KMSS
KSHV
KXRM
WJTV
WSAV
WCBD
WBTW
WFFF
WVNY
WGMB
WVLA
WHBF
KGCW
KLJB
KFTA
KNWA
WJHL
WEHT
WTVW
WANE
WJBF
WTAJ
WNCT
WWLP
WLNS
WLAJ
WMBD
WYZZ
KETK
KFXK
FOX
FOX
FOX
MNTV
MNTV
MNTV
CBS
FOX
The CW
CBS
CBS
MNTV
FOX
ABC
The CW
NBC
NBC
NBC
NBC
NBC
FOX
The CW
CBS
ABC
CBS
MNTV
NBC
FOX
MNTV
NBC
FOX
MNTV
FOX
CBS
NBC
NBC
CBS
FOX
ABC
FOX
NBC
CBS
The CW
FOX
FOX
NBC
CBS
ABC
The CW
CBS
ABC
CBS
CBS
NBC
CBS
ABC
CBS
FOX
NBC
FOX
115
Sioux Falls, SD
121
122
125
127
130
Lafayette, LA
Bakersfield, CA
Youngstown, OH
Columbus, GA
La Crosse, WI
131
Amarillo, TX
137
Monroe, AR
139
Rockford, IL
141
Topeka, KS
142
Midland, TX
143
Lubbock, TX
146
Minot-Bismarck, ND
148 Wichita Falls, TX
149
150
151
Sioux City, IA
Panama City, FL
Erie, PA
153
Joplin, MO
158
Terre Haute, IN
Binghamton, NY
160
162 Wheeling, WV
163
165
Beckley, WV
Abilene, TX
167
Billings, MT
168
169
Hattiesburg, MS
Utica, NY
Clarksburg, WV
Rapid City, SD
Dothan, AL
Elmira, NY
Jackson, TN
170
171
173
176
177
178 Watertown, NY
Alexandria, LA
179
Marquette, MI
182
Grand Junction, CO
187
196
San Angelo, TX
KELO
KDLO
KPLO
KLFY
KGET
WKBN
WYTV
WRBL
WLAX
WEUX
KAMR
KCIT
KARD
KTVE
WQRF
WTVO
KSNT
KTKA
KMID
KPEJ
KLBK
KAMC
KXMA
KXMB
KXMC
KXMD
KFDX
KJTL
KCAU
WMBB
WJET
WFXP
KSNF
KODE
WTWO
WAWV
WIVT
WTRF
WVNS
KTAB
KRBC
KSVI
KHMT
WHLT
WFXV
WUTR
WBOY
KCLO
WDHN
WETM
WJKT
WWTI
WNTZ
WJMN
KREX
KREY
KFQX
KSAN
KLST
CBS
CBS
CBS
CBS
NBC
CBS
ABC
CBS
FOX
FOX
NBC
FOX
FOX
NBC
FOX
ABC
NBC
ABC
ABC
FOX
CBS
ABC
The CW
CBS
CBS
CBS
NBC
FOX
ABC
ABC
ABC
FOX
NBC
ABC
NBC
ABC
ABC
CBS
CBS
CBS
NBC
ABC
FOX
CBS
FOX
ABC
NBC
CBS
ABC
NBC
FOX
ABC
FOX
CBS
CBS
CBS
FOX
NBC
CBS
(1)
Includes stations that we own, operate, or provide services to under local service agreements, including time brokerage agreements,
shared services agreements, joint sales agreements, local marketing agreements and outsourcing agreements.
(2) WDVM serves the Hagerstown, MD sub-market within the DMA. Its signal does not reach the entire Washington, DC market.
April(cid:3)22,(cid:3)2019
(cid:3)
Dear(cid:3)Fellow(cid:3)Shareholders:(cid:3)
(cid:3)
Fiscal(cid:3)year(cid:3)2018(cid:3)marked(cid:3)Nexstar’s(cid:3)seventh(cid:3)consecutive(cid:3)year(cid:3)of(cid:3)record(cid:3)financial(cid:3)performance,(cid:3)
with(cid:3)all(cid:3)of(cid:3)our(cid:3)key(cid:3)metrics(cid:3)–(cid:3)from(cid:3)net(cid:3)revenues(cid:3)to(cid:3)free(cid:3)cash(cid:3)flow(cid:3)–(cid:3)showing(cid:3)double(cid:3)digit(cid:3)growth(cid:3)
and(cid:3)coming(cid:3)in(cid:3)at(cid:3)the(cid:3)highest(cid:3)levels(cid:3)in(cid:3)the(cid:3)Company’s(cid:3)history.(cid:3)Nexstar’s(cid:3)expanded(cid:3)platform(cid:3)and(cid:3)
presence(cid:3) in(cid:3) states(cid:3) with(cid:3) high(cid:3) levels(cid:3) of(cid:3) political(cid:3) spending(cid:3) activity,(cid:3) combined(cid:3) with(cid:3) the(cid:3) ongoing(cid:3)
value(cid:3)of(cid:3)our(cid:3)strategies(cid:3)focused(cid:3)on(cid:3)leveraging(cid:3)our(cid:3)local(cid:3)content(cid:3)to(cid:3)generate(cid:3)continued(cid:3)growth(cid:3)
across(cid:3) our(cid:3) television(cid:3) advertising,(cid:3) distribution(cid:3) and(cid:3) digital(cid:3) revenue(cid:3) streams(cid:3) drove(cid:3) total(cid:3) net(cid:3)
revenue(cid:3)to(cid:3)a(cid:3)record(cid:3)$2.8(cid:3)billion.(cid:3)With(cid:3)the(cid:3)strong(cid:3)operating(cid:3)leverage(cid:3)in(cid:3)our(cid:3)business(cid:3)model(cid:3)and(cid:3)
margin(cid:3)growth(cid:3)related(cid:3)to(cid:3)historic(cid:3)levels(cid:3)of(cid:3)mid(cid:882)term(cid:3)election(cid:3)spending(cid:3)in(cid:3)our(cid:3)markets,(cid:3)Nexstar(cid:3)
generated(cid:3) record(cid:3) Adjusted(cid:3) EBITDA(cid:3) of(cid:3) over(cid:3) $1.0(cid:3) billion(cid:3) and(cid:3) free(cid:3) cash(cid:3) flow(cid:3) of(cid:3) $693.0(cid:3) million,(cid:3)
before(cid:3)$8.5(cid:3)million(cid:3)in(cid:3)one(cid:882)time(cid:3)expenses.(cid:3)For(cid:3)the(cid:3)full(cid:3)year,(cid:3)we(cid:3)delivered(cid:3)about(cid:3)25%(cid:3)of(cid:3)every(cid:3)
net(cid:3) revenue(cid:3) dollar(cid:3) to(cid:3) the(cid:3) free(cid:3) cash(cid:3) flow(cid:3) line(cid:3) allowing(cid:3) us(cid:3) to(cid:3) invest(cid:3) in(cid:3) our(cid:3) people,(cid:3) our(cid:3) local(cid:3) media(cid:3) platform(cid:3) and(cid:3) in(cid:3)
complementary(cid:3)accretive(cid:3)acquisitions,(cid:3)while(cid:3)reducing(cid:3)net(cid:3)debt(cid:3)by(cid:3)approximately(cid:3)$400.0(cid:3)million(cid:3)and(cid:3)returning(cid:3)over(cid:3)$120.0(cid:3)
million(cid:3)to(cid:3)shareholders(cid:3)in(cid:3)the(cid:3)form(cid:3)of(cid:3)share(cid:3)repurchases(cid:3)and(cid:3)dividends.(cid:3)
(cid:3)
With(cid:3)our(cid:3)long(cid:882)term(cid:3)strategic(cid:3)focus(cid:3)on(cid:3)completing(cid:3)accretive(cid:3)transactions(cid:3)to(cid:3)enhance(cid:3)our(cid:3)overall(cid:3)competitive(cid:3)position(cid:3)and(cid:3)
free(cid:3)cash(cid:3)flow(cid:3)growth,(cid:3)we(cid:3)were(cid:3)delighted(cid:3)to(cid:3)announce(cid:3)in(cid:3)December(cid:3)that(cid:3)we(cid:3)reached(cid:3)a(cid:3)definitive(cid:3)agreement(cid:3)to(cid:3)acquire(cid:3)
Tribune(cid:3) Media.(cid:3) The(cid:3) proposed(cid:3) transaction(cid:3) is(cid:3) a(cid:3) strategically(cid:3) and(cid:3) financially(cid:3) compelling(cid:3) growth(cid:3) opportunity(cid:3) that(cid:3) further(cid:3)
expands(cid:3)our(cid:3)geographic(cid:3)diversity(cid:3)and(cid:3)audience(cid:3)reach.(cid:3)Upon(cid:3)closing,(cid:3)Nexstar(cid:3)will(cid:3)be(cid:3)the(cid:3)largest(cid:3)local(cid:3)television(cid:3)group(cid:3)in(cid:3)
the(cid:3)United(cid:3)States(cid:3)with(cid:3)a(cid:3)portfolio(cid:3)of(cid:3)197(cid:3)full(cid:3)power(cid:3)owned(cid:3)or(cid:3)serviced(cid:3)television(cid:3)stations(cid:3)and(cid:3)one(cid:3)AM(cid:3)radio(cid:3)station(cid:3)in(cid:3)115(cid:3)
markets,(cid:3)pro(cid:882)forma(cid:3)for(cid:3)required(cid:3)divestitures,(cid:3)and(cid:3)a(cid:3)growing(cid:3)digital(cid:3)media(cid:3)operation.(cid:3)The(cid:3)enhanced(cid:3)scale(cid:3)of(cid:3)the(cid:3)combined(cid:3)
entity(cid:3)will(cid:3)enable(cid:3)Nexstar(cid:3)to(cid:3)better(cid:3)compete(cid:3)in(cid:3)today’s(cid:3)rapidly(cid:3)transforming(cid:3)industry(cid:3)landscape,(cid:3)while(cid:3)extending(cid:3)our(cid:3)long(cid:882)
term(cid:3)record(cid:3)of(cid:3)delivering(cid:3)greater(cid:3)levels(cid:3)of(cid:3)service(cid:3)to(cid:3)our(cid:3)local(cid:3)communities(cid:3)and(cid:3)increased(cid:3)returns(cid:3)for(cid:3)our(cid:3)shareholders.(cid:3)
(cid:3)
Financially,(cid:3) the(cid:3) Tribune(cid:3) Media(cid:3) transaction(cid:3) is(cid:3) expected(cid:3) to(cid:3) nearly(cid:3) double(cid:3) our(cid:3) pro(cid:882)forma(cid:3) average(cid:3) annual(cid:3) revenue(cid:3) and(cid:3)
adjusted(cid:3)EBITDA(cid:3)and(cid:3)will(cid:3)result(cid:3)in(cid:3)approximately(cid:3)46%(cid:3)growth(cid:3)in(cid:3)Nexstar’s(cid:3)pro(cid:882)forma(cid:3)average(cid:3)annual(cid:3)free(cid:3)cash(cid:3)flow(cid:3)in(cid:3)the(cid:3)
2018/2019(cid:3) cycle(cid:3) to(cid:3) approximately(cid:3) $900(cid:3) million(cid:3) per(cid:3) year.(cid:3) With(cid:3) gross(cid:3) proceeds(cid:3) from(cid:3) recently(cid:3) announced(cid:3) divestiture(cid:3)
agreements(cid:3)exceeding(cid:3)our(cid:3)initial(cid:3)expectations(cid:3)by(cid:3)over(cid:3)36%,(cid:3)we(cid:3)now(cid:3)expect(cid:3)our(cid:3)net(cid:3)leverage(cid:3)ratio(cid:3)to(cid:3)approximate(cid:3)5.1x(cid:3)at(cid:3)
closing(cid:3) and(cid:3) decline(cid:3) to(cid:3) approximately(cid:3) 4.0x(cid:3) by(cid:3) the(cid:3) end(cid:3) of(cid:3) 2020.(cid:3) As(cid:3) with(cid:3) our(cid:3) past(cid:3) acquisitions,(cid:3) we(cid:3) have(cid:3) developed(cid:3) a(cid:3)
comprehensive(cid:3) regulatory(cid:3) compliance(cid:3) plan(cid:3) and(cid:3) a(cid:3) detailed(cid:3) integration(cid:3) plan(cid:3) that(cid:3) will(cid:3) result(cid:3) in(cid:3) significant(cid:3) synergy(cid:3)
realization.(cid:3) Nexstar(cid:3) has(cid:3) committed(cid:3) financing(cid:3) for(cid:3) the(cid:3) transaction(cid:3) and(cid:3) has(cid:3) made(cid:3) all(cid:3) required(cid:3) FCC(cid:3) and(cid:3) other(cid:3) regulatory(cid:3)
applications,(cid:3) and(cid:3) subject(cid:3) to(cid:3) securing(cid:3) requisite(cid:3) approvals(cid:3) we(cid:3) expect(cid:3) to(cid:3) complete(cid:3) the(cid:3) transaction(cid:3) in(cid:3) the(cid:3) third(cid:3) quarter(cid:3) of(cid:3)
2019.(cid:3)For(cid:3)more(cid:3)information(cid:3)regarding(cid:3)the(cid:3)Tribune(cid:3)Media(cid:3)acquisition,(cid:3)please(cid:3)see(cid:3)the(cid:3)Company’s(cid:3)Securities(cid:3)and(cid:3)Exchange(cid:3)
Commission(cid:3)filing(cid:3)at:(cid:3)https://www.sec.gov/Archives/edgar/data/1142417/000119312518342336/d665569d8k.htm.(cid:3)
(cid:3)
As(cid:3)the(cid:3)most(cid:3)powerful(cid:3)and(cid:3)trusted(cid:3)voice(cid:3)in(cid:3)this(cid:3)country,(cid:3)the(cid:3)depth(cid:3)of(cid:3)local(cid:3)broadcast(cid:3)television's(cid:3)contributions(cid:3)to(cid:3)serving(cid:3)
the(cid:3)economic(cid:3)and(cid:3)public(cid:3)needs(cid:3)of(cid:3)local(cid:3)communities(cid:3)is(cid:3)immeasurable.(cid:3)In(cid:3)the(cid:3)23(cid:3)years(cid:3)since(cid:3)we(cid:3)founded(cid:3)Nexstar,(cid:3)we(cid:3)have(cid:3)
remained(cid:3) true(cid:3) to(cid:3) our(cid:3) mission(cid:3) to(cid:3) uphold(cid:3) the(cid:3) public(cid:3) interest(cid:3) principles(cid:3) of(cid:3) localism,(cid:3) diversity(cid:3) and(cid:3) unbiased(cid:3) broadcast(cid:3)
journalism.(cid:3) Through(cid:3) accretive(cid:3) transactions,(cid:3) we’ve(cid:3) strategically(cid:3) assembled(cid:3) highly(cid:3) effective(cid:3) local(cid:3) broadcast(cid:3) and(cid:3) digital(cid:3)
teams(cid:3) and(cid:3) a(cid:3) platform(cid:3) that(cid:3) delivers(cid:3) exceptional(cid:3) local(cid:3) content(cid:3) to(cid:3) inform(cid:3) and(cid:3) entertain(cid:3) our(cid:3) viewers,(cid:3) while(cid:3) providing(cid:3)
premium(cid:3) local(cid:3) advertising(cid:3) opportunities(cid:3) at(cid:3) scale(cid:3) for(cid:3) advertisers(cid:3) and(cid:3) political(cid:3) campaigns.(cid:3) At(cid:3) the(cid:3) same(cid:3) time,(cid:3) our(cid:3)
development(cid:3)of(cid:3)complementary(cid:3)retransmission(cid:3)and(cid:3)digital(cid:3)revenue(cid:3)streams(cid:3)have(cid:3)materially(cid:3)diversified(cid:3)our(cid:3)revenue(cid:3)mix(cid:3)
and(cid:3)we(cid:3)continue(cid:3)to(cid:3)focus(cid:3)on(cid:3)implementing(cid:3)new(cid:3)standards(cid:3)and(cid:3)technologies(cid:3)to(cid:3)monetize(cid:3)the(cid:3)unrivaled(cid:3)reach,(cid:3)trust(cid:3)and(cid:3)
influence(cid:3) of(cid:3) our(cid:3) leading(cid:3) local(cid:3) platforms.(cid:3) These(cid:3) are(cid:3) the(cid:3) drivers(cid:3) of(cid:3) our(cid:3) near(cid:882)(cid:3) and(cid:3) long(cid:882)term(cid:3) financial(cid:3) growth(cid:3) and(cid:3) have(cid:3)
positioned(cid:3)Nexstar(cid:3)to(cid:3)continue(cid:3)investing(cid:3)in(cid:3)our(cid:3)business(cid:3)and(cid:3)our(cid:3)employees,(cid:3)while(cid:3)reducing(cid:3)leverage(cid:3)and(cid:3)returning(cid:3)capital(cid:3)
to(cid:3)shareholders.(cid:3)
(cid:3)
NEXSTAR(cid:3)MEDIA(cid:3)GROUP(cid:3)2018(cid:3)HIGHLIGHTS(cid:3)
(cid:3)
(cid:131) Seventh(cid:3)consecutive(cid:3)year(cid:3)of(cid:3)record(cid:3)financial(cid:3)results(cid:3)
- Net(cid:3)revenue(cid:3)rose(cid:3)13.8%(cid:3)to(cid:3)$2.8(cid:3)billion(cid:3)(cid:3)
Television(cid:3)ad(cid:3)revenue(cid:3)(cid:882)(cid:882)(cid:3)inclusive(cid:3)of(cid:3)local,(cid:3)national(cid:3)and(cid:3)political(cid:3)(cid:882)(cid:882)(cid:3)grew(cid:3)18.2%(cid:3)to(cid:3)$1.3(cid:3)billion(cid:3)
(cid:131)
(cid:131) Retransmission(cid:3)fee(cid:3)revenue(cid:3)improved(cid:3)12.6%(cid:3)to(cid:3)$1.1(cid:3)billion(cid:3)
(cid:131) Digital(cid:3)revenue(cid:3)increased(cid:3)15.2%(cid:3)to(cid:3)$261.2(cid:3)million(cid:3)
- Broadcast(cid:3)cash(cid:3)flow(cid:3)grew(cid:3)29.4%(cid:3)to(cid:3)$1.1(cid:3)billion(cid:3)
- Adjusted(cid:3)EBITDA(cid:3)before(cid:3)one(cid:882)time(cid:3)transaction(cid:3)expenses(cid:3)increased(cid:3)28.6%(cid:3)to(cid:3)$1.03(cid:3)billion(cid:3)
- Adjusted(cid:3)EBITDA(cid:3)increased(cid:3)37.7%(cid:3)to(cid:3)$1.02(cid:3)billion(cid:3)
- Free(cid:3)cash(cid:3)flow(cid:3)before(cid:3)one(cid:882)time(cid:3)transaction(cid:3)expenses(cid:3)rose(cid:3)31.2%(cid:3)to(cid:3)$692.7(cid:3)million(cid:3)
- Free(cid:3)cash(cid:3)flow(cid:3)rose(cid:3)45.9%(cid:3)to(cid:3)$684.2(cid:3)million(cid:3)
(cid:3)
(cid:131) Capital(cid:3)Allocation(cid:3)/(cid:3)Structure(cid:3)
- Increased(cid:3)quarterly(cid:3)cash(cid:3)dividend(cid:3)by(cid:3)25%(cid:3)and(cid:3)paid(cid:3)$68.6(cid:3)million(cid:3)in(cid:3)total(cid:3)cash(cid:3)dividends(cid:3)
- Repurchased(cid:3)751,920(cid:3)shares(cid:3)for(cid:3)$50.5(cid:3)million,(cid:3)or(cid:3)an(cid:3)average(cid:3)price(cid:3)of(cid:3)~$67.17(cid:3)per(cid:3)share(cid:3)
- Reduced(cid:3)total(cid:3)net(cid:3)debt(cid:3)by(cid:3)~$400(cid:3)million(cid:3)
- Refinanced(cid:3)term(cid:3)loans(cid:3)and(cid:3)credit(cid:3)facility(cid:3)in(cid:3)a(cid:3)free(cid:3)cash(cid:3)flow(cid:3)accretive(cid:3)manner(cid:3)
- Completed(cid:3) accretive(cid:3) acquisitions(cid:3) of(cid:3) KRBK(cid:882)TV(cid:3) and(cid:3) WHDF(cid:882)TV(cid:3) for(cid:3) an(cid:3) aggregate(cid:3) purchase(cid:3) price(cid:3) of(cid:3) $20.6(cid:3) million,(cid:3)
including(cid:3)working(cid:3)capital(cid:3)
- Completed(cid:3)accretive(cid:3)acquisition(cid:3)of(cid:3)LKQD,(cid:3)a(cid:3)leading(cid:3)video(cid:3)ad(cid:3)infrastructure(cid:3)company,(cid:3)for(cid:3)approximately(cid:3)$97.0(cid:3)million,(cid:3)
including(cid:3)working(cid:3)capital(cid:3)
(cid:3)
Looking(cid:3) ahead,(cid:3) I(cid:3) am(cid:3) more(cid:3) excited(cid:3) for(cid:3) what(cid:3) the(cid:3) future(cid:3) holds(cid:3) for(cid:3) our(cid:3) business(cid:3) and(cid:3) the(cid:3) overall(cid:3) industry(cid:3) today(cid:3) than(cid:3) ever(cid:3)
before.(cid:3)Since(cid:3)the(cid:3)very(cid:3)first(cid:3)television(cid:3)broadcast,(cid:3)our(cid:3)industry(cid:3)has(cid:3)been(cid:3)engaged(cid:3)in(cid:3)a(cid:3)perpetual(cid:3)state(cid:3)of(cid:3)change(cid:3)which(cid:3)is(cid:3)
why(cid:3) in(cid:3) an(cid:3) era(cid:3) of(cid:3) rapidly(cid:3) evolving(cid:3) video(cid:3) distribution(cid:3) technology,(cid:3) local(cid:3) broadcast(cid:3) television(cid:3) has(cid:3) proven(cid:3) to(cid:3) be(cid:3) resilient,(cid:3)
maintaining(cid:3)its(cid:3)central(cid:3)position(cid:3)in(cid:3)America’s(cid:3)households.(cid:3)With(cid:3)the(cid:3)FCC’s(cid:3)support(cid:3)for(cid:3)the(cid:3)voluntary(cid:3)adoption(cid:3)of(cid:3)new(cid:3)ATSC(cid:3)
3.0(cid:3) standards(cid:3) for(cid:3) innovative(cid:3) Next(cid:3) Gen(cid:3) TV(cid:3) services,(cid:3) our(cid:3) industry(cid:3) will(cid:3) be(cid:3) able(cid:3) to(cid:3) bring(cid:3) consumers(cid:3) more(cid:3) localized(cid:3)
programming(cid:3)content(cid:3)and(cid:3)a(cid:3)broad(cid:3)range(cid:3)of(cid:3)other(cid:3)innovative(cid:3)services,(cid:3)while(cid:3)creating(cid:3)new(cid:3)value(cid:3)and(cid:3)revenue(cid:3)opportunities(cid:3)
for(cid:3)our(cid:3)business,(cid:3)our(cid:3)advertising(cid:3)clients(cid:3)and(cid:3)our(cid:3)shareholders.(cid:3)As(cid:3)such,(cid:3)Nexstar(cid:3)and(cid:3)other(cid:3)broadcasters(cid:3)came(cid:3)together(cid:3)in(cid:3)
late(cid:3)2018(cid:3)to(cid:3)commit(cid:3)to(cid:3)the(cid:3)broad(cid:3)launch(cid:3)of(cid:3)the(cid:3)new(cid:3)ATSC(cid:3)3.0(cid:3)standard(cid:3)across(cid:3)various(cid:3)U.S.(cid:3)markets(cid:3)beginning(cid:3)in(cid:3)2020.(cid:3)We(cid:3)
look(cid:3)forward(cid:3)to(cid:3)continuing(cid:3)our(cid:3)leadership(cid:3)role(cid:3)in(cid:3)the(cid:3)implementation(cid:3)of(cid:3)ATSC(cid:3)3.0(cid:3)and(cid:3)realizing(cid:3)the(cid:3)potentially(cid:3)significant(cid:3)
strategic(cid:3)and(cid:3)economic(cid:3)benefits(cid:3)from(cid:3)the(cid:3)new(cid:3)services(cid:3)and(cid:3)technology(cid:3)offerings(cid:3)in(cid:3)the(cid:3)future.(cid:3)
(cid:3)
In(cid:3)the(cid:3)meantime,(cid:3)as(cid:3)we(cid:3)begin(cid:3)to(cid:3)benefit(cid:3)from(cid:3)initial(cid:3)contributions(cid:3)from(cid:3)Tribune(cid:3)later(cid:3)this(cid:3)year,(cid:3)the(cid:3)continued(cid:3)double(cid:882)digit(cid:3)
growth(cid:3)of(cid:3)combined(cid:3)retransmission(cid:3)and(cid:3)digital(cid:3)revenue,(cid:3)a(cid:3)large(cid:3)number(cid:3)of(cid:3)distribution(cid:3)contract(cid:3)renewals(cid:3)at(cid:3)2019(cid:3)year(cid:882)
end(cid:3)and(cid:3)what(cid:3)many(cid:3)expect(cid:3)to(cid:3)be(cid:3)substantial(cid:3)spending(cid:3)levels(cid:3)related(cid:3)to(cid:3)the(cid:3)upcoming(cid:3)2020(cid:3)presidential(cid:3)election(cid:3)cycle,(cid:3)we(cid:3)
have(cid:3)excellent(cid:3)visibility(cid:3)to(cid:3)delivering(cid:3)on(cid:3)our(cid:3)free(cid:3)cash(cid:3)flow(cid:3)targets(cid:3)and(cid:3)a(cid:3)clear(cid:3)path(cid:3)for(cid:3)the(cid:3)continued(cid:3)near(cid:882)(cid:3)and(cid:3)long(cid:882)term(cid:3)
enhancement(cid:3) of(cid:3) shareholder(cid:3) value.(cid:3) In(cid:3) terms(cid:3) of(cid:3) capital(cid:3) allocation,(cid:3) the(cid:3) active(cid:3) management(cid:3) of(cid:3) our(cid:3) capital(cid:3) structure(cid:3) and(cid:3)
strong(cid:3) free(cid:3) cash(cid:3) flow(cid:3) growth(cid:3) will(cid:3) provide(cid:3) us(cid:3) with(cid:3) the(cid:3) financial(cid:3) flexibility(cid:3) to(cid:3) support(cid:3) our(cid:3) return(cid:3) of(cid:3) capital(cid:3) and(cid:3) leverage(cid:3)
reduction(cid:3)initiatives(cid:3)including(cid:3)share(cid:3)repurchases,(cid:3)dividend(cid:3)payments,(cid:3)debt(cid:3)reduction(cid:3)and(cid:3)strategic(cid:3)business(cid:3)investments.(cid:3)
In(cid:3)this(cid:3)regard,(cid:3)earlier(cid:3)this(cid:3)year(cid:3)the(cid:3)Board(cid:3)of(cid:3)Directors(cid:3)approved(cid:3)a(cid:3)20%(cid:3)increase(cid:3)in(cid:3)the(cid:3)quarterly(cid:3)cash(cid:3)dividend(cid:3)to(cid:3)$0.45(cid:3)per(cid:3)
share(cid:3)beginning(cid:3)in(cid:3)first(cid:3)quarter(cid:3)of(cid:3)2019.(cid:3)(cid:3)(cid:3)
(cid:3)
In(cid:3)summary,(cid:3)Nexstar(cid:3)continues(cid:3)to(cid:3)execute(cid:3)on(cid:3)all(cid:3)facets(cid:3)of(cid:3)our(cid:3)business(cid:3)plan(cid:3)including(cid:3)ongoing(cid:3)operational(cid:3)improvements,(cid:3)
additional(cid:3) synergy(cid:3) realization,(cid:3) further(cid:3) optimizing(cid:3) the(cid:3)capital(cid:3) structure,(cid:3)and(cid:3) improving(cid:3) service(cid:3) to(cid:3) our(cid:3) local(cid:3)communities.(cid:3)
Our(cid:3) disciplines(cid:3) in(cid:3) these(cid:3) areas(cid:3) have(cid:3) strengthened(cid:3) the(cid:3) consistency(cid:3) and(cid:3) visibility(cid:3) of(cid:3) our(cid:3) results,(cid:3) while(cid:3) supporting(cid:3) growing(cid:3)
returns(cid:3) for(cid:3) our(cid:3) shareholders.(cid:3) With(cid:3) our(cid:3) record(cid:3) reported(cid:3) financial(cid:3) results(cid:3) and(cid:3) the(cid:3) value(cid:3) we(cid:3) expect(cid:3) to(cid:3) derive(cid:3) from(cid:3) our(cid:3)
pending(cid:3)accretive(cid:3)acquisition(cid:3)of(cid:3)Tribune(cid:3)Media,(cid:3)we(cid:3)are(cid:3)highly(cid:3)confident(cid:3)in(cid:3)our(cid:3)strong(cid:3)growth(cid:3)prospects(cid:3)going(cid:3)forward(cid:3)as(cid:3)
we(cid:3)follow(cid:3)the(cid:3)successful(cid:3)strategies(cid:3)we’ve(cid:3)established(cid:3)in(cid:3)terms(cid:3)of(cid:3)building(cid:3)the(cid:3)top(cid:3)line,(cid:3)maintaining(cid:3)close(cid:3)control(cid:3)of(cid:3)fixed(cid:3)
and(cid:3)variable(cid:3)costs(cid:3)and(cid:3)optimizing(cid:3)the(cid:3)balance(cid:3)sheet.(cid:3)
(cid:3)
We(cid:3)look(cid:3)forward(cid:3)to(cid:3)reporting(cid:3)on(cid:3)our(cid:3)continued(cid:3)growth(cid:3)and(cid:3)accomplishments(cid:3)in(cid:3)2019(cid:3)and(cid:3)on(cid:3)behalf(cid:3)of(cid:3)the(cid:3)approximate(cid:3)
9,200(cid:3)employees(cid:3)of(cid:3)the(cid:3)“Nexstar(cid:3)Nation”,(cid:3)thank(cid:3)you(cid:3)for(cid:3)your(cid:3)interest(cid:3)and(cid:3)ongoing(cid:3)support.(cid:3)
(cid:3)
Sincerely,(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Perry(cid:3)A.(cid:3)Sook(cid:3)
Chairman,(cid:3)President(cid:3)and(cid:3)Chief(cid:3)Executive(cid:3)Officer(cid:3)
(cid:3)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(cid:3)(cid:3) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 31, 2018
OR
(cid:4) 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
(State of Organization or Incorporation)
545 E. John Carpenter Freeway, Suite 700, Irving, Texas
(Address of Principal Executive Offices)
23-3083125
(I.R.S. Employer Identification No.)
75062
(Zip Code)
(972) 373-8800
(Registrant’s Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Class A Common Stock, $0.01 par value per share
Name of each exchange on which registered
NASDAQ Global Select Market
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:3) No (cid:4)
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:4) No (cid:3)
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 (cid:3) No (cid:4)
Indicate by checkmark 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 (cid:3) No (cid:4)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will
not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. (cid:4)
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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. (check one):
Large accelerated filer
Non-accelerated filer
Emerging growth company
(cid:3)
(cid:4)
(cid:4)
Accelerated filer
Smaller reporting company
(cid:4)
(cid:4)
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. (cid:4)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:4) No (cid:3)
As of June 30, 2018, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant was
$3,210,723,476.
As of February 26, 2019, the Registrant had 45,745,692 shares of Class A Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Registrant’s 2019 Annual Meeting of Stockholders will be filed with the Commission within 120 days
after the close of the Registrant’s fiscal year and incorporated by reference in Part III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
Page
PART I
ITEM 1.
Business.........................................................................................................................................................................
ITEM 1A. Risk Factors...................................................................................................................................................................
ITEM 1B. Unresolved Staff Comments .........................................................................................................................................
ITEM 2.
Properties ......................................................................................................................................................................
ITEM 3.
Legal Proceedings .........................................................................................................................................................
ITEM 4.
Mine Safety Disclosures................................................................................................................................................
PART II
ITEM 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ...
ITEM 6.
Selected Financial Data .................................................................................................................................................
ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations .......................................
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.......................................................................................
ITEM 8.
Financial Statements and Supplementary Data..............................................................................................................
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........................................
ITEM 9A. Controls and Procedures ................................................................................................................................................
ITEM 9B. Other Information ..........................................................................................................................................................
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance............................................................................................
ITEM 11. Executive Compensation...............................................................................................................................................
ITEM 12. Security Ownership of Certain Beneficial Owners and Management, and Related Stockholder Matters....................
ITEM 13. Certain Relationships and Related Transactions, and Director Independence..............................................................
ITEM 14. Principal Accountant Fees and Services .......................................................................................................................
PART IV
ITEM 15. Exhibits and Financial Statement Schedules.................................................................................................................
ITEM 16. Form 10-K Summary .....................................................................................................................................................
Index to Exhibits ...............................................................................................................................................................................
5
21
32
33
33
33
34
36
38
57
57
57
57
58
59
59
59
59
59
59
59
60
Index to Financial Statements ...........................................................................................................................................................
F-1
General
As used in this Annual Report on Form 10-K and unless the context indicates otherwise, “Nexstar” refers to Nexstar Media
Group, Inc. and its consolidated subsidiaries; “Nexstar Broadcasting” refers to Nexstar Broadcasting, Inc., our wholly-owned direct
subsidiary; “Nexstar Digital” refers to Nexstar Digital LLC, our-wholly-owned direct subsidiary; the “Company” refers to Nexstar and
the variable interest entities (“VIEs”) required to be consolidated in our financial statements; and all references to “we,” “our,” “ours,”
and “us” refer to Nexstar.
Nexstar Broadcasting has time brokerage agreements (“TBAs”), shared services agreements (“SSAs”), joint sales agreements
(“JSAs”), local marketing agreements (“LMAs”) and outsourcing agreements (which we generally and collectively refer to as “local
service agreements”) relating to the television stations owned by VIEs but does not own any of the equity interests in these entities.
For a description of the relationship between Nexstar and these VIEs, see Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.”
The information in this Annual Report on Form 10-K includes information related to Nexstar and its consolidated subsidiaries.
It also includes information related to VIEs with whom Nexstar has relationships. In accordance with accounting principles generally
accepted in the United States (“U.S. GAAP”) and as discussed in Note 2 to our Consolidated Financial Statements, the financial
results of the consolidated VIEs are included in the Consolidated Financial Statements contained herein.
In the context of describing ownership of television stations in a particular market, the term “duopoly” refers to owning or
deriving the majority of the economic benefit, through ownership or local service agreements, from two or more stations in a
particular market. For more information on how we derive economic benefit from a duopoly, see Item 1, “Business.”
There are 210 generally recognized television markets, known as Designated Market Areas (“DMAs”), in the United States.
DMAs are ranked in size according to various factors based upon actual or potential audience. DMA rankings contained in this
Annual Report on Form 10-K are from Investing in Television Market Report 2018 4th Edition, as published by BIA Financial
Network, Inc.
Reference is made in this Annual Report on Form 10-K to the following trademarks/tradenames which are owned by the third
parties referenced in parentheses: Two and a Half Men (Warner Bros. Domestic Television) and Entertainment Tonight (CBS
Television Distribution).
3
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). All statements
other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including:
any projections or expectations of earnings, revenue, financial performance, liquidity and capital resources or other financial items;
any assumptions or projections about the television broadcasting industry; any statements of our plans, strategies and objectives for
our future operations, performance, liquidity and capital resources or other financial items; any statements concerning proposed new
products, services or developments; any statements regarding future economic conditions or performance; any statements of belief;
and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,”
“should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,”
“estimates” and other similar words.
Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could
differ from a projection or assumption in any of our forward-looking statements. Our future financial position and results of
operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties discussed under
Item 1A, “Risk Factors” located elsewhere in this Annual Report on Form 10-K and in our other filings with the Securities and
Exchange Commission (“SEC”). The forward-looking statements made in this Annual Report on Form 10-K are made only as of the
date hereof, and we do not have or undertake any obligation to update any forward-looking statements to reflect subsequent events or
circumstances.
4
PART I
Item 1.
Business
Overview
We are a television broadcasting and digital media company focused on the acquisition, development and operation of television
stations and interactive community websites and digital media services in 100 designated market areas throughout the United States.
As of December 31, 2018, we owned, operated, programmed or provided sales and other services to 174 full power television
stations, including those owned by VIEs, in 100 markets in the states of Alabama, Arizona, Arkansas, California, Colorado,
Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Michigan, Mississippi,
Missouri, Montana, Nevada, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island,
South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia and Wisconsin. The stations are affiliates of
ABC, NBC, FOX, CBS, The CW, MNTV and other broadcast television networks. As of December 31, 2018, we reached
approximately 42.7 million, or 38.8%, of all U.S. television households.
The stations we own and operate or provide services to provide free over-the-air programming to our markets’ television
viewing audiences. This programming includes (a) programs produced by networks with which the stations are affiliated;
(b) programs that the stations produce; and (c) first-run and rerun syndicated programs that the stations acquire. Our television
stations’ primary sources of revenue include the sale of commercial air time on our stations to local and national advertisers, the sale
of advertising on our websites in each of our broadcast markets where we deliver community focused content, and revenues earned
from our retransmission consent agreements with traditional multichannel video programming distributors (“MVPDs”), such as cable
and satellite providers, and over-the-top video distributors (“OTTDs”), companies that provide video content through internet
streaming.
Our digital media businesses provide digital publishing and content management platform, digital video advertising platform,
social media advertising platform and other digital media solutions to media publishers and advertisers. We are focused on new
technologies and growing our portfolio of digital products and services complementary to our vision of providing local news,
entertainment and sports content through broadcast and digital platforms.
We seek to grow our revenue and operating income by increasing the audience and revenue shares of the stations we own,
operate, program or provide sales and other services to, as well as through our growing portfolio of digital products and services. We
strive to increase the audience share of the stations by creating a strong local broadcasting presence based on highly rated local news,
local sports coverage and active community sponsorship. We seek to improve revenue share by employing and supporting a high-
quality local sales force that leverages the stations’ strong local brands and community presence with local advertisers. We further
improve broadcast cash flow by maintaining strict control over operating and programming costs. The benefits achieved through these
initiatives are magnified in our duopoly markets by owning or providing services to stations affiliated with multiple networks,
capitalizing on multiple sales forces and achieving an increased level of operational efficiency. As a result of our operational
enhancements, we expect revenue from the stations we have acquired or begun providing services to in the last four years to grow
faster than that of our more mature stations.
We are a Delaware corporation formed in 1996. Our principal offices are at 545 E. John Carpenter Freeway, Suite 700, Irving,
TX 75062. Our telephone number is (972) 373-8800 and our website is http://www.nexstar.tv. The information contained on, or
accessible through, our website is not part of this Annual Report on Form 10-K and is not incorporated herein by reference.
5
Recent Acquisitions
On January 16, 2018, we acquired the outstanding equity of Likqid Media Inc. (“LKQD”), a video advertising infrastructure
company. The purchase price was $97.0 million in cash, including working capital adjustments, of which $94.0 million was paid in
January 2018 and the remaining $3.0 million was paid upon final settlement in April 2018. The purchase price was funded by a
combination of borrowing under our revolving credit facility and cash on hand.
On July 15, 2018, we entered into a definitive agreement to acquire the assets of the CW affiliated television station WHDF
from Huntsville TV, LLC (“Huntsville TV”), for $3.0 million in cash, including working capital adjustments. On July 15, 2018, we
completed the first closing of the acquisition and acquired the station’s assets excluding certain transmission equipment, Federal
Communications Commission (“FCC”) licenses and network affiliation agreement for $2.3 million, funded by cash on hand. We
completed the second closing on November 9, 2018, acquiring the remaining assets and paying the remaining purchase price of $0.7
million. We provided programming and sales and other services to WHDF pursuant to a TBA from July 15, 2018 until the completion
of our acquisition on November 9, 2018.
On August 1, 2018, we entered into a definitive agreement to acquire the assets of the FOX affiliated television station KRBK
from KRBK LLC for $17.6 million in cash, including working capital adjustments. On August 1, 2018, we completed the first closing
of the acquisition and acquired the station’s assets excluding certain transmission equipment, FCC licenses and network affiliation
agreement for $15.1 million, funded by cash on hand. We completed the second closing on November 1, 2018, acquiring the
remaining assets and paying the remaining purchase price of $2.5 million. We provided programming and sales services to KRBK
pursuant to a TBA from August 1, 2018 until the completion of our acquisition on November 1, 2018.
On November 1, 2018, we entered into a definitive agreement to acquire the FCC license, certain transmission equipment and
network affiliation agreement of KHII, formerly KFVE, (“KHII”) from HITV License Subsidiary, Inc. (“HITV”), the MNTV affiliate
serving Honolulu, Hawaii and its satellite stations KGMV serving Wailuku, Hawaii and KGMD serving Hilo, Hawaii. The purchase
price is $6.5 million, of which $0.1 million was paid on November 1, 2018. The acquisition received FCC approval on December 17,
2018. We completed the acquisition on January 28, 2019 and paid the remaining purchase price of $6.4 million. Effective November
1, 2018, we began providing programming and sales services to KHII under a TBA until the completion of our acquisition on January
28, 2019.
Merger Agreement with Tribune
On November 30, 2018, we entered into a definitive merger agreement with Tribune Media Company (“Tribune”) to acquire
Tribune’s outstanding equity for $46.50 per share in a cash transaction. All equity-based awards of Tribune that are outstanding prior
to the merger will vest in full and will be converted into the right to receive the same cash consideration. The estimated total purchase
price is valued at $6.4 billion, consisting of the merger cash consideration and the refinancing of Tribune's outstanding debt. Tribune
shareholders will be entitled to additional cash consideration of approximately $0.30 per share per month if the transaction has not
closed by August 31, 2019, pro-rated for partial months and less an adjustment for any dividends declared on or after September 1,
2019. Tribune currently owns, operates or provides services to 42 television stations.
The merger agreement contains certain termination rights for both us and Tribune. If the merger agreement is terminated in
connection with Tribune entering into a definitive agreement with respect to a superior proposal, as well as under certain other
circumstances, the termination fee payable by Tribune to us will be $135 million. If the merger agreement is terminated because the
required Tribune stockholder vote is not obtained at a stockholder meeting duly held for such purpose, Tribune will be required to
reimburse us for our costs and expenses incurred in connection with the transaction in an amount not to exceed $15 million. Either
party may terminate the merger agreement if the merger is not consummated on or before an end date of November 30, 2019, with an
automatic extension to February 29, 2020, if necessary to obtain regulatory approval under circumstances specified in the merger
agreement.
The merger has been approved by the boards of directors of both companies and is projected to close late in the third quarter of
2019, subject to (i) the approval of the merger by the stockholders of Tribune, (ii) FCC approval, (iii) other regulatory approvals
(including expiration of the applicable Hart-Scott-Rodino “HSR” waiting period) and (iv) satisfaction of other customary closing
conditions. The merger does not require approval of our stockholders and is not subject to any financing contingency. On November
30, 2018, we received committed financing up to a maximum of $6.4 billion from a group of commercial banks to provide the debt
financing to consummate the merger and the refinancing of certain of the existing indebtedness of Tribune and related transactions.
6
In connection with obtaining the HSR approval and the FCC approval, Nexstar agreed to divest one or more television stations
in certain DMAs. Those DMAs are: (i) Salt Lake City, UT; (ii) Grand Rapids-Kalamazoo-Battle Creek, MI; (iii) Wilkes Barre-
Scranton, PA; (iv) Richmond-Petersburg, VA; (v) Des Moines-Ames, IA; (vi) Norfolk-Portsmouth-Newport News, VA; (vii) Fort
Smith-Fayetteville-Springdale-Rogers, AR; (viii) Davenport, IA-Rock Island-Moline, IL; (ix) Memphis, TN; (x) Huntsville-Decatur
(Florence), AL; (xi) Indianapolis, IN; (xii) Hartford-New Haven, CT and (xiii) Harrisburg, PA. Nexstar is required to designate one or
more Tribune stations or Nexstar stations for divestiture in each DMA. Nexstar has also agreed to designate, at its option, certain
additional Tribune stations or Nexstar stations for divestiture and to divest such stations in order to comply with the FCC national cap
as required by the FCC in order to obtain approval of and consummate the transactions.
Operating Strategy
We seek to generate revenue and broadcast cash flow growth through the following strategies:
Develop Leading Local Franchises. Each of the stations that we own, operate, program, or provide sales and other services to
creates a highly recognizable local brand, primarily through the quality of local news programming and community presence. Based
on internally generated analysis, we believe that in over 72.5% of our markets in which we produce local newscasts, we rank among
the top two stations in local news viewership. Strong local news typically generates higher ratings among attractive demographic
profiles and enhances audience loyalty, which may result in higher ratings for programs both preceding and following the news. High
ratings and strong community identity make the stations that we own, operate, program, or provide sales and other services to more
attractive to local advertisers. For the year ended December 31, 2018, we earned approximately 37.9% of our advertising revenue
from spots aired during local news programming. Currently, our stations and the stations we provide services to that produce local
newscasts provide between 15 and 30 hours per week of local news programming. Extensive local sports coverage, active sponsorship
of community events and the local news stories our Washington, D.C. bureau focuses on further differentiate us from our competitors
and strengthen our community relationships and our local advertising appeal.
Invest in Digital Media. We are focused on new technologies and growing our portfolio of digital products and services. Our
station websites provide access to our local news and information, as well as community centric businesses and services. We delivered
to audiences across all of our station web sites in 2018, with 199 million unique visitors who utilized over 5.0 billion page views. Also
in 2018, our mobile websites and mobile application accounted for 36% and 46%, respectively, of our station websites’ overall page
views by year end. We have also invested in additional digital media product lines, including a digital video advertising platform
acquired in early 2018 and other digital media solutions. We are committed to serving our local markets by providing local content to
both online and mobile users wherever and whenever they want.
Emphasize Local Sales. We employ a high-quality local sales force in each of our markets to increase revenue from local
advertisers by capitalizing on our investment in local programming and community websites. We believe that local advertising is
attractive because our sales force is more effective with local advertisers, giving us a greater ability to influence this revenue source.
Additionally, local advertising has historically been a more stable source of revenue than national advertising for television
broadcasters. For the year ended December 31, 2018, revenue generated from local advertising represented 73.2% of our consolidated
spot revenue (total of local and national advertising revenue, excluding political advertising revenue). In most of our markets, we have
increased the size and quality of our local sales force. We also invest in our sales efforts by implementing comprehensive training
programs and employing a sophisticated inventory tracking system to help maximize advertising rates and the amount of inventory
sold in each time period.
Operate Duopoly Markets. Owning or providing services to more than one station in a given market enables us to broaden our
audience share, enhance our revenue share and achieve significant operating efficiencies. Duopoly markets broaden audience share by
providing programming from multiple networks with different targeted demographics. These markets increase revenue share by
capitalizing on multiple sales forces. Additionally, we achieve significant operating efficiencies by consolidating physical facilities,
eliminating redundant management and leveraging capital expenditures between stations. We derived approximately 61.4% of our net
revenue, excluding trade revenue, for the year ended December 31, 2018 from our duopoly markets.
Maintain Strict Cost Controls. We emphasize strict controls on operating and programming costs in order to increase broadcast
cash flow. We continually seek to identify and implement cost savings at each of our stations and the stations we provide services to
and our overall size benefits each station with respect to negotiating favorable terms with programming suppliers and other vendors.
By leveraging our size and corporate management expertise, we are able to achieve economies of scale by providing programming,
financial, sales and marketing support to our stations and the stations we provide services to.
7
Capitalize on Diverse Network Affiliations. We currently own, operate, program or provide sales and other services to a
balanced portfolio of television stations with diverse network affiliations, including ABC, NBC, CBS and FOX affiliated stations
which represented approximately 18.3%, 28.8%, 33.0% and 10.2%, respectively, of our 2018 combined local, national and political
net revenue. The networks provide these stations with quality programming and numerous sporting events such as NBA basketball,
Major League baseball, NFL football, NCAA sports, PGA golf and the Olympic Games. Because network programming and ratings
change frequently, the diversity of our station portfolio’s network affiliations reduces our reliance on the quality of programming from
a single network.
Attract and Retain High Quality Management. We seek to attract and retain station general managers with proven track records
in larger television markets by providing equity incentives not typically offered by other station operators in our markets. Most of our
station general managers have been granted restricted stock units and stock options and have an average of over 20 years of
experience in the television broadcasting industry.
Acquisition Strategy
We selectively pursue acquisitions of television stations where we believe we can improve revenue and cash flow through active
management. When considering an acquisition, we evaluate the target audience share, revenue share, overall cost structure and
proximity to our regional clusters. Additionally, we seek to acquire or enter into local service agreements with stations to create
duopoly markets. We selectively pursue acquisitions of digital properties that leverage our capabilities particularly in video delivery
technology and platforms and with a focus on assisting small and medium-sized businesses to effectively reach targeted consumers
and achieve effective marketing campaigns.
Relationship with VIEs
Through various local service agreements, as of December 31, 2018, we provided sales, programming and other services to 38
full power television stations owned by consolidated VIEs and one full power television station owned by an unconsolidated VIE. As
of December 31, 2018, all of the VIEs and their stations are 100% owned by independent third parties. In compliance with FCC
regulations for all the parties, the VIEs maintain complete responsibility for and control over programming, finances, personnel and
operations of their stations. However, for the consolidated VIEs, we are deemed under U.S. GAAP to have controlling financial
interests in these entities because of (1) the local service agreements Nexstar has with the consolidated VIEs’ stations, (2) Nexstar’s
guarantees of the obligations incurred under Mission Broadcasting, Inc.’s (“Mission”), Marshall Broadcasting Group, Inc.’s
(“Marshall”) and Shield Media LLC’s (“Shield”) senior secured credit facilities, (3) Nexstar having power over significant activities
affecting the consolidated VIEs’ economic performance, including budgeting for advertising revenue, certain advertising sales and, in
some cases, hiring and firing of sales force personnel and (4) purchase options granted by each consolidated VIE, exclusive of
Marshall, which permit Nexstar to acquire the assets and assume the liabilities of each of the consolidated VIEs’ stations at any time,
subject to FCC consent. These purchase options are freely exercisable or assignable by Nexstar without consent or approval by the
VIEs. These option agreements expire on various dates between 2021 and 2028. We expect to renew these option agreements upon
expiration. Therefore, these VIEs are consolidated into these financial statements.
