UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
for the fiscal year ended December 31 2020, 2023
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
for the transition period from to .
Commission File Number: 000-50478
NEXSTAR MEDIA GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 23-3083125 | |
(State of Organization or Incorporation) | (I.R.S. Employer Identification No.) | |
545 E. John Carpenter Freeway, Suite 700, Irving, Texas | 75062 | |
(Address of Principal Executive Offices) | (Zip Code) |
(972) (972) 373-8800
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| NXST | 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. YesYes ☒ ☒ No ☐☐
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 ☐ ☐No No ☒
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. YesYes ☒ ☒ No ☐☐
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). YesYes ☒ ☒ No ☐☐
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”,filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (check one):
Large accelerated filer |
| ☒ |
| Accelerated filer |
| ☐ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☐ No ☒
As of June 30, 2020,2023, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant was $3,644,752,141.$5,587,374,931.
As of February 23, 2021,27, 2024, the Registrant had 43,384,53433,428,504 shares of Class A Common Stock outstanding.
Documents Incorporated By Reference
Portions of the Proxy Statement for the Registrant’s 20212024 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. |
| |||
ITEM 1A. |
| |||
ITEM 1B. |
| |||
ITEM | 29 | |||
ITEM 2. |
| |||
ITEM 3. |
| |||
ITEM 4. |
| |||
PART II | ||||
ITEM 5. |
| |||
ITEM 6. |
| |||
ITEM 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| ||
ITEM 7A. |
| |||
ITEM 8. |
| |||
ITEM 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
| ||
ITEM 9A. |
| |||
ITEM 9B. |
| |||
| Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 50 | ||
| ||||
ITEM 10. |
| |||
ITEM 11. |
| |||
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. |
| |||
PART IV | ||||
ITEM 15. |
| |||
ITEM 16. |
| |||
| ||||
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., a Delaware corporation, and its consolidated wholly-owned subsidiary,wholly owned and majority owned subsidiaries, “Nexstar Media” refers to Nexstar Media Inc. (formerly Nexstar Broadcasting, Inc.);, a Delaware corporation and Nexstar’s wholly owned 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 Inc.Media 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.1, “Business.”
The information in this Annual Report on Form 10-K includes information related to Nexstar and the VIEs with whomwhich 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 in Part IV, Item 15(a) of this Annual Report on Form 10-K, 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 the Investing in2023-2024 Nielsen Local Television Market Report 2020 4th EditionUniverse Estimates, as published by BIA Financial Network, Inc.The Nielsen Company.
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: the risks and uncertainties related to the global Coronavirus Disease 2019 (“COVID-19”) pandemic, including, for example, expectations regarding the impact of COVID-19 oncurrent economic factors that are beyond our businessescontrol, such as inflation, rising interest rates and our future financial performance; our ability to obtain financial and tax benefits from the recently-passed Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”);supply chain disruptions; 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 United States 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
3
PART I
Item 1. Business
|
|
Company Overview
We are a leading diversified media company that produces and distributes engaging local and national news, sports and entertainment content across our television and digital platforms, including more than 310,000 hours of programming produced annually by our business units. Nexstar owns America’s largest local television broadcasting and digital media company focused on the acquisition, development and operationgroup comprised of televisiontop network affiliates, with over 200 owned or partner stations and interactive community websites and digital media services throughout the United States. We also own WGN America, a national general entertainment cable networkin 117 U.S. markets in 40 states and the homeDistrict of ourColumbia reaching over 220 million people. Nexstar’s national newscast “NewsNation,” digitaltelevision properties include a 75% interest in The CW Network, LLC (“The CW”), America’s fifth major broadcast network, NewsNation, America’s fastest-growing national cable news network in primetime, popular entertainment multicast network services, various digital products, servicesnetworks Antenna TV and content,REWIND TV, and a 31.3% ownership stake in Television Food Network, G.P. (“TV Food Network”), and a portfolio of real estate assets.
As of December 31, 2020, we owned, operated, programmed or provided sales and other services to 198 full power television stations, including those owned by VIEs, and one AM radio station in 116 markets in 39 states and the District of Columbia.Network. The stations are affiliates of ABC, NBC, FOX, CBS, The CW, the MyNetworkTV (“MNTV”) and other broadcast television networks. As of December 31, 2020, we reached approximately 39% of U.S. television households (applying the Federal Communications Commission’s (“FCC”) ultra-high-frequency (“UHF”) discount).
The stations we own and operate or provide services to provide free programming to our markets’ television viewing audiences. This programming includes programs produced by networks with which the stations are affiliated, programs that the stations produce, and first-run and rerun syndicated programs that the stations acquire. Our cable network delivers a growing national newscast and quality television series and movies. Our primary sources of revenue include the sale of commercial air time on our stations to local advertisers, the sale of commercial time on our stations and cable network to national advertisers, the sale of advertising on each of our stations’ websites and mobile applications where we deliver community focused content, and the revenues earned from our retransmission consent and carriage agreements with traditional multichannel video programming distributors (“MVPDs”), such as cable and satellite providers, and online video distributors (“OVDs”), companies that provide video content through internet streaming.
Our digital businesses include video and display advertising platforms that are delivered locally or nationally through our own and various third party websites and mobile applications, a recently acquired consumer product reviews platform and other digital media solutions to media publishers and advertisers. We are focused on new technologies and growing ourCompany’s portfolio of digital products, servicesassets, including its local TV station websites, The Hill and content complementaryNewsNationNow.com, is collectively a Top 10 U.S. digital news and information property, attracting almost 99 million unique users for December 2023 according to our vision of providing local news, entertainment and sports content through broadcast and digital platforms.Comscore.
We seek to grow our revenue, operating income, EBITDA and cash flow 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, services and content. 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 hold a variety of investments. TV Food Network, in which we have a 31.3% interest, operates two 24-hour television networks, Food Network and Cooking Channel, as well as their related websites. Food Network is a fully distributed network in the United States with content distributed internationally. Cooking Channel is a digital-tier network available nationally and airs popular off-Food Network programming as well as originally produced programming. We also own attractive real estate in key markets, including development rights for certain of our real estate assets.
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
Significant Transactions and Recent EventsCompetitive Strengths
Recent AcquisitionsUnique Combination of Scaled Local Audiences and Dispositions
2020 Nexstar Acquisitions
OnPowerful National Reach. We are the largest local television broadcasting company in the United States, generating $4.9 billion of revenue for the year ended December 29, 2020,31, 2023. Our and our partners’ over 200 broadcast stations in 117 local markets reach approximately 70% of U.S. television households (without applying the FCC UHF discount), which local reach is augmented by the national reach we acquired 100%have via our broadcast network, The CW, and our cable news network, NewsNation. According to Nielsen, The CW Network reaches 125 million television households, equal to the reach of the membership interests in BestReviews LLC (“BestReviews”) from Tribune Publishing Company, LLC (“TribPub”)ABC, CBS, FOX and BR Holding Company, Inc. (“BR Holdco”) for $169.9NBC broadcast networks, and NewsNation reaches approximately 69 million in cash, funded by cash on hand. BestReviews engages intelevision households, virtually equivalent to the businessreach of testing, researchingCNN, Fox News and reviewing consumer products. Our acquisition of BestReviews diversifies our digital portfolio while presenting new revenue channels by leveraging our media content,MSNBC. Together, Nexstar can provide both national reach and consumer digital usage across multiple platforms.activation of local audiences at scale, representing a differentiated and attractive value proposition for advertisers and brands in an increasingly fragmented marketplace.
On September 17, 2020, we acquired WDKY-TV, the Fox affiliate in the Lexington, KY market, from Sinclair Broadcast Group, Inc. (“Sinclair”) for $18.0 million in cash, funded by cash on hand. This acquisition allowed us entry into this market.
On March 2, 2020, we acquired the Fox affiliate television station WJZY and the MNTV affiliate television station WMYT in the Charlotte, NC market from Fox Television Stations, LLC (“Fox”) for $45.3 million in cash. The acquisition from Fox allowed us entry into this market.
On January 27, 2020, we acquired certain non-license assets associated with television station KGBT-TV in the Harlingen-Weslaco-Brownsville-McAllen, Texas market from Sinclair for $17.9 million in cash, funded by cash on hand.
2020 Mission Acquisitions
On December 30, 2020, Mission Broadcasting, Inc. (“Mission”), our consolidated VIE, acquired the CW affiliate station WPIX in the New York, NY market from The E.W. Scripps Company (“Scripps”). Mission funded the purchase price ofLeading Local Franchises. $85.1 millionWe are focused on building and maintaining leading local franchises in cash through a combination of borrowing from its revolving credit facility and cash on hand. Upon Mission’s acquisition of WPIX, it entered into a TBA with us. Mission also granted us an option to purchase WPIX from Mission, subject to FCC consent. These transactions allowed the Company’s entry into this market.
On November 23, 2020, Mission acquired WXXA, the Fox affiliate in the Albany, NY market, and WLAJ, the ABC affiliate in the Lansing, MI market from Shield Media, LLC (“Shield”) for $20.8 million in cash, funded through a combination of Mission’s borrowing from its revolving credit facility and cash on hand. Effective on November 23, 2020, Mission assumed the existing JSAs and SSAs between Shield and us for the stations. Mission also granted us options to purchase the stations from Mission, subject to FCC consent. Mission’s purchase of these stations allowed its entry into these markets. Prior to Mission’s acquisition, we were the primary beneficiary of these stations and consolidated their accounts into our financial statements. Under Mission’s ownership, we remained the primary beneficiary and continued to consolidate these stations into our financial statements.
On November 16, 2020, Mission acquired KASY, KWBQ and KRWB from Tamer Media, LLC (“Tamer”) for $1.8 million in cash, funded through a combination of Mission’s borrowing from its revolving credit facility and cash on hand. KASY (an MNTV affiliate), KWBQ (a CW affiliate) and KRWB (a CW affiliate)117 local markets which are full power television stations serving the Albuquerque, New Mexico market. Effective on November 16, 2020, Mission assumed the existing SSA between Tamer and us for the stations. Mission also granted us an option to purchase the stations from Mission, subject to FCC consent. Mission’s purchase of these stations allowed its entry into this market. Prior to Mission’s acquisition, we were the primary beneficiary of these stations and consolidated their accounts into our financial statements. Under Mission’s ownership, we remained the primary beneficiary and continued to consolidate these stations into our financial statements.
On September 1, 2020, Mission acquired television stations KMSS serving the Shreveport, Louisiana market, KPEJ serving the Odessa, Texas market and KLJB serving the Quad Cities, Iowa/Illinois market from Marshall Broadcasting Group, Inc. (“Marshall”). The purchase price for the acquisition was $53.2 million, of which $49.0 million was applied against Mission’s existing loans receivable from Marshall on a dollar-for-dollar basis and the remaining $4.2 million in cash was funded by cash on hand. At closing, Mission entered into new SSAs with us for the stations. These transactions allowed Mission’s entry into these markets.
6
2020 Nexstar Dispositions
On March 2, 2020, we completed the sale of Fox affiliate television station KCPQ and the MNTV affiliate television station KZJO in the Seattle, WA market, as well as Fox affiliate television station WITI in the Milwaukee, WI market, to Fox for approximately $349.9 million in cash, resulting in a net gain of $4.7 million. Our proceeds from the sale of the stations were partially used to prepay a portion of our term loans.
On January 14, 2020, we sold our sports betting information website business to Star Enterprises Ltd., a subsidiary of Alto Holdings, Ltd., for a net consideration of $12.9 million (net of $2.4 million cash balance of this business that was transferred to the buyer upon sale) resulting in a net gain of $2.4 million.
See Notes 3 and 9core to our Consolidated Financial Statements in Part IV, Item 15(a)business model. In total, we employ approximately 6,000 journalists and 1,600 salespeople, produce over 310,000 hours of this Annual Report on Form 10-K for additional information on the above transactions.
Operating Strategy
We seek to generate revenue, operating income, EBITDAprogramming, and cash flow growth through the following strategies:
Develop Leading Local Franchises. have developed relationships with over 40,000 advertisers. 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, extensive local sports coverage, and community presence. Based on internally generated analysis, we believe thatWe rank among the top two stations in local news viewership in over 74%79% of our markets in which we produce local newscasts, we rank among the top two stations in localaccording to Comscore for November 2023 late 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, 2020, we earned approximately 43% of our advertising revenue from spots aired during local news programming. Currently,ratings. In 2023, journalists at our stations won 545 awards for their reporting, including 42 Edward R. Murrow awards and the stations we provide services to typically provide between 15 to 40 hours per week of local news programming, but as high as 80 hours per week in stations with enhanced time periods for local news. 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. 117 Emmy awards. We are focused on new technologies and growing our portfolio of digital products, services and content. Our station websites provide access to our local news and information, as well as community centric businesses and services. We delivered digital content to audiences across all of our station web sites in 2020, with approximately 91 million unique monthly users who utilized nearly 7.8 billion page views. Also in 2020, our mobile websites and mobile application accounted for 43% and 38%, respectively, of our station websites’ overall page views by year end. We are committed to serving our local markets by providing local content to both online and mobile users wherever and whenever they want. We have also invested in various digital product lines, including video and display advertising platforms that are delivered locally or nationally through our own and various third party websites and mobile applications, a recently acquired consumer product reviews platform and other digital media solutions to media publishers and advertisers.
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 becauseIn even-numbered years, when most elections are held, we historically have generated substantial revenue from locally driven political advertising. Given 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, 2020, revenue generated by our stations from core local advertising represented approximately 69% of our stations’ consolidated core advertising net revenue (total of core localdiverse and national advertising net revenue, excluding political advertising revenue). In most of our markets,expansive geographic reach, 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.
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 11.9%, 21%, 22.8% and 25.3%, respectively,in more than 80% of our 2020 combined core (local and national) andmarkets where there were contested political advertising net revenue. The networkselections in 2022. In addition, we own or 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.
Operate Duopoly Markets. Owning or providing services to more than one station in a given market enablescertain markets to enable 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 53% of our stations’ net revenue forFor the year ended December 31, 20202023, excluding our owned network assets, the Company earned approximately 71% of its core and political advertising revenue from our duopoly markets.non-network programming.
7Strong National Brands.We have a portfolio of scaled, strong national brands that enables us to engage with national advertisers in more meaningful ways than we have in the past. Our primary national brands include The CW, NewsNation and The Hill. The CW is America’s fifth national broadcast network. NewsNation is America’s fastest growing cable news network in primetime attracting top on-air talent to its ranks given its mission of delivering fact-based, unbiased journalism. The Hill is the nation’s leading, independent political digital media platform.
OperateDiversified Revenue Streams.Our revenue streams are diversified by geography, affiliation and Expand NewsNationsource. In 2023, we generated 55% of our revenue from distribution, 34% from core advertising (of which approximately 68% was from local sources), 1% from political advertising and 10% from digital advertising and other sources. No single customer generated more than 15% of our revenue; no single market generated more than 3% of our revenue; and our affiliations are diverse with no network representing more than 25% of our 2023 combined core and political advertising net revenue.
4
Intense Operational Focus. In September 2020, WGN America successfully launched NewsNation, a live daily three-hour national newscast during prime time. By aggregating our current news resources of 5,500 journalists in 110 newsrooms to produce a national newscast, we can leverage WGN America’s strong reach across the United States. Beginning on March 1, 2021, we will rebrand WGN America as NewsNation, rename our national prime time newscast to “NewsNationPrime” to air every night from 8 p.m. to 10 p.m. Eastern Time and launch “Banfield,” an hour-long news and talk show, to air weeknights at 10 p.m. Eastern Time. We are also expanding NewsNation’s programming to five hours on weeknights with the launch of two new hour-long shows: “NewsNation Early Edition” at 6 p.m. Eastern Time and “The Donlon Report” at 7 p.m. Eastern Time. WGN America is currently available in approximately 74 million households as estimated by The Nielsen Company (US), LLC.
Maintain Strict Cost Controls. We emphasize strict controls on operating and programming costs in order to increase net income, EBITDA and free cash flow. We continually seek to identify and implement cost savings at each of our stations, the stations we provide services to and other business units, and our overall size benefits each station or business unit 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, the stations we provide services to and other business units.
Monetization of Real Estate Assets. We intend to maximize Our operational execution expertise is the monetizationdirect result of our real estate assets by continuously assessing market conditions and executing on what we believe are the best strategies for each of the properties such as opportunistic divestitures, including select properties as part of an accelerated monetization program and improving entitlements of properties to increase value prior to monetization.
Attract and Retain High Quality Management. talented management team. We seek to attract and retain corporate, business unit and 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. Mostincentives.
Attractive Financial Profile.In 2023 and 2022, we generated total net revenue of our station general managers have been granted restricted stock units$4.9 billion and stock options$5.2 billion, respectively, generated net cash flow from operating activities of nearly $1 billion and have extensive experience$1.4 billion, respectively, and returned a significant percentage of that cash flow to shareholders in the television broadcasting industry.
Acquisition Strategy
We selectively pursue acquisitionsform of television stations where weshare repurchases and dividends—$796 million in 2023 and $1.0 billion in 2022—while maintaining a corporate credit rating of Ba3 / BB+ as rated by Moody’s / S&P. We believe we can improvehave the financial flexibility to invest in both organic and inorganic growth initiatives while continuing to return capital to our shareholders.
Growth Strategies
We continually seek to generate revenue, operatingnet income, EBITDA and cash flow growth through active management. When consideringthe following strategies:
Leverage Our Scale. As the largest local television broadcaster with significant, scaled national media properties, we believe we are an acquisition,important partner for the major broadcast networks, multichannel video programming distributors (“MVPDs”) and online video distributors (“OVDs”), and advertisers. We believe we evaluateare one of the targetlargest affiliate groups for each of our major broadcast network partners and we are an important partner for the MVPDs and OVDs which include our content in their consumer offerings. For national advertisers we have a collection of national networks/properties including The CW, NewsNation, Antenna TV and The Hill as well as television stations covering 70% of the country (without applying the FCC UHF discount) including 8 of the top 10 and 18 of the top 25 DMAs. Our digital assets attract an audience share, revenue share, overall cost structurethat makes us a top ten digital news and proximityinformation property, according to Comscore. Our scale provides us with unique operating advantages in the form of services we can provide to our regional clusters. Additionally,advertisers, audience and employees, a platform for growth and operating expense synergies and access to capital. As part of this strategy, in 2023, we seekcentralized our national advertising sales in house in order to acquire or enter into local service agreementsdrive advertising sales across our diversified media portfolio by further emphasizing our client-first approach, combined with stationsa new data-driven, multi-platform focus.
Continue to create duopoly markets.Grow Distribution and Advertising Revenues. We selectively pursue acquisitionsbelieve our core business of distribution and advertising revenue has the potential to continue to grow. We believe that the share of audience that our content generates for MVPDs and OVDs is greater than the share of fees those platforms pay us and that broadcast advertising continues to provide commercial and political advertisers with access to the broadest television audience available. In addition, we are focused on better monetizing our digital properties, including new technologiescontent and audience and growing our portfolio of digital products, services and content and associated revenue streams, including apps for NewsNation, The Hill and other local television station content.
Improve and Expand National Broadcast and Cable Networks.We seek to continue to increase the viewership, revenues and profitability of our national television network assets, The CW and NewsNation.
The CW. As the largest affiliate of The CW, we acquired the network in September 2022 (for no consideration) in order to sustain and grow our CW-related revenue streams and to improve this underexploited national broadcast network asset. Our growth strategy for The CW is to cost efficiently improve and diversify the programming to better align with broadcast audiences with the intention of improving ratings and revenue (both distribution and advertising) and reducing programming and other operating costs. Recognizing the importance of live sports and other sports programming to broadcast audiences, in 2023, we launched CW Sports, a sports programming division of The CW. Since then, we have added sports programming to the network’s primetime line-up including Inside the NFL,100 Days to Indy, and our exclusive broadcast rights to WWE NXT beginning in 2024. CW Sports also expanded the number of hours of network programming on the weekend in 2023 to offer LIV Golf, ACC college footballandbasketballgames, and the future launch of NASCAR Xfinity Series on Saturdays beginning in 2025. We also introduced new, less costly, primetime programming beginning on a limited basis in the summer of 2023 and more substantially with the 2023/2024 broadcast season which began in October 2023. We believe there is potential for The CW to improve its profitability and, together with Nexstar’s CW station affiliates, the overall net profit contribution to Nexstar. In 2023, The CW renewed and expanded its affiliation agreements with key station operators and launched CW Network affiliations on four Nexstar-owned and operated television stations, three of which are in the top-15 television markets.
5
NewsNation. NewsNation is America’s fastest growing cable news network in primetime and has been recognized by independent watchdog groups such as Ad Fontes Media, NewsGuard and AllSides for its independent, unbiased reporting of national and local news. Currently, NewsNation provides 24 hours of news content each weekday which we expect to expand to seven days a week in 2024. NewsNation was launched in 2020, when we initiated the conversion of WGN America to NewsNation, leveraging our core competency in news and profitable foundation to build a network focused on providing unbiased, fact-based news. We believe there is significant growth potential for NewsNation as news networks are among the most watched and profitable cable networks.
Develop New Revenue Streams. We seek to generate new revenue streams leveraging the platform and assets of our company. Given our extensive station portfolio and geographic coverage, we are in the process of converting the technology used by our stations to a new standard, ATSC 3.0, which will enable us to provide new high speed data transmission services to businesses and consumers. In February 2024, we achieved our goal of reaching 50% of U.S. television households with ATSC 3.0. We anticipate that this conversion will enable us to develop a new business and generate additional revenue in the future.
Acquire and Invest in New and Complementary Businesses. We selectively pursue acquisitions where we believe we can improve revenue, operating income, net income, EBITDA and cash flow through active management. We selectively pursue acquisitions of businesses that leverage our platform, scale and capabilities and are complementary to our vision of providing local news, entertainment, and sports content through broadcast and digital platforms. In addition, we will continue to pursue television station acquisitions in markets where permitted by the current regulatory framework.
Relationship with VIEsStations
Through various local service agreements, asAs of December 31, 2020,January 2024, we owned, operated, programmed or provided sales programming and other services to 36201 full power television stations in 117 markets in 40 states and the District of Columbia, reaching approximately 39% of all U.S. television households (reflecting our owned by consolidated VIEsstations only and after applying the Federal Communications Commission’s (“FCC”) ultra-high-frequency (“UHF”) discount) and approximately 70% of all U.S. television households reflecting ours and our partners’ stations and excluding the FCC UHF discount. The stations are affiliates of CBS, FOX, NBC, ABC, The CW, MyNetworkTV (“MNTV”) and other broadcast television networks and provide television programming to consumers in our markets, including network programing, content that the stations produce, including local news, and syndicated programs that the stations acquire. In 2023, we acquired KUSI-TV, a full-power independent station in San Diego, CA, WSNN-LD, a low power independent station in Tampa, FL, which is now affiliated with MNTV; and in 2024 we entered into a time brokerage agreement with KAZT, a full power independent station in Phoenix, AZ, which is now affiliated with The CW. These stations are included in the table below and the full-power stations and included in our station count. We also own and operate one AM radio station in Chicago, IL.
Of the 201 full power television stationstations, 37 are 100% independently owned by an unconsolidated VIE. AsVIEs. We consolidate 35 of December 31, 2020, all of thethese VIEs and their stations are 100% owned by independent third parties.(the “consolidated VIEs”) in our financial statements. In compliance with FCC regulations for all the parties, theall VIEs maintain complete responsibility for and control over programming, finances, personnel and operations of their stations. However, forFor the consolidated VIEs, we are deemed under U.S. GAAP to have controlling financial interests in these entities because of (1) theNexstar’s (i) local service agreements Nexstar has with the consolidated VIEs’ stations, (2) Nexstar’s(ii) guarantee (excluding The CW) of the obligations incurred under Mission’s the senior secured credit facility (3) Nexstar havingof Mission Broadcasting, Inc. (“Mission”), a consolidated VIE, (iii) 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)(iv) renewable, exercisable and assignable purchase options granted by each consolidated VIE which permit Nexstar to acquire the assets and assume the liabilities of all but three 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.
For additional information on VIEs, see Note 2 to our Consolidated Financial Statements in Part IV, Item 15(a) of this Annual Report on Form 10-K.
8
The Stations
The following charttable sets forth general information about the television stations (full power, low power and multicast channels) we own, operate, program or provide sales and other services to as of DecemberJanuary 2024.