8
The Stations
The following chart sets forth general information about the television stations (full power, low power and multicast channels)
we currently own, operate, program or provide sales and other services to:
Market
Rank(1)
6
8
11
Market
DC(3)/Hagerstown, MD
San Francisco, CA
Tampa, FL
12
22
25
27
28
30
33
34
38
39
40
41
43
44
47
Phoenix, AZ
Portland, OR
Raleigh, NC
Nashville, TN
Indianapolis, IN
Salt Lake City, UT
New Haven, CT
Columbus, OH
Spartanburg, SC
Las Vegas, NV
Austin, TX
Harrisburg, PA
Birmingham, AL
Portsmouth, VA
Albuquerque, NM
49
Grand Rapids, MI
51
52
53
54
Memphis, TN
Buffalo, NY
Providence, RI
Fresno, CA
Full
Power
Stations
WDVM
KRON(25)
WFLA
WTTA(24)
KASW
KOIN
WNCN(25)
WKRN
WISH
WNDY(24)
KTVX
KUCW
WTNH
WCTX(24)
WCMH
WSPA
WYCW(24)
KLAS
KXAN
KNVA
KBVO
WHTM
WIAT
WAVY
WVBT
KRQE
KREZ(20)
KBIM(20)
KASY
KRWB
KWBQ
WOOD
WOTV
WATN
WLMT
WNLO
WIVB(24)
WPRI
WNAC
KSEE
KGPE
Primary
Affiliation
IND
MNTV
NBC
MNTV
The CW
CBS
CBS
ABC
The CW
MNTV
ABC
The CW
ABC
MNTV
NBC
CBS
The CW
CBS
NBC
The CW
MNTV
ABC
CBS
NBC
FOX
CBS
CBS
CBS
MNTV
The CW
The CW
NBC
ABC
ABC
The CW
The CW
CBS
CBS
FOX
NBC
CBS
Low Power Stations /
Multicast Channels
WDVM-D2, D3, D4
KRON-D2, D3, D4
WFLA-D2, D3
WTTA-D2
KASW-D2, D3, D4
KOIN-D2, D3
WNCN-D3, D4
WKRN-D2, D3, D4
WISH-D2, D3
WNDY-D2
KTVX-D2, D3, D4
KUCW-D2, D3, D4
KUWB-LD
WTNH-D2
WCTX-D2
WCMH-D2, D3, D4
WSPA-D2
WYCW-D2
KLAS-D2, D3
KXAN-D2, D3
KNVA-D2, D3, D4
KBVO-CD, D2, D3
KHPB-CD
WHTM-D2, D3, D4, D5
WIAT-D2, D3, D4
WAVY-D2, D3, D4
WVBT-D2, D3
KRQE-D2, D3
KREZ-D2
KBIM-D2
KASY-D2, D3, D4
KRWB-D2
KWBQ-D2, D3, D4
WOOD-D2, D3
WOTV-D2, D3, D4
WXSP-CD, D2, D3
WATN-D2, D3
WLMT-D2
WNLO-D2, D3, D4
WIVB-D4
WPRI-D2, D3, D4
WNAC-D2, D3
KSEE-D2, D3
KGPE-D2
Other
Affiliation
Grit, Escape, Laff
Sky link TV, getTV, Grit TV
MeTV, Escape
CoziTV
HSN, Grit, Escape
getTV, Decades
Grit, Escape
MeTV, Justice, Grit
getTV, Justice
Bounce
Me-TV, Laff, Heros & Icons
Movies!, Grit, Escape
CMT
Bounce
Grit
MeTV, ION, Laff
ION
get TV
MeTV, Movies
Cozi TV, ION
Grit, Laff, Escape
MNTV, Bounce, Heros&Icons
The CW
ION, getTV, Laff, WGCB-TV
Escape, Justice, Laff
Bounce, getTV, CBN
Cozi TV, Heroes & Icons
FOX, Bounce
getTV
FOX
Escape, getTV, Cozi TV
MyNet
Grit, Laff, ION
Bounce, Laff
getTV, Grit, Weather
MNTV, Cozi TV, Escape
Laff, Cozi TV
MeTV
Bounce
Laff
MNTV, Bounce, getTV
The CW, Laff
Bounce, Grit
Escape
Status(2)
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
LSA(6)
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
LSA(10)
LSA(10)
LSA(10)
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
LSA(12)
O&O
O&O
FCC License
Expiration
Date(4)
10/1/2020
12/1/2022
2/1/2021
2/1/2021
10/1/2022
2/1/2023
12/1/2020
8/1/2021
8/1/2021
8/1/2021
10/1/2022
10/1/2022
10/1/2022
4/1/2023
4/1/2023
10/1/2021
12/1/2020
12/1/2020
10/1/2022
8/1/2022
8/1/2022
8/1/2022
8/1/2022
8/1/2023
4/1/2021
10/1/2020
10/1/2020
10/1/2022
4/1/2022
10/1/2022
10/1/2022
4/1/2021
10/1/2022
10/1/2021
10/1/2021
10/1/2021
8/1/2021
8/1/2021
6/1/2023
6/1/2023
4/1/2023
4/1/2023
12/1/2022
12/1/2022
9
Market
Rank(1)
56
57
Market
Richmond, VA
Little Rock, AR
58
59
60
62
64
66
67
68
70
72
75
76
78
79
80
81
82
85
89
90
91
92
93
94
95
96
97
Mobile, AL
Albany, NY
Knoxville, TN
Wilkes Barre, PA
Dayton, OH
Honolulu, HI
Green Bay, WI
Roanoke, VA
Charleston, WV
Springfield, MO
Des Moines, IA
Wichita, KS
Brownsville, TX
Huntsville, AL
Rochester, NY
Syracuse, NY
Champaign, IL
El Paso, TX
Waco-Bryan, TX
Shreveport, LA
Jackson, MS
Savannah, GA
Charleston, SC
Florence, SC
Burlington, VT
Baton Rouge, LA
98
Quad Cities, IL
101
Fayetteville, AR
102
Tri-Cities, TN-VA
Full
Power
Stations
WRIC
KARK
KARZ
KLRT
KASN
WKRG
WFNA
WTEN
WXXA
WATE
WBRE
WYOU
WDTN
WBDT(24)
KHON
KHAW(21)
KAII(21)
KGMD(19)
KGMV(19)
KHII(19)
WFRV
WFXR
WWCW
WOWK
KOLR
KOZL
KRBK(18)
WOI
KCWI
KSNW
KSNC(22)
KSNG(22)
KSNK(22)
KVEO
WZDX
WHDF(17)
WROC
WSYR
WCIX
WCIA
KTSM
KWKT
KYLE
KTAL
KMSS
KSHV
WJTV
WSAV
WCBD
WBTW
WFFF
WVNY
WGMB
WVLA
KLJB
KGCW
WHBF
KFTA
KNWA
WJHL
Colorado Springs, CO
KXRM
Primary
Affiliation
ABC
NBC
MNTV
FOX
The CW
CBS
The CW
ABC
FOX
ABC
NBC
CBS
NBC
The CW
FOX
FOX
FOX
MNTV
MNTV
MNTV
CBS
FOX
The CW
CBS
CBS
MNTV
FOX
ABC
The CW
NBC
NBC
NBC
NBC
NBC
FOX
The CW
CBS
ABC
MNTV
CBS
NBC
FOX
MNTV
NBC
FOX
MNTV
FOX
CBS
NBC
NBC
CBS
FOX
ABC
FOX
NBC
FOX
The CW
CBS
FOX
NBC
CBS
Low Power Stations /
Multicast Channels
WRIC-D2, D3, D4
KARK-D2, D3
KARZ-D2, D3
KLRT-D2
Other
Affiliation
ION, getTV, Laff
Laff, Grit
Bounce, ION
Escape
WKRG-D2, D3, D4
WFNA-D2, D3, D4
WTEN-D2, D3, D4
WXXA-D2, D3, D4
WATE-D2, D3, D4
WBRE-D2, D3, D4
WYOU-D2, D3, D4
WDTN-D2, D3
WBDT-D2
KHON-D2, D3, D4
ION, MeTV, Laff
Bounce, Justice, Grit
getTV, Justice, Escape
OTB-TV, Laff, Bounce
getTV, Laff, Cozi TV
Laff, Grit, Justice
Escape, Bounce, Cozi TV
Escape, ION
Bounce
The CW, getTV, Laff
KAII-D2
The CW
WFRV-D2
WFXR-D2, D3, D4
WWCW-D2, D3, D4
WOWK-D2, D3, D4
KOLR-D2, D3, D4
KOZL-D2, D3
KRBK-D2, D3, D4
WOI-D2, D3, D4
KCWI-D2, D3, D4
KSNW-D2, D3, D4
KSNC-D2, D3
KSNG-D2
Bounce
The CW, Bounce, Escape
FOX, Laff, Grit
Escape, Laff, Grit
Laff, Grit, CBN
Escape, Bounce
MeTV, Movies!, ION
Laff, Grit, Cozi TV
Escape, Bounce, Quest
Telemundo, ION, Justice
ION, Justice
Telemundo
KSNL-LD
KVEO-D2, D3, D4
WZDX-D2, D3, D4
NBC
Estrella, Escape, Grit
MNTV, MeTV, Escape
Bounce, Laff, Escape
MeTV, Bounce, Laff
CBS, Escape, Laff
MNTV, Bounce, Grit
Estrella, Escape, Laff
MNTV, Estrella, Bounce
FOX, Estrella, Laff
Laff, Cozi TV, CBN
Escape, ION, Quest
The CW, ION, Escape
The CW, Laff, Bounce
The CW, ION, Laff
The CW, MeTV, Laff
The CW, ION, Laff
MNTV, ION, Escape
Escape, Bounce
Laff, Grit, Quest
The CW, Cozi TV
Laff, ION
The CW
IND
MeTV
ThisTV, Laff, Bounce
KGCW, Grit, Escape
NBC, Escape, Bounce
FOX, Laff, Grit
ABC
WROC-D2, D3, D4
WSYR-D2, D3, D4
WCIX-D2, D3, D4
WCIA-D2, D3, D4
KTSM-D2, D3, D4
KWKT-D2, D3, D4
KYLE-D2, D3, D4
KTAL-D2, D3, D4
KSHV-D2, D3, D4
KXRM-D2, D3, D4
KXTU-LD, D2, D4
WJTV-D2, D3, D4
WSAV-D2, D3, D4
WCBD-D2, D3, D4
WBTW-D2, D3, D4
WFFF-D2, D3
WVNY-D2, D3, D4
WGMB-D2, D3
WVLA-D2, D3
WBRL-CD
KZUP-CD
KLJB-D2
KGCW-D2, D3, D4
WHBF-D2, D3, D4
KFTA-D2, D3, D4
KNWA-D2, D3, D4
WJHL-D2
10
Status(2)
O&O
O&O
O&O
LSA(5)
LSA(5)
O&O
O&O
O&O
LSA(9)
O&O
O&O
LSA(5)
O&O
LSA(11)
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
LSA(5)
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
LSA(7)
LSA(8)
O&O
O&O
O&O
O&O
O&O
O&O
O&O
LSA(5)
O&O
LSA(8)
O&O
O&O
LSA(7)
O&O
O&O
O&O
O&O
O&O
FCC License
Expiration
Date(4)
10/1/2020
(4)
6/1/2021
6/1/2021
6/1/2021
4/1/2021
4/1/2021
6/1/2023
6/1/2023
8/1/2021
8/1/2023
8/1/2023
10/1/2021
10/1/2021
2/1/2023
2/1/2023
2/1/2023
2/1/2023
2/1/2023
2/1/2023
12/1/2021
10/1/2020
10/1/2020
10/1/2020
2/1/2022
2/1/2022
2/1/2022
2/1/2022
2/1/2022
6/1/2022
6/1/2022
6/1/2022
6/1/2022
6/1/2022
8/1/2022
4/1/2021
4/1/2021
6/1/2023
6/1/2023
12/1/2021
12/1/2021
8/1/2022
8/1/2022
8/1/2022
8/1/2022
6/1/2021
6/1/2021
4/1/2022
6/1/2021
4/1/2021
12/1/2020
12/1/2020
4/1/2023
4/1/2023
6/1/2021
6/1/2021
6/1/2021
6/1/2021
2/1/2022
2/1/2022
12/1/2021
6/1/2021
6/1/2021
8/1/2021
Market
Rank(1)
103
Market
Evansville, IN
104
105
106
107
108
110
Ft. Wayne, IN
Augusta, GA
Altoona, PA
Greenville, NC
Springfield, MA
Lansing, MI
113
Peoria, IL
114
Tyler-Longview, TX
115
Sioux Falls, SD
121
122
Lafayette, LA
Bakersfield, CA
125
Youngstown, OH
127
130
Columbus, GA
La Crosse, WI
131
Amarillo, TX
137 Monroe, AR
139
Rockford, IL
141
Topeka, KS
142 Midland, TX
143
Lubbock, TX
146 Minot-Bismarck, ND
148 Wichita Falls, TX
149
150
151
Sioux City, IA
Panama City, FL
Erie, PA
153
Joplin, MO
158
Terre Haute, IN
160
Binghamton, NY
162 Wheeling, WV
163
165
Beckley, WV
Abilene, TX
Full
Power
Stations
WEHT
WTVW
WANE
WJBF
WTAJ
WNCT
WWLP
WLAJ
WLNS(24)
WMBD
WYZZ
KETK
KFXK
KELO
KDLO(23)
KPLO(23)
KLFY
KGET
WYTV
WKBN(24)
WRBL
WLAX
WEUX(16)
KAMR
KCIT
KARD
KTVE
WQRF
WTVO
KSNT
KTKA
KMID
KPEJ
KLBK
KAMC
KXMA
KXMB(15)
KXMC
KXMD(15)
KFDX
KJTL
KCAU
WMBB
WJET
WFXP
KSNF
KODE
WTWO
WAWV
WIVT
WTRF
WVNS
KTAB
KRBC
Primary
Affiliation
ABC
The CW
CBS
ABC
CBS
CBS
NBC
ABC
CBS
CBS
FOX
NBC
FOX
CBS
CBS
CBS
CBS
NBC
ABC
CBS
CBS
FOX
FOX
NBC
FOX
FOX
NBC
FOX
ABC
NBC
ABC
ABC
FOX
CBS
ABC
The CW
CBS
CBS
CBS
NBC
FOX
ABC
ABC
ABC
FOX
NBC
ABC
NBC
ABC
ABC
CBS
CBS
CBS
NBC
Low Power Stations /
Multicast Channels
WEHT-D2, D3
WTVW-D2, D3, D4
WANE-D2, D3, D4
WJBF-D2, D3, D4
WTAJ-D2, D3, D4
WNCT-D2, D3, D4
WWLP-D2, D3, D4
WLAJ-D2
Other
Affiliation
Laff, Cozi TV
Bounce, Escape, ION
ION, Laff, Escape
MeTV, ION, Escape
Escape, Laff, Grit
The CW, getTV, Escape
The CW, ION, Escape
ABC
WMBD-D2, D3, D4
Bounce, Laff, Escape
KETK-D2, D3
KFXK-D2, D3, D4
KTPN-LD
KELO-D2, D3, D4
KDLO-D2
KPLO-D2
KLFY-D2, D3, D4
KGET-D2, D3, D4
KKEY-LP
WYTV- D2
WKBN-D2
WYFX-LD, D2, D3, D4,
D5, D6
WRBL-D2, D3, D4
WLAX-D2, D3, D4
WEUX-D2, D3, D4
KAMR-D2, D3, D4
KCIT-D2, D3, D4
KCPN-LP
KARD-D2, D3, D4
KTVE-D2, D3, D4
WQRF-D2, D3
WTVO-D2, D3, D4
KSNT-D2, D3, D4
KTKA-D2, D3, D4
KTMJ-CD, D2, D3, D4
KMID-D2, D3, D4
KPEJ-D2
KLBK-D2
KAMC-D2, D3, D4
KXMA-D2, D3, D4
KXMB-D2, D3, D4
KXMC-D2, D3, D4
KXMD-D2, D3, D4
KFDX-D2, D3, D4
KJTL-D2, D3, D4
KJBO-LP
KCAU-D2, D3, D4
WMBB-D2, D3, D4
WJET-D2, D3, D4
WFXP-D2, D3
KSNF-D2, D3, D4
KODE-D2, D3, D4
WTWO-D2, D3, D4
WAWV-D2, D3
WIVT-D2, D3, D4
WBGH-CD, D3
WTRF-D2, D3, D4
WVNS-D2
KTAB-D2, D3, D4
KRBC-D2, D3, D4
Grit, ION
MNTV, Escape, Laff
MNTV
MNTV, ION, Escape
MNTV
MNTV
getTV, ION, Laff
The CW, Telemundo, Laff
Telemundo
MNTV
FOX
FOX, MNTV, ION, Bounce, Laff,
getTV
MeTV, ION, Laff
MeTV, Laff, Grit
MeTV, Escape, Bounce
MNTV, Laff, Cozi TV
Grit, Escape, Bounce
MNTV
Bounce, Grit, Cozi TV
KARD, Laff, Escape
Bounce, Escape
MNTV, Laff, Grit
FOX, ION, Bounce
getTV, The CW, Justice
FOX, Escape, Grit, Laff
Laff, Escape, Grit
Estrella
Laff
Escape, Bounce, CBN
CBS, Laff, Escape
The CW, Laff, Escape
The CW, Laff, Escape
The CW, Laff, Escape
MNTV, Laff, Cozi TV
Grit, Bounce, Escape
MNTV
Escape, Laff, Bounce
MeTV, Laff, Escape
Laff, Escape, Cozi TV
Grit, Bounce
Laff, Escape, Cozi TV
Grit, Bounce, ION
Laff, Escape, Cozi TV
Grit, Bounce
NBC, Laff, Escape
NBC, ABC
MNTV, ABC, Escape
FOX
Telemundo, Escape, ION
Grit, Laff, Bounce
Status(2)
O&O
LSA(5)
O&O
O&O
O&O
O&O
O&O
LSA(9)
O&O
O&O
LSA(13)
O&O
LSA(8)
LSA(8)
O&O
O&O
O&O
O&O
O&O
O&O
LSA(11)
O&O
O&O
O&O
O&O
O&O
O&O
LSA(5)
LSA(5)
O&O
LSA(5)
O&O
LSA(5)
O&O
LSA(11)
O&O
O&O
LSA(7)
O&O
LSA(5)
O&O
O&O
O&O
O&O
O&O
LSA(5)
LSA(5)
O&O
O&O
O&O
LSA(5)
O&O
LSA(5)
O&O
LSA(5)
O&O
O&O
O&O
O&O
O&O
LSA(5)
FCC License
Expiration
Date(4)
8/1/2021
8/1/2021
8/1/2021
4/1/2021
8/1/2023
12/1/2020
4/1/2023
10/1/2021
10/1/2021
12/1/2021
12/1/2021
8/1/2022
8/1/2022
8/1/2022
4/1/2022
4/1/2022
4/1/2022
6/2/2025
12/1/2022
12/1/2022
10/1/2021
10/1/2021
4/2/2025
12/1/2021
12/1/2021
8/1/2022
8/1/2022
8/1/2022
6/1/2021
6/1/2021
12/1/2021
12/1/2021
6/1/2022
6/1/2022
8/1/2022
8/1/2022
8/1/2022
8/1/2022
4/1/2022
4/1/2022
4/1/2022
4/1/2022
(4)
8/1/2022
8/1/2022
2/1/2022
2/1/2021
8/1/2023
8/1/2023
2/1/2022
2/1/2022
8/1/2021
8/1/2021
6/1/2023
6/1/2023
10/1/2020
10/1/2020
8/1/2022
8/1/2022
11
Market
Rank(1)
167
Market
Billings, MT
168
169
Hattiesburg, MS
Utica, NY
Clarksburg, WV
Rapid City, SD
Dothan, AL
Elmira, NY
Jackson, TN
170
171
173
176
177
178 Watertown, NY
179
Alexandria, LA
182 Marquette, MI
187
Grand Junction, CO
196
San Angelo, TX
Full
Power
Stations
KSVI
KHMT
WHLT
WFXV
WUTR
WBOY
KCLO
WDHN
WETM
WJKT
WWTI
WNTZ
WJMN
KREX
KREY(14)
KFQX
KLST
KSAN
Primary
Affiliation
ABC
FOX
CBS
FOX
ABC
NBC
CBS
ABC
NBC
FOX
ABC
FOX
CBS
CBS
CBS
FOX
CBS
NBC
Low Power Stations /
Multicast Channels
KSVI-D2, D3
KHMT-D2, D3, D4
WHLT-D2, D3, D4
WFXV-D2, D3
WUTR-D2, D3, D4
WPNY-LP
WBOY-D2, D3, D4
KCLO-D2, D3, D4
WDHN-D2, D3, D4
WETM-D2, D3, D4
WJKT-D2, D3, D4
WWTI-D2, D3, D4
WNTZ-D2, D3, D4
WJMN-D2, D3, D4
KREX-D2, D3, D4
KREY-D2, D3, D4
KFQX-D2, D3, D4
KGJT-CD
KLST-D2, D3
KSAN-D2, D3, D4
Other
Affiliation
Escape, Bounce
Grit, Laff, ION
The CW, ION, Escape
Escape, Laff
MNTV, Grit, Bounce
MNTV
ABC, Escape, Laff
The CW, ION, Escape
Escape, Laff, Cozi TV
IND, Laff, Escape
Escape, Laff, Grit
The CW, Laff, Escape
Bounce, Escape, Laff
Escape, Laff, Bounce
Laff, MNTV, Bounce
CBS, Escape, Grit
CBS, Escape, Grit
MNTV
Escape, Grit
Laff, Bounce, ION
FCC License
Expiration
Date(4)
4/1/2022
4/1/2022
6/1/2021
6/1/2023
6/1/2023
6/1/2023
10/1/2020
4/1/2022
4/1/2021
6/1/2023
8/1/2021
6/1/2023
6/1/2021
10/1/2021
4/1/2022
4/1/2022
4/1/2022
4/1/2022
8/1/2022
8/1/2022
Status(2)
O&O
LSA(5)
O&O
O&O
LSA(5)
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
O&O
LSA(5)
O&O
O&O
LSA(5)
(1) Market rank refers to ranking the size of the DMA in which the station is located in relation to other DMAs. Source: Investing in Television Market
(2)
(3)
(4)
Report 2018 4th Edition, as published by BIA Financial Network, Inc.
O&O refers to stations that we own and operate. LSA, or local service agreement, is the general term we use to refer to a contract under which we
provide services utilizing our employees to a station owned and operated by an independent third-party. Local service agreements include TBAs,
SSAs, JSAs, LMAs and outsourcing agreements. For further information regarding the LSAs to which we are a party, see Note 2 to our Consolidated
Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K.
Although WDVM is located within the Washington, D.C. DMA, its signal does not reach the entire Washington, D.C. metropolitan area. WDVM
serves the Hagerstown, MD sub-market within the DMA. WDVM is the only commercial station licensed in the city of Hagerstown.
Application for renewal of license was submitted timely to the FCC. Under the FCC’s rules, the license expiration date is automatically extended
pending FCC review of and action on the renewal application.
These stations are owned by Mission.
KNVA is owned by 54 Broadcasting, a subsidiary of Vaughan Media LLC (“Vaughan”).
These stations are owned by Marshall.
These stations are owned by White Knight Broadcasting (“White Knight”).
These stations are owned by Shield.
(5)
(6)
(7)
(8)
(9)
(10) These stations are owned by Tamer Media, LLC (“Tamer”).
(11) These stations are owned by Vaughan.
(12) WNAC is owned by WNAC, LLC.
(13) WYZZ is owned by Cunningham Broadcasting Corporation.
(14) KREY operate as satellite stations of KREX.
(15) KXMB and KXMD operate as satellite stations of KXMC.
(16) WEUX operates as a satellite station of WLAX.
(17) On July 15, 2018, we entered into a definitive agreement to acquire WHDF’s assets and began providing programming and sales and other services to
the station under a TBA. On November 9, 2018, we completed the acquisition of WHDF and terminated the TBA. Refer to Item 1, “Business–Recent
Acquisitions” for additional information.
(18) On August 1, 2018, we entered into a definitive agreement to acquire KRBK’s assets and began providing programming and sales and other services to
the station under a TBA. On November 1, 2018, we completed the acquisition of KRBK and terminated the TBA. Refer to Item 1, “Business–Recent
Acquisitions” for additional information.
(19) On November 1, 2018, we entered into a definitive agreement to acquire the FCC license, certain transmission equipment and network affiliation
agreement of KHII, including its satellite stations KGMV and KGMD. On January 28, 2019, we completed the acquisition. We provided programming
and sales and other services to KHII under a TBA from November 1, 2018 until the completion of our acquisition. Refer to Item 1, “Business–Recent
Acquisitions” for additional information.
(20) KREZ and KBIM operate as satellite stations of KRQE.
(21) KHAW and KAII operate as satellite stations of KHON.
(22) KSNC, KSNG and KSNK operate as satellite stations of KSNW.
(23) KDLO and KPLO operate as satellite stations of KELO.
(24)
Pursuant to the FCC’s incentive auction, these stations ceased broadcasting on their former channels and implemented channel sharing arrangements
with another Company station in the same market.
Pursuant to the FCC’s incentive auction, stations KRON and WNCN will move to VHF channels and must vacate their current channels by September
2019 and May 2020, respectively.
(25)
12
Industry Background
Commercial television broadcasting began in the United States on a regular basis in the 1940s. A limited number of channels are
available for over-the-air broadcasting in any one geographic area and a license to operate a television station must be granted by the
FCC. All television stations in the country are grouped by The Nielsen Company, LLC, a national audience measuring service, into
210 generally recognized television markets, known as DMAs, that are ranked in size according to various metrics based upon actual
or potential audience. Each DMA is an exclusive geographic area consisting of all counties in which the home-market commercial
stations receive the greatest percentage of total viewing hours. Nielsen publishes data on estimated audiences for the television
stations in each DMA on a quarterly basis. The estimates are expressed in terms of a “rating,” which is a station’s percentage of the
total potential audience in the market, or a “share,” which is the station’s percentage of the audience actually watching television. A
station’s rating in the market can be a factor in determining advertising rates.
Most television stations are affiliated with networks and receive a significant part of their programming, including prime-time
hours, from networks. Whether or not a station is affiliated with one of the four major networks (NBC, CBS, FOX or ABC) has a
significant impact on the composition of the station’s revenue, expenses and operations. Network programming is provided to the
affiliate by the network in exchange for the payment to the network of affiliation fees and the network’s retention of a substantial
majority of the advertising time during network programs. The network then sells this advertising time and retains the revenue. The
affiliate retains the revenue from the remaining advertising time it sells during network programs and from advertising time it sells
during non-network programs.
Broadcast television stations compete for advertising revenue primarily with other commercial broadcast television stations,
cable and satellite television systems, OTTDs, Google, Facebook and other online media, newspapers and radio stations serving the
same market. Non-commercial, religious and Spanish-language broadcasting stations in many markets also compete with commercial
stations for viewers. In addition, the Internet and other leisure activities may draw viewers away from commercial television stations.
Advertising Sales
General
Television station revenue is substantially derived from the sale of local and national advertising. All network-affiliated stations
are required to carry advertising sold by their networks which reduces the amount of advertising time available for sale by stations.
Our stations sell the remaining advertising to be inserted in network programming and the advertising in non-network programming,
retaining all of the revenue received from these sales. A national syndicated program distributor will often retain a portion of the
available advertising time for programming it supplies in exchange for no fees or reduced fees charged to stations for such
programming. These programming arrangements are referred to as barter programming.
Advertisers wishing to reach a national audience usually purchase time directly from the networks or advertise nationwide on a
case-by-case basis. National advertisers who wish to reach a particular region or local audience often buy advertising time directly
from local stations through national advertising sales representative firms. Local businesses purchase advertising time directly from
the station’s local sales staff.
Advertising rates are based upon a number of factors, including:
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
a program’s popularity among the viewers that an advertiser wishes to target;
the number of advertisers competing for the available time;
the size and the demographic composition of the market served by the station;
the availability of alternative advertising media in the market;
the effectiveness of the station’s sales force;
development of projects, features and programs that tie advertiser messages to programming; and
the level of spending commitment made by the advertiser.
Advertising rates are also determined by a station’s overall ability to attract viewers in its market area, as well as the station’s
ability to attract viewers among particular demographic groups that an advertiser may be targeting. Advertising revenue is positively
affected by strong local economies. Conversely, declines in advertising budgets of advertisers, particularly in recessionary periods,
adversely affect the broadcast industry and, as a result, may contribute to a decrease in the revenue of broadcast television stations.
13
Seasonality
Advertising revenue is positively affected by national and regional political election campaigns, and certain events such as the
Olympic Games or the Super Bowl. Stations’ advertising revenue is generally highest in the second and fourth quarters of each year,
due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to, and including, the
holiday season. In addition, advertising revenue is generally higher during even-numbered years when state, congressional and
presidential elections occur and advertising is aired during the Olympic Games.
Local Sales
Local advertising time is sold by each station’s local sales staff who call upon advertising agencies and local businesses, which
typically include car dealerships, retail stores and restaurants. Compared to revenue from national advertising accounts, revenue from
local advertising is generally more stable and more predictable. We seek to attract new advertisers to our television stations and
websites and to increase the amount of advertising time sold to existing local advertisers by relying on experienced local sales forces
with strong community ties, producing news and other programming with local advertising appeal and sponsoring or co-promoting
local events and activities. We place a strong emphasis on the experience of our local sales staff and maintain an on-going training
program for sales personnel.
National Sales
National advertising time is sold through national sales representative firms which call upon advertising agencies, whose clients
typically include automobile manufacturers and dealer groups, telecommunications companies, fast food franchisers and national
retailers (some of which may advertise locally).
Compensation for Retransmission Consent
We receive compensation from cable, satellite and other MVPDs and OTTDs in return for our consent to the retransmission of
the signals of our television stations. The revenues primarily represent payments from the MVPDs and OTTDs and are typically based
on the number of subscribers they have. Our successful negotiations with these distributors have created agreements that now produce
meaningful sustainable revenue streams.
Network Affiliations
Except for WDVM (independent station), all of the full power television stations that we own and operate, program or provide
sales and other services to as of December 31, 2018 are affiliated with a network pursuant to an affiliation agreement. The agreements
with ABC, FOX, NBC and CBS are the most significant to our operations. The terms of these agreements expire as discussed below:
Network
Affiliations
ABC
FOX
NBC
CBS
Expiration Date
30 agreements expire in December 2022.
Of the 32 agreements, one expires in June 2019, 30 expire in December 2019 and one(1) expires in December 2020.
Of the 33 agreements, 18 expire in December 2019 and 15 expire in December 2020.
Of the 46 agreements, 18 expire in in August 2019, one expires in December 2019, one expires in February 2020, 10
expire in June 2020, one expires in January 2021, two expire in June 2021 and 13 expire in December 2021.
(1) The affiliation agreement is owned by a station to which we provide sales and other services. We do not consolidate this station in our financial
statements due to lack of a controlling financial interest.
Each affiliation agreement provides the affiliated station with the right to broadcast all programs transmitted by the network
with which it is affiliated. In exchange, the network receives affiliation fees and has the right to sell a substantial majority of the
advertising time during these broadcasts. We expect the network affiliation agreements listed above to be renewed upon expiration.
14
Competition
Competition in the television industry takes place on several levels: competition for audience, competition for programming and
competition for advertising.
Audience. We compete for audience share specifically on the basis of program popularity. The popularity of a station’s
programming has a direct effect on the advertising rates it can charge its advertisers. A portion of the daily programming on the
stations that we own or provide services to is supplied by the network with which each station is affiliated. In those periods, the
stations are dependent upon the performance of the network programs in attracting viewers. Stations program non-network time
periods with a combination of self-produced news, public affairs and other entertainment programming, including movies and
syndicated programs. The major television networks have also begun to provide their programming directly to the consumer via
portable digital devices, such as tablets and cell phones, which present an additional source of competition for television broadcaster
audience share. Other sources of competition for audience include home entertainment systems (such as DVDs and DVRs), video-on-
demand and pay-per-view, the Internet (including network distribution of programming through websites and mobile platforms) and
gaming devices.
Although the commercial television broadcast industry historically has been dominated by the ABC, NBC, CBS and FOX
television networks, other newer television networks and the growth in popularity of subscription systems, such as local cable and
direct broadcast satellite (“DBS”) systems and video streaming services, which air exclusive programming not otherwise available in a
market, have become significant competitors for the over-the-air television audience.
Programming. Competition for programming involves negotiating with national program distributors or syndicators that sell
first-run and rerun packages of programming. Stations compete against in-market broadcast station operators for exclusive access to
off-network reruns (such as Two and a Half Men) and first-run product (such as Entertainment Tonight) in their respective markets.
Cable systems generally do not compete with local stations for programming, although various national cable networks from time to
time have acquired programs that would have otherwise been offered to local television stations. Warner Media, LLC, Comcast
Corporation, Viacom Inc., CBS Corporation, The News Corporation Limited and the Walt Disney Company each owns a television
network and multiple cable networks and also owns or controls major production studios, which are the primary sources of
programming for the networks. It is uncertain whether in the future such programming, which is generally subject to short-term
agreements between the studios and the networks, will be moved from or to the networks. Television broadcasters also compete for
non-network programming unique to the markets they serve. As such, stations strive to provide exclusive news stories and unique
features such as investigative reporting and coverage of community events and to secure broadcast rights for regional and local
sporting events.
Advertising. Stations compete for advertising revenue with other television stations in their respective markets and other
advertising media such as newspapers, radio stations, magazines, outdoor advertising, transit advertising, yellow page directories,
direct mail, MVPDs, OTTDs and online media (e.g. Google, Facebook, etc.). Competition for advertising dollars in the broadcasting
industry occurs primarily within individual markets. Generally, a television broadcast station in a particular market does not compete
with stations in other market areas.
The broadcasting industry is continually faced with technological change and innovation which increase the popularity of
competing entertainment and communications media. Further advances in technology may increase competition for household
audiences and advertisers. An increase in the popularity of OTTDs may result in popular product offerings that do not include
television broadcast stations. The increased use of digital technology by MVPDs, along with video compression techniques, will
reduce the bandwidth required for television signal transmission. These technological developments are applicable to all video
delivery systems, including over-the-air broadcasting, and have the potential to provide vastly expanded programming to highly
targeted audiences. Reductions in the cost of creating additional channel capacity could lower entry barriers for new channels and
encourage the development of increasingly specialized “niche” programming. This ability to reach very narrowly defined audiences is
expected to alter the competitive dynamics for advertising expenditures. We are unable to predict the effect that these or other
technological changes will have on the broadcast television industry or on the future results of our operations or the operations of the
stations to which we provide services.
15
Federal Regulation
Television broadcasting is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the
“Communications Act”). The following is a brief discussion of certain (but not all) provisions of the Communications Act and the
FCC’s regulations and policies that affect the business operations of television broadcast stations. Over the years, the U.S. Congress
and the FCC have added, amended and deleted statutory and regulatory requirements to which station owners are subject. Some of
these changes have a minimal business impact whereas others may significantly affect the business or operation of individual stations
or the broadcast industry as a whole. For more information about the nature and extent of FCC regulation of television broadcast
stations, you should refer to the Communications Act and the FCC’s rules, case precedent, public notices and policies.
License Grant and Renewal. The Communications Act prohibits the operation of broadcast stations except under licenses issued
by the FCC. Television broadcast licenses are granted for a maximum term of eight years and are subject to renewal upon application
to the FCC. The FCC is required to grant an application for license renewal if during the preceding term the station served the public
interest, the licensee did not commit any serious violations of the Communications Act or the FCC’s rules, and the licensee committed
no other violations of the Communications Act or the FCC’s rules which, taken together, would constitute a pattern of abuse. A
majority of renewal applications are routinely granted under this standard. If a licensee fails to meet this standard the FCC may still
grant renewal on terms and conditions that it deems appropriate, including a monetary forfeiture or renewal for a term less than the
normal eight-year period.
After a renewal application is filed, interested parties, including members of the public, may file petitions to deny the
application, to which the licensee/renewal applicant is entitled to respond. After reviewing the pleadings, if the FCC determines that
there is a substantial and material question of fact whether grant of the renewal application would serve the public interest, the FCC is
required to hold a hearing on the issues presented. If, after the hearing, the FCC determines that the renewal applicant has met the
renewal standard, the FCC will grant the renewal application. If the licensee/renewal applicant fails to meet the renewal standard or
show that there are mitigating factors entitling it to renewal subject to appropriate sanctions, the FCC can deny the renewal
application. In the vast majority of cases where a petition to deny is filed against a renewal application, the FCC ultimately grants the
renewal without a hearing. No competing application for authority to operate a station and replace the incumbent licensee may be filed
against a renewal application.
In addition to considering rule violations in connection with a license renewal application, the FCC may sanction a station
licensee for failing to observe FCC rules and policies during the license term, including the imposition of a monetary forfeiture.
Under the Communications Act, the term of a broadcast license is automatically extended during the pendency of the FCC’s
processing of a timely renewal application.
Station Transfer. The Communications Act prohibits the assignment or the transfer of control of a broadcast license without
prior FCC approval.
Ownership Restrictions. The Communications Act limits the extent of non-U.S. ownership of companies that own U.S.
broadcast stations. Under this restriction, the holder of a U.S. broadcast license may have no more than 20% non-U.S. ownership (by
vote and by equity). The Communications Act further prohibits more than 25% indirect foreign ownership or control of a licensee
through a parent company unless the FCC determines the public interest will not be served by enforcement of such restriction. The
FCC has interpreted this provision of the Communications Act to require an affirmative public interest finding before indirect foreign
ownership of a broadcast licensee may exceed 25%. The FCC will entertain and authorize, on a case-by-case basis and upon a
sufficient public interest showing, proposals to exceed the 25% indirect foreign ownership limit in broadcast licensees. In September
2016, the FCC adopted rules to simplify and streamline the process for requesting authority to exceed the 25% indirect foreign
ownership limit and reformed the methodology that publicly traded broadcasters may use to assess their compliance with the foreign
ownership restrictions.
The FCC also has rules which establish limits on the ownership of broadcast stations. These ownership limits apply to
attributable interests in a station licensee held by an individual, corporation, partnership or other entity. In the case of corporations,
officers, directors and voting stock interests of 5% or more (20% or more in the case of certain passive investors, such as insurance
companies and bank trust departments) are considered attributable interests. For partnerships, all general partners and non-insulated
limited partners are attributable. Limited liability companies are treated the same as partnerships. The FCC also considers attributable
the holder of more than 33% of a licensee’s total assets (defined as total debt plus total equity), if that person or entity also provides
over 15% of the station’s total weekly broadcast programming or has an attributable interest in another media entity in the same
market which is subject to the FCC’s ownership rules. If a shareholder of Nexstar holds a voting stock interest of 5% or more (20% or
more in the case of certain passive investors, such as insurance companies and bank trust departments), we must report that
shareholder, its parent entities, and attributable individuals and entities of both, as attributable interest holders in Nexstar.
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The FCC is required to review its media ownership rules every four years to eliminate those rules it finds no longer serve the
“public interest, convenience and necessity.” In August 2016, the FCC adopted a Second Report and Order (the “2016 Ownership
Order”) concluding the agency’s 2010 and 2014 quadrennial reviews. The 2016 Ownership Order (1) retained the then-existing local
television ownership rule and radio/television cross-ownership rule with minor technical modifications, (2) extended the ban on
common ownership of two top-four television stations in a market to network affiliation swaps, (3) retained the then-existing ban on
newspaper/broadcast cross-ownership in local markets while considering waivers and providing an exception for failed or failing
entities, (4) retained the dual network rule, (5) made JSA relationships attributable interests and (6) defined a category of sharing
agreements designated as SSAs between stations and required public disclosure of those SSAs (while not considering them
attributable). Nexstar and other parties filed petitions seeking reconsideration of various aspects of the 2016 Ownership Order. On
November 16, 2017, the FCC adopted an order (the “Reconsideration Order”) addressing the petitions for reconsideration. The
Reconsideration Order (1) eliminated the rules prohibiting newspaper/broadcast cross-ownership and limiting television/radio cross-
ownership, (2) eliminated the requirement that eight or more independently-owned television stations remain in a market for common
ownership of two television stations in the market to be permissible, (3) retained the general prohibition on common ownership of two
“top four” stations in a local market but provided for case-by-case review, (4) eliminated the television JSA attribution rule, and (5)
retained the SSA definition and disclosure requirement for television stations. These rule modifications took effect on February 7,
2018, when the U.S. Court of Appeals for the Third Circuit (the “Third Circuit”) denied a mandamus petition which had sought to stay
their effectiveness. The Reconsideration Order’s rule modifications (a) could allow Nexstar to acquire a second television station in
certain markets where ownership of two television stations was not previously permitted, (b) allow Nexstar to acquire television
stations without regard to any interests of its officers, directors or attributable shareholders in same-market radio stations or
newspapers, (c) permit Nexstar’s existing JSAs with independently-owned television stations to remain in effect indefinitely, and (d)
could enable Nexstar to enter into new JSAs without violating FCC regulations. The Reconsideration Order remains subject to
appeals before the Third Circuit.
In December 2018, the FCC initiated its 2018 quadrennial review with the issuance of a Notice of Proposed Rulemaking.
Among other things, the FCC seeks comment on all aspects of the local television ownership rule’s implementation and whether the
current version of the rule remains necessary in the public interest. Comments and reply comments in the 2018 quadrennial review are
due in the first and second quarters of 2019.
Local Television Ownership (Duopoly Rule). Under the current local television ownership, or “duopoly,” rule, a single entity is
allowed to own or have attributable interests in two television stations in a market if (1) the two stations do not have overlapping
service areas, or (2) one of the combining stations is not ranked among the top four stations in the DMA, although the FCC will
consider showings that this “top four” prohibition should not apply in a given case. The duopoly rule also allows the FCC to consider
waivers to permit the ownership of a second station, where otherwise prohibited, where the second station has failed or is failing or
unbuilt. The FCC reconfirmed that the duopoly rule continues to serve the public interest in the 2016 Ownership Order, which
generally retained the rule in the form in which it had existed since 1999. In its Reconsideration Order, however, the FCC modified
the duopoly rule to (1) eliminate the “eight voices” test (whereby the rule had previously required, in addition to the “top four”
prohibition, that at least eight independently owned television stations remain in a market after a proposed combination) and (2)
permit case-by-case review of proposed “top four” combinations (while generally retaining the “top four” prohibition). These
modifications took effect on February 7, 2018. The modifications could allow Nexstar to acquire a second television station in certain
markets where ownership of two television stations was not previously permitted. The November 2017 reconsideration order remains
subject to federal court appeals.
The FCC attributes toward the local television ownership limits another in-market station when one station owner programs that
station pursuant to a TBA or LMA, if the programmer provides more than 15% of the second station’s weekly broadcast
programming. However, LMAs entered into prior to November 5, 1996 are exempt attributable interests until the FCC determines
otherwise. This “grandfathering,” when reviewed by the FCC, is subject to possible extension or termination.
In its 2016 Ownership Order, the FCC reinstated a rule that attributed another in-market station toward the local television
ownership limits when one station owner sells more than 15% of the second station’s weekly advertising inventory under a JSA (this
rule had been previously adopted but was vacated by the Third Circuit). Parties to JSAs entered into prior to March 31, 2014 were
permitted to continue to operate under these JSAs until September 30, 2025. However, in the Reconsideration Order, the FCC
eliminated the JSA attribution rule in its entirety. This elimination took effect on February 7, 2018. As a result of this rule
elimination, Nexstar’s existing JSAs with independently-owned television stations may remain in effect indefinitely, and Nexstar may
enter into new JSAs without violating FCC regulations. The November 2017 reconsideration order remains subject to federal court
appeals.
In certain markets, the Company owns and operates both full-power and low-power television broadcast stations. The FCC’s
duopoly rule and policies regarding ownership of television stations in the same market apply only to full-power television stations
and not low-power television stations.
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In a number of markets, the Company owns two stations in compliance with the duopoly rule. We also are permitted to own two
or more stations in various other markets pursuant to waivers under the FCC’s rules permitting common ownership of a “satellite”
television station in a market where a licensee also owns the “primary” station. Additionally, we are permitted to own two stations in
the Quad Cities, Illinois/Iowa, Greenville-Spartanburg, South Carolina-Asheville, North Carolina and Hartford-New Haven,
Connecticut markets pursuant to waivers allowing ownership of a second station where that station is “failing.”
In all of the markets where we have entered into local service agreements, except for five, we provide programming comprising
less than 15% of the second station’s programming. In the five markets where we provide more programming to the second station—
WFXP in Erie, Pennsylvania, KHMT in Billings, Montana, KFQX in Grand Junction, Colorado, KNVA in Austin, Texas and WNAC-
TV in Providence, Rhode Island—the LMAs were entered into prior to November 5, 1996 and are considered grandfathered.
Therefore, we may continue to program these stations under the terms of these agreements until the FCC determines otherwise.
With respect to our other local service agreements, a previous FCC rule made a majority of our JSAs attributable, but this rule
was eliminated effective February 7, 2018. As a result, our existing JSAs are no longer attributable and may remain in effect
indefinitely. Under rules in effect both prior to and after February 7, 2018, our SSAs with independently owned same-market stations
are non-attributable. We may therefore retain our existing SSAs in effect indefinitely, but we must disclose them, and the FCC may in
the future consider regulations with respect to such agreements.
National Television Ownership. There is no limit on the number of television stations which a party may own. However, the
FCC’s rules limit the percentage of U.S. television households which a party may reach through its attributable interests in television
stations to 39%. This rule originally provided that when calculating a party’s nationwide aggregate audience coverage, the ownership
of an ultra-high frequency (“UHF”) station would be counted as 50% of a market’s percentage of total national audience. In August
2016, the FCC adopted an order eliminating this “UHF discount.” On reconsideration, however, the FCC reinstated the discount,
which took effect once again in June 2017. A petition for review of the FCC’s order reinstating the UHF discount remains pending in
a federal appeals court, and Nexstar has intervened in the litigation in support of the FCC. In December 2017, the FCC initiated a
proceeding to broadly reexamine its national television ownership rule, including the percentage reach cap and the UHF discount.
Comments and reply comments in this proceeding were filed in the first and second quarters of 2018.
The stations that Nexstar owns have a combined national audience reach of 38.8% of television households without the UHF
discount.
Radio/Television Cross-Ownership Rule (One-to-a-Market Rule). An FCC rule formerly limited the extent to which a party
could hold attributable interests in both television stations and radio stations in the same market. In its November 2017
Reconsideration Order, however, the FCC eliminated the radio/television cross-ownership rule in its entirety. This elimination took
effect on February 7, 2018. The Reconsideration Order remains subject to federal court appeals.
Local Television/Newspaper Cross-Ownership Rule. An FCC rule formerly prohibited a party from having an attributable
interest in a television station and a daily newspaper in the same market. In its November 2017 Reconsideration Order, however, the
FCC eliminated the newspaper/broadcast cross-ownership rule in its entirety. This elimination took effect on February 7, 2018. The
Reconsideration Order remains subject to federal court appeals.
Local Television/Cable Cross-Ownership. There is no FCC rule prohibiting common ownership of a cable television system and
a television broadcast station in the same area.
MVPD Carriage of Local Television Signals. Broadcasters may obtain carriage of their stations’ signals on cable, satellite and
other MVPDs through either mandatory carriage or through “retransmission consent.” Every three years all stations must formally
elect either mandatory carriage (“must-carry” for cable distributors and “carry one-carry all” for satellite television providers) or
retransmission consent. The next election must be made by October 1, 2020 and will be effective January 1, 2021. Must-carry
elections require that the MVPD carry one station programming stream and related data in the station’s local market. However,
MVPDs may decline a must-carry election in certain circumstances. MVPDs do not pay a fee to stations that elect mandatory carriage.
A broadcaster that elects retransmission consent waives its mandatory carriage rights, and the broadcaster and the MVPD must
negotiate in good faith for carriage of the station’s signal. Negotiated terms may include channel position, service tier carriage,
carriage of multiple program streams, compensation and other consideration. If a broadcaster elects to negotiate retransmission terms,
it is possible that the broadcaster and the MVPD will not reach agreement and that the MVPD will not carry the station’s signal.
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MVPD operators are actively seeking to change the regulations under which retransmission consent is negotiated before both
the U.S. Congress and the FCC in order to increase their bargaining leverage with television stations. 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 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 in certain
circumstances.
In March 2014, the FCC amended its rules governing “good faith” retransmission consent negotiations to provide that it is a per
se violation of the statutory duty to negotiate in good faith for a television broadcast station that is ranked among the top-four stations
in a market (as measured by audience share) to negotiate retransmission consent jointly with another top-four station in the same
market if the stations are not commonly owned. On December 5, 2014, the U.S. Congress extended the joint negotiation prohibition
to all non-commonly owned television stations in a market. Under this rule and the subsequent legislation, same-market stations may
not (1) delegate authority to negotiate or approve a retransmission consent agreement to another non-commonly owned station located
in the same DMA or to a third-party that negotiates on behalf of another non-commonly owned station in the same DMA; or (2) if not
commonly owned, facilitate or agree to facilitate coordinated negotiation of retransmission consent terms between themselves,
including through the sharing of information. Accordingly, the VIEs with which we have sharing agreements must separately
negotiate their respective retransmission consent agreements with MVPDs. Concurrently with its adoption of the prohibition on
certain joint retransmission consent negotiations, the FCC also adopted a further notice of proposed rulemaking which seeks additional
comment on the elimination or modification of the network non-duplication and syndicated exclusivity rules. Comments and reply
comments on the further notice were filed in 2014.
In addition, in the STELA Reauthorization Act of 2014, which was adopted and signed into law in December 2014, the U.S.
Congress directed the FCC to commence a rulemaking to “review its totality of the circumstances test for good faith [retransmission
consent] negotiations.” The FCC commenced this proceeding in September 2015, and comments and reply comments were filed in
2015 and 2016. In July 2016, the then-Chairman of the FCC publicly announced that the agency would not adopt additional rules in
this proceeding. However, the proceeding remains open.
The FCC’s rules also govern which local television signals a satellite subscriber may receive. The U.S. Congress and the FCC
have also imposed certain requirements relating to satellite distribution of local television signals to “unserved” households that do not
receive a useable signal from a local network-affiliated station and to cable and satellite carriage of out-of-market signals.
Certain online video distributors and other OTTDs have begun streaming broadcast programming over the Internet. In June
2014, the U.S. Supreme Court held that an OTTD’s retransmissions of broadcast television signals without the consent of the
broadcast station violate copyright holders’ exclusive right to perform their works publicly as provided under the Copyright Act of
1976, as amended (the “Copyright Act”). In December 2014, the FCC issued a Notice of Proposed Rulemaking proposing to interpret
the term “MVPD” to encompass OTTDs that make available for purchase multiple streams of video programming distributed at a
prescheduled time and seeking comment on the effects of applying MVPD rules to such OTTDs. Comments and reply comments
were filed in 2015. Although the FCC has not classified OTTDs as MVPDs to date, several OTTDs have signed agreements for
retransmission of local stations within their markets, and others are actively seeking to negotiate such agreements.
The Company has elected to exercise retransmission consent rights for all of its stations where it has legal rights to do so. The
Company has negotiated retransmission consent agreements with the majority of MVPDs serving its markets to carry the stations’
signals and, where permitted by its network affiliation agreements, will negotiate agreements with OTTDs.
Employees
As of December 31, 2018, the Company had a total of 8,959 employees, comprised of 8,249 full-time and 710 part-time
employees. As of December 31, 2018, 632 of our employees were covered by collective bargaining agreements. We believe that our
employee relations are satisfactory, and we have not experienced any work stoppages at any of our facilities. However, we cannot
assure you that our collective bargaining agreements will be renewed in the future, or that we will not experience a prolonged labor
dispute, which could have a material adverse effect on our business, financial condition or results of operations.
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Legal Proceedings
From time to time, we are involved in litigation that arises from the ordinary operations of business, such as contractual or
employment disputes or other general actions. In the event of an adverse outcome of these proceedings, we believe the resulting
liabilities would not have a material adverse effect on our financial condition or results of operations.
On March 16, 2018, a group of companies including Nexstar (the “Defendants”) received a Civil Investigative Demand from the
Antitrust Division of the DOJ regarding an investigation into the exchange of certain information related to the pacing of sales related
to the same period in the prior year among broadcast stations in some DMAs in alleged violation of federal antitrust law. Other
Defendants entered into a proposed consent decree with the DOJ on November 6, 2018. Without admitting any wrongdoing, Nexstar
agreed to settle the matter with the DOJ on December 5, 2018. The DOJ filed an amended complaint adding Nexstar to the consent
decree on December 13, 2018. The consent decree, which settles any claims by the government of alleged violations of federal
antitrust laws in connection with the alleged information sharing, does not include any financial penalty. Pursuant to the consent
decree, we have agreed not to exchange certain non-public information with other stations operating in the same DMA except in
certain cases, to implement certain antitrust compliance measures and to monitor and report on compliance with the consent decree.
On July 30, 2018, Clay, Massey & Associates, PC filed an antitrust class action complaint in the U.S. District Court for the
Northern District of Illinois on behalf of itself and all others similarly situated against Gray Television, Inc., Hearst Communications,
Nexstar Media Group, Inc., Tegna Inc., Tribune Media Company and Sinclair Broadcast Group, Inc. The lawsuit alleges unlawful
coordination between broadcast television station owners to artificially increase prices of television spot advertisements in violation of
Section 1 of the Sherman Act (15 U.S.C. §1). Nexstar has since been named in 15 similar complaints, including ten in the Northern
District of Illinois, three in the Southern District of New York, and two in the District of Maryland. Each complaint includes similar
allegations and claims a violation of Section 1 of the Sherman Act. One, filed in the District of Maryland, also alleges violations of
state antitrust and consumer protection statutes and a claim for unjust enrichment.
On October 9, 2018, these cases were consolidated in a multi-district litigation in the District Court for the Northern District of
Illinois captioned In Re: Local TV Advertising Antitrust Litigation, No. 1:18-cv-06785 (“MDL Litigation”). On January 23, 2019, the
Court in the MDL Litigation appointed plaintiffs’ lead and liaison counsel. The MDL Litigation is ongoing. Nexstar denies the
allegations against it and will defend its advertising practices as necessary.
Available Information
We file annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains a
website that contains reports, proxy and information statements and other information regarding issuers, including us, that file
electronically with the SEC. The address for the SEC’s website is http://www.sec.gov. Due to the availability of our filings on the
SEC website, we do not currently make available our filings on our Internet website. Upon request, we will provide free copies of our
annual reports on Form 10-K, quarterly reports on Form 10-Q and any other filings with the SEC. Requests can be sent to Nexstar
Media Group, Inc., Attn: Investor Relations, 545 E. John Carpenter Freeway, Suite 700, Irving, TX 75062. Additional information
about us, our stations and the stations we program or provide services to can be found on our website at http://www.nexstar.tv. We do
not incorporate the information contained on or accessible through our corporate web site into this Annual Report on Form 10-K.
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Item 1A. Risk Factors
You should carefully consider the risks described below and all of the information contained in this document. The risks and
uncertainties described below are not the only risks and uncertainties that the Company faces. Additional risks and uncertainties not
presently known to the Company or that the Company currently deems immaterial may also impair the Company’s business
operations. If any of those risks occur, the Company’s business, financial condition and results of operations could suffer. The risks
discussed below also include forward-looking statements, and the Company’s actual results may differ substantially from those
discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” for further
information.
Risks Related to Our Operations
General trends in the television industry could adversely affect demand for television advertising as consumers migrate to
alternative media, including the Internet, for entertainment.
Television viewing among consumers has been negatively impacted by the increasing availability of alternative media,
including the Internet. In recent years, demand for television advertising has been declining and demand for advertising in alternative
media has been increasing, and we expect this trend to continue.
The networks have begun streaming some of their programming on the Internet and other distribution platforms simultaneously
with, or in close proximity to, network programming broadcast on local television stations, including those we own or provide services
to. These and other practices by the networks dilute the exclusivity and value of network programming originally broadcast by the
local stations and may adversely affect the business, financial condition and results of operations of our stations. Also, refer to “Risks
Related to Our Industry – Intense competition in the television industry and alternative forms of media could limit our growth and
profitability.”
The Company’s substantial debt could limit its ability to grow and compete.
As of December 31, 2018, the Company had $4.0 billion of debt, which represented 68.2% of the total combined capitalization.
The Company’s high level of debt could have important consequences to its business. For example, it could:
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limit the Company’s ability to borrow additional funds or obtain additional financing in the future;
limit the Company’s ability to pursue acquisition opportunities;
expose the Company to greater interest rate risk since the interest rate on borrowings under the senior secured credit
facilities is variable;
limit the Company’s flexibility to plan for and react to changes in our business and our industry; and
impair our ability to withstand a general downturn in our business and place us at a disadvantage compared to our
competitors that are less leveraged.
See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual
Obligations” for disclosure of the approximate aggregate amount of principal indebtedness scheduled to mature.
The Company could also incur additional debt in the future. The terms of the Company’s senior secured credit facilities, as well
as the indentures governing our 6.125% senior unsecured notes (“6.125% Notes”), our 5.625% senior unsecured notes (“5.625%
Notes”) and our 5.875% senior unsecured notes (“5.875% Notes”), limit, but do not prohibit the Company from incurring substantial
amounts of additional debt. To the extent the Company incurs additional debt, we would become even more susceptible to the
leverage-related risks described above.
21
The agreements governing the Company’s debt contain various covenants that limit management’s discretion in the operation
of our business.
The terms of the Company’s senior secured credit facilities and the indentures governing our 6.125% Notes, 5.625% Notes and
5.875% Notes contain various restrictive covenants customary for arrangements of these types that restrict our ability to, among other
things:
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incur additional debt and issue preferred stock;
pay dividends and make other distributions;
make investments and other restricted payments;
make acquisitions;
merge, consolidate or transfer all or substantially all of our assets;
enter into sale and leaseback transactions;
create liens;
sell assets or stock of our subsidiaries; and
enter into transactions with affiliates.
In addition, the Company’s senior secured credit facilities require us to maintain or meet certain financial ratios, including a
maximum consolidated first lien net leverage ratio. Future financing agreements may contain similar, or even more restrictive,
provisions and covenants. Because of these restrictions and covenants, management’s ability to operate our business at its discretion is
limited, and we may be unable to compete effectively, pursue acquisitions or take advantage of new business opportunities, any of
which could harm our business.
If we fail to comply with the restrictions in present or future financing agreements, a default may occur. A default could allow
creditors to accelerate the related debt as well as any other debt to which a cross-acceleration or cross-default provision applies. A
default could also allow creditors to foreclose on any collateral securing such debt.
The credit agreement governing our obligations under our senior secured credit facility contains covenants that require us to
comply with a maximum consolidated first lien net leverage ratio of 4.25 to 1.00. The covenants, which are calculated on a quarterly
basis, include the combined results of the Company. The credit agreements governing Mission’s, Marshall’s and Shield’s obligations
under their senior secured credit facilities do not contain financial covenant ratio requirements; however, they include events of
default if we do not comply with all covenants contained in the credit agreement governing our senior secured credit facility.
The Company may not be able to generate sufficient cash flow to meet its debt service requirements.
The Company’s ability to service its debt depends on its ability to generate the necessary cash flow. Generation of the necessary
cash flow is partially subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond the
Company’s control. The Company cannot assure you that its business will generate cash flow from operations, that future borrowings
will be available to the Company under its current or any replacement credit facilities, or that it will be able to complete any necessary
financings, in amounts sufficient to enable the Company to fund its operations or pay its debts and other obligations, or to fund its
liquidity needs. If the Company is not able to generate sufficient cash flow to service its debt obligations, it may need to refinance or
restructure its debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. Additional financing may not be
available in sufficient amounts, at times or on terms acceptable to the Company, or at all. If the Company is unable to meet its debt
service obligations, its lenders may determine to stop making loans to the Company, and/or the Company’s lenders or other holders of
its debt could accelerate and declare due all outstanding obligations under the respective agreements, all of which could have a
material adverse effect on the Company.
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The owners of the VIEs may make decisions regarding the operation of their respective stations that could reduce the amount
of cash we receive under our local service agreements.
As of December 31, 2018, the VIEs are each 100% owned by independent third parties. These entities owned and operated 39
full power television stations. We have entered into local service agreements with these VIEs, pursuant to which we provide services
to their stations. In return for the services we provide, we receive substantially all of the VIEs’ available cash, after satisfaction of their
operating costs and any debt obligations.
On June 28, 2018, Marshall amended its senior secured credit facility. The amendment refinanced the then outstanding principal
balances of Marshall’s Term Loan A and revolving credit facility of $48.8 million and $3.0 million, respectively. The refinancing was
funded by Marshall’s new Term Loan A of $51.8 million. The amendment also extended the maturity date of Marshall’s Term Loan A
to December 1, 2019.
On October 26, 2018, Mission refinanced its Term Loan B and revolving credit facility. The amendment extended the maturity
date of Mission’s revolving credit facility from July 19, 2022 to October 26, 2023 and reduced the applicable margin portion of the
interest rates by 25 basis points for both the Term Loan B and revolving loan.
On October 26, 2018, Shield refinanced its Term Loan A. The amendment extended the maturity date from July 19, 2022
to October 26, 2023 and reduced the applicable margin portion of the interest rate by 25 basis points.
As of December 31, 2018, Mission’s senior secured credit facility consists of a Term Loan B with an outstanding balance of
$224.6 million due January 17, 2024 and a $3.0 million revolving credit facility, of which nothing was drawn and outstanding.
Marshall’s senior secured credit facility consists of a Term Loan A with an outstanding balance of $45.4 million due December 1,
2019 and a revolving credit facility with an outstanding balance of $5.6 million, also due on December 1, 2019. Shield’s senior
secured credit facility consists of a Term Loan A with an outstanding balance of $22.6 million due October 26, 2023.
We guarantee full payment of all of the obligations incurred under the Mission, Marshall and Shield senior secured credit
facilities in the event of their default. All consolidated VIEs, exclusive of Marshall, have granted purchase options that permit Nexstar
to acquire the assets and assume the liabilities of each of those VIEs’ stations, subject to FCC consent. These purchase options are
freely exercisable or assignable by Nexstar without consent or approval by the VIEs.
We do not own the VIEs or any of their respective television stations. However, we are deemed under U.S. GAAP to have
controlling financial interests in the consolidated VIEs because of (1) the local service agreements Nexstar has with the VIEs’ stations,
(2) Nexstar’s guarantees of the obligations incurred under the Mission, Marshall and Shield senior secured credit facilities, (3) Nexstar
having power over significant activities affecting the VIEs’ economic performance, including budgeting for advertising revenue,
advertising sales and, in some cases, hiring and firing of sales force personnel and (4) purchase options granted by each VIE, exclusive
of Marshall, which permit Nexstar to acquire the assets and assume the liabilities of each of the VIEs’ stations at any time, subject to
FCC consent.
In compliance with FCC regulations, the VIEs maintain complete responsibility for and control over programming, finances and
personnel for their respective stations. As a result, the VIEs’ boards of directors and officers can make decisions with which we
disagree and which could reduce the cash flow generated by these stations and, as a consequence, the amounts we receive under our
local service agreements with the VIEs. For instance, the VIEs may decide to obtain and broadcast programming which, in our
opinion, would prove unpopular and/or would generate less advertising revenue.
The Company’s pension and other postretirement benefit plans are currently underfunded. A declining stock market and lower
interest rates could affect the value of the Company’s retirement plan assets and increase its postretirement obligations.
The Company has a funded, qualified non-contributory defined benefit retirement plan which covers certain employees and
former employees. As of December 31, 2018, these qualified retirement plans were underfunded by approximately $40.8 million. The
qualified retirement plans had $330.9 million in total net assets available to pay benefits to participants enrolled in the plans as of
December 31, 2018. The Company made no contributions in 2018 to the plan.
The Company also has non-contributory unfunded supplemental executive retirement and ERISA excess plans which
supplement the coverage of the defined benefit retirement plan to certain employees and former employees. As of December 31, 2018,
the total liability was $51.9 million. The Company also has a retiree medical savings account plan which reimburses eligible retired
employees for certain medical expenses and an unfunded plan that provides certain health and life insurance benefits to retired
employees who were hired prior to 1992. Although the Company has frozen participation and benefits under all plans, two significant
elements in determining the Company’s pension expense are the expected return on plan assets and the discount rate used in projecting
obligations. Large declines in the stock market and lower discount rates increase the Company’s expense and may necessitate higher
cash contributions to the qualified retirement plans.
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The recording of deferred tax asset valuation allowances in the future or the impact of tax law changes on such deferred tax
assets could affect our operating results.
The Company currently has significant net deferred tax assets resulting from tax credit carryforwards, net operating losses and
other deductible temporary differences that are available to reduce taxable income in future periods. Based on our assessment of the
Company’s deferred tax assets, we determined that as of December 31, 2018, based on projected future income, approximately $103.1
million of the Company’s deferred tax assets, net of valuation allowance, will more likely than not be realized in the future. Should we
determine in the future that these assets will not be realized, the Company will be required to record a valuation allowance in
connection with these deferred tax assets and the Company’s operating results would be adversely affected in the period such
determination is made. In addition, tax law changes could negatively impact the Company’s deferred tax assets.
The Company’s ability to use net operating loss carry-forwards (“NOLs”) to reduce future tax payments may be limited if
taxable income does not reach sufficient levels or there is a change in ownership of Nexstar, Mission, Marshall or certain of
our other VIEs.
At December 31, 2018, the Company had NOLs of approximately $148.6 million for U.S. federal tax purposes and $301.8
million for state tax purposes. Federal NOLs generated for years prior to 2018 expire at varying dates through 2037 and NOLs
generated in 2018 carry forward indefinitely. To the extent available, we intend to use these NOLs to reduce the corporate income tax
liability associated with our operations. Section 382 (“Section 382”) of the Internal Revenue Code of 1986, as amended (the “Code”),
generally imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has
undergone significant changes in stock ownership. In general, an ownership change, as defined by Section 382, results from a
transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the
outstanding stock of a company by certain stockholders or public groups, which are generally outside of our control.
The ability to use NOLs is also dependent upon the Company’s ability to generate taxable income. The NOLs could expire
before the Company generates sufficient taxable income to use them. To the extent the Company’s use of NOLs is significantly
limited, the Company’s income could be subject to corporate income tax earlier than it would if it were able to use NOLs, which could
have a negative effect on the Company’s financial results and operations. Changes in ownership are largely beyond the Company’s
control and the Company can give no assurance that it will continue to have realizable NOLs.
The revenue generated by stations we operate or provide services to could decline substantially if they fail to maintain or renew
their network affiliation agreements on favorable terms, or at all.
Due to the quality of the programming provided by the networks, stations that are affiliated with a network generally have
higher ratings than unaffiliated independent stations in the same market. As a result, it is important for stations to maintain their
network affiliations. Most of the stations that we operate or provide services to have network affiliation agreements. As of December
31, 2018, 30 full power television stations have primary affiliation agreements with ABC, 33 with NBC, 32 with FOX, 46 with CBS,
18 with The CW and 14 with MNTV. Each of ABC, NBC and CBS generally provides affiliated stations with up to 22 hours of prime-
time programming per week, while each of FOX, MNTV and The CW provides affiliated stations with up to 15 hours of prime-time
programming per week. In return, affiliated stations broadcast the respective network’s commercials during the network programming.
All of the network affiliation agreements of the stations that we own, operate, program or provide sales and other services to are
scheduled to expire at various times through December 2022. In order to renew certain of our affiliation agreements we may be
required to make cash payments to the network and to accept other material modifications of existing affiliation agreements. If any of
our stations cease to maintain affiliation agreements with their networks for any reason, we would need to find alternative sources of
programming, which may be less attractive to our audiences and more expensive to obtain. In addition, a loss of a specific network
affiliation for a station may affect our retransmission consent payments resulting in us receiving less retransmission consent fees.
Further, some of our network affiliation agreements are subject to earlier termination by the networks under specified circumstances.
For more information regarding these network affiliation agreements, see Item 1, “Business—Network Affiliations.”
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The loss of or material reduction in retransmission consent revenues or further change in the current retransmission consent
regulations could have an adverse effect on our business, financial condition and results of operations.
A significant portion of Nexstar’s revenue comes from its retransmission consent agreements with MPVDs (mainly cable and
satellite television providers) and OTTDs. These agreements permit the distributors to retransmit our stations’ signals to their
subscribers in exchange for the payment of compensation to us from the system operators as consideration. If we are unable to
renegotiate these agreements on favorable terms, or at all, the failure to do so could have an adverse effect on our business, financial
condition and results of operations.
Though we are typically able to renegotiate our retransmission consent agreements on favorable terms, the payments due us
under these agreements are customarily based on a price per subscriber of the applicable distributor. In recent years the subscribership
of MVPDs has declined, as the growth of direct Internet streaming of video programming to televisions and mobile devices has
incentivized consumers to “cut the cord” and discontinue their cable or satellite service subscriptions. Decreasing MVPD
subscribership leads to less revenue under our retransmission agreements, which ultimately could have an adverse effect on our
business, financial condition and results of operations. Also, refer to “Risks Related to Our Industry – Intense competition in the
television industry and alternative forms of media could limit our growth and profitability.”
Moreover, the national television broadcast networks have taken the position that they, as the owners or licensees of certain of
the programming we broadcast and provide for retransmission, are entitled to a portion of the compensation we receive from MVPDs
under our retransmission consent agreements and are requiring their network affiliation agreements with us to provide for such
payments. All of our affiliation agreements with the broadcast networks also include terms that limit our ability to grant retransmission
consent rights to traditional MVPDs as well as OTTDs, services that provide multiple video streaming channels to consumers. The
need to pay a portion of our retransmission consent revenue to our networks, and network limitations on our ability to enter into
retransmission consent agreements, could materially reduce this revenue source to the Company and could have an adverse effect on
its business, financial condition and results of operations.
In addition, MVPDs are actively seeking to change the regulations under which retransmission consent is negotiated before both
the U.S. Congress and the FCC in order to increase their bargaining leverage with television stations. On March 3, 2011, the FCC
initiated a Notice of Proposed Rulemaking to reexamine its rules (1) 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; (2) for providing advance notice to consumers in the event of dispute; and (3) to extend
certain cable-only obligations to all MVPDs. The FCC 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 in certain
circumstances.
On March 31, 2014, the FCC amended its rules governing “good faith” retransmission consent negotiations to provide that it is a
per se violation of the statutory duty to negotiate in good faith for a television broadcast station that is ranked among the top-four
stations in a market (as measured by audience share) to negotiate retransmission consent jointly with another top-four station in the
same market if the stations are not commonly owned. On December 5, 2014, the U.S. Congress extended the joint negotiation
prohibition to all non-commonly owned television stations in a market. Under this rule and the subsequent legislation, same-market
stations may not (1) delegate authority to negotiate or approve a retransmission consent agreement to another non-commonly owned
station located in the same DMA or to a third-party that negotiates on behalf of another non-commonly owned television station in the
same DMA; or (2) if not commonly owned, facilitate or agree to facilitate coordinated negotiation of retransmission consent terms
between themselves, including through the sharing of information. Accordingly, the VIEs with which we have sharing agreements
must separately negotiate their respective retransmission consent agreements with MVPDs and OTTDs.
Concurrently with its adoption of the prohibition on certain joint retransmission consent negotiations, the FCC also adopted a
further notice of proposed rulemaking which seeks additional comment on the elimination or modification of the network non-
duplication and syndicated exclusivity rules. The FCC’s prohibition on certain joint retransmission consent negotiations and its
possible elimination or modification of the network non-duplication and syndicated exclusivity protection rules may 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 FCC’s network non-duplication and syndicated exclusivity proposals, or the impact of these proposals, on its business.
In addition, in the STELA Reauthorization Act of 2014, which was adopted and signed into law in December 2014, the U.S.
Congress directed the FCC to commence a rulemaking to “review its totality of the circumstances test for good faith [retransmission
consent] negotiations.” The FCC commenced this proceeding in September 2015, and comments and reply comments were submitted
in 2015 and 2016. In July 2016, the then-Chairman of the FCC announced that the agency would not adopt additional rules in this
proceeding. However, the proceeding remains open.
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Certain online video distributors and other OTTDs have begun streaming broadcast programming over the Internet. In June
2014, the U.S. Supreme Court held that an OTTD’s retransmissions of broadcast television signals without the consent of the
broadcast station violate copyright holders’ exclusive right to perform their works publicly as provided under the Copyright Act. In
December 2014, the FCC issued a Notice of Proposed Rulemaking proposing to interpret the term “MVPD” to encompass OTTDs that
make available for purchase multiple streams of video programming distributed at a prescheduled time and seeking comment on the
effects of applying MVPD rules to such OTTDs. Comments and reply comments were filed in 2015. Although the FCC has not
classified OTTDs as MVPDs to date, several OTTDs have signed agreements for retransmission of local stations within their markets,
and others are actively seeking to negotiate such agreements. If the FCC ultimately determines that an OTTD is not an MVPD or
declines to apply certain rules governing MVPDs to OTTDs, our business and results of operations could be materially and adversely
affected.
The FCC could decide not to grant renewal of the FCC license of any of the stations we operate or provide services to which
would require that station to cease operations.
Television broadcast licenses are granted for a maximum term of eight years and are subject to renewal upon application to the
FCC. The FCC is required to grant an application for license renewal if, during the preceding term, the station served the public
interest, the licensee did not commit any serious violations of the Communications Act or the FCC’s rules, and the licensee committed
no other violations of the Communications Act or the FCC’s rules which, taken together, would constitute a pattern of abuse. A
majority of renewal applications are routinely granted under this standard. If a licensee fails to meet this standard the FCC may still
grant renewal on terms and conditions that it deems appropriate, including a monetary forfeiture or renewal for a term less than the
normal eight-year period. However, in an extreme case, the FCC may deny a station’s license renewal application, resulting in
termination of the station’s authority to broadcast. Under the Communications Act, the term of a broadcast license is automatically
extended during the pendency of the FCC’s processing of a timely renewal application. The Company expects the FCC to grant future
renewal applications for its stations in due course but cannot provide any assurances that the FCC will do so.
The loss of the services of our chief executive officer could disrupt management of our business and impair the execution of our
business strategies.
We believe that our success depends upon our ability to retain the services of Perry A. Sook, our founder and President and
Chief Executive Officer. Mr. Sook has been instrumental in determining our strategic direction and focus. The loss of Mr. Sook’s
services could adversely affect our ability to manage effectively our overall operations and successfully execute current or future
business strategies. On January 15, 2019, we extended Mr. Sook’s executive employment agreement with Nexstar until February 28,
2023, with automatic renewal for successive one-year periods.
The Company’s growth may be limited if it is unable to implement its acquisition strategy.
The Company has achieved much of its growth through acquisitions. The Company intends to continue its growth by selectively
pursuing acquisitions of television stations. The television broadcast industry is undergoing consolidation, which may reduce the
number of acquisition targets and increase the purchase price of future acquisitions. Some of the Company’s competitors may have
greater financial or management resources with which to pursue acquisition targets. Therefore, even if the Company is successful in
identifying attractive acquisition targets, it may face considerable competition and its acquisition strategy may not be successful.
FCC rules and policies may also make it more difficult for the Company to acquire additional television stations. Television
station acquisitions are subject to the approval of the FCC and, potentially, other regulatory authorities. FCC rules limit the number of
television stations a company may own and define the types of local service agreements that “count” as ownership by the party
providing the services. Those rules are subject to change. The need for FCC and other regulatory approvals could restrict the
Company’s ability to consummate future transactions, including the proposed acquisition of Tribune, if, for example, the FCC or other
government agencies believe that a proposed transaction would result in excessive concentration or other public interest detriment in a
market, even if the proposed combination may otherwise comply with FCC ownership limitations. Additionally, our television
acquisitions over the past several years have significantly increased the Company’s national audience reach to a level that approaches
national television ownership limits imposed by the Communications Act and FCC rules. This may restrict future television station
acquisitions by the Company and may require the Company to divest current stations in connection with any acquisition in order to
comply with national television ownership limits.
26
Growing the Company’s business through acquisitions involves risks and if it is unable to manage effectively its growth, its
operating results will suffer.
During the three years ended December 31, 2018, the Company acquired or assumed the agreements to provide services to a
total of 79 full power television stations, net of divestitures, of which 65 full power stations in 42 markets were acquired or local
service agreements assumed through our merger with Media General, Inc. (“Media General”), net of required station divestitures
previously owned by us and Media General and a relinquishment of a station pursuant to the completed spectrum auction in 2017.
Following these transactions, we now own, operate, program or provide sales and other services to 174 full power television stations
in 100 markets. Additionally, we have entered into a definitive merger agreement to acquire Tribune’s outstanding equity for cash
consideration. Tribune currently owns, operates or provides services to 42 television stations. To manage effectively its growth and
address the increased reporting requirements and administrative demands that will result from future acquisitions, the Company will
need, among other things, to continue to develop its financial and management controls and management information systems. The
Company will also need to continue to identify, attract and retain highly skilled finance and management personnel. Failure to do any
of these tasks in an efficient and timely manner could seriously harm its business.
There are other risks associated with growing our business through acquisitions. For example, with any past or future acquisition,
there is the possibility that:
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we may not be able to successfully reduce costs, increase advertising revenue or audience share or realize anticipated
synergies and economies of scale with respect to any acquired station;
we may not be able to generate adequate returns on our acquisitions or investments;
we may encounter and fail to address risks or other problems associated with or arising from our reliance on the
representations and warranties and related indemnities, if any, provided to us by the sellers of acquired companies;
an acquisition may increase our leverage and debt service requirements or may result in our assuming unexpected
liabilities;
our management may be reassigned from overseeing existing operations by the need to integrate the acquired business;
we may experience difficulties integrating operations and systems, as well as company policies and cultures;
we may be unable to retain and grow relationships with the acquired company’s key customers;
we may fail to retain and assimilate employees of the acquired business; and
problems may arise in entering new markets in which we have little or no experience.
The occurrence of any of these events could have a material adverse effect on our operating results, particularly during the
period immediately following any acquisition.
FCC actions may restrict our ability to create duopolies under local service agreements or common ownership, which may harm
our existing operations and impair our acquisition strategy.
In a number of our markets, we have created duopolies by entering into what we refer to as local service agreements. While
these agreements take varying forms, a typical local service agreement is an agreement between two separately owned television
stations serving the same market, whereby the owner of one station provides operational assistance to the other station, subject to
ultimate editorial and other controls being exercised by the latter station’s owner. By operating or entering into local service
agreements with same-market stations, we (and the other station) achieve significant operational efficiencies. We also broaden our
audience reach and enhance our ability to capture more advertising spending in a given market. Additionally, we achieve significant
operational efficiencies by owning multiple stations in a market where FCC rules allow us to do so.
The FCC is required to review its media ownership rules every four years and eliminate those rules it finds no longer serve the
“public interest, convenience and necessity.” In August 2016, the FCC adopted the 2016 Ownership Order concluding the agency’s
2010 and 2014 quadrennial reviews. The 2016 Ownership Order (1) retained the then-existing local television ownership rule and
radio/television cross-ownership rule with minor technical modifications, (2) extended the ban on common ownership of two top-four
television stations in a market to network affiliation swaps, (3) retained the then-existing ban on newspaper/broadcast cross-ownership
in local markets while considering waivers and providing an exception for failed or failing entities, (4) retained the dual network rule,
(5) made JSA relationships attributable interests, and (6) defined a category of sharing agreements designated as SSAs between
stations and required public disclosure of those SSAs (while not considering them attributable).
27
Nexstar and other parties filed petitions seeking reconsideration of various aspects of the 2016 Ownership Order. On November
16, 2017, the FCC adopted the Reconsideration Order addressing the petitions for reconsideration. The Reconsideration Order (1)
eliminated the rules prohibiting newspaper/broadcast cross-ownership and limiting television/radio cross-ownership, (2) eliminated
the requirement that eight or more independently-owned television stations remain in a market for common ownership of two
television stations in the market to be permissible, (3) retained the general prohibition on common ownership of two “top four”
stations in a local market but provided for case-by-case review, (4) eliminated the television JSA attribution rule, and (5) retained the
SSA definition and disclosure requirement for television stations. These rule modifications took effect on February 7, 2018, when the
Third Circuit denied a mandamus petition which had sought to stay their effectiveness. The Reconsideration Order remains subject to
an appeal before the Third Circuit.
In December 2018, the FCC initiated its 2018 quadrennial review with the issuance of a Notice of Proposed Rulemaking.
Among other things, the FCC seeks comment on all aspects of the local television ownership rule’s implementation and whether the
current version of the rule remains necessary in the public interest. Comments and reply comments in the 2018 quadrennial review are
due in the first and second quarters of 2019.
The 2016 Ownership Order reinstated a rule that attributed another in-market station toward the local television ownership
limits when one station owner sells more than 15% of the second station’s weekly advertising inventory under a JSA (this rule had
been previously adopted but was vacated by the Third Circuit). Parties to JSAs entered into prior to March 31, 2014 were permitted to
continue to operate under these JSAs until September 30, 2025. However, in its November 2017 Reconsideration Order, the FCC
eliminated the JSA attribution rule in its entirety. This elimination took effect on February 7, 2018, although the Reconsideration
Order remains subject to a federal court appeal.
We cannot predict what additional rules the FCC will adopt or when they will be adopted. In addition, uncertainty about media
ownership regulations and adverse economic conditions have dampened the acquisition market from time to time, and changes in the
regulatory approval process may make materially more expensive, or may materially delay, the Company’s ability to close upon
currently pending acquisitions or consummate further acquisitions in the future.
The FCC may decide to terminate “grandfathered” time brokerage agreements.
The FCC attributes TBAs and LMAs to the programmer under its ownership limits if the programmer provides more than 15%
of a station’s weekly broadcast programming. However, TBAs and LMAs entered into prior to November 5, 1996 are exempt from
attribution for now.
The FCC may review these “grandfathered” TBAs and LMAs in the future. During this review, the FCC may determine to
terminate the “grandfathered” period and make all TBAs and LMAs fully attributable to the programmer. If the FCC does so, we will
be required to terminate or modify our grandfathered TBAs and LMAs unless the FCC’s rules allow ownership of two stations in the
applicable markets. As of December 31, 2018, we provide services under “grandfathered” TBAs or LMAs to five television stations
owned by third parties.
We are subject to foreign ownership limitations which limits foreign investments in us.
The Communications Act limits the extent of non-U.S. ownership of companies that own U.S. broadcast stations. Under this
restriction, the holder of a U.S. broadcast license may have no more than 20% non-U.S. ownership (by vote and by equity). The
Communications Act prohibits more than 25% indirect foreign ownership or control of a licensee through a parent company unless the
FCC determines the public interest will not be served by enforcement of such restriction. The FCC has interpreted this provision to
require an affirmative public interest showing before indirect foreign ownership of a broadcast licensee may exceed 25%. Therefore,
certain investors may be prevented from investing in us if our foreign ownership is at or near the FCC limits.
The FCC’s multiple ownership rules may limit our ability to acquire television stations in particular markets, restricting our
ability to execute our acquisition strategy.
The number of television stations we may acquire in any local market or nationwide is limited by FCC rules and may vary
depending upon whether the interests in other television stations or other media properties of persons affiliated with us are attributable
under FCC rules. The broadcast television interests of our officers, directors and most stockholders with 5% or greater voting power
are attributable under the FCC’s rules, which may limit us from acquiring or owning television stations in particular markets while
those officers, directors or stockholders are associated with us. In addition, the holder of otherwise non-attributable equity and/or debt
in a licensee in excess of 33% of the total debt and equity of the licensee will be attributable where the holder is either a major
program supplier to that licensee or the holder has an attributable interest in another broadcast station in the same market that is
subject to the FCC’s media ownership rules.
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The Company has a material amount of goodwill and intangible assets, and therefore the Company could suffer additional
losses due to future asset impairment charges.
As of December 31, 2018, $5.4 billion, or 77.0%, of the Company’s combined total assets consisted of goodwill and intangible
assets, including FCC licenses and network affiliation agreements. The Company recorded an impairment charge of $19.9 million
during the year ended December 31, 2018 attributable to the goodwill of its digital businesses. The Company tests goodwill and FCC
licenses annually, and on an interim date if factors or indicators become apparent that would require an interim test of these assets, in
accordance with accounting and disclosure requirements for goodwill and other intangible assets. The Company tests its finite-lived
intangible assets whenever circumstances or indicators become apparent that the asset may not be recoverable through expected future
cash flows. The methods used to evaluate the impairment of the Company’s goodwill and intangible assets would be affected by a
significant reduction, or a forecast of such reductions, in operating results or cash flows at the Company’s broadcast business or at one
or more of the Company’s digital businesses. Our broadcast business’ operating results and cash flows could be affected by a
significant adverse change in the advertising marketplaces in which the Company’s television stations operate, the loss of network
affiliations or by adverse changes to FCC ownership rules, among others, which may be beyond the Company’s control. Our digital
business’ operating results and cash flows could be affected by intense competition, investment in technologies that are subject to a
greater degree of obsolescence, significant reliance on third-party vendors to deliver services, rapid evolving nature and other factors.
If the carrying amount of goodwill and intangible assets is revised downward due to impairment, such non-cash charge could
materially affect the Company’s financial position and results of operations.
There can be no assurances concerning continuing dividend payments and any decrease or suspension of the dividend could
cause our stock price to decline.
Our common stockholders are only entitled to receive the dividends declared by our board of directors. Our board of directors
has declared in 2019 a total cash dividend with respect to the outstanding shares of our Class A common stock of $1.80 per share in
equal quarterly installments of $0.45 per share. We expect to continue to pay quarterly cash dividends at the rate set forth in our
current dividend policy. However, future cash dividends, if any, will be at the discretion of our board of directors and can be changed
or discontinued at any time. Dividend determinations (including the amount of the cash dividend, the record date and date of payment)
will depend upon, among other things, our future operations and earnings, targeted future acquisitions, capital requirements and
surplus, general financial condition, contractual restrictions and other factors as our board of directors may deem relevant. In addition,
the Company’s senior secured credit facilities and the indentures governing our existing notes limit our ability to pay dividends. Given
these considerations, our board of directors may increase or decrease the amount of the dividend at any time and may also decide to
suspend or discontinue the payment of cash dividends in the future.
We have made investments in digital businesses.
We have invested in various digital media businesses as well as digital offerings for each of our broadcast stations. Due to
intense competition, investment in technologies that are subject to a greater degree of obsolescence, historical impairment losses on
our digital assets, significant reliance on third-party vendors to deliver services, limited operating history, the rapid evolving nature of
digital businesses and difficulties in integrating acquisitions into our operations, the actual future operating results could be volatile
and negatively impact the year-to-year trends of our operations.
Cybersecurity risks could affect the Company’s operating effectiveness.
The Company uses computers in substantially all aspects of its business operations. Its revenues are increasingly dependent on
digital products. Such use exposes the Company to potential cyber incidents resulting from deliberate attacks or unintentional events.
It is not uncommon for a company such as ours to be subjected to continuous attempted cyber-attacks or other malicious efforts to
cause a cyber incident. These incidents can include, but are not limited to, gaining unauthorized access to digital systems for purposes
of misappropriating assets or sensitive information, corrupting data or causing operational disruption. The results of these incidents
could include, but are not limited to, business interruption, disclosure of nonpublic information, decreased advertising revenues,
misstated financial data, liability for stolen assets or information, increased cybersecurity protection costs, litigation and reputational
damage adversely affecting customer or investor confidence. The Company’s Cybersecurity Committee helps mitigate cybersecurity
risks. The role of the committee is to oversee cyber risk assessments, monitor applicable key risk indicators, review cybersecurity
training procedures, establish cybersecurity policies and procedures, and to invest in and implement enhancements to the Company’s
cybersecurity infrastructure. Investments over the past year included enhancements to monitoring systems, firewalls, and intrusion
detection systems.
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Risks Related to Our Industry
Our operating results are dependent on advertising revenue and as a result, we may be more vulnerable to economic downturns
and other factors beyond our control than businesses not dependent on advertising.
We derive a majority of our revenue from the sale of advertising time on our stations and community portal websites. Our
ability to sell advertising time depends on numerous factors that may be beyond our control, including:
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the health of the economy in the local markets where our stations are located and in the nation as a whole;
the popularity of our station and website programming;
fluctuations in pricing for local and national advertising;
the activities of our competitors, including increased competition from other forms of advertising-based media,
particularly newspapers, cable television, Internet and radio;
the decreased demand for political advertising in non-election years; and
changes in the makeup of the population in the areas where our stations are located.
Because businesses generally reduce their advertising budgets during economic recessions or downturns, the reliance upon
advertising revenue makes our operating results susceptible to prevailing economic conditions. In addition, our programming may not
attract sufficient targeted viewership, and we may not achieve favorable ratings. Our ratings depend partly upon unpredictable and
volatile factors beyond our control, such as viewer preferences, competing programming and the availability of other entertainment
activities. A shift in viewer preferences could cause our programming not to gain popularity or to decline in popularity, which could
cause our advertising revenue to decline. Further, we and the programming providers upon which we rely may not be able to
anticipate, and effectively react to, shifts in viewer tastes and interests in our markets.
Because a high percentage of our operating expense is fixed, a relatively small decrease in advertising revenue could have a
significant negative impact on our financial results.
Our business is characterized generally by high fixed costs, primarily for debt service, broadcast rights and personnel. Other
than commissions paid to our sales staff and outside sales agencies, our expenses do not vary significantly with an increase or decrease
in advertising revenue. As a result, a relatively small change in advertising prices could have a disproportionate effect on our financial
results. Accordingly, a minor shortfall in expected revenue could have a significant negative impact on our financial results.
Preemption of regularly scheduled programming by news coverage may affect our revenue and results of operations.
The Company may experience a loss of advertising revenue and incur additional broadcasting expenses due to preemption of
our regularly scheduled programming by network coverage of a major global news event such as a war or terrorist attack or by
coverage of local disasters, such as tornados and hurricanes. As a result, advertising may not be aired and the revenue for such
advertising may be lost unless the station is able to run the advertising at agreed-upon times in the future. Advertisers may not agree to
run such advertising in future time periods, and space may not be available for such advertising. The duration of any preemption of
programming cannot be predicted if it occurs. In addition, our stations and the stations we provide services to may incur additional
expenses as a result of expanded news coverage of a war or terrorist attack or local disaster. The loss of revenue and increased
expenses could negatively affect our results of operations.
If we are unable to respond to changes in technology and evolving industry trends, our television businesses may not be able to
compete effectively.
New technologies may adversely affect our television stations. Information delivery and programming alternatives such as
cable, direct satellite-to-home services, pay-per-view, video on demand, over-the-top distribution of programming, the Internet,
telephone company services, mobile devices, digital video recorders and home video and entertainment systems have fractionalized
television viewing audiences and expanded the numbers and types of distribution channels for advertisers to access. Over the past
decade, cable television programming services, other emerging video distribution platforms and the Internet have captured an
increasing market share, while the aggregate viewership of the major television networks has declined. In addition, the expansion of
cable and satellite television, digital delivery and other technological changes has increased, and may continue to increase, the
competitive demand for programming. Such increased demand, together with rising production costs, may increase our programming
costs or impair our ability to acquire or develop desired programming.
30
In addition, video compression techniques now in use are expected to permit greater numbers of channels to be carried within
existing bandwidth. These compression techniques and other technological developments are applicable to all video delivery systems,
including over-the-air broadcasting, and have the potential to provide vastly expanded programming to targeted audiences. Reduction
in the cost of creating additional channel capacity could lower entry barriers for new channels and encourage the development of
increasingly specialized niche programming, resulting in more audience fractionalization. This ability to reach very narrowly defined
audiences may alter the competitive dynamics for advertising expenditures. We are unable to predict the effect that these and other
technological changes will have on the television industry or our results of operations.
The FCC can sanction us for programming broadcast on our stations which it finds to be indecent.
The FCC may impose substantial fines, to a maximum of $325,000 per violation, on television broadcasters for the broadcast of
indecent material in violation of the Communications Act and its rules. Because the Company’s programming is in large part
comprised of programming provided by the networks with which the stations are affiliated, the Company does not have full control
over what is broadcast on its stations and may be subject to the imposition of fines if the FCC finds such programming to be indecent.
In June 2012, the U.S. Supreme Court decided a challenge to the FCC’s indecency enforcement without resolving the
constitutionality of such enforcement, and the FCC thereafter requested public comment on the appropriate substance and scope of its
indecency enforcement policy. The FCC has issued very few further decisions or rules in this area, and the courts may in the future
have further occasion to review the FCC’s current policy or any modifications thereto. The outcomes of these proceedings could affect
future FCC policies in this area and could have a material adverse effect on our business.
Intense competition in the television industry and alternative forms of media could limit our growth and profitability.
As a television broadcasting company, we face a significant level of competition, both directly and indirectly. We generally
compete for our audience against all the other leisure activities in which one could choose to engage rather than watch television.
Specifically, stations we own or provide services to compete for audience share, programming and advertising revenue with other
television stations in their respective markets and with other advertising media, including newspapers, radio stations, cable television,
DBS systems, mobile services, video streaming services and the Internet.
The entertainment and television industries are highly competitive and are undergoing a period of consolidation. Many of our
current and potential competitors have greater financial, marketing, programming and broadcasting resources than we do. The markets
in which we operate are also in a constant state of change arising from, among other things, technological improvements and
economic and regulatory developments. Technological innovation and the resulting proliferation of television entertainment, such as
cable television, wireless cable, satellite-to-home distribution services, pay-per-view, home video and entertainment systems and
Internet and mobile distribution of video programming have fractionalized television viewing audiences and have subjected free over-
the-air television broadcast stations to increased competition. We may not be able to compete effectively or adjust our business plans
to meet changing market conditions.
Technologies used in the entertainment industry continue to evolve rapidly, leading to alternative methods for the delivery and
storage of digital content. These technological advancements have driven changes in consumer behavior and have empowered
consumers to seek more control over when, where and how they consume news and entertainment, including through the so-called
“cutting the cord” and other consumption strategies. The networks have also begun streaming some of their programming on the
Internet and other distribution platforms simultaneously with, or in close proximity to, network programming broadcast on local
television stations, including those we own or provide services to. These innovations and other practices by the networks dilute the
exclusivity and value of network programming originally broadcast by the local stations and may adversely affect the business,
financial condition and results of operations of our stations. We are unable to predict what forms of competition will develop in the
future, the extent of the competition or its possible effects on our business.
The FCC could implement regulations or the U.S. Congress could adopt legislation that might have a significant impact on the
operations of the stations we own and the stations we provide services to or the television broadcasting industry as a whole.
The FCC has open proceedings to determine whether to standardize TV stations’ reporting of programming responsive to local
needs and interests; whether to modify its network non-duplication and syndicated exclusivity rules; whether to modify its standards
for “good faith” retransmission consent negotiations; and whether to broaden the definition of “MVPD” to include “over-the-top”
video programming distributors. Additionally, FCC proceedings to determine whether to modify or eliminate certain of its broadcast
ownership rules are the subject of pending court appeals, and the FCC has initiated its next quadrennial proceeding to review the
agency’s media ownership rules.
31
The FCC also has sought comment on whether there are alternatives to the use of DMAs to define local markets such that
certain viewers whose current DMAs straddle multiple states would be provided with more in-state broadcast programming. If the
FCC determines to modify the use of existing DMAs to determine a station’s local market, such change might materially alter current
station operations and could have an adverse effect on our business, financial condition and results of operations.
The FCC also may decide to initiate other new rule-making proceedings on its own or in response to requests from outside
parties, any of which might have such an impact. The U.S. Congress may also act to amend the Communications Act in a manner that
could impact our stations and the stations we provide services to or the television broadcast industry in general.
The FCC is reallocating a portion of the spectrum available for use by television broadcasters to wireless broadband use, which
could substantially impact our future operations and may reduce viewer access to our programming.
The FCC is in the process of repurposing a portion of the broadcast television spectrum for wireless broadband use. Pursuant to
federal legislation enacted in 2012, the FCC conducted an incentive auction for the purpose of making additional spectrum available to
meet future wireless broadband needs. Under the auction statute and rules, certain television broadcasters accepted bids from the FCC to
voluntarily relinquish all or part of their spectrum in exchange for consideration, and certain wireless broadband providers and other
entities submitted successful bids to acquire the relinquished television spectrum. Over the next several years, television stations that are
not relinquishing their spectrum are being “repacked” into the frequency band still remaining for television broadcast use.
The incentive auction commenced on March 29, 2016 and officially concluded on April 13, 2017. Ten of Nexstar’s stations and
one station owned by Vaughan, a consolidated VIE, accepted bids to relinquish their spectrum. Of these 11 total stations, one station went
off the air in November 2017. The station that went off the air is not expected to have a significant impact on our future financial results
because it is located in a remote rural area of the country and the Company has other stations which serve the same area. Of the remaining
ten stations, eight have ceased broadcasting on their current channels and implemented channel sharing arrangements. The remaining two
stations moving to very high frequency (“VHF”) channels must vacate their current channels by September 2019 and May 2020,
respectively.
The majority of the Company’s television stations did not accept bids to relinquish their television channels. Of those stations, 61
full power stations owned by Nexstar and 17 full power stations owned by VIEs have been assigned to new channels in the reduced post-
auction television band. These “repacked” stations are required to construct and license the necessary technical modifications to operate
on their new assigned channels and must cease operating on their former channels, by deadlines which the FCC has established and which
are no later than July 13, 2020. Congress has allocated up to an industry-wide total of $2.75 billion to reimburse television broadcasters,
MVPDs and other parties for costs reasonably incurred due to the repack. This allocation includes $1 billion added to the TV Broadcaster
Relocation Fund as part of the Consolidated Appropriations Act, 2018. This fund is not available to reimburse repacking costs for stations
which are surrendering their spectrum and entering into channel sharing relationships. Broadcasters and MVPDs have submitted
estimates to the FCC of their reimbursable costs. As of February 6, 2019, these costs were approximately $1.9 billion, and the FCC has
indicated that it expects those costs to rise. In 2018 and 2017, the Company spent a total of $29.4 million in capital expenditures related
to station repack, all of which have been reimbursed by the FCC in 2018. As of December 31, 2018, approximately $192.0 million of
estimated remaining costs in connection with the station repack are expected to be incurred by the Company, some or all of which will be
reimbursable. We cannot determine if the FCC will be able to fully reimburse our repacking costs as this is dependent on certain factors,
including our ability to incur repacking costs that are equal to or less than the FCC’s allocation of funds to us and whether the FCC will
have available funds to reimburse us for additional repacking costs that we previously may not have anticipated. Whether the FCC will
have available funds for additional reimbursements will also depend on the repacking costs that will be incurred by other broadcasters,
MVPDs and other parties that are also seeking reimbursements.
The reallocation of television spectrum to broadband use may be to the detriment of our investment in digital facilities, could
require substantial additional investment to continue our current operations, and may require viewers to invest in additional equipment
or subscription services to continue receiving broadcast television signals. We cannot predict the impact of the incentive auction and
subsequent repacking on our business.
Item 1B. Unresolved Staff Comments
None.
32
Item 2.
Properties
We have office space for our corporate headquarters in Irving, TX, which is leased through 2024. Each of our markets has
facilities consisting of offices, studios, sales offices and tower and transmitter sites. We own approximately 61% of our office and
studio locations and approximately 44% of our tower and transmitter locations. The remaining properties that we utilize are leased.
We consider all of our properties, together with equipment contained therein, to be adequate for our present needs. We continually
evaluate our future needs and from time to time will undertake significant projects to replace or upgrade facilities.
While none of our owned or leased properties are individually material to our operations, if we were required to relocate any
towers, the cost could be significant. This is because the number of sites in any geographic area that permit a tower of reasonable
height to provide good coverage of the market is limited, and zoning and other land use restrictions, as well as Federal Aviation
Administration and FCC regulations, limit the number of alternative locations or increase the cost of acquiring them for tower sites.
See Item 1, “Business—The Stations” for a complete list of stations by market.
Item 3.
Legal Proceedings
From time to time, the Company is involved in litigation that arises from the ordinary course of business, such as contractual or
employment disputes or other general actions. In the event of an adverse outcome of these legal proceedings, the Company believes
the resulting liabilities would not have a material adverse effect on the Company’s financial condition, results of operations or cash
flows.
On March 16, 2018, a group of companies including Nexstar (the “Defendants”) received a Civil Investigative Demand from the
Antitrust Division of the DOJ regarding an investigation into the exchange of certain information related to the pacing of sales related
to the same period in the prior year among broadcast stations in some DMAs in alleged violation of federal antitrust law. Other
Defendants entered into a proposed consent decree with the DOJ on November 6, 2018. Without admitting any wrongdoing, Nexstar
agreed to settle the matter with the DOJ on December 5, 2018. The DOJ filed an amended complaint adding Nexstar to the consent
decree on December 13, 2018. The consent decree, which settles any claims by the government of alleged violations of federal
antitrust laws in connection with the alleged information sharing, does not include any financial penalty. Pursuant to the consent
decree, we have agreed not to exchange certain non-public information with other stations operating in the same DMA except in
certain cases, to implement certain antitrust compliance measures and to monitor and report on compliance with the consent decree.
On July 30, 2018, Clay, Massey & Associates, PC filed an antitrust class action complaint in the U.S. District Court for the
Northern District of Illinois on behalf of itself and all others similarly situated against Gray Television, Inc., Hearst Communications,
Nexstar Media Group, Inc., Tegna Inc., Tribune Media Company and Sinclair Broadcast Group, Inc. The lawsuit alleges unlawful
coordination between broadcast television station owners to artificially increase prices of television spot advertisements in violation of
Section 1 of the Sherman Act (15 U.S.C. §1). Nexstar has since been named in 15 similar complaints, including ten in the Northern
District of Illinois, three in the Southern District of New York, and two in the District of Maryland. Each complaint includes similar
allegations and claims a violation of Section 1 of the Sherman Act. One, filed in the District of Maryland, also alleges violations of
state antitrust and consumer protection statutes and a claim for unjust enrichment.
On October 9, 2018, these cases were consolidated in a multi-district litigation in the District Court for the Northern District of
Illinois captioned In Re: Local TV Advertising Antitrust Litigation, No. 1:18-cv-06785 (“MDL Litigation”). On January 23, 2019, the
Court in the MDL Litigation appointed plaintiffs’ lead and liaison counsel. The MDL Litigation is ongoing. Nexstar denies the
allegations against it and will defend its advertising practices as necessary.
Item 4.
Mine Safety Disclosures
None.
33
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Prices; Record Holders and Dividends
Our Class A Common Stock trades on The NASDAQ Global Select Market (“NASDAQ”) under the symbol “NXST.”
As of February 26, 2019, there were approximately 24,000 shareholders of record of our Class A Common Stock, including
shares held in nominee names by brokers and other institutions.
Pursuant to our current dividend policy, our board of directors declared in 2018, 2017 and 2016 total annual cash dividends of
$1.50 per share, $1.20 per share and $0.96 per share, respectively, with respect to outstanding shares of our Class A common stock.
The dividends were paid in equal quarterly installments.
On January 25, 2019, our board of directors approved a 20% increase in the quarterly cash dividend to $0.45 per share of
outstanding Class A Common Stock beginning with the first quarter of 2019. Dividend determinations will depend upon, among other
things, our future operations and earnings, targeted future acquisitions, capital requirements and surplus, general financial condition,
contractual restrictions and other factors as our board of directors may deem relevant. Additionally, the Company’s senior secured
credit facilities and the indentures governing its existing notes limit its ability to pay dividends. Given these considerations, our board
of directors may increase or decrease the amount of dividends at any time and may also decide to suspend or discontinue the payment
of cash dividends in the future.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
None.
Securities Authorized for Issuance Under Equity Compensation Plans as of December 31, 2018
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
Number of
securities to be
issued upon
exercise of
outstanding
options
(a)
1,809,268
—
1,809,268
Weighted
average exercise
price of
outstanding
options
(b)
$21.92
—
$21.92
Number of securities
remaining available
for future issuance
excluding securities
reflected in column (a)
(c)
853,813
—
853,813
For a more detailed description of our equity plans and grants, we refer you to Note 10 to the Consolidated Financial Statements
included in Part IV, Item 15(a) of this Annual Report on Form 10-K.
34
Comparative Stock Performance Graph
The following graph compares the total return of our Class A Common Stock based on closing prices for the period from
December 31, 2013 through December 31, 2018 with the total return of the NASDAQ Composite Index and our peer index of pure
play television companies. Our peer index consists of the following publicly traded companies: Gray Television, Inc., Tegna, Inc. and
Sinclair Broadcast Group, Inc. The graph assumes the investment of $100 in our Class A Common Stock and in both of the indices on
December 31, 2013, with the reinvestment of dividends into shares of our Class A Common Stock or the indices, as applicable. The
performance shown is not necessarily indicative of future performance.
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
December 2018
200.00
180.00
160.00
140.00
120.00
100.00
80.00
60.00
40.00
20.00
0.00
2013
2014
2015
2016
2017
2018
Nexstar Media Group, Inc.
NASDAQ Composite-Total Return
Peer Group
Nexstar Media Group, Inc. (NXST)
NASDAQ Composite Index
Peer Group
12/31/13
12/31/14
12/31/15
12/31/16
12/31/17
$
$
$
100.00 $
100.00 $
100.00 $
94.26 $
114.75 $
97.60 $
108.36 $
122.74 $
105.49 $
119.32 $
133.62 $
94.39 $
150.20 $
173.22 $
106.95 $
12/31/18
154.16
168.30
82.47
35
Item 6.
Selected Financial Data
The selected consolidated financial data as of and for the years ended December 31, 2018, 2017, 2016, 2015 and 2014 are
presented in the table below. The period-to-period comparability of our consolidated financial statements is affected by acquisitions.
In 2018, we acquired or began services to five full power television stations and acquired one digital media business. In 2017, we
acquired or began services to 65 full power television stations, net of station divestitures, and acquired two digital businesses. In 2016,
we acquired nine full power television stations, including consolidated VIEs. In 2015, we acquired 14 full power television stations,
including consolidated VIEs, and two digital media businesses. This information should be read in conjunction with Part II, Item 7
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial
Statements and related Notes included herein. Amounts below are presented in thousands, except per share amounts.
Statements of Operations Data, for the years
ended December 31:
Net revenue
Operating expenses (income):
Corporate expenses
Direct operating expenses, net of trade
Selling, general and administrative expenses,
excluding corporate
Trade and barter expense
Depreciation
Amortization of intangible assets
Amortization of broadcast rights, excluding barter
Goodwill and intangible assets impairment(1)
Gain on disposal of stations, net(2)
Reimbursement from the FCC related to station repack(3)
Total operating expenses
Income from operations(4)
Interest expense, net
Loss on extinguishment of debt, net(5)
Pension and other postretirement plans credit, net(6)
Other expenses
Income before income taxes
Income tax (expense) benefit(7)
Net income
Net loss (income) attributable to noncontrolling interests
Net income attributable to Nexstar Media Group, Inc.
Net income per common share attributable to
Nexstar Media Group, Inc.:
Basic
Diluted
Weighted average common shares outstanding:
Basic
Diluted
2018
2017
2016
2015
2014
$ 2,766,696 $ 2,431,966 $ 1,103,190 $
896,377 $
631,311
110,921
1,101,423
138,394
978,930
51,177
371,242
44,856
293,288
35,174
178,781
469,012
16,494
109,789
149,406
61,342
19,911
-
(29,381)
2,008,917
757,779
(220,994)
(12,120)
10,755
(2,475)
532,945
(144,680)
388,265
1,212
389,477 $
466,712
56,970
100,658
159,500
62,908
19,985
(57,716)
-
1,926,341
505,625
(241,195)
(34,882)
13,120
(1,284)
241,384
233,943
475,327
(330)
474,997 $
$
212,429
45,439
51,300
46,572
22,461
15,262
-
-
815,882
287,308
(116,081)
-
-
(555)
170,672
(77,572)
93,100
(1,563)
91,537 $
187,624
46,651
47,222
48,475
22,154
-
-
-
690,270
206,107
(80,520)
-
-
(517)
125,070
(48,687)
76,383
1,301
77,684 $
140,255
31,333
35,047
25,850
11,634
-
-
-
458,074
173,237
(61,959)
(71)
-
(556)
110,651
(46,101)
64,550
-
64,550
$
$
8.52 $
8.21 $
10.38 $
10.07 $
2.98 $
2.89 $
2.50 $
2.42 $
2.10
2.02
45,718
47,412
45,754
47,149
30,687
31,664
31,100
32,091
30,774
32,003
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Certain of our digital businesses recognized impairment charges related to goodwill and finite-lived intangible assets during the years ended December 31, 2018, 2017 and 2016. For
additional information, refer to Note 5 to our Consolidated Financial Statements in Part IV, Item 15(a) of this Form 10-K.
In connection with our merger with Media General on January 17 ,2017, we sold the assets of 12 full power television stations in 12 markets, five of which were previously owned by
us and seven of which were previously owned by Media General. These divestitures resulted in a $57.7 million net gain on disposals.
Certain of the Company’s stations have been assigned with new channels (“repack”) in connection with the FCC’s process of repurposing a portion of the broadcast television
spectrum for wireless broadband use. These stations are currently spending costs, mainly capital expenditures, to construct and license the necessary technical modifications to operate
on their newly assigned channels and to vacate their former channels no later than July 13, 2020. Subject to fund limitations, the FCC reimburses television broadcasters, MVPDs and
other parties for costs reasonably incurred due to the repack. The reimbursements received by the Company from the FCC were recognized as operating income in 2018.
Income from operations is generally higher during even-numbered years, when advertising revenue is increased due to the occurrence of state and federal elections and the Olympic
Games. However, due to the accretive acquisitions in 2014 through 2018, the income from operations increased over time.
In October 2018, the Company refinanced its then existing term loans and revolving loans. The Company also made prepayments of its outstanding term loans during 2018. These
transactions resulted in total loss on extinguishment of debt of $12.1 million. In January 2017, the Company refinanced its then existing term loans and revolving loans. In February
2017, the Company called the entire principal balance of its $525.0 million 6.875% Notes, resulting in a loss on extinguishment of debt of $22.2 million. The Company also made
prepayments of its outstanding term loans during 2017. These transactions, resulted in total loss on extinguishment of debt of $34.9 million.
The Company previously reported its pension and other postretirement benefit credit, consisting of expected return on plan assets and interest cost, as a credit to corporate expenses. As
discussed in Note 2 to our Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K, the Company adopted ASU 2017-07 which requires
presentation of net periodic benefit cost, other than service costs, as a separate line item below income from operations. The adoption of ASU 2017-17 reduced the operating income in
2017 by $13.2 million but did not impact net income.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law which reduced the federal corporate income tax rate from 35% to 21%. The reduction in the federal
corporate income tax rate resulted in a reduction of the Company’s net deferred tax liability of $322.2 million and a corresponding deferred income tax benefit in 2017.
36
Balance Sheet data, as of December 31:
Cash and cash equivalents
Working capital
Net intangible assets and goodwill
Total assets(1)(2)
Total debt(1)(2)
Total stockholders’ equity
Statements of Cash Flows data, for the years
ended December 31:
Net cash provided by (used in):
Operating activities(3)
Investing activities(3)
Financing activities(3)
Capital expenditures, net of proceeds from
asset disposals(4)
Cash payments for broadcast rights
2018
2017
2016
2015
2014
115,652 $
385,515
87,680 $
173,639
$ 145,115 $
362,903
43,416 $ 131,912
178,661
113,967
5,438,145 5,492,110 1,340,565 1,255,358
772,660
7,062,030 7,481,647 2,966,085 1,835,134 1,414,102
3,981,003 4,362,460 2,342,419 1,476,214 1,220,369
56,537
1,868,984 1,581,310
284,354
86,373
$ 736,867 $
(175,514) (2,066,285)
(531,890) 1,057,367
109,091 $ 284,253 $ 205,308 $ 176,561
(230,033)
145,356
(135,122)
822,932
(474,341)
180,537
101,902
61,979
52,435
62,531
31,152
23,004
25,397
22,473
20,300
12,025
(1)
(2)
(3)
(4)
The Company’s total assets and total debt increased in January 2017 following the consummation of our merger with Media General. Refer to Notes 3 and 7 to
our Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information.
On July 27, 2016, we completed the issuance and sale of $900.0 million of 5.625% Notes. The gross proceeds of the notes, plus pre-funded interests, were
deposited into a segregated escrow account until their utilization in January 2017 to partially finance our merger with Media General. Refer to Note 7 to our
Consolidated Financial Statements in Part IV, Item 5(a) of this Annual Report on Form 10-K for additional information on the 5.625% Notes.
As discussed in Note 2 – Recent Accounting Pronouncements to our Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K,
the Company adopted the FASB ASU No. 2016-15, which provides guidance related to classification on the statement of cash flows of certain cash receipts and
cash payments, and the FASB ASU 2016-18, which provides guidance related to classification on the statement of cash flows of restricted cash. These adoptions
changed the cash flow reporting of certain transactions of the Company between 2017 and 2016. Accordingly, our current presentation of the 2017 net cash
provided by operating activities, and net cash provided by financing activities decreased by $27.6 million and $896.0 million, respectively, compared to amounts
previously presented. Our 2017 net cash in investing activities increased by $4.2 million. Also, our current presentation of the 2016 net cash provided by
operating activities and net cash provided by financing activities increased by $22.7 million and $900.00 million, respectively, and our 2016 net cash used in
investing activities decreased by $5.1 million.
In 2018, our capital expenditures included $26.8 million, which we reimbursed from the FCC in connection with the station repack. It also included capital
expenditures of $2.9 million, which was funded by the proceeds from the incentive auction received in 2017.
37
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with Item 6. “Selected Financial Data” and our
Consolidated Financial Statements and related Notes included in Part IV, Item 15(a) of this Annual Report on Form 10-K.
As a result of our deemed controlling financial interests in the consolidated VIEs in accordance with U.S. GAAP, we
consolidate the financial position, results of operations and cash flows of these VIEs as if they were wholly-owned entities. We believe
this presentation is meaningful for understanding our financial performance. Refer to Note 2 to our Consolidated Financial
Statements for a discussion of our determinations of VIE consolidation under the related authoritative guidance. The following
discussion of our financial position and results of operations includes the consolidated VIEs’ financial position and results of
operations.
Executive Summary
2018 Highlights
•
•
•
Net revenue during 2018 increased by $334.7 million, or 13.8% compared to the same period in 2017. The increase in net
revenue was primarily due to an increase in political advertising and retransmission compensation of $221.2 million and
$82.9 million, respectively, from our legacy stations and incremental revenue from our newly acquired stations and
entities of $121.4 million. These increases were partially offset by a decrease in our legacy stations’ revenue from local
and national advertising of $41.5 million, primarily due to changes in the mix between our local, national, and political
advertising during an election year. Our adoption of the new revenue accounting guidance also decreased our barter
revenue (and the related barter expense) by $42.5 million, but did not impact our income from operations, our net income
or our cash flows.
During 2018, our Board of Directors declared quarterly dividends of $0.375 per share of our outstanding common stock,
or total dividend payments of $68.6 million.
During 2018, we repurchased a total of 751,920 shares of our Class A common stock for $50.5 million, funded by cash on
hand. On April 26, 2018, our Board of Directors approved an increase in our share repurchase authorization to repurchase
up to an additional $200.0 million of our Class A common stock. As of December 31, 2018, the remaining available
amount under the share repurchase authorization was $201.9 million, inclusive of the 2018 additional authorization and
the remaining balance under our prior authorization.
2018 Acquisitions
LKQD
WHDF
KRBK
KHII
Acquisition Date
January 16, 2018
Purchase Price
$97.0 million in cash
Acquired the outstanding equity of LKQD.
Assets Acquired
First closing on July 15,
2018
$2.3 million paid in cash at
first closing
Acquired the assets of WHDF, a full power television station in
the Huntsville, Alabama market and an affiliate of CW.
Second closing on
November 9, 2018
$0.7 million paid in cash at
second closing
First closing on August 1,
2018
$15.1 million paid in cash at
first closing
Acquired the assets of KRBK, a full power television station in
the Springfield, Missouri market and an affiliate of FOX.
Second closing on
November 1, 2018
$2.5 million paid in cash at
second closing
Provided certain services
through TBA effective on
November 1, 2018
Completed the station
acquisition on January 28,
2019
$0.1 million paid in cash as
advance payment
$6.4 million paid in cash at
final closing
We consolidated certain assets of KHII in December 2018 due
to our controlling financial interest. KHII is a full power
television station affiliated with MNTV in the Honolulu,
Hawaii market and its satellite stations KGMV serving
Wailuku, Hawaii and KGMD serving Hilo, Hawaii markets.
The purchase price for the LKQD acquisition was funded by a combination of a borrowing under our revolving credit facility
and cash on hand. The acquisition of LKQD broadened and diversified our digital portfolio with technologies that are complementary
to our current offerings of digital solutions and services for media publishers, and multi-platform marketing solutions for local and
national advertisers.
38
The purchase prices to acquire WHDF and KRBK were funded by cash on hand. These acquisitions created two new duopolies
for Nexstar. We previously provided programming and sales services to these stations under TBAs from July 15, 2018 through
November 9, 2018 for WHDF and from August 1, 2018 through November 1, 2018 for KRBK.
Effective November 1, 2018, we began managing some elements of KHII’s operation under a TBA until the completion of the
acquisition. On December 17, 2018, we obtained FCC approval for the acquisition and became the primary beneficiary of our variable
interests in KHII. Therefore, as of this date, the stations’ assets that we agreed to acquire pursuant to a purchase agreement, and
transactions thereafter, were consolidated into our financial statements. On January 28, 2019, we completed the acquisition and paid
the remaining purchase price of $6.4 million, funded by cash on hand. The TBA with KHII was terminated as of this date.
Merger Agreement with Tribune
On November 30, 2018, we entered into a definitive merger agreement with Tribune to acquire Tribune’s outstanding equity
for $46.50 per share in a cash transaction. All equity-based awards of Tribune that are outstanding prior to the merger will vest in full
and will be converted into the right to receive the same cash consideration. The estimated total purchase price is valued at $6.4 billion,
consisting of the merger cash consideration and the refinancing of Tribune's outstanding debt. Tribune shareholders will be entitled to
additional cash consideration of approximately $0.30 per share per month if the transaction has not closed by August 31, 2019, pro-
rated for partial months and less an adjustment for any dividends declared on or after September 1, 2019. Tribune currently owns,
operates or provides services to 42 television stations. We and Tribune plan to divest certain of our stations in connection with the
proposed merger in order to comply with FCC media ownership rules.
The merger agreement contains certain termination rights for both us and Tribune. If the merger agreement is terminated in
connection with Tribune entering into a definitive agreement with respect to a superior proposal, as well as under certain other
circumstances, the termination fee payable by Tribune to us will be $135 million. If the merger agreement is terminated because the
required Tribune stockholder vote is not obtained at a stockholder meeting duly held for such purpose, Tribune will be required to
reimburse us for our costs and expenses incurred in connection with the transaction in an amount not to exceed $15 million. Either
party may terminate the merger agreement if the merger is not consummated on or before an end date of November 30, 2019, with an
automatic extension to February 29, 2020, if necessary to obtain regulatory approval under circumstances specified in the merger
agreement.
The merger has been approved by the boards of directors of both companies and is projected to close late in the third quarter of
2019, subject to (i) the approval of the merger by the stockholders of Tribune, (ii) FCC approval, (iii) other regulatory approvals
(including expiration of the applicable HSR waiting period) and (iv) satisfaction of other customary closing conditions. The merger
does not require approval of our stockholders and is not subject to any financing contingency. On November 30, 2018, we received
committed financing up to a maximum of $6.4 billion from a group of commercial banks to provide the debt financing to consummate
the merger and the refinancing of certain of the existing indebtedness of Tribune and related transactions.
In connection with obtaining the HSR approval and the FCC approval, Nexstar agreed to divest one or more television stations
in certain DMAs. Those DMAs are: (i) Salt Lake City, UT; (ii) Grand Rapids-Kalamazoo-Battle Creek, MI; (iii) Wilkes Barre-
Scranton, PA; (iv) Richmond-Petersburg, VA; (v) Des Moines-Ames, IA; (vi) Norfolk-Portsmouth-Newport News, VA; (vii) Fort
Smith-Fayetteville-Springdale-Rogers, AR; (viii) Davenport, IA-Rock Island-Moline, IL; (ix) Memphis, TN; (x) Huntsville-Decatur
(Florence), AL; (xi) Indianapolis, IN; (xii) Hartford-New Haven, CT and (xiii) Harrisburg, PA. Nexstar is required to designate one or
more Tribune stations or Nexstar stations for divestiture in each DMA. Nexstar has also agreed to designate, at its option, certain
additional Tribune stations or Nexstar stations for divestiture and to divest such stations in order to comply with the FCC national cap
as required by the FCC in order to obtain approval of and consummate the transactions.
2018 Debt Transactions
•
•
•
On January 16, 2018, we borrowed $44.0 million under our revolving credit facility to fund the acquisition of LKQD.
Through June 2018, we repaid the entire $44.0 million principal balance under our revolving credit facility, funded by
cash on hand.
In June 2018, Marshall refinanced the outstanding principal balances under its Term Loan A and revolving credit facility
of $48.8 million and $3.0 million, respectively, funded by a new Term Loan A of $51.8 million due on December 1, 2019.
On July 27, 2018, we reallocated $5.6 million of our unused revolving loan credit facility to Marshall. On the same day,
Marshall drew the full $5.6 million revolving loan facility and used the funds to partially repay its outstanding Term Loan
A.
39
•
•
•
On October 26, 2018, the Company completed a refinancing of certain of its senior secured credit facilities, including (i)
Nexstar’s and Mission’s Term Loan B with outstanding principal balances of $1.579 billion and $228.5 million,
respectively, (ii) Nexstar’s and Shield’s Term Loan A with outstanding principal balances of $679.5 million and $23.0
million, respectively, and (iii) Nexstar’s and Mission’s revolving credit facilities of $163.4 million and $3.0 million,
respectively, of which no amounts were drawn. The amendments extended the maturity date of Term Loan A and
revolving credit facilities from July 19, 2022 to October 26, 2023 and reduced the applicable margin portion of the interest
rates by 25 basis points for Term Loan B, Term Loan A and revolving loans. The maturity date of Term Loan B did not
change (January 17, 2024). Nexstar also borrowed an additional $150.0 million Term Loan A under its amended senior
secured credit facility. The proceeds were used to partially repay the outstanding principal balance of Nexstar’s Term
Loan B of $150.0 million. Nexstar continues to guarantee Mission’s and Shield’s obligations, and Mission continues to
guarantee Nexstar’s obligations under the amended senior secured credit facilities.