6
Market Rank(1) | Market | Status(2) | Full Power | Primary | Low Power Stations / | Other Affiliation(3)(4) | FCC License |
1 | New York, NY | LSA | WPIX(5) | The CW | WPIX-D2, D4 | Antenna TV, Rewind TV | (23) |
2 | Los Angeles, CA | O&O | KTLA | The CW | KTLA-D2, D3, D4, D5 | Antenna TV, GRIT, TBD, Rewind TV | (23) |
3 | Chicago, IL | O&O | WGN | Independent | WGN-D2, D3, D4, D5 | Antenna TV, GRIT, Rewind TV, TBD | 4/1/2030 |
4 | Philadelphia, PA | O&O | WPHL(6) | The CW | WPHL-D2, D3, D4 | Antenna TV/MNTV, GRIT, Comet | (23) |
5 | Dallas, TX | O&O | KDAF | The CW | KDAF-D2, D3, D4, D5 | Antenna TV, GRIT, Charge!, Rewind TV | 8/1/2030 |
6 | Houston, TX | O&O | KIAH | The CW | KIAH-D2, D3, D4, D5 | Antenna TV, Comet, TBD, Court TV | (23) |
9 | DC/Hagerstown, MD | O&O | WDCW | The CW | WDCW-D2, D3, D4 | Antenna TV, WDVM, Univision | 10/1/2028 |
10 | San Francisco, CA | O&O | KRON(6) | The CW/ MNTV | KRON-D2, D3, D4, D5 | Antenna TV, Rewind TV, Charge!, ShopLC | (23) |
11 | Phoenix, AZ | LSA | KAZT(8) | The CW | KAZT-D2, D3, D4, D5 | MeTV, HSN, Charge!, AZTV | 10/1/2030 |
12 | Tampa, FL | O&O | WFLA | NBC | WFLA-D2, D3 | Charge!, Antenna TV | 2/1/2029 |
17 | Denver, CO | O&O | KDVR | FOX | KDVR-D2, D3 | Antenna TV, TBD | (23) |
19 | Cleveland, OH | O&O | WJW | FOX | WJW-D2, D3, D4 | Antenna TV, Comet, Charge! | 10/1/2029 |
20 | Sacramento, CA | O&O | KTXL | FOX | KTXL-D2, D3, D4 | Antenna TV, GRIT, TBD | (23) |
21 | Charlotte, NC | O&O | WJZY | FOX | WJZY-D3, D4, D5, D6, | Charge!, GRIT, TheGrio, ION, | 12/1/2028 |
22 | Raleigh, NC | O&O | WNCN | CBS | WNCN-D2, D3, D4 | Rewind TV, GRIT, Antenna TV | 12/1/2028 |
23 | Portland, OR | O&O | KOIN | CBS | KOIN-D2, D3 | getTV, Rewind TV | (23) |
24 | St. Louis, MO | O&O | KTVI | FOX | KTVI-D2, D3, D4 | Antenna TV, GRIT, Dabl | (23) |
25 | Indianapolis, IN | O&O | WTTV | CBS | WTTV-D2, D3, D4 | Independent, Comet, TBD | 8/1/2029 |
26 | Nashville, TN | O&O | WKRN | ABC | WKRN-D2, D3, D4 | ION Mystery, True Crime, Rewind TV | 8/1/2029 |
27 | Salt Lake City, UT | O&O | KTVX | ABC | KTVX-D2, D3, D4 | MeTV, Rewind TV, TheGrio | (23) |
30 | San Diego, CA | O&O | KSWB | FOX | KSWB-D2, D3, D4 | Antenna TV, Court TV, ION | (23) |
32 | New Haven, CT | O&O | WTNH | ABC | WTNH-D2 | Rewind TV | (23) |
33 | Columbus, OH | O&O | WCMH | NBC | WCMH-D2, D3, D4 | GRIT, ION, Laff | 10/1/2029 |
34 | Kansas City, MO | O&O | WDAF | FOX | WDAF-D2, D3, D4 | Antenna TV, Rewind TV, TBD | (23) |
35 | Austin, TX | O&O | KXAN | NBC | KXAN-D2, D3, D4 | Cozi TV, ION, Rewind TV, Defy | (23) |
36 | Spartanburg, SC | O&O | WSPA | CBS | WSPA-D3 | ION | 12/1/2028 |
40 | Las Vegas, NV | O&O | KLAS | CBS | KLAS-D2, D3, D4 | Rewind TV, getTV, ShopLC | (23) |
42 | Grand Rapids, MI | O&O | WOOD | NBC | WOOD-D2, D3 | Rewind TV, TheGrio | 10/1/2029 |
43 | Portsmouth, VA | O&O | WAVY | NBC | WAVY-D2, D3, D4 | Nest, getTV, ShopLC | 10/1/2028 |
44 | Harrisburg, PA | O&O | WHTM | ABC | WHTM-D2, D3, D4, D5 | ION, GRIT, Laff, WLYH | (23) |
45 | Greensboro, NC | O&O | WGHP | FOX | WGHP-D2, D3, D4 | Antenna TV, GRIT, Dabl | 12/1/2028 |
46 | Birmingham, AL | O&O | WIAT | CBS | WIAT-D2, D3, D4 | ION Mystery, GRIT, Defy | 4/1/2029 |
47 | Oklahoma City, OK | O&O | KFOR | NBC | KFOR-D2, D3, D4 | Antenna TV, True Crime, Dabl | (23) |
49 | Albuquerque, NM | O&O | KRQE | CBS | KRQE-D2, D3 | FOX, Bounce | (23) |
50 | Memphis, TN | O&O | WREG | CBS | WREG-D2, D3 | News3, Antenna TV | 8/1/2029 |
7
Market Rank(1) | Market | Status(2) | Full Power | Primary | Low Power Stations / | Other Affiliation(3)(4) | FCC License |
51 | New Orleans, LA | O&O | WGNO | ABC | WGNO-D2, D3, D4 | Antenna TV, Rewind TV, TBD | (23) |
52 | Fresno, CA | O&O | KSEE | NBC | KSEE-D2, D3, D4 | Bounce, GRIT, Rewind TV | (23) |
53 | Providence, RI | O&O | WPRI | CBS | WPRI-D2, D3, D4 | MNTV, True Crime, Dabl | (23) |
54 | Buffalo, NY | O&O | WIVB(9) | CBS | WIVB-D2 | QVC | (23) |
56 | Richmond, VA | O&O | WRIC | ABC | WRIC-D2, D3, D4 | Rewind TV, Cozi TV, Laff | 10/1/2028 |
57 | Mobile, AL | O&O | WKRG | CBS | WKRG-D2, D3, D4 | ION, MeTV, Court TV | 4/1/2029 |
58 | Wilkes Barre, PA | O&O | WBRE | NBC | WBRE-D2, D3, D4 | Laff, Rewind TV, True Crime | (23) |
59 | Little Rock, AR | O&O | KARK | NBC | KARK-D2, D3, D4 | Laff, GRIT, Antenna TV | 6/1/2029 |
60 | Albany, NY | O&O | WTEN | ABC | WTEN-D2, D3, D4 | Cozi TV, Antenna TV, ION Mystery | (23) |
61 | Knoxville, TN | O&O | WATE | ABC | WATE-D2, D3, D4 | Antenna TV, Rewind TV, Cozi TV | 8/1/2029 |
63 | Lexington, KY | O&O | WDKY | FOX | WDKY-D2, D3, D4 | Rewind TV, Charge!, Comet | 8/1/2029 |
66 | Dayton, OH | O&O | WDTN | NBC | WDTN-D2, D3 | ION Mystery, ION | 10/1/2029 |
67 | Des Moines, IA | O&O | WHO | NBC | WHO-D2, D3, D4 | Rewind TV, Antenna TV, Iowa’s Weather Channel | 2/1/2030 |
68 | Honolulu, HI | O&O | KHON | FOX | KHON-D2, D3, D4 | The CW, GRIT, Rewind TV | (23) |
69 | Green Bay, WI | O&O | WFRV | CBS | WFRV-D2, D3, D4 | Bounce, True Crime, Rewind TV | 12/1/2029 |
70 | Roanoke, VA | O&O | WFXR | FOX | WFXR-D2, D3, D4 | The CW, Bounce, Quest | 10/1/2028 |
72 | Wichita, KS | O&O | KSNW | NBC | KSNW-D2, D3, D4 | Telemundo, ION, True Crime | 6/1/2030 |
73 | Springfield, MO | O&O | KRBK | FOX | KRBK-D2, D3, D4 | Antenna TV, Dabl, ION | (23) |
76 | Rochester, NY | O&O | WROC | CBS | WROC-D2, D3, D4 | Bounce, GRIT, ION Mystery | (23) |
79 | Charleston, WV | O&O | WOWK | CBS | WOWK-D2, D3, D4 | ION Mystery, GRIT, Rewind TV | 10/1/2028 |
81 | Huntsville, AL | O&O | WHNT | CBS | WHNT-D2, D3 | The CW, Antenna TV | 4/1/2029 |
82 | Brownsville, TX | O&O | KVEO | NBC | KVEO-D2 | CBS | 8/1/2030 |
83 | Waco-Bryan, TX | O&O | KWKT | FOX | KWKT-D2, D3, D4 | MNTV, Antenna TV, Bounce | (23) |
85 | Savannah, GA | O&O | WSAV | NBC | WSAV-D2, D3, D4 | The CW, Court TV/MNTV, Laff | (23) |
86 | Colorado Springs, CO | O&O | KXRM | FOX | KXRM-D2, D3, D4 | The CW, ION, ION Mystery | (23) |
87 | Syracuse, NY | O&O | WSYR | ABC | WSYR-D2, D3, D4 | Antenna TV, Bounce, Laff | (23) |
88 | Charleston, SC | O&O | WCBD | NBC | WCBD-D2, D3, D4 | The CW, ION, Laff | 12/1/2028 |
89 | El Paso, TX | O&O | KTSM | NBC | KTSM-D2, D3, D4 | Estrella, ION Mystery, Laff | (23) |
91 | Champaign, IL | O&O | WCIA | CBS | WCIA-D2, D3, D4 | MNTV, Bounce, GRIT | (23) |
92 | Shreveport, LA | O&O | KTAL | NBC | KTAL-D2, D3, D4 | Laff, Cozi TV, HSN | (23) |
8
Market Rank(1) | Market | Status(2) | Full Power | Primary | Low Power Stations / | Other Affiliation(3)(4) | FCC License |
93 | Burlington, VT | O&O | WFFF | FOX | WFFF-D2, D3,D4 | ION Mystery, Bounce, Antenna TV | (23) |
95 | Baton Rouge, LA | O&O | WGMB | FOX | WGMB-D2, D3 | The CW, Cozi TV | 6/1/2029 |
96 | Fayetteville, AR | O&O | KFTA | FOX | KFTA-D2, D3, D4, D5 | NBC, ION Mystery, Court TV, MNTV | (23) |
98 | Jackson, MS | O&O | WJTV | CBS | WJTV-D2, D3, D4 | The CW, ION, Court TV | 6/1/2029 |
99 | Myrtle Beach-Florence, SC | O&O | WBTW | CBS | WBTW-D2, D3, D4 | MNTV/Antenna TV, ION, ION Mystery | 12/1/2028 |
101 | Tri-Cities, TN-VA | O&O | WJHL | CBS | WJHL-D2, D3 | ABC, Antenna TV | 8/1/2029 |
102 | Greenville, NC | O&O | WNCT | CBS | WNCT-D2, D3, D4 | The CW, Rewind TV, ION Mystery | 12/1/2028 |
104 | Quad Cities, IL | O&O | WHBF | CBS | WHBF-D2, D3, D4 | Court TV, GRIT, ION Mystery | 12/1/2029 |
107 | Evansville, IN | O&O | WEHT | ABC | WEHT-D2, D3, D4 | Laff, Cozi TV, Rewind TV | 8/1/2029 |
108 | Ft. Wayne, IN | O&O | WANE | CBS | WANE-D2, D3, D4 | ION, Laff, ION Mystery | 8/1/2029 |
109 | Tyler-Longview, TX | O&O | KETK | NBC | KETK-D2, D3, D4 | GRIT, ION, Antenna TV | (23) |
110 | Augusta, GA | O&O | WJBF | ABC | WJBF-D2, D3, D4 | MeTV, ION, ION Mystery | 4/1/2029 |
111 | Sioux Falls, SD | O&O | KELO | CBS | KELO-D2, D3, D4 | MNTV, ION, The CW | 4/1/2030 |
112 | Altoona, PA | O&O | WTAJ | CBS | WTAJ-D2, D3, D4 | ION Mystery, Laff, GRIT | (23) |
113 | Lansing, MI | O&O | WLNS(9) | CBS | WLAJ-D2 | The CW | 10/1/2029 |
115 | Springfield, MA | O&O | WWLP | NBC | WWLP-D2, D3, D4 | The CW, ION, ION Mystery | (23) |
117 | Youngstown, OH | O&O | WKBN(9) | CBS | WKBN-D2 | FOX | 10/1/2029 |
123 | Peoria, IL | O&O | WMBD | CBS | WMBD-D2, D3, D4 | Bounce, Laff, ION Mystery | 12/1/2029 |
124 | Bakersfield, CA | O&O | KGET | NBC | KGET-D2, D3, D4 | The CW, Telemundo, Laff | (23) |
125 | Lafayette, LA | O&O | KLFY | CBS | KLFY-D2, D3, D4 | Dabl, ION, Laff | 6/1/2029 |
126 | Columbus, GA | O&O | WRBL | CBS | WRBL-D2, D3, D4 | Rewind TV, ION, Laff | 4/1/2029 |
129 | La Crosse, WI | O&O | WLAX | FOX | WLAX-D2, D3, D4 | Antenna TV, Laff, GRIT | 12/1/2029 |
131 | Amarillo, TX | O&O | KAMR | NBC | KAMR-D2, D3, D4 | MNTV, Laff, Antenna TV | (23) |
137 | Rockford, IL | O&O | WQRF | FOX | WQRF-D2, D3, D4 | Bounce, ION Mystery, Rewind TV | 12/1/2029 |
140 | Topeka, KS | O&O | KSNT | NBC | KSNT-D2, D3, D4 | FOX, ION, Bounce | 6/1/2030 |
141 | Lubbock, TX | O&O | KLBK | CBS | KLBK-D2, D3, D4 | Court TV, Antenna TV, Rewind TV | 8/1/2030 |
142 | Monroe, LA | O&O | KARD | FOX | KARD-D2, D3, D4 | Bounce, GRIT, Antenna TV | 6/1/2029 |
145 | Minot-Bismarck, ND | O&O | KXMB(21) | CBS | KXMB-D2, D3, D4 | The CW, Laff, ION Mystery | 4/1/2030 |
147 | Midland, TX | O&O | KMID | ABC | KMID-D2, D3, D4 | Laff, ION Mystery, GRIT | 8/1/2030 |
148 | Panama City, FL | O&O | WMBB | ABC | WMBB-D2, D3, D4 | The CW, Laff, ION Mystery | 2/1/2029 |
149 | Wichita Falls, TX | O&O | KFDX | NBC | KFDX-D2, D3, D4 | MNTV, Laff, Antenna TV | (23) |
150 | Sioux City, IA | O&O | KCAU | ABC | KCAU-D2, D3, D4 | ION Mystery, Laff, Bounce | 2/1/2030 |
151 | Joplin, MO | O&O | KSNF | NBC | KSNF-D2, D3, D4 | Laff, ION Mystery, Antenna TV | 2/1/2030 |
9
Market Rank(1) | Market | Status(2) | Full Power | Primary | Low Power Stations / | Other Affiliation(3)(4) | FCC License |
153 | Erie, PA | O&O | WJET | ABC | WJET-D2, D3, D4 | Laff, ION Mystery, Cozi TV | (23) |
159 | Terre Haute, IN | O&O | WTWO | NBC | WTWO-D2, D3, D4 | Laff, ION Mystery, Antenna TV | 8/1/2029 |
162 | Binghamton, NY | O&O | WIVT | ABC | WIVT-D2, D3, D4 | NBC, Laff, ION Mystery | (23) |
163 | Wheeling, WV | O&O | WTRF | CBS | WTRF-D2, D3, D4 | MNTV, ABC, ION Mystery | 10/1/2028 |
165 | Billings, MT | O&O | KSVI | ABC | KSVI-D2(6), D3, D4 | The CW, ION Mystery, Antenna TV | 4/1/2030 |
166 | Beckley, WV | O&O | WVNS | CBS | WVNS-D2 | FOX | 10/1/2028 |
167 | Abilene, TX | O&O | KTAB | CBS | KTAB-D2, D3, D4 | Telemundo, ION Mystery, ION | (23) |
168 | Hattiesburg, MS | O&O | WHLT | CBS | WHLT-D2, D3, D4 | The CW, ION, ION Mystery | 6/1/2029 |
169 | Rapid City, SD | O&O | KCLO | CBS | KCLO-D2, D3, D4 | The CW, ION, ION Mystery | (23) |
170 | Dothan, AL | O&O | WDHN | ABC | WDHN-D2, D3, D4 | ION Mystery, Laff, Antenna TV | 4/1/2029 |
171 | Utica, NY | O&O | WFXV | FOX | WFXV-D2, D3 | ION Mystery, Laff | (23) |
172 | Clarksburg, WV | O&O | WBOY | NBC | WBOY-D2, D3, D4 | ABC, ION Mystery, Laff | 10/1/2028 |
175 | Jackson, TN | O&O | WJKT | FOX | WJKT-D2, D3, D4 | ION Mystery, Laff, GRIT | 8/1/2029 |
178 | Elmira, NY | O&O | WETM | NBC | WETM-D2, D3, D4 | Antenna TV, Laff, ION Mystery | (23) |
179 | Watertown, NY | O&O | WWTI | ABC | WWTI-D2, D3, D4 | The CW, Laff, ION Mystery | (23) |
181 | Marquette, MI | O&O | WJMN | MNTV | WJMN-D2, D3, D4 | ION Mystery, Laff, Bounce | 10/1/2029 |
182 | Alexandria, LA | O&O | WNTZ | FOX | WNTZ-D2, D3, D4 | Bounce, ION Mystery, Laff | 6/1/2029 |
187 | Grand Junction, CO | O&O | KREX | CBS | KREX-D2, D3, D4 | Laff, MNTV, Bounce | 4/1/2030 |
197 | San Angelo, TX | O&O | KLST | CBS | KLST-D2, D3, D4 | ION Mystery, GRIT, Antenna TV | (23) |
Market Rank(1) | Market | Status(2) | Full Power Stations | Primary Affiliation | Low Power Stations / Multicast Channels | Other Affiliation | FCC License Expiration Date |
1 | New York, NY | LSA | WPIX(5) | The CW | WPIX-D2, D3, D4 | Antenna TV, Court TV, TBD | 6/1/2023 |
2 | Los Angeles, CA | O&O | KTLA | The CW | KTLA-D2, D3, D4 | AntennaTV, CourtTV, TBD | 12/1/2022 |
3 | Chicago, IL | O&O | WGN | Independent | WGN-D2, D3, D4 | AntennaTV, CourtTV, TBD | 12/1/2021 |
4 | Philadelphia, PA | O&O | WPHL | MNTV | WPHL-D2, D3, D4 | AntennaTV, CourtTV, Comet | 8/1/2023 |
5 | Dallas, TX | O&O | KDAF | The CW | KDAF-D2, D3, D4 | AntennaTV, CourtTV, Charge! | 8/1/2022 |
6 | San Francisco, CA | O&O | KRON | MNTV | KRON-D2, D3, D4, D5 | Sky Link TV, GetTV, CourtTV, AntennaTV | 12/1/2022 |
8 | Houston, TX | O&O | KIAH | The CW | KIAH-D2, D3, D4, D5 | AntennaTV, Comet, TBD, CourtTV | 8/1/2022 |
9 | DC/Hagerstown, MD | O&O O&O | WDVM(3) WDCW | Independent The CW | WDVM-D2, D3, D4 WDCW-D2, D3 | Grit, CourtTV Mystery, Laff AntennaTV, WDVM | (4) (4) |
13 | Tampa, FL | O&O O&O | WFLA WTTA(18) | NBC MNTV | WFLA-D2, D3 WTTA-D2 | CourtTV Mystery CoziTV | 2/1/2028 2/1/2021 |
16 | Denver, CO | O&O O&O O&O | KDVR KWGN KFCT | FOX The CW FOX | KDVR-D2, D3 KWGN-D2, D3, D4 | AntennaTV, TBD CourtTV, Comet, Charge! | 4/1/2022 4/1/2022 4/1/2022 |
19 | Cleveland, OH | O&O | WJW | FOX | WJW-D2, D3, D4 | AntennaTV, Comet, Charge! | 10/1/2021 |
20 | Sacramento, CA | O&O | KTXL | FOX | KTXL-D2, D3, D4 | AntennaTV, CourtTV, TBD | 12/1/2022 |
21 | Portland, OR | O&O O&O | KOIN KRCW | CBS The CW | KOIN-D2, D3 KRCW-D2, D3, D4 | getTV, Bounce AntennaTV, CourtTV, TBD | 2/1/2023 2/1/2023 |
22 | Charlotte, NC | O&O O&O | WJZY WMYT | FOX MNTV | WJZY-D3, D4, D5, D6, D7, D8 WMYT | Son Life, Movies, H&I, ION, Light TV, ShopLC | (4) (4) |
23 | St. Louis, MO | O&O O&O | KPLR KTVI | The CW FOX | KPLR-D2, D3, D4 KTVI-D2, D3, D4 | CourtTV, Comet, Grit AntennaTV, CourtTV Mystery, Dabl | 2/1/2022 2/1/2022 |
24 | Raleigh, NC | O&O | WNCN | CBS | WNCN-D2, D3, D4 | CourtTV, Grit, CourtTV Mystery | (4) |
25 | Indianapolis, IN | O&O O&O O&O | WTTV WTTK WXIN | CBS CBS FOX | WTTV-D2, D3 WTTK-D2, D3 WXIN-D2, D3, D4 | Independent, Comet Independent, Cozi AntennaTV, CourtTV, Charge! | 8/1/2021 8/1/2021 8/1/2021 |
27 | San Diego, CA | O&O | KSWB | FOX | KSWB-D2, D3, D4 | AntennaTV, CourtTV, ION | 12/1/2022 |
29 | Nashville, TN | O&O | WKRN | ABC | WKRN-D2, D3, D4 | Bounce, True Crime, Grit | 8/1/2021 |
30 | Salt Lake City, UT | O&O O&O | KTVX KUCW | ABC The CW | KTVX-D2, D3, D4 KUCW-D2, D3, D4 | MeTV, Laff, Heroes & Icons Movies!, Grit, CourtTV | 10/1/2022 10/1/2022 |
32 | New Haven, CT | O&O O&O | WTNH WCTX(18) | ABC MNTV | WTNH-D2 WCTX-D2 | Bounce Grit | 4/1/2023 4/1/2023 |
33 | Columbus, OH | O&O | WCMH | NBC | WCMH-D2, D3, D4 | CourtTV, ION, Laff | 10/1/2021 |
34 | Kansas City, MO | O&O | WDAF | FOX | WDAF-D2, D3, D4 | AntennaTV, CourtTV, Charge! | 2/1/2022 |
35 | Spartanburg, SC | O&O O&O | WSPA WYCW(18) | CBS The CW | WSPA-D3 WYCW-D3 | ION get TV | (4) (4) |
38 | Austin, TX | O&O LSA O&O | KXAN KNVA(8) KBVO | NBC The CW MNTV | KXAN-D2, D3 KNVA-D2, D3, D4 KBVO-CD, D2, D3, D4 | Cozi TV, ION Grit, Laff, CourtTV Bounce, Heroes & Icons, AntennaTV | 8/1/2022 8/1/2022 8/1/2022 |
40 | Las Vegas, NV | O&O | KLAS | CBS | KLAS-D2, D3, D4 | MeTV, Movies!, ION | 10/1/2022 |
41 | Grand Rapids, MI | O&O O&O O&O | WOOD WOTV | NBC ABC | WOOD-D2, D3 WOTV-D2, D3, D4 WXSP-CD, D2, D3 | Bounce, Laff getTV, Grit, Weather MNTV, Cozi TV, CourtTV Mystery | 10/1/2021 10/1/2021 10/1/2021 |
42 | Harrisburg, PA | O&O | WHTM | ABC | WHTM-D2, D3, D4, D5 | ION, getTV, Laff, WLYH | 8/1/2023 |
44 | Oklahoma City, OK | O&O O&O | KAUT KFOR | Independent NBC | KAUT-D2, D3, D4 KFOR-D2, D3, D4 | CourtTV, CourtTV Mystery, Cozi TV AntennaTV, True Crime, Dabl | 6/1/2022 6/1/2022 |
45 | Birmingham, AL | O&O | WIAT | CBS | WIAT-D2, D3, D4 | CourtTV Mystery, True Crime, CourtTV | 4/1/2021 |
46 | Portsmouth, VA | O&O O&O | WAVY WVBT | NBC FOX | WAVY-D2, D3, D4 WVBT-D2, D3 | Bounce, getTV, ShopLC Cozi TV, Heroes & Icons | (4) (4) |
47 | Greensboro, NC | O&O | WGHP | FOX | WGHP-D2, D3, D4 | AntennaTV, CourtTV, Dabl | (4) |
48 | Albuquerque, NM | O&O O&O O&O LSA LSA LSA | KRQE KREZ(14) KBIM(14) KASY(5) KRWB(5) KWBQ(5) | CBS CBS CBS MNTV The CW The CW | KRQE-D2, D3 KREZ-D2 KBIM-D2 KASY-D2, D3, D4, D5 KRWB-D2, D3, D4 KWBQ-D2, D3, D4 | FOX, Bounce FOX FOX CourtTV Mystery, getTV, Cozi TV, AntennaTV Grit, Laff, ION Grit, Laff, ION | 10/1/2022 4/1/2022 10/1/2022 10/1/2022 10/1/2022 10/1/2022 |
9
Market Rank(1) | Market | Status(2) | Full Power Stations | Primary Affiliation | Low Power Stations / Multicast Channels | Other Affiliation | FCC License Expiration Date |
50 | New Orleans, LA | O&O O&O | WGNO WNOL | ABC The CW | WGNO-D2, D3, D4 WNOL-D2, D3, D4 | AntennaTV, Dabl, TBD CourtTV, Comet, Charge! | 6/1/2021 6/1/2021 |
51 | Memphis, TN | O&O | WREG | CBS | WREG-D2, D3 | News3, AntennaTV | 8/1/2021 |
52 | Providence, RI | O&O LSA | WPRI WNAC(9) | CBS FOX | WPRI-D2, D3, D4 WNAC-D2, D3, D4 | MNTV, Bounce, getTV The CW, Laff, AntennaTV | 4/1/2023 4/1/2023 |
53 | Buffalo, NY | O&O O&O | WNLO WIVB(18) | The CW CBS | WNLO-D2 WIVB-D2 | Bounce CourtTV | 6/1/2023 6/1/2023 |
55 | Fresno, CA | O&O O&O | KSEE KGPE | NBC CBS | KSEE-D2, D3 KGPE-D2, D3, D4 | Bounce, Grit CourtTV Mystery, Light TV, Court TV | 12/1/2022 12/1/2022 |
56 | Richmond, VA | O&O | WRIC | ABC | WRIC-D2, D3, D4 | ION, getTV, Laff | (4) |
57 | Mobile, AL | O&O O&O | WKRG WFNA | CBS The CW | WKRG-D2, D3, D4 WFNA-D2, D3, D4 | ION, MeTV, CourtTV Bounce, True Crime, Grit | 4/1/2021 4/1/2021 |
58 | Wilkes Barre, PA | O&O LSA | WBRE WYOU(5) | NBC CBS | WBRE-D2, D3, D4 WYOU-D2, D3, D4 | Laff, Grit, True Crime CourtTV Mystery, Bounce, Cozi TV | 8/1/2023 8/1/2023 |
59 | Little Rock, AR | O&O O&O LSA LSA | KARK KARZ KLRT(5) KASN(5) | NBC MNTV FOX The CW | KARK-D2, D3, D4 KARZ-D2, D3 KLRT-D2 | Laff, Grit, Antenna TV Bounce, ION CourtTV Mystery | 6/1/2021 6/1/2021 6/1/2021 6/1/2021 |
60 | Albany, NY | O&O LSA | WTEN WXXA(5) | ABC FOX | WTEN-D2, D3, D4 WXXA-D2, D3, D4 | getTV, True Crime, CourtTV Mystery OTB-TV, Laff, Bounce | 6/1/2023 6/1/2023 |
62 | Knoxville, TN | O&O | WATE | ABC | WATE-D2, D3, D4 | getTV, Laff, Cozi TV | 8/1/2021 |
63 | Lexington, KY | O&O | WDKY | FOX | WDKY-D2, D3, D4 | Comet, Charge, TBD | 8/1/2021 |
65 | Dayton, OH | O&O LSA | WDTN WBDT(7)(18) | NBC The CW | WDTN-D2, D3 WBDT-D2 | CourtTV Mystery, ION Bounce | 10/1/2021 10/1/2021 |
67 | Honolulu, HI | O&O O&O O&O O&O O&O O&O | KHON KHAW(15) KAII(15) KGMD(15) KGMV(15) KHII | FOX FOX FOX MNTV MNTV MNTV | KHON-D2, D3, D4 KHAW-D2, D3, D4 KAII-D2, D3, D4 | The CW, getTV, CourtTV The CW, getTV, CourtTV The CW, getTV, CourtTV | 2/1/2023 2/1/2023 2/1/2023 2/1/2023 2/1/2023 2/1/2023 |
68 | Des Moines, IA | O&O | WHO | NBC | WHO-D2, D3, D4 | Weather, AntennaTV, CourtTV | 2/1/2022 |
69 | Green Bay, WI | O&O | WFRV | CBS | WFRV-D2, D3 | Bounce, True Crime | 12/1/2021 |
70 | Wichita, KS | O&O O&O O&O O&O O&O | KSNW KSNC(16) KSNG(16) KSNK(16) | NBC NBC NBC NBC | KSNW-D2, D3, D4 KSNC KSNG-D2 KSNK KSNL-LD | Telemundo, ION, True Crime
Telemundo
NBC | 6/1/2022 6/1/2022 6/1/2022 6/1/2022 6/1/2022 |
71 | Roanoke, VA | O&O O&O | WFXR WWCW | FOX The CW | WFXR-D2, D3, D4 WWCW-D2, D3, D4 | The CW, Bounce, CourtTV Mystery FOX, Laff, Grit | (4) (4) |
74 | Springfield, MO | LSA O&O O&O | KOLR(5) KOZL KRBK | CBS MNTV FOX | KOLR-D2, D3, D4 KOZL-D2, D3 KRBK-D2, D3, D4 | Laff, Grit, ShopLC CourtTV Mystery, Bounce MeTV, Movies!, ION | 2/1/2022 2/1/2022 2/1/2022 |
75 | Charleston, WV | O&O | WOWK | CBS | WOWK-D2, D3, D4 | CourtTV Mystery, Laff, Grit | (4) |
77 | Rochester, NY | O&O | WROC | CBS | WROC-D2, D3, D4 | Bounce, Laff, CourtTV Mystery | 6/1/2023 |
79 | Huntsville, AL | O&O O&O | WHDF WHNT | The CW CBS | WHDF-D2 WHNT-D2, D3 | CourtTV The CW, AntennaTV | 4/1/2021 4/1/2021 |
82 | Colorado Springs, CO | O&O O&O | KXRM | FOX | KXRM-D2, D3, D4 KXTU-LD, D2, D3, D4 | The CW, ION, CourtTV Mystery The CW, Bounce, Laff, AntennaTV | 4/1/2022 |
83 | Waco-Bryan, TX | O&O O&O | KWKT KYLE | FOX MNTV | KWKT-D2, D3, D4 KYLE-D2, D3, D4 | MNTV, AntennaTV, Bounce FOX, Estrella, Laff | 8/1/2022 8/1/2022 |
85 | Brownsville, TX | O&O | KVEO | NBC | KVEO-D2, D3, D4, D5 | CBS, Estrella, CourtTV Mystery, Grit | 8/1/2022 |
86 | Shreveport, LA | O&O LSA LSA | KTAL KMSS(5) KSHV(6) | NBC FOX MNTV | KTAL-D2, D3, D4
KSHV-D2, D3, D4 | Laff, Cozi TV, HSN
CourtTV Mystery, ION, Quest | 8/1/2022 6/1/2021 6/1/2021 |
87 | Syracuse, NY | O&O | WSYR | ABC | WSYR-D2, D3, D4 | AntennaTV, Bounce, Laff | 6/1/2023 |
89 | Charleston, SC | O&O | WCBD | NBC | WCBD-D2, D3, D4 | The CW, ION, Laff | (4) |
90 | Champaign, IL | O&O O&O | WCIX WCIA | MNTV CBS | WCIX-D2, D3, D4 WCIA-D2, D3, D4 | CBS, CourtTV Mystery, Laff MNTV, Bounce, Grit | 12/1/2021 12/1/2021 |
91 | Savannah, GA | O&O | WSAV | NBC | WSAV-D2, D3, D4 | The CW, CourtTV/MNTV, Laff | 4/1/2021 |
93 | El Paso, TX | O&O | KTSM | NBC | KTSM-D2, D3, D4 | Estrella, CourtTV Mystery, Laff | 8/1/2022 |
94 | Baton Rouge, LA | O&O LSA O&O O&O | WGMB WVLA(6) | FOX NBC | WGMB-D2, D3 WVLA-D2, D3 WBRL-CD KZUP-CD | The CW, Cozi TV Laff, ION The CW Independent | 6/1/2021 6/1/2021 6/1/2021 6/1/2021 |
95 | Fayetteville, AR | O&O O&O O&O | KFTA KNWA KXNW | FOX NBC MNTV | KFTA-D2, D3, D4 KNWA-D2, D3, D4 | NBC, CourtTV Mystery, Bounce FOX, Laff, Grit | 6/1/2021 6/1/2021 6/1/2021 |
96 | Burlington, VT | O&O LSA | WFFF WVNY(5) | FOX ABC | WFFF-D2, D3,D4 WVNY-D2, D3, D4 | CourtTV Mystery, Bounce, AntennaTV Laff, Grit, Quest | 4/1/2023 4/1/2023 |
97 | Jackson, MS | O&O | WJTV | CBS | WJTV-D2, D3, D4 | The CW, ION, CourtTV | 6/1/2021 |
10
Market Rank(1) | Market | Status(2) | Full Power Stations | Primary Affiliation | Low Power Stations / Multicast Channels | Other Affiliation | FCC License Expiration Date |
99 | Myrtle Beach-Florence, SC | O&O | WBTW | CBS | WBTW-D2, D3, D4 | MNTV/AntennaTV, ION, CourtTV Mystery | (4) |
100 | Tri-Cities, TN-VA | O&O | WJHL | CBS | WJHL-D2, D3 | ABC, AntennaTV | 8/1/2021 |
102 | Greenville, NC | O&O | WNCT | CBS | WNCT-D2, D3, D4 | The CW, getTV, CourtTV Mystery | 12/1/2027 |
103 | Quad Cities, IL | LSA O&O O&O | KLJB(5) KGCW WHBF | FOX The CW CBS | KLJB-D2 KGCW-D2, D3, D4 WHBF-D2, D3, D4 | MeTV ThisTV, Laff, Bounce Court TV, Grit, CourtTV Mystery | 2/1/2022 2/1/2022 12/1/2021 |
106 | Evansville, IN | O&O LSA | WEHT WTVW(5) | ABC The CW | WEHT-D2, D3 WTVW-D2, D3, D4 | Laff, Cozi TV Bounce, CourtTV Mystery, ION | 8/1/2021 8/1/2021 |
107 | Altoona, PA | O&O | WTAJ | CBS | WTAJ-D2, D3, D4 | CourtTV Mystery, Laff, Grit | 8/1/2023 |
109 | Sioux Falls, SD | O&O O&O O&O | KELO KDLO(17) KPLO(17) | CBS CBS CBS | KELO-D2, D3, D4 KDLO-D2, D3, D4 KPLO-D2, D3, D4 | MNTV, ION, CourtTV Mystery MNTV, ION, CourtTV Mystery MNTV, ION, CourtTV Mystery | 4/1/2022 4/1/2022 4/1/2022 |
110 | Tyler-Longview, TX | O&O LSA LSA | KETK KFXK(6) | NBC FOX | KETK-D2, D3, D4 KFXK-D2, D3, D4 KTPN-LD(6) | Grit, ION, AntennaTV MNTV, CourtTV Mystery, Laff MNTV | 8/1/2022 8/1/2022 8/1/2022 |
111 | Ft. Wayne, IN | O&O | WANE | CBS | WANE-D2, D3, D4 | ION, Laff, CourtTV Mystery | 8/1/2021 |
112 | Augusta, GA | O&O | WJBF | ABC | WJBF-D2, D3, D4 | MeTV, ION, CourtTV Mystery | 4/1/2021 |
115 | Lansing, MI | LSA O&O | WLAJ(5) WLNS(18) | ABC CBS | WLAJ-D2 | The CW+ | 10/1/2021 10/1/2021 |
116 | Springfield, MA | O&O | WWLP | NBC | WWLP-D2, D3, D4 | The CW, ION, CourtTV Mystery | 4/1/2023 |
119 | Youngstown, OH | LSA O&O O&O | WYTV(7) WKBN(18) | ABC CBS | WYTV- D2 WKBN-D2 WYFX-LD, D2, D3, D4, D5, D6 | MNTV FOX FOX, MNTV, ION, Bounce, Laff, getTV | 10/1/2021 10/1/2021 |
122 | Lafayette, LA | O&O | KLFY | CBS | KLFY-D2, D3, D4 | getTV, ION, Laff | 6/1/2021 |
123 | Peoria, IL | O&O LSA | WMBD WYZZ(10) | CBS FOX | WMBD-D2, D3, D4 | Bounce, Laff, CourtTV Mystery | 12/1/2021 12/1/2021 |
125 | Bakersfield, CA | O&O O&O | KGET | NBC | KGET-D2, D3, D4 KKEY-LP | The CW, Telemundo, Laff Telemundo | 12/1/2022 12/1/2022 |
127 | Columbus, GA | O&O | WRBL | CBS | WRBL-D2, D3, D4 | MeTV, ION, Laff | 4/1/2021 |
129 | La Crosse, WI | O&O O&O | WLAX WEUX(13) | FOX FOX | WLAX-D2, D3, D4 WEUX-D2, D3, D4 | AntennaTV, Laff, Grit AntennaTV, CourtTV Mystery, Bounce | 12/1/2021 12/1/2021 |
131 | Amarillo, TX | O&O LSA LSA | KAMR KCIT(5) | NBC FOX | KAMR-D2, D3, D4 KCIT-D2, D3, D4 KCPN-LP(5) | MNTV, Laff, Cozi TV Grit, CourtTV Mystery, Bounce MNTV | 8/1/2022 8/1/2022 8/1/2022 |
138 | Midland, TX | O&O LSA | KMID KPEJ(5) | ABC FOX | KMID-D2, D3, D4 KPEJ-D2 | Laff, CourtTV Mystery, Grit Estrella | 8/1/2022 8/1/2022 |
139 | Rockford, IL | O&O LSA | WQRF WTVO(5) | FOX ABC | WQRF-D2, D3 WTVO-D2, D3, D4 | Bounce, CourtTV Mystery MNTV, Laff, Grit | 12/1/2021 12/1/2021 |
141 | Minot-Bismarck, ND | O&O O&O O&O O&O | KXMA KXMB(12) KXMC KXMD(12) | The CW CBS CBS CBS | KXMA-D2, D3, D4 KXMB-D2, D3, D4 KXMC-D2, D3, D4 KXMD-D2, D3, D4 | CBS, Laff, CourtTV Mystery The CW, Laff, CourtTV Mystery The CW, Laff, CourtTV Mystery The CW, Laff, CourtTV Mystery | 4/1/2022 4/1/2022 4/1/2022 4/1/2022 |
142 | Topeka, KS | O&O LSA O&O | KSNT KTKA(7) | NBC ABC | KSNT-D2, D3, D4 KTKA-D2, D3, D4 KTMJ-CD, D2, D3, D4 | FOX, ION, Bounce getTV, The CW, AntennaTV FOX, CourtTV Mystery, Grit, Laff | 6/1/2022 6/1/2022 |
143 | Monroe, AR | O&O LSA | KARD KTVE(5) | FOX NBC | KARD-D2, D3, D4 KTVE-D2, D3, D4 | Bounce, Grit, Cozi TV KARD, Laff, CourtTV Mystery | 6/1/2021 6/1/2021 |
145 | Lubbock, TX | O&O LSA | KLBK KAMC(5) | CBS ABC | KLBK-D2, D3 KAMC-D2, D3, D4 | CourtTV, AntennaTV CourtTV Mystery, Bounce, QVC2 | 8/1/2022 8/1/2022 |
148 | Sioux City, IA | O&O | KCAU | ABC | KCAU-D2, D3, D4 | CourtTV Mystery, Laff, Bounce | 2/1/2022 |
149 | Wichita Falls, TX | O&O LSA LSA | KFDX KJTL(5) | NBC FOX | KFDX-D2, D3, D4 KJTL-D2, D3, D4 KJBO-LP(5) | MNTV, Laff, Cozi TV Grit, Bounce, CourtTV Mystery MNTV | 8/1/2022 8/1/2022 8/1/2022 |
151 | Erie, PA | O&O LSA | WJET WFXP(5) | ABC FOX | WJET-D2, D3, D4 WFXP-D2, D3, D4 | Laff, CourtTV Mystery, Cozi TV Grit, Bounce, AntennaTV | 8/1/2023 8/1/2023 |
152 | Joplin, MO | O&O LSA | KSNF KODE(5) | NBC ABC | KSNF-D2, D3, D4 KODE-D2, D3, D4 | Laff, CourtTV Mystery, Cozi TV Grit, Bounce, ION | 2/1/2022 2/1/2022 |
153 | Panama City, FL | O&O | WMBB | ABC | WMBB-D2, D3, D4 | MeTV, Laff, CourtTV Mystery | 2/1/2021 |
156 | Terre Haute, IN | O&O LSA | WTWO WAWV(5) | NBC ABC | WTWO-D2, D3, D4 WAWV-D2, D3 | Laff, CourtTV Mystery, Cozi TV Grit, Bounce | 8/1/2021 8/1/2021 |
162 | Binghamton, NY | O&O O&O | WIVT | ABC | WIVT-D2, D3, D4 WBGH-CD, D2 | NBC, Laff, CourtTV Mystery NBC, ABC | 6/1/2023 6/1/2023 |
11
Market Rank(1) | Market | Status(2) | Full Power Stations | Primary Affiliation | Low Power Stations / Multicast Channels | Other Affiliation | FCC License Expiration Date |