In 2018, we prepaid a total of $360.0 million in principal balance under our Term Loan B, funded by cash on hand.
Through December 2018, the Company repaid scheduled maturities of $46.6 million under its term loans.
Overview of Operations
As of December 31, 2018, we owned, operated, programmed or provided sales and other services to 174 full power television
stations, including those owned by VIEs, in 100 markets in the states of Alabama, Arizona, Arkansas, California, Colorado,
Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Michigan, Mississippi,
Missouri, Montana, Nevada, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island,
South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia and Wisconsin. The stations are affiliates of
ABC, NBC, FOX, CBS, The CW, MNTV and other broadcast television networks. Through various local service agreements, we
provided sales, programming and other services to 39 full power television stations owned by independent third parties, of which 38
full power television stations are VIEs that are consolidated into our financial statements. See Note 2—Variable Interest Entities to our
Consolidated Financial Statements in Part I, Item 1 of this Form 10-K for a discussion of the local service agreements we have with
these independent third parties.
The operating revenue of our stations is derived substantially from broadcast and website advertising revenue, which is affected
by a number of factors, including the economic conditions of the markets in which we operate, the demographic makeup of those
markets and the marketing strategy we employ in each market. Most advertising contracts are short-term and generally run for a few
weeks. For the years ended December 31, 2018 and 2017, revenue generated from local broadcast advertising represented 73.2% and
72.9%, respectively, of our consolidated spot revenue (total of local and national broadcast advertising revenue, excluding political
advertising revenue). The remaining broadcast advertising revenue represents inventory sold for national or political advertising. All
national and political revenue is derived from advertisements placed through advertising agencies. While the majority of local spot
revenue is placed by local agencies, some advertisers place their schedules directly with the stations’ local sales staff, thereby
eliminating the agency commission. Each station also has an agreement with a national representative firm that provides for sales
representation outside the particular station’s market. Advertising schedules received through the national representative firm are for
national or large regional accounts that advertise in several markets simultaneously. National representative commission rates vary
within the industry and are governed by each station’s agreement.
Another source of revenue for the Company that has grown significantly in recent years relates to retransmission of our station
signals by cable, satellite and other MVPDs. MVPDs generally pay for retransmission rights on a rate per subscriber basis. The growth
of this revenue stream was primarily due to increases in the subscriber rates paid by MVPDs resulting from contract renewals
(retransmission compensation agreements generally have a three-year term), scheduled annual escalation of rates per subscriber, and
the establishment of distribution agreements with OTTDs. Additionally, the rates per subscriber of newly acquired television stations
are converted into our terms which are typically higher than those of other companies because we have been negotiating such
agreements for a longer period of time and are, therefore, approximately one full negotiating cycle ahead of our competitors.
Currently, broadcasters deliver more than 30% of all television viewing audiences in a pay television household but are paid
approximately 12-14% of the total cable programming fees. Nexstar anticipates retransmission fees will continue to increase until
there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers.
Most of our stations have a network affiliation agreement pursuant to which the network provides programming to the station
during specified time periods, including prime time, in exchange for affiliation fees paid to the networks, in most cases, and the right
to sell a substantial majority of the advertising time during these broadcasts. Network affiliation fees have been increasing industry
wide and we expect they will continue to increase over the next several years.
40
Each station acquires licenses to broadcast programming in non-news and non-network time periods. The licenses are either
purchased from a program distributor for cash and/or the program distributor is allowed to sell some of the advertising inventory as
compensation to eliminate or reduce the cash cost for the license. The latter practice is referred to as barter broadcast rights. Barter
broadcast rights were previously recorded as assets and amortized as programming expense over the earlier of the license period or
period of usage. Upon adoption of the new revenue accounting guidance that took effect on January 1, 2018, we no longer recognize
assets and expense resulting from these transactions. Refer to Note 2 – Recent Accounting Pronouncements to our Consolidated
Financial Statements in Part IV, Item 5(a) of this Annual Report on Form 10-K for additional information.
Our primary operating expenses include employee salaries, commissions and benefits, newsgathering and programming costs. A
large percentage of the costs involved in the operation of our stations and the stations we provide services to remains relatively fixed.
We guarantee full payment of all obligations incurred under Mission’s, Marshall’s and Shield’s senior secured credit facilities in
the event of their default. Mission is a guarantor of our senior secured credit facility, our 6.125% Notes and our 5.625% Notes but
does not guarantee our 5.875% Notes. Marshall and Shield do not guarantee any debt within the group. In consideration of our
guarantee of Mission’s senior secured credit facility, Mission has granted us purchase options to acquire the assets and assume the
liabilities of each Mission station, subject to FCC consent. These option agreements (which expire on various dates between 2021 and
2028) are freely exercisable or assignable by us without consent or approval by Mission or its shareholders. We expect these option
agreements to be renewed upon expiration.
We do not own the consolidated VIEs or their television stations. However, we are deemed under U.S. GAAP to have
controlling financial interests in these entities because of (1) the local service agreements Nexstar has with their stations, (2) our
guarantees of the obligations incurred under Mission’s, Marshall’s and Shield’s senior secured credit facilities, (3) our power over
significant activities affecting the VIEs’ economic performance, including budgeting for advertising revenue, advertising sales and, in
some cases, hiring and firing of sales force personnel and (4) purchase options granted by each VIE, exclusive of Marshall, which
permit Nexstar to acquire the assets and assume the liabilities of each of the VIEs’ stations at any time, subject to FCC consent. In
compliance with FCC regulations for all the parties, each of the consolidated VIEs maintain complete responsibility for and control
over programming, finances and personnel for their stations. Refer to Note 2 – Variable Interest Entities to our Consolidated Financial
Statements in Part IV, Item 5(a) of this Annual Report on Form 10-K for additional information with respect to consolidated VIEs.
Regulatory Developments
As a television broadcaster, the Company is highly regulated, and its operations require that it retain or renew a variety of
government approvals and comply with changing federal regulations. In 2016, the FCC reinstated a rule providing that a television
station licensee which sells more than 15 percent of the weekly advertising inventory of another television station in the same DMA is
deemed to have an attributable ownership interest in that station (this rule had been adopted in 2014 but was vacated by a federal court
of appeals). Parties to existing JSAs that were deemed attributable interests and did not comply with the FCC’s local television
ownership rule were given until September 30, 2025 to come into compliance. In November 2017, however, the FCC adopted an order
on reconsideration that eliminated the rule. That elimination became effective on February 7, 2018, although the FCC’s November
2017 order on reconsideration remains the subject of pending court appeals. If the Company is ultimately required to amend or
terminate its existing agreements, the Company could have a reduction in revenue and increased costs if it is unable to successfully
implement alternative arrangements that are as beneficial as the existing JSAs.
The FCC is in the process of repurposing a portion of the broadcast television spectrum for wireless broadband use. In an incentive
auction which concluded in April 2017, certain television broadcasters accepted bids from the FCC to voluntarily relinquish all or part of
their spectrum in exchange for consideration. Television stations that are not relinquishing their spectrum are being “repacked” into the
frequency band still remaining for television broadcast use. In July 2017, the Company received $478.6 million in gross proceeds from
the FCC for eight stations that now share a channel with another station, two that will move to a VHF channel and one that went off the
air in November 2017. The station that went off the air is not expected to have a significant impact on our future financial results because
it is located in a remote rural area of the country and the Company has other stations which serve the same area. The two stations moving
to VHF channels must vacate their current channels by September 2019 and May 2020, respectively.
61 full power stations owned by Nexstar and 17 full power stations owned by VIEs have been assigned to new channels in the
reduced post-auction television band and will be required to construct and license the necessary technical modifications to operate on their
new assigned channels on a variable schedule ending in July 2020. Congress has allocated up to an industry-wide total of $2.75 billion to
reimburse television broadcasters, MVPDs and other parties for costs reasonably incurred due to the repack. In 2018 and 2017, the
Company spent a total of $29.4 million in capital expenditures related to station repack, all of which have been reimbursed by the FCC in
2018. As of December 31, 2018, approximately $192.0 million of estimated remaining costs in connection with the station repack are
expected to be incurred by the Company, some or all of which will be reimbursable. If the FCC fails to fully reimburse the Company’s
repacking costs, the Company could have increased costs related to the repacking.
41
Seasonality
Advertising revenue is positively affected by national and regional political election campaigns and certain events such as the
Olympic Games or the Super Bowl. Advertising revenue is generally highest in the second and fourth quarters of each year, due in
part to increases in consumer advertising in the spring and retail advertising in the period leading up to, and including, the holiday
season. In addition, advertising revenue is generally higher during even-numbered years, when state, congressional and presidential
elections occur and from advertising aired during the Olympic Games. 2018 was an election year and an Olympic year.
Historical Performance
Revenue
The following table sets forth the amounts of the Company’s principal types of revenue (in thousands) and each type of revenue
(other than trade and barter) and agency commissions as a percentage of total revenue for the years ended December 31:
2018
2017
2016
Local
National
Political
Retransmission
compensation
Digital
Other
Trade and barter
revenue
Total revenue
Less: Agency
Commissions
Net Revenue
Amount %
$ 797,709 28.8 $ 913,571 $
356,633
31,605
Previously
Reported Reclassifications
(108,211) $
(53,976)
(4,740)
292,211 10.6
251,209 9.1
Presentation %
Current
Previously
Reported Reclassifications
(43,827) $
(21,689)
(16,282)
805,360 33.1 $ 388,183 $
144,009
302,657 12.4
108,544
26,865 1.1
Current
Presentation %
344,356 32.7
122,320 12.1
92,262 9.1
1,121,081 40.5
261,159 9.4
26,485 1.0
995,790
230,792
17,861
-
(4,040)
-
995,790 40.9
226,752 9.3
17,861 0.9
394,038
101,759
6,148
-
(3,385)
-
394,038 33.2
98,374 8.6
6,148 0.5
16,842 0.6
56,681
2,766,696 100.0 2,602,933
-
(170,967)
56,681 2.3
45,692
2,431,966 100.0 1,188,373
-
(85,183)
45,692 3.8
1,103,190 100.0
-
$2,766,696
(170,967)
$2,431,966
170,967
-
$ 2,431,966
(85,183)
$1,103,190
85,183
-
$ 1,103,190
On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, the new
revenue accounting guidance issued by the Financial Accounting Standards Board. The adoption resulted in certain changes in our
revenue recognition policies and the presentation of certain revenue sources. Beginning in the first quarter of 2018, we no longer
recognize barter revenue (and related barter expense) resulting from the exchange of advertising time for certain program material.
During the years ended December 31, 2017 and 2016, the Company recognized barter revenue (and related barter expense) of $42.5
million and $34.7 million, respectively, included in the trade and barter revenue line in the table above. Additionally, we now present
local, national, political and digital revenues, exclusive of the related agency commission. As shown in the reclassifications column in
the table above, the change in the presentation of local, national, political and digital revenues in years 2017 and 2016 are for
comparative purposes and did not impact our past or future net revenue, income from operations or net income.
42
Results of Operations
The following table sets forth a summary of the Company’s operations for the years ended December 31 (in thousands), and
each component of operating expense as a percentage of net revenue:
Net revenue
Operating expenses:
Corporate expenses
Direct operating expenses,
net of trade
Selling, general and administrative
expenses, excluding corporate
Trade and barter expense
Depreciation
Amortization of intangible assets
Amortization of broadcast rights,
excluding barter
Goodwill and intangible assets
impairment
Gain on disposal of stations, net
Reimbursement from the FCC related
to station repack
Total operating expenses
Income from operations
2018
Amount
%
$
2,766,696
100.0
Amount
$
2,431,966
2017
%
2016
Amount
%
1,103,190 100.0
100.0 $
110,921
1,101,423
469,012
16,494
109,789
149,406
61,342
19,911
-
(29,381)
2,008,917
757,779
$
4.0
39.8
17.0
0.6
4.0
5.4
2.2
0.7
-
(1.1)
138,394
978,930
466,712
56,970
100,658
159,500
62,908
19,985
(57,716)
-
1,926,341
505,625
$
5.7
51,177
4.6
40.3
371,242
33.7
19.2
2.3
4.1
6.6
212,429
45,439
51,300
46,572
19.3
4.1
4.7
4.2
2.6
22,461
2.0
0.8
(2.4)
15,262
-
-
$
-
815,882
287,308
1.4
-
-
Year Ended December 31, 2018 Compared to Year Ended December 31, 2017
The period-to-period comparability of our consolidated operating results is affected by acquisitions. For each quarter we present,
our legacy stations include those stations that we owned or provided services to for the complete quarter in the current and prior years.
For our annual and year to date presentations, we combine the legacy stations’ amounts presented in each quarter.
Revenue
Local advertising revenue was $797.7 million for the year ended December 31, 2018, compared to $805.4 million for the same
period in 2017, a decrease of $7.7 million, or 1.0%. National advertising revenue was $292.2 million for the year ended December 31,
2018 compared to $302.7 million for the same period in 2017, a decrease of $10.4 million, or 3.5%. Our legacy stations’ local and
national advertising revenue decreased by $41.5 million, which reflected the changes in the mix between our local, national and
political advertising revenue during an election year. Our station divestitures in 2017 also resulted in a decrease in revenue of $0.7
million. These decreases were partially offset by $21.7 million incremental revenue during the first quarter of 2018, resulting from our
merger with Media General in January 2017, and $2.5 million incremental revenue from station acquisitions in the third and fourth
quarters of 2018. Our largest advertiser category, automobile, represented approximately 24% and 25% of our local and national
advertising revenue for each of the years ended December 31, 2018 and 2017, respectively. Overall, including past results of our
newly acquired stations, automobile revenues decreased by approximately 10% during the year. The other categories representing our
top five were attorneys and medical/healthcare, which increased in 2018, and furniture and fast food/restaurants, which decreased in
2018.
Political advertising revenue was $251.2 million for the year ended December 31, 2018, compared to $26.9 million for the same
period in 2017, an increase of $224.3 million, as 2018 was an election year.
43
Retransmission compensation was $1.121 billion for the year ended December 31, 2018, compared to $995.8 million for the
same period in 2017, an increase of $125.3 million, or 12.6%. Our legacy stations’ revenue increased by $82.9 million primarily due
to scheduled annual escalation of rates per subscriber, renewals of smaller contracts providing for higher rates per subscriber
(contracts generally have a three-year term) and initial contributions from distribution agreements with OTTDs. Additionally, our
merger with Media General in January 2017 resulted in incremental revenue of $38.5 million and our station acquisitions in the third
and fourth quarters of 2018 resulted in incremental revenue of $4.7 million, partially offset by $0.8 million decrease resulting from
station divestitures in 2017. Broadcasters currently deliver more than 30% of all television viewing audiences in a pay television
household but are paid approximately 12-14% of the total cable programming fees. We anticipate continued increase of retransmission
fees until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers.
Digital media revenue, representing advertising revenue on our stations’ web and mobile sites and revenue from our other
digital operations, was $261.2 million for the year ended December 31, 2018, compared to $226.8 million for the same period in 2017,
an increase of $34.4 million or 15.2%. This was primarily attributable to $51.8 million incremental revenue from our newly acquired
stations and entities, an increase in revenue from our social media platform of $6.5 million and an increase in revenue of our legacy
stations of $2.3 million. These increases were partially offset by a decrease in revenue as a result of rebranding and consolidation of
our digital products and offerings of $26.1 million.
Operating Expenses (Income)
Corporate expenses, related to costs associated with the centralized management of our stations, were $110.9 million for the
year ended December 31, 2018, compared to $138.4 million for the same period in 2017, a decrease of $27.5 million, or 19.9%. This
was primarily attributable to a decrease in payroll, severance, bonuses and payroll related expenses of $26.9 million and a decrease in
legal and professional fees of $8.2 million, both of which were primarily associated with our 2017 acquisitions. These decreases were
partially offset by a $7.2 million increase in stock-based compensation related to equity incentives awarded during 2018 and 2017.
Station direct operating expenses, consisting primarily of news, engineering, programming and selling, general and
administrative expenses (net of trade expense) were $1.570 billion for the year ended December 31, 2018, compared to $1.446 billion
for the same period in 2017, an increase of $124.8 million, or 8.6%. The increase was primarily due to expenses of our newly acquired
stations and entities of $88.5 million (including network and programming costs of $24.4 million), partially offset by a decrease of
$1.2 million related to our station divestitures in 2017. Additionally, our legacy stations’ programming costs increased by $61.3
million primarily due to network affiliation renewals and annual increases in our network affiliation costs. Network affiliation costs
have been increasing industry-wide and will continue to increase over the next several years. These increases were partially offset by a
$25.2 million decrease in the direct operating expenses of our digital media entities as a result of rebranding and consolidation of our
digital products and offerings.
Depreciation of property and equipment was $109.8 million for the year ended December 31, 2018, compared to $100.7 million
for the same period in 2017, an increase of $9.1 million, or 9.1%. This was primarily due to increased depreciation of various assets
that were disposed and being replaced in connection with the station repack of $6.4 million, and incremental depreciation from newly
capitalized assets.
Amortization of intangible assets was $149.4 million for the year ended December 31, 2018, compared to $159.5 million for the
same period in 2017, a decrease of $10.1 million, or 6.3%. This was primarily attributable to decreases in amortization from certain
fully amortized assets, partially offset by incremental amortization from our acquisitions in 2018.
Amortization of broadcast rights, excluding barter were flat at $61.3 million for the year ended December 31, 2018, compared to
$62.9 million for the same period in 2017.
In 2017, certain of our stations were assigned to new channels (“repack”) in connection with the FCC’s process of repurposing a
portion of the broadcast television spectrum for wireless broadband use. Our stations are currently spending costs, mainly capital
expenditures, to construct and license the necessary technical modifications to operate on their newly assigned channels and to vacate
their former channels no later than July 13, 2020. Subject to fund limitations, the FCC reimburses television broadcasters, MVPDs and
other parties for costs reasonably incurred due to the repack. In 2018, we received a total of $29.4 million in reimbursements from the
FCC which we recognized as operating income.
In the fourth quarter of 2018 and 2017, we recorded goodwill and intangible asset impairment charges of $19.9 million and
$20.0 million, respectively, on some of our digital businesses. These were attributable to industry-wide margin compression, greater
levels of competition and shortfalls from operating forecasts.
44
In connection with our merger with Media General in 2017, we sold the assets of 12 full power television stations in 12 markets,
five of which were previously owned by us and seven of which were previously owned by Media General. We sold the Media General
stations for a total consideration of $427.6 million and we sold our stations for $114.4 million. These divestitures resulted in a net gain
on disposal of $57.7 million in 2017.
Interest Expense, net
Interest expense, net was $221.0 million for the year ended December 31, 2018, compared to $241.2 million for the same period
in 2017, a decrease of $20.2 million, or 8.4%, primarily attributable to one time fees associated with the financing of our acquisitions
in 2017 and the redemption of our $525.0 million 6.875% Notes in February 2017, partially offset by the effects of an increasing trend
in the London Interbank Offered Rate (“LIBOR”).
Loss on Extinguishment of Debt
Loss on extinguishment of debt was $12.1 million for the year ended December 31, 2018, compared to $34.9 million for the
same period in 2017, a decrease of $22.8 million, or 65.3%. In 2018, we refinanced certain of our term loans and revolving loans,
resulting in a loss on extinguishment of debt of $3.7 million. We also made prepayments of our outstanding term loans during 2018,
resulting in a loss on extinguishment of debt of $8.4 million. In 2017, we redeemed the entire $525.0 million principal balance under
our 6.875% Notes at a redemption price equal to 103.438%. We also refinanced $670.8 million of the Company’s term loans and
revolving loans and prepaid $260.0 million principal balance under our term loans. These transactions resulted in total loss on
extinguishments of debt of $34.9 million, representing premiums paid to retire the 6.875% Notes and the write-off of unamortized
debt financing costs and debt discounts/premiums associated with these debt instruments.
Income Taxes
Income tax expense was $144.7 million for the year ended December 31, 2018, compared to an income tax benefit of $233.9
million for the same period in 2017, an increase in income tax expense of $378.6 million. The effective tax rates during the years
ended December 31, 2018 and 2017 were 27.1% and -96.9%, respectively. This significant change relates to the prior year
remeasurement under the Tax Cuts and Jobs Act of 2017.
In 2017, the Tax Cuts and Jobs Act of 2017 was signed into law which reduced the federal corporate income tax rate from 35%
to 21%. The reduction in the federal corporate income tax rate resulted in a $322.2 million reduction of the Company’s net deferred
tax liability, or a 133.1% increase in the effective tax rate between the two periods. Other changes to the effective tax rates relate to
various permanent differences such as the tax impact of limitation on compensation deduction, the tax impact related to goodwill
impairment and the tax impact of excess tax benefits related stock-based compensation recognized in the income statement pursuant to
ASU No. 2016-09 (adopted as of January 1, 2017). These transactions and events resulted in a total income tax expense effect of $5.68
million, or an increase to the effective tax rate of 1.1%.
Year Ended December 31, 2017 Compared to Year Ended December 31, 2016
The period-to-period comparability of our consolidated operating results is affected by acquisitions. For each quarter we present,
our legacy stations include those stations that we owned or provided services to for the complete quarter in the current and prior years.
For our annual and year to date presentations, we combine the legacy stations’ amounts presented in each quarter.
Revenue
Local advertising revenue was $805.4 million for the year ended December 31, 2017, compared to $344.4 million for the same
period in 2016, an increase of $461.0 million, or 133.9%. National advertising revenue was $302.7 million for the year ended
December 31, 2017 compared to $122.3 million for the same period in 2016, an increase of $180.4 million, or 147.5%. The increase in
local and national advertising revenue was primarily attributable to incremental revenue from the stations we acquired through our
merger with Media General in January 2017 along with other acquisitions of $671.5 million, less decreases in revenue resulting from
station divestitures of $17.2 million. Our legacy stations’ local and national advertising revenue decreased by $13.7 million during the
year ended December 31, 2017 compared to the same period in 2016, which includes the impact of revenue from the 2016 Olympics
on our NBC affiliate legacy stations. Our largest advertiser category, automobile, represented approximately 25% and 26% of our
local and national advertising revenue for the years ended December 31, 2017 and 2016, respectively. Overall, including past results
of our newly acquired stations, automobile revenues decreased by approximately 4% during the year. The other categories
representing our top five were fast food/restaurants, furniture and medical/healthcare, which declined this year, and attorneys, which
increased in 2017.
45
Political advertising revenue was $26.9 million for the year ended December 31, 2017, compared to $92.3 million for the same
period in 2016, a decrease of $65.4 million, as 2017 was not an election year.
Retransmission compensation was $995.8 million for the year ended December 31, 2017, compared to $394.0 million for the
same period in 2016, an increase of $601.8 million, or 152.7%. The increase in retransmission compensation was attributable to
incremental revenue from the stations we acquired through our merger with Media General in January 2017 along with other
acquisitions of $550.9 million, less decrease in revenue resulting from station divestitures of $14.1 million. Our legacy stations’
revenue also increased by $64.9 million, primarily due to the renewals of contracts providing for higher rates per subscriber (contracts
generally have a three-year term) and scheduled annual escalation of rates per subscriber. In 2016, we successfully renewed our legacy
stations’ retransmission compensation agreements representing approximately 50% of our legacy stations’ subscriber base. There were
no significant renewals of retransmission compensation agreements in 2017. Broadcasters currently deliver more than 30% of all
television viewing audiences in a pay television household but are paid approximately 12-14% of the total cable programming fees.
We anticipate continued increase of retransmission fees until there is a more balanced relationship between viewers delivered and fees
paid for delivery of such viewers.
Digital media revenue, representing advertising revenue on our stations’ web and mobile sites and revenue from our other
digital operations, was $226.8 million for the year ended December 31, 2017, compared to $98.4 million for the same period in 2016,
an increase of $128.4 million or 130.5%. This was primarily attributable to the incremental revenue from the stations and digital
businesses we acquired through our merger with Media General in January 2017 along with other acquisitions of $148.2 million and
an increase in the revenue of our legacy stations of $4.4 million. These were partially offset by a decrease in revenue as a result of
rebranding and consolidation of our digital products and offerings of $22.9 million and a decrease in revenue resulting from station
divestitures of $1.3 million.
Operating Expenses (Income)
Corporate expenses, related to costs associated with the centralized management of our stations, were $138.4 million for the
year ended December 31, 2017, compared to $51.2 million for the same period in 2016, an increase of $87.2 million, or 170.3%. This
was primarily attributable to an increase in payroll, severance, bonuses and payroll related expenses of $50.5 million and an increase
in legal and professional fees of $13.9 million, both of which were primarily associated with our acquisitions and increased number of
stations and entities. Additionally, new equity incentive awards during the current year increased our stock-based compensation by
$12.7 million.
Station direct operating expenses, consisting primarily of news, engineering, programming and selling, general and
administrative expenses (net of trade expense) were $1.446 billion for the year ended December 31, 2017, compared to $583.7 million
for the same period in 2016, an increase of $862.0 million, or 147.7%. The increase was primarily due to expenses of the stations and
digital businesses we acquired through our merger with Media General in January 2017 along with other acquisitions of $862.2
million, and an increase in programming costs for our legacy stations of $38.4 million primarily related to recently enacted network
affiliation agreements. Network affiliation costs have been increasing industry-wide and will continue to increase over the next several
years. These increases were partially offset by a $21.2 million decrease in the direct operating expenses of our digital media entities as
a result of rebranding and consolidation of our digital products and offerings and a $16.0 million decrease in our direct operating
expenses attributable to stations divested.
Depreciation of property and equipment was $100.7 million for the year ended December 31, 2017, compared to $51.3 million
for the same period in 2016, an increase of $49.4 million, or 96.2%. The increase was primarily due to the acquisition of assets
through our merger with Media General.
Amortization of intangible assets was $159.5 million for the year ended December 31, 2017, compared to $46.6 million for the
same period in 2016, an increase of $112.9 million, or 242.5%. The increase was primarily due to the acquisition of intangible assets
through our merger with Media General.
Amortization of broadcast rights, excluding barter was $62.9 million for the year ended December 31, 2017, compared to $22.5
million for the same period in 2016, an increase of $40.4 million, or 180.1%, primarily attributable to our acquisition of broadcast
rights through our merger with Media General.
In the fourth quarter of 2017, we recorded goodwill and intangible asset impairment charges of $20.0 attributable to our digital
businesses as a result of reorganization, greater levels of competition and shortfalls from operating forecasts.
In connection with our merger with Media General, we sold the assets of 12 full power television stations in 12 markets, five of
which were previously owned by us and seven of which were previously owned by Media General. We sold the Media General
stations for a total consideration of $427.6 million and we sold our stations for $114.4 million. These divestitures resulted in a net gain
on disposal of $57.7 million.
46
Interest Expense, net
Interest expense, net was $241.2 million for the year ended December 31, 2017, compared to $116.1 million for the same period
in 2016, an increase of $125.1 million, or 107.8%, primarily attributable to interest on new borrowings and one-time fees associated
with the financing of our acquisitions, less decreases in interest resulting from redemptions.
Income Taxes
Income tax benefit was $233.9 million for the year ended December 31, 2017, compared to an income tax expense of $77.6
million for the same period in 2016. The effective tax rates were -96.9% and 45.5% for each of the respective periods.
In 2017, the Tax Cuts and Jobs Act of 2017 was signed into law which reduces the federal corporate income tax rate from 35%
to 21%. The reduction in the federal corporate income tax rate resulted in a reduction of the Company’s net deferred tax liability and a
corresponding recognition of income tax benefit of $322.2 million, or a decrease to the effective tax rate of 133.1%. Other changes to
the effective tax rates relate to various permanent differences such as the tax impact of our previously owned stations divested in 2017,
the tax impact of limitation on compensation deduction, the tax impact related to domestic production activities deduction and the tax
impact of excess tax benefits related stock-based compensation which are now recognized in the income statement pursuant to ASU
No. 2016-09 (adopted as of January 1, 2017). These transactions and events resulted in a total income tax benefit effect of $19.6
million, or a decrease to the effective tax rate of 9.5%.
47
Liquidity and Capital Resources
The Company is leveraged, which makes it vulnerable to changes in general economic conditions. The Company’s ability to
meet the future cash requirements described below depends on its ability to generate cash in the future, which is subject to general
economic, financial, competitive, legislative, regulatory and other conditions, many of which are beyond the Company’s control.
Based on current operations and anticipated future growth, the Company believes that its available cash, anticipated cash flow from
operations and available borrowings under the senior secured credit facilities will be sufficient to fund working capital, capital
expenditure requirements, interest payments and scheduled debt principal payments for at least the next twelve months as of the filing
date of this Annual Report on Form 10-K. In order to meet future cash needs the Company may, from time to time, borrow under its
existing senior secured credit facilities or issue other long- or short-term debt or equity, if the market and the terms of its existing debt
arrangements permit. We will continue to evaluate the best use of our operating cash flow among our capital expenditures,
acquisitions and debt reduction.
Overview
The following tables present summarized financial information management believes is helpful in evaluating the Company’s
liquidity and capital resources (in thousands):
Net cash provided by operating activities(1)
Net cash used in investing activities(1)(2)
Net cash (used in) provided by financing activities(1)
Net increase (decrease) in cash, cash equivalents and restricted cash(1)
Cash paid for interest(1)
Income taxes paid, net of refunds(3)
$
$
$
$
Years Ended December 31,
2017
2016
2018
736,867 $
(175,514)
(531,890)
29,463 $
218,746 $
90,717 $
109,091 $
(2,066,285)
1,057,367
(899,827) $
239,558 $
272,689 $
284,253
(135,122)
822,932
972,063
78,261
29,391
(1)
(2)
(3)
As discussed in Note 2 – Recent Accounting Pronouncements to our Consolidated Financial Statements in Part IV, Item 15 of this Annual
Report on Form 10-K, the Company, effective on January 1, 2018, adopted the FASB issued ASU No. 2016-15, which provides guidance
related to classification on the statement of cash flows of certain cash receipts and cash payments, and the FASB ASU 2016-18, which
provides guidance related to classification on the statement of cash flows of restricted cash. These adoptions changed the cash flow reporting
of certain transactions of the Company between 2017 and 2016. Accordingly, our current presentation of the 2017 net cash provided by
operating activities, net cash used in investing activities and net cash provided by financing activities decreased by $27.6 million, $4.2 million
and $900.0 million, respectively, compared to amounts previously presented. Also, our current presentation of the 2016 net cash provided by
operating activities and net cash provided by financing activities increased by $22.7 million and $900.00 million, respectively, and our 2016
net cash used in investing activities decreased by $5.1 million.
In 2018, the investing activities included total capital expenditures of $106.2 million, of which $26.8 million was reimbursed from the FCC in
connection with the station repack and $2.9 million was funded by the incentive auction proceeds received from the FCC in 2017.
The cash paid for income taxes, net of refunds, during the year ended December 31, 2018 includes payments totaling $1.1 million in tax
liabilities assumed in the acquisition of LKQD and was funded by the seller through working capital. The cash paid for income taxes, net of
refunds, during the year ended December 31, 2017 includes payments totaling $237.9 million, primarily related to the proceeds received to
relinquish certain spectrum and tax liabilities resulting from various sale of stations. No payments for tax liabilities resulting from non-
recurring events were made during 2016.
Cash and cash equivalents
Long-term debt including current portion
Unused revolving loan commitments under senior secured credit facilities(1)
$
As of December 31,
2018
2017
145,115 $
3,981,003
166,372
115,652
4,362,460
172,000
(1)
Based on the covenant calculations as of December 31, 2018, all of the $166.4 million total unused revolving loan commitments under the
Company’s senior secured credit facilities were available for borrowing.
48
Cash Flows – Operating Activities
Net cash flows provided by operating activities increased by $627.8 million during the year ended December 31, 2018 compared
to the same period in 2017. This was primarily attributable to an increase in net revenue (excluding trade and barter) of $374.6 million
less an increase in station and corporate operating expenses (excluding non-cash transactions) of $89.2 million, a decrease in payments
for tax liabilities of $182.0 million, primarily due to nonrecurring tax payments in 2017 resulting from the sale of stations and tax
payments related to the proceeds from spectrum auction, a decrease in cash paid for interest of $20.8 million, a decrease in the use of
cash resulting from timing of payments to vendors of $32.8 million, source of cash resulting from timing of accounts receivable
collections of $87.5 million, and a decrease in payments for contingent consideration related to a past acquisition of $4.0 million.
Cash paid for interest decreased by $20.8 million during the year ended December 31, 2018 compared to the same period in
2017, primarily due to one-time fees incurred in 2017 associated with the financing of our acquisitions.
Net cash flows provided by operating activities decreased by $175.2 million during the year ended December 31, 2017
compared to the same period in 2016. This was primarily attributable to an increase in payments for tax liabilities of $243.3 million,
primarily related to proceeds from the spectrum auction and station divestitures, an increase in cash paid for interest of $161.3 million,
use of cash resulting from timing of payments to vendors of $64.1 million, use of cash resulting from timing of accounts receivable
collections of $29.4 million and an increase in payments for broadcast rights of $39.5 million. These transactions were partially offset
by an increase in net revenue (excluding trade and barter) of $1.318 billion less an increase in station and corporate operating expenses
(excluding non-cash transactions) of $940.6 million.
Cash paid for interest increased by $161.3 million during the year ended December 31, 2017 compared to the same period in
2016, primarily due to interest on borrowings during 2017 (net of redemptions) and one-time fees associated with the financing of our
2017 acquisitions.
Cash Flows – Investing Activities
Net cash flows used in investing activities for the year ended December 31, 2018 was $175.5 million, compared to $2.066
billion and $135.1 million for the same period in 2017 and 2016, respectively.
In 2018, we completed our acquisition of LKQD for a cash purchase price of $97.0 million, less $11.2 million of cash acquired,
and the acquisitions of two new stations for $18.0 million. We also spent $106.2 million in capital expenditures. These transactions
were partially offset by reimbursements from the FCC related to station repack of $29.4 million and proceeds from disposal of assets
of $4.3 million.
In 2017, we completed our merger with Media General and paid $1.376 billion in cash consideration to stockholders of Media
General, less $63.9 million of cash acquired through the merger. In connection with the merger, we also repaid $1.658 billion of
Media General’s certain then existing indebtedness as part of the acquisition purchase price. In 2017, we also completed our
acquisition of certain assets of a station for $4.1 million in cash. We also spent $72.5 million in capital expenditures. These
transactions were partially offset by $481.9 million net proceeds from station divestitures and $478.6 million gross proceeds to
relinquish the spectrum of certain Company stations that accepted bids in the 2017 incentive auction. We also received $20.0 million
in proceeds from disposal of assets, primarily the sale of a real estate property.
In 2016, we acquired certain assets of four full power stations in four markets in West Virginia and paid $58.5 million.
Additionally, we completed the acquisition of five full power stations for total payments of $45.5 million. In 2016, we spent $31.9
million in capital expenditures.
During the year ended December 31, 2018, capital expenditures increased by $33.8 million compared to the same period in 2017,
primarily due to increased spending of $26.8 million related to station repack and $2.9 million related to the relinquishment of certain
spectrum. The capital expenditures related to station repack were reimbursed from the FCC and the capital expenditures related to
relinquishment of certain spectrum were funded by the incentive auction proceeds received from the FCC in 2017. During the year
ended December 31, 2017, capital expenditures increased by $40.6 million compared to the same period in 2016, primarily due to
capital expenditures for newly acquired stations.
49
Cash Flows – Financing Activities
Net cash flows used in financing activities for the year ended December 31, 2018 was $531.9 million, compared to net cash
provided by financing activities during the same period in 2017 and 2016 of $1.057 billion and $822.9 million, respectively.
In 2018, we borrowed $44.0 million under our revolving credit facility to partially fund our acquisition of LKQD and received
$6.0 million in proceeds from stock option exercises. Marshall also issued a $51.8 million term loan to refinance the outstanding
principal balances under its previous term loan and revolving credit facility of $48.8 million and $3.0 million, respectively.
Additionally, Marshall borrowed a $5.6 million revolving loan to partially repay its Term Loan A. In October 2018, the Company
amended its credit agreements which decreased the interest rates and extended the maturity date on certain of its debt. In connection
with this refinancing, Nexstar borrowed an additional $150.0 million under its Term Loan A, the proceeds of which were used to
partially repay the outstanding principal balance under Nexstar’s Term Loan B. These transactions were partially offset by repayments
of outstanding obligations under our revolving credit facility of $44.0 million, repayments of outstanding principal balance under the
Company’s term loans of $401.6 million, purchases of treasury stock of $50.5 million, payments of dividends to our common
stockholders of $68.6 million ($0.375 per share each quarter), payments for capital lease and capitalized software obligations of $8.8
million, cash payment for taxes in exchange for shares of common stock withheld of $4.9 million, payments to acquire the remaining
assets of a station previously owned by KRBK, LLC of $2.5 million and payments for debt financing costs associated with the
Company’s debt refinancing of $1.1 million.
In 2017, the Company borrowed term loans, net of debt discount, of $3.531 billion and drew $3.0 million under a revolving
loan. We also received $8.2 million in proceeds from stock option exercises. These cash flow increases were partially offset by
repayments of certain then existing term and revolving loans of Nexstar, Mission and Marshall with an aggregate principal of $670.8
million, our redemption of the entire $525.0 million principal amount of our 6.875% Notes at a redemption price equal to 103.438%,
repayments of outstanding principal balance under our term loans of $454.4 million associated with the amendments to senior secured
credit facilities in July 2017, prepayments of $260.0 million outstanding principal balances under our term loans, scheduled
repayments of outstanding principal balance under our, Mission’s, Marshall’s and Shield’s term loans of $12.2 million, payments for
debt financing costs associated with new term loans and new revolving credit facilities of $52.0 million, payments to acquire the
remaining assets of stations previously owned by West Virginia Media Holdings of $66.9 million, repurchases of our Class A
Common Stock of $99.0 million, payments of dividends to our common stockholders of $55.9 million ($0.30 per share each quarter),
payments for contingent consideration, mainly related to our merger with Media General, of $259.6 million, payments for capital lease
and capitalized software obligations of $7.1 million and cash payment for taxes in exchange for shares of Nexstar common stock
withheld of $4.1 million.
In 2016, we issued our $900.0 million 5.625% Notes at par. The proceeds of this loan were directly deposited in a restricted
escrow account which was eventually released to us in January 2017 to partially fund our merger with Media General and related
transactions. During 2016, we also borrowed a total of $58.0 million under our revolving credit facility to fund our acquisitions. We
also received $1.2 million proceeds from stock option exercises. These cash flow increases were partially offset by repayments of
outstanding obligations under our revolving credit facility of $58.0 million, scheduled repayments of outstanding principal balance
under our, Mission’s and Marshall’s term loans of $22.1 million, payments for debt financing costs of $20.7 million, payments of
dividends to our common stockholders of $29.4 million ($0.24 per share each quarter), payments for contingent consideration related
to a past acquisition of $2.0 million, payments for capital lease and capitalized software obligations of $3.3 million and distribution to
a noncontrolling interest of $0.6 million.
50
Future Sources of Financing and Debt Service Requirements
As of December 31, 2018, the Company had total combined debt of $4.0 billion, which represented 68.2% of the Company’s
combined capitalization. The Company’s high level of debt requires that a substantial portion of cash flow be dedicated to pay
principal and interest on debt, which reduces the funds available for working capital, capital expenditures, acquisitions and other
general corporate purposes.
The following table summarizes the approximate aggregate amount of principal indebtedness scheduled to mature for the
periods referenced as of December 31, 2018 (in thousands):
Nexstar senior secured credit facility
Mission senior secured credit facility
Marshall senior secured credit facility
Shield senior secured credit facility
5.875% senior unsecured notes due 2022
6.125% senior unsecured notes due 2022
5.625% senior unsecured notes due 2024
Total
2019
$ 2,148,128 $
228,527
51,183
22,959
400,000
275,000
900,000
$ 4,025,797 $
41,477 $
2,285
51,183
1,148
-
-
-
96,093 $
2020-2021 2022-2023 Thereafter
688,525 $ 1,318,580
217,102
-
-
-
-
900,000
106,871 $ 1,387,151 $ 2,435,682
99,546 $
4,570
-
2,755
-
-
-
4,570
-
19,056
400,000
275,000
-
We make semiannual interest payments on our $275.0 million 6.125% Notes on February 15 and August 15 of each year. We
make semiannual interest payments on the 5.625% Notes on February 1 and August 1 of each year. We also make semiannual
payments on the 5.875% Notes on May 15 and November 15 of each year. Interest payments on our, Mission’s, Marshall’s and
Shield’s senior secured credit facilities are generally paid every one to three months and are payable based on the type of interest rate
selected.
The terms of our, Mission’s, Marshall’s and Shield’s senior secured credit facilities, as well as the indentures governing our
6.125% Notes, 5.625% Notes and the 5.875% Notes, limit, but do not prohibit us, Mission, Marshall or Shield, from incurring
substantial amounts of additional debt in the future.
The Company does not have any rating downgrade triggers that would accelerate the maturity dates of its debt. However, a
downgrade in the Company’s credit rating could adversely affect its ability to renew the existing credit facilities, obtain access to new
credit facilities or otherwise issue debt in the future and could increase the cost of such debt.
The Company had $166.4 million of total unused revolving loan commitments under the senior secured credit facilities, all of
which were available for borrowing, based on the covenant calculations as of December 31, 2018. The Company’s ability to access
funds under its senior secured credit facilities depends, in part, on our compliance with certain financial covenants. Any additional
drawings under the senior secured credit facilities will reduce the Company’s future borrowing capacity and the amount of total
unused revolving loan commitments.
During 2018, we repurchased a total of 751,920 shares of our Class A common stock for $50.5 million, funded by cash on hand.
On April, 26, 2018, our Board of Directors approved an increase in our share repurchase authorization to repurchase up to an
additional $200.0 million of our Class A common stock. As of December 31, 2018, the remaining available amount under the share
repurchase authorization was $201.9 million, inclusive of the 2018 additional authorization and the remaining balance under our prior
authorization.
On November 30, 2018, we entered into a definitive merger agreement with Tribune to acquire Tribune’s outstanding equity
for $46.50 per share in a cash transaction that is valued at $6.4 billion, consisting of the merger cash consideration and the refinancing
of Tribune's outstanding debt. The merger is not subject to any financing condition and we received committed financing up to a
maximum of $6.4 billion from a group of commercial banks to provide the debt financing to consummate the merger and the
refinancing of certain of the existing indebtedness of Tribune and related transactions. The merger has been approved by the boards of
directors of both companies and is projected to close late in the third quarter of 2019, subject to FCC approval, other regulatory
approvals and satisfaction of other customary closing conditions. We and Tribune plan to divest certain of our stations in connection
with the proposed merger in order to comply with FCC media ownership rules.
51
The merger agreement contains certain termination rights for both us and Tribune. If the merger agreement is terminated in
connection with Tribune entering into a definitive agreement with respect to a superior proposal, as well as under certain other
circumstances, the termination fee payable by Tribune to us will be $135 million. If the merger agreement is terminated because the
required Tribune stockholder vote is not obtained at a stockholder meeting duly held for such purpose, Tribune will be required to
reimburse us for our costs and expenses incurred in connection with the transaction in an amount not to exceed $15 million. Either
party may terminate the merger agreement if the merger is not consummated on or before an end date of November 30, 2019, with an
automatic extension to February 29, 2020, if necessary to obtain regulatory approval under circumstances specified in the merger
agreement.
On January 25, 2019, Nexstar’s Board of Directors declared a quarterly dividend of $0.45 per share of its Class A common
stock. The dividend was paid on February 22, 2019 to stockholders of record on February 8, 2019.
On January 28, 2019, Nexstar completed the acquisition of KHII and paid the remaining purchase price of $6.4 million, funded
by cash on hand.
Debt Covenants
Our credit agreement contains a covenant which requires us to comply with a maximum consolidated first lien net leverage ratio
of 4.25 to 1.00. The financial covenant, which is formally calculated on a quarterly basis, is based on our combined results. The
Mission, Marshall and Shield amended credit agreements do not contain financial covenant ratio requirements but do provide for
default in the event we do not comply with all covenants contained in our credit agreement. As of December 31, 2018, we were in
compliance with our financial covenant. We believe Nexstar, Mission, Marshall and Shield will be able to maintain compliance with
all covenants contained in the credit agreements governing the senior secured facilities and the indentures governing our 6.125%
Notes, our 5.625% Notes and our 5.875% Notes for a period of at least the next 12 months from December 31, 2018.
No Off-Balance Sheet Arrangements
As of December 31, 2018, we did not have any relationships with unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance or variable interest entities, which would have been established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. All of our arrangements with our VIEs
in which we are the primary beneficiary are on-balance sheet arrangements. Our variable interests in other entities are obtained
through local service agreements, which have valid business purposes and transfer certain station activities from the station owners to
us. We are, therefore, not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in
such relationships.
52
Contractual Obligations
The following summarizes the Company’s contractual obligations as of December 31, 2018, and the effect such obligations are
expected to have on the Company’s liquidity and cash flow in future periods (in thousands):
Total
2019
2020-2021 2022-2023 Thereafter
Recorded contractual obligations:
Nexstar senior secured credit facility
Mission senior secured credit facility
Marshall senior secured credit facility
Shield senior secured credit facility
5.875% senior unsecured notes due 2022
6.125% senior unsecured notes due 2022
5.625% senior unsecured notes due 2024
Capital lease obligations
Broadcast rights current cash commitments(1)
Other(2)(3)(4)
Unrecorded contractual obligations:
Network affiliation agreements
Cash interest on debt(5)
Operating lease obligations
Executive employee contracts(6)
Broadcast rights future cash commitments(7)
Other
$ 2,148,128 $
228,527
51,183
22,959
400,000
275,000
900,000
24,227
25,447
34,340
1,326,594
940,137
121,072
57,131
114,757
29,958
$ 6,699,460 $
41,477 $
2,285
51,183
1,148
-
-
-
1,766
8,373
8,198
542,790
199,615
22,179
29,545
46,118
11,513
966,190 $
99,546 $
4,570
-
2,755
-
-
-
3,638
12,051
20,513
688,525 $ 1,318,580
217,102
-
-
-
-
900,000
15,202
-
-
4,570
-
19,056
400,000
275,000
-
3,621
5,023
5,629
598,880
389,499
36,635
25,024
55,821
18,445
-
32,841
37,577
-
-
-
1,267,377 $ 1,944,591 $ 2,521,302
184,924
318,182
24,681
2,562
12,818
-
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Future minimum payments for license agreements for which the license period has begun.
Excludes our liabilities, as of December 31, 2018, to surrender spectrum pursuant to the FCC’s incentive auction of $130.0 million. These
liabilities represent our obligations to move two of our stations from UHF channels to VHF channels. Upon completion, the liabilities and the
related spectrum assets will be derecognized with no expected cash flow impact.
As of December 31, 2018, we had $12.5 million of gross unrecognized tax benefits. This liability represents an estimate of tax positions that
the Company has taken in its tax returns, which may ultimately not be sustained upon examination by the tax authorities. The resolution of
these tax positions may not require cash settlement due to the existence of federal and state NOLs. As such, our contractual obligations table
above excludes this liability.
As of December 31, 2018, we had $92.8 million and $21.4 million of funding obligations with respect to our pension benefit plans and other
postretirement benefit plans, respectively, which are not included in the table above. See Note 8 to our Consolidated Financial Statements for
further information regarding our funding obligations for these benefit plans.
Estimated interest payments due as if all debt outstanding as of December 31, 2018 remained outstanding until maturity, based on interest
rates in effect at December 31, 2018.
Includes the employment contracts for all corporate executive employees and general managers of our stations and entities. We expect our
contracts will be renewed or replaced with similar agreements upon their expiration. Amounts included in the table above assumed that
contracts are not terminated prior to their expiration.
Future minimum payments for license agreements for which the license period has not commenced and no liability has been recorded.
53
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, which requires us to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the
date of the Consolidated Financial Statements and reported amounts of revenue and expenses during the period. On an ongoing basis,
we evaluate our estimates, including those related to business acquisitions, goodwill and intangible assets, property and equipment,
broadcast rights, retransmission compensation, trade, pension and postretirement benefits and income taxes. We base our estimates on
historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from those estimates.
For an overview of our significant accounting policies, we refer you to Note 2 to our Consolidated Financial Statements in Part
IV, Item 15 of this Annual Report on Form 10-K. We believe the following critical accounting policies are those that are the most
important to the presentation of our Consolidated Financial Statements, affect our more significant estimates and assumptions, and
require the most subjective or complex judgments by management.
Consolidation of Variable Interest Entities
We regularly evaluate our local service agreements and other arrangements where we may have variable interests to determine
whether we are the primary beneficiary of a VIE. Under U.S. GAAP, a company must consolidate an entity when it has a “controlling
financial interest” resulting from ownership of a majority of the entity’s voting rights. Accounting rules expanded the definition of
controlling financial interest to include factors other than equity ownership and voting rights.
In applying accounting and disclosure requirements, we must base our decision to consolidate an entity on quantitative and
qualitative factors that indicate whether or not we have the power to direct the activities of the entity that most significantly affect its
economic performance and whether or not we have the obligation to absorb losses of the entity or the right to receive benefits from the
entity that could potentially be significant to the VIE. Our evaluation of the “power” and “economics” model must be an ongoing
process and may alter as facts and circumstances change.
Mission, Marshall, Shield and other consolidated VIEs are included in our Consolidated Financial Statements because we are
deemed to have controlling financial interests in these entities as VIEs for financial reporting purposes as a result of (1) local service
agreements we have with the stations they own, (2) our guarantee of the obligations incurred under Mission’s, Marshall’s and Shield’s
senior secured credit facilities, (3) our power over significant activities affecting these entities’ economic performance, including
budgeting for advertising revenue, advertising sales and, in some cases, hiring and firing of sales force personnel and (4) purchase
options granted by each VIE, exclusive of Marshall, which permit Nexstar to acquire the assets and assume the liabilities of each of
the VIEs’ stations at any time, subject to FCC consent. These purchase options are freely exercisable or assignable by Nexstar without
consent or approval by the VIEs. These option agreements expire on various dates between 2021 and 2028. We expect to renew these
option agreements upon expiration. Therefore, these VIEs are consolidated into these financial statements.
Valuation of Goodwill and Intangible Assets
Intangible assets represented $5.4 billion, or 77.0%, of our total assets as of December 31, 2018. Intangible assets consist
primarily of goodwill, FCC licenses, network affiliation agreements, developed technology and customer relationships arising from
acquisitions. The purchase prices of acquired businesses are allocated to the assets and liabilities acquired at estimated fair values at
the date of acquisition using various valuation techniques, including discounted projected cash flows, the cost approach and the
income approach. The fair value estimates are based on, but not limited to, expected future revenue and cash flows, expected future
growth rates, and estimated discount rates. The excess of the purchase price over the fair value of net assets acquired is recorded as
goodwill. If the fair value of these assets is less than the carrying value, we are required to record an impairment charge.
We aggregate our television station markets into a single broadcast business reporting unit for purposes of our goodwill
impairment tests because of their similar economic characteristics. We perform our FCC license impairment tests on a market basis.
The Company’s digital businesses increased from three reporting units to four reporting units with the acquisition of LKQD in early
2018. The reporting units within the Company’s digital business are not economically similar, and therefore, not aggregated.
We test our goodwill and FCC licenses in our fourth quarter each year, or whenever events or changes in circumstances indicate
that such assets might be impaired. We first assess the qualitative factors to determine the likelihood of our goodwill and FCC licenses
being impaired. Our qualitative analysis includes, but is not limited to, assessing the changes in macroeconomic conditions, regulatory
environment, industry and market conditions, and the financial performance versus budget of the reporting units, as well as any other
events or circumstances specific to the reporting unit or the FCC licenses. If it is more likely than not that the fair value of a reporting
unit or an FCC license is greater than their respective carrying amounts, no further testing will be required. Otherwise, we will apply
the quantitative impairment test method.
54
The quantitative impairment test for goodwill is performed by comparing the fair value of a reporting unit with its carrying
amount. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and no further testing is required. If
the fair value of the reporting unit is less than the carrying value, an impairment charge is recognized for the amount by which the
carrying amount exceeds the reporting unit’s fair value, however, the loss recognized should not exceed the total amount of goodwill
allocated to that reporting unit. The quantitative impairment test for FCC licenses consists of a market-by-market comparison of the
carrying amounts of FCC licenses with their fair value, using a discounted cash flow analysis. An impairment is recorded when the
carrying value of an FCC license exceeds its fair value.
We test our finite-lived intangible assets whenever events or circumstances indicate that their carrying amount may not be
recoverable, relying on a number of factors including operating results, business plans, economic projections and anticipated future
cash flows. Impairment in the carrying amount of a finite-lived intangible asset is recognized when the expected future operating cash
flow derived from the operations to which the asset relates is less than its carrying value.
We performed our annual impairment tests on goodwill and FCC licenses attributable to our broadcast business using the
qualitative analysis approach and concluded that it was more likely than not that their fair values would sufficiently exceed the
carrying amounts. There were no indicators that our finite-lived intangible assets attributable to broadcast markets will not be
recoverable.
We performed the quantitative goodwill impairment tests on two of our digital reporting units as a result of shortfalls from
operating forecasts and increased levels of competition. The quantitative impairment tests resulted in total impairment charges of
$19.9 million. For the remaining two digital reporting units, the Company performed its annual impairment tests using the qualitative
analysis approach and concluded that it was more likely than not that their fair values would sufficiently exceed the carrying amounts.
As of December 31, 2018, three of the Company’s digital reporting units had no remaining goodwill balance and one digital reporting
unit acquired in January 2018 had a goodwill balance of $42.1 million.
The quantitative analyses for our digital businesses was performed using a combination of a discounted cash flows analysis and
market revenue multiples analysis, including the following key assumptions: (i) compound annual growth rate ranging from 4.4% to
5.0% based on management projections and industry trends, (ii) operating profit margins in the initial year ranging from 1.1% to 5.9%
driven by planned development activities, increasing to 6.3% to 13.7% reflecting a mature operating model, (iii) discount rate of 15.0%
based on an analysis of digital media companies, (iv) income tax rate of 21.0% to 28.7% based on statutory federal and blended state
tax rates, (v) terminal growth rate of 2.5% based on a mature company in the digital media industry and (vi) market revenue multiples,
adjusted for our reporting units’ forecasted operating performance, ranging from 0.3 to 0.5.
Our quantitative goodwill impairment tests are sensitive to changes in key assumptions used in our analysis, such as expected
future cash flows and market trends. If the assumptions used in our analysis are not realized, it is possible that an additional
impairment charge may need to be recorded in the future. We cannot accurately predict the amount and timing of any impairment of
goodwill or other intangible assets. Further, we will need to continue to evaluate the carrying value of our goodwill and any additional
impairment charges that we may take in the future could have an impact on our results of operations and financial condition. We will
actively monitor the results of these reporting units in future quarters.
We also performed quantitative and qualitative tests to determine whether these digital reporting units’ finite-lived assets are
recoverable. Based on our estimate of undiscounted future pre-tax cash flows expected to result from the use of these assets, we
determined that the carrying amounts are recoverable as of December 31, 2018. No other events or circumstances were noted in 2018
that would indicate impairment.
Broadcast Rights Carrying Amount
We record cash broadcast rights contracts as an asset and a liability when the license period has begun, the cost of each program
is known or reasonably determinable, we have accepted the program material, and the program is produced and available for
broadcast. Cash broadcast rights are initially recorded at the contract cost and are amortized on a straight-line basis over the period the
programming airs. The current portion of cash broadcast rights represents those rights available for broadcast which will be amortized
in the succeeding year. Periodically, we evaluate the net realizable value, calculated using the average historical rates for the programs
or the time periods the programming will air, of our cash broadcast rights and adjust amortization in that quarter for any deficiency
calculated. As of December 31, 2018, the carrying amounts of our current cash broadcast rights were $7.7 million and our non-current
cash broadcast rights were $16.5 million.
55
As discussed in Note 2 to our Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K, we
adopted the FASB issued new revenue standard (ASU No. 2014-09) effective on January 1, 2018. As a result of the adoption, we no
longer recognize barter revenue, barter expense, barter broadcast rights and barter broadcast liabilities resulting from the exchange of
advertising time for certain program material. As of December 31, 2017, the current barter broadcast rights (and the related current
barter broadcast liabilities) were $9.7 million and the noncurrent barter broadcast rights (and the related noncurrent barter broadcast
liabilities) were $12.5 million. On January 1, 2018, an adjustment was recorded to remove the offsetting balances of these accounts.
Pension plans and postretirement benefits
A determination of the liabilities and cost of the Company’s pension and other postretirement plans requires the use of
assumptions. The actuarial assumptions used in the Company’s pension and postretirement reporting are reviewed annually with
independent actuaries and are compared with external benchmarks, historical trends and the Company’s own experience to determine
that its assumptions are reasonable. The assumptions used in developing the required estimates include the following key factors:
•
•
•
•
•
discount rates
expected return on plan assets
mortality rates
retirement rates
expected contributions
The expected rate of return on plan assets is 7.00%. The effective discount rate used for determining pension benefit obligations
and pension net periodic benefit credit at year end was 4.12% and 3.49%, respectively. As of and for the year ended December 31,
2018, our pension benefit obligations and net periodic benefit cost (credit) was $423.7 million and ($11.6) million, respectively. As of
December 31, 2018, a 1% change in the discount rates would have the following effects (in thousands):
Projected impact on net periodic benefit credit
Projected impact on pension benefit obligations
Retransmission Revenue
1% Increase
1% Decrease
$
2,394 $
(38,918)
(3,189)
46,409
We earn revenues from local cable providers, DBS services and other MVPDs and OTTDs for the retransmission of our
broadcasts. These revenues are generally earned based on a price per subscriber of the distributor within the retransmission area. The
distributors report their subscriber numbers to us generally on a 30- to 60-day lag, generally upon payment of the fees due to us. Prior
to receiving the reports, we record revenue based on management’s estimate of the number of subscribers, utilizing historical levels
and trends of subscribers for each distributor. The impact of the lag in the number of subscribers is not significant.
Income Taxes
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary differences between the carrying amounts and tax basis of assets and
liabilities. A valuation allowance is applied against net deferred tax assets if, based on the weight of available evidence, it is more
likely than not that some or all of the deferred tax assets will not be realized. While we have considered future taxable income in
assessing the need for a valuation allowance, in the event that we were to determine that we would not be able to realize all or part of
our deferred tax assets in the future, an adjustment to the valuation allowance would be charged to income in the period such a
determination was made. Section 382 of the Code generally imposes an annual limitation on the amount of NOLs that may be used to
offset taxable income when a corporation has undergone significant changes in stock ownership. Ownership changes are evaluated as
they occur and could limit the ability to use NOLs. The Company does not expect any NOLs to expire as a result of Section 382
limitations.
The ability to use NOLs is also dependent upon the Company’s ability to generate taxable income. The NOLs could expire prior
to their use. To the extent the Company’s use of NOLs is significantly limited, the Company’s income could be subject to corporate
income tax earlier than it would if it were not able to use NOLs, which could have a negative effect on the Company’s financial results
and operations. Changes in ownership are largely beyond our control and we can give no assurance that we will continue to have
realizable NOLs.
56
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes
that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information.
We recognize interest and penalties relating to income taxes as components of income tax expense.
Recent Accounting Pronouncements
Refer to Note 2 of our Consolidated Financial Statements in Part IV, Item 15(a) of this Annual Report on Form 10-K for a
discussion of recently issued accounting pronouncements, including our expected date of adoption and effects on results of operations
and financial position.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to our long-term debt obligations.
The term loan borrowings under the Company’s senior credit facilities bear interest at rates ranging from 4.27% to 4.77% as of
December 31, 2018, which represented the base rate, or LIBOR, plus the applicable margin, as defined. The revolving loans bear
interest at LIBOR plus the applicable margin, which totaled 4.27% at December 31, 2018. Interest is payable in accordance with the
credit agreements.
If LIBOR were to increase by 100 basis points, or one percentage point, from the December 31, 2018 level, the Company’s
annual interest expense would increase and cash flow from operations would decrease by $24.5 million, based on the outstanding
balance of its credit facilities as of December 31, 2018. An increase in LIBOR of 50 basis points (one-half of a percentage point)
would result in a $12.2 million increase in the Company’s annual interest expense and decrease in cash flows from operations. If
LIBOR were to decrease either by 100 basis points or 50 basis points, the Company’s annual interest would decrease and cash flows
from operations would increase by $24.5 million and $12.2 million, respectively. Our 5.625% Notes, 6.125% Notes and 5.875% Notes
are fixed rate debt obligations and therefore are not exposed to market interest rate changes. As of December 31, 2018, we have no
financial instruments in place to hedge against changes in the benchmark interest rates on our senior credit facilities.
Impact of Inflation
We believe that our results of operations are not affected by moderate changes in the inflation rate.
Item 8.
Financial Statements and Supplementary Data
Our Consolidated Financial Statements are filed with this report. The Consolidated Financial Statements and Supplementary
Data are included in Part IV, Item 15(a) of this Annual Report on Form 10-K.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Nexstar’s management, with the participation of its President and Chief Executive Officer along with its Chief Financial
Officer, conducted an evaluation as of the end of the period covered by this Annual Report of the effectiveness of the design and
operation of Nexstar’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.
Based upon that evaluation, Nexstar’s President and Chief Executive Officer and its Chief Financial Officer concluded that as of
December 31, 2018, Nexstar’s disclosure controls and procedures were effective in providing reasonable assurance that information
required to be disclosed in the reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to Nexstar’s
management, including its President and Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the quarterly period as of the end of the period covered by this report, there have been no changes in Nexstar’s internal
control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over
financial reporting.
57
Management’s Report on Internal Control over Financial Reporting
Nexstar’s management is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with U.S. GAAP. Management assesses the effectiveness of our internal control over financial reporting as of
December 31, 2018 based upon the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control—Integrated Framework (2013).
As of December 31, 2018, we have excluded from our assessment of internal control over financial reporting the accounts of
LKQD, KRBK, and WHDF, because they were acquired in business combinations during 2018, and KHII, because it was a VIE first
consolidated during 2018. The total assets and total revenues of these entities that are excluded from our assessment of internal control
over financial reporting collectively represent approximately 0.5% and 1.5%, respectively, of the related consolidated financial
statement amounts as of and for the year ended December 31, 2018. LKQD was the most significant, representing 0.4% of
consolidated total assets and 1.2% of consolidated total revenues as of and for the year ended December 31, 2018.
Based on management’s assessment, we have concluded that our internal control over financial reporting was effective as of
December 31, 2018.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of our internal
control over financial reporting as of December 31, 2018 as stated in their report which appears herein.
Item 9B.
Other Information
None.
58
Item 10.
Directors, Executive Officers and Corporate Governance
PART III
Information concerning directors that is required by this Item 10 will be set forth in the Proxy Statement to be provided to
stockholders in connection with our 2019 Annual Meeting of Stockholders (the “Proxy Statement”) or in an amendment to this Annual
Report on Form 10-K under the headings “Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance,” which
information is incorporated herein by reference.
Item 11.
Executive Compensation
Information required by this Item 11 will be set forth in the Proxy Statement under the headings “Compensation of Named
Executive Officers” and “Compensation of Directors,” which information is incorporated herein by reference. Information specified in
Items 402(k) and 402(l) of Regulation S-K and set forth in the Proxy Statement is incorporated by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management, and Related Stockholder Matters
Information required by this Item 12 will be set forth in the Proxy Statement under the headings “Beneficial Ownership of
Nexstar Common Stock,” and “Compensation of Named Executive Officers,” which information is incorporated herein by reference.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Information required by this Item 13 will be set forth in the Proxy Statement under the heading “Certain Relationships and
Related Person Transactions,” which information is incorporated herein by reference.
Item 14.
Principal Accountant Fees and Services
Information required by this Item 14 will be set forth in the Proxy Statement under the heading “Ratification of the Selection of
Independent Registered Public Accounting Firm,” which information is incorporated herein by reference.
Item 15.
Exhibits and Financial Statement Schedules
(a) Documents filed as part of this report:
PART IV
(1) Consolidated Financial Statements. The Consolidated Financial Statements of Nexstar Media Group, Inc. listed on the
index on page F-1 have been included beginning on page F-3 of this Annual Report on Form 10-K.
The audited Financial Statements of Mission Broadcasting, Inc. as of December 31, 2018 and 2017 and for each of the
three years in the period ended December 31, 2018, as filed in Mission Broadcasting, Inc.’s Annual Report on Form 10-K,
are incorporated by reference in this report.
(2)
(3)
Financial Statement Schedules. The schedule of Valuation and Qualifying Accounts appears in Note 17 to the
Consolidated Financial Statements filed as part of this report.
Exhibits. The exhibits listed on the accompanying Index to Exhibits on this Annual Report on Form 10-K are filed,
furnished or incorporated into this Annual Report on Form 10-K by reference, as applicable.
Item 16.
Form 10-K Summary
Not applicable.
59
Exhibit
Number
2.1
2.2
3.1
3.2
3.3
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
Exhibit Index
Exhibit Description
Agreement and Plan of Merger, dated as of January 27, 2016, by and between Nexstar Media Group, Inc., Media General,
Inc., and Neptune Merger Sub, Inc. (Incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K (File No. 000-
50478) filed by Nexstar Media Group, Inc. on January 28, 2016).
Agreement and Plan of Merger, dated as of November 30, 2018, by and between Nexstar Media Group, Inc., Tribune
Media Company and Titan Merger Sub, Inc. (Incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K (File
No. 000-50478) filed by Nexstar Media Group, Inc. on December 4, 2018).
Amended and Restated Certificate of Incorporation of Nexstar Media Group, Inc. (Incorporated by reference to Exhibit 3.1
to Registration Statement on Form S-4 (File No. 333-190283) filed by Nexstar Broadcasting, Inc.).
Certificate of Amendment to Amended and Restated Certificate of Incorporation of Nexstar Media Group, Inc.
(Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Media
Group, Inc. on January 17, 2017).
Amended and Restated By-Laws of Nexstar Media Group, Inc. (Incorporated by reference to Exhibit 3.1 to Current Report
on Form 8-K (File No. 000-50478) filed by Nexstar Media Group, Inc. on January 30, 2013).
Specimen Class A Common Stock Certificate. (Incorporated by reference to Exhibit 4.1 to Amendment No. 6 to
Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Media Group, Inc.).
Indenture, dated as of January 29, 2015, among Nexstar Broadcasting, Inc., Nexstar Media Group, Inc., as a guarantor,
Mission Broadcasting, Inc., as a guarantor, and Wells Fargo Bank, National Association, as trustee (Incorporated by
reference to Exhibit 4.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Media Group, Inc. on
January 30, 2015).
Form of Senior Note (Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K (File No. 000-50478) filed
by Nexstar Media Group, Inc. on January 30, 2015).
Indenture, dated as of July 27, 2016, between Nexstar Escrow Corporation, as issuer, and Wells Fargo Bank, National
Association, as trustee (Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K (File No. 000-50478) filed
by Nexstar Media Group, Inc. on July 29, 2016).
Form of Senior Note (Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K (File No. 000-50478) filed
by Nexstar Media Group, Inc. on July 29, 2016).
First Supplemental Indenture, dated as of January 17, 2017, by and among Nexstar Broadcasting, Inc., as issuer, the
guarantors party thereto, and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.3
to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Media Group, Inc. on January 17, 2017).
Indenture, dated as of November 5, 2014, by and between Media General Financing Sub, Inc. (to be merged with and into
Lin Television Corporation) and The Bank of New York Mellon (Incorporated by reference to Exhibit 4.1 to the Current
Report on Form 8-K (File No. 001-06383) filed by Media General, Inc. on November 5, 2014).
Form of 5.875% Senior Notes due 2022 (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File
No. 001-06383) filed by Media General, Inc. on November 5, 2014).
Supplemental Indenture, dated as of December 19, 2014, among Media General, Inc. (formerly known as Mercury New
Holdco, Inc.), the additional guarantors named therein, LIN Television Corporation and The Bank of New York Mellon, as
Trustee, amending the Indenture, dated as of November 5, 2014, incorporated by reference to Exhibit 4.1 to Media General
Inc.’s Form 8-K filed December 23, 2014.
4.10
Second Supplemental Indenture, dated as of November 4, 2015, among Media General, Inc., Dedicated Media, Inc., the
other guarantors party thereto and The Bank of New York Mellon, as Trustee, amending the Indenture dated as of
November 5, 2014, as supplemented (Incorporated by reference to Exhibit 4.1 to Quarterly Report on Form 10-Q (File No.
001-06383) filed by Media General, Inc. on November 6, 2015).
4.11
Third Supplemental Indenture, dated as of January 17, 2017, by and among Lin Television Corporation, as issuer, the
guarantors party thereto, and The Bank of New York Mellon, as trustee (Incorporated by reference to Exhibit 4.5 to Current
Report on Form 8-K (File No. 000-50478) filed by Nexstar Media Group, Inc. on January 17, 2017).
4.12
Fourth Supplemental Indenture, dated as of March 17, 2017, by and among Nexstar Broadcasting, Inc., a Delaware
corporation, as successor to LIN Television Corporation, the guarantors party thereto, and The Bank of New York Mellon,
as trustee (Incorporated by reference to Exhibit 4.1 to Quarterly Report on Form 10-Q for the period ended March 31, 2017
(File No. 000-50478) filed by Nexstar Media Group, Inc.).
10.1
Contingent Value Rights Agreement, dated as of January 13, 2017, by and between Nexstar Media Group, Inc. and
10.2
American Stock Transfer & Trust Company, LLC as rights agent (Incorporated by reference to Exhibit 10.1 to Current
Report on Form 8-K (File No. 000-50478) filed by Nexstar Media Group, Inc. on January 17, 2017).
Stock Option Agreement, dated as of November 29, 2011, by and among Mission Broadcasting, Inc., Nancie J. Smith,
Dennis Thatcher and Nexstar Broadcasting, Inc. (Incorporated by reference to Exhibit 10.44 to Annual Report on Form 10-
K for the year ended December 31, 2011 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
60
10.3
Commitment Letter, dated as of January 27, 2016, by and among Nexstar Media Group, Inc., Bank of America, N.A.,
10.4
10.5
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC, Credit Suisse AG, Deutsche
Bank AG New York Branch, Deutsche Bank AG Cayman Islands Branch and Deutsche Bank Securities Inc. (Incorporated
by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Media Group, Inc. on
January 28, 2016).
Credit Agreement, dated as of January 17, 2017, by and among Nexstar Media Group, Inc., as a holding company, Nexstar
Broadcasting, Inc., as the borrower, Bank of America, N.A., as the administrative agent, the collateral agent, a letter of
credit issuer and a swing line lender and other financial institutions from time to time party thereto (Incorporated by
reference to Exhibit 10.2 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Media Group, Inc. on
January 17, 2017).
Credit Agreement, dated as of January 17, 2017, by and among Nexstar Broadcasting, Inc., Nexstar Media Group, Inc.,
Bank of America, N.A. and the several lenders party thereto, as amended by that Amendment No. 1, dated as of July 19,
2017 (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar
Broadcasting Group, Inc. on July 25, 2017).
10.6
Credit Agreement, dated as of January 17, 2017, by and among Nexstar Broadcasting, Inc., Nexstar Media Group, Inc.,
10.7
10.8
10.9
10.10
10.11
10.12
Bank of America, N.A. and the several lenders party thereto, as amended by that Amendment No. 2, dated as of October
26, 2018 (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar
Media Group, Inc. on November 1, 2018).
Credit Agreement, dated as of January 17, 2017, by and among Mission Broadcasting, Inc., as the borrower and Bank of
America, N.A., as the administrative agent and the collateral agent and other financial institutions from time to time party
thereto (Incorporated by reference to Exhibit 10.8 to Annual Report on Form 10-K for the period ended December 31, 2016
(File No. 333-62916-02) filed by Mission Broadcasting, Inc.).
Credit Agreement, dated as of January 17, 2017, by and among Mission Broadcasting, Inc., Bank of America, N.A. and the
several lenders party thereto, as amended by that Amendment No. 1, dated as of July 19, 2017 (Incorporated by reference
to Exhibit 10.1 to Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. on July 25,
2017).
Credit Agreement, dated as of January 17, 2017, by and among Mission Broadcasting, Inc., Bank of America, N.A. and the
several lenders party thereto, as amended by that Amendment No. 2, dated as of October 26, 2018 (Incorporate by
reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 333-62916-02) filed by Mission Broadcasting, Inc. on
November 1, 2018).
Credit Agreement, dated as of January 17, 2017, by and among Marshall Broadcasting Group, Inc., as the borrower and
Bank of America, N.A., as the administrative agent and the collateral agent and other financial institutions from time to
time party thereto. (Incorporated by reference to Exhibit 10.8 to Annual Report on Form 10-K for the year ended December
31, 2017 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
Credit Agreement, dated as of January 17, 2017, by and among Marshall Broadcasting Group, Inc., Bank of America, N.A.
and the several lenders party thereto, as amended by that Amendment No. 1, dated as of July 19, 2017. (Incorporated by
reference to Exhibit 10.9 to Annual Report on Form 10-K for the year ended December 31, 2017 (File No. 000-50478) filed
by Nexstar Media Group, Inc.).
Amendment No. 2 to Credit Agreement, dated as of June 28, 2018, by and among Marshall Broadcasting Group, Inc., Bank
of America, N.A. and the several lenders party thereto (Incorporated by reference to Exhibit 10.1 to Quarterly Report on
Form 10-Q for the quarter ended June 30, 2018 (File No. 000-50478) filed by Nexstar Media Group, Inc.)
10.13
Credit Agreement, dated as of January 17, 2017, by and among WXXA-TV LLC and WLAJ-TV LLC, as the borrower,
Shield Media Lansing LLC and Shield Media LLC, as holding companies, and Bank of America, N.A., as the
administrative agent and the collateral agent and other financial institutions from time to time party thereto. (Incorporated
by reference to Exhibit 10.10 to Annual Report on Form 10-K for the year ended December 31, 2017 (File No. 000-50478)
filed by Nexstar Media Group, Inc.).
10.14
Credit Agreement, dated as of January 17, 2017, by and among WXXA-TV LLC and WLAJ-TV LLC, as the borrower,
Shield Media Lansing LLC and Shield Media LLC, as holding companies, and Bank of America, N.A., as the
administrative agent and the collateral agent and other financial institutions from time to time party thereto, as amended by
that Amendment No. 1, dated as of July 19, 2017. (Incorporated by reference to Exhibit 10.11 to Annual Report on Form
10-K for the year ended December 31, 2017 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
Credit Agreement, dated as of January 17, 2017, by and among WXXA-TV LLC, WLAJ-TV LLC, Shield Media Lansing
LLC, Shield Media LLC, Bank of America, N.A. and the several lenders party thereto, as amended by that Amendment No.
2, dated as of October 26, 2018 (Incorporated by reference to Exhibit 10.7 to Quarterly Report on Form 10-Q for the
quarter ended September 30, 2018 (File No. 000-50478) filed by Nexstar Media Group, Inc.)
Executive Employment Agreement, dated as of January 5, 1998, by and between Perry A. Sook and Nexstar Media Group,
Inc., as amended on January 5, 1999. (Incorporated by reference to Exhibit 10.11 to Registration Statement on Form S-4
(File No. 333-62916) filed by Nexstar Finance, L.L.C. and Nexstar Finance, Inc.).
10.15
10.16
10.17
Amendment to Employment Agreement, dated as of May 10, 2001, by and between Perry A. Sook and Nexstar Media
Group, Inc. (Incorporated by reference to Exhibit 10.12 to Registration Statement on Form S-4 (File No. 333-62916) filed
by Nexstar Finance, L.L.C. and Nexstar Finance, Inc.).
61
10.18
Modifications to Employment Agreement, dated as of September 26, 2002, by and between Perry A. Sook and Nexstar
Media Group, Inc. (Incorporated by reference to Exhibit 10.55 to Amendment No. 2 to Registration Statement on Form S-1
(File No. 333-86994) filed by Nexstar Media Group, Inc.).
10.19
Addendum to Employment Agreement, dated as of August 25, 2003, by and between Perry A. Sook and Nexstar Media
10.20
10.21
Group, Inc. (Incorporated by reference to Exhibit 10.20 to Registration Statement on Form S-1 (File No. 333-86994) filed
by Nexstar Media Group, Inc.).
Addendum to Employment Agreement, dated as of July 2, 2007, by and between Perry A. Sook and Nexstar Media Group,
Inc. (Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the period ended June 30, 2007 (File
No. 000-50478) filed by Nexstar Media Group, Inc. on August 8, 2007).
Addendum to Executive Employment Agreement between Perry A. Sook and Nexstar Media Group, Inc. (Incorporated by
reference to Exhibit 10.93 to Annual Report on Form 10-K (File No. 000-50478) filed by Nexstar Media Group, Inc. on
March 31, 2009).
10.22
Addendum to Executive Employment Agreement, dated as of September 11, 2012, between Perry A. Sook and Nexstar
Broadcasting, Inc. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-50478) filed by
Nexstar Media Group, Inc. on September 17, 2012).
10.23
Amendment to Executive Employment Agreement, dated as of January 29, 2015 between Perry A. Sook and Nexstar
10.24
Broadcasting, Inc. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-50478) filed by
Nexstar Media Group, Inc. on February 5, 2015).
Amendment to Executive Employment Agreement, dated as of January 15, 2019 between Perry A. Sook and Nexstar
Broadcasting, Inc. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-50478) filed by
Nexstar Media Group, Inc. on January 22, 2019).
10.25
Executive Employment Agreement, dated as of July 13, 2009, by and between Thomas E. Carter and Nexstar Media
10.26
Group, Inc. (Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q (File No. 000-50478) filed by
Nexstar Media Group, Inc. on August 12, 2009).
Amendment to the Executive Agreement between Thomas E. Carter and Nexstar Media Group, Inc. (Incorporated by
reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-50478) filed by Nexstar Media Group, Inc. on
August 1, 2014).
10.27
Amendment to Executive Employment Agreement, dated as of January 9, 2017, between Thomas E. Carter and Nexstar
10.28
10.29
Media Group, Inc. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-50478) filed by
Nexstar Media Group, Inc. on January 13, 2017).
Executive Employment Agreement between Timothy Busch and Nexstar Media Group, Inc. (Incorporated by reference to
Exhibit 10.1 to Quarterly Report on Form 10-Q (File No. 000-50478) filed by Nexstar Media Group, Inc. on August 12,
2008).
Amendment to the Executive Employment Agreement, dated as of May 31, 2013, between Timothy C. Busch and Nexstar
Media Group, Inc. (Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K (File No. 000-50478) filed by
Nexstar Media Group, Inc. on June 6, 2013).
10.30
Second Amendment to the Executive Employment Agreement, dated as of January 17, 2017, between Timothy C. Busch
and Nexstar Media Group, Inc. (Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the period
ended March 31, 2017 (File No. 000-50478) filed by Nexstar Media Group, Inc.)
10.31
Executive Employment Agreement between Brian Jones and Nexstar Media Group, Inc. (Incorporated by reference to
Exhibit 10.2 to Quarterly Report on Form 10-Q (File No. 000-50478) filed by Nexstar Media Group, Inc. on August 12,
2008).
10.32
Amendment to the Executive Employment Agreement, dated as of May 31, 2013, between Brian Jones and Nexstar Media
10.33
10.34
10.35
Group, Inc. (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-50478) filed by
Nexstar Media Group, Inc. on June 6, 2013).
Second Amendment to the Executive Employment Agreement, dated as of January 17, 2017, between Brian Jones and
Nexstar Media Group, Inc. (Incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the period
ended March 31, 2017 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
Amendment to Executive Employment Agreement, dated as of July 27, 2017, between Brian Jones and Nexstar Media
Group, Inc. (Incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the period ended March 31,
2018 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
Executive Employment Agreement, dated as of April 1, 2017, between Gregory Raifman and Nexstar Media Group, Inc.
(Incorporated by reference to Exhibit 10.29 to Annual Report on Form 10-K for the year ended December 31, 2017 (File
No. 000-50478) filed by Nexstar Media Group, Inc.).
10.36
Time Brokerage Agreement, dated as of April 1, 1996, by and between SJL Communications, L.P. and NV Acquisitions
10.37
10.38
Co. (WFXP - WJET) (Incorporated by reference to Exhibit 10.48 to Amendment No. 2 to Registration Statement on Form
S-1 (File No. 333-86994) filed by Nexstar Media Group, Inc.).
Amendment to Time Brokerage Agreement, dated as of July 31, 1998, between SJL Communications, L.P. and NV
Acquisitions Co. (WFXP - WJET) (Incorporated by reference to Exhibit 10.49 to Amendment No. 2 to Registration
Statement on Form S-1 (File No. 333-86994) filed by Nexstar Media Group, Inc.).
Amendment to Time Brokerage Agreement, dated as of July 17, 2006, between Nexstar Broadcasting, Inc. and Mission
Broadcasting, Inc. (WFXP - WJET) (Incorporated by reference to Exhibit 10.21 to Annual Report on Form 10-K for the
year ended December 31, 2011 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
62
10.39
Letter, notifying Mission Broadcasting, Inc. of the election to extend Time Brokerage Agreement (WFXP - WJET)
(Incorporated by reference to Exhibit 10.22 to Annual Report on Form 10-K for the year ended December 31, 2011 (File
No. 000-50478) filed by Nexstar Media Group, Inc.).
10.40
Amendment to Time Brokerage Agreement, dated as of August 2, 2016, by and between Mission Broadcasting, Inc. and
10.41
10.42
Nexstar Broadcasting, Inc. (WFXP) (Incorporated by reference to Exhibit 10.16 to Quarterly Report on Form 10-Q for the
period ended March 31, 2016 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.)
Shared Services Agreement entered into as of July 1, 2017 by and between Mission Broadcasting, Inc. and Nexstar
Broadcasting, Inc. (Incorporated by reference to Exhibit 10.77 to Annual Report on Form 10-K for the year ended
December 31, 2017 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
Agreement for the Sale of Commercial Time, dated as of June 1, 1999, among Mission Broadcasting of Wichita Falls, Inc.,
David Smith and Nexstar Broadcasting of Wichita Falls, L.P. (KJTL and KJBO-LP - KFDX) (Incorporated by reference to
Exhibit 10.44 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Media
Group, Inc.).
10.43
Amendment to Agreement for Sale of Commercial Time, dated January 1, 2004, by and between Nexstar Broadcasting,
10.44
10.45
Inc. (as successor to Nexstar Broadcasting of Wichita Falls, L.P.) and Mission Broadcasting, Inc. (f/k/a Mission
Broadcasting of Wichita Falls, Inc.) (KJTL and KJBO - KFDX). (Incorporated by reference to Exhibit 10.101 to
Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.).
Agreement for the Sale of Commercial Time, dated as of May 9, 2003, by and between Mission Broadcasting, Inc. and
Nexstar Broadcasting of the Midwest, Inc. (WAWV - WTWO) (Incorporated by reference to Exhibit 10.2 to Quarterly
Report on Form 10-Q for the period ended June 30, 2003 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.).
Amendment to Agreement for Sale of Commercial Time, dated January 13, 2004, by and between Nexstar Broadcasting,
Inc. and Mission Broadcasting, Inc. (WAWV-WTWO). (Incorporated by reference to Exhibit 10.97 to Amendment No. 1
to Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.).
10.46
Extension of the Agreement for the Sale of Commercial Time, dated as of May 1, 2013, by and between Mission
10.47
10.48
Broadcasting, Inc. and Nexstar Broadcasting, Inc. (WAWV-TV) (Incorporated by reference to Exhibit 10.1 to Quarterly
Report on Form 10-Q for the period ended March 31, 2013 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.).
Amendment to Agreement for Sale of Commercial Time, dated December 30, 2003, by and between Nexstar Broadcasting,
Inc. and Mission Broadcasting, Inc. (KOLR-KOZL). (Incorporated by reference to Exhibit 10.93 to Amendment No. 1 to
Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.).
Amendment to Agreement for Sale of Commercial Time, dated December 30, 2003, by and between Nexstar Broadcasting,
Inc. and Mission Broadcasting, Inc. (KAMC-KLBK). (Incorporated by reference to Exhibit 10.91 to Amendment No. 1 to
Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.).
10.49
Amendment to Agreement for Sale of Commercial Time, dated January 1, 2004, by and between Nexstar Broadcasting,
10.50
10.51
Inc. and Mission Broadcasting, Inc. (KCIT-KAMR). (Incorporated by reference to Exhibit 10.95 to Amendment No. 1 to
Registration Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.).
Agreement for Sale of Commercial Time, dated April 1, 2004, by and between Nexstar Broadcasting, Inc. and Mission
Broadcasting, Inc. (WUTR-WFXV). (Incorporated by reference to Exhibit 10.99 to Amendment No. 1 to Registration
Statement on Form S-4 (File No. 333-114963) filed by Nexstar Broadcasting, Inc.).
Letter dated March 25, 2014, notifying Mission Broadcasting, Inc. of the election to extend Shared Services Agreement and
Agreement for the Sale of Commercial Time (WUTR) (Incorporated by reference to Exhibit 10.1 to Quarterly Report on
Form 10-Q for the period ended March 31, 2014 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
10.52
Agreement for the Sale of Commercial Time, dated December 1, 2011, by and between Mission Broadcasting, Inc. and
10.53
10.54
Nexstar Broadcasting, Inc. (WEHT-WTVW) (Incorporated by reference to Exhibit 10.46 to Annual Report on Form 10-K
for the year ended December 31, 2011 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
Agreement for the Sale of Commercial Time, dated as of January 1, 2013, by and between Mission Broadcasting, Inc. and
Nexstar Broadcasting, Inc. (KLRT-TV - KASN) (Incorporated by reference to Exhibit 10.85 to Annual Report on Form 10-
K for the year ended December 31, 2012 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
Agreement for the Sale of Commercial Time, dated as of March 1, 2013, by and between Mission Broadcasting, Inc. and
Nexstar Broadcasting, Inc. (WVNY) (Incorporated by reference to Exhibit 10.88 to Annual Report on Form 10-K for the
year ended December 31, 2012 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
10.55
Letter, extending Shared Services Agreement and Sale of Commercial Time, dated as of June 1, 2013, by and between
10.56
10.57
10.58
Mission Broadcasting, Inc. and Nexstar Broadcasting, Inc. (KRBC) (Incorporated by reference to Exhibit 10.7 to Quarterly
Report on Form 10-Q for the period ended June 30, 2013 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
Letter dated May 28, 2014, notifying Mission Broadcasting, Inc. of the election to extend Shared Services Agreement and
Agreement for the Sale of Commercial Time (KSAN) (Incorporated by reference to Exhibit 10.1 to Quarterly Report on
Form 10-Q for the period ended June 30, 2014 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.).
Letter dated September 15, 2014, notifying Mission Broadcasting, Inc. of the election to extend the Agreement for the Sale
of Commercial Time (WYOU) (Incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the period
ended September 30, 2014 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
Letter dated September 15, 2014, notifying Mission Broadcasting, Inc. of the election to extend the Agreement for the Sale
of Commercial Time (KODE) (Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the period
ended September 30, 2014 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
63
10.59
10.60
Letter dated October 15, 2014, notifying Mission Broadcasting, Inc. of the election to extend Shared Services Agreement
and Agreement for the Sale of Commercial Time (WTVO) (Incorporated by reference to Exhibit 10.3 to Quarterly Report
on Form 10-Q for the period ended September 30, 2014 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
Agreement for the Sale of Commercial Time, dated as of January 15, 2018, by and between Mission Broadcasting, Inc. and
Nexstar Broadcasting, Inc. (KTVE-TV) (Incorporated by reference to Exhibit 10.56 to Annual Report on Form 10-K for
the period ended December 31, 2017 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.).
10.61
Option Agreement, dated as of November 30, 1998, among Bastet Broadcasting, Inc., David Smith and Nexstar
Broadcasting Group, L.L.C. (WFXP) (Incorporated by reference to Exhibit 10.47 to Amendment No. 2 to Registration
Statement on Form S-1 (File No. 333-86994) filed by Nexstar Media Group, Inc.).
10.62
Amendment to Option Agreement, dated as of November 15, 2014, by and between Mission Broadcasting Inc. and Nexstar
Broadcasting, Inc. (WFXP) (Incorporated by reference to Exhibit 10.37 to Annual Report on Form 10-K (File No. 000-
50478) filed by Nexstar Media Group, Inc. on March 2, 2015).
10.63
Option Agreement, dated as of May 19, 1998, among Bastet Broadcasting, Inc., David Smith and Nexstar Broadcasting of
10.64
Northeastern Pennsylvania, L.P. (WYOU) (Incorporated by reference to Exhibit 10.45 to Amendment No. 2 to Registration
Statement on Form S-1 (File No. 333-86994) filed by Nexstar Media Group, Inc.).
Option Agreement, dated as of June 1, 1999, among Mission Broadcasting of Wichita Falls, Inc., David Smith and Nexstar
Broadcasting of Wichita Falls, L.P. (KJTL and KJBO-LP (Incorporated by reference to Exhibit 10.42 to Amendment No. 2
to Registration Statement on Form S-1 (File No. 333-86994) filed by Nexstar Media Group, Inc.).
10.65
Option Agreement, dated as of April 1, 2002, by and between Mission Broadcasting of Joplin, Inc. and Nexstar
10.66
Broadcasting of Joplin, L.L.C. (KODE) (Incorporated by reference to Exhibit 10.50 to Amendment No. 2 to Registration
Statement on Form S-1 (File No. 333-86994) filed by Nexstar Media Group, Inc.).
Amendment to Option Agreements, dated as of October 18, 2002, among Mission Broadcasting, Inc., David Smith, Nexstar
Broadcasting of Northeastern Pennsylvania, L.L.C., Nexstar Broadcasting Group, L.L.C., Nexstar Broadcasting of Wichita
Falls, L.L.C., and Nexstar Broadcasting of Joplin, L.L.C. (WYOU, WFXP, KJTL, KJBO-LP and KODE) (Incorporated by
reference to Exhibit 10.54 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-86994) filed by
Nexstar Media Group, Inc.).
10.67
Amendment to Option Agreement, dated as of May 1, 2018, by and between Mission Broadcasting, Inc. and Nexstar
Broadcasting, Inc. (WYOU) (Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter
ended June 30, 2018 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.).
10.68
Amendment to Option Agreement, dated as of May 1, 2018, by and between Mission Broadcasting, Inc. and Nexstar
Broadcasting, Inc. (KJTL) (Incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter
ended June 30, 2018 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.).
10.69
Amendment to Option Agreement, dated April 25, 2011, by and between Mission Broadcasting, Inc. and Nexstar
10.70
Broadcasting, Inc. (KODE) (Incorporated by reference to Exhibit 10.26 to Annual Report on Form 10-K for the year ended
December 31, 2011 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
Option Agreement, dated as of May 9, 2003, among Mission Broadcasting, Inc., David Smith and Nexstar Broadcasting of
the Midwest, Inc. (WAWV) (Incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the period
ended June 30, 2003 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.).
10.71
Amendment of Option Agreement, dated as of May 1, 2012, by and between Mission Broadcasting, Inc. and Nexstar
10.72
Broadcasting, Inc. (WAWV) (Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q (File No. 000-
50478) filed by Nexstar Media Group, Inc. on August 8, 2012).
Option Agreement, dated as of June 13, 2003, among Mission Broadcasting, Inc., David Smith and Nexstar Broadcasting
of Abilene, L.L.C. (KRBC) (Incorporated by reference to Exhibit 10.64 to Amendment No. 3 to Registration Statement on
Form S-1 (File No. 333-86994) filed by Nexstar Media Group, Inc.).
10.73
Amendment to Option Agreement, dated as of June 1, 2012, by and between Mission Broadcasting, Inc. and Nexstar
10.74
10.75
10.76
10.77
10.78
Broadcasting, Inc. (KRBC and KSAN) (Incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q (File
No. 000-50478) filed by Nexstar Media Group, Inc. on August 8, 2012).
Amendment to Option Agreement, dated as of December 17, 2012, by and between Mission Broadcasting Inc. and Nexstar
Broadcasting, Inc. (KHMT) (Incorporated by reference to Exhibit 10.66 to Annual Report on Form 10-K for the year ended
December 31, 2012 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.).
Amendment to Option Agreement, dated as of December 17, 2012, by and between Mission Broadcasting Inc. and Nexstar
Broadcasting, Inc. (KAMC) (Incorporated by reference to Exhibit 10.65 to Annual Report on Form 10-K for the year ended
December 31, 2012 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.).
Amendment to Option Agreement, dated as of December 17, 2012, by and between Mission Broadcasting Inc. and Nexstar
Broadcasting, Inc. (KOLR) (Incorporated by reference to Exhibit 10.67 to Annual Report on Form 10-K for the year ended
December 31, 2012 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.).
Option Agreement, dated as of January 1, 2013, among Mission Broadcasting Inc., Nancie Smith, Dennis Thatcher and
Nexstar Broadcasting, Inc. (KLRT-TV - KASN) (Incorporated by reference to Exhibit 10.87 to Annual Report on Form 10-
K for the year ended December 31, 2012 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
Option Agreement, dated as of March 1, 2013, among Mission Broadcasting Inc., Nancie Smith, Dennis Thatcher and
Nexstar Broadcasting, Inc. (WVNY) (Incorporated by reference to Exhibit 10.90 to Annual Report on Form 10-K for the
year ended December 31, 2012 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
64
10.79
10.80
10.81
10.82
10.83
10.84
10.85
10.86
14.1
21.1
23.1
31.1
31.2
32.1
32.2
101
Amendment to Option Agreement, dated October 15, 2013 by and between Mission Broadcasting, Inc. and Nexstar
Broadcasting, Inc. (WTVO) (Incorporated by reference to Exhibit 10.54 to Annual Report on Form 10-K for the year ended
December 31, 2013 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.).
Option Agreement, dated as of November 1, 2013, among Mission Broadcasting, Inc., Nancie Smith, Dennis Thatcher and
Nexstar Broadcasting, Inc. (WTVW) (Incorporated by reference to Exhibit 10.4 to Quarterly Report on Form 10-Q for the
period ended September 30, 2013 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
Amendment to Option Agreement, dated as of January 15, 2017, among Mission Broadcasting Inc. and Nexstar
Broadcasting , Inc. (KTVE) (Incorporated by reference to Exhibit 10.76 to Annual Report on Form 10-K for the year ended
December 31, 2017 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
Amendment to Option Agreement, dated as of May 1, 2018, by and between Mission Broadcasting, Inc. and Nexstar
Broadcasting, Inc. (KCIT) (Incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter
ended June 30, 2018 (File No. 333-62916-02) filed by Mission Broadcasting, Inc.).
Nexstar Media Group, Inc. 2003 Long-Term Equity Incentive Plan (Incorporated by reference to Exhibit 4.3 to Registration
Statement on Form S-8 (File No. 333-117166) filed by Nexstar Media Group, Inc. on July 6, 2004).
Nexstar Media Group, Inc. 2006 Long-Term Equity Incentive Plan (Incorporated by reference to Information Required in
Proxy Statement on Schedule 14A (File No. 000-50478) filed by Nexstar Media Group, Inc. on May 1, 2006).
Nexstar Media Group, Inc. 2012 Long-Term Equity Incentive Plan (Incorporated by reference to Exhibit 10.1 to Current
Report on Form 8-K (File No. 000-50478) filed by Nexstar Media Group, Inc. on October 2, 2012).
Nexstar Media Group, Inc. 2015 Long-Term Equity Incentive Plan (Incorporated by reference to Definitive Proxy
Statement on Schedule 14A (File No. 000-50478) filed by Nexstar Media Group, Inc. on April 24, 2015).
Nexstar Media Group, Inc. Code of Ethics. (Incorporated by reference to Exhibit 14.1 to the Annual Report on Form 10-K
for the year ended December 31, 2003 (File No. 000-50478) filed by Nexstar Media Group, Inc.).
Subsidiaries of the Registrant.*
Consent issued by PricewaterhouseCoopers LLP.*
Certification of Perry A. Sook pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
Certification of Thomas E. Carter pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
Certification of Perry A. Sook pursuant to 18 U.S.C. ss. 1350.*
Certification of Thomas E. Carter pursuant to 18 U.S.C. ss. 1350.*
The Company's Consolidated Financial Statements and related Notes for the year ended December 31, 2018 from this
Annual Report on Form 10-K, formatted in iXBRL (Inline eXtensible Business Reporting Language).*
+
*
Schedules have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be
furnished to the Securities and Exchange Commission upon request.
Filed herewith.
65
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.
SIGNATURES
NEXSTAR MEDIA GROUP, INC.
By:
By:
/s/ PERRY A. SOOK
Perry A. Sook
President and Chief Executive Officer
/s/ THOMAS E. CARTER
Thomas E. Carter
Chief Financial Officer
Dated: February 26, 2019
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on
behalf of the Registrant and in the capacities indicated on February 26, 2019.
Name
Title
/s/ PERRY A. SOOK
Perry A. Sook
President, Chief Executive Officer and Chairman
(Principal Executive Officer)
/s/ THOMAS E. CARTER
Thomas E. Carter
/s/ GEOFF ARMSTRONG
Geoff Armstrong
/s/ DENNIS J. FITZSIMONS
Dennis J. FitzSimons
/s/ JAY M. GROSSMAN
Jay M. Grossman
/s/ C. THOMAS MCMILLEN
C. Thomas McMillen
/s/ LISBETH MCNABB
Lisbeth McNabb
/s/ DENNIS A. MILLER
Dennis A. Miller
/s/ JOHN R. MUSE
John R. Muse
/s/ I. MARTIN POMPADUR
I. Martin Pompadur
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
66
NEXSTAR MEDIA GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm ..............................................................................................................
F-2
Consolidated Balance Sheets as of December 31, 2018 and 2017.....................................................................................................
F-3
Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2018, 2017 and 2016......
F-4
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2018, 2017 and 2016 ...............
F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016 ..................................................
F-6
Notes to Consolidated Financial Statements ......................................................................................................................................
F-7
F-1
To the Board of Directors and Stockholders of Nexstar Media Group, Inc.:
Opinions on the Financial Statements and Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of Nexstar Media Group, Inc. and its subsidiaries (the “Company”) as of December 31, 2018 and 2017
and the related consolidated statements of operations and comprehensive income, of changes in stockholders’ equity and of cash flows for each of the three years in the
period ended December 31, 2018, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's
internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31,
2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018 in conformity with accounting
principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for revenues from contracts with customers and
the manner in which it accounts for restricted cash in 2018.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing
under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial
reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
As described in Management’s Report on Internal Control over Financial Reporting, management has excluded from its assessment of internal control over financial
reporting as of December 31, 2018 LKQD, KRBK, and WHDF, because they were acquired by the Company in business combinations during 2018, and KHII, because
it was a VIE first consolidated by the Company during 2018. We have also excluded LKQD, KRBK, WHDR and KHII from our audit of internal control over financial
reporting. The total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting for LKQD, KRBK,
WHDF (each wholly-owned subsidiaries) and KHII (a consolidated subsidiary) collectively represent approximately 0.5% and 1.5%, respectively, of the related
consolidated financial amounts as of and for the year ended December 31, 2018. LKQD was the most significant, representing 0.4% of consolidated total assets and 1.2%
of consolidated total revenues as of and for the year ended December 31, 2018.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Dallas, Texas
February 26, 2019
We have served as the Company’s auditor since 1997.
F-2
NEXSTAR MEDIA GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
December 31,
2018
2017
Current assets:
ASSETS
Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts of $13,158 and $13,358, respectively
Spectrum asset
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Goodwill
FCC licenses
Other intangible assets, net
Other noncurrent assets, net
Total assets(1)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt
Accounts payable
Accrued expenses
Interest payable
Liability to surrender spectrum asset
Other current liabilities
Total current liabilities
Debt
Deferred tax liabilities
Other noncurrent liabilities
Total liabilities(1)
Commitments and contingencies (Note 13)
Stockholders' equity:
Preferred stock - $0.01 par value, 200,000 shares authorized; none issued and outstanding at each
of December 31, 2018 and 2017
Class A Common stock - $0.01 par value, 100,000,000 shares authorized; 47,291,463 shares issued,
45,626,246 shares outstanding as of December 31, 2018 and 47,291,463 shares issued, 45,966,414 shares
outstanding as of December 31, 2017
Class B Common stock - $0.01 par value, 20,000,000 shares authorized; none issued and outstanding
at each of December 31, 2018 and 2017
Class C Common stock - $0.01 par value, 5,000,000 shares authorized; none issued and
outstanding at each of December 31, 2018 and 2017
Additional paid-in capital
Accumulated other comprehensive (loss) income
Retained earnings
Treasury stock - at cost; 1,665,217 and 1,325,049 shares at December 31, 2018 and 2017, respectively
Total Nexstar Media Group, Inc. stockholders' equity
Noncontrolling interests in consolidated variable interest entities
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
$
$
145,115 $
547,285
52,002
22,673
767,075
731,538
2,167,954
1,778,268
1,491,923
125,272
7,062,030 $
96,093 $
67,828
143,850
32,047
52,002
12,352
404,172
3,884,910
633,880
270,084
5,193,046
-
473
-
-
1,351,931
(14,316)
620,371
(105,685)
1,852,774
16,210
1,868,984
7,062,030 $
115,652
562,943
305,764
71,859
1,056,218
734,138
2,142,846
1,767,638
1,581,626
199,181
7,481,647
92,808
31,136
175,940
39,563
314,087
17,169
670,703
4,269,652
619,441
340,541
5,900,337
-
473
-
-
1,342,541
6,140
299,523
(78,063)
1,570,614
10,696
1,581,310
7,481,647
The accompanying Notes are an integral part of these Consolidated Financial Statements.
(1)
The consolidated total assets as of December 31, 2018 and 2017 include certain assets held by consolidated VIEs of $390.3 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 December 31, 2018 and 2017
include certain liabilities of consolidated VIEs of $45.1 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.
F-3
NEXSTAR MEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share information)
Net revenue
Operating expenses (income):
Years Ended December 31,
2017
$ 2,766,696 $ 2,431,966 $1,103,190
2018
2016
Direct operating expenses, excluding depreciation and amortization
Selling, general and administrative expenses, excluding depreciation and amortization
Amortization of broadcast rights
Amortization of intangible assets
Depreciation
Reimbursement from the FCC related to station repack
Goodwill and intangible assets impairment
Gain on disposal of stations, net
Total operating expenses
Income from operations
Interest expense, net
Loss on extinguishment of debt
Pension and other postretirement plans credit, net
Other expenses
Income before income taxes
Income tax (expense) benefit
Net income
Net loss (income) attributable to noncontrolling interests
Net income attributable to Nexstar Media Group, Inc.
Net income per common share attributable to Nexstar Media Group, Inc.:
Basic
Diluted
Weighted average number of common shares outstanding:
Basic
Diluted
Net income
Other comprehensive (loss) income:
Change in unrecognized amounts included in pension and other postretirement benefit
obligations, net of tax benefit (expense) of $7,147 in 2018 and ($2,160) in 2017
Total comprehensive income
Total comprehensive loss (income) attributable to noncontrolling interests
Total comprehensive income attributable to Nexstar Media Group, Inc.
1,117,917
579,933
61,342
149,406
109,789
(29,381)
19,911
-
2,008,917
757,779
(220,994)
(12,120)
10,755
(2,475)
532,945
(144,680)
388,265
1,212
389,477 $
993,405
605,106
105,403
159,500
100,658
-
19,985
(57,716)
1,926,341
505,625
(241,195)
(34,882)
13,120
(1,284)
241,384
233,943
475,327
(330)
474,997 $
381,997
263,606
57,145
46,572
51,300
-
15,262
-
815,882
287,308
(116,081)
-
-
(555)
170,672
(77,572)
93,100
(1,563)
91,537
8.52 $
8.21 $
10.38 $
10.07 $
2.98
2.89
$
$
$
45,718
47,412
45,754
47,149
30,687
31,664
$
388,265 $
475,327 $
93,100
(20,456)
367,809
1,212
369,021 $
6,140
481,467
(330)
481,137 $
-
93,100
(1,563)
91,537
$
The accompanying Notes are an integral part of these Consolidated Financial Statements.
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-
F
NEXSTAR MEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
2018
2017
2016
$
388,265 $
475,327 $
93,100
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for bad debt
Amortization of broadcast rights, excluding barter
Depreciation of property and equipment
Amortization of intangible assets
Loss (gain) on asset disposal, net
Amortization of debt financing costs and debt discounts
Loss on extinguishment of debt
Goodwill and intangible assets impairment
Stock-based compensation expense
Deferred income taxes
Payments for broadcast rights
Other noncash credits, net
Change in the fair value of contingent consideration
Payments for contingent consideration in connection with an acquisition
Spectrum repack reimbursements
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable
Prepaid expenses and other current assets
Other noncurrent assets
Accounts payable, accrued expenses and other current liabilities
Taxes payable
Interest payable
Other noncurrent liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment
Deposits and payments for acquisitions, net of cash acquired
Proceeds from sale of stations
Spectrum repack reimbursements
Proceeds received to relinquish spectrum asset
Proceeds from disposals of property and equipment
Proceeds received from settlement of corporate-owned life insurance policies
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term debt, net of debt discounts
Repayments of long-term debt
Premium paid on debt extinguishment
Payments for debt financing costs
Contributions from a noncontrolling interest, net
Purchase of treasury stock
Proceeds from exercise of stock options
Common stock dividends paid
Purchase of noncontrolling interests
Payments for contingent consideration in connection with acquisitions
Cash paid for shares withheld for taxes
Payments for capital lease and capitalized software obligations
Net cash (used in) provided by financing activities
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Supplemental information:
Interest paid
Income taxes paid, net of refunds
Non-cash investing and financing activities:
10,707
61,342
109,789
149,406
5,793
9,765
12,120
19,911
31,260
12,403
(61,979 )
(2,432 )
-
-
(29,381 )
30,874
97
1,602
(29,672 )
41,635
(7,516 )
(17,122 )
736,867
(106,246 )
(103,976 )
-
29,381
-
4,344
983
(175,514 )
251,387
(653,011 )
-
(1,056 )
226
(50,524 )
5,970
(68,629 )
(2,468 )
-
(4,938 )
(8,847 )
(531,890 )
29,463
115,652
145,115 $
218,746 $
90,717 $
$
$
$
10,263
62,908
100,658
159,500
(55,982 )
10,483
34,882
19,985
24,068
(463,185 )
(62,531 )
(3,491 )
-
(4,044 )
-
(56,669 )
1,169
516
(62,496 )
(42,638 )
(17,421 )
(22,211 )
109,091
(72,461 )
(2,975,254 )
481,946
-
478,608
20,026
850
(2,066,285 )
3,533,981
(1,922,329 )
(18,050 )
(52,039 )
247
(99,008 )
8,155
(55,892 )
(66,901 )
(259,603 )
(4,099 )
(7,095 )
1,057,367
(899,827 )
1,015,479
115,652 $
239,558 $
272,689 $
4,107 $
20,723 $
- $
- $
434,269 $
1,031,443 $
10,702 $
34,558 $
12,361 $
3,057
22,461
51,300
46,572
1,553
5,649
-
15,262
11,390
54,591
(23,004 )
(1,612 )
4,044
-
-
(27,290 )
(6,972 )
244
1,628
(75 )
33,251
(896 )
284,253
(31,870 )
(103,970 )
-
-
-
718
-
(135,122 )
958,000
(80,140 )
-
(20,707 )
(643 )
-
1,225
(29,445 )
(100 )
(2,000 )
-
(3,258 )
822,932
972,063
43,416
1,015,479
78,261
29,391
2,339
706
108,694
1,019
-
-
-
-
-
Accrued purchases of property and equipment
Noncash purchases of property and equipment
Consolidation of variable interest entities
Accrued debt financing costs
Debt assumed in connection with a merger
Issuance/reissuance of Class A Common Stock in connection with a merger
Stock option replacement awards in connection with a merger
Relinquishment of spectrum asset and derecognition of liability to surrender spectrum asset
Contingent consideration payable in connection with a merger
19,364 $
565 $
6,500 $
- $
- $
- $
- $
314,086 $
- $
The accompanying Notes are an integral part of these Consolidated Financial Statements.
$
$
$
$
$
$
$
$
$
F-6
NEXSTAR MEDIA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Business Operations
As of December 31, 2018, Nexstar Media Group, Inc. and its wholly-owned subsidiaries (“Nexstar”) owned, operated,
programmed or provided sales and other services to 174 full power television stations, including those owned by variable interest
entities (“VIEs”), in 100 markets in the states of Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia,
Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nevada,
New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota,
Tennessee, Texas, Utah, Vermont, Virginia, West Virginia and Wisconsin. The stations are affiliates of ABC, NBC, FOX, CBS, The
CW, MNTV, and other broadcast television networks. As of December 31, 2018, the stations reached approximately 42.7 million, or
38.8%, of all U.S. television households. Through various local service agreements, Nexstar provided sales, programming, and other
services to 39 full power television stations owned by independent third parties.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Nexstar and the accounts of independently-owned VIEs for
which Nexstar is the primary beneficiary (See Note 2—Variable Interest Entities). Nexstar and the consolidated VIEs are collectively
referred to as the “Company.” Noncontrolling interests represent the VIE owners’ share of the equity in the consolidated VIEs and are
presented as a component separate from Nexstar Media Group, Inc. stockholders’ equity. All intercompany account balances and
transactions have been eliminated in consolidation. Nexstar management evaluates each arrangement that may include variable
interests and determines the need to consolidate an entity where it determines Nexstar is the primary beneficiary of a VIE in
accordance with related authoritative literature and interpretive guidance. On December 17, 2018, Nexstar became the primary
beneficiary of its variable interest in the station KHII (formerly KFVE) and consolidated this station as of that date. See Note 2 –
Variable Interest Entities for additional information.
As of December 31, the following are assets of consolidated VIEs, excluding intercompany amounts, that are not available to
settle the obligations of Nexstar and the liabilities of consolidated VIEs, excluding intercompany amounts, for which their creditors do
not have recourse to the general credit of Nexstar (in thousands):
Current assets
Spectrum asset
Other current assets
Total current assets
Property and equipment, net
Goodwill
FCC licenses
Other intangible assets, net
Other noncurrent assets, net
Total assets
Current Liabilities
Liability to surrender spectrum asset
Other current liabilities
Total current liabilities
Noncurrent liabilities
Total liabilities
Liquidity
2018
2017
$
$
$
$
- $
20,898
20,898
10,994
121,600
157,658
75,513
3,652
390,315 $
- $
17,594
17,594
27,542
45,136 $
26,695
22,038
48,733
7,517
130,362
151,808
81,916
6,543
426,879
27,347
24,146
51,493
30,339
81,832
The Company is leveraged, which makes it vulnerable to changes in general economic conditions. The Company’s ability to
repay or refinance its debt will depend on, among other things, financial, business, market, competitive and other conditions, many of
which are beyond the Company’s control.
F-7
On November 30, 2018, Nexstar entered into a definitive merger agreement with Tribune Media Company (“Tribune”) to
acquire the latter’s outstanding equity and to settle the outstanding equity-based awards for $46.50 per share in a cash transaction. The
estimated total purchase price is valued at $6.4 billion, consisting of the merger cash consideration and the refinancing of Tribune's
outstanding debt. The merger has been approved by the boards of directors of both companies and is projected to close late in the third
quarter of 2019, subject to (i) the approval of the merger by the stockholders of Tribune, (ii) FCC approval, (iii) other regulatory
approvals (including expiration of the applicable Hart-Scott-Rodino “HSR” waiting period) and (iv) satisfaction of other customary
closing conditions. On November 30, 2018, Nexstar received committed financing up to a maximum of $6.4 billion from a group of
commercial banks to provide the debt financing to consummate the merger and the refinancing of certain of the existing indebtedness
of Tribune and related transactions. See Note 3 for additional information on the merger agreement and Note 7 for information with
respect to the Company’s other debt transactions during 2018.
As of December 31, 2018, the Company was in compliance with its financial covenants contained in the amended credit
agreements governing its senior secured credit facilities and the indentures governing the 6.125% senior unsecured notes due 2022
(“6.125% Notes”), the 5.625% senior unsecured notes due 2024 (“5.625% Notes”) and the 5.875% senior unsecured notes due 2022
(“5.875% Notes”).
Variable Interest Entities
The Company may determine that an entity is a VIE as a result of local service agreements entered into with an entity. The term
local service agreement 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. A local
service agreement can be (1) a time brokerage agreement (“TBA”) or a local marketing agreement (“LMA”) which allows Nexstar to
program most of a station’s broadcast time, sell the station’s advertising time and retain the advertising revenue generated in exchange
for monthly payments, based on the station’s monthly operating expenses, (2) a shared services agreement (“SSA”) which 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 as described in the SSA, or (3) a joint sales agreement (“JSA”) which permits Nexstar to
sell certain of the station’s advertising time and retain a percentage of the related revenue, as described in the JSA.
Consolidated VIEs
Nexstar consolidates entities in which Nexstar is deemed under accounting principles generally accepted in the United States
(“U.S. GAAP”) to have controlling financial interests for financial reporting purposes as a result of (1) local service agreements
Nexstar has with the stations owned by these entities, (2) Nexstar’s guarantees of the obligations incurred under certain VIEs’ senior
secured credit facilities (see Note 7), (3) Nexstar having power over significant activities affecting these VIEs’ economic performance,
including budgeting for advertising revenue, certain advertising sales and, in some cases, hiring and firing of sales force personnel and
(4) purchase options granted by each VIE, exclusive of Marshall Broadcasting Group, Inc. (“Marshall”), which permit Nexstar to
acquire the assets and assume the liabilities of each of the VIEs’ stations, subject to Federal Communications Commission (“FCC”)
consent.
In connection with an agreement to acquire the MNTV affiliated television station KHII from HITV License Subsidiary, Inc.
(“HITV”), Nexstar began providing programming and sales services to the station effective November 1, 2018. On December 17,
2018, the FCC approved Nexstar’s acquisition of the station. Nexstar evaluated its business arrangement with KHII and determined
that it has a variable interest in the station. Nexstar has also determined that it is the primary beneficiary of the variable interest
because it has the ultimate power to direct the activities that most significantly impact the economic performance of the station
including developing the annual operating budget, programming and oversight and control of sales management personnel. Thus,
Nexstar consolidated KHII as of December 17, 2018 under authoritative guidance related to the consolidation of VIEs. The assets that
were consolidated into Nexstar included the licensed assets and network affiliation agreement of KHII but were attributed to the
owner of the station at the time (noncontrolling interest). On January 28, 2019, Nexstar completed the acquisition of the station. See
Note 3 for additional information.