163 | Wheeling, WV | O&O | WTRF | CBS | WTRF-D2, D3, D4 | MNTV, ABC, CourtTV Mystery | (4) |
164 | Beckley, WV | O&O | WVNS | CBS | WVNS-D2 | FOX | (4) |
165 | Abilene, TX | O&O LSA | KTAB KRBC(5) | CBS NBC | KTAB-D2, D3, D4 KRBC-D2, D3, D4 | Telemundo, CourtTV Mystery, ION Grit, Laff, Bounce | 8/1/2022 8/1/2022 |
167 | Billings, MT | O&O LSA | KSVI KHMT(5) | ABC FOX | KSVI-D2, D3, D4 KHMT-D2, D3, D4 | CourtTV Mystery, Bounce, AntennaTV CourtTV, ION, Laff, | 4/1/2022 4/1/2022 |
168 | Hattiesburg, MS | O&O | WHLT | CBS | WHLT-D2, D3, D4 | The CW, ION, CourtTV Mystery | 6/1/2021 |
169 | Rapid City, SD | O&O | KCLO | CBS | KCLO-D2, D3, D4 | The CW, ION, CourtTV Mystery | 4/1/2022 |
170 | Clarksburg, WV | O&O | WBOY | NBC | WBOY-D2, D3, D4 | ABC, CourtTV Mystery, Laff | (4) |
171 | Utica, NY | O&O LSA O&O | WFXV WUTR(5) | FOX ABC | WFXV-D2, D3 WUTR-D2, D3, D4 WPNY-LP | CourtTV Mystery, Laff MNTV, Grit, Bounce MNTV | 6/1/2023 6/1/2023 6/1/2023 |
172 | Dothan, AL | O&O | WDHN | ABC | WDHN-D2, D3, D4 | CourtTV Mystery, Laff, Cozi TV | 4/1/2021 |
175 | Jackson, TN | O&O | WJKT | FOX | WJKT-D2, D3, D4 | CourtTV Mystery, Laff, Grit | 8/1/2021 |
178 | Elmira, NY | O&O | WETM | NBC | WETM-D2, D3, D4 | AntennaTV, Laff, CourtTV Mystery | 6/1/2023 |
180 | Watertown, NY | O&O | WWTI | ABC | WWTI-D2, D3, D4 | The CW, Laff, CourtTV Mystery | 6/1/2023 |
181 | Alexandria, LA | O&O | WNTZ | FOX | WNTZ-D2, D3, D4 | Bounce, CourtTV Mystery, Laff | 6/1/2021 |
183 | Marquette, MI | O&O | WJMN | CBS | WJMN-D2, D3, D4 | CourtTV Mystery, Laff, Bounce | 10/1/2021 |
187 | Grand Junction, CO | O&O O&O LSA O&O | KREX KREY(11) KFQX(5) | CBS CBS FOX | KREX-D2, D3, D4 KREY-D2, D3, D4 KFQX-D2, D3, D4 KGJT-CD | Laff, MNTV, Bounce FOX, CourtTV Mystery, Grit CBS, CourtTV Mystery, Grit MNTV | 4/1/2022 4/1/2022 4/1/2022 4/1/2022 |
197 | San Angelo, TX | O&O LSA | KLST KSAN(5) | CBS NBC | KLST-D2, D3, D4 KSAN-D2, D3, D4 | CourtTV Mystery, Grit, AntennaTV Laff, Bounce, ION | 8/1/2022 8/1/2022 |
|
|
|
|
|
|
|
|
10
Network Affiliations
All, except three, of the full power television stations that we own and operate, program or provide sales and other services to are currently affiliated with a network pursuant to an affiliation agreement. The agreements with CBS, FOX, NBC, ABC, and The CW are the most significant to our operations. The current terms of these agreements expire as discussed below:
Affiliation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Industry Background
Commercial television broadcasting began
Each affiliation agreement provides the total potential audience inaffiliated station with 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 providedright to the affiliatebroadcast all programs transmitted by the network inwith which it is affiliated. In exchange, for the payment to the network ofreceives affiliation fees from us and has the network’s retention ofright to sell a substantial majority of the advertising time during these broadcasts. We expect the network programs.affiliation agreements listed above to be renewed upon expiration.
Networks
We own, operate or have an ownership interest in the following:
Network / Entity | Network | Description | % Owned by | U.S. TV | % of (Broadcast) | % of (PayTV) |
The CW Network | Broadcast | Fifth major broadcast network in the U.S. | 75% | 125 | 100% | -- |
NewsNation | PayTV | National cable news network | 100% | 69 | -- | 92% |
Antenna TV | Broadcast | Multicast entertainment network | 100% | 125 | 100% | -- |
REWIND TV | Broadcast | Multicast entertainment network | 100% | 66(2) | 53%(2) | -- |
TV Food Network | PayTV | Food Network and Cooking Channel | 31.3% | 70 and 34 | -- | 94% and 45% |
The CW. The CW is one of America’s major broadcast networks and reaches 100% of US television households. The CW delivers 15 hours of primetime entertainment programming and three hours of children’s programming per week in addition to over 300 hours of sports per year as the broadcast home to LIV Golf, ACC football and basketball games, Inside the NFL, WWE NXT beginning in 2024 and NASCAR Xfinity Series beginning in 2025. For its smaller market affiliates, CWPlus supplements The CW programming with additional syndicated content to provide 24 hours of programming, seven days per week. The fully ad-supported CW App, with more than 100 million downloads to date, is available for free to consumers on all major platforms and is home to the latest episodes and seasons of The CW’s primetime programming, live streaming of LIV Golf tournaments and a library of entertaining film and television content for on-demand viewing.
NewsNation. NewsNation is a national cable news network which primarily delivers national news programming supplemented by quality television series. NewsNation is the fastest-growing national cable news network in primetime reaching 69 million television households across the United States. Validated by independent watchdog groups, NewsNation is America’s source for engaging and unbiased news, which reflects the full range of perspectives across the country. The network then sells thisdraws on the local and national expertise of Nexstar’s 6,000 journalists in 110 newsrooms across the country. NewsNation is available on every major cable and satellite provider, streaming platforms including YouTubeTV, Hulu, DirecTV Stream, FuboTV and Sling, online at www.newsnationnow.com, and on the NewsNationNow app available on Android and iOS.
Antenna TV and REWIND TV. Antenna TV and REWIND TV are multicast networks reaching 100% and over 50% of U.S. television households. The networks primarily air sitcom hits from the 1950s through the 1990s.
11
TV Food Network. We also hold a 31.3% interest in TV Food Network, which annually distributes significant cash flow to us. TV Food Network operates two 24-hour television networks, Food Network and Cooking Channel, offering quality television, video, internet and mobile entertainment and information focusing on food and entertaining. During 2023, we received cash distributions from TV Food Network totaling $270 million. Our partner in TV Food Network is Warner Bros. Discovery, Inc., which owns a 68.7% interest in TV Food Network and operates the networks on behalf of the partnership.
Digital Assets
Our digital businesses include video and display advertising timeplatforms that are delivered locally or nationally through our own and retainsvarious third-party websites, mobile and over-the-top (“OTT”) applications, other digital media solutions to media publishers and advertisers and a consumer product reviews platform. Our digital assets include 140 local websites, 278 mobile applications, 25 connected television applications, six free-ad supported television (“FAST”) channels representing content from our local television stations, The CW, NewsNation, The Hill, and BestReviews, and a suite of advertising solutions.
The Hill. The Hill is the revenue.nation’s leading digital-first political news brand and the definitive source for non-partisan political news and information. Inside the Beltway it’s known as an essential, agenda-setting read for lawmakers and influencers. Beyond the Capitol, millions of Americans turn to The affiliate retainsHill to decode how events in Washington will impact their communities and lives.
BestReviews. BestReviews is a leading consumer product recommendations company which simplifies the way consumers buy products and services across thousands of categories by independently researching, analyzing, and testing products and recommending the best picks. BestReviews monetizes its content through a revenue share model with its retail partners against all sales generated by BestReviews.
Operating Model
Our primary sources of revenue include contractual distribution revenue from retransmission consent and carriage agreements with MVPDs, such as cable and satellite providers, and OVDs, companies that provide video content through internet streaming either directly or via our network affiliation partners, as well as affiliation fees from local affiliates of The CW; the remainingsale of commercial air time by the stations to local advertisers; the sale of commercial airtime by the stations and by our broadcast and cable networks to national advertisers; the sale of advertising time it sells during network programson the stations’ websites, on our other owned or third party websites, and through mobile and OTT applications and other digital advertising solutions.
Our primary operating expenses include programming, newsgathering, production and promotion, employee salaries and benefits, sales commissions, digital cost of goods sold and content creation costs, and other administrative and corporate expenses. A large percentage of the costs involved in our operations is relatively fixed.
We seek to grow our revenue, net income, EBITDA and cash flow by continuing to provide high quality programming that attracts and engages audiences as our reach and consumer engagement are important to our distribution partners and advertisers. We use our industry-leading scale to assist us in securing distribution revenue streams, to provide advertisers with solutions across geographies and media types to engage both local and national audiences at scale and to leverage costs against a broader platform. In addition, we plan to continue to acquire or invest in businesses that can benefit from advertising time it sells during non-network programs.our scale, asset mix and record of management and cost discipline.
BroadcastDistribution
We receive compensation from cable, satellite and other MVPDs and OVDs in return for our consent to the retransmission of the signals of our television stations compete forand the carriage of NewsNation. Distribution revenues primarily represent payments from the MVPDs and OVDs and are typically based on the number of subscribers they have. Our successful negotiations related to these distribution agreements produce meaningful recurring revenue streams. We also generate distribution revenues from programmers who lease the use of our spectrum in selected local markets to air their content on our multicast streams.
12
Advertising
Our advertising revenue is primarily with other commercial broadcast television stations, MVPDs, OVDs, 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 derived from the sale of local and national advertising. All network-affiliatedadvertising on our 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 programmingwebsites, apps 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 feesother digital platforms or reduced fees charged to stations for such programming. These programming arrangements are referred to as barter programming.via third party media.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 a strong local economies.economy. 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 our advertising revenue. In even-numbered years we generate substantial advertising revenue from the revenue of broadcast television stations.
13
Seasonality
political advertising we sell to candidates, political action committees and political parties. Advertising revenue is also positively affected by national and regional political election campaigns, and certain events such as the Olympic Games or the Super Bowl. Stations’ advertisingAdvertising 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.businesses. 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 stationsIn 2023, national and websites and to increase the amount ofpolitical 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 iswas sold through third party national sales representative firms which call upon advertising agencies, whose clients typically include automobile manufacturers and dealer groups, telecommunications companies, fast food franchisersagencies. Beginning in January 2024, our national advertising is sold through our national sales division. We continue to sell our political advertising inventory through third party national sales representative firms. Digital advertising that is not sold through our local and national retailers (some of which may advertise locally).
Distribution Revenue
We receive compensation from cable, satellite and other MVPDs and OVDs in return for our consent to the retransmission of the signals of our television stations and the carriage of WGN America. The revenues primarily represent payments from the MVPDs and OVDs and aresales teams is 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 WGN-TV, WDVM and KAUT (independent stations), all of the full power television stations that we own and operate, program or provide sales and other services to as of December 31, 2020 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:
|
| |
|
| |
|
| |
|
| |
|
|
(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
Investmentssold via programmatic exchanges.
We hold a variety of investments as further described in Note 7 to our Consolidated Financial Statements. Currently, we derive significant cash flows from our largest equity method investment, a 31.3% interest in TV Food Network which operates two 24-hour television networks, Food Network and Cooking Channel, as well as their related websites. During 2020, we received cash distributions from TV Food Network totaling $223.3 million. Our partner in TV Food Network is Discovery, Inc. (“Discovery”), which owns a 68.7% interest in TV Food Network and operates the networks on behalf of the partnership. Food Network programming content attracts audiences interested in food-related topics such as food preparation, dining out, entertaining, food manufacturing, nutrition and healthy eating. Food Network engages audiences by creating original programming that is entertaining, instructional and informative. Food Network is a fully distributed network in the United States with content distributed internationally. Cooking Channel caters to avid food lovers by focusing on food information and instructional cooking programming and delivers content focused on baking, ethnic cuisine, wine and spirits, healthy and vegetarian cooking and kids’ foods. Cooking Channel is a digital-tier network, available nationally and airs popular off-Food Network programming as well as originally produced programming.
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 specificallybased on the basis of program popularity. The popularity of a station’sour programming has an effect on the rates we can secure from our distributors and a direct effect on the advertising rates itwe can charge itsour advertisers. A portionWe compete against other broadcast television programming, cable and satellite television programming as well as the direct-to-consumer programming provided via a variety of streaming services, including some of the daily programming on the stations that we own or provide services to is supplied by the networkbroadcast television networks with which each station is affiliated. In those periods, theour 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.affiliated. Other sources of competition for audience include the internet, gaming devices, home entertainment systems (such as DVDs and DVRs), video-on-demand and pay-per-view, the Internet (includingvideo-on-demand. The CW, our broadcast television network, distribution of programming through websites and mobile platforms) and gaming devices.
Although the commercial televisioncompetes with other 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 cableother video programming for viewers 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.
WGN America’s NewsNation, our growing national newscast,cable news network, competes with other established national newscastsnews networks such as CNN, FOX News and MSNBC for viewers. WGN America’s entertainment
Programming. Our local television stations compete for syndicated programming also competes for viewers with other distribution technologies.
Programming. Competition for programming involves negotiating withfrom national program distributors or syndicators that sell first-run and rerun packages of programming. Stationscompete to secure broadcast rights for regional and local sporting events. We compete against in-market broadcast station operators, cable networks and streaming services for exclusive access to off-network reruns and first-run productthis programming in our markets. In a different way, our local stations also compete with other stations 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 to their local audience. The CW competes against other broadcast television and to secure broadcast rightscable networks as well as other video providers, such as direct-to-consumer streaming platforms for regionaltelevision content. NewsNation competes against other cable news networks for talent and local sporting events.stories.
Advertising. Our stations compete for advertising revenue with other television stations in their respective markets and other advertising media such as newspapers,online media (e.g., Google, Meta, Tiktok, Snapchat, etc.), OVDs, MVPDs, radio stations, magazines,newspapers, outdoor advertising, transit advertising, yellow page directories,and direct mail, MVPDs, OVDs and online media (e.g. Google, Facebook, etc.).among others. 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. Our national newscast cable networkThe CW also competes for advertising revenue with other broadcast networks and other distribution technologies. NewsNation also competes for advertising revenue with other advertising media and with other established national newscastsnetworks such as CNN, FOX News and MSNBC.
15
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 OVDs 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.
13
Federal Regulation
Television broadcasting is subject to the jurisdiction of the FCCFederal Communications Commission (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. Congressour operations. These rules are subject to change, which may affect our operations.
FCC Licenses, Renewals 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, refer to the Communications Act and the FCC’s rules, case precedent, public notices and policies.Transfers
License Grant and Renewal.The Communications Act prohibits the operation ofrequires broadcast stations exceptto operate under licenses issued by the FCC. Television broadcast licenses are granted for a maximum term of eight years and are subject to renewalmay be renewed upon application to the FCC. The FCC is required to grantgrants 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 failsWe consistently have received renewals and approvals in the past and are permitted to meet this standard the FCC may still grantcontinue operations when 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 thatdelayed; however, there are mitigating factors entitling it to renewal subject to appropriate sanctions,no assurances that this will be the FCC can denycase in 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.future.
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. We initiated the license renewal process for our stations in June 2020 and will continue these filings through April 2023.
Station Transfer. The Communications Act prohibits the assignment or the transfer of control of a broadcast station’s FCC license without prior FCC approval.
Foreign 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 nostations, generally prohibiting more than 20% non-U.S. ownership (by vote and by equity). The Communications Act further prohibits in a U.S. broadcast licensee or more than 25% indirect foreign ownership or control of asuch licensee through a parent company if the FCC determines the public interest will 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%.company. The FCC will entertain and may authorize, on a case-by-case basis, and upon a sufficient public interest showing and favorable executive branch review, proposals to exceed the 25% indirect foreign ownership limit in broadcast licensees.
16Multiple Ownership Rules
The FCC also hasmultiple ownership rules restrict the number of television stations in which establish limits ona single person or entity may have an “attributable interest.”
Ownership Attribution. For purposes of determining compliance with the multiple ownership of broadcast stations. These ownership limits apply to attributable interestsrules, the FCC rules consider the “attributable interests” in a broadcast station licensee held by an individual corporation, partnership or other entity. In the case ofThe following are considered “attributable interests”: (i) for corporations, officers, directorsofficership, directorship and voting stock interests of 5% or more (20% or more in the case of certain passive investors, such as insurance companiesinvestors), (ii) for partnerships and bank trust departments) are considered attributable interests. For partnerships, all general partners and non-insulated limited partners are attributable. Limited liability companies, are treatedany limited partnership interest or limited liability company interest, unless properly “insulated” from involvement in the same as partnerships. The FCC also considers attributable the holder ofpartnership’s media activities, and any general partnership interest, and (iii) more than 33% of a licensee’s total assets (defined as total debt plus total equity), if that person or entitythe holder of such interest 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)investors), we must report that shareholder, its parent entities, and attributable individuals and entities of both, as attributable interest holders in Nexstar.
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
Local Television Multiple Ownership Order”) concluding the agency’s 2010 and 2014 quadrennial reviews. The 2016 Ownership Order (1) retained(Duopoly) Rule. Under the 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 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 television JSA relationships attributable interests and (6) defined a category of sharing agreements designated as SSAs between commercial television 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 (the “eight voices test”), (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. On September 23, 2019, however, the Third Circuit issued an opinion vacating the Reconsideration Order on the ground that the FCC had failed to adequately analyze the effect of the Reconsideration Order’s deregulatory rule changes on minority and woman ownership of broadcast stations. The Third Circuit later denied petitions for en banc rehearing and its decision took effect on November 29, 2019. On December 20, 2019, the FCC issued an order reinstating the local television ownership rule, the radio/television cross-ownership rule, the newspaper/broadcast cross-ownership rule and the television JSA attribution rule as they existed prior to the Reconsideration Order (including the eight voices test with respect to local television ownership). On April 17, 2020, the FCC and a group of media industry stakeholders (including Nexstar) filed separate petitions for certiorari requesting that the U.S. Supreme Court review the Third Circuit’s decision. The Supreme Court granted certiorari on October 2, 2020. It held oral argument in the case on January 19, 2021, and a decision is expected later in 2021.
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 were filed in the second quarter of 2019. As of December 31, 2020, the proceeding remains open.
Local Television Ownership (Duopoly Rule). Under the current local televisionmultiple ownership, or “duopoly,” rule, a single entity is allowed to own or have attributable interests in two television stations in a marketDMA if (1)(i) the two stations do not have overlapping service areas, or (2) after the combination there are(ii) at least eight independently owned and operating full-power television stations in the DMA with overlapping service contours and one of the combiningtwo stations is not ranked among the top four stations in the DMA.DMA in terms of audience share (subject to certain exceptions based on a case-by-case determination). 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. In its November 2017 Reconsideration Order, the FCC modified the duopoly rule to eliminate the “eight voices” test and permit case-by-case review of proposed “top four” combinations. As a result of the Third Circuit’s September 2019 opinion vacating the Reconsideration Order, the duopoly rule has been reinstated to the form in which it existed prior to the Reconsideration Order, although the Third Circuit’s decision is under review by the U.S. Supreme Court.
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. Parties to JSAs entered into prior to March 31, 2014 were permitted to continue to operate under these JSAs until September 30, 2025. In the Reconsideration Order, the FCC eliminated the JSA attribution rule in its entirety. As a result of the Third Circuit’s September 2019 opinion vacating the Reconsideration Order, the rule has been reinstated, although the Third Circuit’s decision is under review by the U.S. Supreme Court.
17
In certain markets, the Company owns and operates both full-power and low-power television (“LPTV”) broadcast stations. The FCC’s duopoly rulerules and policies regarding ownership of television stations in the same market and nationally generally apply only to full-power television stations and not low-power television stations.
In a number of markets,2023, the Company owns two stations in compliance withFCC extended the duopoly rule. We also are permittedrule to own two or more stationsprohibit, in various other markets pursuant to waivers undercertain circumstances, the FCC’s rules permitting common ownershipacquisition of a “satellite” television station innetwork affiliation that would establish 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.” We also own two “top four” stations in the Indianapolis, Indiana market pursuant to an FCC determination that prohibition of such ownership would not serve the public interest.combination involving a network-affiliated LPTV station or digital multicast stream.
In all of the markets where we have entered into local service agreements, except for six, we provide programming comprising less than 15% of the second station’s programming. In five of the 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 TBAs or 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. Our LMA with Mission for WPIX in New York is not attributable because we do not own a station in that market.
With respect to our other local service agreements, a majority of our JSAs are once again attributable as a result of the JSA attribution rule’s reinstatement following the September 2019 Third Circuit decision, but we are allowed to maintain those agreements in effect through September 2025. 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. Multiple Ownership Rule. There is no limit on the number of television stations which a party may own nationally. However, theThe 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 whenWhen calculating a party’s nationwide aggregate audience coverage, the ownership of a UHF station would beis counted as 50% of a market’s percentage of total national audience. In August 2016, the FCC adopted an order eliminating this “UHF discount,” and that rule change became effective in October 2016. On April 20, 2017, the FCC adopted an order on reconsideration that reinstated the discount, which took effect once again in June 2017. A federal appeals court dismissed a petition for review of the discount’s reinstatement in July 2018. 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 2018, and the proceeding remains open.
14
Local Service Agreements. The FCC applies the local television ownership limits to a non-owned station when the owner of a station in the same market provides more than 15% of the second station’s weekly broadcast programming. However, local marketing agreements entered into prior to November 5, 1996 (“grandfathered LMAs”) are exempt from this attribution rule until the FCC determines otherwise. This “grandfathering” is subject to possible extension or termination in a future FCC review. Nexstar is currently a party to certain grandfathered LMAs.
The
Under current FCC rules, joint sales agreement (“JSAs”) and shared services agreements (“SSAs”) between independently owned television stations that do not exceed the programming threshold noted above are non-attributable but must be publicly disclosed, and the FCC may in the future consider regulations with respect to such agreements. Nexstar ownsis currently a party to certain JSA and SSA agreements whereby it provides services to have a combined national audience reach of approximately 39% of all U.S. television households (applying the FCC’s UHF discount).
Radio/Television Cross-Ownership Rule (One-to-a-Market Rule). In markets with at least 20 independently owned stations.
Quadrennial Review of Media Ownership Rules. The FCC is required to review its media “voices,ownership rules every four years and to eliminate those rules it finds are no longer “necessary in the public interest as a result of competition.” ownership of one television station and up to seven radio stations, or two television stations (if allowed under the television duopoly rule) and six radio stations is permitted. If the number of independently owned media “voices” is fewer than 20 but greater than or equal to 10, ownership of one television station (or two if allowed) and four radio stations is permitted. In markets with fewer than 10 independent media “voices,” ownership of one television station (or two if allowed) and one radio station is permitted. In calculating the number of independent media “voices” in a market,December 2023, the FCC includes all independently owned radio and television stations, independently owned cable systems (counted as one voice), and independently owned daily newspapers which have circulation that exceeds 5% of the households in the market. In all cases, the television and radio components of the combination must also comply, respectively, withissued an order concluding its 2018 quadrennial review. The order retained the local television ownership rule and the local radio ownership rule. The FCC eliminated the radio/television cross-ownership rule in its November 2017 Reconsideration Order but reinstated it following the Third Circuit’s September 2019 decision, although the Third Circuit’s decision is under review by the U.S. Supreme Court.
Local Newspaper/Broadcast Cross-Ownership Rule. Under this rule, a party is prohibited from having an attributable interest in a television (or radio) station and a daily newspaper in the same market. The FCC eliminated the newspaper/broadcast cross-ownership rule in its November 2017 Reconsideration Order but reinstated it following the Third Circuit’s September 2019 decision, although the Third Circuit’s decision is under review by the U.S. Supreme Court. The FCC may consider waivers or grant exemptions fromwithout deregulatory changes while extending the rule to prohibit, in certain circumstances.
18
Local Television/Cable Cross-Ownership. There is no FCC rule prohibiting common ownershipcircumstances, the acquisition of a cable television systemnetwork affiliation that would establish a “top four” combination involving a network affiliated LPTV station or digital multicast stream. The FCC’s 2018 quadrennial review order is subject to appeal, and a television broadcast station in addition, the same area.2022 quadrennial review is currently pending. Thus, the media ownership rules may be subject to change in response to current or future quadrennial reviews or other proceedings.
Distribution by Multichannel Video Programming Distributors (“MVPDs”) and Online Video Distributors (“OVDs”)
MVPD Carriage of Local Television Signals. Broadcasters may obtain carriage of their television 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, 20232026 and will be effective January 1, 2024. Must-carry2027. Mandatory carriage 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.market, subject to limited exceptions. MVPDs do not pay a fee to stations that elect mandatory carriage. We and our partners have elected “retransmission consent” for all of our stations.
A broadcaster, like Nexstar, that elects retransmission consent waives its mandatory carriage rights, and the broadcaster and the MVPD must negotiate in good faithterms 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. Pursuant to the FCC rules and federal statutory law all broadcasters and MVPDs must conduct retransmission consent negotiations in “good faith,” and a broadcaster may not undertake such negotiations for third parties including VIEs in markets where that broadcaster also owns a television station. MVPDs and broadcasters may file FCC complaints against each other for violations of the good faith negotiation rules, and such complaints have been filed against Nexstar in the past. We cannot predict the impact that any such complaints may have on our operations.
MVPD operatorsMVPDs have actively sought 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, thestations, and there are still-open FCC initiated a Notice of Proposed Rulemakingproceedings 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.review these regulations.
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, 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 located in the same DMA and not commonly owned, facilitate or agree to facilitate coordinated negotiation of retransmission consent terms between themselves, including through the sharing of information. Accordingly, the in-market 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 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. Comments and reply comments on the further notice were filed in 2014, and the proceeding remains open.
Congress’s December 5, 2014 legislation also 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 OVDs have begun streamingstream broadcast programming over the Internet. In June 2014, the U.S. Supreme Court held that an OVD’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”).internet. In December 2014, the FCC issued a Notice of Proposed Rulemaking proposing to interpret the term “MVPD” to encompass OVDs 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 OVDs. Comments and reply comments were filed in 2015. AlthoughThe proceeding remains open.
Broadcast Transmission Standard (ATSC 3.0)
In November 2017, the FCC hasadopted rules to permit television broadcasters to voluntarily broadcast using a new broadcast television transmission standard developed by the Advanced Television Systems Committee, Inc., also referred to as “ATSC 3.0” or “NEXTGEN TV.” The ATSC 3.0 standard provides for a more efficient use of spectrum, which could enable us to provide additional services to consumers and businesses, including additional content, interactive television, signal encryption and data transmission services. Nexstar and its partners have adopted the ATSC 3.0 technology in their stations covering over 50% of U.S. television households.
15
Because ATSC 3.0 is not classified OVDs as MVPDscompatible with existing television equipment, the FCC requires the stations which have adopted the ATSC 3.0 technology to date, several OVDs have signed agreementscontinue broadcasting a substantially similar signal in the existing standard until the FCC phases out the requirement. In June 2023, the FCC issued a Third Report and Order and Fourth Further Notice of Proposed Rulemaking that extends the sunset for retransmissioncertain transition requirements from July 2023 to July 2027. In addition, in June 2020, the FCC adopted a Declaratory Ruling and Notice of Proposed Rulemaking declaring that local stations within their markets, and others are actively seekingnational ownership restrictions do not apply to negotiate such agreements.non-video services provided on a broadcaster’s ATSC 3.0 spectrum.
Other FCC Broadcast Regulations and Enforcement
The Company has electedFCC continues to exercisestrictly enforce its regulations concerning indecency, sponsorship identification, political advertising, good faith retransmission consent rights for allnegotiation, unauthorized assignments and transfers of control, multiple ownership, children’s television, environmental concerns, emergency alerting and information, equal employment opportunity, technical operating matters, antenna tower maintenance, and other matters. The FCC may impose substantial forfeitures or, in extreme cases, revoke licenses if it determines that 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 OVDs.rules have been violated.
19
Human Capital Management
Values. Our key human capital management objectives are to attract, develop, and retain top industry talent that reflects the diversity of the communities in which we operate and provide services. We encourage every individual’s contributionscontribution and personal growth and foster work environments that provide personal pride through job satisfaction and a balanced life. We embrace the communities in which we operate and promote open communications, innovation and creativity.
Engagement and Opportunities. With markets ranging from small to major,large to national, we offer a broad range of opportunities for every experience level, including for those who are just starting their broadcasting career or are ready to make the leap intomove to a larger market.market or onto the national stage. Our market diversity allows us to give our employees room to grow and progress in their careers. Our management team supports a culture of developing future leaders from our existing workforce, enabling us to promote from within for many leadership positions. As of December 31, 2020,2023, our voluntary retention rate for employees was approximately 71%82%.
Compensation and Benefits. We offer our employees a broad range of company-paid benefits and we believe our compensation package and benefits are competitive with others in our industry. Our employee wages are competitive and consistent with employee positions, experience, knowledge and location. In addition, in 2019, the Company initiated a company-wide minimum wage above the federal requirement, which has been increased effective January 1, 2021. Annual wage increases and incentive payments are based on merit and are communicated to employees as a part of the annual review process.
Community Outreach. At Nexstar, we pride ourselves on the opportunities we provide for our employees to give back to their communities. On our 20th anniversary in June 2016, we organized our inaugural Founders Day of Caring, an employee driven effort focused on local non-profits and charities. Our employees fanned out across the country to contribute thousands of hours of community services. Founders Day has continued to be a success for our employees and their communities, with a pause in 2020. We anticipate resuming our Founders Day activities in 2021.
Diversity and Inclusion.We strive to foster a culture of diversity and inclusion so all of our employees feel respected and none of them feels discriminated against. In 2020, we launched our Diversity and Inclusion Council, a working committee dedicated to creating a path toward a more diverse and inclusive workplace, where diverse talent can flourish and build a career. The Council is comprised of ten members from throughout the Company, with membership changing periodically. In 2020, the Council, initiated our Employee Resource Groups and established a model mentorship program that rolled out Company-wide in 2020. .We value diversity at all levels and continue to focus on extending our diversity and inclusion initiatives across our entire workforce. We believe a diverse workforce fosters innovation and cultivates an environment of unique perspectives. AsWe encourage a culture of December 31, 2020, approximately 41%diversity and 32% ofinclusion so our employees feel respected and do not feel discriminated against. To help us achieve our diversity goals, our Diversity and Inclusion Council, a ten-member group of rotating members, regularly meets and advises senior management respectively, were women.on ideas and initiatives to help diverse and inclusive workplace, where diverse talent can flourish and build a career. In addition, we have five Employee Resource Groups in the U.S., approximately 30%categories of Latinx, Women, African American, Veterans and 23% of ourLGBTQ+ designed to bring together employees and our management, respectively, were racially/ethnically diverse.who share similar cultures, backgrounds, and/or interests, as well as those employees who wish to provide support to that group. In order to ensure accountability in making progress in our diversity goals, a portion of our managers’ bonuses are tied to diversity metrics in their markets.
As of December 31, 2023, approximately 41% and 30% of our employees and our management (Vice Presidents and above), respectively, were women. In addition, we have implemented Employee Resource Groups in the categoriesU.S., approximately 26% and 11% of Latinx, Women, African American, Veteransour employees and LGBTQ+. These groups are designedour management, respectively, were racially/ethnically diverse. This compares to bring together employees who share similar cultures, backgrounds, and/or interests, as well as those employees who wish to provide support to that group.approximately 40% of the U.S. population which is racially/ethnically diverse (source: 2020 United States Census Bureau population).
16
Training and Mentorship. We are committed to developing the talents of our employees. We have partnered with Everfi, a leading provider of onlineemployees and provide our employees workplace training, to deliver engaging and compelling content to all employees.training. Our catalog of courses includes harassment prevention, diversity/equity/inclusion, ethics, managing bias, supervisor/manager skills, and most recently, COVID-19health-related safety. In addition, during the fourth quarter of 2020, our Corporate Human Resources team conductedwe have a successful pilot for a new mentorship program that will be launched company-wide in March 2021. The program matches mentors and mentees across the company and provides the pairs with a 12-topic curriculum covering skills such as communications, networking, work/life balance, and goal setting. S
In 2018,elected Nexstar settled a U.S. Department of Justice Antitrust Division investigation, as did a number of other television broadcasting companies. Nexstar did not admit any wrongdoing but, as a part of the settlement agreement, it agreed to take certain actions, including providingemployees also participate in annual training programs to all officers and sales related employees to ensure they understand theunderstanding of antitrust laws and how those lawsthey apply to Nexstar and our employees and to help them spot common patterns that may implicate antitrust laws.
Nexstar sales employees also participate in a media sales training program provided by The Center for Sales Strategy, a third party vendor.third-party vendor.
20
Safety and COVID-19 ResponseHealth. We value our employees and are committed to providing a safe and healthy workplace.workplace for our employees. All employees are required to comply with our safety rules and are expected to actively contribute to making our company a safer place to work. In responseEmployees must immediately report accidents, injuries, and unsafe equipment, practices or conditions to COVID-19, we implemented remote working for manya supervisor or other designated person. Threats or acts of our employees. Our work locations developedviolence or physical intimidation are prohibited and implemented their own plans for staffing during the pandemic, with a focus on reducing headcounts within our facilitiessubject to reduce the risk for those employees whose job functions could not be performed remotely,disciplinary action up to and in compliance with applicable state and local safety requirements and protocols. Currently, a majorityincluding termination of our workforce have returned to working in a facility under strong safety protocols. In allowing additional employees to return to our facilities, we considered and continue to consider guidance from the Centers for Disease Control, other health organizations, federal, state and local governmental authorities, and our customers, among others. We have taken, and continue to take, robust actions to help protect the health, safety and well-being of our employees, to support our suppliers and local communities, and to continue to serve our customers.employment.
Employees. As of December 31, 2020,2023, we had a total of 12,41213,294 employees, comprised of 11,08611,877 full-time and 1,3261,417 part-time employees. As of December 31, 2020, 1,5482023, 1,944 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.
Community Outreach. We pride ourselves on the opportunities we provide for our employees to give back to their communities. At the local level, our stations are actively involved in over 1,775 community outreach initiatives in 2023. Nexstar and its partner stations work with local community groups to increase awareness, raise money and otherwise assist these local groups with their missions. Stations run promotions and air content related to the initiative and station employees participate in local events. On a companywide basis, Nexstar engages in a variety of initiatives as well, including, among others, partnering with Feeding America, the nation’s largest domestic hunger relief organization by providing air-time and financial support from 2021 – 2023; Project Roadblock, a national multiplatform program aimed at preventing drunk driving, by donating airtime and news coverage to the issue; and Remarkable Women, Nexstar’s own initiative to celebrate local women to inspire, lead and pave the way for other women to succeed, by airing content and contributing to the winners’ charitable organizations of her choice. In addition, since our 20th anniversary in June 2016 (with the exception of 2020), we organized an annual Founder’s Day of Caring, an employee-driven effort focused on local non-profits and charities. Across the country our employees take the day to contribute thousands of hours of community services. In 2023, our Founder’s Day initiatives provided nearly 17,500 hours of service in one day to the communities served by Nexstar TV stations.
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. See Note 1716 to our Consolidated Financial Statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K, which is incorporated herein by reference.
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 Internetinternet 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 sitewebsite into this Annual Report on Form 10-K.
21
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.
Summary Risk Factors
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may
adversely affect our business, financial condition, results of operations, cash flows, and prospects. These risks are discussed more fully below and include, but are not limited to:
Risks Related to Our Operations
|
|
cash flows•
|
|
|
|
|
|
of cash we receive under our local service agreements;
|
|
|
|
assets could affect our operating results;
|
|
|
|
inability to renew expiring distribution agreements on favorable terms or at all;
|
|
and results of operations;
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
business;
|
|
22
|
|
Risks Related to Our Industry
|
|
•
|
|
•
|
|
evolving advertising trends;
|
|
|
|
operations or the television broadcasting industry as a whole; and
|
|
could substantially impact our future operations.
Risks Related to Tribune’s Emergence from Bankruptcy
|
|
appeals seeking to overturn the order confirming Tribune’s bankruptcy plan.
Risks Related to Tribune Publishing’s Spin-Off
|
|
•
19
|
|
spin-off; and
|
|
Risks Related to Our Operations
Our business,distribution revenues and operating results of operations, financial condition, cash flows and stock price have been and may continue to be adversely affected by, pandemics, epidemicsamong other factors, declining MVPD subscribers and our inability to renew expiring distribution agreements on favorable terms or other public health emergencies, such asat all.
A significant portion of Nexstar’s revenue comes from its retransmission consent and carriage agreements with MVPDs (mainly cable and satellite television providers) and OVDs. These agreements permit the recent outbreakdistributors to retransmit our stations’ and our cable and broadcast networks’ signals to their subscribers in exchange for the payment of COVID-19.
Our business, results of operations, financial condition, cash flows and stock pricecompensation to us. If we are unable to renegotiate these agreements on favorable terms, or at all, the failure to do so could have been and may continue to be adversely affected by the COVID-19 outbreak. In March 2020, the World Health Organization characterized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The outbreak has resulted in governments in the U.S. and around the world implementing increasingly stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures, and other measures.
We are considered an essential industry, as defined by the U.S. Department of Homeland Security. Although we have continued to operate our facilities to date consistent with federal guidelines and state and local orders, the outbreak of COVID-19 and any preventive or protective actions taken by governmental authorities have had and may continue to have a material adverse effect on our workforce and operations, customers (e.g. advertisers and advertising agencies, MVPDs and OVDs) and supply chain (e.g. networks). The impact of COVID-19 significantly reduced the demand for television advertising in 2020, mostly in the first part of the second quarter, and has had, and may continue to have, a material adverse impact on our financial condition, results of operations and cash flows in the future. The extent to which COVID-19 may adversely impact our business in the future depends on future developments, which are highly uncertain and unpredictable, depending upon the severity and duration of the outbreak and the effectiveness of actions in the United States taken to contain or mitigate its effects. Any resulting financial impact cannot be estimated reasonably at this time, but may materially adversely affect our business, results of operations, financial condition and cash flows. Even after the COVID-19 pandemic has subsided, we may experience materially adverse impacts to our business due to any resulting economic recession or depression. Additionally, concerns over the economic impact of COVID-19 have caused extreme volatility in financial and other capital markets, which has and may continue to adversely impact our stock price and our ability to access capital markets.
23
Our liquidity could also be negatively impacted if these conditions continue for a significant period of time and we may be required to pursue additional sources of financing to obtain working capital to meet our business operating requirements, our capital expenditures and to continue to service our debt. Capital and credit markets have been disrupted by the crisis and our ability to obtain any required financing on reasonable terms or at all is not guaranteed and is largely dependent upon evolving market conditions and other factors. Depending on the continued impact of the crisis, further actions may be required to improve the Company’s cash position, working capital and capital structure. Our credit rating could also be negatively affected, which could also impact our liquidity, our financial condition and our ability to obtain financing.
A sustained economic downturn may also result in the carrying values of our major assets, including goodwill, indefinite-lived intangible assets, long-lived assets and equity investments exceeding their fair value, which may require us to recognize an impairment to those assets. A sustained downturn in the financial markets and related pension asset values may have the effect of increasing our pension funding obligations in order to ensure that our qualified pension plans continue to be adequately funded, which may divert cash flow from other uses.
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 operationsoperations. In addition, occasionally these negotiations result in a temporary removal of our stations.stations from the distributor’s service which disruption could have an adverse effect on our operating results.
Though we are typically able to renegotiate our retransmission consent agreements on favorable terms, the payments due to us under these agreements are customarily based on a price per subscriber of the applicable distributor. In the past several years, the number of subscribers to MVPDs has declined as the growth of direct internet streaming of video programming to televisions and mobile devices has led consumers to discontinue their cable or satellite service subscriptions. As our retransmission consent agreements include payment terms by subscriber numbers, if the rate of reductions in the number of MVPD subscribers increases, this could also have an adverse effect on our business revenues, financial condition and results of operations. Also, refer to “Risks Related to Our Industry––Industry—Intense competition in the television industry and alternative forms of media could limit our growth and profitability.”
Our affiliation agreements with the “Big 4” broadcast networks (ABC, CBS, NBC and FOX) include terms that limit our ability to grant retransmission consent rights to OVDs and other service providers that provide video streaming to consumers. As a result, the Big 4 networks generally negotiate directly with OVDs for carriage of their local affiliate stations, including certain of our stations. The terms the networks negotiate may be unfavorable or unacceptable to us, as a result of which we may receive reduced revenue from our stations’ carriage on OVDs or may choose not to permit an OVD’s carriage of our stations at all, which could materially reduce this revenue source to the Company if we cannot reduce network affiliation fees or generate additional revenue streams from other relationships we have with the Big 4 networks and OVDs, and could have an adverse effect on our business, financial condition and results of operations.
Our station revenues and operating results may be adversely affected if we are unable to renew our 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. All but three of the stations that we operate or provide services to have network affiliation agreements which have expiration/renewal dates at various times through December 2026. In order to renew certain of our affiliation agreements, we may be required to make increased payments to the networks and to accept other 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.”
Our revenue and operating results may be adversely affected if we are unable to retain our largest customers, which account for a significant percentage of our total revenue, on favorable terms, or at all.
During the years ended December 31, 2023, 2022 and 2021, the Company’s revenues from two customers exceeded 10%. Each of these customers represented approximately 12% and 14% for 2023, 10% and 11% for 2022, and 12% and 13% for 2021, of the Company’s consolidated net revenues. The loss of or disruption in our relationship with one or more of our major customers could have a material adverse effect on our business, operating results, or financial condition. In addition, any consolidation of our customers could reduce the number of customers to whom our services could be sold and increase our revenue concentration.
20
Our advertising revenue and operating results may be affected by economic downturns, geopolitical events and other factors outside of our control.
We derive a significant amount of our revenue from the sale of television and digital advertising. Our ability to sell advertising time depends on numerous factors that may be beyond our control, including: the health of the economy; the popularity of our programming, including trust in news organizations; fluctuations in pricing for advertising; the activities of our competitors; and the amount of demand for political advertising in election years. Because businesses generally reduce their advertising budgets during economic recessions or downturns, our 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.
In addition, 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.
Because a significant percentage of our operating expenses are fixed, a relatively small decrease in revenue could have a significant negative impact on our operating 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.
Our growth may be limited if we are unable to implement an acquisition strategy and our operating results may be adversely affected if we are unable to successfully integrate any future acquisition.
Historically, we achieved much of our growth through acquisitions. We intend to continue our growth by selectively pursuing acquisitions of businesses that leverage our platform, scale and capabilities. Some of our competitors may have greater financial or management resources with which to pursue acquisition targets. Therefore, even if we are successful in identifying attractive acquisition targets, we may face considerable competition and our acquisition strategy may not be successful.
Current and future changes to rules and policies of the FCC and other regulatory authorities which limit the ownership of television stations may also make it more difficult for us to acquire additional television stations. Additionally, our television acquisitions over the past several years have significantly increased our national audience reach to a level that is at the national television ownership limit imposed by the Communications Act and FCC rules. This may restrict our future television station acquisitions and may require us to divest current stations in connection with any acquisition in order to comply with the national television ownership limit. For more information see “Federal Regulation.”
There are a number of risks associated with growing our business through acquisitions. For example, with any past or future acquisition, there is the possibility that: we may not be able to manage the increased reporting and administrative demands; we may not be able to successfully reduce costs, increase revenue or audience or realize anticipated synergies and economies of scale with respect to any acquired business; 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.
21
Our substantial debt and related interest expense could limit itsour ability to grow and compete.reinvest in the business, make acquisitions and/or return capital to shareholders.
As of December 31, 2020,2023, the Company had $7.7$6.8 billion of debt, net of unamortized financing costs, discounts and premium, which represented 75.3%74.8% of the total combined capitalization.
Of the Company’s $6.8 billion of debt, $4.1 billion is floating rate debt for which the Company pays interest based on a spread to current SOFR rates. As SOFR has increased, the Company’s interest expense has also increased, reducing the amount of cash flow from operations the Company has available to reinvest in its operations, make acquisitions or return to shareholders. The Company’s high level of debt could have other important consequences for its business, including: limiting the Company’s ability to borrow additional funds or obtain additional financing in the future; using cash from operations to reduce indebtedness instead of reinvesting in the business, making acquisitions or returning capital to shareholders; limiting the Company’s flexibility to plan for and react to changes in its business. For example, it could:
|
|
|
|
|
|
|
|
|
|
business and its industry; and impairing 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”Material Cash Requirements” 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 Nexstar’s 5.625% senior unsecured notes due 2027 (“5.625% Notes due 2027”) and Nexstar’s 4.75% senior unsecured notes due 2028 (“4.75% Notes due 2028”), limit, but do not prohibit the Company from incurring substantial amounts of additional debt. To the extent the Company incurs additional debt it would become even more susceptible to the leverage-related risks described above.
24
The agreements governing the Company’s debtinstruments contain various covenants that limit management’s discretion in the operation of its business.
The terms of the Company’s senior secured credit facilities and the indentures governing Nexstar’s 5.625% Notes due 2027 and Nexstar’s 4.75% Notes due 2028 contain variousmaintenance or other restrictive covenants customary for arrangements of these types thattypes. The restrictive covenants restrict our ability to, among other things:
| things 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, Nexstar’s senior secured credit facility requires us to maintain or meet certain financial ratios, including a maximum consolidated first lien net leverage ratio.ratio of 4.25 to 1.00. 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 ourCompany could also incur additional debt in the future. The terms of the Company’s 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, includefacilities, as well as the combined results of the Company. The credit agreementsindentures governing Mission’s obligations under itsNexstar’s senior secured credit facility does not contain financial covenant ratio requirements; however, they include events of default if weunsecured notes, limit, but do not comply with all covenants contained inprohibit the credit agreement governing our senior secured credit facility.Company from incurring substantial amounts of additional debt. To the extent the Company incurs additional debt, it would become even more susceptible to the leverage-related risks described above.
The Company
We may not be able to generate sufficient cash flow to meet itsour 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.
25
We may be required to cease certain station operations if the FCC denies renewal of any of our station licenses.
The FCC generally grants 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. While a majority of renewal applications are routinely granted under this standard, if we fail to meet this standard the FCC may condition or shorten renewal or, in a worst case, deny a station’s license renewal application, resulting in termination of the station’s authority to broadcast. The Company expects the FCC to grant pending and future renewal applications for its stations in due course but cannot provide any assurances that the FCC will do so. See “Federal Regulation—FCC Licenses, Renewals and Transfers.”
22
The financial performance of our equity method investments and the performance of third-party services providers, upon which we rely but do not control, could adversely impact our results of operations.
We have significant investments in businesses (primarily our 31.3% interest in TV Food Network) that we account for under the equity method of accounting. For the year ended December 31, 2023, our income from equity investments from TV Food Network was $177 million and we received cash distributions of $270 million. If the change in earnings and distributions from our equity investments are material in any year, those changes may have a material effect on our net income, cash flows, financial condition and liquidity. We do not control the day-to-day operations of our equity method investments or have the ability to cause them to pay dividends or make other payments or advances to their stockholders, including us, and thus the management of these businesses could impact our results of operations and cash flows. Additionally, these businesses are subject to laws, regulations, market conditions and other risks inherent in their operations. Any of these factors could adversely impact our results of operations, our cash flows and the value of our investment.
In addition, we rely on a number of third parties service providers, including software providers and large technology companies, to enable or perform many core business operations, some of which are specialized services provided by small companies. If these providers are unable to meet our needs or change the way they perform their services, we could be adversely affected.
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 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 August 1, 2022, we extended Mr. Sook’s appointment as our Chief Executive Officer through March 31, 2026, with automatic renewal for successive one-year periods.
Our operating results could be adversely affected if the owners of the VIEs may make decisions regarding the operation of their respective stations that couldadversely impact their operating results and reduce the amount of cash we receivepayments due to us under our local service agreements.agreements.
As of December 31, 2020, the
The VIEs are each 100% owned by independent third parties. These entities owned and operated 37 full power television stations, of which 36 stations were included in our financial statements as consolidated VIEs. We have entered into local service agreements with thesethe VIEs, pursuant to which we provide services to their stations. In return for the services we provide, we receive substantially all of the consolidated VIEs’ available cash, after satisfaction of their operating costs and any debt obligations.
As of December 31, 2020, Mission’s senior secured credit facility consists of a $330.0 million total revolving credit facility, of which $327.0 million was drawn and outstanding.
We guarantee In addition, Nexstar (excluding The CW) guarantees the full payment of all of the obligations incurred under Mission’sone of our VIEs’ (Mission) senior secured credit facility in the event of its default. All but three stations owned by consolidated VIEs 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.See “Stations.”
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 guarantee of the obligations incurred under Mission’s senior secured credit facility, (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 which permit Nexstar to acquire the assets and assume the liabilities of each of the VIEs’ stations at any time, exclusive of three stations, 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
Future impairment charges could adversely affect our opinion, would prove unpopular and/or would generate less advertising revenue.operating results.