F-8
The following table summarizes the various local service agreements Nexstar had in effect as of December 31, 2018 with its
consolidated VIEs:
Service Agreements
Owner
Full Power Stations
TBA Only
LMA Only
SSA & JSA
Mission Broadcasting, Inc. (“Mission”)
HITV
WNAC, LLC
54 Broadcasting, Inc. (“54 Broadcasting”)
Mission
WFXP, KHMT and KFQX
KHII, KGMD, KGMV
WNAC
KNVA
KJTL, KLRT, KASN, KOLR, KCIT, KAMC, KRBC,
KSAN, WUTR, WAWV, WYOU, KODE, WTVO,
KTVE, WTVW and WVNY
White Knight Broadcasting (“White Knight”) WVLA, KFXK, KSHV
Shield Media, LLC (“Shield”)
Vaughan Media, LLC (“Vaughan”)
Marshall
Tamer Media, LLC (“Tamer”)
WXXA and WLAJ
WBDT, WYTV and KTKA
KLJB, KPEJ and KMSS
KWBQ, KASY and KRWB
SSA Only
Nexstar’s ability to receive cash from Mission, Marshall, White Knight, Shield, Tamer, Vaughan, WNAC, LLC, 54
Broadcasting and HITV is governed by the local service agreements. Under these agreements, Nexstar has received substantially all of
the consolidated VIEs’ available cash, after satisfaction of operating costs and debt obligations. Nexstar anticipates it will continue to
receive substantially all of the consolidated VIEs’ available cash, after satisfaction of operating costs and debt obligations. In
compliance with FCC regulations for all the parties, Mission, Marshall, White Knight, Shield, Tamer, Vaughan, WNAC, LLC, 54
Broadcasting and HITV maintain complete responsibility for and control over programming, finances, personnel and operations of
their stations.
Nexstar had a variable interest in KRBK, LLC, the owner of station KRBK, upon execution of a TBA effective August 1, 2018
and a purchase agreement to acquire the assets of the station. Nexstar evaluated its business arrangement with KRBK, LLC and
determined that it was the primary beneficiary of the variable interest because it had the ultimate power to direct the activities that
most significantly impact the economic performance of the station including developing the annual operating budget, selling
advertising, and oversight and control of sales management personnel. Thus, Nexstar consolidated KRBK as of August 1, 2018 under
authoritative guidance related to the consolidation of VIEs. The assets that were consolidated into Nexstar included the licensed assets
and network affiliation agreement of KRBK but were attributed to the owner of the station at the time (noncontrolling interest). On
October 17, 2018, Nexstar received approval from the FCC to acquire the licensed assets of the station. On November 1, 2018,
Nexstar paid the former owner of the remaining purchase price, acquired the full balance of the noncontrolling interest and completed
the acquisition. As of this date, KRBK is no longer a VIE. See Note 3 for additional information.
F-9
The carrying amounts and classification of the assets and liabilities, excluding intercompany amounts, of the VIEs which have
been included in the Consolidated Balance Sheets were as follows (in thousands):
2018
2017
Current assets:
Cash and cash equivalents
Accounts receivable, net
Spectrum asset
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Goodwill
FCC licenses
Other intangible assets, net
Other noncurrent assets, net
Total assets
Current liabilities:
Current portion of debt
Interest payable
Liability to surrender spectrum asset
Other current liabilities
Total current liabilities
Debt
Other noncurrent liabilities
Total liabilities
Non-Consolidated VIEs
$
$
$
$
19,060 $
22,725
-
4,423
46,208
30,861
154,787
157,658
89,225
8,073
486,812 $
54,616 $
345
-
17,594
72,555
243,717
27,542
343,814 $
17,180
24,407
26,695
6,762
75,044
25,971
163,549
151,808
97,757
9,443
523,572
56,565
994
27,347
24,146
109,052
245,523
30,594
385,169
Nexstar has an outsourcing agreement with Cunningham Broadcasting Corporation (“Cunningham”), which continues through
December 31, 2020. Under the outsourcing agreement, Nexstar provides certain engineering, production, sales and administrative
services for WYZZ, the FOX affiliate in the Peoria, Illinois market, through WMBD, the Nexstar television station in that market.
During the term of the outsourcing agreement, Nexstar retains the broadcasting revenue and related expenses of WYZZ and is
obligated to pay a monthly fee to Cunningham based on the combined operating cash flow of WMBD and WYZZ, as defined in the
agreement.
Nexstar has determined that it has a variable interest in WYZZ. Nexstar has evaluated its arrangements with Cunningham and
has determined that it is not the primary beneficiary of the variable interest in this station because it does not have the ultimate power
to direct the activities that most significantly impact the station’s economic performance, including developing the annual operating
budget, programming and oversight and control of sales management personnel. Therefore, Nexstar has not consolidated WYZZ
under authoritative guidance related to the consolidation of VIEs. Under the local service agreement for WYZZ, Nexstar pays for
certain operating expenses, and therefore may have unlimited exposure to any potential operating losses. Nexstar’s management
believes that Nexstar’s minimum exposure to loss under the WYZZ agreement consists of the fees paid to Cunningham. Additionally,
Nexstar indemnifies the owners of Cunningham from and against all liability and claims arising out of or resulting from its activities,
acts or omissions in connection with the agreement. The maximum potential amount of future payments Nexstar could be required to
make for such indemnification is undeterminable at this time. There were no significant transactions arising from Nexstar’s
outsourcing agreement with Cunningham.
In connection with an agreement to acquire WHDF from Huntsville TV, LLC, Nexstar began providing programming and sales
services to the station effective July 15, 2018. Nexstar evaluated its business arrangement with WHDF at that time and determined that
it had a variable interest in WHDF for which it was not the primary beneficiary. On October 17, 2018, Nexstar received approval from
the FCC to acquire the remaining assets of WHDF and, on November 9, 2018, Nexstar paid the remaining purchase price to the seller
and completed the acquisition. As the TBA terminated upon Nexstar’s completion of its acquisition of WHDF on November 9, 2018,
WHDF is no longer considered a VIE. See Note 3 for additional information.
F-10
Basis of Presentation
Certain prior year financial statement amounts have been reclassified to conform to the current year presentation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and use
assumptions that affect the reported amounts of assets and liabilities and the disclosure for contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses during the reporting period. The more significant
estimates made by management include those relating to the allowance for doubtful accounts, valuation related to business
combinations, including assets acquired, liabilities assumed, contingent consideration liability and any other assets or liabilities
recognized from these transactions, retransmission revenue recognized, trade transactions, pension and postretirement obligations,
income taxes, the recoverability of goodwill, FCC licenses and other long-lived assets, the recoverability of broadcast rights and the
useful lives of property and equipment and intangible assets. Actual results may vary from such estimates recorded.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of ninety days or less to be cash
equivalents.
Accounts Receivable and Allowance for Doubtful Accounts
The Company’s accounts receivable consist primarily of billings to its customers for advertising broadcast on its stations or
placed on its websites, for retransmission consent from cable or satellite operators, for digital publishing and content management,
digital video advertising, social media advertising and related services. Trade receivables normally have terms of 30 days and the
Company has no interest provision for customer accounts that are past due. The Company maintains an allowance for estimated losses
resulting from the inability of customers to make required payments. Management periodically evaluates the collectability of accounts
receivable based on a combination of factors, including customer payment history, known customer circumstances, the overall aging
of customer balances and trends. In circumstances where management is aware of a specific customer’s inability to meet its financial
obligations, an allowance is recorded to reduce the receivable amount to an amount estimated to be collectable.
Concentration of Credit Risk
Financial instruments which potentially expose the Company to a concentration of credit risk consist principally of cash and
cash equivalents, restricted cash, and accounts receivable. Cash deposits are maintained with several financial institutions. Deposits
held with banks may exceed the amount of insurance provided on such deposits; however, the Company believes these deposits are
maintained with financial institutions of reputable credit and are not subject to any unusual credit risk. A significant portion of the
Company’s accounts receivable is due from local and national advertising agencies. The Company does not require collateral from its
customers but maintains reserves for potential credit losses. Management believes that the allowance for doubtful accounts is
adequate, but if the financial condition of the Company’s customers were to deteriorate, additional allowances may be required. The
Company has not experienced significant losses related to receivables from individual customers or by geographical area.
Revenue Recognition
As discussed in Recent Accounting Pronouncements below, the Company adopted the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606) and all related amendments. ASC 606 establishes a comprehensive new revenue
recognition model designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the
entity expects to be entitled to receive in exchange for those goods or services and requires significantly enhanced revenue disclosures.
The Company adopted this standard effective January 1, 2018 using the modified retrospective method as applied to customer
contracts that were not completed as of January 1, 2018. As a result, financial information for reporting periods beginning after
January 1, 2018 is presented under ASC 606, while comparative financial information has not been adjusted and continues to be
reported in accordance with the Company’s historical accounting policy for revenue recognition prior to the adoption of ASC 606.
F-11
The Company’s revenue is primarily derived from the sale of advertising and the compensation received from traditional
multichannel video programming distributors (“MVPDs”), such as cable and satellite providers, as well as over-the-top video
distributors (“OTTDs”), companies that provide video content through internet streaming, in return for the Company’s consent to the
retransmission of the signals of its television stations. Total revenue includes advertising revenue, retransmission compensation,
digital revenue and other broadcast related revenues. The Company’s contracts with customers may include multiple performance
obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone
selling price, which is generally determined based on the price charged to customers. The Company also determines whether gross or
net presentation is appropriate based on its relationship in the applicable transaction with its ultimate customer. Any amounts paid by
customers but not earned as of the balance sheet date are recorded as a contract liability (deferred revenue). The lag between billing
the customers and when the payment is due is not significant.
The stations’ advertising contracts are short-term in nature and include a number of spots that are delivered over the term of
the arrangement. For broadcast of commercials (local, national and political advertising), the performance obligation is identified at
the contract level as it represents a station’s promise to deliver an agreed number of spots, an agreed price per spot and other
specifications. Each performance obligation is satisfied over time as the advertiser receives and consumes benefits when a station airs
the advertiser’s commercial. For digital advertising, the performance obligation is a station’s promise to place an advertisement in its
website and is satisfied either based on impressions or the placement of ads over an agreed period of time. Advertising revenue is
recognized, for the amount the Company is entitled to receive, when the advertisements are broadcast on its stations or delivered on
the stations’ websites.
The Company’s retransmission consent agreements with MVPDs and OTTDs generally have a three-year term and provide
revenue based on a monthly amount the Company is entitled to receive per subscriber. Under ASC 606, these revenues are considered
arising from the licensing of functional intellectual property. As such, the Company applies the exception for sales- or usage-based
royalty for the accounting of variable consideration and recognizes revenue (retransmission compensation) at the point in time the
broadcast signal is delivered to the distributors. The distributors report their subscriber numbers to the Company on a 30- to 60-day
lag, which coincides with their payment of the fees due to the Company. Prior to receiving the report, the Company records revenue
based on estimated number of subscribers and the monthly amount the Company is entitled to receive per subscriber. The impact of
the lag in the number of subscribers is not significant.
Revenue from the Company’s other digital businesses includes revenue from digital publishing and content management
platforms, a digital video advertising platform, a social media advertising platform and related services. Revenue is recognized at the
time advertising is delivered or upon performance of services. The Company applies the right to invoice practical expedient to certain
transactions where the invoice amount corresponds directly with the value to its customers. Most of the arrangements with customers
are short-term in nature.
The Company trades certain advertising time for various goods and services. These transactions are short-term in nature and are
recorded at the estimated fair value of the goods or services received. Revenue from trade transactions is recognized when the related
advertisement spots are broadcast. The Company recorded $16.8 million, $14.2 million and $11.0 million of trade revenue during the
years ended December 31, 2018, 2017, and 2016 respectively. Trade expense is recognized when services or merchandise received are
used. The Company recorded $16.5 million, $14.5 million and $10.8 million of trade expense for the years ended December 31, 2018,
2017 and 2016, respectively, which were included in direct operating expenses in the Company’s Consolidated Statements of
Operations and Comprehensive Income.
The above revenue recognition policies are consistent with the Company’s historical accounting policies prior to the adoption of
ASC 606.
Effective on January 1, 2018, the Company no longer recognizes barter revenue (and the related barter expense) resulting from
the exchange of advertising time for certain program material. During the year ended December 31, 2017, barter revenue (and the
related barter expense) were $42.5 million. During the year ended December 31, 2016, barter revenue (and the related barter expense)
were $34.7 million. Barter expense was included in amortization of broadcast rights in the accompanying Consolidated Statement of
Operations. As of December 31, 2017, the current barter assets (and the related current barter liabilities) were $9.7 million, and the
noncurrent barter assets (and the related noncurrent barter liabilities) were $12.5 million. On January 1, 2018, the Company recorded
an adjustment to remove the offsetting balances of barter assets and barter liabilities.
Under the Company’s historical accounting policy prior to the adoption of ASC 606, barter revenue (and the related barter
expense) would have been $41.9 million during the year ended December 31, 2018. In addition, the current barter assets (and the
related current barter liabilities) would have been $8.7 million, and the noncurrent barter assets (and the related noncurrent barter
liabilities) would have been $8.1 million as of December 31, 2018.
F-12
The Company elected to utilize the practical expedient around costs incurred to obtain contracts for television advertising and
digital advertising due to their short-term nature. Additionally, the incremental benefit from efforts in acquiring these contracts is
considered not significant. Thus, the Company continued to expense sales commissions when incurred.
The Company did not disclose the value of unsatisfied performance obligations on its contracts with customers because they are
either (i) contracts with an original expected term of one year or less, (ii) contracts for which the sales- or usage-based royalty
exception was applied, or (iii) contracts for which revenue is recognized in proportion to the amount the Company has the right to
invoice for services performed.
The Company’s contract liabilities, which are reflected in its Consolidated Financial Statements as accrued expenses and other
liabilities, consist primarily of customer payments for products or services received before the transfer of control to the customer
occurs (deferred revenue). The Company’s performance obligations related to contract liabilities of $5.4 million as of January 1, 2018
were recognized as revenue during the first quarter of 2018. The Company’s performance obligations related to contract liabilities of
$2.3 million as of December 31, 2018 are expected to be recognized as revenue in the first quarter of 2019.
See Note 14 for disaggregated revenue information.
Broadcast Rights and Broadcast Rights Payable
The Company records broadcast rights contracts as an asset and a liability when the following criteria are met: (1) the license
period has begun, (2) the cost of each program is known or reasonably determinable, (3) the program material has been accepted in
accordance with the license agreement, and (4) the program is produced and available for broadcast. Cash broadcast rights are initially
recorded at the contract cost and are amortized on a straight-line basis over the period the programming airs. The current portion of
cash broadcast rights represents those rights available for broadcast which will be amortized in the succeeding year. The Company
periodically evaluates the net realizable value, calculated using the average historical rates for the programs or the time periods the
programming will air, of cash broadcast rights and adjusts the amortization for any deficiency calculated.
Effective on January 1, 2018, the Company no longer recognizes barter broadcast rights and barter broadcast rights payable
resulting from the exchange of advertising time for certain program material. See Revenue Recognition policy above for additional
information.
Property and Equipment, Net
Property and equipment is stated at cost or estimated fair value at the date of acquisition through a business combination. The
cost and related accumulated depreciation applicable to assets sold or retired are removed from the accounts and the gain or loss on
disposition is recognized. Major renewals and betterments are capitalized, and ordinary repairs and maintenance are charged to
expense in the period incurred. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets (see Note
4).
Intangible Assets, Net
Intangible assets consist primarily of goodwill, FCC licenses, network affiliation agreements, developed technology and
customer relationships arising from acquisitions. The Company accounts for acquired businesses using the acquisition method of
accounting, which requires that purchase prices, including any contingent consideration, are measured at acquisition date fair values.
These purchase prices are allocated to the assets acquired and liabilities assumed at estimated fair values at the date of acquisition
using various valuation techniques, including discounted projected cash flows, the cost approach and the income approach. The fair
value estimates are based on, but not limited to, expected future revenue and cash flows, expected future growth rates, and estimated
discount rates. The excess of the purchase price over the fair value of net assets acquired is recorded as goodwill. During the
measurement period, which may be up to one year from the acquisition date, the Company records adjustments related to the assets
acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final
determination of the values of assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments are
recognized in the Company’s Consolidated Statements of Operations and Comprehensive Income.
F-13
The Company’s goodwill and FCC licenses are considered to be indefinite-lived intangible assets and are not amortized but are
tested for impairment annually in the Company’s fourth quarter, or whenever events or changes in circumstances indicate that such
assets might be impaired. The use of an indefinite life for FCC licenses contemplates the Company’s historical ability to renew its
licenses such that renewals generally may be obtained indefinitely and at little cost. Therefore, cash flows derived from the FCC
licenses are expected to continue indefinitely. Network affiliation agreements are subject to amortization computed on a straight-line
basis over the estimated useful life of 15 years. The 15-year life assumes affiliation contracts will be renewed upon expiration.
Changes in the likelihood of renewal could require a change in the useful life of such assets and cause an acceleration of amortization.
The Company evaluates the remaining lives of its network affiliations whenever changes occur in the likelihood of affiliation contract
renewals, and at least on an annual basis.
The Company aggregates its television stations into a single broadcast business reporting unit for purposes of goodwill
impairment tests because of their similar economic characteristics. The Company’s impairment review for FCC licenses is performed
at the television station market level. In January 2018, the Company’s digital businesses increased from three reporting units to four
reporting units with the acquisition of Likqid Media Inc. (“LKQD”) (See Note 3). The reporting units within the Company’s digital
business are not economically similar, and therefore, not aggregated.
The Company first assesses the qualitative factors to determine the likelihood of the goodwill and FCC licenses being impaired.
The qualitative analysis includes, but is not limited to, assessing the changes in macroeconomic conditions, regulatory environment,
industry and market conditions, and the financial performance versus budget of the reporting units, as well as any other events or
circumstances specific to the reporting units or the FCC licenses. If it is more likely than not that the fair value of a reporting unit’s
goodwill or a station’s FCC license is greater than its carrying amount, no further testing will be required. Otherwise, the Company
will apply the quantitative impairment test method.
The quantitative impairment test for goodwill is performed by comparing the fair value of a reporting unit with its carrying
amount. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and no further testing is required. If
the fair value of the reporting unit is less than the carrying value, an impairment charge is recognized for the amount by which the
carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill
allocated to that reporting unit. The quantitative impairment test for FCC licenses consists of a market-by-market comparison of the
carrying amounts of FCC licenses with their fair value, using a discounted cash flow analysis. An impairment is recorded when the
carrying value of an FCC license exceeds its fair value.
Determining the fair value of reporting units and FCC licenses requires management to make a number of judgments about
assumptions and estimates that are highly subjective and that are based on unobservable inputs. The actual results may differ from
these assumptions and estimates, and it is possible that such differences could have a material impact on the Company’s Consolidated
Financial Statements. In addition to the various inputs (i.e. market growth, operating profit margins, discount rates) used to calculate
the fair value of reporting units and FCC licenses, the Company evaluates the reasonableness of its assumptions by comparing the
total fair value of all its reporting units to its total market capitalization; and by comparing the fair values of its reporting units and
FCC licenses to recent market television station sale transactions.
The Company tests finite-lived intangible assets and other long-lived assets for impairment whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable, relying on a number of factors including operating results,
business plans, economic projections and anticipated future cash flows. The impairment test for finite-lived intangible assets consists
of an asset (asset group) comparison of the carrying amount with its estimated undiscounted future cash flows. An impairment in the
carrying amount of a finite-lived intangible asset is recognized when the expected discounted future operating cash flow derived from
the operation to which the asset relates is less than its carrying value.
Debt Financing Costs
Debt financing costs represent direct costs incurred to obtain long-term financing and are amortized to interest expense over the
term of the related debt using the effective interest method. Previously capitalized debt financing costs are expensed and included in
loss on extinguishment of debt if the Company determines that there has been a substantial modification of the related debt. Deferred
financing costs related to term loans and senior unsecured notes are combined with debt discounts and presented as a direct deduction
from the carrying amount of debt. Debt financing costs related to revolving credit facilities are included in other noncurrent assets.
Comprehensive Income
The Company’s comprehensive income consists of net income and unrecognized actuarial gains and losses on its pension and
postretirement liabilities, net of income tax adjustments.
F-14
Advertising Expense
The cost of advertising is expensed as incurred. The Company incurred advertising costs in the amount of $8.2 million, $9.2
million and $4.0 million for the years ended December 31, 2018, 2017 and 2016, respectively, of which the majority was recognized
in trade expense.
Financial Instruments
The Company utilizes the following categories to classify the valuation methodologies for fair values of 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 carrying amount of cash, cash equivalents and restricted cash, accounts receivable, broadcast rights, accounts payable, and
accrued expenses and other current liabilities approximates fair value due to their short-term nature.
See Note 3 for fair value disclosures of spectrum asset and contingent consideration liability (CVR) in connection with
Nexstar’s merger with Media General, Inc. (“Media General”).
See Note 7 for fair value disclosures related to the Company’s debt.
Certain investments held in the pension and other post retirement plans have been valued using net asset value (“NAV”) as a
practical expedient for fair value. In accordance with ASC 820, investments measured at NAV are excluded from the fair value
hierarchy. See Note 8 for fair value disclosures related to retirement and postretirement plans.
Pension plans and postretirement benefits
A determination of the liabilities and cost of the Company’s pension and other postretirement plans requires the use of
assumptions. The actuarial assumptions used in the Company’s pension and postretirement reporting are reviewed annually with
independent actuaries and are compared with external benchmarks, historical trends and the Company’s own experience to determine
that its assumptions are reasonable. The assumptions used in developing the required estimates include the following key factors:
discount rates, expected return on plan assets, mortality rates, retirement rates and expected contributions. The amount by which the
projected benefit obligation exceeds the fair value of the pension plan assets is recorded in other noncurrent liabilities in the
accompanying Consolidated Balance Sheet.
As discussed under Recent Accounting Pronouncements, as of January 1, 2018, the Company adopted ASU No. 2017-07. Under
ASU No. 2017-07, entities are required to (1) disaggregate the current-service-cost component from the other components of net
benefit cost (the “other components”) and present such current-service-costs in the same income statement line item as other
compensation costs for services rendered by the pertinent employees during the period and (2) present the other components in the
income statement separately from the service cost component and outside the subtotal of income from operations. The Company had
no service costs during the years ended December 31, 2018, 2017 and 2016. In accordance with this adoption, the net periodic benefit
credit, which consists of interest costs and expected return on plan assets, is disclosed on a separate line item below income from
operations in the Consolidated Statements of Operations and Comprehensive Income.
Company-owned Life Insurance
The Company owns life insurance policies on certain executives, current employees, former employees and retirees. These
policies were assumed from a past acquisition. Management considers these policies to be operating assets. Cash surrender values of
life insurance policies are presented net of policy loans. Borrowings and repayments against company-owned life insurance are
reflected in the operating activities section of the statement of cash flows. Under ASU No. 2016-15, payments received for the
settlement of corporate-owned life insurance claims are now required to be disclosed within investing activities. Accordingly, amounts
previously reported in fiscal year 2017 as a source of cash from operating activities have been reclassified to investing activities in the
Consolidated Statements of Cash Flows.
F-15
Stock-Based Compensation
Nexstar maintains stock-based employee and non-employee compensation plans which are described more fully in Note 10. The
Company calculates the grant-date fair value of employee and non-employee stock options using the Black-Scholes model. The fair
values of time-based and performance-based restricted stock units are based on the number of shares awarded and market price of the
stock on the date of award. These amounts are recognized into selling, general and administrative expense over the vesting period of
the options or the time-based restricted stock units, and for performance-based restricted stock units, when it is probable that the
performance conditions will be achieved. The excess or shortage of tax deductions over the compensation cost of stock-based
payments is recognized as income tax benefit or income tax expense, respectively.
Income Taxes
The Company accounts for income taxes under the asset and liability method which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and tax basis of
assets and liabilities. A valuation allowance is applied against net deferred tax assets if, based on the weight of available evidence, it is
more likely than not that some or all of the deferred tax assets will not be realized. Nexstar and its subsidiaries file a consolidated
federal income tax return. Mission, Marshall, White Knight and 54 Broadcasting file their own separate federal income tax returns.
Shield, Vaughan, Tamer and WNAC are disregarded entities for tax purposes and do not incur tax within the consolidated financial
statements.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will
be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes
that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information.
The Company recognizes interest and penalties relating to income taxes within income tax expense.
Income Per Share
Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding
during the period. Diluted income per share is computed using the weighted-average number of common shares and potentially
dilutive common shares outstanding during the period. Potentially dilutive common shares are calculated using the treasury stock
method. They consist of stock options and restricted stock units outstanding during the period and reflect the potential dilution that
could occur if common shares were issued upon exercise of stock options and vesting of restricted stock units. The following table
shows the amounts used in computing the Company’s diluted shares during the years ended December 31, 2018, 2017 and 2016 (in
thousands):
Weighted average shares outstanding - basic
Dilutive effect of equity incentive plan instruments
Weighted average shares outstanding - diluted
2018
2017
2016
45,718
1,694
47,412
45,754
1,395
47,149
30,687
977
31,664
The Company has outstanding stock options and restricted stock units to acquire 21,000, 153,000 and 351,000 weighted average
shares of common stock for the years ended December 31, 2018, 2017 and 2016, respectively, the effects of which are excluded from
the calculation of dilutive income per share, as their inclusion would have been anti-dilutive for the periods presented.
Segments
Nexstar operates in one reportable television broadcast segment. The other activities of the Company include corporate
functions, digital businesses and eliminations.
Recent Accounting Pronouncements
New Accounting Standards Adopted
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The Company adopted
this standard and all related amendments effective January 1, 2018 using the modified retrospective method as applied to customer
contracts that were not completed as of January 1, 2018. Upon adoption of this standard, the cumulative adjustment to the Company’s
retained earnings as of January 1, 2018 for the cumulative effect of initially applying the new standard is not material. See Revenue
Recognition above for the Company’s updated accounting policy and for expanded disclosures.
F-16
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash
Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) (“ASU 2016-15”). The amendments in ASU 2016-15
address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under FASB
Accounting Standards Codification 230, Statement of Cash Flows. The amendments in ASU 2016-15 are effective for fiscal years, and
interim periods within those years, beginning after December 15, 2017. The Company has applied the change in accounting as of
January 1, 2018 on a retrospective basis. This adoption impacted Nexstar’s previous financing activity classification of payments for
contingent consideration in 2017 related to an acquisition. The payment was not made soon after the consummation of a business
combination and includes an amount that is more than the acquisition date fair value of the contingent consideration liability. Under
ASU 2016-15, this portion of the transaction should be classified as an operating activity in the Consolidated Statement of Cash
Flows. The adoption also impacted Nexstar’s disclosure of payments received for the settlement of corporate-owned life insurance
claims within the Consolidated Statement of Cash Flows during the year ended December 31, 2017. The payments were previously
reported as a source of cash from operating activities and are now required to be disclosed within investing activities, as indicated in
the third table below. ASU No 2016-15 did not impact the Company’s cash flow presentations during the year ended December 31,
2016.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, a consensus of
the FASB Emerging Issues Task Force (“ASU 2016-18”), which provides guidance on the presentation of restricted cash or restricted
cash equivalents in the statement of cash flows. ASU 2016-18 is effective for public business entities in fiscal years beginning after
December 15, 2017, including interim periods within those fiscal years. The Company has applied the change in accounting as of
January 1, 2018 on a retrospective basis. This adoption impacted the following transactions and balances during the years ended
December 31, 2017 and 2016:
2016 Transactions
In July 2016, Nexstar issued its $900.0 million 5.625%
Notes at par, the gross proceeds of which were directly
deposited into a restricted escrow account.
2016 Consolidated Statement of Cash Flows (Previous Presentation)
No cash flow from issuance of long-term debt was reported in the financing activities due to
direct deposit of proceeds into a restricted escrow account not owned by Nexstar. Instead, the
transaction was reported as a supplemental information for non-cash investing and financing
activity.
In 2016, Nexstar pre-funded the interest on the 5.625%
Notes totaling $26.7 million, also deposited into the
restricted escrow account.
$21.7 million of the pre-funded interest was previously reported as a use of cash from change in
prepaid expenses and other current assets. This amount was also included in the supplemental
information of the Consolidated Statement of Cash Flows, under the caption Interest Paid. The
remaining $5.1 million was previously reported as a use of cash from investing activities.
In 2016, Nexstar earned $1.1 million in interest income from
the escrow deposit.
The income was previously presented as an adjustment against net income and reduced net cash
provided by operating activities
As of December 31, 2016, the restricted escrow account had
a balance of $927.8 million.
Not previously included in the cash balance at the end of period.
2017 Transactions
In January 2017, the funds previously deposited in a
restricted escrow account totaling $927.8 million were
released to Nexstar’s and were deposited into Nexstar’s
operating cash.
2017 Consolidated Statement of Cash Flows (Previous Presentation)
(i) $21.6 million source of cash from change in prepaid expenses and other current assets,
(ii) $1.1 million source of cash from change in other noncurrent assets,
(iii) $5.1 million source of cash from investing activities, and
(iv) $900.0 million reported as proceeds from issuance of long-term debt under financing
activities
On February 1, 2017, Nexstar paid the first semi-annual
interest due to the lenders of the 5.625% Notes of $25.9
million.
No cash flow reported in 2017 for the payment of interest on the 5.625% Notes as the cash flow
impact was reported in 2016 when the pre-funding was made
Under ASU 2016-18, transfers between cash, cash equivalents, and amounts generally described as restricted cash or restricted
cash equivalents are not part of an entity’s operating, investing and financing activities, and details of those transfers are not reported
as cash flow activities in the statement of cash flows. As such, the previous classifications in the 2017 and 2016 Consolidated
Statements of Cash Flows related to these transactions were reversed. Additionally, the cash, cash equivalents and restricted cash as of
December 31, 2016 increased. Also, the supplemental cash flow information for interest paid increased in 2017 and decreased in 2016.
The supplemental information for non-cash investing and financing activities in 2016 related to the issuance of 5.625% Notes directly
deposited into an escrow account decreased.
F-17
The following tables summarize the line items in the Consolidated Statement of Cash Flows that were impacted by the adoption
of ASU 2016-15 and ASU 2016-18 along with reclassifications to conform with current year presentation (in thousands):
Previously
Reported
Year Ended December 31, 2017
Adjustments for adoption of
ASU 2016-15
ASU 2016-18
Reclassifications
Current
Presentation
Cash flows from operating activities:
Payments for contingent consideration in connection with an
acquisition
Other non-cash credits
Accounts receivable
Prepaid expenses and other current assets
Other noncurrent assets
Net cash provided by operating activities
Cash flows from investing activities:
Withdrawal of interest previously deposited in escrow
Proceeds received from corporate-owned life insurance policies
Net cash used in investing activities
Cash flows from financing activities:
$
- $
(4,044)
$
(1,617)
(55,819)
22,825
(278)
136,721
5,063
-
(2,062,072)
-
(850)
-
-
(4,894)
-
850
850
-
-
-
(21,656)
(1,080)
(22,736)
(5,063)
(5,063)
Proceeds from long-term debt
Payments for contingent consideration in connection with an
acquisition
Net cash provided by financing activities
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
4,433,981
-
(900,000)
(263,647)
1,953,323
27,972
87,680
4,044
4,044
-
-
-
(900,000)
(927,799)
927,799
$
- $
(1,874)
-
-
1,874
-
-
-
-
-
-
-
-
-
(4,044)
(3,491)
(56,669)
1,169
516
109,091
-
850
(2,066,285)
3,533,981
(259,603)
1,057,367
(899,827)
1,015,479
Supplemental information:
Interest paid
$
213,683 $
- $
25,875 $
- $
239,558
Previously
Reported
Year Ended December 31, 2016
Adjustments for adoption of
ASU 2016-15
ASU 2016-18
Reclassifications
Current
Presentation
Cash flows from operating activities:
Income from escrow deposit
Prepaid expenses and other current assets
Net cash provided by operating activities
Cash flows from investing activities:
Prepaid interest deposited in escrow
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term debt
Net cash (used in) provided by financing activities
Net increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at end of period
Supplemental information:
Interest paid
Non-cash investing and financing activities:
$
(1,080) $
(28,628)
261,517
- $
-
-
1,080 $
21,656
22,736
(5,063)
(140,185)
58,000
(77,068)
44,264
87,680
99,917
-
-
-
-
-
-
-
5,063
5,063
900,000
900,000
927,799
927,799
(21,656)
- $
-
-
-
-
-
-
-
-
-
-
(6,972)
284,253
-
(135,122)
958,000
822,932
972,063
1,015,479
78,261
Proceeds from the issuance of debt directly deposited into escrow $
900,000 $
- $
(900,000) $
- $
-
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a
Business (“ASU 2017-01”). ASU 2017-01 provides clarification on the definition of a business and adds guidance to assist entities
with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. To be considered a
business under the new guidance, it must include an input and a substantive process that together significantly contribute to the ability
to create output. The amendment removes the evaluation of whether a market participant could replace missing elements. The
amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those
fiscal years, and will be applied prospectively. The Company has applied the change in accounting as of January 1, 2018. The
adoption of this ASU did not impact the Company's Consolidated Financial Statements.
F-18
In March 2017, the FASB issued ASU No. 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”). ASU 2017-07 requires
entities to (1) disaggregate the current-service-cost component from the other components and present it with other current
compensation costs for related employees in the income statement and (2) present the other components elsewhere in the income
statement and outside of income from operations if that subtotal is presented. In addition, ASU 2017-07 requires entities to disclose
the income statement lines that contain the other components if they are not presented on appropriately described separate lines. The
amendment should be applied retrospectively for the presentation of the service cost component and prospectively for the
capitalization of the service cost component. ASU 2017-07 is effective for fiscal years beginning after December 15, 2017, including
interim periods within those fiscal years. The Company has applied the change in accounting as of January 1, 2018. Accordingly, net
periodic benefit income, excluding service costs, of $13.1 million for the year ended December 31, 2017 was adjusted out of selling,
general and administrative expenses, and separately stated below income from operations. The adoption of this ASU did not impact
the Company's Consolidated Financial Statements for the year ended December 31, 2016.
In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718) – Scope of Modification
Accounting (“ASU 2017-09”). ASU 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must
be accounted for as modifications. The new guidance will reduce diversity in practice and result in fewer changes to the terms of an
award being accounted for as modifications. Under ASU 2017-09, an entity will not apply modification accounting to a share-based
payment award if the award’s fair value, vesting conditions and classification as an equity or liability instrument are the same
immediately before and after the change. ASU 2017-09 will be applied prospectively to awards modified on or after the adoption date.
ASU 2017-09 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The
Company has applied the change in accounting as of January 1, 2018. The adoption of this ASU did not impact the Company's
Consolidated Financial Statements.
In February 2018, the FASB issued ASU No. 2018-02, Reporting Comprehensive Income: Reclassification of Certain Tax
Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). ASU 2018-02 provides the option to reclassify stranded
tax effects related to the U.S. Tax Cuts and Jobs Act of 2017 (“Tax Act”) in accumulated other comprehensive income to retained
earnings. The adjustment relates to the change in the U.S. corporate income tax rate. The adoption of this ASU did not impact the
Company's Consolidated Financial Statements.
In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to
Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). The standard aligns the accounting for share-based payment
awards issued to employees and nonemployees. Changes to the accounting for nonemployee awards include: (1) equity-classified
share-based payment awards issued to nonemployees will now be measured on the grant date, instead of the previous requirement to
remeasure the awards through the performance completion date; (2) for performance conditions, compensation cost associated with
the award will be recognized when achievement of the performance condition is probable, rather than upon achievement of the
performance condition; and (3) the current requirement to reassess the classification (equity or liability) for nonemployee awards upon
vesting will be eliminated, except for awards in the form of convertible instruments. The guidance should be applied to all new awards
granted after the date of adoption. In addition, the modified retrospective approach should be used on all liability-classified awards
that have not been settled and equity-classified awards for which a measurement date has not been established by the adoption date by
remeasurement at fair value as of the adoption date with a cumulative effect adjustment to opening retained earnings in the fiscal year
of adoption. The standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal
years. Early adoption is permitted, but no earlier than an entity’s adoption of ASC 606. The Company has applied the change in
accounting as of January 1, 2018. The adoption of this ASU did not impact the Company's Consolidated Financial Statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):
Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (“ASU
2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a
service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The
amendments in this Update are effective for interim and annual reporting periods beginning after December 15, 2019, and early
adoption is permitted. The Company has applied the change in accounting as of January 1, 2018. The adoption of this ASU did not
have a significant impact on the Company's Consolidated Financial Statements.
In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification,
amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the
amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the
amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note
or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for
which a statement of comprehensive income is required to be filed. This final rule was effective on November 5, 2018. The Company
has applied the new SEC disclosure requirements in its Consolidated Financial Statements on a retrospective basis.
F-19
New Accounting Standards Not Yet Adopted
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). Under this guidance, lessees are
required to recognize on the balance sheet a right-of-use asset and a lease liability arising from operating leases except for short-term
contracts with original terms of twelve months or less. The new guidance also requires enhanced qualitative and quantitative
disclosures in the notes to the financial statements and is expected to provide transparency of information and comparability among
organizations. ASU 2016-02 and related amendments is effective for interim and annual reporting periods beginning after December
15, 2018, with early adoption permitted. The Company will adopt ASU 2016–02 as of January 1, 2019 using the optional transition
method. As such, the Company's reporting for the comparative periods presented in the financial statements will continue to be in
accordance with ASC Topic 840, Leases. The Company will apply certain practical expedients offered in the new lease guidance, such
as no reassessment of whether expired or existing contracts contain leases, no re-evaluation of the classification of expired or existing
leases and no reassessment of initial direct costs for existing leases. Upon adoption, the Company expects to record an increase in total
assets and total liabilities by less than 2%. Management does not expect the standard to have a material impact on its cash flows or
results of operations.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”). The
standard requires entities to estimate loss of financial assets measured at amortized cost, including trade receivables, debt securities
and loans, using an expected credit loss model. The expected credit loss model differs from the previous incurred losses model
primarily in that the loss recognition threshold of “probable” has been eliminated and that expected loss should consider reasonable
and supportable forecasts in addition to the previously considered past events and current conditions. Additionally, the guidance
requires additional disclosures related to the further disaggregation of information related to the credit quality of financial assets by
year of the asset’s origination for as many as five years. In November 2018, the FASB issued ASU No. 2018-19 to clarify the scope of
the guidance in the amendments in ASU 2016-13. Entities must apply the standard provision as a cumulative-effect adjustment to
retained earnings as of the beginning of the first reporting period in which the guidance is effective. The standard is effective for fiscal
years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for annual periods
beginning after December 15, 2018, and interim periods within those fiscal years. The Company is currently evaluating the impact of
adopting ASU 2016-13 on its Consolidated Financial Statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) (“ASU 2018-13”), which modifies
the disclosure requirements on fair value measurements. The amendments in this update are effective for all entities for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or
modified disclosures. The Company is currently evaluating the impact of adopting ASU 2018-13 on its Consolidated Financial
Statements.
In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic
715-20) (“ASU 2018-14”). ASU 2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required
disclosures and adds additional disclosures. The amendments in this Update are effective for fiscal years ending after December 15,
2020, with early adoption is permitted. The updated standard should be applied on a retrospective basis. The Company is currently
evaluating the impact of adopting ASU 2018-14 on its Consolidated Financial Statements.
In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party
Guidance for Variable Interest Entities (“ASU 2018-17”). The amendments in this Update for determining whether a decision-making
fee is a variable interest require reporting entities to consider indirect interests held through related parties under common control on a
proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required in GAAP). Therefore, these
amendments likely will result in more decision makers not having a variable interest through their decision-making arrangements. The
amendments in this Update are effective for interim and annual reporting periods beginning after December 15, 2019, and early
adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2018-17 on its Consolidated Financial
Statements.
F-20
3. Acquisitions and Dispositions
Merger Agreement with Tribune
On November 30, 2018, Nexstar entered into a definitive merger agreement with Tribune to acquire Tribune’s outstanding
equity for $46.50 per share in a cash transaction. All equity-based awards of Tribune that are outstanding prior to the merger will vest
in full and will be converted into the right to receive the same cash consideration. The estimated total purchase price is valued at $6.4
billion, consisting of the merger cash consideration and the refinancing of Tribune's outstanding debt. Tribune shareholders will be
entitled to additional cash consideration of approximately $0.30 per share per month if the transaction has not closed by August 31,
2019, pro-rated for partial months and less an adjustment for any dividends declared on or after September 1, 2019. Transaction costs
relating to this proposed acquisition, including legal and professional fees of $2.5 million and $1.2 million were expensed as incurred
during the years ended December 31, 2018 and 2017, respectively.
The merger agreement contains certain termination rights for both Nexstar and Tribune. If the merger agreement is terminated
in connection with Tribune entering into a definitive agreement with respect to a superior proposal, as well as under certain other
circumstances, the termination fee payable by Tribune to Nexstar will be $135 million. If the merger agreement is terminated because
the required Tribune stockholder vote is not obtained at a stockholder meeting duly held for such purpose, Tribune will be required to
reimburse Nexstar for its costs and expenses incurred in connection with the transaction in an amount not to exceed $15 million.
Either party may terminate the merger agreement if the merger is not consummated on or before an end date of November 30, 2019,
with an automatic extension to February 29, 2020, if necessary to obtain regulatory approval under circumstances specified in the
merger agreement.
The merger has been approved by the boards of directors of both companies and is projected to close late in the third quarter of
2019, subject to (i) the approval of the merger by the stockholders of Tribune, (ii) FCC approval, (iii) other regulatory approvals
(including expiration of the applicable HSR waiting period) and (iv) satisfaction of other customary closing conditions. The merger
does not require approval of Nexstar’s stockholders and is not subject to any financing contingency. On November 30, 2018, Nexstar
received committed financing up to a maximum of $6.4 billion from a group of commercial banks to provide the debt financing to
consummate the merger and the refinancing of certain of the existing indebtedness of Tribune and related transactions.
In connection with obtaining the HSR approval and the FCC approval, Nexstar agreed to divest one or more television stations
in certain DMAs. Those DMAs are: (i) Salt Lake City, UT; (ii) Grand Rapids-Kalamazoo-Battle Creek, MI; (iii) Wilkes Barre-
Scranton, PA; (iv) Richmond-Petersburg, VA; (v) Des Moines-Ames, IA; (vi) Norfolk-Portsmouth-Newport News, VA; (vii) Fort
Smith-Fayetteville-Springdale-Rogers, AR; (viii) Davenport, IA-Rock Island-Moline, IL; (ix) Memphis, TN; (x) Huntsville-Decatur
(Florence), AL; (xi) Indianapolis, IN; (xii) Hartford-New Haven, CT and (xiii) Harrisburg, PA. Nexstar is required to designate one or
more Tribune stations or Nexstar stations for divestiture in each DMA. Nexstar has also agreed to designate, at its option, certain
additional Tribune stations or Nexstar stations for divestiture and to divest such stations in order to comply with the FCC national cap
as required by the FCC in order to obtain approval of and consummate the transactions
Tribune is a diversified media and entertainment business, comprising of 42 owned or operated local television stations.
Nexstar and Tribune plan to divest certain of their stations in connection with the proposed merger in order to comply with FCC media
ownership rules.
2018 Acquisitions
LKQD
On January 16, 2018, Nexstar Digital LLC (“Nexstar Digital”), a wholly-owned subsidiary of Nexstar, acquired the outstanding
equity of LKQD, a video advertising infrastructure company, for $97.0 million. In January 2018, $94.0 million of the purchase price
was paid, funded by a combination of borrowing under Nexstar’s revolving credit facility (Note 7) and cash on hand. The remaining
purchase price of $3.0 million (working capital adjustment) was paid to the former owners on April 27, 2018, funded by cash on hand.
The sellers were also entitled to receive up to $35.0 million in additional cash payments if a certain earnings target was achieved
during the fiscal year 2019 and if certain employees continued their employment with Nexstar Digital on the date of payment (the
“Earnout Payments”). However, as of December 31, 2018, the employees ceased employment with Nexstar Digital and forfeited the
additional payments. In the fourth quarter of 2018, Nexstar Digital reversed its previous estimated accrual of $1.9 million related to
the Earnout Payments.
The acquisition of LKQD broadened and diversified Nexstar Digital’s portfolio with technologies that are complementary to its
current offerings of digital solutions and services for media publishers, and multi-platform marketing solutions for local and national
advertisers. Transaction costs relating to this acquisition, including legal and professional fees of $0.4 million, were expensed as
incurred during the year ended December 31, 2018.
F-21
The fair values of the assets acquired and liabilities assumed in the acquisition are as follows (in thousands):
Cash and cash equivalents
Accounts receivable
Prepaids
Property and equipment
Other intangible assets
Goodwill
Total assets acquired and consolidated
Less: Accounts payable and accrued expenses
Less: Taxes payable
Less: Deferred tax liabilities
Net assets acquired and consolidated
$
$
11,167
24,712
13
210
45,320
42,475
123,897
(18,816)
(1,065)
(6,984)
97,032
The fair value assigned to goodwill is attributable to future expense reductions utilizing management’s leverage in operating
costs. The goodwill and other intangible assets are not deductible for tax purposes. Other intangible assets are amortized over an
estimated weighted average useful life of approximately three years.
During 2018, Nexstar Digital recorded measurement period adjustments including a decrease in accounts receivable of $1.2
million, resulting from changes in the estimate of collectability of accounts receivable. This adjustment increased goodwill by $1.3
million, along with other measurement period adjustments.
LKQD’s net revenue of $34.2 million and operating income of $12.9 million from the date of acquisition to December 31, 2018
have been included in the accompanying Consolidated Statements of Operations and Comprehensive Income.
WHDF
On July 15, 2018, Nexstar entered into a definitive agreement to acquire the assets of television station WHDF from Huntsville
TV, LLC for $3.0 million in cash, including working capital adjustments. WHDF is a full power television station in the Huntsville,
Alabama market and an affiliate of CW. Nexstar provided programming and sales services to this station pursuant to a TBA from July
15, 2018 through the completion of the acquisition.
On July 15, 2018, Nexstar completed the first closing and acquired the station’s assets excluding certain transmission
equipment, FCC licenses and network affiliation agreements for $2.3 million, funded by cash on hand. As discussed in Note 2,
Nexstar was not the primary beneficiary of its variable interests in WHDF. Therefore, in the third quarter of 2018, the station’s
remaining assets were not consolidated into Nexstar’s financial statements under authoritative guidance related to the consolidation of
VIEs.
The acquisition was approved by the FCC on October 17, 2018 and Nexstar completed the second closing on November 9, 2018,
acquiring the remaining assets and paying the remaining purchase price of $0.7 million, funded by cash on hand. The TBA was also
terminated as of this date. The station’s net revenue and operating income from November 9, 2018 to December 31, 2018 were not
significant.
Subject to final determination, which is expected to occur within 12 months of the acquisition date, the provisional fair values of
the assets acquired and liabilities assumed in the first and second closing are as follows (in thousands):
Prepaid expenses and other current assets
Property and equipment
Other intangible assets
Other noncurrent assets
FCC licenses
Network affiliation agreements
Total assets acquired
Less: Accrued expenses
Net assets acquired
$
$
66
1,539
246
26
379
686
2,942
(30)
2,912
Other intangible assets are amortized over an estimated weighted average useful life of three years.
F-22
KRBK
On August 1, 2018, Nexstar entered into a definitive agreement to acquire the assets of KRBK from KRBK LLC for $17.6
million in cash, including working capital adjustments. KRBK is a full power television station in the Springfield, Missouri market
and an affiliate of FOX. Nexstar provided programming and sales services to this station pursuant to a TBA from August 1, 2018
through the completion of the acquisition. The transaction created a new duopoly for Nexstar.
On August 1, 2018, Nexstar completed the first closing of the acquisition and acquired the station’s assets excluding certain
transmission equipment, FCC licenses and network affiliation agreements for $15.1 million, funded by cash on hand. Of this amount,
$13.1 million was considered a deposit for the second closing and the remainder was allocated to the initial assets acquired. Since not
all assets needed to operate the station were acquired in August 2018, the first closing did not represent an acquisition of a business.
However, as discussed in Note 2, Nexstar was the primary beneficiary of its variable interests in KRBK throughout the duration of the
TBA. Therefore, the station’s remaining assets as of August 1, 2018, and transactions thereafter, were consolidated into Nexstar’s
financial statements under authoritative guidance related to the consolidation of VIEs. The consolidation of the remaining assets of
KRBK resulted in a noncontrolling interest of $15.6 million, representing the estimated fair value of KRBK’s assets attributable to the
owner.
The acquisition was approved by the FCC on October 17, 2018. On November 1, 2018, Nexstar acquired the remaining assets of
KRBK, paid the owners the remaining purchase price of $2.5 million, funded by cash on hand, and utilized the $13.1 million deposit
previously paid to the owners to acquire the noncontrolling interest of $15.6 million. The TBA was also terminated as of this date.
Subject to final determination, which is expected to occur within 12 months of the acquisition date, the provisional fair values of
the assets acquired and liabilities assumed in the first and second closing are as follows (in thousands):
Accounts receivable
Broadcast rights
Property and equipment
FCC licenses
Network affiliation agreements
Goodwill
Other intangible assets
Other noncurrent assets
Total assets acquired
Less: Accounts payable and accrued expenses
Net assets acquired
$
$
2,091
73
3,894
4,401
5,719
2,544
119
7
18,848
(1,281)
17,567
The fair value assigned to goodwill is attributable to future expense reductions utilizing management’s leverage in programming
and other station operating costs. The goodwill and FCC licenses are deductible for tax purposes. The intangible assets related to the
network affiliation agreements are amortized over 15 years. Other intangible assets are amortized over an estimated weighted average
useful life of one year.
The station’s net revenue of $4.9 million and operating income of $2.2 million from August 1, 2018 to December 31, 2018 have
been included in the accompanying Consolidated Statements of Operations and Comprehensive Income. Transaction costs relating to
the acquisition were not significant during the year ended December 31, 2018.
KHII
On November 1, 2018, Nexstar entered into a definitive agreement to acquire from HITV the FCC license, certain transmission
equipment and the network affiliation agreement of KHII, the MNTV affiliate serving Honolulu, Hawaii and its satellite stations
KGMV serving Wailuku, Hawaii and KGMD serving Hilo, Hawaii. On November 1, 2018, Nexstar paid an advance payment of $0.1
million towards the purchase price of $6.5 million. Effective November 1, 2018, Nexstar began managing some elements of KHII’s
operation under a TBA until the transaction receives FCC approval and closes.
As discussed in Note 2, following the FCC approval on December 17, 2018, Nexstar became the primary beneficiary of its
variable interest in KHII and the satellite stations. Therefore, as of December 17, 2018 and transactions thereafter, the stations’ assets
that Nexstar agreed to acquire pursuant to the purchase agreement were consolidated into Nexstar’s financial statements under
authoritative guidance related to the consolidation of VIEs. The consolidation of the assets of the KHII stations resulted in
noncontrolling interests of $6.5 million, representing the estimated fair value attributable to the owners.
F-23
Subject to final determination, which is expected to occur within 12 months of the acquisition date, the provisional fair values of
the stations’ assets consolidated into Nexstar are as follows (in thousands):
Property and equipment
FCC licenses
Network affiliation agreements
Consolidated assets of VIE
$
$
400
5,850
250
6,500
On January 28, 2019, Nexstar completed its acquisition of KHII and paid the remaining purchase price of $6.4 million, funded
by cash on hand. Accordingly, the deposit and the payment of the remaining purchase price were applied against the full balance of
the noncontrolling interest. The TBA was also terminated as of this date.
The station’s net revenue and operating income from November 1, 2018 to December 31, 2018 were not significant.
F-24
2017 Acquisitions
Merger with Media General
On January 17, 2017, Nexstar completed its merger with Media General. Prior to the completion of the merger, Media General
owned, operated or serviced 78 full power television stations in 48 markets. In connection with the merger, Nexstar sold the assets of
seven of Media General’s full power television stations in seven markets. The full power television stations acquired and consolidated
by Nexstar as a result of the merger, net of divestitures, were as follows:
Market Rank
at Acquisition
Nexstar:
Market
Full Power Stations
Primary Affiliation
Indianapolis, IN
6 San Francisco, CA
11 Tampa, FL
24 Raleigh, NC
25 Portland, OR
27
29 Nashville, TN
30 New Haven, CT
32 Columbus, OH
37 Spartanburg, SC
39 Austin, TX
42 Portsmouth, VA
43 Harrisburg, PA
44 Grand Rapids, MI
45 Birmingham, AL
48 Albuquerque, NM
52 Providence, RI
53 Buffalo, NY
55 Richmond, VA
59 Albany, NY
60 Mobile, AL
62 Knoxville, TN
64 Dayton, OH
65 Honolulu, HI
66 Wichita, KS
88 Colorado Springs, CO
91 Savannah, GA
94 Charleston, SC
95 Jackson, MS
98 Tri-Cities, TN-VA
100 Greenville, NC
102 Florence, SC
109 Sioux Falls, SD
110 Ft. Wayne, IN
111 Augusta, GA
113 Lansing, MI
114 Springfield, MA
115 Youngstown, OH
120 Lafayette, LA
127 Columbus, GA
135 Topeka, KS
168 Hattiesburg, MS
172 Rapid City, SD
39 Austin, TX
48 Alburquerque, NM
52 Providence, RI
59 Albany, NY
64 Dayton, OH
113 Lansing, MI
115 Youngstown, OH
135 Topeka, KS
KRON
WFLA, WTTA
WNCN
KOIN
WISH, WNDY
WKRN
WTNH, WCTX
WCMH
WSPA, WYCW
KXAN, KBVO
WAVY, WVBT
WHTM
WOOD, WOTV
WIAT
KRQE, KREZ, KBIM
WPRI
WIVB, WNLO
WRIC
WTEN, WCDC
WKRG, WFNA
WATE
WDTN
KHON, KHAW, KAII
KSNW, KSNC, KSNG, KSNK
KXRM
WSAV
WCBD
WJTV
WJHL
WNCT
WBTW
KELO, KDLO, KPLO
WANE
WJBF
WLNS
WWLP
WKBN
KLFY
WRBL
KSNT
WHLT
KCLO
KNVA
KASY, KRWB, KWBQ
WNAC
WXXA
WBDT
WLAJ
WYTV
KTKA
VIEs:
MNTV
NBC, MNTV
CBS
CBS
The CW, MNTV
ABC
ABC, MNTV
NBC
CBS, The CW
NBC, MNTV
NBC, FOX
ABC
NBC, ABC
CBS
CBS
CBS
CBS, The CW
ABC
ABC, ABC
CBS, The CW
ABC
NBC
FOX, FOX, FOX
NBC
FOX
NBC
NBC
CBS
CBS
CBS
CBS
CBS
CBS
ABC
CBS
NBC
CBS
CBS
CBS
NBC
CBS
CBS
The CW
MNTV, The CW, The CW
FOX
FOX
NBC
ABC
ABC
ABC
As discussed in Note 2, Nexstar is the primary beneficiary of its variable interests in Shield, Tamer, Vaughan, WNAC, LLC and
54 Broadcasting and has consolidated these entities, including the stations they own.
F-25
Upon the completion of the merger, each issued and outstanding share of common stock, no par value, of Media General
immediately prior to the effective time of the merger, other than shares or other securities representing capital stock in Media General
owned, directly or indirectly, by Nexstar or any subsidiary of Media General, was converted into the right to receive (i) $10.55 in
cash, without interest (the “Cash Consideration”), (ii) 0.1249 of a share of Nexstar’s Class A Common Stock (the “Nexstar Common
Stock”), par value $0.01 per share (the “Stock Consideration”), and (iii) one non-tradeable CVR representing the right to receive a pro
rata share of the net proceeds from the disposition of Media General’s spectrum in the FCC’s recently concluded spectrum auction
(the “FCC auction”), subject to and in accordance with the contingent value rights agreement governing the CVRs (the CVR, together
with the Stock Consideration and the Cash Consideration, the “Merger Consideration”). The CVRs are not transferable, except in
limited circumstances specified in the agreement governing the CVRs.
Upon the completion of the merger, each unvested Media General stock option outstanding immediately prior to the effective
time became fully vested and was converted into an option to purchase Nexstar Common Stock at the same aggregate price as
provided in the underlying Media General stock option, with the number of shares of Nexstar Common Stock adjusted to account for
the Cash Consideration and the exchange ratio for the Stock Consideration. Additionally, the holders of Media General stock options
received one CVR for each share subject to the Media General stock option immediately prior to the effective time. All other equity-
based awards of Media General outstanding immediately prior to the merger vested in full and were converted into the right to receive
the Merger Consideration.
The following table summarizes the components of the total consideration paid, payable or issued upon closing of the merger (in
thousands):
Cash Consideration
Nexstar Common Stock issued (15,670,094 shares)
Reissued Nexstar Common Stock from treasury (560,316 shares)
Stock option replacement awards (228,438 options)
Repayment of Media General debt, including premium and accrued interest
Contingent consideration liability (CVR)
$
$
1,376,108
995,835
35,608
10,702
1,658,135
271,008
4,347,396
Concurrent with the closing of the merger, Nexstar sold the assets of 12 full power television stations in 12 markets, five of
which were previously owned by Nexstar and seven of which were previously owned by Media General. Nexstar sold the Media
General stations for a total consideration of $427.6 million and recognized a loss on disposal of $4.7 million (the “Media General
Divestitures”). Nexstar sold its stations for $114.4 million and recognized gain on disposal of $62.4 million (the “Nexstar
Divestitures”). The net gain recognized from these divestitures was included as a separate line item in the accompanying Consolidated
Statements of Operations and Comprehensive Income for the year ended December 31, 2017.