The Company’s pension and other postretirement benefit plans (OPEB) 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 various funded, qualified non-contributory defined benefit retirement plans which cover certain employees and former employees. As of December 31, 2020, these qualified retirement plans were underfunded by approximately $274.0 million. The qualified retirement plans had $2.2222023, $8.0 billion, inor 66.2%, of the Company’s combined total net assets availableconsisted of goodwill and intangible assets, including FCC licenses and network affiliation agreements. During the fourth quarter of 2023, Nexstar recorded a $35 million impairment of goodwill and finite-lived intangible assets attributable to pay benefits to participants enrolled in the plans as of December 31, 2020.a digital business. The Company contributed a totalregularly tests its goodwill and other intangible assets for impairment. If the carrying amount of $40.5 million in 2020goodwill and intangible assets is revised downward due to the Tribune Media Company (“Tribune”) qualified pension plans.
The Company also has non-contributory unfunded supplemental executive retirement and ERISA excess plans which supplement the coverage of the defined benefit retirement plans to certain employees and former employees. As of December 31, 2020, the total liability was $57.7million. The Company also has various retiree medical savings account plans which reimburse eligible retired employees for certain medical expenses and unfunded plans that provide certain health and life insurance benefits to certain retired employees. Although the Company has frozen participation and benefits under all plans, two significant elements in determiningimpairment, such non-cash charge could materially affect the Company’s pension expense are the expected return on plan assetsfinancial position and the discount rate usedresults of operations. See “Critical Accounting Estimates—Valuation of Goodwill and Intangible Assets.”
23
Changes 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.
The recording of deferred tax assetassets or valuation allowances in the future or the impactas a result 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, 2020,2023, based on projected future income, approximately $234.4$185 million of the Company’s deferred tax assets, net of valuation allowance, of $23.5 million,primarily related to NOLs attributable to a consolidated VIE, 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.
26
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 or certain of our other VIEs. See “Critical Accounting Estimates—Income Taxes.”
At December 31, 2020, the Company had NOLs of approximately $158.6 million for U.S. federal tax purposes and $271.0 million for state tax purposes. A valuation allowance has been recorded against $107.2 million of federal NOLs and $34.8 million of state NOLs attributable to a consolidated VIE. Federal NOLs generated for years prior to 2018 expire at varying dates through 2037 and NOLs generated after 2017 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 Company’s NOLs are subject to limitations under Section 382. As of December 31, 2020, the Company does not expect any NOLs to expire as a result of a Section 382 limitation.
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.
We could face additional tax-related liabilities if the IRS prevails on a proposed income tax audit adjustment related to a past transaction of Tribune and Federal income tax audits of Tribune. We may also face additional tax liabilities stemming from anproposed and ongoing tax audit of Tribune.audits.
While we believe our tax positions and reserves are reasonable, the resolutions of certain tax issues related to a past transaction of Tribune Media Company (“Tribune”) are unpredictable and could negatively impact our effective tax rate, net income or cash flows for the period or periods in question. Specifically, we may be faced with additional tax liabilities as a result of our acquisition of Tribune for the transactions contemplated by thean agreement, dated August 21, 2009, between Tribune and Chicago Entertainment Ventures, LLC (formerly Chicago Baseball Holdings, LLC) (“CEV LLC”), and its subsidiaries (collectively, “New Cubs LLC”), governing the contribution of certain assets and liabilities related to the business of the Chicago Cubs Major League Baseball franchise then owned by Tribune and its subsidiaries to New Cubs LLC, and related agreements thereto (the “Chicago Cubs Transactions”). We may also be faced with tax liabilities as a result of the 2014–2015 federal income tax audits of Tribune.Tribune for taxable years 2014 and 2015.
On June 28, 2016, the IRS issued to Tribune a Notice of Deficiency which presented the IRS’s position that the gain onwith respect to the Chicago Cubs Transactions should have been included in Tribune’s 2009 taxable income. Accordingly, the IRS has proposed a $182 million tax and a $73 million gross valuation misstatement penalty. After-tax interest on the proposed tax and penalty through December 31, 2020 would be approximately $120.0 million. During the third quarter of 2016, Tribune filed a petition in U.S. Tax Court to contest the IRS’s determination. A bench trialAfter-tax interest on the aforementioned proposed tax and penalty through December 31, 2023 would be approximately $191 million. In addition, if the IRS prevails in its position, under the tax rules for determining tax basis upon emergence from bankruptcy, the Company would be required to reduce its tax basis in certain assets. The reduction in tax basis would be required to reflect the reduction in the U.S. Tax Court took place between October 28, 2019 and November 8, 2019, and closing arguments took place on December 11, 2019. The Company has completedamount of the Tax Court briefing process and expects an opinion onCompany’s guarantee of the merits to be issuedNew Cubs partnership debt which was included in the first halfreported tax basis previously determined upon emergence from bankruptcy and subject to Tribune’s 2014 and 2015 federal income tax audits (described below).
On September 19, 2019, Tribune became a wholly owned subsidiary of 2021. The U.S. Tax Court issued an opinion on January 6, 2020 that the IRS satisfied the procedural requirements for the imposition of the gross valuation misstatement penalty. The judge deferred any litigation of the penalty until the tax issue has been resolved by the Tax Court. If Tribune prevails on the tax issue, then there would be no penalty to litigate. We continue to pursue resolution of this disputed tax matterNexstar following Nexstar’s merger with the IRS and we continue to disagreeTribune. Nexstar disagrees with the IRS’s position that the transactionChicago Cubs Transactions generated a taxable gain in 2009, the proposed penalty and the IRS’s calculation of the gain. If the IRS prevails in its position, the gain on the Chicago Cubs Transactions would be deemed to be taxable in 2009. We estimate that the federal and state income taxes would be approximately $225 million before interest and penalties. Any tax, interest and penalty due will be offset by tax payments made relating to this transaction subsequent to 2009. Tribune made approximately $147.0$154 million of tax payments prior to its merger with NexstarNexstar.. In addition, if
A bench trial in the U.S. Tax Court took place between October 28, 2019 and November 8, 2019, and closing arguments took place on December 11, 2019. The Tax Court issued a separate opinion on January 6, 2020 holding that the IRS prevails with its position, undersatisfied the tax rulesprocedural requirements for determining tax basis upon emergence from bankruptcy, we would be required to reduce Tribune’s tax basis in certain assets. The reduction in tax basis would be required to reflect the reduction in the amount of Tribune’s guaranteeimposition of the New Cubs partnership debt whichgross valuation misstatement penalty. The judge deferred any litigation of the penalty until a final determination was included inreached by the reported tax basis previously determined upon emergence from Tribune’s bankruptcy. Tribune no longer owns any portionTax Court or Court of CEV LLC. Appeals.We did not recognize any tax reserves
On October 26, 2021, the Tax Court issued an opinion related to the Chicago Cubs Transactions.Transactions, which held that Tribune’s structure was, in substantial part, in compliance with partnership provisions of the Code and, as a result, did not trigger the entire 2009 taxable gain proposed by the IRS. On October 19, 2022, the Tax Court entered the decision that there is no tax deficiency or penalty due in the 2009 tax year. On January 13, 2023, the IRS filed a notice of appeal to the U.S. Court of Appeals for the Seventh Circuit. On February 3, 2023, the Company filed a notice of cross-appeal. On February 15, 2024, the case was argued before the U.S. Court of Appeals for the Seventh Circuit. The Company expects a ruling from the Court of Appeals in the second half of 2024.
27As of December 31, 2023, we believe the tax impact of applying the Tax Court opinion to 2009 and its impact on subsequent years is not material to the Company’s accounting for uncertain tax positions or to its Consolidated Financial Statements. Although management believes its estimates and judgments are reasonable, the timing and ultimate resolution are unpredictable and could materially change.
24
Prior to ourNexstar’s merger with Tribune in September 2019, Tribune andwas undergoing a few of its subsidiaries were undergoing separate 2014–2015 federal income tax audits.audit for taxable years 2014 and 2015. In the third quarter of 2020, the IRS completed its audits of the Tribune acquired entities, and with the exceptionaudit of Tribune Media Company, all other entity audits have been resolved and closed. For Tribune Media Company, the IRS issued a Revenue Agent’s Report which disallowsdisallowed the reporting of certain assets and liabilities related to Tribune’s emergence from Chapter 11 bankruptcy on December 31, 2012. We disagree with the IRS’s proposed adjustments to the tax basis of certain assets and the related taxable income impact, and we are contesting the adjustments through the IRS administrative appealsappeal procedures. If the IRS prevails within its position and after taking into account the impact of the Tax Court opinion, Nexstar would be required to reduce its tax basis in certain assets resulting in a $40.0$16 million increase in its federal and state taxes payable and a $140$70 million increase in deferred income tax liability as of December 31, 2020.2023. In accordance with ASCAccounting Standards Codification (“ASC”) Topic 740, the Company has appropriately reflected $11.0$11 million for certain contested issues in its liability for unrecognizeduncertain tax benefits.positions at December 31, 2023 and December 31, 2022.
The revenue generated
Our pension and postretirement benefit plan obligations may be increased 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.a declining stock market and lower interest rates.
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.
Nexstar has various funded, qualified non-contributory defined benefit retirement plans which cover certain employees and former employees. As of December 31, 2020, 29 full power television stations have primary affiliation agreements with ABC, 35 with NBC, 43 with FOX, 49 with CBS, 23 with2023, the pension benefit obligations for these qualified retirement plans were $1.7 billion. The CWqualified retirement plans also had $1.5 billion in total net assets available, or underfunded by approximately $171 million, to pay benefits to participants enrolled in the plans as of December 31, 2023. Nexstar was not required and 16 with MNTV. Each of ABC, NBCdid not make contributions to its qualified pension benefit plans in 2023.
Nexstar also has non-contributory unfunded supplemental executive retirement 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 broadcastERISA excess plans which supplement the applicable network’s commercials during the network programming.
Allcoverage of the network affiliation agreements of the stations that we own, operate, program or provide salesdefined benefit retirement plans to certain employees and other servicesformer employees. During 2023, Nexstar contributed $4 million to are scheduled to expire at various times through December 2024. 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.”
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 MVPDs (mainly cable and satellite television providers) and OVDs. These agreements permit the distributors to retransmit our stations’ and WGN America’s 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 OVDs, services that provide video streaming 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.
28
In addition, MVPDs have actively sought 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, 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 located in the same DMA and not commonly owned, facilitate or agree to facilitate coordinated negotiation of retransmission consent terms between themselves, including through the sharing of information. Accordingly, the in-market VIEs with which we have local service agreements must separately negotiate their respective retransmission consent agreements with MVPDs and OVDs.
Concurrently with its adoption of the prohibition on certain joint retransmission consent negotiations, 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 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 if they are adopted.
Congress’s December 5, 2014 legislation also 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.
In December 2019, Congress enacted and the President signed into law the Television Viewer Protection Act of 2019 (the “TVPA”). Among other things, the TVPA directs the FCC to adopt rules that require “large [television] groups” (which, as defined in the statute, include Nexstar) to negotiate retransmission consent in good faith with certain “qualified [MVPD] buying group[s]” (as defined in the statute) comprised of multiple MVPDs. Nexstar’s obligation under the TVPA to negotiate retransmission consent on a collective basis with certain groups of MVPDs may add complexity to Nexstar’s overall negotiation process and could adversely affect the amount and flow of Nexstar’s retransmission consent revenues. We cannot predict the effect of the TVPA and the FCC’s implementing rules on our business and results of operations.
Certain OVDs have begun streaming broadcast programming over the Internet. In June 2014, the U.S. Supreme Court held that an OVD’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 OVDs 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 OVDs. Comments and reply comments were filed in 2015. Although the FCC has not classified OVDs as MVPDs to date, several OVDs 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 OVD is not an MVPD or declines to apply certain rules governing MVPDs to OVDs, our business and results of operations could be materially and adversely affected.
29
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. We are filing applications to renew our television licenses on a rolling schedule ending in April 2023. 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 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.
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. For instance, Nexstar currently owns several television stations pursuant to relaxations of FCC ownership rules that have since been negated by court review. Under certain circumstances, Nexstar could be required to divest those stations in the future. The need for FCC and other regulatory approvals could restrict the Company’s ability to consummate future transactions, 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 our 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.
Growing the Company’s business through acquisitions involves risks and if it is unable to manage effectively its growth, its operating results will suffer.
In 2020, we and Mission acquired various television stations in various markets. We also completed our acquisition of BestReviews, a company engaged in the business of testing, researching and reviewing consumer products. In 2019, we completed our merger with Tribune and acquired 31 full power television stations and one AM radio station in 23 markets (net of divestitures of 13 Tribune stations), WGN America, a national general entertainment cable network, a 31.3% ownership stake in TV Food Network and a portfolio of real estate assets. 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.
30
There are other risks associated with growing our business through acquisitions. For example, with any past or future acquisition, there is the possibility that:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 entering into and operating under 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 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 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 television JSA relationships attributable interests, and (6) defined a category of sharing agreements designated as SSAs between commercial television 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 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 eight voices test, (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. On September 23, 2019, however, the Third Circuit issued an opinion vacating the Reconsideration Order on the ground that the FCC had failed to adequately analyze the effect of the Reconsideration Order’s deregulatory rule changes on minority and woman ownership of broadcast stations. The Third Circuit later denied petitions for en banc rehearing and its decision took effect on November 29, 2019. On December 20, 2019, the FCC issued an order reinstating the local television ownership rule, the radio/television cross-ownership rule, the newspaper/broadcast cross-ownership rule and the television JSA attribution rule as they existed prior to the Reconsideration Order (including the eight voices test with respect to local television ownership). On April 17, 2020, the FCC and a group of media industry stakeholders (including Nexstar) filed separate petitions for certiorari requesting that the U.S. Supreme Court review the Third Circuit’s decision. The Supreme Court granted certiorari on October 2, 2020. It held oral argument in the case on January 19, 2021, and a decision is expected later in 2021.
31
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 were filed in the second quarter of 2019.plans. As of December 31, 2020,2023, the proceeding remains open.
The 2016 Ownership Order reinstated a ruletotal liability was $40 million. Nexstar also has various retiree medical savings account plans which reimburse eligible retired employees for certain medical expenses and unfunded plans that attributed another in-market station towardprovide certain health and life insurance benefits to certain retired employees. Although Nexstar has frozen participation and benefits under all plans, two significant elements in determining the local television ownership limits when one station owner sells more than 15% ofpension expense or credit are the second station’s weekly advertising inventory under a JSA. Parties to JSAs entered into prior to March 31, 2014 were permitted to continue to operate under these JSAs until September 30, 2025. Inexpected return on plan assets and the Reconsideration Order, the FCC eliminated the JSA attribution rulediscount rate used in its entirety. As a result of the Third Circuit’s September 2019 opinion vacating the Reconsideration Order, the rule has been reinstated, although the Third Circuit’s decision is under review by the U.S. Supreme Court.
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 changesprojecting obligations. Large declines in the regulatory approval processstock market and lower discount rates increase the expense and may make materially more expensive, or may materially delay, the Company’s ability to consummate further acquisitions in the future.
The FCC may decide to terminate “grandfathered” time brokerage agreements.
The FCC attributes TBAs and LMAsnecessitate higher cash contributions to the programmer under its ownership limits if the programmer provides more than 15% of a station’s weekly broadcast programmingqualified retirement plans.
Adverse results from litigation or governmental investigations involving us can impact our business practices and has an attributable ownership interest in a station in the same market. However, otherwise attributable TBAs and LMAs entered into prior to November 5, 1996 are exempt from attribution for now.operating results.
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 such 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, 2020, we provide services under “grandfathered” TBAs or LMAs to five television stations owned by third parties.
We are subjectparty to foreign ownership limitations which limits foreign investmentsvarious litigation and regulatory, environmental and other proceedings with governmental authorities and administrative agencies. Adverse outcomes in us.
The Communications Act limits the extent of non-U.S. ownership of companieslawsuits or investigations may result in significant monetary damages or injunctive relief 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 ownershipadversely affect our operating results or control of a licensee through a parent company if the FCC determines the public interest will 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 limitfinancial condition as well as our ability to acquire television stationsconduct our businesses as they are presently being conducted.
Any decrease 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, broadcast radio and daily newspaper 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 media facility in the same market that is subject to the FCC’s media ownership rules.
32
The Company has a material amount of goodwill and intangible assets, and therefore the Company could suffer losses due to future asset impairment charges.
As of December 31, 2020, $8.8 billion, or 65.9%, of the Company’s combined total assets consisted of goodwill and intangible assets, including FCC licenses and network affiliation agreements. 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 or 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 theour dividend payments or stock repurchases 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 20202023 a total cash dividend with respectof $5.40 per share (in equal quarterly installments of $1.35 per share) to the outstanding shares of our Class A common stockstock. In January 2024, our board of $2.24directors approved a 25% increase in the quarterly cash dividend to $1.69 per share beginning with the dividend declared in equal quarterly installmentsthe first quarter of $0.56 per share.2024. 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 investmentsengage in digital businesses.
We have invested in various digital media businesses as well as digital offerings for eachshare repurchases of our broadcast stations. Duecommon stock from time to intense competition, investmenttime in technologies that are subjectaccordance with authorizations from our board of directors. Our repurchase program does not have an expiration date and does not obligate us to a greater degreerepurchase any specific dollar amount or to acquire any specific number of obsolescence, historical impairment losses onshares. Further, our digital assets, significant reliance on third-party vendors to deliver services, limited operating history, the rapid evolving nature of digital businessesshare repurchases could affect our share trading prices or increase their volatility and difficulties in integrating acquisitions into our operations, the actual future operating results couldmay be volatile and negatively impact the year-to-year trends of our operations.
Adverse results from litigationsuspended or governmental investigations involving us can impact our business practices and operating results.
We are party to various litigation and regulatory, environmental and other proceedings with governmental authorities and administrative agencies. Adverse outcomes in lawsuits or investigationsterminated at any time, which may result in significant monetary damages or injunctive relief that may adversely affect our operating results or financial condition as well as our ability to conduct our businesses as they are presently being conducted.
33
The financial performancea decrease in the trading prices of our equity method investments could adversely impact our results of operations.common stock.
We have significant investments in businesses (primarily our 31.3% interest in TV Food Network) that we account for under the equity method of accounting. Under the equity method, we report our proportionate share of the net earnings or losses of our equity affiliates in our Consolidated Statement of Operations and Comprehensive Income under “Income (loss) on equity investments, net,” which contributes to our income from continuing operations before income taxes. For the year ended December 31, 2020, our income from equity investments from TV Food Network was $220.3 million, less the amortization of basis difference of $147.2 million (as described in more detail in Note 7 to our Consolidated Financial Statements). During this period, we also received cash distribution from TV Food Network of $223.3 million. If the earnings or losses of and distributions from our equity investments are material in any year, those earnings or losses and distributions may have a material effect on our net income, cash flows, financial condition and liquidity. We do not control the day-to-day operations of our equity method investments or have the ability to cause them to pay dividends or make other payments or advances to their stockholders, including us, and thus the management of these businesses could impact our results of operations and cash flows. Additionally, these businesses are subject to laws, regulations, market conditions and other risks inherent in their operations. Any of these factors could adversely impact our results of operations, our cash flows and the value of our investment.
25
We may not be able to adequately protect the intellectual property and other proprietary rights that are material to our business, or to defend successfully against intellectual property infringement claims by third parties.
Our business relies on a combination of patented and patent-pending technology, trademarks, trade names, copyrights, and other proprietary rights, as well as contractual arrangements, including licenses, to establish and protect its technology, intellectual property and brand names. We believe our proprietary technology, trademarks and other intellectual property rights are important to our continued success and our competitive position. Any impairment of any such intellectual property or brands could adversely impact the results of our operations or financial condition.
We seek to limit the threat of content piracy; however, policing unauthorized use of our broadcasts, products and services and related intellectual property is often difficult and the steps taken by us may not in every case prevent infringement by unauthorized third parties. Developments in technology increase the threat of content piracy by making it easier to duplicate and widely distribute pirated material. Our use of contractual provisions, confidentiality procedures and agreements, and trademark, copyright, unfair competition, trade secret and other laws to protect our intellectual property rights and proprietary technology may not be adequate. Litigation may be necessary to enforce our intellectual property rights and protect our proprietary technology, or to defend against claims by third parties that the conduct of our businesses or our use of intellectual property infringes upon such third party’s intellectual property rights. Protection of our intellectual property rights is dependent on the scope and duration of our rights as defined by applicable laws in the U.S. and abroad and the manner in which those laws are construed. If those laws are drafted or interpreted in ways that limit the extent or duration of our rights, or if existing laws are changed, our ability to generate revenue from intellectual property may decrease, or the cost of obtaining and maintaining rights may increase. There can be no assurance that our efforts to enforce our rights and protect our products, services and intellectual property will be successful in preventing content piracy.
Furthermore, any intellectual property litigation or claims brought against us, whether or not meritorious, could result in substantial costs and diversion of our resources, and there can be no assurances that favorable final outcomes will be obtained in all cases. The terms of any settlement or judgment may require us to pay substantial amounts to the other party or cease exercising our rights in such intellectual property. In addition, we may have to seek a license to continue practices found to be in violation of a third party’s rights, which may not be available on reasonable terms, or at all. Our business, financial condition or results of operations may be adversely affected as a result.
Cybersecurity risks could adversely affect the Company’s operating effectiveness.effectiveness and operating results.
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. ItWhile we have not experienced cybersecurity incidents that materially impacted our operating results and financial condition, 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 changes in our work environment as a result of health-related events and the COVID-19 pandemicsubsequent transition to increased remote work could also impact the security of our systems, as well as our ability to protect against attacks and detect and respond to them quickly. The rapid adoption of some third-party services designed to enable the transition to a remote workforcework also may introduce additional security risk that is not fully mitigated prior to the use of these services.risks. We may also be subject to increasedface additional cyber-attacks such as phishing attacks by threat actors using the attention placed on the pandemicuse supply chain or third-party attacks as a method for targetingpenetrating our personnel.computer systems. The possible consequences of such an attack include but are not limited to loss of data, damage to the Company’s reputation, interruptions to our operations, and/or the need to pay ransom. 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.
34
A significant concentration of our revenue is to a select number of customers.
During the year ended December 31, 2020, revenues from two of the Company's customers exceeded 10%. Each of these customers represents approximately 11% of the Company’s consolidated net revenues. During the years ended December 31, 2019 and 2018, no single customer provided more than 10% of the Company’s consolidated net revenues. A disruption in our relationship with any of these customers could adversely affect our business. We could experience fluctuations in our customer base or the mix of revenue by customer as markets and strategies evolve. In addition, any consolidation of our customers could reduce the number of customers to whom our services could be sold. Our inability to meet our customers’ requirements could adversely impact our revenue. The loss of one or more of our major customers or any significant reduction in the service requirements of these customers could have a material adverse effect on our business, results of operations, or financial condition.
26
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:
|
|
|
|
|
|
|
|
|
|
|
|
Because businesses generally reduce their advertising budgets during economic recessions or downturns, our 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 resulting loss of revenue and increased expenses could negatively affect our results of operations.
35
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, online 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 broadcast 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.
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. Furthermore, the FCC has authorized television broadcasters to transmit using a so-called “Next Gen” (ATSC 3.0) standard on a voluntary, market-driven basis. This new transmission standard may allow broadcast television stations to provide a multitude of enhanced services to consumers, including but not limited to the delivery of ultra-high definition video and advanced audio to home and mobile screens, new public safety capabilities such as advanced emergency alerting, and localized, personalized and interactive content. 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, exceeding $400,000 per violation (and subject to annual adjustments for inflation), 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.
36
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 other video services in addition to 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 streaming video, cable television, wireless cable, satellite-to-home distribution services, pay-per-view, home video and entertainment systems and Internet and mobile distribution of video programmingthe internet have fractionalized television viewing audiences and have subjected free over-the-air television broadcast networks, cable networks and television stations to increased competition.competition and declining viewership. 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. We may not be able to compete effectively or adjust our business plans to meet changing market conditions.
Technologies used Also, refer to “Risks Related to Our Industry––Intense competition in the entertainmenttelevision industry continue to evolve rapidly, leading toand alternative methods for the deliveryforms of media could limit our growth and storage of digital content. These technological advancements have drivenprofitability.”
New or changed federal statutes, legislation and regulations or 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 someapplication 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 ofexisting regulations could significantly impact our 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 online video programming distributors. Additionally,distributors; and the outcomes of FCC proceedings to determine whether to modify or eliminate certainappropriate substance and scope of its broadcast ownership rules have in some cases been negated by court review and are the subject of further litigation,indecency enforcement policy; and the FCC has initiated its next quadrennial proceedinga review of the broadcast ownership rules. In addition, changes in FCC and DOJ/FTC rules around owning or providing services to review the agency’s media ownership rules.
multiple stations in a local market, or other rules, could adversely impact us. 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.impact our business or operations. 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. For more information about the regulations that we are subject to see—“Federal Regulation.”
We are subject to foreign ownership limitations which limit foreign investments in us.
The Communications Act limits the extent of non-U.S. ownership of companies that own U.S. broadcast stations. Under these restrictions, 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 if the FCC determines the public interest will be served by enforcement of such restriction. The FCC has reallocatedinterpreted this provision to require an affirmative public interest showing before indirect foreign ownership of a portion of the spectrum available for use by television broadcasters to wireless broadband use, which could substantially impactbroadcast licensee may exceed 25%. Therefore, certain investors may be prevented from investing in us if our future operations and may reduce viewer access to our programming.
The FCC has repurposed a portion of the broadcast television spectrum for wireless broadband use. Pursuant to federal legislation enacted in 2012,foreign ownership is at or near the FCC conducted an incentive auction in 2016-17 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 their spectrum in exchange for consideration, and certain wireless broadband providers and other entities submitted successful bids to acquire the relinquished television spectrum. Television stations that did not relinquish their spectrum were “repacked” into the frequency band still remaining for television broadcast use.limits.
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 did not have a significant impact on our financial results because it was 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 ceased broadcasting on their current channels and implemented channel sharing arrangements. Of the two remaining stations, one moved to a very high frequency (“VHF”) channel and vacated its former channel in 2019 and the remaining station moved to a VHF channel and vacated its current channel in April 2020.
37
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 were assigned to new channels in the reduced post-auction television band. These “repack” stations have commenced operation on their new assigned channels and have ceased operating on their former channels. 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 fund is not available to reimburse repacking costs for stations which are surrendering their spectrum and entering into channel sharing relationships. Broadcasters, MVPDs and other parties have submitted to the FCC estimates of their reimbursable costs, followed by subsequent requests for reimbursement of those costs. As of January 4, 2021, verified cost estimates were over $2.19 billion, with additional reimbursements still to be made to repack stations as well as certain low power television and FM radio stations affected by the repack. As of January 7, 2021, the FCC reported that all repack stations had ceased operating on their former channel assignments. This includes all repack stations owned by Nexstar and its VIEs, although the Company will continue to incur costs to convert one station from interim to permanent facilities on its new channel. During the years ended December 31, 2020, 2019 and 2018, we spent a total of $54.7 million, $79.3 million and $26.8 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. During the years ended December 31, 2020, 2019 and 2018, we received $57.3 million, $70.4 million and $29.4 million, respectively, 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. 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. We cannot yet fully predict the impact of the incentive auction and subsequent repack on our business.
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 yet fully predict the impact of the incentive auction and subsequent repack on our business.
38
Risks Related to Tribune’s Emergence from Bankruptcy
We may not be able to settle, on a favorable basis or at all, unresolved claims filed in connection with Tribune’s Chapter 11 proceedings and resolve the appeals seeking to overturn the order confirming Tribune’s bankruptcy plan (as defined below).
On December 31, 2012, certain entities (including Tribune and certain of its direct and indirect subsidiaries) that had filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) on December 8, 2008 (or on October 12, 2009, in the case of Tribune CNLBC, LLC) (the “Debtors”) emerged from Chapter 11. Certain of the Debtors’ Chapter 11 cases have not yet been closed by the Bankruptcy Court, and certain claims asserted against the Debtors in the Chapter 11 cases remain unresolved. As a result, we expect to continue to incur certain expenses pertaining to the Chapter 11 proceedings in future periods, which may be material.27
On April 12, 2012, the Debtors, the official committee of unsecured creditors, and creditors under certain prepetition debt facilities filed a Chapter 11 plan of reorganization (the “Plan”) with the Bankruptcy Court. On July 23, 2012, the Bankruptcy Court issued an order confirming the Plan (the “Confirmation Order”).
Several notices of appeal of the Confirmation Order were filed. The appellants sought, among other relief, to overturn the Confirmation Order and certain prior orders of the Bankruptcy Court, in whole or in part, including the settlement of certain causes of action relating to the Leveraged ESOP Transactions consummated by Tribune and Tribune’s employee stock ownership plan, EGI-TRB, L.L.C., a Delaware limited liability company wholly-owned by Sam Investment Trust (a trust established for the benefit of Samuel Zell and his family) (the “Zell Entity”) and Samuel Zell in 2007, that was embodied in the Plan. See Note 17 to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.
More specifically, notices of appeal were filed on August 2, 2012 by Wilmington Trust Company (“WTC”), as successor indenture trustee for the Predecessor’s Exchangeable Subordinated Debentures due 2029 (“PHONES”), and on August 3, 2012 by the Zell Entity, Aurelius Capital Management LP, Law Debenture Trust Company of New York (n/k/a Delaware Trust Company) (“Delaware Trust Company”), successor trustee under the indenture for the Predecessor’s prepetition 6.61% debentures due 2027 and the 7.25% debentures due 2096, and Deutsche Bank Trust Company Americas, successor trustee under the indentures for the Predecessor’s prepetition medium-term notes due 2008, 4.875% notes due 2010, 5.25% notes due 2015, 7.25% debentures due 2013 and 7.5% debentures due 2023. WTC and the Zell Entity also sought to overturn determinations made by the Bankruptcy Court concerning the priority in right of payment of the PHONES and the subordinated promissory notes held by the Zell Entity and its permitted assignees, respectively.
As of December 31, 2020, each of the Confirmation Order appeals have been dismissed or otherwise resolved by a final order, with the exception of the appeals of Delaware Trust Company and Deutsche Bank. On July 30, 2018, the United States District Court for the District of Delaware (the “District Court”) entered an order affirming (i) the Bankruptcy Court’s judgment overruling Delaware Trust Company’s and Deutsche Bank’s objections to confirmation of the Plan and (ii) the Bankruptcy Court’s order confirming the Plan. Delaware Trust Company and Deutsche Bank appealed the District Court’s order to the United States Court of Appeals for the Third Circuit (the “Third Circuit”) on August 27, 2018. That appeal remains pending before the Third Circuit. If the remaining appellants succeed on their appeals, our financial condition may be adversely affected.
39
Risks Related to Tribune Publishing’s Spin-Off
If the Tribune Publishing Company (“Tribune Publishing”) spin-off does not qualify as a tax-free distribution under Section 355 of the Internal Revenue Code, (“IRC”), including as a result of subsequent acquisitions of stock of Tribune or Tribune Publishing, then Tribune may be required to pay substantial U.S. federal income taxes.
On August 4, 2014, Tribune completed a separation transaction, resulting in the spin-off of the assets (other than owned real estate and certain other assets) and certain liabilities of the businesses primarily related to Tribune’s then principal publishing operations through a tax-free, pro rata dividend to its stockholders and warrant holders of 98.5% of the shares of common stock of Tribune Publishing. At that time, Tribune retained 1.5% of the outstanding common stock of Tribune Publishing. The publishing operations consisted of newspaper publishing and local news and information gathering functions that operated daily newspapers and related websites, as well as a number of ancillary businesses that leveraged certain of the assets of those businesses. As a result of the completion of the spin-off, Tribune Publishing operates the Publishing Businesspublishing business as an independent, publicly-traded company. On January 31, 2017, Tribune sold its remaining Tribune Publishing shares.
In connection with the Tribune Publishing spin-off, Tribune received a private letter ruling (the “IRS Ruling”) from the IRS to the effect that the distribution and certain related transactions qualified as tax-free to Tribune, its then stockholders and warrant holders and Tribune Publishing for U.S. federal income tax purposes. Although a private letter ruling from the IRS generally is binding on the IRS, the IRS Ruling did not rule that the distribution satisfies every requirement for a tax-free distribution, and the parties have relied on the opinion of special tax counsel, Debevoise & Plimpton LLP, to the effect that the distribution and certain related transactions qualified as tax-free to Tribune and its then stockholders and warrant holders. The opinion of the special tax counsel relied on the IRS Ruling as to matters covered by it.
The IRS Ruling and the opinion of the special tax counsel were based on, among other things, certain representations and assumptions as to factual matters made by Tribune and certain of its then stockholders. The failure of any factual representation or assumption to be true, correct and complete in all material respects could adversely affect the validity of the IRS Ruling or the opinion of the special tax counsel. An opinion of counsel represents counsel’s best legal judgment and is not binding on the IRS or the courts, and the IRS or the courts may not agree with the opinion. In addition, the IRS Ruling and the opinion of the special tax counsel were based on the current law then in effect, and cannot be relied upon if current law changes with retroactive effect.
If the Tribune Publishing spin-off is ultimately determined not to be tax free,tax-free, we could be liable for the U.S. federal and state income taxes imposed as a result of the transaction. Furthermore, events subsequent to the distribution could cause us to recognize a taxable gain in connection therewith. Although Tribune Publishing is required to indemnify us against taxes on the distribution that arise after the distribution as a result of actions or failures to act by Tribune Publishing or any member thereof, Tribune Publishing’s failure to meet such obligations and our administrative and legal costs in enforcing such obligations may have a material adverse effect on our financial condition.
40
Federal and state fraudulent transfer laws and Delaware corporate law may permit a court to void the Tribune Publishing spin-off, which would adversely affect our financial condition and our results of operations.
In connection with the Tribune Publishing spin-off, Tribune undertook several corporate reorganization transactions which, along with the contribution of the Tribune Publishing business, the distribution of Tribune Publishing shares and the cash dividend that was paid to Tribune, may be subject to challenge under federal and state fraudulent conveyance and transfer laws as well as under Delaware corporate law, even though the Tribune Publishing spin-off has been completed. Under applicable laws, any transaction, contribution or distribution contemplated as part of the Tribune Publishing spin-off could be voided as a fraudulent transfer or conveyance if, among other things, the transferor received less than reasonably equivalent value or fair consideration in return for, and was insolvent or rendered insolvent by reason of, the transfer.
We cannot be certain as to the standards a court would use to determine whether or not any entity involved in the Tribune Publishing spin-off was insolvent at the relevant time. In general, however, a court would look at various facts and circumstances related to the entity in question, including evaluation of whether or not:
• the sum of its debts, including contingent and unliquidated liabilities, was greater than the fair market value of all of its assets;28
• the present fair market value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or
• it could pay its debts as they become due.
If a court were to find that any transaction, contribution or distribution involved in the Tribune Publishing spin-off was a fraudulent transfer or conveyance, the court could void the transaction, contribution or distribution. In addition, the distribution could also be voided if a court were to find that it is not a legal distribution or dividend under Delaware corporate law. The resulting complications, costs and expenses of either finding would materially adversely affect our financial condition and results of operations.
We may be exposed to additional liabilities as a result of the Tribune Publishing spin-off.
The separation and distribution agreement Tribune entered into in connection with the Tribune Publishing spin-off sets forth the distribution of assets, liabilities, rights and obligations of Tribune and Tribune Publishing following the spin-off, and includes indemnification obligations for such liabilities and obligations. In addition, pursuant to the tax matters agreement, certain income tax liabilities and related responsibilities are allocated between, and indemnification obligations have been assumed by, each of Tribune and Tribune Publishing. In connection with the Tribune Publishing spin-off, Tribune also entered into an employee matters agreement, pursuant to which certain obligations with respect to employee benefit plans were allocated to Tribune Publishing. Each company will rely on the other company to satisfy its performance and payment obligations under these agreements. Certain of the liabilities to be assumed or indemnified by Tribune or Tribune Publishing under these agreements are legal or contractual liabilities of the other company. However, it could be later determined that Tribune must retain certain of the liabilities allocated to Tribune Publishing pursuant to these agreements, including with respect to certain multiemployer benefit plans, which amounts could be material. Furthermore, if Tribune Publishing were to breach or be unable to satisfy its material obligations under these agreements, including a failure to satisfy its indemnification obligations, Tribune could suffer operational difficulties or significant losses.
41
| Item 1B. Unresolved Staff Comments |
None.
None.
Item 1C. Cybersecurity
Cybersecurity Governance, Risk Management and Strategy
In the current digital environment, companies like ours may be the target of cyber-attacks or other malicious efforts to cause a cyber incident. These cyber 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 possible consequences of such an attack include but are not limited to loss of data, damage to the Company’s reputation, interruptions to our operations, and/or the need to pay ransom. Historically, we have not experienced cybersecurity incidents that materially impacted our business strategy, operating results and financial condition but we cannot guarantee a future cybersecurity incident would not materially impact us.
We recognize the importance of maintaining the confidence and trust of our customers, suppliers, employees, audience, and communities by maintaining our data and information security. In managing our cyber risk, we utilize the National Institute of Standards and Technology Framework for Improving Critical Infrastructure Cybersecurity (the “NIST Framework”) issued by the U.S. government as a guideline to manage our cybersecurity-related risk. In addition, we have established security control requirements for our third party vendors based on global standards.
Our day-to-day cybersecurity efforts are led operationally by our Chief Technology and Digital Officer and Senior Vice President, Technology who have over 10 and 25 years, respectively, of networking and information technology management or executive experience, and oversee a team of in-house cybersecurity specialists. Our Cybersecurity Committee, comprised of representatives from key management groups including accounting, finance, legal, internal audit, and information technology, also supports our cybersecurity efforts. The Cybersecurity Committee consults with representatives from senior management and retains third-party contractors as needed. The role of the Cybersecurity Committee is to oversee cyber risk assessments, monitor applicable key risk indicators, review cybersecurity training procedures, establish cybersecurity policies and procedures, and implement enhancements to our cybersecurity infrastructure. The Cybersecurity Committee meets monthly, or more regularly as necessary, and ensures that senior management, and ultimately, the Board, is given the information required to manage and exercise proper oversight over cybersecurity risks and ensure that escalation procedures are followed in the event of a cybersecurity incident.
As part of its role as independent oversight of the key risks facing Nexstar, the Board itself and through its Audit Committee devotes regular and thorough attention to our cybersecurity risk. The Audit Committee receives quarterly (or more frequent as necessary) reports from senior financial executives and Nexstar’s Chief Technology and Digital Officer to evaluate cybersecurity and data risks. Such reporting includes updates on the Company’s cybersecurity program, the external threat environment, and the Company’s programs to address and mitigate the risks associated with the evolving cybersecurity threat landscape. In accordance with our Cyber Incident Response Plan, the Audit Committee is promptly informed of any cybersecurity incidents that could potentially materially adversely affect the Company or its information systems and is regularly updated about incidents with lesser impact potential. The Audit Committee and management regularly brief the full Board on these matters as well.
For additional discussion of certain risks associated with cybersecurity, see “Risk Factors” under the heading “Cybersecurity risks could affect the Company’s operating effectiveness.”
29
Item 2. Properties
|
|
We have office space for our corporate headquarters in Irving, TX, which is leased through 2024.2033. Each of our markets has facilities consisting of offices, studios, sales offices and tower and transmitter sites. We own approximately 56%53% of our office and studio locations and approximately 60%55% of our tower and transmitter locations. The remaining properties that we utilize in our operations 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 is 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
|
|
The information set forth under Note 1716 to our Consolidated Financial Statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K is incorporated herein by reference. For additional discussion of certain risks associated with legal proceedings, see “Risk Factors” above.”
Item 4. Mine Safety Disclosures None. 30
|
|
None.
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 Stockcommon stock trades on The NASDAQ Global Select Market (“NASDAQ”) under the symbol “NXST.”
As of February 23, 2021,27, 2024, there were approximately 58,000180,000 shareholders of record of our Class A Common Stock,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 2020, 20192023, 2022 and 20182021 total annual cash dividends of $2.24$5.40 per share, $1.80$3.60 per share and $1.50$2.80 per share, respectively, with respect to outstanding shares of our Class A common stock. The dividends were paid in equal quarterly installments.
On January 27, 2021,26, 2024, our board of directors approved a 25% increase in the quarterly cash dividend to $0.70$1.69 per share of outstanding Class A Common Stockcommon stock beginning with the first quarter of 2021.2024. 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 Nexstar’s existing notes limit our 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
The following is a summary of Nexstar’s repurchases of its Class A common stock by month during the fourth quarter of 2020:2023 (in millions, except for share and per share information):
|
|
|
|
|
|
|
|
|
| Total Number of Shares |
|
| Approximate Dollar Value |
| ||
|
|
|
|
|
|
|
|
|
| Purchased as Part of |
|
| of Shares That May Yet Be |
| ||
|
| Total Number |
|
| Average Price |
|
| Publicly Announced |
|
| Purchased Under the |
| ||||
|
| of Shares Purchased |
|
| Paid per Share |
|
| Plans or Programs |
|
| Plans or Programs |
| ||||
November 9 - 20, 2020 |
|
| 481,235 |
|
| $ | 99.54 |
|
|
| 481,235 |
|
| $ | 211,312,650 |
|
December 11 - 28, 2020 |
|
| 354,510 |
|
| $ | 102.61 |
|
|
| 354,510 |
|
|
| 174,934,661 |
|
|
|
| 835,745 |
|
| $ | 100.84 |
|
|
| 835,745 |
|
|
|
|
|
|
|
|
|
|
|
|
| Total Number of Shares |
|
| Approximate Dollar Value |
| ||||
|
|
|
|
|
|
|
| Purchased as Part of |
|
| of Shares That May Yet Be |
| ||||
|
| Total Number |
|
| Average Price |
|
| Publicly Announced |
|
| Purchased Under the |
| ||||
|
| of Shares Purchased |
|
| Paid per Share |
|
| Plans or Programs |
|
| Plans or Programs |
| ||||
October 4 ̶ 25, 2023 |
|
| 267,321 |
|
| $ | 140.27 |
|
|
| 267,321 |
|
| $ | 706 |
|
November 15 ̶ 30, 2023 |
|
| 132,390 |
|
| $ | 148.18 |
|
|
| 132,390 |
|
|
| 687 |
|
December 1 ̶ 29, 2023 |
|
| 229,758 |
|
| $ | 149.01 |
|
|
| 229,758 |
|
|
| 652 |
|
|
|
| 629,469 |
|
| $ | 145.13 |
|
|
| 629,469 |
|
|
|
| |
On JanuaryJuly 27, 2021,2022, our Boardboard of Directorsdirectors approved a new share repurchase program authorizing the Company to repurchase up to $1.0an additional $1.5 billion of its Class A common stock. The new $1.0 billion share repurchase program increased the Company’s existing share repurchase authorization,stock, of which $174.9 million$1.258 billion remained outstandingavailable as of December 31, 2020.2022. During the year ended December 31, 2023, Nexstar repurchased a total of 3,782,104 shares of its common stock for $605 million, funded by cash on hand, which were accounted for as treasury stock. As of December 31, 2023, the remaining available amount under the share repurchase authorization was $652 million.
Share repurchases are executed from time to time in open market transactions, block trades or in private transactions, including through Rule 10b5-1 plans. There is no minimum number of shares that Nexstar is required to repurchase. The repurchase program does not have an expiration date and may be suspended or discontinued at any time without prior notice.
31
Securities Authorized for Issuance Under Equity Compensation Plans as of December 31, 20202023
|
| Number of securities |
|
|
|
|
| Number of securities |
| |||
|
| to be issued upon |
|
| Weighted average |
|
| remaining available |
| |||
|
| exercise of outstanding |
|
| exercise price of |
|
| for future issuance |
| |||
|
| options and vesting of |
|
| outstanding |
|
| excluding securities |
| |||
Plan Category |
| restricted stock units |
|
| options |
|
| reflected in column (a) |
| |||
|
| (a) |
|
| (b) |
|
| (c) |
| |||
Equity compensation plans approved by security holders(1) |
|
| 1,232,959 |
|
| $ | 47.17 |
|
|
| 1,562,447 |
|
Equity compensation plans not approved by security holders |
|
| - |
|
|
| - |
|
|
| - |
|
|
|
| 1,232,959 |
|
| $ | 47.17 |
|
|
| 1,562,447 |
|
|
| Number of |
|
|
|
|
|
|
|
|
| |
|
| securities to be |
|
| Weighted |
|
| Number of securities |
| |||
|
| issued upon |
|
| average exercise |
|
| remaining available |
| |||
|
| exercise of |
|
| price of |
|
| for future issuance |
| |||
|
| outstanding |
|
| outstanding |
|
| excluding securities |
| |||
Plan Category |
| options |
|
| options |
|
| reflected in column (a) |
| |||
|
| (a) |
|
| (b) |
|
| (c) |
| |||
Equity compensation plans approved by security holders |
|
| 1,504,873 |
|
| $ | 21.42 |
|
|
| 2,852,958 |
|
Equity compensation plans not approved by security holders |
|
| - |
|
|
| - |
|
|
| - |
|
|
|
| 1,504,873 |
|
| $ | 21.42 |
|
|
| 2,852,958 |
|
For a more detailed description of our equity plans and grants, we refer you to Note 1413 to the Consolidated Financial Statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K.
43
Comparative Stock Performance Graph
The following graph compares the total return of our Class A Common Stockcommon stock based on closing prices for the period from December 31, 20152018 through December 31, 20202023 with the total return of the NASDAQ Composite Index and our peer index of pure playcomparable television companies. Our peer group index consists of the following publicly traded companies: Gray Television, Inc., Tegna, Inc., Sinclair, Inc. (“Sinclair”), The E.W. Scripps Company, Fox Corporation and Sinclair.Paramount Global. The graph assumes the investment of $100 in our Class A Common Stockcommon stock and in both of the indices on December 31, 2015,2018, with the reinvestment of dividends into shares of our Class A Common Stockcommon stock or the indices, as applicable. The performance shown is not necessarily indicative of future performance.
| 12/31/2018 |
|
| 12/31/2019 |
|
| 12/31/2020 |
|
| 12/31/2021 |
|
| 12/31/2022 |
|
| 12/31/2023 |
| ||||||||||||
Nexstar Media Group, Inc. (NXST) | $ |
| 100.00 |
|
| $ |
| 151.87 |
|
| $ |
| 145.00 |
|
| $ |
| 204.37 |
|
| $ |
| 241.77 |
|
| $ |
| 223.71 |
|
NASDAQ Composite Index | $ |
| 100.00 |
|
| $ |
| 136.69 |
|
| $ |
| 198.10 |
|
| $ |
| 242.03 |
|
| $ |
| 163.28 |
|
| $ |
| 236.17 |
|
Peer Group | $ |
| 100.00 |
|
| $ |
| 109.58 |
|
| $ |
| 96.01 |
|
| $ |
| 97.64 |
|
| $ |
| 72.12 |
|
| $ |
| 65.21 |
|
Item 6. Reserved
| 12/31/2015 |
|
| 12/31/2016 |
|
| 12/31/2017 |
|
| 12/31/2018 |
|
| 12/31/2019 |
|
| 12/31/2020 |
| ||||||||||||
Nexstar Media Group, Inc. (NXST) | $ |
| 100.0 |
|
| $ |
| 110.00 |
|
| $ |
| 138.61 |
|
| $ |
| 142.27 |
|
| $ |
| 216.06 |
|
| $ |
| 206.29 |
|
NASDAQ Composite Index | $ |
| 100.0 |
|
| $ |
| 108.87 |
|
| $ |
| 141.13 |
|
| $ |
| 137.12 |
|
| $ |
| 187.44 |
|
| $ |
| 271.64 |
|
Peer Group | $ |
| 100.0 |
|
| $ |
| 89.48 |
|
| $ |
| 101.39 |
|
| $ |
| 78.18 |
|
| $ |
| 111.76 |
|
| $ |
| 100.21 |
|
32
44
|
|
The selected consolidated financial data as of and for the years ended December 31, 2020, 2019, 2018, 2017, and 2016 are presented in the table below. The period-to-period comparability of our consolidated financial statements is affected by acquisitions. Fiscal year 2020 is a political year and all of the full power television stations we acquired in September 2019 were in full operations in the current year. In 2020, we and Mission acquired various full power television stations in various markets, and we also acquired BestReviews. In 2019, we acquired 23 full power television stations, net of all station divestitures, one AM radio station, a national entertainment cable network, a 31.3% interest in TV Food Network and a portfolio of real estate assets. In 2018, we acquired or began providing services to five full power television stations and acquired one digital business. In 2017, we acquired or began providing services to 65 full power television stations, net of all station divestitures, and acquired two digital businesses. In 2016, we acquired nine full power television stations, including consolidated VIEs. 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.
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2016 |
| |||||
Statements of Operations Data, for the years ended December 31: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
| $ | 4,501,269 |
|
| $ | 3,039,324 |
|
| $ | 2,766,696 |
|
| $ | 2,431,966 |
|
| $ | 1,103,190 |
|
Operating expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses |
|
| 182,960 |
|
|
| 189,548 |
|
|
| 110,921 |
|
|
| 138,394 |
|
|
| 51,177 |
|
Direct operating expenses, net of trade |
|
| 1,708,124 |
|
|
| 1,331,248 |
|
|
| 1,101,423 |
|
|
| 978,930 |
|
|
| 371,242 |
|
Selling, general and administrative expenses, excluding corporate |
|
| 729,097 |
|
|
| 540,433 |
|
|
| 469,012 |
|
|
| 466,712 |
|
|
| 212,429 |
|
Trade and barter expense |
|
| 12,396 |
|
|
| 17,384 |
|
|
| 16,494 |
|
|
| 56,970 |
|
|
| 45,439 |
|
Depreciation |
|
| 147,688 |
|
|
| 123,375 |
|
|
| 109,789 |
|
|
| 100,658 |
|
|
| 51,300 |
|
Amortization of intangible assets |
|
| 279,710 |
|
|
| 200,317 |
|
|
| 149,406 |
|
|
| 159,500 |
|
|
| 46,572 |
|
Amortization of broadcast rights, excluding barter |
|
| 137,490 |
|
|
| 85,018 |
|
|
| 61,342 |
|
|
| 62,908 |
|
|
| 22,461 |
|
Goodwill and intangible assets impairment(1) |
|
| - |
|
|
| 63,317 |
|
|
| 19,911 |
|
|
| 19,985 |
|
|
| 15,262 |
|
Gain on disposal of stations, net(2) |
|
| (7,473 | ) |
|
| (96,091 | ) |
|
| - |
|
|
| (57,716 | ) |
|
| - |
|
Reimbursement from the FCC related to station repack(3) |
|
| (57,261 | ) |
|
| (70,356 | ) |
|
| (29,381 | ) |
|
| - |
|
|
| - |
|
Change in the fair value of contingent consideration attributable to a merger(4) |
|
| 3,933 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Gain on relinquishment of spectrum(4) |
|
| (10,791 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total operating expenses |
|
| 3,125,873 |
|
|
| 2,384,193 |
|
|
| 2,008,917 |
|
|
| 1,926,341 |
|
|
| 815,882 |
|
Income from operations(5) |
|
| 1,375,396 |
|
|
| 655,131 |
|
|
| 757,779 |
|
|
| 505,625 |
|
|
| 287,308 |
|
Income (loss) on equity investments, net(6) |
|
| 70,154 |
|
|
| 17,925 |
|
|
| (2,436 | ) |
|
| (1,268 | ) |
|
| (562 | ) |
Interest expense, net |
|
| (335,303 | ) |
|
| (304,350 | ) |
|
| (220,994 | ) |
|
| (241,195 | ) |
|
| (116,081 | ) |
Loss on extinguishment of debt, net(7) |
|
| (50,745 | ) |
|
| (10,301 | ) |
|
| (12,120 | ) |
|
| (34,882 | ) |
|
| - |
|
Pension and other postretirement plans credit, net(8) |
|
| 46,010 |
|
|
| 15,600 |
|
|
| 10,755 |
|
|
| 13,120 |
|
|
| - |
|
Other (expenses) income |
|
| (944 | ) |
|
| (684 | ) |
|
| (39 | ) |
|
| (16 | ) |
|
| 7 |
|
Income before income taxes |
|
| 1,104,568 |
|
|
| 373,321 |
|
|
| 532,945 |
|
|
| 241,384 |
|
|
| 170,672 |
|
Income tax (expense) benefit(9) |
|
| (296,508 | ) |
|
| (137,026 | ) |
|
| (144,680 | ) |
|
| 233,943 |
|
|
| (77,572 | ) |
Net income |
|
| 808,060 |
|
|
| 236,295 |
|
|
| 388,265 |
|
|
| 475,327 |
|
|
| 93,100 |
|
Net (income) loss attributable to noncontrolling interests |
|
| 3,381 |
|
|
| (6,036 | ) |
|
| 1,212 |
|
|
| (330 | ) |
|
| (1,563 | ) |
Net income attributable to Nexstar Media Group, Inc. |
| $ | 811,441 |
|
| $ | 230,259 |
|
| $ | 389,477 |
|
| $ | 474,997 |
|
| $ | 91,537 |
|
Net income per common share attributable to Nexstar Media Group, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 18.06 |
|
| $ | 5.01 |
|
| $ | 8.52 |
|
| $ | 10.38 |
|
| $ | 2.98 |
|
Diluted |
| $ | 17.37 |
|
| $ | 4.80 |
|
| $ | 8.21 |
|
| $ | 10.07 |
|
| $ | 2.89 |
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 44,921 |
|
|
| 45,986 |
|
|
| 45,718 |
|
|
| 45,754 |
|
|
| 30,687 |
|
Diluted |
|
| 46,720 |
|
|
| 47,923 |
|
|
| 47,412 |
|
|
| 47,149 |
|
|
| 31,664 |
|
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2016 |
| |||||
Balance Sheet data, as of December 31: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 152,701 |
|
| $ | 232,070 |
|
| $ | 145,115 |
|
| $ | 115,652 |
|
| $ | 87,680 |
|
Working capital |
|
| 479,094 |
|
|
| 404,210 |
|
|
| 362,903 |
|
|
| 385,515 |
|
|
| 173,639 |
|
Net intangible assets and goodwill |
|
| 8,832,913 |
|
|
| 9,177,960 |
|
|
| 5,438,145 |
|
|
| 5,492,110 |
|
|
| 1,340,565 |
|
Total assets(1) |
|
| 13,404,276 |
|
|
| 13,989,737 |
|
|
| 7,062,030 |
|
|
| 7,481,647 |
|
|
| 2,966,085 |
|
Total debt(1) |
|
| 7,668,003 |
|
|
| 8,492,588 |
|
|
| 3,981,003 |
|
|
| 4,362,460 |
|
|
| 2,342,419 |
|
Total stockholders’ equity |
|
| 2,536,876 |
|
|
| 2,053,493 |
|
|
| 1,868,984 |
|
|
| 1,581,310 |
|
|
| 284,354 |
|
Statements of Cash Flows data, for the years ended December 31: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
| $ | 1,254,170 |
|
| $ | 417,467 |
|
| $ | 736,867 |
|
| $ | 109,091 |
|
| $ | 284,253 |
|
Investing activities(2) |
|
| (39,750 | ) |
|
| (4,702,155 | ) |
|
| (175,514 | ) |
|
| (2,066,285 | ) |
|
| (135,122 | ) |
Financing activities(2) |
|
| (1,293,789 | ) |
|
| 4,388,251 |
|
|
| (531,890 | ) |
|
| 1,057,367 |
|
|
| 822,932 |
|
Capital expenditures, net of proceeds from asset disposals(3) |
|
| 214,394 |
|
|
| 193,060 |
|
|
| 101,902 |
|
|
| 52,435 |
|
|
| 31,152 |
|
Cash payments for broadcast rights |
|
| 193,586 |
|
|
| 100,630 |
|
|
| 61,979 |
|
|
| 62,531 |
|
|
| 23,004 |
|
|
|
|
|
|
|
46
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
20202023 Highlights
|
|
|
|
|
|
|
|
|
|
2020 Nexstar Acquisitions
On December 29, 2020, we acquired 100.0% of the membership interests in BestReviews from TribPub and BR Holdco for $169.9 million in cash, funded by cash on hand. BestReviews engages in the business of testing, researching and reviewing consumer products. The acquisition of BestReviews diversifies
On September 17, 2020, we acquired WDKY-TV, the Fox affiliate in the Lexington, KY market, from Sinclair for $18.0$125 million, in cash, funded by cash on hand. This acquisition allowed us entry into this market.
On March 2, 2020, we
On January 27, 2020, we acquired certain non-license assets associated with television station KGBT-TV in the Harlingen-Weslaco-Brownsville-McAllen, Texas market from Sinclair for $17.9 million in cash funded by cash on hand.
47
2020 Mission Acquisitions
On December 30, 2020, Mission, our consolidated VIE, acquired the CW affiliate station WPIX in New York, NY from Scripps. Mission funded the purchase price of $85.1 million in cash through a combination of borrowing from its revolving credit facility and cash on hand. Upon Mission’s acquisition of WPIX, it entered into a TBA with us. Mission also granted us an option to purchase WPIX from Mission, subject to FCC consent. These transactions allowed the Company’s entry into this market.
On November 23, 2020, Mission acquired WXXA, the Fox affiliate in the Albany, NYTampa, Florida market and WLAJ, the ABC affiliate in the Lansing, MI market, from Shield for $20.8 million in cash, funded through a combination of Mission’s borrowing from its revolving credit facility and cash on hand. Effective on November 23, 2020, Mission assumed the existing JSAs and SSAs between Shield and us for the stations. Mission also granted us options to purchase the stations from Mission, subject to FCC consent. Mission’s purchase of these stations allowed its entry into these markets. Prior to Mission’s acquisition, we were the primary beneficiary of these stations and consolidated their accounts into our financial statements. Under Mission’s ownership, we remained the primary beneficiary and continued to consolidate these stations into our financial statements.