F-26
The fair values of the assets acquired and liabilities assumed (net of the effects of the Media General Divestitures but including
the consolidation of the assets and liabilities of Shield, Tamer, Vaughan, WNAC, LLC and 54 Broadcasting) are as follows (in
thousands):
Cash and cash equivalents
Accounts receivable
Spectrum asset
Prepaid expenses and other current assets
Property and equipment
FCC licenses
Network affiliation agreements
Other intangible assets
Goodwill
Other noncurrent assets
Total assets acquired and consolidated
Less: Accounts payable and accrued expenses
Less: Taxes payable
Less: Interest payable
Less: Debt
Less: Deferred tax liabilities
Less: Other noncurrent liabilities
Less: Noncontrolling interests in consolidated VIEs
Net assets acquired and consolidated
$
$
63,850
301,604
465,582
35,973
482,144
1,242,847
1,323,200
101,083
1,701,097
36,104
5,753,484
(187,721)
(10,854)
(12,794)
(434,269)
(957,779)
(227,378)
(7,600)
3,915,089
The estimated acquisition date fair value of Media General’s spectrum auctioned with the FCC (spectrum asset) is $465.6
million and was calculated as gross proceeds to receive from the FCC to surrender the spectrum of certain Media General stations, less
estimated costs to dispose such assets. As of the acquisition date, the estimated fair value of the CVR payable to the holders was
$271.0 million and was calculated as the gross proceeds to receive from the FCC to surrender the spectrum of certain Media General
stations, less estimated transaction expenses, repacking expenses and taxes as defined in the CVR agreement. The fair value
measurements of the spectrum asset and the CVR are considered Level 3 as significant inputs are unobservable to the market.
On July 21, 2017, the Company received $478.6 million of gross proceeds from the FCC to surrender the spectrum of 11
stations previously owned or operated by Media General. The gross proceeds were recorded as liability to surrender spectrum asset
pending the relinquishment of spectrum assets or conversion from UHF to VHF. In November 2017, one station went off the air.
During 2018, eight stations ceased broadcasting on their previous channels and implemented channel sharing agreements. These
relinquishments of spectrum resulted in the derecognition of the associated spectrum asset and liability to surrender spectrum asset.
The remaining two stations will convert from UHF to VHF. See Note 12 for additional information with respect to the auctioned
spectrum.
On August 28, 2017, Nexstar completed the $258.6 million initial payments of the CVR to the holders, which represents the
majority of the estimated amount due. As of December 31, 2018, the remaining amount payable to the CVR holders is estimated at
$12.4 million.
The fair value assigned to goodwill is attributable to future expense reductions utilizing management’s leverage in operating
costs. The intangible assets related to the network affiliation agreements are amortized over 15 years. Other intangible assets are
amortized over an estimated weighted average useful life of 19 years. The carryover of the tax basis in goodwill, FCC licenses,
network affiliation agreements, other intangible assets and property and equipment of $159.0 million, $294.3 million, $31.7 million,
$40.4 million and $247.8 million, respectively, are deductible for tax purposes.
Nexstar assumed the $400.0 million 5.875% Notes previously issued by LIN TV. Nexstar also consolidated Shield’s senior
secured credit facility with an outstanding Term Loan A principal balance of $24.8 million. These debts were assumed at fair values
on the merger closing date. See Note 7 for additional information.
Nexstar also assumed Media General’s pension and postretirement obligations (included in other noncurrent liabilities). See
Note 8 for additional information.
F-27
The consolidation of Shield, Tamer, Vaughan, WNAC, LLC and 54 Broadcasting resulted in noncontrolling interests of $7.6
million, representing the residual fair value attributable to the owners of these entities as of January 17, 2017, estimated by applying
the income approach valuation technique.
The Cash Consideration, the repayment of Media General debt, including premium and accrued interest, and the related fees and
expenses were funded through a combination of cash on hand, proceeds from the Nexstar Divestitures and the Media General
Divestitures and borrowings during 2017.
During 2017, Nexstar recorded measurement period adjustments, including (i) the result of our ongoing valuation procedures on
acquired intangible assets which decreased property and equipment, FCC licenses and other intangible assets by $1.8 million, $255.3
million and $25.1 million, respectively, and increased the network affiliation agreements by $254.5 million, (ii) a change in the
estimated fair value of Media General’s spectrum asset which increased by $24.0 million, (iii) changes in the estimate of collectability
of accounts receivable and various fair value assumptions, which decreased the estimated fair value of accounts receivable by $23.4
million, (iv) an increase in goodwill and deferred tax liabilities of $32.8 million and $7.4 million, respectively, and a decrease in
income tax payable of $6.5 million, due to the measurement period adjustments discussed in items (i) through (iii), and (v)
reclassifications from other noncurrent assets to prepaid expenses and other current assets and reclassifications between accounts
payable, accrued expenses, and other noncurrent liabilities. None of these measurement period adjustments had a material impact on
the Company’s results of operations.
The acquisition’s net revenue of $1.412 billion and operating income of $300.4 million from January 17, 2017 to December 31,
2017 have been included in the accompanying Consolidated Statements of Operations and Comprehensive Income.
Transaction costs relating to the merger, including legal and professional fees and severance costs, were $52.4 million and $8.4
million during the years ended December 31, 2017 and 2016, respectively. These costs were included in selling, general and
administrative expense, excluding depreciation and amortization in the accompanying Consolidated Statements of Operations and
Comprehensive Income.
WVMH
On November 16, 2015, Nexstar entered into a definitive agreement to acquire the assets of three CBS affiliated full power
television stations and one NBC affiliated full power television station from WVMH for $130.0 million in cash, plus working capital
adjustments. The stations affiliated with CBS are WOWK in the Charleston-Huntington, West Virginia market, WTRF in the
Wheeling, West Virginia-Steubenville, Ohio market and WVNS in the Bluefield-Beckley-Oak Hill, West Virginia market. WBOY in
the Clarksburg-Weston, West Virginia market is affiliated with NBC. This acquisition allows Nexstar entrance into these markets.
Nexstar provided programming and sales services to these stations pursuant to a TBA from December 1, 2015 through the completion
of the acquisition.
On January 4, 2016, Nexstar completed the first closing of the transaction and acquired the stations’ assets excluding certain
transmission equipment, the FCC licenses and network affiliation agreements for $65.0 million, including a deposit paid upon signing
the purchase agreement in November 2015 of $6.5 million. The purchase price paid in 2016 was funded through a combination of
cash on hand and borrowings under Nexstar’s revolving credit facility in 2016.
The fair values of the assets acquired and liabilities assumed in the first closing are as follows (in thousands):
Accounts receivable
Prepaid expenses and other current assets
Property and equipment
Other intangible assets
Goodwill
Total assets acquired at first closing
Less: Accounts payable and accrued expenses
Less: Other noncurrent liabilities
Net assets acquired at first closing
Deposit on second closing
Total paid at first closing
$
$
438
114
18,362
3,402
35
22,351
(623)
(307)
21,421
43,543
64,964
Other intangible assets are amortized over an estimated weighted average useful life of three years.
F-28
Nexstar became the primary beneficiary of its variable interests in WVMH’s stations upon receiving FCC approval on August 2,
2016 to acquire the stations’ remaining assets. Therefore, Nexstar has consolidated these remaining assets under authoritative
guidance related to the consolidation of VIEs as of this date. The fair values of the assets consolidated were as follows (in thousands):
Broadcast rights
Property and equipment
FCC licenses
Network affiliation agreements
Goodwill
Consolidated assets of VIEs
Less: Broadcast rights payable
Consolidated net asset of VIEs
$
$
527
3,489
41,230
35,387
28,588
109,221
(527)
108,694
The fair value assigned to goodwill is attributable to future expense reductions utilizing management’s leverage in programming
and other station operating costs. The goodwill and FCC licenses are deductible for tax purposes. The intangible assets related to the
network affiliation agreements are amortized over 15 years.
On January 31, 2017, Nexstar completed its acquisition of the remaining assets of the stations and paid WVMH the remaining
purchase price of $66.9 million, plus working capital adjustments, funded by cash on hand. Accordingly, the deposit on the second
closing and the payment of the remaining purchase price were applied against the full balance of noncontrolling interests. The TBA
was also terminated as of this date.
The stations’ net revenue of $51.3 million and operating income of $11.5 million during the year ended December 31, 2017
have been included in the accompanying Consolidated Statements of Operations and Comprehensive Income. No significant
transaction costs were incurred during the twelve months ended December 31, 2017 and December 31, 2016.
Parker
On May 27, 2014, Mission assumed the rights, title and interest to an existing purchase agreement to acquire Parker
Broadcasting of Colorado, LLC (“Parker”), the owner of television station KFQX, the FOX affiliate in the Grand Junction, Colorado
market, for $4.0 million in cash. In connection with this assumption, Mission paid a deposit of $3.2 million on June 13, 2014. The
acquisition was approved by the FCC in February 2017 and met all other customary conditions in March 2017. On March 31, 2017,
Mission completed this acquisition and paid the remaining purchase price of $0.8 million, funded by cash on hand. The acquisition
allows Mission entrance into this market.
The fair values of the assets acquired and liabilities assumed are as follows (in thousands):
FCC licenses
Network affiliation agreements
Other intangible assets
Goodwill
Total assets acquired
$
$
1,539
1,743
20
698
4,000
The fair value assigned to goodwill is attributable to future expense reductions utilizing management’s leverage in programming
and other station operating costs. The goodwill and FCC licenses are deductible for tax purposes. The intangible assets related to the
network affiliation agreements are amortized over 15 years.
Nexstar had a variable interest in Parker and had consolidated this entity until Mission acquired Parker’s outstanding equity.
Since Nexstar no longer has variable interests in Parker, its accounts were deconsolidated from Nexstar’s financial statements.
However, since Nexstar is the primary beneficiary of variable interests in Mission, it retained a beneficial financial interest in KFQX
and continued to consolidate this station. (See Note 2)
WLWC-TV
On October 2, 2017, Nexstar completed the acquisition of certain assets of WLWC, a CW affiliated full power television station
in the Providence, Rhode Island market, from OTA Broadcasting (PVD), LLC for $4.1 million in cash, funded by cash on hand.
F-29
The fair values of the assets acquired and liabilities assumed are as follows (in thousands):
Broadcast rights
Property and equipment
Network affiliation
Other intangible assets
Total assets acquired
Less: Broadcast rights payable
Net assets acquired
$
$
1,599
1,158
2,517
385
5,659
(1,599)
4,060
Nexstar accounted for the transaction as an asset purchase because it was concentrated in acquiring the station’s affiliation with
the CW. Additionally, the FCC license, a significant input to operate a station, was not acquired by Nexstar. Thus, no goodwill was
allocated from the purchase price. The intangible assets related to the network affiliation agreements are amortized over 15 years.
2016 Acquisitions
Reiten
On February 1, 2016, Nexstar completed the acquisition of the assets of four full power television stations from Reiten
Television, Inc. (“Reiten”) for $44.0 million in cash, funded by a combination of cash on hand and borrowings under Nexstar’s
revolving credit facility. The purchase price includes a $2.2 million deposit paid by Nexstar upon signing the purchase agreement in
September 2015. The stations, all affiliated with CBS at acquisition, are KXMA, KXMB, KXMC and KXMD in the Minot-Bismarck-
Dickinson, North Dakota market. This acquisition allows Nexstar entrance into this market. At acquisition, KXMA, KXMB and
KXMD were satellite stations of KXMC. KXMA subsequently became an affiliate of The CW network. Transaction costs relating to
this acquisition, including legal and professional fees of $0.1 million, were expensed as incurred during the year ended December 31,
2016.
The stations’ net revenue of $11.1 million and operating income of $1.0 million from the date of acquisition to December 31,
2016 have been included in the accompanying Consolidated Statements of Operations and Comprehensive Income.
KCWI
On March 14, 2016, Nexstar completed the acquisition of the assets of KCWI, the CW affiliate in the Des Moines-Ames, Iowa
market, from Pappas Telecasting of Iowa, LLC (“Pappas”) for $3.9 million. A deposit of $0.2 million was paid upon signing the
purchase agreement in October 2014. No significant transaction costs relating to this acquisition were incurred during the year ended
December 31, 2016.
KCWI’s net revenue of $3.1 million and operating income of $2.7 million from the date of acquisition to December 31, 2016
have been included in the accompanying Consolidated Statements of Operations and Comprehensive Income.
Unaudited Pro Forma Information
Other than Media General, the acquisitions completed during 2018, 2017 and 2016 are not significant for financial reporting
purposes, both individually and in aggregate. Therefore, pro forma information has not been provided for these acquisitions.
The following unaudited pro forma information has been presented for the periods indicated as if the acquisition of Media
General and the related consolidation of VIEs had occurred on January 1, 2016 (in thousands, except per share data):
Net revenue
Income before income taxes
Net income
Net income attributable to Nexstar
Net income per common share attributable to Nexstar - basic
Net income per common share attributable to Nexstar - diluted
F-30
Years Ended December 31,
2017
2,484,214 $
288,279
503,871
503,541
10.84 $
10.52 $
2016
2,457,492
124,966
49,318
46,547
0.99
0.97
$
$
$
The above selected unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative
of results of operations in future periods or results that would have been achieved had the Company owned the acquired stations
during the specified periods.
4. Property and Equipment
Property and equipment consisted of the following, as of December 31 (dollars in thousands):
Buildings and improvements
Land
Leasehold improvements
Studio and transmission equipment
Computer equipment
Furniture and fixtures
Vehicles
Construction in progress
Less: accumulated depreciation
Property and equipment, net
Estimated
useful life,
in years
39
N/A
term of lease
5-15
3-5
7
5
N/A
2018
231,270 $
126,926
27,573
555,389
97,180
18,720
38,398
74,924
1,170,380
(438,842)
731,538 $
2017
225,183
127,625
29,114
539,788
96,487
18,876
35,211
21,236
1,093,520
(359,382)
734,138
$
$
The increase in property and equipment primarily relates to spectrum repack projects, routine purchases of property and
equipment, less disposals, and business acquisitions (see Note 3).
Property under capital lease with a cost of $5.8 million was included in leasehold improvements as of each of December 31,
2018 and 2017. Property under capital lease with a cost of $5.2 million was included in studio and transmission equipment as of each
of December 31, 2018 and 2017.
5. Intangible Assets and Goodwill
Intangible assets subject to amortization consisted of the following, as of December 31 (dollars in thousands):
Estimated
useful life,
in years
Gross
2018
Accumulated
Amortization
Net
Gross
2017
Accumulated
Amortization
Net
Network affiliation
agreements
Other definite-lived
intangible assets
Other intangible assets
15
$ 1,977,825 $
(575,860) $ 1,401,965 $ 1,971,170 $
(461,345) $ 1,509,825
1-20
246,137
$ 2,223,962 $
(156,179)
193,089
89,958
(732,039) $ 1,491,923 $ 2,164,259 $
(121,288)
71,801
(582,633) $ 1,581,626
The increases in network affiliation agreements and other definite-lived intangible assets relate to Company acquisitions (see
Note 3).
In the fourth quarter of 2018, management reviewed the recoverability of other definite-lived intangible assets attributable to
two of Nexstar’s digital businesses as a result of shortfalls from operating forecasts and increased levels of competition. Based on the
analysis of estimated undiscounted future pre-tax cash flows expected to result from the use of these assets, management determined
that their carrying values were recoverable as of December 31, 2018. No other events or circumstances were noted in 2018 that would
indicate impairment.
In the fourth quarter of 2017, management reviewed the recoverability of other definite-lived intangible assets attributable to
Nexstar’s digital businesses and recognized total impairment charges of $8.5 million.
F-31
The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years and
thereafter for definite-lived intangible assets as of December 31, 2018 (in thousands):
2019
2020
2021
2022
2023
Thereafter
$
$
140,793
130,335
119,559
114,147
112,954
874,135
1,491,923
The changes in the carrying amounts of goodwill and FCC licenses for the years ended December 31, 2018 and 2017 are as
follows (in thousands):
Goodwill
Accumulated
Impairment
Gross
(61,253) $
591,945 $
(49,421) $
Gross
Net
473,304 $
FCC Licenses
Accumulated
Impairment
534,557 $
Balances as of December 31, 2016 $
Acquisitions and consolidation
1,701,719
of VIEs (See Notes 2 and 3)
(22,823)
Nexstar Divestitures (See Note 3)
(698)
Deconsolidation of a VIE
-
Impairment
Balances as of December 31, 2017 2,212,755
Acquisitions and consolidation of
45,019
VIEs (See Notes 2 and 3)
-
Impairment
Balances as of December 31, 2018 $ 2,257,774 $
Net
542,524
1,244,386
(17,733)
(1,539)
-
1,767,638
- 1,701,719 1,244,386
(19,962)
2,861
(19,744)
(698)
-
(1,539)
(11,517)
(11,517)
-
(69,909) 2,142,846 1,815,048
-
2,011
-
-
(47,410)
10,630
45,019
-
-
(19,911)
(19,911)
(89,820) $ 2,167,954 $ 1,825,678 $
-
-
10,630
-
(47,410) $ 1,778,268
As discussed in Note 2, the Company has one broadcast business reporting unit and four digital reporting units for purposes of
annual goodwill impairment review as of December 31, 2018. The Company’s annual impairment review of FCC Licenses is
performed at the station market level.
In the fourth quarter of 2018, the Company performed its annual impairment tests on goodwill and FCC licenses attributable to
the broadcast business using the qualitative analysis approach and concluded that it was more likely than not that their fair values
would sufficiently exceed the carrying amounts.
In the fourth quarter of 2018, management performed quantitative impairment tests on two of its digital reporting units as a
result of shortfalls from operating forecasts and increased levels of competition. The quantitative analyses were performed using a
combination of a discounted cash flows analysis and market revenue multiples analysis, including the following key assumptions: (i)
compound annual growth rate ranging from 4.4% to 5.0% based on management projections and industry trends, (ii) operating profit
margins in the initial year ranging from 1.1% to 5.9% driven by planned development activities, increasing to 6.3% to 13.7%
reflecting a mature operating model, (iii) discount rate of 15.0% based on an analysis of digital media companies, (iv) income tax rate
of 21.0% to 28.7% based on statutory federal and blended state tax rates, (v) terminal growth rate of 2.5% based on a mature company
in the digital media industry and (vi) market revenue multiples, adjusted for the reporting units’ forecasted operating performance,
ranging from 0.2 to 0.4. The Company’s quantitative impairment tests resulted in total impairment charges of $19.9 million. For the
remaining two digital reporting units, the Company performed its annual impairment tests using the qualitative analysis approach and
concluded that it was more likely than not that their fair values would sufficiently exceed the carrying amounts. As of December 31,
2018, three of the Company’s digital reporting units had no remaining goodwill balance and one digital reporting unit acquired in
January 2018 had a goodwill balance of $42.1 million.
In the fourth quarter of 2017, management performed the one-step quantitative impairment tests on each of its three digital
reporting units as a result of shortfalls from operating forecasts and increased levels of competition. The Company’s analyses resulted
in total impairment charges of $11.5 million. As of December 31, 2017, the total remaining goodwill of digital businesses was $19.9
million.
F-32
6. Accrued Expenses
Accrued expenses consisted of the following, as of December 31 (in thousands):
Compensation and related taxes
Network affiliation fees
Other
7. Debt
2018
2017
$
$
44,269 $
21,916
77,665
143,850 $
44,775
68,197
62,968
175,940
Long-term debt consisted of the following, as of December 31 (in thousands):
Term loans, net of financing costs and discount of $37,679 and $57,547, respectively
Revolving loans
6.125% Senior unsecured notes due 2022, net of financing costs of $1,556 and $1,992,
respectively
5.875% Senior unsecured notes due 2022, plus premium of $6,233 and $8,102, respectively
5.625% Senior unsecured notes due 2024, net of financing costs of $11,792 and $13,525,
respectively
Less: current portion
Nexstar Senior Secured Credit Facility
$
2018
2,407,490 $
5,628
2017
2,791,875
3,000
273,444
406,233
273,008
408,102
888,208
3,981,003
(96,093)
3,884,910 $
886,475
4,362,460
(92,808)
4,269,652
$
On January 16, 2018, Nexstar borrowed $44.0 million from its revolving credit facility to partially fund the acquisition of
LKQD (See Note 3). Through June 2018, Nexstar repaid in full the outstanding principal balance under its revolving loan for total
payments of $44.0 million.
On July 27, 2018, Nexstar reallocated $5.6 million of its unused revolving loan credit facility to Marshall.
On October 26, 2018, Nexstar amended its senior secured credit facility. The amendment extended the maturity date of Term
Loan A and revolving credit facility from July 19, 2022 to October 26, 2023 and reduced the applicable margin portion of the interest
rates by 25 basis points for Term Loan B, Term Loan A and revolving credit facility. The maturity date of Term Loan B did not
change (January 17, 2024). Nexstar also borrowed an additional $150.0 million Term Loan A under its amended senior secured credit
facility. The proceeds were used to partially repay the outstanding principal balance of Nexstar’s Term Loan B of $150.0 million.
Through December 2018, Nexstar prepaid a total of $360.0 million in principal balance under its Term Loan B, funded by cash
on hand. During the year ended December 31, 2018, Nexstar repaid scheduled maturities of $36.2 million of its Term Loan A.
The refinancing of loans and prepayments of debt during 2018 resulted in a total loss of extinguishment of debt of $11.6 million,
representing the write-off of unamortized debt financing costs and debt discounts.
On November 30, 2018, Nexstar received committed financing up to a maximum of $6.4 billion from a group of commercial
banks to provide the debt financing to consummate its proposed merger with Tribune and the refinancing of certain of the existing
indebtedness of Tribune and related transactions. The merger has been approved by the boards of directors of both companies and is
projected to close late in the third quarter of 2019, subject to the approval of the merger by the stockholders of Tribune, FCC approval,
other regulatory approvals and satisfaction of other customary closing conditions. See Note 3 for additional information.
As of December 31, 2018, Nexstar’s Term Loan B and Term Loan A, net of financing costs and discounts, had balances of
$1.289 billion and $825.1 million, respectively. As of December 31, 2017, Nexstar’s Term Loan B and Term Loan A, net of financing
costs and discounts, had balances of $1.782 billion and $711.0 million, respectively. No amounts were outstanding under the
revolving credit facility as of each of the years then ended.
F-33
Interest rates are selected at Nexstar’s option and the applicable margin is adjusted quarterly as defined in Nexstar’s amended
credit agreement. The interest rate of Nexstar’s Term Loan A was 4.27% and 3.56% as of December 31, 2018 and 2017, respectively,
and the interest rate of Nexstar’s Term Loan B was 4.77% and 4.06% as of December 31, 2018 and 2017, respectively. The interest
rate on Nexstar’s revolving credit facility was 4.27% and 3.56% as of December 31, 2018 and 2017, respectively. Interest is payable
periodically based on the type of interest rate selected. Additionally, Nexstar is required to pay quarterly commitment fees on the
unused portion of its revolving loan commitment of 0.5% per annum.
Mission Senior Secured Credit Facility
On October 26, 2018, Mission amended its senior secured credit facility. The amendment extended the maturity date of
Mission’s revolving credit facility from July 19, 2022 to October 26, 2023 and reduced the applicable margin portion of the interest
rates by 25 basis points for the Term Loan B and revolving credit facility. The loan refinancing resulted in a loss on extinguishment of
debt of $0.5 million, representing the write-off of unamortized debt financing costs.
During the year ended December 31, 2018, Mission repaid scheduled maturities of $2.3 million of its Term Loan B.
As of December 31, 2018 and 2017, Mission’s Term Loan B, net of financing costs and discounts, had balances of $224.6
million and $225.7 million, respectively, and none outstanding under its revolving credit facility as of each of the years then ended.
Terms of the Mission senior secured credit facility, including repayment, maturity and interest rates, are the same as the terms of
the Nexstar senior secured facility described above. Interest rates are selected at Mission’s option and the applicable margin is
adjusted quarterly as defined in Mission’s amended credit agreement. The interest rate of Mission’s Term Loan B was 4.77% and
4.06% as of December 31, 2018 and 2017, respectively. The interest rate on Mission’s revolving loans was 4.27% and 3.56% as of
December 31, 2018 and 2017, respectively.
Marshall Senior Secured Credit Facility
On June 28, 2018, Marshall amended its senior secured credit facility. The amendment refinanced the then outstanding principal
balances of Marshall’s Term Loan A and revolving credit facility of $48.8 million and $3.0 million, respectively. The refinancing was
funded by Marshall’s new Term Loan A of $51.8 million which Nexstar continues to guarantee. The amendment also extended the
maturity date of Marshall’s Term Loan A to December 1, 2019.
On July 27, 2018, Marshall drew the full $5.6 million revolving loan facility reallocated from Nexstar and used the funds to
partially repay its outstanding Term Loan A.
During the year ended December 31, 2018, Marshall repaid $1.8 million scheduled maturities of its Term Loan A.
As of December 31, 2018 and 2017, Marshall’s Term Loan A, net of financing costs and discounts, had balances of $45.4
million and $49.6 million, respectively, and $5.6 million and $3.0 million outstanding under its revolving credit facility as of each of
the years then ended. As of December 31, 2018, all of Marshall’s outstanding debts are classified as current liabilities in the
accompanying Consolidated Balance Sheet.
Interest rates are selected at Marshall’s option and the applicable margin is adjusted quarterly as defined in Marshall’s amended
credit agreement. The interest rate on Marshall’s Term Loan A and revolving credit facility was 4.52% and 3.56% as of December 31,
2018 and 2017, respectively. Interest is payable periodically based on the type of interest rate selected. Additionally, Marshall is
required to pay quarterly commitment fees on the unused portion of its revolving loan commitment of 0.5% per annum. Marshall had
no unused revolving credit facility as of each of the years then ended.
Shield Senior Secured Credit Facility
On October 26, 2018, Shield amended its senior secured credit facility. The amendment extended the maturity date of its Term
Loan A from July 19, 2022 to October 26, 2023 and reduced the applicable margin portion of the interest rates by 25 basis points.
During the year ended December 31, 2018, Shield repaid $1.2 million scheduled maturities of its Term Loan A.
As of December 31, 2018 and 2017, Shield’s Term Loan A, net of financing costs and discounts, had a balance of $22.6 million
and $23.8 million, respectively.
Terms of the Shield senior secured credit facility, including repayment, maturity and interest rates, are the same as the terms of
the Nexstar senior secured credit facility described above. Interest rates are selected at Shield’s option and the applicable margin is
adjusted quarterly as defined in Shield’s amended credit agreement. The interest rate on Shield’s Term Loan A was 4.27% and 3.56%
as of December 31, 2018 and 2017, respectively.
F-34
Unused Commitments and Borrowing Availability
The Company had $166.4 million of total unused revolving loan commitments under the respective Nexstar and Mission senior
secured credit facilities, all of which was available for borrowing, based on the covenant calculations as of December 31, 2018. The
Company’s ability to access funds under the senior secured credit facilities depends, in part, on its compliance with certain financial
covenants. As of December 31, 2018, the Company was in compliance with its financial covenants.
On November 30, 2018, Nexstar received committed financing up to a maximum of $6.4 billion from a group of commercial
banks to provide the debt financing to consummate its proposed merger with Tribune and the refinancing of certain of the existing
indebtedness of Tribune and related transactions. The merger has been approved by the boards of directors of both companies and is
projected to close late in the third quarter of 2019, subject to the approval of the merger by the stockholders of Tribune, FCC approval,
other regulatory approvals and satisfaction of other customary closing conditions. See Note 3 for additional information.
5.875% Notes
As part of Nexstar’s merger with Media General on January 17, 2017, Nexstar assumed the $400.0 million 5.875% Senior Notes
due 2022 previously issued by Media General’s subsidiary.
The 5.875% Notes will mature on November 15, 2022. Interest on the 5.875% Notes is payable semiannually in arrears on May
15 and November 15 of each year. The 5.875% Notes were issued pursuant to an Indenture, dated as of November 5, 2014 (the
“5.875% Indenture”). The 5.875% Notes are senior unsecured obligations of Nexstar and certain of Nexstar’s future 100% owned
subsidiaries, subject to certain customary release provisions.
The 5.875% Notes are senior obligations of Nexstar but junior to the secured debt, to the extent of the value of the assets
securing such debt. The 5.875% Notes rank equal to the 5.625% Notes and the 6.125% Notes.
At any time on or after November 15, 2017, Nexstar may redeem the 5.875% Notes, in whole or in part, at the redemption prices
set forth in the 5.875% Indenture. At any time before August 1, 2019, Nexstar may also redeem the 5.875% Notes at 105.875% of the
aggregate principal amount at a redemption price, plus accrued and unpaid interest, if any, to the date of redemption, with the net cash
proceeds from equity offerings, provided that (1) at least $200.0 million aggregate principal amount of 5.875% Notes issued under the
5.875% Indenture remains outstanding after each such redemption and (2) the redemption occurs within 90 days after the closing of
the note offering.
Upon the occurrence of a change of control (as defined in the 5.875% Indenture), each holder of the 5.875% Notes may require
Nexstar to repurchase all or a portion of the 5.875% Notes in cash at a price equal to 101.0% of the aggregate principal amount to be
repurchased, plus accrued and unpaid interest, if any, thereon to the date of repurchase.
The 5.875% Indenture contains covenants that limit, among other things, Nexstar’s ability to (1) incur additional debt, (2) make
certain restricted payments, (3) consummate specified asset sales, (4) enter into transactions with affiliates, (5) create liens, (6) pay
dividends or make other distributions, (7) repurchase or redeem capital, (8) merge or consolidate with another person and (9) enter
new lines of business.
The 5.875% Indenture provides for customary events of default (subject in certain cases to customary grace and cure periods),
which include nonpayment, breach of covenants in the 5.875% Indenture, payment defaults or acceleration of other indebtedness, a
failure to pay certain judgments, certain events of bankruptcy and insolvency and any guarantee of the 5.875% Notes that ceases to be
in full force and effect with certain exceptions specified in the 5.875% Indenture. Generally, if an event of default occurs, the Trustee
or holders of at least 25% in principal amount of the then outstanding notes may declare the principal of and accrued but unpaid
interest, including additional interest, on all the notes to be due and payable.
5.625% Notes
On July 27, 2016, Nexstar completed the issuance and sale of $900.0 million of 5.625% Notes at par. The proceeds were used to
partially fund Nexstar’s merger with Media General consummated on January 17, 2017 (See Note 3).
The 5.625% Notes will mature on August 1, 2024. Interest on the 5.625% Notes is payable semiannually in arrears on February
1 and August 1 of each year. The 5.625% Notes were issued pursuant to an Indenture, dated as of July 27, 2016 (the “5.625%
Indenture”). The 5.625% Notes are senior unsecured obligations of Nexstar and are guaranteed by Mission and certain of Nexstar’s
and Mission’s future 100% owned subsidiaries, subject to certain customary release provisions.
The 5.625% Notes are senior obligations of Nexstar and Mission but junior to the secured debt to the extent of the value of the
assets securing such debt. The 5.625% Notes rank equal to the 5.875% Notes and the 6.125% Notes.
F-35
Nexstar has the option to redeem all or a portion of the 5.625% Notes at any time prior to August 1, 2019 at a price equal to
100% of the principal amount redeemed plus accrued and unpaid interest to the redemption date plus applicable premium as of the
date of redemption. At any time on or after August 1, 2019, Nexstar may redeem the 5.625% Notes, in whole or in part, at the
redemption prices set forth in the 5.625% Indenture. At any time prior to August 1, 2019, Nexstar may also redeem up to 40% of the
aggregate principal amount at a redemption price of 105.625%, plus accrued and unpaid interest, if any, to the date of redemption,
with the net cash proceeds from equity offerings.
Upon the occurrence of a change in control (as defined in the 5.625% Indenture), each holder of the 5.625% Notes may require
Nexstar to repurchase all or a portion of the 5.625% Notes in cash at a price equal to 101.0% of the aggregate principal amount to be
repurchased, plus accrued and unpaid interest, if any, thereon to the date of repurchase.
The 5.625% Indenture contains covenants that limit, among other things, Nexstar’s ability to (1) incur additional debt, (2) pay
dividends or make other distributions or repurchases or redeem its capital stock, (3) make certain investments, (4) create liens, (5)
merge or consolidate with another person or transfer or sell assets, (6) enter into restrictions affecting the ability of Nexstar’s restricted
subsidiaries to make distributions, loans or advances to it or other restricted subsidiaries, (7) prepay, redeem or repurchase certain
indebtedness and (8) engage in transactions with affiliates.
The 5.625% Indenture provides for customary events of default (subject in certain cases to customary grace and cure periods),
which include nonpayment, breach of covenants in the Indenture, payment defaults or acceleration of other indebtedness, a failure to
pay certain judgments and certain events of bankruptcy and insolvency. Generally, if an event of default occurs, the Trustee or holders
of at least 25% in principal amount of the then outstanding 5.625% Notes may declare the principal of and accrued but unpaid interest,
including additional interest, on all the 5.625% Notes to be due and payable.
In 2016, Nexstar recorded $15.7 million in legal, professional and underwriting fees related to the issuance of the 5.625% Notes,
which were recorded as debt finance costs and are being amortized over the term of the 5.625% Notes. Debt financing costs are netted
against the carrying amount of the related debt.
6.125% Senior Unsecured Notes
On January 29, 2015, Nexstar completed the issuance and sale of $275.0 million 6.125% Notes at par.
The 6.125% Notes will mature on February 15, 2022. Interest on the 6.125% Notes is payable semiannually in arrears on
February 15 and August 15 of each year commencing on August 15, 2015. The 6.125% Notes were issued pursuant to an Indenture,
dated as of January 29, 2015 (the “6.125% Indenture”). The 6.125% Notes are senior unsecured obligations of Nexstar and are
guaranteed by Mission and certain of Nexstar’s and Mission’s future 100% owned subsidiaries, subject to certain customary release
provisions.
The 6.125% Notes are senior obligations of Nexstar and Mission but junior to the secured debt, including the Nexstar Facility,
the Mission Facility and the Marshall Facility to the extent of the value of the assets securing such debt. The 6.125% Notes rank equal
to the 5.625% Notes and 5.875% Notes.
Nexstar has the option to redeem all or a portion of the 6.125% Notes at any time after February 15, 2018 at the redemption
prices set forth in the 6.125% Indenture. At any time before February 15, 2018, Nexstar may also redeem up to 40% of the aggregate
principal amount at a redemption price of 106.125%, plus accrued and unpaid interest, if any, to the date of redemption, with the net
cash proceeds from equity offerings.
Upon the occurrence of a change in control (as defined in the 6.125% Indenture), each holder of the 6.125% Notes may require
Nexstar to repurchase all or a portion of the 6.125% Notes in cash at a price equal to 101.0% of the aggregate principal amount to be
repurchased, plus accrued and unpaid interest, if any, thereon to the date of repurchase.
The 6.125% Indenture contains covenants that limit, among other things, Nexstar’s ability to (1) incur additional debt, (2) pay
dividends or make other distributions or repurchases or redeem its capital stock, (3) make certain investments, (4) create liens, (5)
merge or consolidate with another person or transfer or sell assets, (6) enter into restrictions affecting the ability of Nexstar’s restricted
subsidiaries to make distributions, loans or advances to it or other restricted subsidiaries; prepay, redeem or repurchase certain
indebtedness and (7) engage in transactions with affiliates.
The 6.125% Indenture provides for customary events of default (subject in certain cases to customary grace and cure periods),
which include nonpayment, breach of covenants in the Indenture, payment defaults or acceleration of other indebtedness, a failure to
pay certain judgments and certain events of bankruptcy and insolvency. Generally, if an event of default occurs, the Trustee or holders
of at least 25% in principal amount of the then outstanding 6.125% Notes may declare the principal of and accrued but unpaid interest,
including additional interest, on all the 6.125% Notes to be due and payable.
F-36
In 2015, Nexstar recorded $3.0 million in legal, professional and underwriting fees related to the issuance of the 6.125% Notes,
which were recorded as debt finance costs and amortized over the term of the 6.125% Notes. Debt financing costs are netted against
the carrying amount of the related debt.
Collateralization and Guarantees of Debt
The Company’s credit facilities described above are collateralized by a security interest in substantially all the combined assets,
excluding FCC licenses and the other assets of consolidated VIEs unavailable to creditors of Nexstar (See Note 2). Nexstar guarantees
full payment of all obligations incurred under the Mission, Marshall and Shield senior secured credit facilities in the event of their
default. Mission and Nexstar Digital, a wholly-owned subsidiary of Nexstar, are guarantors of Nexstar’s senior secured credit facility.
Mission is also a guarantor of Nexstar’s 6.125% Notes and the 5.625% Notes but does not guarantee Nexstar’s 5.875% Notes. Nexstar
Digital does not guarantee any of the notes. Marshall and Shield are not guarantors of any debt within the group.
In consideration of Nexstar’s guarantee of the Mission senior secured credit facility, Mission has granted Nexstar purchase
options to acquire the assets and assume the liabilities of each Mission station, subject to FCC consent. These option agreements
(which expire on various dates between 2021 and 2028) are freely exercisable or assignable by Nexstar without consent or approval by
Mission. The Company expects these option agreements to be renewed upon expiration.
Debt Covenants
The Nexstar credit agreement (senior secured credit facility) contains a covenant which requires Nexstar to comply with a
maximum consolidated first lien net leverage ratio of 4.25 to 1.00. The financial covenant, which is formally calculated on a quarterly
basis, is based on the combined results of the Company. The Mission, Marshall and Shield amended credit agreements do not contain
financial covenant ratio requirements but do provide for default in the event Nexstar does not comply with all covenants contained in
its credit agreement. As of December 31, 2018, the Company was in compliance with its financial covenants.
Fair Value of Debt
The aggregate carrying amounts and estimated fair values of the Company’s debt were as follows, as of December 31 (in
thousands):
Term loans(1)
Revolving loans(1)
6.125% Senior unsecured notes(2)
5.875% Senior unsecured notes(2)
5.625% Senior unsecured notes(2)
2018
Fair
Value
Carrying
Amount
$ 2,407,490 $ 2,389,439 $
5,528
275,688
397,000
837,000
5,628
273,444
406,233
888,208
Carrying
Amount
2017
Fair
Value
2,791,875 $ 2,852,199
2,985
284,625
415,500
925,875
3,000
273,008
408,102
886,475
(1)
(2)
The fair value of senior secured credit facilities is computed based on borrowing rates currently available to the Company for bank loans with
similar terms and average maturities. These fair value measurements are considered Level 3, as significant inputs to the fair value calculation
are unobservable in the market.
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, as quoted market prices are available for low
volume trading of these securities.
Debt Maturities
The scheduled maturities of the Company’s debt, excluding the unamortized financing costs, discounts and premium, as of
December 31, 2018 are summarized as follows (in thousands):
2019
2020
2021
2022
2023
Thereafter
$
$
F-37
96,093
44,910
61,961
762,536
624,616
2,435,681
4,025,797
8. Retirement and Postretirement Plans
The Company has a funded, qualified non-contributory defined benefit retirement plan which covers certain employees and
former employees. Additionally, there are non-contributory unfunded supplemental executive retirement and ERISA excess plans
which supplement the coverage available to certain executives. All of these retirement plans are frozen. The Company also has a
retiree medical savings account plan which reimburses eligible retired employees for certain medical expenses and an unfunded plan
that provides certain health and life insurance benefits to retired employees who were hired prior to 1992.
The Company uses a December 31 measurement date for its pension and other postretirement benefit plans (“OPEB”). The
Company recognizes the underfunded status of these plan liabilities on its Consolidated Balance Sheet. The funded status of a plan
represents the difference between the fair value of plan assets and the related plan projected benefit obligation. Changes in the funded
status are recognized in other comprehensive income and amortized into comprehensive income over a five year term.
Benefit Obligations
The following table provides a reconciliation of the changes in the plans’ benefit obligations for the periods January 17, 2017 to
December 31, 2017 and January 1, 2018 to December 31, 2018 (in thousands):
Change in benefit obligation:
Benefit obligation at beginning of period
Service cost
Interest cost
Participant contributions
Plan settlements(1)
Divestiture transfer(2)
Actuarial (gain) loss
Benefit payments
Benefit obligation at end of period(3)(4)
2018
2017
Pension Benefits
OPEB
Pension Benefits
OPEB
$
$
460,862 $
-
13,965
-
-
-
(21,568)
(29,559)
423,700 $
23,374 $
16
689
20
-
-
(1,362)
(1,328)
21,409 $
562,197 $
-
14,981
-
(40,235)
(60,032)
11,301
(27,350)
460,862 $
22,601
22
695
48
-
-
1,431
(1,423)
23,374
(1) In December 2017, the Company offered terminated vested participants of the legacy Media General Retirement Plan an
opportunity to receive a lump sum payout in settlement of their retirement plan liability. Approximately one third of the
roughly 2,200 participants elected to do so, resulting in $39.0 million in payouts from plan assets. The Company recognized
an immediate gain of $1.2 million in 2017 related to this settlement and included it as an offset against pension expense in the
Consolidated Statements of Operations and Comprehensive Income.
(2) Upon the consummation of the Media General transaction, approximately $60 million of the benefit obligation related to the
Company's retirement plan was transferred to Graham Media Group, Inc., as part of the Media General Divestitures discussed
in Note 3.
(3) Unless required, the Company’s policy is to fund benefits under the supplemental executive retirement, ERISA Excess, and
all postretirement benefits plans as claims and premiums are paid. As of December 31, 2018, the benefit obligation related to
the supplemental executive retirement and ERISA Excess plans included in the preceding table was approximately $51.9
million.
(4) As of December 31, 2018, the pension benefit obligation includes $371.8 million that is substantially funded by plan assets.
These plan assets cover approximately 89% of the benefit obligation.
The Plans’ benefit obligations were determined using the following assumptions:
Discount rate
Compensation increase rate
2018
2017
Pension
Benefits
OPEB
Pension
Benefits
OPEB
4.12%
-
4.06%
2.00%
3.49%
-
3.47%
3.00%
F-38
Plan Assets
The following table provides a reconciliation of the changes in the fair value of the plans’ assets for the periods January 17,
2017 to December 31, 2017 and January 1, 2018 to December 31, 2018 (in thousands):
Change in plan assets:
Fair value of plan assets at beginning of period
Actual return on plan assets
Employer contributions
Participant contributions
Plan settlements
Benefit payments
Fair value of plan assets at end of period
2018
2017
Pension Benefits
OPEB
Pension Benefits
OPEB
$
$
381,455 $
(25,108)
4,126
-
-
(29,559)
330,914 $
- $
-
1,308
20
-
(1,328)
- $
394,526 $
49,853
4,661
-
(40,235)
(27,350)
381,455 $
-
-
1,375
48
-
(1,423)
-
Under the fair value hierarchy, $49.2 million and $57.6 million of the Company’s retirement plan assets as of December 31,
2018 and 2017, respectively, fall under Level 1 (quoted prices in active markets). The Company also utilizes common collective trust
funds as the remaining investment vehicle for its defined benefit plans. A Common Collective Trust Fund is a pooled fund operated
by a bank or trust company for investment of the assets of various organizations and individuals in a well-diversified portfolio.
Investments in Common Collective Trust Funds are stated at the fair value as determined by the issuer based on the fair value of the
underlying investments (Net Asset Value or “NAV”). As of December 31, 2018 and 2017, respectively, $281.7 million and $323.8
million of the plan assets were measured at NAV.
The asset allocation for the Company’s funded retirement plans at the end of 2018, and the asset allocation range for 2019, by
asset category, are as follows:
Asset Category
Equity securities
Fixed income securities/cash
Other
Total
Asset Allocation
2019
40%
60%
-
Percentage of Plan Assets at Year End
2018
35%
64%
1%
100%
As the plan sponsor of the funded retirement plans, the Company’s investment strategy is to achieve a rate of return on the plans’
assets that, over the long-term, will fund the plans’ benefit payments and will provide for other required amounts in a manner that
satisfies all fiduciary responsibilities. A determinant of the plans’ returns is the asset allocation policy. The Company’s investment
policy provides ranges (3-23% U.S. large cap equity, 0-13% U.S. small/mid cap equity, 0-19% international/global equity, 0-17%
other equity, 50-70% fixed income and 0-10% cash) for the plans’ long-term asset mix. The Company periodically (at least annually)
reviews and rebalances the asset mix if necessary. The Company also reviews the plans’ overall asset allocation to determine the
proper balance of securities by market capitalization, value or growth, U.S., international or global or the addition of other asset
classes.
The plans’ investment policy is reviewed frequently and administered by an investment consultant. Periodically, the Company
evaluates each investment with the investment consultant to determine if the overall portfolio has performed satisfactorily when
compared to the defined objectives, similarly invested portfolios and specific market indices. The policy contains general guidelines
for prohibited transactions such as:
•
•
•
•
•
borrowing of money
purchase of securities on margin
short sales
pledging any securities except loans of securities that are fully-collateralized
purchase or sale of futures or options for speculation or leverage
F-39
Restricted transactions include:
•
•
•
purchase or sale of commodities, commodity contracts or illiquid interests in real estate or mortgages
purchase of illiquid securities such as private placements
use of various futures and options for hedging or for taking limited risks with a portion of the portfolio’s assets
Investments in Common Collective Trust Funds do not have any unfunded commitments, and do not have any applicable
liquidation periods or defined terms and periods to be held. The portfolios offer daily liquidity; however, they request 5 business days’
notice for both withdrawals and redemptions. Strategies of the Common Collective Trust Funds by major category are as follows:
•
•
•
Equity Common Collective Trusts are primarily invested in funds seeking investment results that correspond to the total
return performance of their respective benchmarks in both the U.S. and International markets.
Fixed Income Common Collective Trusts are primarily invested in funds with an investment objective to provide
investment returns through fixed-income and commingled investment vehicles that seek to outperform their respective
benchmarks.
Real Estate and Real Asset Common Collective Trusts seek to achieve high current return and long-term capital growth by
investing in equity securities of real estate investment trusts that seek to outperform their respective benchmarks.
Funded Status
The following table provides a statement of the funded status of the plans at December 31 (in thousands):
Amounts recorded in the balance sheet:
Current liabilities
Noncurrent liabilities
Funded status
2018
2017
Pension Benefits
OPEB
Pension Benefits
OPEB
$
$
(4,091) $
(88,695)
(92,786) $
(1,883) $
(19,526)
(21,409) $
(3,714) $
(75,693)
(79,407) $
(1,882)
(21,492)
(23,374)
The following table provides a summary of the Company’s accumulated other comprehensive income (loss) related to pension
and other postretirement benefit plans prior to any deferred tax effects (in thousands):
January 17, 2017
Actuarial gain (loss)
December 31, 2017
Actuarial (loss) gain
December 31, 2018
Pension Benefits
OPEB
$
$
- $
9,733
9,733
(29,074)
(19,341) $
-
(1,433)
(1,433)
1,471
38
The estimated net loss for the other postretirement benefit plans that will be amortized from accumulated other comprehensive
income into net periodic benefit cost in 2019 is $46 thousand. There is no prior service cost or transition obligation recognized in
accumulated other comprehensive income.
F-40
Expected Cash Flows
The following table includes amounts that are expected to be contributed to the plans by the Company, in thousands. It
additionally reflects benefit payments that are made from the plans’ assets as well as those made directly from the Company’s assets,
and it includes the participants’ share of the costs, which is funded by participant contributions. The amounts in the table are
actuarially determined and reflect the Company’s best estimate given its current knowledge including the impact of recent pension
funding relief legislation. Actual amounts could be materially different.
Employer Contributions
2019 to participant benefits
Expected Benefit Payments
2019
2020
2021
2022
2023
2024-2028
Net Periodic Benefit Cost
Pension Benefits
OPEB
$
$
4,091 $
30,520 $
30,169
29,901
29,579
29,470
141,763
1,883
1,883
1,877
1,865
1,838
1,815
8,013
The following table provides the components of net periodic benefit cost (credit) for the plans for the periods January 17, 2017
to December 31, 2017 and January 1, 2018 to December 31, 2018 (in thousands):
2018
2017
Service cost
Interest cost
Expected return on plan assets
Amortization of net loss
Settlement gain recognized
Net periodic benefit cost (credit)
Pension Benefits
$
- $
13,965
(25,534)
-
-
(11,569) $
OPEB
Pension Benefits
OPEB
16 $
689
-
109
-
814 $
- $
14,981
(27,658)
-
(1,160)
(13,837) $
22
695
-
-
-
717
$
The Company anticipates recording an aggregate net periodic benefit credit of $5.6 million for its pension and other benefits in
2019, as the expected return on plan assets exceeds estimated interest cost. An interest crediting rate of 2.30% was assumed for 2018
to determine net periodic benefit costs for LIN TV’s supplemental retirement plan. This rate is assumed to increase to 3.20% in 2019
and to 4.00% thereafter compounded annually.
The net periodic costs for the Company’s pension and other benefit plans were determined using the following assumptions:
Discount rate
Expected return on plan assets
Compensation increase rate
2018
2017
Pension
Benefits
OPEB
Pension
Benefits
OPEB
3.49%
7.00%
-
3.42%
-
2.00%
3.87%
7.25%
-
3.80%
-
3.00%
The reasonableness of the expected return on the funded retirement plan assets was assessed with the assistance of an
investment consultant, but all assumptions were reviewed by management. Their proprietary model simulates possible capital market
scenarios based on the current economic environment and their capital market assumptions to come up with expected returns for the
portfolio based on the current asset allocation.
F-41
Defined Contribution Plans
The Company has established retirement savings plans under Section 401(k) of the Internal Revenue Code (the “Plans”). The
Plans cover substantially all Company employees who meet the minimum age and service requirements and allow participants to defer
a portion of their annual compensation on a pre-tax basis. Employer contributions to the Plans may be made at the discretion of
management of the Company. During the years ended December 31, 2018, 2017 and 2016, Nexstar contributed $8.5 million, $4.2
million and $1.6 million, respectively, to the Plans. The Company also sponsors a Supplemental 401(k) plan as previously described.
The Company has a Supplemental Income Deferral Plan for which certain employees, including executive officers, were eligible.
The plan provides benefits to highly compensated employees in circumstances in which the maximum limits established under the
ERISA and the Internal Revenue Code prevent them from receiving Company contributions. The amounts recorded by the Company
for these plans for 2018 is nominal.
9. Common Stock
The holders of Class A common stock are entitled to one vote per share and the holders of Class B common stock are entitled to
10 votes per share. Holders of Class A common stock and Class B common stock generally vote together as a single class on all
matters submitted to a vote of the stockholders. Holders of Class C common stock have no voting rights.
The common stockholders are entitled to receive cash dividends, subject to the rights of holders of any series of preferred stock,
on an equal per share basis. The Nexstar Facility provides limits on the amounts of dividends the Company may pay to stockholders
over the term of the Nexstar Credit Agreement.
On January 25, 2019, the board of directors declared a quarterly cash dividend for 2019 beginning in the first quarter. See Note
18 for additional information.
In 2018, 2017 and 2016, the board of directors declared annual cash dividends of $1.50 per share, $1.20 per share and $0.96 per
share, respectively, of Nexstar’s outstanding Class A common stock. The dividends were paid in equal quarterly installments.
On April 26, 2018, Nexstar’s Board of Directors approved an additional $200 million increase in Nexstar’s share repurchase
authorization to repurchase its Class A common stock. As of December 31, 2018, the remaining available amount under the share
repurchase authorization was $201.9 million, inclusive of the 2018 additional authorization and the remaining balance under the prior
authorization. Share repurchases may be made from time to time in open market transactions, block trades or in private transactions.
There is no minimum number of shares that is required to be repurchased and the repurchase program may be suspended or
discontinued at any time without prior notice. In 2018, Nexstar repurchased a total of 751,920 shares of Class A common stock for
$50.5 million, funded by cash on hand. In 2017, Nexstar repurchased a total of 1,689,132 shares of Class A common stock for $99.0
million, funded by cash on hand.
During the years ended December 31, 2018, 2017 and 2016, 411,752 shares, 680,511 shares and 116,821 shares, respectively, of
Class A common stock were reissued from treasury to fulfill stock option exercises and vesting of restricted stock units.
In connection with the acquisition of Media General on January 17, 2017, Nexstar issued 15,670,094 shares of Class A common
stock and reissued 560,316 shares of Class A common stock from treasury. See Note 3 for additional information.
F-42
10. Stock-Based Compensation Plans
Stock-Based Compensation Expense
The Company measures compensation cost related to stock options based on the grant-date fair value of the awards, calculated
using the Black-Scholes option-pricing model. The compensation cost related to time-based restricted stock units (“RSUs”) and
performance-based restricted stock units (“PSUs”) is based on the market price of the stock on the date of the award. The fair values
of the stock options and RSUs are recognized ratably over their respective vesting periods. The fair values of PSUs are recognized
when it is probable that the performance conditions will be achieved.
In 2017, Nexstar issued 228,438 replacement stock options in connection with its acquisition of Media General (See Note 3).
There were no stock options granted in 2018 and 2016. The assumptions used in calculating the fair values of options granted during
the year ended December 31, 2017 was as follows:
Expected volatility
Risk-free interest rates
Expected life
Dividend yields
Weighted-average grant date fair value per share
32.4% to 47.7%
0.5% to 2.2%
0.2 to 7 years
1.9%
46.85
$
The expected volatility assumptions used for stock option grants were based on Nexstar’s historical volatility rates over a period
approximating the expected life of the options. The expected term assumption is calculated utilizing Nexstar’s historical exercise and
post-vesting cancellation experience combined with expectations developed over outstanding options. The risk-free interest rates used
are based on the daily U.S. Treasury yield curve rate in effect at the time of the grant having a period commensurate with the expected
term assumption. The expected dividend yield is based on the current annual dividend divided by the stock price on the date of grant.
The Company recognized stock-based compensation expense of $31.3 million, $24.1 million and $11.4 million for the years
ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, there was $65.1 million of total unrecognized
compensation cost related to stock options and restricted stock units, expected to be recognized over a weighted-average period of
2.43 years.
Stock-Based Compensation Plans
Nexstar has two stock-based compensation plans that provide for the granting of stock options, stock appreciation rights, RSUs
and PSUs to directors, employees or consultants of Nexstar: the 2015 Long-Term Equity Incentive Plan, approved by Nexstar’s
majority stockholders on June 11, 2015 (the “2015 Plan”) and the 2012 Long-Term Equity Incentive Plan, approved by Nexstar’s
majority stockholders on September 26, 2012 (the “2012 Plan”). A maximum of 2,500,000 shares and 1,500,000 shares of Nexstar’s
Class A common stock can be issued under the 2015 Plan and the 2012 Plan, respectively. No new awards are granted under equity
incentive plans prior to these plans but any unissued available shares can be issued under the 2012 Plan.
At December 31, 2018, 853,813 shares remained available for future grants, of which 836,063 shares and 17,750 shares were
available under the 2015 Plan and the 2012 Plan, respectively. Nexstar utilizes any available treasury stock or issues new shares of its
Class A common stock when options are exercised or restricted stock units vest.
Stock Options
Options are granted with an exercise price at least equal to the fair market value of the underlying shares of common stock on
the date of the grant, vest over a range of four to five years and expire ten years from the date of grant. Except as otherwise determined
by the compensation committee or with respect to the termination of a participant’s services in certain circumstances, including a
change of control, no option may be exercised within six months of the date of the grant. Upon the employee’s termination, all
nonvested options are forfeited immediately and any unexercised vested options are cancelled from 30 to 180 days following the
termination date.
F-43
The following table summarizes activity and information related to stock options for the year ended December 31, 2018:
Weighted-
Average
Exercise
Outstanding Options
Weighted-
Average
Remaining
Contractual
Term (Years)
Shares
Price
Aggregate
Intrinsic
Value
(thousands)
5.06
107,273
Outstanding as of December 31, 2017
Granted
Exercised
Vested
Forfeited/cancelled
Balances as of December 31, 2018
Exercisable as of December 31, 2018
Fully vested and expected to vest as of December 31, 2018
1,960,459 $
- $
(141,660) $
- $
(9,531) $
1,809,268 $
1,759,268 $
1,809,268 $
23.48
-
42.66
-
35.19
21.92
21.20
21.92
4.05 $
4.00 $
4.05 $
102,625
101,049
102,625
Non-Vested Options
Weighted-
Average
Grant-Date
Fair Value
31.75
-
-
31.82
-
31.45
Shares
256,875 $
- $
- $
(206,875) $
$
50,000 $
Aggregate intrinsic value represents the difference between the closing market price of Nexstar’s common stock on the last day
of the fiscal period, which was $78.64 on December 31, 2018, and the stock option exercise prices multiplied by the number of
options outstanding. For the years ended December 31, 2018, 2017 and 2016, the aggregate intrinsic value of options exercised, on
their respective exercise dates, was $5.0 million, $34.1 million and $2.3 million, respectively. For the years ended December 31, 2018,
2017 and 2016, the aggregate fair value of options vested was $6.6 million, $17.6 million and $9.0 million, respectively.