On November 16, 2020, Mission acquired KASY, KWBQ and KRWB from Tamer for $1.8 million in cash, funded through a combination of Mission’s borrowing from its revolving credit facility and cash on hand. KASY (an MNTV affiliate), KWBQ (a CW affiliate) and KRWB (a CW affiliate) areKUSI-TV, an independent full power television stationsstation serving the Albuquerque, New Mexico market. Effective on November 16, 2020, Mission assumed the existing SSA between Tamer and usSan Diego, CA market, for the stations. Mission also granted us an option to purchase the stations from Mission, subject to FCC consent. Mission’s purchase of these stations allowed its entry into this market. Prior to Mission’s acquisition, we were the primary beneficiary of these stations and consolidated their accounts into our financial statements. Under Mission’s ownership, we remained the primary beneficiary and continued to consolidate these stations into our financial statements.
On September 1, 2020, Mission acquired television stations KMSS serving the Shreveport, Louisiana market, KPEJ serving the Odessa, Texas market and KLJB serving the Quad Cities, Iowa/Illinois market from Marshall. Thea combined total purchase price for the acquisition was $53.2 million, of which $49.0 million was applied against Mission’s existing loans receivable from Marshall on a dollar-for-dollar basis and the remaining $4.2$38 million in cash was fundedcash.
2020 Nexstar Dispositions
On March 2, 2020, we completed the sale of Fox affiliate television station KCPQ and the MNTV affiliate television station KZJO in the Seattle, WA market, as well as Fox affiliate television station WITI in the Milwaukee, WI market,2023 annual meeting, to, Fox for approximately $349.9 million in cash, resulting in a net gain of $4.7 million. Our proceeds from the sale of the stations were partially used to prepay a portion of our term loans.
On January 14, 2020, we sold our sports betting information website business to Star Enterprises Ltd., a subsidiary of Alto Holdings, Ltd., for a net consideration of $12.9 million (net of $2.4 million cash balance of this business that was transferred to the buyer upon sale). We recognized a $2.4 million gain on disposal of this business.
See also Notes 3 and 9 to our Consolidated Financial Statements in Part IV, Item 15(a) of this Annual Report on Form 10-K for additional information on the above transactions.
48
2020 Debt Transactions
|
|
|
|
|
|
|
|
|
|
|
|
Impact of COVID-19 Pandemic
COVID-19 was first reported in late 2019 and has since dramatically impacted the global health and economic environment, including millions of confirmed cases, business slowdowns or shutdowns, government challenges and market volatility. In March 2020, the World Health Organization characterized COVID-19 as a pandemic and the President of the United States declared the COVID-19 pandemic a national emergency. The virus continues to spread throughout the U.S. and the world and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders and business limitations and shutdowns. While we are unable to accurately predict the full impact that COVID-19 will have on our future results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration, severity and containment measures, our compliance and the measures we have taken around the pandemic situation have impacted our day-to-day operations and disrupted our business and operations, as well as those of our key business partners, affiliates, vendors and other counterparties, and will continue to do so for an indefinite period of time. In response to COVID-19, we implemented remote working for many of our employees. Our work locations developed and implemented their own plans for staffing during the pandemic, with a focus on reducing headcounts within our facilities to reduce the risk for those employees whose job functions could not be performed remotely, and in compliance with applicable state and local safety requirements and protocols. Our leadership, crisis management and business resumption teams and local site leadership continue closely to monitor and address the developments, including the impact on our company, our employees, our customers, our suppliers and our communities. We considered and continue to consider guidance from the Centers for Disease Control, other health organizations, federal, state and local governmental authorities, and our customers, among others. We have taken, and continue to take, robust actions to help protect the health, safety and well-being of our employees, to support our suppliers and local communities, and to continue to serve our customers.
49
The disruptions caused by COVID-19 had an adverse impact on our business and our financial results mostly in the first part of the second quarter of 2020. This was followed by a significant improvement in our financial results through December 31, 2020 as certain areas throughout the United States permitted the re-opening of non-essential businesses, which has had a favorable impact to the macroeconomic environment and to the Company’s revenue. The current year results were also higher than prior year primarily due to the increase in revenue from political advertising and contributions from the acquisition of Tribune in September 2019. Overall, the Company remained profitable in 2020 and the disruptions from COVID-19 did not have a material impact on its liquidity. There were also no material changes in our customer mix, including our advertisers, MVPDs and OVDs. As of December 31, 2020, our unrestricted cash on hand amounted to $152.7 million, a decrease from the December 31, 2019 level of $232.1 million as we allocated resources toward acquisition of businesses and leverage reduction, including debt prepayments, repurchases of our Class A common stock and dividends to stockholders. As of December 31, 2020, we had a positive working capital of $479.1 million, an increase from the December 31, 2019 levels of $404.2 million. We continue to generate operating cash flows and we believe we have sufficient unrestricted cash on hand and have the availability to access additional cash up to $92.7 million and $3.0 million under our and Mission’s respective amended revolving credit facilities (with a maturity date of October 2023) to meet our business operating requirements, our capital expenditures and to continue to service our debt for at least the next 12 months as of the filing date of this Annual Report on Form 10-K. The full extent of the impact of the COVID-19 pandemic on our future business operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity and impact of the COVID-19 pandemic, and any additional preventative and protective actions that the U.S. government, or the Company, may direct, which may result in an extended period of continued business disruption. Further financial impact cannot be reasonably estimated at this time but may continue to have a material impact on our business and results of operations and may also have a material impact on our financial condition and liquidity. We will continue to evaluate the nature and extent of the impact of COVID-19 on our business in future periods.
The CARES Act
On March 27, 2020, the CARES Act was signed into law. The CARES Act provides opportunities for additional liquidity, loan guarantees, and other government programs to support companies affected by the COVID-19 pandemic and their employees. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, defermentdeclassify its Board of employer side social security payments, deferral of contributions to qualified pension plans and other postretirement benefit plans, net operating loss carryback periods, alternative minimum tax credit refunds, modifications toDirectors beginning at the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. In particular, under the CARES Act, (i) for taxable years beginning before 2021, net operating loss carryforwards and carrybacks may offset 100% of taxable income, (ii) NOLs arising in 2018, 2019, and 2020 taxable years may be carried back to each of the preceding five years to generate a refund and (iii) for taxable years beginning in 2019 and 2020, the base for interest deductibility is increased from 30% to 50% of EBITDA. Under the CARES Act, we elected to defer $31.7 million of employer social security payments in two equal installments on December 31, 2021 and 2022. We elected not to defer any cash contribution requirements to our qualified pension plans under the CARES Act. We intend to continue to review and consider any available potential benefits under the CARES Act for which we qualify, including those described above. The U.S. government or any other governmental authority that agrees to provide such aid under the CARES Act or any other crisis relief assistance may impose certain requirements on the recipients of the aid, including restrictions on executive officer compensation, dividends, prepayment of debt, limitations on debt and other similar restrictions that will apply for a period of time after the aid is repaid or redeemed in full.2024 annual meeting.
33
Overview of Operations
As of December 31, 2020, January 2024, we owned, operated, programmed or provided sales and other services to 198201 full power television stations and one AM radio station, including those owned by VIEs, in 116117 markets in 3940 states and the District of Columbia. 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 37 full power television stations owned by independent third parties, of which 3635 full power television stations are VIEs that are consolidated into our financial statements. See Note 2 to our Consolidated Financial Statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K for a discussion of the local service agreements we have with these independent third parties. We also own WGN America, a national general entertainment cable network and the home of our national newscast NewsNation, digital multicast network services, various digital products, services and content, a 31.3% ownership stake in TV Food Network, and a portfolio of real estate assets.
On October 1, 2020, Nexstar Broadcasting, Inc., our wholly-owned subsidiary, filed a Certificate of Amendment with the Secretary of State of Delaware to change its name to Nexstar Inc. In connection with this change, effective on November 1, 2020, we merged our two primary operating subsidiaries, Nexstar Inc. and Nexstar Digital, LLC, with Nexstar Inc. surviving the merger as our single operating subsidiary. Accordingly, our broadcasting, network and digital businesses are now operating under the Nexstar Inc. umbrella.
50
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, 2020 and 2019, revenue generated by our television stations from core local advertising represented approximately 69% and 72%, respectively, of our consolidated core advertising net revenue (total of core local and national advertising revenue, excluding political advertising revenue). The remaining core 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 is its distribution revenue which relates to retransmission of Company stations’ signals and the carriage of WGN America (NewsNation and other entertainment programming) by cable, satellite and other MVPDs and OVDs. 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 consent and carriage agreements generally have a three-year term), scheduled annual escalation of rates per subscriber, and the establishment of distribution agreements with OVDs. 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 that 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 that they will continue to increase over the next several years.
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.
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 senior secured credit facility in the event of its default. Mission is a guarantor of our senior secured credit facility, our 5.625% Notes due 2027 and our 4.75% Notes due 2028. In consideration of our guarantee of Mission’s senior secured credit facility, except for three stations, 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 for financial reporting purposes in these entities because of (1)(i) the local service agreements we have with their stations, (2)(ii) our (excluding The CW) guarantee of the obligations incurred under Mission’s senior secured credit facilities, (3)facility, (iii) 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)(iv) purchase options granted by each consolidated VIE which permit us to acquire the assets and assume the liabilities of each of these VIEs’ stations, exclusive of stations KMSS, KPEJ and KLJB, at any time, subject to FCC consent. In compliance with FCC regulations for all the parties, each of the consolidated VIEs maintains complete responsibility for and control over programming, finances and personnel for its stations.
ReferWe also own a 75.0% ownership interest in The CW, the fifth major broadcast network in the U.S., NewsNation, a national cable news network, two digital multicast networks, Antenna TV and Rewind TV, multicast network services provided to Notes 2third parties, and 3a 31.3% ownership stake in TV Food Network. Our digital assets include 140 local websites, 278 mobile applications, 25 connected television applications, and six FAST channels representing products of our local television stations, The CW, NewsNation, The Hill, and BestReviews and a suite of advertising solutions.
The largest portion of operating revenue of our Company is derived from distribution revenue, which relates to retransmission of Company stations’ signals and the carriage of our Consolidated Financial Statementscable and broadcast networks by cable, satellite and other MVPDs and OVDs and, in Part IV, Item 15(a)the case of this Annual ReportThe CW, its local affiliates. For the year ended December 31, 2023, the Company’s distribution revenue represented 55.3% of total net revenue. Distributors generally pay for retransmission rights of local stations and for carriage of our networks on Form 10-Ka per subscriber basis. Distribution revenue is affected positively or negatively by the rate of growth or decline of subscribers and the growth in the per subscriber fee due to contract renegotiations or annual escalators in existing contracts. Nexstar anticipates that retransmission fees will continue to increase until there is a more balanced relationship between viewers delivered and fees paid for additional informationdelivery of such viewers. We also generate distribution revenues from the affiliation fees that CW’s third-party local station affiliates pay to the network and from programmers who lease the use of our spectrum in selected local markets to air their content on our multicast streams.
We also generate revenue from core television advertising and digital advertising. For the year ended December 31, 2023, the Company generated 33.7% of its net revenue from core advertising and 8.0% from digital advertising. Advertisers typically pay for advertising on our television and digital assets based on the number of impressions our programming or digital content delivers. As a result, our core television and digital advertising is affected by a number of factors, including the size and demographics of the audience viewing our programming and digital content, economic conditions, demand for advertising and our sales effort. Digital advertising that is not directly sold to advertisers through our in-house and third party sales teams, is sold via programmatic exchanges. In addition, we generate digital advertising revenue from the sale of advertising on third party sites and other local and national services.
In even years, we generate a substantial amount of revenue from political advertising. For the years ended December 31, 2023 and 2022, the Company generated 1.3% and 9.7%, respectively, of our net revenue from political advertising. Political advertising is affected by the number of competitive races there are and the extent to which the Company’s stations are located in the relevant competitive markets, the amount of funds raised by candidates, PACs and others, the availability and pricing of television advertising inventory and the availability of alternative media. Because of the scale of Nexstar, we typically have a presence in the substantial majority of markets with respectcompetitive political races. All national revenue is derived from advertisements placed through advertising agencies.
Our primary operating expenses include programming, newsgathering, production and promotion, employee salaries and benefits, sales commissions, digital cost of goods sold and content creation costs, and other administrative and corporate expenses. Programming costs are primarily related to consolidated VIEsfees paid to networks with which ours and acquisitions.our partners’ stations are affiliated and license fees for original and sports programming, in the case of The CW, and syndicated programming in the case of the stations and our networks. A large percentage of the costs involved in our operations is relatively fixed.
5134
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,On April 1, 2021, the FCC reinstatedU.S. Supreme Court issued a previously adopteddecision that reversed a lower court of appeals ruling and upheld the FCC’s elimination or modification of certain of its media ownership rules in the agency’s 2010/2014 quadrennial review of those rules. Among the regulations eliminated in 2021 as a result of the Supreme Court ruling was 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 DMAmarket under a JSA is deemed to have an attributable ownership interest in that station. Partiesstation, as well as a requirement that at least eight independently owned television stations remain in a local television market for a party to existing JSAsacquire a second station in that were deemed attributable interests and did not comply withmarket. While these restrictions are no longer in effect, the FCC’s local2022 quadrennial media ownership review and an FCC proceeding to review the current national limit on television ownership rule were given until September 30, 2025 to come into compliance. In November 2017, the FCC adopted an order on reconsideration that eliminated the rule. That elimination became effective on February 7, 2018. On September 23, 2019, a federal court of appeals vacated the FCC’s November 2017 order on reconsideration. The court later denied petitions for en banc rehearing; on November 29, 2019 its decision became effective; and on December 20, 2019 the FCC issued an order that formally reinstated the rule. On April 17, 2020, the FCC and a group of media industry stakeholders (including Nexstar) filed separate petitions for certiorari requesting that the U.S. Supreme Court review the September 2019 appeals court decision. The Supreme Court granted certiorari on October 2, 2020. It held oral argument in the case on January 19, 2021, and a decision is expected later in 2021. If the Company is ultimately required to amend or terminate its existing JSAs, 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.
currently pending. The FCC has repurposed a portion of the broadcast television spectrum for wireless broadband use. In an incentive auction which concludedcould reinstitute its earlier restrictions or impose other limitations in April 2017, certain television broadcasters accepted bids from the FCC to voluntarily relinquish their spectrum in exchange for consideration. Television stations that did not relinquish their spectrum were “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, one station that moved to a VHF channel in 2019, one station that moved to a VHF channel in April 2020 and one that went off the air in November 2017. The station that went off the air did not have a significant impact on our financial results because it was located in a remote rural area of the country and the Company has other stations which serve the same area.these or any future reviews.
Sixty-one (61) full power stations owned by Nexstar and 17 full power stations owned by VIEs were assigned to new channels in the reduced post-auction television band. These stations have commenced operation on their new assigned channels and have ceased operating on their former channels. 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. During the years ended December 31, 2020, 2019 and 2018, the Company spent a total of $54.7 million, $79.3 million and $26.8 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. During the years ended December 31, 2020, 2019 and 2018, the Company received $57.3 million, $70.4 million and $29.4 million, respectively, 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. SeasonalityAs of December 31, 2020, approximately $23.7 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 repack.
Seasonality
Advertising revenue is positively affected by nationala strong economy. Conversely, declines in advertising budgets of advertisers, particularly in recessionary periods, adversely affect the broadcast industry and, regionalas a result, may contribute to a decrease in our advertising revenue. In even-numbered years we generate substantial advertising revenue from the political election campaignsadvertising we sell to candidates, political action committees and political parties. Advertising revenue is also positively affected by 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. Fiscal year 2020 was a federal election year. The rescheduling of the 2020 Summer Olympics to 2021, due to the COVID-19 pandemic, decreased our advertising revenue in 2020 but is expected to increase our advertising revenue in 2021 if the Summer Olympics occur as scheduled.
52
Historical Performance
Revenue
The following table sets forth the amounts of the Company’s principal types of revenue (dollars in thousands)millions) and each type of revenue as a percentage of total net revenue for the years ended December 31:
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||||||||||||||||||||||||||||||||||||||
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||||||||||||||||||||
Core advertising (local and national) |
| $ | 1,571,072 |
|
|
| 34.9 |
|
| $ | 1,335,126 |
|
|
| 43.9 |
|
| $ | 1,089,920 |
|
|
| 39.4 |
| ||||||||||||||||||||||||
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
| ||||||||||||||||||||||||||||||
Core advertising |
| $ | 1,660 |
|
|
| 33.7 |
|
| $ | 1,718 |
|
|
| 33.0 |
|
| $ | 1,762 |
|
|
| 37.9 |
| ||||||||||||||||||||||||
Political advertising |
|
| 507,564 |
|
|
| 11.3 |
|
|
| 51,889 |
|
|
| 1.7 |
|
|
| 251,209 |
|
|
| 9.1 |
|
|
| 66 |
|
|
| 1.3 |
|
|
| 506 |
|
|
| 9.7 |
|
|
| 45 |
|
|
| 1.0 |
|
Distribution |
|
| 2,152,622 |
|
|
| 47.8 |
|
|
| 1,368,881 |
|
|
| 45.0 |
|
|
| 1,121,081 |
|
|
| 40.5 |
|
|
| 2,727 |
|
|
| 55.3 |
|
|
| 2,571 |
|
|
| 49.3 |
|
|
| 2,473 |
|
|
| 53.2 |
|
Digital |
|
| 223,368 |
|
|
| 4.9 |
|
|
| 241,519 |
|
|
| 8.0 |
|
|
| 261,159 |
|
|
| 9.4 |
|
|
| 395 |
|
|
| 8.0 |
|
|
| 365 |
|
|
| 7.0 |
|
|
| 322 |
|
|
| 6.9 |
|
Other |
|
| 34,468 |
|
|
| 0.8 |
|
|
| 24,524 |
|
|
| 0.8 |
|
|
| 26,485 |
|
|
| 1.0 |
|
|
| 85 |
|
|
| 1.7 |
|
|
| 51 |
|
|
| 1.0 |
|
|
| 46 |
|
|
| 1.0 |
|
Trade |
|
| 12,175 |
|
|
| 0.3 |
|
|
| 17,385 |
|
|
| 0.6 |
|
|
| 16,842 |
|
|
| 0.6 |
| ||||||||||||||||||||||||
Total net revenue |
| $ | 4,501,269 |
|
|
| 100.0 |
|
| $ | 3,039,324 |
|
|
| 100.0 |
|
| $ | 2,766,696 |
|
|
| 100.0 |
|
| $ | 4,933 |
|
|
| 100.0 |
|
| $ | 5,211 |
|
|
| 100.0 |
|
| $ | 4,648 |
|
|
| 100.0 |
|
Results of Operations
The following table sets forth a summary of the Company’s operations for the years ended December 31 (dollars in thousands)millions), and each component of operating expense as a percentage of net revenue:
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||||||||||||||
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
| ||||||
Net revenue |
| $ | 4,933 |
|
|
| 100.0 |
|
| $ | 5,211 |
|
|
| 100.0 |
|
| $ | 4,648 |
|
|
| 100.0 |
|
Operating expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Direct operating |
|
| 2,153 |
|
|
| 43.6 |
|
|
| 2,005 |
|
|
| 38.5 |
|
|
| 1,862 |
|
|
| 40.0 |
|
Selling, general and administrative, excluding corporate |
|
| 903 |
|
|
| 18.3 |
|
|
| 904 |
|
|
| 17.3 |
|
|
| 848 |
|
|
| 18.2 |
|
Corporate |
|
| 193 |
|
|
| 3.9 |
|
|
| 198 |
|
|
| 3.8 |
|
|
| 176 |
|
|
| 3.8 |
|
Depreciation and amortization |
|
| 941 |
|
|
| 19.1 |
|
|
| 662 |
|
|
| 12.7 |
|
|
| 589 |
|
|
| 12.7 |
|
Goodwill and other long-lived asset impairments |
|
| 35 |
|
|
| 0.7 |
|
|
| 133 |
|
|
| 2.6 |
|
|
| 23 |
|
|
| 0.5 |
|
Reimbursement from the FCC related to station repack |
|
| - |
|
|
| - |
|
|
| (3 | ) |
|
| (0.1 | ) |
|
| (20 | ) |
|
| (0.4 | ) |
Other |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (5 | ) |
|
| (0.1 | ) |
Total operating expenses |
|
| 4,225 |
|
|
|
|
|
| 3,899 |
|
|
|
|
|
| 3,473 |
|
|
|
| |||
Income from operations |
| $ | 708 |
|
|
|
|
| $ | 1,312 |
|
|
|
|
| $ | 1,175 |
|
|
|
| |||
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||||||||||||||
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
| ||||||
Net revenue |
| $ | 4,501,269 |
|
|
| 100.0 |
|
| $ | 3,039,324 |
|
|
| 100.0 |
|
| $ | 2,766,696 |
|
|
| 100.0 |
|
Operating expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses |
|
| 182,960 |
|
|
| 4.1 |
|
|
| 189,548 |
|
|
| 6.2 |
|
|
| 110,921 |
|
|
| 4.0 |
|
Direct operating expenses, net of trade |
|
| 1,708,124 |
|
|
| 37.9 |
|
|
| 1,331,248 |
|
|
| 43.8 |
|
|
| 1,101,423 |
|
|
| 39.8 |
|
Selling, general and administrative expenses, excluding corporate |
|
| 729,097 |
|
|
| 16.2 |
|
|
| 540,433 |
|
|
| 17.8 |
|
|
| 469,012 |
|
|
| 17.0 |
|
Depreciation |
|
| 147,688 |
|
|
| 3.3 |
|
|
| 123,375 |
|
|
| 4.1 |
|
|
| 109,789 |
|
|
| 4.0 |
|
Amortization of intangible assets |
|
| 279,710 |
|
|
| 6.2 |
|
|
| 200,317 |
|
|
| 6.6 |
|
|
| 149,406 |
|
|
| 5.4 |
|
Amortization of broadcast rights |
|
| 137,490 |
|
|
| 3.0 |
|
|
| 85,018 |
|
|
| 2.7 |
|
|
| 61,342 |
|
|
| 2.2 |
|
Trade and barter expense |
|
| 12,396 |
|
|
| 0.3 |
|
|
| 17,384 |
|
|
| 0.6 |
|
|
| 16,494 |
|
|
| 0.6 |
|
Reimbursement from the FCC related to station repack |
|
| (57,261 | ) |
|
| (1.3 | ) |
|
| (70,356 | ) |
|
| (2.3 | ) |
|
| (29,381 | ) |
|
| (1.1 | ) |
Change in the fair value of contingent consideration attributable to a merger |
|
| 3,933 |
|
|
| 0.1 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Gain on relinquishment of spectrum |
|
| (10,791 | ) |
|
| (0.2 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Goodwill and intangible assets impairment |
|
| - |
|
|
| - |
|
|
| 63,317 |
|
|
| 2.1 |
|
|
| 19,911 |
|
|
| 0.7 |
|
Gain on disposal of stations, net |
|
| (7,473 | ) |
|
| (0.2 | ) |
|
| (96,091 | ) |
|
| (3.2 | ) |
|
| - |
|
|
| - |
|
Total operating expenses |
|
| 3,125,873 |
|
|
|
|
|
|
| 2,384,193 |
|
|
|
|
|
|
| 2,008,917 |
|
|
|
|
|
Income from operations |
| $ | 1,375,396 |
|
|
|
|
|
| $ | 655,131 |
|
|
|
|
|
| $ | 757,779 |
|
|
|
|
|
35
53
Year Ended December 31, 20202023 Compared to Year Ended December 31, 20192022
The period-to-period comparability of our consolidated operating results is affected by acquisitions. For each quarter we present, our legacy stationsbusiness units include those stationsbusiness units that we owned or provided services toconsolidated into our financial statements for the complete quarter in the current and prior years. For our annual and year to date presentations, we combine the legacy stations’business unit amounts presented in each quarter.
Revenue
Revenue
Core advertising revenue was $1.571$1.66 billion for the year ended December 31, 2020 as2023 compared to $1.335$1.72 billion for the same period in 2019, an increase2022, a decrease of $236.0$58 million, or 17.5%3.4%. The increase was primarily due to ourExcluding the $63 million of incremental revenue generated from the Tribune acquisition in September 2019 of $419.1 million and current year station acquisitions of $24.7 million, partially offset by a decrease incore advertising revenue from station divestituresour acquisition of $66.5 million. Our legacy stations’The CW (acquired on September 30, 2022), core advertising revenue decreased by $141.3 million,7.0% primarily due to a weaker advertising market and the business disruptions causedabsence of first quarter advertising revenue from the Olympics on our NBC affiliate stations, partially offset by COVID-19 and changesan increase in advertising revenue during the first quarter from the Super Bowl aired on FOX, where we have more FOX-affiliated stations versus NBC-affiliated stations in the mix between our core and political advertising. Our largest advertiser category, automobile, represented approximately 18% and 22% of our local and national advertising revenue for each of the years ended December 31, 2020 and 2019, respectively. Overall, including past results of our newly acquired stations, revenues from our automobile category decreased by approximately 30% in 2020 compared to 2019. The other categories representing our top five were attorneys, medical/healthcare, radio/TV/cable/newspaper and home repair/manufacturing, which decreased in 2020, and insurance which increased in 2020. The full extent of the impact of the COVID-19 pandemic on our business operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that the U.S. government, we, or our business partners, may direct, which may result in an extended period of continued business disruption. Further financial impact cannot be reasonably estimated at this time but may continue to have a material impact on our core advertising revenue and our overall results of operations. Additionally, the rescheduling of the summer Olympics to 2021, also due to the COVID-19 pandemic, decreased our advertising revenue in 2020 but is expected to increase our advertising revenue in 2021 if the Summer Olympics occur as scheduled.prior year.
Political advertising revenue was $507.6$66 million for the year ended December 31, 2020,2023 compared to $51.9$506 million for the same period in 2019, an increase2022, a decrease of $455.7$440 million, as 2020 was a federal2023 is not an election year. Of this increase, $147.4 million was attributable to the incremental revenue from the Tribune stations we acquired in 2019, $17.3 million was attributable to current year station acquisitions and $293.6 million was attributable to our legacy stations.
Distribution revenue was $2.153$2.73 billion for the year ended December 31, 2020,2023 compared to $1.369$2.57 billion for the same period in 2019,2022, an increase of $783.7$156 million, or 57.3%6.1%. Excluding the $53 million of incremental distribution revenue from our acquisition of The increase wasCW and the combined effect of the temporary disruption of a large MVPD for 76 days in the third quarter of 2023 and the impact of the removal of partner stations from certain MVPDs related to continued negotiation (5.6% decrease in revenue), distribution revenue increased by 9.6% primarily due to incremental revenuerenewals of contracts in 2020 generated from the Tribune acquisition in September 2019 of $571.3 million2022 providing for higher rates per subscriber and current year station acquisitions of $47.0 million, partially offset by a decrease in revenue from station divestitures of $81.6 million. Our legacy stations’ revenue also increased by $247.1 million due to the combined effect of scheduled annual escalation of rates per subscriber, renewals of contracts providing for higher rates per subscriber (contracts generally have a three-year term), contributions from distribution agreements with OVDs and a net increase in revenue in 2020 resulting from the 2019 (July and August) temporary disruption of a distribution agreement with a certain customer, partially offset by temporary disruption of a certain customer in the month of December 2020. 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.continued MVPD subscriber attrition. We anticipate continued increase in distribution revenueof retransmission fees until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers. In January 2024, our partner stations have successfully renewed one of the distribution agreements and have been restored on the MVPD’s service.
Digital revenue, representing advertising revenue on our stations’ web and mobile sites and other internet-based revenue, from our other digital operations, was $223.4$395 million for the year ended December 31, 2020,2023 compared to $241.5$365 million for the same period in 2019, a decrease2022, an increase of $18.1$30 million, or 7.5%. Our digital8.2%, primarily due to incremental revenue from our legacy stationsacquisition of The CW (acquired on September 30, 2022) of $32 million.
Operating Expenses
Direct operating expenses, consisting primarily of programming, news, and other digital businesses decreasedtechnical expenses, and selling, general and administrative expenses were $3.06 billion for the year ended December 31, 2023 compared to $2.91 billion for the same period in 2022, an increase of $147 million, or 5.1%. Excluding the incremental $74 million of operating expenses from our acquisition of The CW, direct operating and selling, general and administrative expenses increased by $29.5 million2.6% primarily due to the business disruption caused by COVID-19an increase in station programming costs from network affiliation renewals and realignedannual increases in network affiliation costs, increased news programming at NewsNation and our local stations as well as increased digital business operations. These decreases weresales and administrative expenses, partially offset by incremental revenue from the Tribune acquisition in September 2019 of $10.8 million, net of a decrease in revenuecommission incurred from station divestitures.national representation due to a decrease in political advertising revenue.
Operating Expenses (Income)
Corporate expenses, related to costs associated with the centralized management of our stations, were $183.0$193 million for the year ended December 31, 2020,2023 compared to $189.5$198 million for the same period in 2019,2022, a decrease of $6.6$5 million, or 3.5%.
54
Station direct operating expenses, consisting primarily of news, engineering, programming and selling, general and administrative expenses (net of trade expense) were $2.437 billion for the year ended December 31, 2020, compared to $1.872 billion for the same period in 2019, an increase of $565.0 million, or 30.2%2.5% (no significant change).