Time-Based Restricted Stock Units
The RSUs vest over a range of two to five years from the date of the award. All unvested RSUs are forfeited immediately upon
the employee’s termination for any reason other than change of control. The following table summarizes activity and information
related to RSUs for the year ended December 31, 2018:
Unvested as of December 31, 2017
Awarded
Vested
Forfeited/cancelled
Unvested as of December 31, 2018
Performance-Based Restricted Stock Units
Unvested
Shares
1,090,125 $
525,000 $
(310,125) $
(48,625) $
1,256,375 $
Weighted-
Average
Grant-Date
Fair Value
63.09
64.42
61.89
63.96
63.91
The vesting of the PSUs is contingent on the continued service of the grantee and the achievement of specific performance
metrics (generally over a three-year period) designated by the Board of Directors of the Company. All unvested PSUs are forfeited
immediately upon the employee’s termination for any reason other than change of control. The following table summarizes activity
and information related to PSUs for the year ended December 31, 2018:
Unvested as of December 31, 2017
Awarded
Vested
Forfeited/cancelled
Unvested as of December 31, 2018
Unvested
Shares
50,000 $
142,500 $
(25,000) $
- $
167,500 $
Weighted-
Average
Grant-Date
Fair Value
45.24
67.13
45.24
-
63.86
F-44
11. Income Taxes
The income tax expense (benefit) consisted of the following components for the years ended December 31 (in thousands):
Current tax expense (benefit):
Federal
State
Deferred tax (benefit) expense:
Federal
State
Income tax (benefit) expense
2018
2017
2016
$
$
102,516 $
29,761
132,277
7,997
4,406
12,403
144,680 $
190,743 $
38,499
229,242
(438,281)
(24,904)
(463,185)
(233,943) $
12,054
10,927
22,981
53,094
1,497
54,591
77,572
The following is a reconciliation of the federal statutory income tax rate to income tax expense for the years ended December 31
(in thousands):
Federal income tax at the statutory rate
State and local taxes, net of federal benefit
Nondeductible compensation
Nontaxable proceeds on station divestiture
Nondeductible earnout payments
Nondeductible acquisition costs
Nondeductible meals and entertainment
Nondeductible goodwill impairment
Domestic production activities deduction
Excess tax benefit on stock-based compensation
Disposition of nondeductible goodwill
Impact of federal tax rate reduction
Change in beginning of year valuation allowance
Other
Income tax (benefit) expense
2018
2017
2016
$
$
111,915 $
27,123
2,858
-
-
-
2,047
1,532
-
(750)
-
-
1,430
(1,475)
144,680 $
84,476 $
10,676
6,375
(9,146)
-
3,901
1,546
3,577
(11,178)
(8,106)
3,279
(322,193)
1,635
1,215
(233,943) $
59,735
7,697
709
-
1,415
12
504
5,276
-
-
-
-
-
2,224
77,572
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the
Internal Revenue Code. The Act reduces the federal corporate income tax rate from 35% to 21% effective for tax years beginning after
December 31, 2017. Although the federal corporate income tax rate reduction is only effective for tax periods beginning after
December 31, 2017, ASC 740 requires the Company to remeasure the existing net deferred tax liability in the period of enactment.
The Act also provides for immediate expensing of 100% of the costs of qualified property that are incurred and placed in service
during the period from September 27, 2017 to December 31, 2022. Beginning January 1, 2023, the immediate expensing provision is
phased down by 20% per year until it is completely phased out as of January 1, 2027. Additionally, effective January 1, 2018, the Act
modifies the executive compensation deduction limitation and imposes possible limitations on the deductibility of interest expense. As
a result of these provisions of the Act, the Company’s deduction related to executive compensation and interest expense could be
limited in future years.
Staff Accounting Bulletin No. 118 (“SAB 118”), issued by the SEC on December 22, 2017, provides guidance to assist filers in
accounting for the impact of the enactment of the Tax Cuts and Jobs Act (the “Act”). SAB 118 outlines the approach companies may
take if they determine that the necessary information is not available (in reasonable detail) to evaluate, compute and prepare
accounting entries to recognize the effects of the Act by the time the financial statements are required to be filed. Companies may use
this approach when the timely determination of some or all of the income tax effect(s) from the Act is incomplete by the due date of
the financial statements. The SAB divides items into three different buckets: 1. Items where there is sufficient time and information to
complete the accounting as of the reporting date. 2. Items where provisional estimates can be reasonably determined as of the
reporting date. 3. Items where a reasonable estimate cannot be determined as of the reporting date. SAB 118 allows filers to make
measurement period adjustments for up to 12 months for items where an estimate has been used or a reasonable estimate could not be
determined as of the reporting date.
F-45
The Company completed its analysis through the measurement period. During the measurement period, based upon Treasury
Regulations issued in 2018, the deductibility of officer stock compensation under 162(m) was adjusted. There were no other changes.
The components of the net deferred tax asset (liability) were as follows, as of December 31 (in thousands):
Deferred tax assets:
Net operating loss carryforwards
Compensation
Rent
Pension
Other
Total deferred tax assets
Valuation allowance for deferred tax assets
Total deferred tax assets
Deferred tax liabilities:
Property and equipment
Other intangible assets
Goodwill
FCC licenses
Other
Total deferred tax liabilities
Net deferred tax liabilities
2018
2017
$
$
46,189 $
14,085
1,916
30,679
13,270
106,139
(3,071)
103,068
(72,703)
(291,673)
(37,455)
(318,562)
(13,070)
(733,463)
(630,395) $
51,802
15,574
2,173
28,033
12,732
110,314
(2,155)
108,159
(72,423)
(312,460)
(31,062)
(305,293)
(4,854)
(726,092)
(617,933)
As of December 31, 2018, the Company had a valuation allowance related to deferred tax assets of $3.1 million which was not
likely to be realized, an increase of $1.4 million from December 31, 2017. During the year ended December 31, 2018, the valuation
allowance increased primarily due to the Company’s belief, based upon consideration of the positive and negative evidence, that
certain deferred tax assets related to one of the VIEs were not likely to be realized.
As of December 31, 2018, the Company's reserve for uncertain tax positions totaled approximately $12.5 million. For the years
ended December 31, 2018, 2017 and 2016 there were $12.5 million, $23.3 million and $3.7 million of gross unrecognized tax benefits,
respectively, that would reduce the effective tax rate if the underlying tax positions were sustained or settled favorably.
A reconciliation of the beginning and ending balances of the gross liability for uncertain tax positions is as follows (in
thousands):
Uncertain tax position liability at the beginning of the year
Increases resulting from merger transaction
Increases related to tax positions taken during the current period
Increases related to tax positions taken during prior periods
Decreases related to tax positions taken during prior periods
Decreases related to settlements with taxing authorities
Decreases related to expiration of statute of limitations
Uncertain tax position liability at the end of the year
2018
2017
2016
$
$
23,258 $
432
45
1,497
(12,496)
-
(194)
12,542 $
3,677 $
22,605
1,847
-
(2,440)
(806)
(1,625)
23,258 $
3,677
-
-
-
-
-
-
3,677
There can be no assurance that the outcomes from any tax examinations will not have a significant impact on the amount of such
liabilities, which could have an impact on the operating results or financial position of the Company.
Interest expense and penalties related to the Company’s uncertain tax positions are reflected as a component of income tax
benefit (expense) in the Company’s Consolidated Statements of Operations and Comprehensive Income.
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is subject to
U.S. federal tax examinations for years after 2014. Additionally, any NOLs that were generated in prior years and utilized in the
current year or future years may also be subject to examination by the Internal Revenue Service. Generally, the Company is subject to
state tax examination for years after 2014 and any NOLs that were generated in prior years and utilized in the current year or future
years may also be subject to examination.
F-46
The Company has gross federal and state income tax NOL carryforwards of $148.6 million and $301.8 million, respectively,
which are available to reduce future taxable income if utilized before their expiration. The federal NOLs expire through 2038 if not
utilized. Section 382 of the Internal Revenue Code of 1986, as amended, generally imposes an annual limitation on the amount of
NOLs that may be used to offset taxable income when a corporation has undergone significant changes in stock ownership. Ownership
changes are evaluated as they occur and could limit the ability to use NOLs. As of December 31, 2018, the Company does not expect
any NOLs to expire as a result of Section 382 limitations.
The ability to use NOLs is also dependent upon the Company’s ability to generate taxable income. The NOLs could expire
before the Company generates sufficient taxable income. To the extent the Company’s use of NOLs is significantly limited, the
Company’s income could be subject to corporate income tax earlier than it would if it were able to use NOLs, which could have a
negative effect on the Company’s financial results and operations. Changes in ownership are largely beyond the Company’s control
and the Company can give no assurance that it will continue to have realizable NOLs.
12. FCC Regulatory Matters
Television broadcasting is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the
“Communications Act”). The Communications Act prohibits the operation of television broadcasting stations except under a license
issued by the FCC, and empowers the FCC, among other things, to issue, revoke, and modify broadcasting licenses, determine the
location of television stations, regulate the equipment used by television stations, adopt regulations to carry out the provisions of the
Communications Act and impose penalties for the violation of such regulations. The FCC’s ongoing rule making proceedings could
have a significant future impact on the television industry and on the operation of the Company’s stations and the stations to which it
provides services. In addition, the U.S. Congress may act to amend the Communications Act or adopt other legislation in a manner
that could impact the Company’s stations, the stations to which it provides services and the television broadcast industry in general.
The FCC has adopted rules with respect to the final conversion of existing low power and television translator stations to digital
operations, which must be completed by July 2021.
Media Ownership
The FCC is required 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.”
In August 2016, the FCC adopted a Second Report and Order (the “2016 Ownership Order”) concluding the agency’s 2010 and
2014 quadrennial reviews. The 2016 Ownership Order (1) retained the then-existing local television ownership rule and
radio/television cross-ownership rule with minor technical modifications, (2) extended the ban on common ownership of two top-four
television stations in a market to network affiliation swaps, (3) retained the then-existing ban on newspaper/broadcast cross-ownership
in local markets while considering waivers and providing an exception for failed or failing entities, (4) retained the dual network rule,
(5) made JSA relationships attributable interests and (6) defined a category of sharing agreements designated as SSAs between
stations and required public disclosure of those SSAs (while not considering them attributable).
The 2016 Ownership Order reinstated a rule that attributed another in-market station toward the local television ownership
limits when one station owner sells more than 15% of the second station’s weekly advertising inventory under a JSA (this rule had
been previously adopted in 2014 but was vacated by the U.S. Court of Appeals for the Third Circuit (the “Third Circuit”)). Parties to
JSAs entered into prior to March 31, 2014 were permitted to continue to operate under those JSAs until September 30, 2025.
Nexstar and other parties filed petitions seeking reconsideration of various aspects of the 2016 Ownership Order. On November
16, 2017, the FCC adopted an order (the “Reconsideration Order”) addressing the petitions for reconsideration. The Reconsideration
Order (1) eliminated the rules prohibiting newspaper/broadcast cross-ownership and limiting television/radio cross-ownership, (2)
eliminated the requirement that eight or more independently-owned television stations remain in a local market for common
ownership of two television stations in that market to be permissible, (3) retained the general prohibition on common ownership of
two “top four” stations in a local market but provided for case-by-case review, (4) eliminated the television JSA attribution rule, and
(5) retained the SSA definition and disclosure requirement for television stations. These rule modifications took effect on February 7,
2018, when the Third Circuit denied a mandamus petition which had sought to stay their effectiveness. The Reconsideration Order
remains subject to appeals before the Third Circuit.
In December 2018, the FCC initiated its 2018 quadrennial review with the issuance of a Notice of Proposed Rulemaking.
Among other things, the FCC seeks comment on all aspects of the local television ownership rule’s implementation and whether the
current version of the rule remains necessary in the public interest. Comments and reply comments in the 2018 quadrennial review are
due in the first and second quarters of 2019.
F-47
The FCC’s media ownership rules limit the percentage of U.S. television households which a party may reach through its
attributable interests in television stations to 39% on a nationwide basis. Historically, the FCC has counted the ownership of an ultra-
high frequency (“UHF”) station as reaching only 50% of a market’s percentage of total national audience. On August 24, 2016, the
FCC adopted a Report and Order abolishing this “UHF discount” for the purposes of a licensee’s determination of compliance with
the 39% national cap, and that rule change became effective in October 2016. On April 20, 2017, the FCC adopted an order on
reconsideration that reinstated the UHF discount. That order stated that the FCC would launch a comprehensive rulemaking later in
2017 to evaluate the UHF discount together with the national ownership limit. The FCC initiated that proceeding in December 2017,
and comments and reply comments were filed in the first and second quarters of 2018. The FCC’s April 2017 reinstatement of the
UHF discount became effective on June 15, 2017. A petition for review of the FCC’s order reinstating the UHF discount was filed in a
federal appeals court, and Nexstar intervened in the litigation in support of the FCC. On July 25, 2018, the federal court dismissed the
appeal for lack of standing. Nexstar is in compliance with the 39% national cap limitation without the UHF discount and, therefore,
with the UHF discount as well.
Spectrum
The FCC is in the process of repurposing a portion of the broadcast television spectrum for wireless broadband use. Pursuant to
federal legislation enacted in 2012, the FCC conducted an incentive auction for the purpose of making additional spectrum available to
meet future wireless broadband needs. Under the auction statute and rules, certain television broadcasters accepted bids from the FCC to
voluntarily relinquish all or part of their spectrum in exchange for consideration, and certain wireless broadband providers and other
entities submitted successful bids to acquire the relinquished television spectrum. Over the next several years, television stations that are
not relinquishing their spectrum are being “repacked” into the frequency band still remaining for television broadcast use.
The incentive auction commenced on March 29, 2016 and officially concluded on April 13, 2017. Ten of Nexstar’s stations and
one station owned by Vaughan, a consolidated VIE, accepted bids to relinquish their spectrum. On July 21, 2017, the Company received
$478.6 million of gross proceeds from the FCC related to the incentive auction. These were recorded as liability to surrender spectrum
asset pending the relinquishment of spectrum assets or conversion from UHF to VHF. Of the 11 total stations that accepted bids, one
station went off the air in November 2017 and the associated spectrum asset and liability to surrender spectrum, both amounting to
$34.6 million, were derecognized in the fourth quarter of 2017. The station that went off the air is not expected to have a significant
impact on the Company’s future financial results because it is located in a remote rural area of the country and the Company has other
stations which serve the same area. Of the remaining ten stations, eight have ceased broadcasting on their previous channels and
implemented channel sharing agreements. As a result, the associated spectrum asset and liability to surrender spectrum, both amounting
to $314.1 million, were derecognized in the second quarter of 2018. The remaining two stations will move to VHF channels and must
vacate their current channels by September 2019 and May 2020, respectively.
The majority of the Company’s television stations did not accept bids to relinquish their television channels. Of those stations, 61
full power stations owned by Nexstar and 17 full power stations owned by VIEs have been assigned to new channels in the reduced post-
auction television band. These “repacked” stations are required to construct and license the necessary technical modifications to operate
on their newly assigned channels and must cease operating on their former channels by deadlines which the FCC has established and
which are no later than July 13, 2020. Congress has allocated up to an industry-wide total of $2.75 billion to reimburse television
broadcasters, MVPDs and other parties for costs reasonably incurred due to the repack. This allocation includes $1 billion added to the
TV Broadcaster Relocation Fund as part of the Consolidated Appropriations Act, 2018. This fund is not available to reimburse repacking
costs for stations which are surrendering their spectrum and entering into channel sharing relationships. Broadcasters and MVPDs have
submitted estimates to the FCC of their reimbursable costs. As of February 6, 2019, these costs were approximately $1.9 billion, and the
FCC has indicated that it expects those costs to rise. During the years ended December 31, 2018 and 2017, the Company spent a total of
$26.8 million and $2.6 million, respectively, in capital expenditures related to station repack which were recorded as assets under the
property and equipment caption in the accompanying Consolidated Balance Sheets. In 2018, the Company received $29.4 million in
reimbursements from the FCC related to these expenditures which were recorded as operating income in the accompanying Consolidated
Statements of Operations and Comprehensive Income. There were no reimbursements received related to station repack in 2017. The
Company cannot determine if the FCC will be able to fully reimburse its repacking costs as this is dependent on certain factors, including
the Company’s ability to incur repacking costs that are equal to or less than the FCC’s allocation of funds to the Company and whether
the FCC will have available funds to reimburse the Company for additional repacking costs that it previously may not have anticipated.
Whether the FCC will have available funds for additional reimbursements will also depend on the repacking costs that will be incurred by
other broadcasters, MVPDs and other parties that are also seeking reimbursements.
The reallocation of television spectrum to broadband use 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 impact of the incentive
auction and subsequent repacking on its business.
F-48
Exclusivity/Retransmission Consent
On March 3, 2011, the FCC initiated a Notice of Proposed Rulemaking which among other things 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 in certain circumstances.
In March 2014, the FCC adopted a further notice of proposed rulemaking which sought additional comment on the elimination
or modification of the network non-duplication and syndicated exclusivity rules. The FCC’s possible elimination or modification of
the network non-duplication and syndicated exclusivity protection rules may 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 FCC’s network non-duplication and
syndicated exclusivity proposals, or the impact of these proposals.
On December 5, 2014, federal legislation directed the FCC to commence a rulemaking to “review its totality of the
circumstances test for good faith [retransmission consent] negotiations.” The FCC commenced this proceeding in September 2015
and comments and reply comments were submitted. In July 2016, the then-Chairman of the FCC publicly announced that the agency
would not adopt additional rules in this proceeding. However, the proceeding remains open.
Further, certain online video distributors and other OTTDs have begun streaming broadcast programming over the Internet. In
June 2014, the U.S. Supreme Court held that an OTTD’s retransmissions of broadcast television signals without the consent of the
broadcast station violate copyright holders’ exclusive right to perform their works publicly as provided under the Copyright Act. In
December 2014, the FCC issued a Notice of Proposed Rulemaking proposing to interpret the term “MVPD” to encompass OTTDs that
make available for purchase multiple streams of video programming distributed at a prescheduled time and seeking comment on the
effects of applying MVPD rules to such OTTDs. Comments and reply comments were filed in 2015. Although the FCC has not
classified OTTDs as MVPDs to date, several OTTDs have signed agreements for retransmission of local stations within their markets
and others are actively seeking to negotiate such agreements.
13. Commitments and Contingencies
Merger Agreement with Tribune
On November 30, 2018, Nexstar entered into a definitive merger agreement with Tribune to acquire the latter’s outstanding
equity and equity-based awards for $46.50 per share in a cash transaction. The estimated total purchase price is valued at $6.4 billion,
consisting of the merger cash consideration and the refinancing of Tribune's outstanding debt. The merger has been approved by the
boards of directors of both companies and is projected to close late in the third quarter of 2019, subject to (i) the approval of the
merger by the stockholders of Tribune, (ii) FCC approval, (iii) other regulatory approvals (including expiration of the applicable HSR
waiting period) and (iv) satisfaction of other customary closing conditions. On November 30, 2018, Nexstar received committed
financing up to a maximum of $6.4 billion from a group of commercial banks to provide the debt financing to consummate the merger
and the refinancing of certain of the existing indebtedness of Tribune and related transactions. See Note 3 for additional information.
Broadcast Rights Commitments
Broadcast rights acquired for cash under license agreements are recorded as an asset and a corresponding liability at the
inception of the license period. Future minimum payments for license agreements for which the license period has not commenced and
no asset or liability has been recorded are as follows as of December 31, 2018 (in thousands):
2019
2020
2021
2022
2023
$
$
46,118
35,731
20,090
12,740
78
114,757
F-49
Operating Leases
The Company leases office space, vehicles, towers, antenna sites, studio and other operating equipment under noncancelable
operating lease arrangements expiring through June 2114. Rent expense recorded in the Company’s Consolidated Statements of
Operations and Comprehensive Income for such leases was $22.8 million, $24.6 million and $12.7 million for the years ended
December 31, 2018, 2017 and 2016, respectively. Future minimum lease payments under these operating leases are as follows as of
December 31, 2018 (in thousands):
2019
2020
2021
2022
2023
Thereafter
Capital Leases
$
$
22,179
19,841
16,794
13,573
11,108
37,577
121,072
The Company leases certain equipment, tower facilities and other real estate properties under noncancelable lease arrangements.
These contracts were accounted for as capital leases and included in property and equipment (See Note 4). The future minimum lease
payments under these agreements as of December 31, 2018 are as follows (in thousands):
2019
2020
2021
2022
2023
Thereafter
Less: Amount representing interest
Guarantee of Mission, Marshall and Shield Debt
$
$
1,766
1,795
1,843
1,803
1,818
15,202
24,227
7,323
16,904
Nexstar and its subsidiaries guarantee full payment of all obligations incurred under the Mission, Marshall and Shield senior
secured credit facilities. In the event that Mission, Marshall or Shield are 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 these
guarantees would be generally limited to the borrowings outstanding. As of December 31, 2018, Mission had a maximum
commitment of $227.6 million under its senior secured credit facility, of which $224.6 million of debt was outstanding, Marshall had
used all its commitment under its senior secured credit facility and had outstanding obligations of $51.1 million, and Shield had also
used all of its commitment and had outstanding obligations of $22.6 million. Based on the terms of the credit agreements, Mission’s
outstanding debt is due January 2024, Marshall’s outstanding debt is due December 2019 and Shield’s outstanding debt is due October
2023. Marshall’s debt is included in the current liabilities in the accompanying December 31, 2018 Consolidated Balance Sheet. The
other debts guaranteed by Nexstar are long-term debt obligations of Mission and Shield.
Indemnification Obligations
In connection with certain agreements that the Company enters into in the normal course of its business, including local service
agreements, business acquisitions and borrowing arrangements, the Company enters into contractual arrangements under which the
Company agrees to indemnify the third party to such arrangement from losses, claims and damages incurred by the indemnified party
for certain events as defined within the particular contract. Such indemnification obligations may not be subject to maximum loss
clauses and the maximum potential amount of future payments the Company could be required to make under these indemnification
arrangements may be unlimited. Historically, payments made related to these indemnifications have been insignificant and the
Company has not incurred significant costs to defend lawsuits or settle claims related to these indemnification agreements.
F-50
Collective Bargaining Agreements
As of December 31, 2018, certain technical, production and news employees at 14 of the Company’s stations are covered by
collective bargaining agreements. The Company believes that employee relations are satisfactory and has not experienced any work
stoppages at any of its stations. However, there can be no assurance that the collective bargaining agreements will be renewed in the
future or that the Company will not experience a prolonged labor dispute, which could have a material adverse effect on its business,
financial condition, or results of operations.
Litigation
From time to time, the Company is involved with claims that arise out of the normal course of its business. In the opinion of
management, any resulting liability with respect to these claims would not have a material adverse effect on the Company’s financial
position or results of operations.
On March 16, 2018, a group of companies including Nexstar (the “Defendants”) received a Civil Investigative Demand from the
Antitrust Division of the DOJ regarding an investigation into the exchange of certain information related to the pacing of sales related
to the same period in the prior year among broadcast stations in some DMAs in alleged violation of federal antitrust law. Other
Defendants entered into a proposed consent decree with the DOJ on November 6, 2018. Without admitting any wrongdoing, Nexstar
agreed to settle the matter with the DOJ on December 5, 2018. The DOJ filed an amended complaint adding Nexstar to the consent
decree on December 13, 2018. The consent decree, which settles any claims by the government of alleged violations of federal
antitrust laws in connection with the alleged information sharing, does not include any financial penalty. Pursuant to the consent
decree, we have agreed not to exchange certain non-public information with other stations operating in the same DMA except in
certain cases, to implement certain antitrust compliance measures and to monitor and report on compliance with the consent decree.
On July 30, 2018, Clay, Massey & Associates, PC filed an antitrust class action complaint in the U.S. District Court for the
Northern District of Illinois on behalf of itself and all others similarly situated against Gray Television, Inc., Hearst Communications,
Nexstar Media Group, Inc., Tegna Inc., Tribune Media Company and Sinclair Broadcast Group, Inc. The lawsuit alleges unlawful
coordination between broadcast television station owners to artificially increase prices of television spot advertisements in violation of
Section 1 of the Sherman Act (15 U.S.C. §1). Nexstar has since been named in 15 similar complaints, including ten in the Northern
District of Illinois, three in the Southern District of New York, and two in the District of Maryland. Each complaint includes similar
allegations and claims a violation of Section 1 of the Sherman Act. One, filed in the District of Maryland, also alleges violations of
state antitrust and consumer protection statutes and a claim for unjust enrichment.
On October 9, 2018, these cases were consolidated in a multi-district litigation in the District Court for the Northern District of
Illinois captioned In Re: Local TV Advertising Antitrust Litigation, No. 1:18-cv-06785 (“MDL Litigation”). On January 23, 2019, the
Court in the MDL Litigation appointed plaintiffs’ lead and liaison counsel. The MDL Litigation is ongoing. Nexstar denies the
allegations against it and will defend its advertising practices as necessary.
14. Segment Data
The Company evaluates the performance of its operating segments based on net revenue and operating income. The Company’s
broadcast segment includes television stations and related community focused websites that Nexstar owns, operates, programs or
provides sales and other services to in various markets across the United States. The other activities of the Company include corporate
functions, digital businesses and eliminations.
Segment financial information is included in the following tables for the periods presented (in thousands):
Year Ended December 31, 2018
Net revenue
Depreciation
Amortization of intangible assets
Income (loss) from operations
Goodwill
Assets
$
Broadcast
Other
Consolidated
2,612,531 $
89,312
126,850
918,401
2,125,479
6,622,604
154,165 $
20,477
22,556
(160,622)
42,475
439,426
2,766,696
109,789
149,406
757,779
2,167,954
7,062,030
F-51
Year Ended December 31, 2017
Net revenue
Depreciation
Amortization of intangible assets
Income (loss) from operations
Goodwill
Assets
Year Ended December 31, 2016
Net revenue
Depreciation
Amortization of intangible assets
Income (loss) from operations
$
$
Broadcast
Other
Consolidated
2,306,404 $
85,913
147,328
694,967
2,122,935
6,723,685
125,562 $
14,745
12,172
(189,342)
19,911
757,962
2,431,966
100,658
159,500
505,625
2,142,846
7,481,647
Broadcast
Other
Consolidated
1,040,704 $
44,313
33,079
372,496
62,486 $
6,987
13,493
(85,188)
1,103,190
51,300
46,572
287,308
The following table presents the disaggregation of the Company’s revenue under ASC 606 for the periods presented.
Comparative 2017 and 2016 revenues are presented in accordance with the Company’s historical accounting standard prior to the
adoption of ASC 606 (in thousands):
Year Ended December 31, 2018
Local
National
Political
Retransmission compensation
Digital
Other
Trade revenue
Net revenue
Year Ended December 31, 2017
Local
National
Political
Retransmission compensation
Digital
Other
Trade and barter revenue
Net revenue
Year Ended December 31, 2016
Local
National
Political
Retransmission compensation
Digital
Other
Trade and barter revenue
Net revenue
$
$
$
$
$
$
Broadcast
Other
Consolidated
797,709 $
292,211
251,209
1,121,081
107,054
26,425
16,842
2,612,531 $
- $
-
-
-
154,105
60
-
154,165 $
797,709
292,211
251,209
1,121,081
261,159
26,485
16,842
2,766,696
Broadcast
Other
Consolidated
$
805,360
302,657
26,865
995,790
101,286
17,765
56,681
2,306,404
$
$
-
-
-
-
125,466
96
-
125,562
$
805,360
302,657
26,865
995,790
226,752
17,861
56,681
2,431,966
Broadcast
Other
Consolidated
$
344,356
122,319
92,262
394,038
35,944
6,093
45,692
1,040,704
$
$
-
-
-
-
62,431
55
-
62,486
$
344,356
122,319
92,262
394,038
98,375
6,148
45,692
1,103,190
The Company is a television broadcasting and digital media company focused on the acquisition, development and operation of
television stations and interactive community websites and digital media services in medium-sized markets in the United States.
Advertising revenue (local, national, political and digital) is positively affected by national and regional political campaigns, and
certain events such as the Olympic Games or the Super Bowl. Company stations’ advertising revenue is generally highest in the
second and fourth quarters of each year, due in part to increases in consumer advertising in the spring and retail advertising in the
period leading up to, and including, the holiday season. In addition, advertising revenue is generally higher during even-numbered
years when congressional and presidential elections occur, and advertising is aired during the Olympic Games.
The Company receives compensation from MVPDs and OTTDs in return for the consent to the retransmission of the signals of
its television stations. Retransmission compensation is recognized at the point in time the broadcast signal is delivered to the
distributors and is based on a price per subscriber.
F-52
Beginning in 2018, the Company no longer recognizes barter revenue (and the related barter expense) resulting from the
exchange of advertising time for certain program material. During the year ended December 31, 2017, the Company recognized barter
revenue (and barter expense) of $42.5 million. During the year ended December 31, 2016, the Company recognized barter revenue
(and barter expense) of $34.7 million. These are included in the trade and barter revenue line in the tables above.
15. Condensed Consolidating Financial Information
The following condensed consolidating financial information presents the financial position, results of operations and cash flows
of the Company, including its wholly-owned subsidiaries and its consolidated VIEs. 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, excluding consolidating entities. The Nexstar
Broadcasting column presents the financial information of Nexstar Broadcasting, Inc. (“Nexstar Broadcasting”), a wholly-owned
subsidiary of Nexstar and issuer of the 5.625% Notes, the 6.125% Notes and the 5.875% Notes. The Mission column presents the
financial information of Mission, an entity which Nexstar Broadcasting is required to consolidate as a VIE (See Note 2). The Non-
Guarantors column presents the combined financial information of Nexstar Digital and other VIEs consolidated by Nexstar
Broadcasting (See Note 2).
Nexstar Broadcasting’s outstanding 5.875% Notes are fully and unconditionally guaranteed, jointly and severally, by Nexstar,
subject to certain customary release provisions. These notes are not guaranteed by any other entities.
Nexstar Broadcasting’s outstanding 5.625% Notes and 6.125% Notes are fully and unconditionally guaranteed, jointly and
severally, by Nexstar and Mission, subject to certain customary release provisions. These notes are not guaranteed by any other
entities.
The indentures governing the 5.625% Notes and the 6.125% Notes are not registered but require consolidating information that
presents the guarantor information.
As discussed in Note 2, the Company adopted ASU No. 2016-15 on a retrospective basis which reclassified the cash flow
classification of certain payments for contingent consideration related to an acquisition in 2017 from financing activities to operating
activities and payments received for the settlement of corporate-owned life insurance claims from operating activities to investing
activities. The Company also adopted ASU No. 2016-18 on a retrospective basis which impacted the cash flow treatment of transfers
between cash, cash equivalents and restricted cash in 2017. Further, the Company adopted ASU No. 2017-07 on a retrospective basis
which requires the presentation of the net periodic benefit costs, other than the current service costs, in the income statement
separately from the service cost component and outside the subtotal of income from operations. The effects of these adoptions were
reflected in the accompanying Condensed Consolidating Statement of Operations for the year ended December 31, 2017 and the
Condensed Consolidating Statement of Cash Flows for the years ended December 31, 2017 and 2016.
F-53
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2018
(in thousands)
Consolidated
Nexstar Broadcasting Mission Guarantors Eliminations Company
Nexstar
Non-
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable
Amounts due from consolidated entities
Spectrum asset
Other current assets
Total current assets
Investments in subsidiaries
Amounts due from consolidated entities
Property and equipment, net
Goodwill
FCC licenses
Other intangible assets, net
Other noncurrent assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Current portion of debt
Accounts payable
Amounts due to consolidated entities
Liability to surrender spectrum asset
Other current liabilities
Total current liabilities
Debt
Amounts due to consolidated entities
Deferred tax liabilities
Other noncurrent liabilities
Total liabilities
Total Nexstar Media Group, Inc.
stockholders' equity (deficit)
Noncontrolling interests in consolidated
variable interest entities
Total liabilities and stockholders' equity
(deficit)
$
- $
-
-
-
-
-
1,119,605
782,365
-
-
-
-
-
$ 1,901,970 $
105,665 $ 10,798 $
466,270 12,857
88,987 77,521
-
52,002
17,420
1,655
730,344 102,831
-
108,884
-
-
696,910 19,867
1,970,692 33,187
1,620,610 43,102
1,365,159 13,712
4,421
6,609,259 $217,120 $
116,660
28,652 $
68,158
-
-
3,598
100,408
-
-
14,833
164,075
114,556
113,052
4,191
- $
-
(166,508)
-
-
(166,508)
(1,228,489)
(782,365)
(72)
-
-
-
-
511,115 $ (2,177,434) $
145,115
547,285
-
52,002
22,673
767,075
-
-
731,538
2,167,954
1,778,268
1,491,923
125,272
7,062,030
$
- $
-
-
-
299
299
-
-
62
-
361
41,477 $
47,574
-
52,002
155,023
296,076
2,285 $
2,357
-
-
4,441
9,083
3,641,193 222,354
-
-
6,820
5,376,423 238,257
559,057
624,869
255,228
52,331 $
17,897
166,508
-
28,486
265,222
21,363
223,519
8,949
8,036
527,089
- $
-
(166,508)
-
-
(166,508)
-
(782,576)
-
-
(949,084)
96,093
67,828
-
52,002
188,249
404,172
3,884,910
-
633,880
270,084
5,193,046
1,901,609
1,232,836 (21,137)
(32,184)
(1,228,350)
1,852,774
-
-
-
16,210
-
16,210
$ 1,901,970 $
6,609,259 $217,120 $
511,115 $ (2,177,434) $
7,062,030
F-54
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2017
(in thousands)
Consolidated
Nexstar Broadcasting Mission Guarantors Eliminations Company
Nexstar
Non-
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable
Amounts due from consolidated entities
Spectrum asset
Other current assets
Total current assets
Investments in subsidiaries
Amounts due from consolidated entities
Property and equipment, net
Goodwill
FCC licenses
Other intangible assets, net
Other noncurrent assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Current portion of debt
Accounts payable
Liability to surrender spectrum asset
Amounts due to consolidated entities
Other current liabilities
Total current liabilities
Debt
Amounts due to consolidated entities
Deferred tax liabilities
Other noncurrent liabilities
Total liabilities
Total Nexstar Media Group, Inc.
stockholders' equity (deficit)
Noncontrolling interests in consolidated
variable interest entities
Total liabilities and stockholders' equity
(deficit)
$
- $
-
-
-
-
-
617,297
970,207
-
-
-
-
-
$ 1,587,504 $
90,860 $
9,524 $
484,096 14,717
55,417 92,923
-
279,069
64,256
2,070
973,698 119,234
-
109,354
-
-
697,898 18,454
1,959,386 33,187
1,615,830 43,102
1,476,297 15,841
2,645
7,021,766 $232,463 $
189,303
15,268 $
64,130
-
26,695
5,533
111,626
-
-
17,861
150,273
108,706
89,488
7,233
- $
-
(148,340)
-
-
(148,340)
(726,651)
(970,207)
(75)
-
-
-
-
485,187 $ (1,845,273) $
115,652
562,943
-
305,764
71,859
1,056,218
-
-
734,138
2,142,846
1,767,638
1,581,626
199,181
7,481,647
$
- $
-
-
-
-
-
-
-
-
-
36,243 $
24,293
286,740
-
2,314 $
1,090
-
-
192,827 13,310
540,103 16,714
4,024,129 223,428
-
-
7,626
6,214,439 247,768
714,408
613,227
322,572
54,251 $
5,753
27,347
148,340
26,535
262,226
22,095
256,010
6,214
10,343
556,888
- $
-
-
(148,340)
-
(148,340)
-
(970,418)
-
-
(1,118,758)
92,808
31,136
314,087
-
232,672
670,703
4,269,652
-
619,441
340,541
5,900,337
1,587,504
807,327 (15,305)
(82,397)
(726,515)
1,570,614
-
-
-
10,696
-
10,696
$ 1,587,504 $
7,021,766 $232,463 $
485,187 $ (1,845,273) $
7,481,647
F-55
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
Year Ended December 31, 2018
(in thousands)
Net broadcast revenue (including trade)
Revenue between consolidated entities
Net revenue
Operating expenses (income):
Direct operating expenses, excluding
depreciation and amortization
Selling, general, and administrative expenses,
excluding depreciation and amortization
Local service agreement fees between
consolidated entities
Amortization of broadcast rights
Amortization of intangible assets
Depreciation
Reimbursement from the FCC related to station
repack
Goodwill and intangible assets impairment
Total operating expenses
(Loss) income from operations
Interest expense, net
Loss on extinguishment of debt
Pension and other postretirement plans credit, net
Other expenses
Equity in income of subsidiaries
Income (loss) before income taxes
Income tax (expense) benefit
Net income (loss)
Net loss attributable to noncontrolling interests
Net income (loss) attributable to Nexstar
Net income (loss)
Other comprehensive income:
Change in unrecognized amounts included in pension
and other postretirement benefit
obligations, net of tax benefit of $7,147
Total comprehensive income (loss)
Comprehensive loss attributable to noncontrolling
interests
Comprehensive income (loss) attributable to
Nexstar
Nexstar
Nexstar Broadcasting Mission
$
- $
31,758
31,758
2,495,780 $
91,257
2,587,037
69,227 $
39,997
109,224
Non-
Consolidated
Guarantors Eliminations Company
2,766,696
-
2,766,696
- $
(237,379)
(237,379)
201,689 $
74,367
276,056
-
890,378
40,861
193,061
(6,383)
1,117,917
37,568
559,024
4,965
40,633
(62,257)
579,933
-
-
-
-
77,482
57,022
118,068
99,526
55,650
1,584
2,129
3,171
35,607
2,736
29,209
7,092
(168,739)
-
-
-
-
61,342
149,406
109,789
-
-
37,568
(5,810)
-
-
-
-
408,006
402,196
(1,231)
400,965
-
$400,965 $
(23,933)
-
1,777,567
809,470
(206,267)
(11,647)
10,755
(2,475)
-
599,836
(153,871)
445,965
-
445,965 $
(2,818)
-
105,542
3,682
(11,101)
(452)
-
-
-
(7,871)
2,042
(5,829)
-
(5,829) $
(2,630)
19,911
325,619
(49,563)
(3,626)
(21)
-
-
-
(53,210)
8,380
(44,830)
1,212
(43,618) $
-
-
(237,379)
-
-
-
-
-
(408,006)
(408,006)
-
(408,006)
-
(408,006) $
(29,381)
19,911
2,008,917
757,779
(220,994)
(12,120)
10,755
(2,475)
-
532,945
(144,680)
388,265
1,212
389,477
$400,965 $
445,965 $
(5,829) $
(44,830) $
(408,006) $
388,265
-
400,965
(20,456)
425,509
-
(5,829)
-
(44,830)
-
(408,006)
(20,456)
367,809
-
-
-
1,212
-
1,212
$400,965 $
425,509 $
(5,829) $
(43,618) $
(408,006) $
369,021
F-56
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
Year Ended December 31, 2017
(in thousands)
Net broadcast revenue (including trade and barter)
Revenue between consolidated entities
Net revenue
Operating expenses (income):
Direct operating expenses, excluding
depreciation and amortization
Selling, general, and administrative expenses,
excluding depreciation and amortization
Local service agreement fees between
consolidated entities
Amortization of broadcast rights
Amortization of intangible assets
Depreciation
Goodwill and intangible assets impairment
Gain on disposal of stations, net
Total operating expenses
Income (loss) from operations
Interest expense, net
Loss on extinguishment of debt
Pension and other postretirement plans credit, net
Other expenses
Equity in income of subsidiaries
Income (loss) before income taxes
Income tax benefit (expense)
Net income (loss)
Net income attributable to noncontrolling interests
Net income (loss) attributable to Nexstar
Nexstar
Nexstar Broadcasting Mission
$
- $
-
-
2,160,330 $
71,434
2,231,764
Non-
Consolidated
Guarantors Eliminations Company
2,431,966
-
2,431,966
- $
(146,286)
(146,286)
201,044 $
38,272
239,316
70,592 $
36,580
107,172
-
793,606
35,820
167,690
(3,711)
993,405
-
582,314
4,168
43,423
(24,799)
605,106
-
-
-
-
51,859
92,888
137,808
91,791
-
-
-
-
-
-
-
471,363
471,363
-
471,363
-
$471,363 $
(57,716)
1,692,550
539,214
(226,853)
(32,523)
13,120
(1,284)
-
291,674
219,460
511,134
-
511,134 $
35,500
5,645
2,422
2,342
-
85,897
21,275
(10,135)
(2,133)
-
-
-
9,007
(3,400)
5,607
-
5,607 $
30,417
6,870
19,270
6,525
19,985
-
294,180
(54,864)
(4,207)
(226)
-
-
-
(59,297)
17,883
(41,414)
(330)
(41,744) $
(117,776)
-
-
-
-
(146,286)
-
-
-
-
-
(471,363)
(471,363)
-
(471,363)
-
(471,363) $
-
105,403
159,500
100,658
19,985
(57,716)
1,926,341
505,625
(241,195)
(34,882)
13,120
(1,284)
-
241,384
233,943
475,327
(330)
474,997
Net income (loss)
Other comprehensive income:
Change in unrecognized amounts included in pension
and other postretirement benefit obligations, net of tax
of $2,160
$471,363 $
-
471,363
511,134 $
5,607 $
(41,414) $
(471,363) $
475,327
6,140
517,274
-
5,607
-
(41,414)
-
(471,363)
6,140
481,467
Total comprehensive income (loss)
Comprehensive income attributable to
noncontrolling interests
Comprehensive income (loss) attributable to
Nexstar
-
-
-
(330)
-
(330)
$471,363 $
517,274 $
5,607 $
(41,744) $
(471,363) $
481,137
F-57
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
Year Ended December 31, 2016
(in thousands)
Net broadcast revenue (including trade and barter)
Revenue between consolidated entities
Net revenue
Operating expenses:
Direct operating expenses, excluding
depreciation and amortization
Selling, general, and administrative expenses,
excluding depreciation and amortization
Local service agreement fees between
consolidated entities
Amortization of broadcast rights
Amortization of intangible assets
Depreciation
Goodwill impairment
Total operating expenses
Income (loss) from operations
Interest expense, net
Other expenses
Equity in income of subsidiaries
Income (loss) before income taxes
Income tax (expense) benefit
Net income (loss)
Net income attributable to noncontrolling interests
Net income (loss) attributable to Nexstar
Comprehensive income (loss) attributable to
Nexstar
Nexstar
Nexstar Broadcasting Mission
$
- $
-
-
939,333 $
34,436
973,769
Non-
Consolidated
Guarantors Eliminations Company
1,103,190
-
1,103,190
102,455 $
11,942
114,397
- $
(89,308)
(89,308)
61,402 $
42,930
104,332
-
284,866
30,278
67,067
(214)
381,997
-
246,698
3,611
18,822
(5,525)
263,606
-
-
-
-
-
-
-
-
-
72,193
72,193
-
72,193
-
72,193
49,202
47,990
27,394
45,173
186
701,509
272,260
(104,231)
(555)
-
167,474
(69,149)
98,325
-
98,325
18,000
5,567
2,544
2,400
-
62,400
41,932
(10,251)
-
-
31,681
(12,337)
19,344
-
19,344
16,367
3,588
16,634
3,727
15,076
141,281
(26,884)
(1,599)
-
-
(28,483)
3,914
(24,569)
(1,563)
(26,132)
(83,569)
-
-
-
-
(89,308)
-
-
-
(72,193)
(72,193)
-
(72,193)
-
(72,193)
-
57,145
46,572
51,300
15,262
815,882
287,308
(116,081)
(555)
-
170,672
(77,572)
93,100
(1,563)
91,537
$ 72,193 $
98,325 $
19,344 $
(26,132) $
(72,193) $
91,537
F-58
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2018
(in thousands)
Nexstar
Nexstar
Broadcasting
Mission
Non-
Guarantors
Eliminations
Cash flows from operating activities $
- $
709,446 $
4,810 $
22,611 $
Cash flows from investing activities:
Purchases of property and equipment
Spectrum repack reimbursements
Deposits and payments for acquisitions
Other investing activities
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term debt
Repayments of long-term debt
Common stock dividends paid
Purchase of treasury stock
Inter-company payments
Other financing activities
Net cash used in financing activities
-
-
-
-
-
(93,181)
23,933
(103,976)
5,322
(167,902)
(4,044)
2,818
-
-
(1,226)
(9,021)
2,630
-
5
(6,386)
-
-
(68,629)
(50,524)
118,121
1,032
-
194,000
(590,247)
-
-
(118,121)
(12,371)
(526,739)
-
(2,310)
-
-
-
-
(2,310)
57,387
(60,454)
-
-
-
226
(2,841)
Net increase in cash,
cash equivalents and restricted cash
Cash, cash equivalents and restricted
cash at beginning of period
Cash, cash equivalents and restricted
cash at end of period
Consolidated
Company
736,867
- $
-
-
-
-
-
-
-
-
-
-
-
-
-
(106,246)
29,381
(103,976)
5,327
(175,514)
251,387
(653,011)
(68,629)
(50,524)
-
(11,113)
(531,890)
29,463
14,805
1,274
13,384
-
-
90,860
9,524
15,268
-
115,652
$
- $
105,665 $ 10,798 $
28,652 $
- $
145,115
F-59
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2017
(in thousands)
Cash flows from operating activities $
Nexstar
Nexstar
Consolidated
Non-
Broadcasting Mission Guarantors Eliminations Company
109,091
- $
21,867 $
82,532 $
4,692 $
- $
Cash flows from investing activities:
Purchases of property and equipment
Deposits and payments for
acquisitions
Proceeds from sale of a station
Proceeds received to relinquish
spectrum
Other investing activities
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term debt
Repayments of long-term debt
Premium paid on debt extinguishment
Payments for debt financing costs
Purchase of noncontrolling interests
Payments for contingent consideration
Common stock dividends paid
Purchase of treasury stock
Inter-company payments
Other financing activities
Net cash provided by (used in)
financing activities
Net (decrease) increase in cash,
cash equivalents and restricted cash
Cash, cash equivalents and restricted
cash at beginning of period
Cash, cash equivalents and restricted
cash at end of period
$
-
(62,056)
(700)
(9,705)
-
(72,461)
-
-
(2,974,454)
481,946
(800)
-
-
-
-
-
(2,975,254)
481,946
478,608
20,374
(2,055,582)
-
-
100
(1,400)
402
(9,303)
-
-
-
-
-
-
(55,892)
(99,008)
150,844
4,056
3,249,575 230,609
(1,640,088) (227,051)
-
(3,804)
-
-
-
-
-
-
(18,050)
(48,235)
(66,901)
(258,647)
-
-
(150,844)
(6,529)
53,797
(55,190)
-
-
-
(956)
-
-
-
(319)
478,608
20,876
(2,066,285)
3,533,981
(1,922,329)
(18,050)
(52,039)
(66,901)
(259,603)
(55,892)
(99,008)
-
(2,792)
-
-
-
-
-
-
-
-
-
-
-
-
-
1,060,281
(246)
(2,668)
-
1,057,367
-
(912,769)
3,046
9,896
-
(899,827)
-
1,003,629
6,478
5,372
-
1,015,479
- $
90,860 $
9,524 $
15,268 $
- $
115,652
F-60
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2016
(in thousands)
Nexstar
Nexstar
Broadcasting
Mission
Non-
Guarantors
Eliminations
Consolidated
Company
284,253
- $
Cash flows from operating activities $
- $
274,472 $
5,370 $
4,411 $
Cash flows from investing activities:
Purchases of property and equipment
Deposits and payments for acquisitions
Other investing activities
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term debt
Repayments of long-term debt
Common stock dividends paid
Payments for debt financing costs
Inter-company payments
Other financing activities
Net cash provided by (used in)
financing activities
Net increase (decrease) in cash,
cash equivalents and restricted cash
Cash, cash equivalents and restricted
cash at beginning of period
Cash, cash equivalents and restricted
cash at end of period
$
-
-
-
-
(28,326)
(103,970)
718
(131,578)
(241)
-
-
(241)
(3,303)
-
-
(3,303)
-
-
(29,445)
-
28,220
1,225
958,000
(73,155)
-
(20,024)
(28,220)
(3,358)
-
(2,335)
-
(683)
-
-
-
(4,650)
-
-
-
(2,643)
-
-
-
-
-
-
-
-
-
-
(31,870)
(103,970)
718
(135,122)
958,000
(80,140)
(29,445)
(20,707)
-
(4,776)
-
833,243
(3,018)
(7,293)
-
822,932
-
976,137
2,111
(6,185)
-
972,063
-
27,492
4,367
11,557
-
43,416
- $
1,003,629 $
6,478 $
5,372 $
- $
1,015,479
F-61
16. Unaudited Quarterly Data
Net revenue
Income from operations
Income before income taxes
Net income attributable to Nexstar
Basic net income per common share
Basic weighted average shares outstanding
Diluted net income per common share
Diluted weighted average shares outstanding
Net revenue
Income from operations
(Loss) income before income taxes
Net income attributable to Nexstar
Basic net income per common share
Basic weighted average shares outstanding
Diluted net income per common share
Diluted weighted average shares outstanding
$
$
$
$
$
$
Three Months Ended
March 31,
2018
June 30,
2018
September 30,
2018
December 31,
2018
615,336
117,616
64,845
48,122
(in thousands, except per share amounts)
693,015
$
192,893
135,071
100,514
660,323
174,494
119,870
87,732
$
1.04 $
46,075
1.01 $
47,685
1.92 $
45,631
1.86 $
47,147
2.21 $
45,552
2.12 $
47,338
798,022
272,776
213,159
153,109
3.36
45,619
3.22
47,482
Three Months Ended
March 31,
2017
June 30,
2017
September 30,
2017
December 31,
2017
540,317
107,520
(997)
6,049
0.14 $
44,200
0.13 $
45,419
(in thousands, except per share amounts)
611,870
$
125,916
74,085
46,475
626,115
135,529
80,777
43,992
$
$
0.94 $
46,931
0.91 $
48,195
1.01 $
46,107
0.98 $
47,452
653,664
136,660
87,519
378,481
8.27
45,754
8.03
47,149
As discussed in Note 2, the Company adopted ASU No. 2017-07 on a retrospective basis which requires the presentation of the
net periodic benefit costs, other than the current service costs, in the income statement separately and outside the subtotal of income
from operations. The effects of this adoption in fiscal year 2017 are reflected in the unaudited quarterly data table above.
17. Valuation and Qualifying Accounts
Allowance for Doubtful Accounts Rollforward
Year Ended December 31, 2018
Year Ended December 31, 2017
Year Ended December 31, 2016
Balance at
Beginning
of Period
Additions
Charged to
Costs and
Expenses
$
$
13,358
5,805
5,369
10,707
10,263
4,160
Deductions(1)
$
(10,907)
(2,710)
(3,724)
$
Balance at
End of
Period
13,158
13,358
5,805
(1) Uncollectible accounts written off, net of recoveries.
18. Subsequent Events
On January 25, 2019, Nexstar’s Board of Directors declared a quarterly dividend of $0.45 per share of its Class A common
stock. The dividend was paid on February 22, 2019 to stockholders of record on February 8, 2019.
On January 28, 2019, Nexstar completed the acquisition of KHII and paid the remaining purchase price of $6.4 million, funded
by cash on hand. See Note 3 for additional information.
F-62
Non-GAAP Financial Information
We utilize broadcast cash flow, adjusted EBITDA and free cash flow in our communications with investors. These
financial measures are not defined under U.S. GAAP.
Broadcast cash flow is calculated as net income, plus interest expense (net), loss on extinguishment of debt, income tax
expense (benefit), depreciation, amortization of intangible assets and broadcast rights (excluding barter), loss (gain) on asset
disposal, corporate expenses, other expense (income) and goodwill and intangible assets impairment, minus pension and
other postretirement plans credit (net), reimbursement from the FCC related to station repack and broadcast rights payments.
We consider broadcast cash flow to be an indicator of our assets’ operating performance. We also believe that broadcast cash
flow and multiples of broadcast cash flow are useful to investors because it is frequently used by industry analysts, investors
and lenders as a measure of valuation for broadcast companies.
Adjusted EBITDA is calculated as broadcast cash flow, plus pension and other postretirement plans credit (net), minus
corporate expenses. We consider Adjusted EBITDA to be an indicator of our assets’ operating performance and a measure of
our ability to service debt. It is also used by management to identify the cash available for strategic acquisitions and
investments, maintain capital assets and fund ongoing operations and working capital needs. We also believe that Adjusted
EBITDA is useful to investors and lenders as a measure of valuation and ability to service debt.
Free cash flow is calculated as net income, plus interest expense (net), loss on extinguishment of debt, income tax
expense (benefit), depreciation, amortization of intangible assets and broadcast rights (excluding barter), loss (gain) on asset
disposal, stock-based compensation expense, goodwill and intangible assets impairment and other expense (income), minus
payments for broadcast rights, cash interest expense, capital expenditures, proceeds from disposals of property and
equipment, and net operating cash income taxes. We consider Free Cash Flow to be an indicator of our assets’ operating
performance. In addition, this measure is useful to investors because it is frequently used by industry analysts, investors and
lenders as a measure of valuation for broadcast companies, although their definitions of Free Cash Flow may differ from our
definition.
In the following tables, we have provided reconciliations between our net income, a GAAP defined measure which is
presented in our financial statements, and our non-GAAP measures. While many of these amounts are presented in our
financial statements, these tables are unaudited. The amounts below are presented in thousands.
Net income
Add (Less):
Interest expense, net
Loss on extinguishment of debt
Income tax expense (benefit)
Depreciation
Amortization of intangible assets
Amortization of broadcast rights, excluding barter
Loss (gain) on asset disposal, net
Corporate expenses
Goodwill and intangible assets impairment
Other expenses
Pension and other postretirement plans credit, net
Reimbursement from the FCC related to station repack
Payments for broadcast rights
Broadcast cash flow
Add (Less):
Pension and other postretirement plans credit, net
Corporate expenses, excluding one-time transaction expenses
Adjusted EBITDA before one-time transaction expenses
Less:
Corporate one-time transaction expenses
Adjusted EBITDA
i
Years Ended December 31,
2018
2017
$
388,265 $
475,327
220,994
12,120
144,680
109,789
149,406
61,342
5,793
110,921
19,911
2,475
(10,755 )
(29,381 )
(61,979 )
1,123,581
10,755
(102,448 )
1,031,888
$
(8,473 )
1,023,415 $
241,195
34,882
(233,943)
100,658
159,500
62,908
(55,982)
138,394
19,985
1,284
(13,120)
—
(62,531)
868,557
13,120
(79,446)
802,231
(58,948)
743,283
Net income
Add (Less):
Interest expense, net
Loss on extinguishment of debt
Income tax (benefit) expense
Depreciation
Amortization of intangible assets
Amortization of broadcast rights, excluding barter
Loss (gain) on asset disposal, net
Stock-based compensation expense
Goodwill and intangible assets impairment
Corporate one-time transaction expenses
Other expenses
Payments for broadcast rights
Cash interest expense(1)
Capital expenditures, excluding station repack and CVR spectrum(2)
Capital expenditures related to station repack
Proceeds from disposals of property and equipment
Operating cash income taxes, net of refunds(3)
Free cash flow before one-time transaction expenses
Less:
Corporate one-time transaction expenses
Free cash flow
Years Ended December 31,
2017
2018
$
388,265 $
475,327
220,994
12,120
144,680
109,789
149,406
61,342
5,793
31,260
19,911
8,473
2,475
(61,979 )
(211,230 )
(76,521 )
(26,832 )
4,344
(89,577 )
692,713
241,195
34,882
(233,943)
100,658
159,500
62,908
(55,982)
24,068
19,985
58,948
1,284
(62,531)
(211,137)
(69,553)
(2,908)
20,026
(34,767)
527,960
$
(8,473 )
684,240 $
(58,948)
469,012
(1) Excludes payments of $19.6 million in one-time fees in January 2017 associated with the financing of the Company’s
merger with Media General.
(2) During the year ended December 31, 2018, capital expenditures related to relinquishment of the CVR spectrum were $2.9
million.
(3) Excludes (i) FY 2018 net payment of $1.1 million in taxes related to tax liabilities assumed in an acquisition and (ii) FY
2017 payments of $237.9 million related to the proceeds received to relinquish the spectrum of certain stations and tax
liabilities resulting from various sale of stations.
ii
Officers
Perry A. Sook
President and Chief Executive Officer
Thomas E. Carter
Executive Vice President and Chief Financial Officer
Timothy C. Busch
President, Nexstar Broadcasting, Inc.
Gregory Raifman
President, Nexstar Digital LLC
Brian Jones
Executive Vice President, Chief Operating Officer
Nexstar Broadcasting, Inc.
Elizabeth Ryder
Executive Vice President, General Counsel and Secretary
Blake Russell
Executive Vice President, Station Operations and
Content Development
Brett Jenkins
Executive Vice President, Chief Technology Officer
Board of Directors
Perry A. Sook
Chairman
Geoff Armstrong(1)(2)
Chief Executive Officer
310 Partners
Dennis J. FitzSimons(1)
Chairman of the Board
Robert R. McCormick Foundation
Jay M. Grossman(2)
Managing Partner and Co-Chief Executive Officer
ABRY Partners, LLC
C. Thomas McMillen(3)
President and Chief Executive Officer
LEAD1 Association
Lisbeth McNabb(1)
Chief Financial Officer and Chief Operating Officer
Linux Foundation
Dennis A. Miller(2)
Chairman of the Board
Industrial Media
John R. Muse(3)
Chairman of the Board
Lucchese, Inc. and Free Flow Wines
I. Martin Pompadur(3)
Investor
Committee Membership:
(1) Audit Committee
(2) Compensation Committee
(3) Nominating & Corporate Governance Committee
Stock Exchange Listing
NASDAQ Global Select Market
Symbol: NXST
Stock Transfer Agent and
Registrar
American Stock Transfer &
Trust Company
Legal Counsel
Kirkland & Ellis LLP
New York, NY
Independent Registered Public
Accounting Firm
PricewaterhouseCoopers LLP
Dallas, TX
Additional Information
Corporate Headquarters
Nexstar Media Group, Inc.
545 E. John Carpenter Freeway
Suite 700
Irving, TX 75062
(972) 373-8800 Phone
(972) 373-8888 Fax
www.nexstar.tv
Annual Meeting of Stockholders
The 2019 Annual Meeting will be held
on Wednesday, June 5, 2019
at 10:00 a.m., CDT,
at 545 E. John Carpenter Freeway,
Suite 120,
Irving, TX 75062