This
Depreciation and amortization expense was primarily due to expenses associated with the Tribune stations and other businesses we acquired in 2019 of $511.1 million (including network and programming costs of $343.4 million), and expenses associated with our current year station acquisitions of $47.3 million. In addition, our legacy stations’ programming costs increased by $118.2 million, primarily due to network affiliation renewals and annual increases in our network affiliation costs. In 2020, we also recorded $19.9 million in provision for uncollectible amounts associated with transactions among entities for which we have or had variable interests. These increases were partially offset by a decrease in expense from our station divestitures of $84.3 million and a $60.3 million decrease in the operating expenses of our digital products due to lower revenue.
Depreciation of property and equipment was $147.7$941 million for the year ended December 31, 2020,2023 compared to $123.4$662 million for the same period in 2019,2022, an increase of $24.3$279 million, or 19.7%42.1%. Depreciation and amortization expense consists of the following:
incremental depreciation from the Tribune stations36
In 2023 and 2022, we acquired in September 2019recorded $35 million and $96 million, respectively, of $29.4 million.
Amortization ofgoodwill and intangible assets impairment on our product review and recommendation platform reporting unit. The Company’s assessment indicated that the reporting unit’s carrying amount exceeded its fair value, and therefore an impairment loss was $279.7identified and recorded in the fourth quarter of 2023 and 2022, respectively. As of December 31, 2023, this reporting unit has no remaining goodwill balance.
In 2022 certain real estate properties located in Chicago were sold and written down to their estimated fair value, less cost to sell, resulting in the Company’s recognition of impairment charges of $37 million in the fourth quarter of 2022.
Income from equity method investments, net
Income from equity method investments, net was $104 million for the year ended December 31, 2020,2023, compared to $200.3$153 million for the same period in 2019, an increase2022, a decrease of $79.4$49 million. Our largest equity method investment is TV Food Network in which we own a 31.3% interest. We record our equity in TV Food Network’s net income, less our share in the amortization of basis difference related to the investment, as income from equity method investments. In 2023, TV Food Network’s net income decreased by $159 million or 39.6%. Thisresulting to our share in its income to decrease by $50 million. TV Food Network’s lower net income was primarily due to increaseda decrease in its advertising revenue driven by a weaker advertising market. There was no significant change to our share in the amortization fromof basis difference associated with our investment in TV Food Network. For additional information on our investment in TV Food Network, including the Tribune stations we acquired in September 2019 of $95.3 million, net of decreases in amortization from certain fully amortized assets and divested stations.accounting for basis difference, refer to Note 6 to our Consolidated Financial Statements.
Amortization of broadcast rightsInterest Expense, net
Interest expense, net was $137.5$447 million for the year ended December 31, 2020,2023 compared to $85.0$337 million for the same period in 2019,2022, an increase of $52.5$110 million, or 61.7%. The increase was32.6%, primarily due to incremental amortization fromincreases in interest rates in the Tribune stations we acquired in 2019 of $54.0 million, net of decreases from station divestitures. This increase wasCompany’s outstanding loans under its senior secured credit facilities, partially offset by a reductiondecreases in amortization costs on our legacy stations due to renegotiation of certain film contracts which resulted in reduced distribution rates.
Certain of the Company’s stations, including certain Tribune stations, were repackedinterest expense from debt repayments and lower interest rates obtained in connection with the FCC’s processrefinancing of repurposingcertain of our term loans in June 2022. Interest rates on outstanding loans under the Company’s senior secured credit facilities ranged from 6.85% to 7.85% as of December 31, 2023, compared to interest rates ranging from 5.86% to 6.89% as of December 31, 2022. These interest rates were a portionmixture of Secured Overnight Financing Rate (“SOFR”) plus Credit Spread Adjustment (“CSA”) used to account for the broadcast television spectrum for wireless broadband use. These stations have vacated their former channels by the FCC-prescribed deadlinedifference between SOFR and London Interbank Offered Rate (“LIBOR”), plus applicable margin in 2023 compared to a mixture of July 13, 2020SOFR plus CSA plus applicable margin and are continuing to spend costs, mainly capital expenditures, to construct and license the necessary technical modifications to permanently operate on their newly assigned channels. Subject to fund limitations, the FCC reimburses television broadcasters, MVPDsU.S. LIBOR plus applicable margin in 2022.
Pension and other parties for costs reasonably incurred due to the repack. In 2020postretirement plans credit, net
Pension and 2019, we received a total of $57.3 million and $70.4 million, respectively, in reimbursements from the FCC which we recognized as operating income.
In April 2020, we completed a station’s conversion to a VHF channel representing our final relinquishment of spectrum pursuant to the FCC’s incentive auction conducted in 2016-2017. Accordingly, the associated spectrum asset with a carrying amount of $67.2 million and liability to surrender spectrum of $78.0 million were derecognized, resulting in a non-cash gain on relinquishment of spectrum of $10.8 million. This gain was partially offset by a $3.9 million increase (expense) in the estimated fair value of contingent consideration liability related to a merger and spectrum auction.
In 2019, we recorded a $63.3 million goodwill and intangible assets impairment on our digital reporting unit due to deterioration in customer relationships, mainly driven by marketplace changes on select demand-side platform customers, that led to a long-term projected decrease in operating results.
In 2020, we sold two Fox affiliate television stations and our sports betting information website business for total proceeds of $362.8 million in cash. These disposals resulted in a total gain on sale of $7.1 million. In 2019, in connection with the Tribune merger, we sold the assets of 21 full power television stations in 16 markets, eight of which were previously owned by us and 13 of which were previously owned or operated by Tribune. We sold the Tribune stations for $1.008 billion in cash, including working capital adjustments, and we sold our stations for $358.6 million in cash, including working capital adjustments. These divestitures resulted in a net gain on disposal of $96.1 million.
Income on equity investments, net
Income on equity investments,other postretirement plans credit, net was $70.2$36 million for the year ended December 31, 2020,2023 compared to $17.9$43 million for the same period in 2019, an increase2022, a decrease of $52.1 million. This$7 million (no significant change).
Income Taxes
Income tax expense was primarily attributable to the increase in income on equity investment from our 31.3% investment in TV Food Network, less amortization of basis difference. For the year ended December 31, 2020, we recognized our full year’s share in equity income of TV Food Network compared to last year’s share from September 19, 2019, the date we acquired our 31.3% ownership stake in this investment, to December 31, 2019.
55
Interest Expense, net
Interest expense, net was $335.3$131 million for the year ended December 31, 2020, compared to $304.4 million for the same period in 2019, an increase of $30.9 million, or 10.2%, primarily due to the issuance of debt in September 2019 (term loans and $1.785 billion Notes due 2027) associated with the financing of our merger with Tribune. These increases were partially offset by decreases in interest expense primarily due to prepayments and scheduled repayments of term loans, reduction in LIBOR funding costs on our senior secured loans and refinancing of certain bonds in September 2020 for a lower interest rate (issuance of $1.0 billion 4.75% Notes due 2028 and redemption of $900 million 5.625% Notes due 2024).
Loss on Extinguishment of Debt
Loss on extinguishment of debt was $50.7 million for the year ended December 31, 2020, compared to $10.3 million for the same period in 2019, an increase of $40.4 million. In 2020, we made various prepayments of our outstanding term loans, redeemed our $900 million 5.625% Notes due 2024 and amended our and Mission’s credit agreements, resulting in a loss on extinguishment of debt of $50.7 million. In November 2019, we redeemed our $400.0 million 5.875% Notes due 2022 and our $275.0 million 6.125% Notes due 2022. We also made prepayments of our outstanding term loans during 2019. These 2019 transactions resulted in total loss on extinguishment of debt of $10.3 million.
Income Taxes
Income tax expense was $296.5 million for the year ended December 31, 2020,2023 compared to an income tax expense of $137.0$274 million for the same period in 2019, an increase in income tax expense2022, a decrease of $159.5$143 million. The effective tax rates during the years ended December 31, 20202023 and 20192022 were 26.9%32.7% and 36.8%22.5%, respectively.
Nexstar reported permanent differences, including an adjustment for losses related to the minority interest in The decreaseCW, resulting in an incremental income tax expense of $44 million or 7.2% increase to the effective tax rate. Also, changes in the valuation allowance resulted in an incremental income tax expense of $15 million, or a 2.9% increase to the effective tax rate was driven primarily by a consolidated VIE’s establishment of a valuation allowance on its deferred tax assets in 2019 and the decrease in non-deductible goodwill associated with divestitures and impairment loss incurred in 2019. In 2020, certain of our consolidated VIEs recorded a valuation allowance on deferred tax assets of $5.3 million, compared to the $19.9 million valuation allowance on deferred tax assets recorded in 2019, including a newly established valuation allowance of $18.1 million by a consolidated VIE. This resulted in a decrease to the effective tax rate of 4.9%. In 2020, the effective tax rate also decreased by 5.15% as a result of the decrease in the amount of non-deductible goodwill associated with divestitures and impairment loss incurred in 2019.2023.
37
Year Ended December 31, 20192022 Compared to Year Ended December 31, 20182021
The period-to-period comparability of our consolidated operating results is affected by acquisitions. For each quarter we present, our legacy stationsbusiness units include those stationsbusiness units that we owned or provided services toconsolidated into our financial statements for the complete quarter in the current and prior years. For our annual and year to date presentations, we combine the legacy stations’business unit amounts presented in each quarter.
Revenue
Core advertising revenue was $1.335$1.72 billion for the year ended December 31, 2019 as2022 compared to $1.090$1.76 billion for the same period in 2018, an increase2021, a decrease of $245.2$44 million, or 22.5%. The increase is2.5%, primarily due to our incrementala weaker national advertising market, the absence of third quarter advertising revenue from acquisitions, primarily resulting fromthe Olympics on our merger with TribuneNBC affiliate stations and changes in the mix between our core and political advertising revenues of $275.0$70 million, partially offset by a decrease inincremental revenue as a result of station divestitures of $14.6 million. Our legacy stations’ core advertising revenue decreased by $15.1 million. Our largest advertiser category, automobile, represented approximately 22% and 23% of our local and national advertising revenue for each of the years ended December 31, 2019 and 2018, respectively. Overall, including past results of our newly acquired stations, revenues from our automobile category decreased by approximately 3% in 2019 compared to 2018.acquisition of The other categories representing our top five were attorneys and home repair/manufacturing, which increased in 2019, and furniture and medical/healthcare, which decreased in 2019.CW of $27 million.
Political advertising revenue was $51.9$506 million for the year ended December 31, 2019,2022 compared to $251.2$45 million for the same period in 2018, a decrease2021, an increase of $199.3 million, or 79.3%. Our legacy stations’ revenue decreased by $206.8$461 million, as 20192022 was not ana mid-term election year. This was partially offset by incremental revenue from acquisitions of $12.5 million, less decreases from station divestitures of $5.0 million.
56
Distribution revenue was $1.369$2.57 billion for the year ended December 31, 2019,2022 compared to $1.121$2.47 billion for the same period in 2018,2021, an increase of $247.8$98 million, or 22.1%,4.0%. The increase was primarily due to scheduled annual escalation of rates per subscriber, renewals of contracts in 2021 providing for higher rates per subscriber and incremental revenue from our acquisitions, mainly Tribune, acquisition of $169.8The CW of $17 million, less decreasespartially offset by continued MVPD subscriber attrition, a few periods during the negotiation of new contracts with our MVPD partners where our partners’ stations were not available and a settlement of a dispute in revenue resulting from station divestitures of $18.5 million. Our legacy stations’ revenue also increased by $96.5 million taking into account the combined effect of recent retransmission consent agreement renewals and scheduled annual rate increases per subscriber, contributions from distribution agreements with OVDs and the temporary disruption of distribution agreementsconnection with a customer from July 2, 2019 to August 29, 2019. Broadcasters currently deliver more than 30%new contract with one of all television viewing audiences in a pay television household but are paid approximately 12-14% of the total cable programming fees.our distributors. We anticipate continued increase in distribution revenueof retransmission fees until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers.
Digital revenue, representing advertising revenue on our stations’ web and mobile sites and other internet-based revenue, from our other digital operations, was $241.5$365 million for the year ended December 31, 2019,2022 compared to $261.2$322 million for the same period in 2018, a decrease2021, an increase of $19.7$43 million, or 7.5%13.0%, primarily due to growth in our television stations digital advertising and services revenue, incremental revenue from our acquisitions of The CW in September 2022 of $17 million and a digital business we acquired in the third quarter of 2021 of $22 million, offset by weakness in the national digital advertising market and ecommerce.
Operating Expenses
Direct operating expenses, consisting primarily of news, engineering and programming, and selling, general and administrative expenses were $2.91 billion for the year ended December 31, 2022 compared to $2.71 billion for the same period in 2021, an increase of $197 million, or 7.3%. This was primarily due to a $49.7 million net decreasean increase in revenuecost related to incremental operating expenses from our social media platformacquisitions of The CW in September 2022 of $70 million and a digital business we acquired in the effectsthird quarter of marketplace changes which decreased select demand-side platform customer buying,2021 of $16 million, an increase in variable costs associated with the increase in net revenue, an increase in station programming costs due to network affiliation renewals and annual increases in network affiliation costs, and increased promotion costs, partially offset by growth ona reversal of an accrual in connection with a settlement of a dispute in connection with a new contract with one of our agency services. These decreases were partially offset by incremental revenue from acquisitions,distributors and some administrative savings, primarily Tribune, of $19.5 million and an increase in revenue from our legacy stations of $12.2 million.related to healthcare.
Operating Expenses (Income)
Corporate expenses, related to costs associated with the centralized management of our stations, were $189.5$198 million for the year ended December 31, 2019,2022 compared to $110.9$176 million for the same period in 2018,2021, an increase of $78.6$22 million, or 70.9%. This was12.9%, primarily attributabledue to an increase in legal and professional fees, severance, bonuses and other compensation costs of $69.5 million primarily associated with our acquisition of Tribune, and an increase in stock-based compensation related to new equity incentive awards of $6.1 million$15 million..
Station direct operating expenses, consisting primarily of news, engineering, programming
Depreciation and selling, general and administrative expenses (net of trade expense) were $1.872 billion for the year ended December 31, 2019, compared to $1.570 billion for the same period in 2018, an increase of $302.0 million, or 19.2%.The increaseamortization expense was primarily due to expenses of our newly acquired stations and entities, mainly Tribune, of $247.3 million (including network and programming costs of $157.0 million), partially offset by a decrease of $18.0 million related to our station divestitures. Additionally, our legacy stations’ programming costs increased by $96.6 million primarily due to network affiliation renewals and annual increases in our network affiliation costs. These increases were partially offset by an $18.6 million decrease in the operating expenses of our digital products due primarily to marketplace changes and challenges that led to lower revenue.
Depreciation of property and equipment was $123.4$662 million for the year ended December 31, 2019,2022 compared to $109.8$589 million for the same period in 2018,2021, an increase of $13.6$73 million, or 12.4%12.5%. This was primarily due to incremental depreciation related to assets acquired inDepreciation and amortization expense consists of the Tribune merger of $9.0 million and increased depreciation from related station repacking activities.following:
syndicated programming to national news programs
.Certain of the Company’s stations, including certain Tribune stations, were repacked in connection with the FCC’s process of repurposing a portion of the broadcast television spectrum for wireless broadband use. The Company’s 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 2019 and 2018, we received a total of $70.4$7 million, and $29.4 million, respectively, in reimbursements from the FCC which we recognized as operating income.or 4.0% (no significant change).
38
In the thirdfourth quarter of 2019,2022, we recorded a $63.3$96 million goodwill and intangible assets impairment on our digitalproduct review and recommendation platform reporting unit dueunit. The Company’s assessment indicated that the reporting unit’s carrying amount exceeded its fair value, and therefore an impairment loss was identified.
In 2022 and 2021, certain real estate properties located in Chicago were classified as held for sale. Due to deteriorationdesignations as held for sale assets, the properties’ carrying amounts were written down to their estimated fair value, less estimated cost to sell, resulting in customer relationships, mainly driven by marketplace changes on select demand-side platform customers, that led to a long-term projected decrease in operating results.
In connection with the Tribune merger, we sold the assetsCompany’s recognition of 21 full power television stations in 16 markets, eightimpairment charges of which were previously owned by us$37 million and 13 of which were previously owned or operated by Tribune. We sold the Tribune stations for $1.008 billion in cash, including working capital adjustments, and we sold our stations for $358.6$23 million in cash, including working capital adjustments. These divestitures resulted in a net gainthe fourth quarter of 2022 and 2021, respectively.
Gain on disposalbargain purchase
Gain on bargain purchase of $96.1 million.
57
Income on equity investments, net
In connection with our merger with Tribune completed on September 19, 2019, we acquired a 31.3% ownership stake in TV Food Network. From the date of acquisition to December 31, 2019, Nexstar recognized equity in income from this investment of $20.5 million, along with loss from other equity method investments of $2.6 million.
Interest Expense, net
Interest expense, net was $304.3$56 million for the year ended December 31, 2019, compared2022 pertains to $221.0 million forour acquisition of The CW, representing the same periodexcess of the fair value of the net assets acquired over the $0 purchase consideration and the fair value of noncontrolling interests. For additional information on this acquisition, see Note 3, “Acquisitions and Dispositions” to our Consolidated Financial Statements included in 2018, an increasePart IV, Item 15(a) of $83.4 million, or 37.7%, primarily due to interestthis Annual Report on new borrowings of $87.0 million and one time fees associated with the financing of our merger with Tribune of $26.6 million. Form 10-K.
These increases were partially offset by decreases in debt related interest expense of $23.7 million, primarily due to prepayments and scheduled repayments of term loans and redemption of bonds, and interest income we earnedIncome from an escrow deposit during the third quarter of 2019 of $4.9 million and a reduction in interestequity method investments, net
Income from our existing term loans due to principal prepayments and scheduled repayments.
Loss on Extinguishment of Debt
Loss on extinguishment of debtequity method investments, net was $10.3$153 million for the year ended December 31, 2019,2022, compared to $12.1$125 million for the same period in 2018,2021, an increase of $28 million. Our largest equity method investment is TV Food Network in which we own a 31.3% interest. We record our equity in TV Food Network’s net income, less our share in the amortization of basis difference related to the investment, as income from equity method investments. In 2022, certain components of such basis difference reached the end of the estimated amortization life resulting to a decrease in our share in the amortization of $1.8$55 million or 15.0%(increase in income). In November 2019, we redeemedThis was partially offset by a decrease in our $400.0 million 5.875% Notes due 2022 andshare in TV Food Network’s net income of $27 million. For additional information on our $275.0 million 6.125% Notes due 2022. We also made prepayments ofinvestment in TV Food Network, including the accounting for basis difference, refer to Note 6 to our outstanding term loans during 2019. These transactions resulted in total loss on extinguishment of debt of $10.3 million. In October 2018, the Company refinanced its then existing term loans and revolving loans. We also made various prepayments of outstanding term loans during 2018. These transactions resulted in a total loss on extinguishment of debt of $12.1 million.Consolidated Financial Statements.
Income Taxes
Income taxInterest Expense, net
Interest expense, net was $137.0$337 million for the year ended December 31, 2019,2022 compared to $283 million for the same period in 2021, an increase of $54 million, or 19.1%, primarily due to increases in interest rates in the Company’s outstanding loans under its senior secured credit facilities, partially offset by decreases in interest expense from debt repayments and lower interest rates obtained in connection with the refinancing of certain of our term loans in June 2022. Interest rates on outstanding loans under the Company’s senior secured credit facilities ranged from 5.86% to 6.89% as of December 31, 2022, compared to interest rates ranging from 1.60% to 2.60% as of December 31, 2021. These interest rates were a mixture of SOFR plus CSA used to account for the difference between SOFR and LIBOR, plus applicable margin and U.S. LIBOR plus applicable margin in 2022 compared to U.S. LIBOR plus applicable margin only in 2021.
Pension and other postretirement plans credit, net
Pension and other postretirement plans credit, net was $43 million for the year ended December 31, 2022 compared to $81 million for the same period in 2021, a decrease of $38 million, primarily due to lower estimated expected return on plan assets of $19 million, higher estimated interest cost of $7 million and a $13 million settlement gain from the purchase of an annuity contract related to certain participants of a qualified pension plan during the fourth quarter of 2021.
Income Taxes
Income tax expense was $274 million for the year ended December 31, 2022 compared to an income tax expense of $144.7$263 million for the same period in 2018, a decrease in income tax expense2021, an increase of $7.7$11 million. The effective tax rates during the years ended December 31, 20192022 and 20182021 were 36.8%22.5% and 27.1%24.1%, respectively.
In 2019, we recognized The decrease in the effective tax impact ofrate is primarily related to changes in the divested stations previously owned by us includingvaluation allowance resulting in an incremental income tax expensebenefit of $10.3$24 million, or an increasea 2.1% decrease to the effective tax rate in 2022. The gain on bargain purchase arising from the acquisition of 2.8%, attributable to nondeductible goodwill written off asThe CW resulted in a result of the sale. We also recognized an impairment loss on our reporting unit’s goodwill and intangible assets. The impairment loss related to goodwill is not deductible for purposes of calculating the tax provision resulting in an income tax expense of $8.9 million, or an increase1.1% decrease to the effective tax rate of 2.4%. Valuation allowance increased by $19.9 million, or an increase to the effective tax rate of 5.3%, primarily due to the Company’s belief, based upon consideration of positive and negative evidence, that certain deferred tax assets related to one of the VIEs were not likely to be realized. Other changes to the effective tax rates relate to the various permanent differences such as the tax impact of limitation on compensation deduction, the tax impact related to nondeductible meals and entertainment and the tax impact of excess 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 $6.18 million, or an increase to the effective tax rate of 1.64%.rate.
58
39
Liquidity and Capital Resources
We areThe Company is leveraged, which makes usit vulnerable to changes in general economic conditions. OurThe Company’s ability to meet the future cash requirements described below dependsrepay or refinance its debt will depend on, its ability to generate cash in the future, which is subject to general economic,among other things, financial, business, market, competitive legislative, regulatory and other conditions, many of which are beyond ourthe Company’s control. BasedThe Company’s primary sources of liquidity include cash on current operations and anticipated future growth, we believe that our available cash, anticipated cash flow from operations and available borrowingshand, borrowing capacity under the senior securedits revolving credit facilities will be(with a maturity date of June 2027) and cash generated from operations. The Company believes these sources of liquidity are sufficient to fund workingmeet its business operating requirements, its capital capital expenditure requirements, interest paymentsexpenditures and scheduledto continue to service its debt principal payments for at least the next twelve12 months as of the filing date of this Annual Report on Form 10-K. In order to meet future cash needs we may, from time to time, borrow under our existingAs of December 31, 2023, the Company was in compliance with the financial covenants contained in the amended credit agreements governing its senior secured credit facilities or issue other long- or short-term debt or equity, iffacilities.
Any future adverse economic conditions, including those resulting from heightened and sustained inflation and higher interest rates, could adversely affect the marketCompany’s future operating results, cash flows 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.financial condition.
Overview
Cash Flow Summary
The following tables present summarized financial information management believes is helpful in evaluating the Company’s liquiditytotal operating, investing and financing activity cash flows for the three years ended December 31 (in millions):
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Net cash provided by operating activities |
| $ | 999 |
|
| $ | 1,403 |
|
| $ | 1,215 |
|
Net cash provided by (used in) investing activities(1) |
|
| (173 | ) |
|
| 125 |
|
|
| (232 | ) |
Net cash used in financing activities |
|
| (899 | ) |
|
| (1,515 | ) |
|
| (945 | ) |
Net increase (decrease) in cash, cash equivalents and restricted cash |
| $ | (73 | ) |
| $ | 13 |
|
| $ | 38 |
|
Cash paid for interest |
| $ | 437 |
|
| $ | 330 |
|
| $ | 273 |
|
Income taxes paid, net of refunds(2) |
| $ | 169 |
|
| $ | 370 |
|
| $ | 320 |
|
|
| As of December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Cash, cash equivalents and restricted cash |
| $ | 147 |
|
| $ | 220 |
|
|
| Years Ended December 31, |
| |||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Net cash provided by operating activities |
| $ | 1,254,170 |
|
| $ | 417,467 |
|
| $ | 736,867 |
|
Net cash used in investing activities(1) |
|
| (39,750 | ) |
|
| (4,702,155 | ) |
|
| (175,514 | ) |
Net cash provided by (used in) financing activities |
|
| (1,293,789 | ) |
|
| 4,388,251 |
|
|
| (531,890 | ) |
Net increase (decrease) in cash, cash equivalents and restricted cash |
| $ | (79,369 | ) |
| $ | 103,563 |
|
| $ | 29,463 |
|
Cash paid for interest |
| $ | 324,347 |
|
| $ | 250,663 |
|
| $ | 218,746 |
|
Income taxes paid, net of refunds(2) |
| $ | 351,715 |
|
| $ | 315,051 |
|
| $ | 90,717 |
|
|
|
|
|
|
| As of December 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Cash, cash equivalents and restricted cash |
| $ | 169,309 |
|
| $ | 248,678 |
|
Long-term debt, including current portion |
|
| 7,668,003 |
|
|
| 8,492,588 |
|
Unused revolving loan commitments under senior secured credit facilities (1) |
|
| 95,662 |
|
|
| 142,662 |
|
|
|
59
Cash Flows – Flows—Operating Activities
Net cash provided by operating activities decreased by $404 million during the year ended December 31, 2023 compared to the same period in 2022. This was primarily due to a decrease in operating income (excluding non-cash transactions) of $417 million, an increase in payments for broadcast rights of $173 million, higher interest payments of $107 million and timing of accounts receivable collections of $42 million. These decreases were partially offset by sources of cash resulting from timing of payments to our vendors of $110 million, lower income tax payments of $201 million and an increase in distribution from our equity investment in TV Food Network of $20 million. The increase in payments for broadcast rights was due to incremental payments from our acquisition of The CW (acquired on September 30, 2022) of $211 million, partially offset by a decrease in payments for our syndicated programming of $38 million. The increase in interest payments was primarily due to higher interest rates, partially offset by decreases in interest expense from debt repayments and lower interest rates obtained in connection with the refinancing of certain of our term loans in June 2022.
Net cash provided by operating activities increased by $836.7$188 million during the year ended December 31, 20202022 compared to the same period in 2019.2021. This was primarily attributabledue to an increase in net revenueoperating income (excluding trade)non-cash transactions) of $1.467 billion,$357 million, sources of cash resulting from timing of accounts receivable collections of $108 million, and an increase in distributions from our equity investments, primarilyinvestment in TV Food Network of $208.4 million, and the collection of copyright royalty receivables of $13.9$10 million. These increases were partially offset by an increase in our corporate, direct operating and selling, general and administrative expenses (excluding non-cash transactions) of $538.4 million, an increase in cash paid for interest of $73.7 million, higher income tax payments of $36.7 million, an increase in payments for broadcast rights of $93.0$77 million, use of cash from timing of accounts receivable collections of $18.2 million, and use of cash from timing of payments made to our vendors of $99.8$107 million, higher interest payments of $57 million, higher tax payments of $50 million and other items. The increase in payments for broadcast rights was due to incremental payments from our acquisition of The CW of $119 million, partially offset by a decrease in payments for our syndicated programming of $42 million.
40
Cash paid for interest increased by $73.7 million during the year ended December 31, 2020 compared to the same period in 2019, primarily due to increases in the issuance of debteffective interest rates in September 2019 (termthe Company’s outstanding floating rate loans under its senior secured credit facilities due to the increase in SOFR and $1.785 billion Notes due 2027) associated with the financing of our merger with Tribune. These increases wereLIBOR, partially offset by decreases in interest expense from debt repayments and lower interest rates obtained in connection with the refinancing of certain of our term loans in June 2022. The increase in tax payments was primarily due to prepayments and scheduled repayments of term loans, reduction in LIBOR funding costs on our senior secured loans and refinancingthe sale of certain bondsreal estate properties in September 2020 for a lower interest rate (issuance2022 resulting in tax payments of $1.0 billion 4.75% Notes due 2028$48 million.
Cash Flows—Investing Activities
Net cash used in investing activities was $173 million and redemption of $900$232 million 5.625% Notes due 2024).
during the years ended December 31, 2023 and 2021, respectively. Net cash provided by operatinginvesting activities decreased by $319.4 million during the year ended December 31, 2019 compared to2022 was $125 million.
In 2023, we spent a total of $149 million in capital expenditures and $38 million in the same period in 2018. This was primarily attributable to an increase in stationacquisitions of KUSI-TV and corporate operating expenses (excluding non-cash transactions)WSNN-LD, partially offset by a deposit received associated with a proposed sale of $371.0a real estate asset of $10 million.
In 2022, we received proceeds from the sale of certain real estate properties of $241 million, received a deposit associated with a proposed sale of real estate property of $10 million and recorded cash acquired from The CW acquisition of $29 million, partially offset by an increase in net revenue (excluding trade)capital expenditures of $272.1 million, an increase in payments for tax liabilities of $224.3 million, primarily due to a nonrecurring tax payment of $199.5 million resulting from the sale of stations, an increase in payments for broadcast rights of $38.7 million, an increase in cash paid for interest of $31.9 million and a decrease in source of cash from timing of accounts receivable collections of $28.7 million. These were partially offset by a decrease in use of cash resulting from timing of payments to vendors of $127.6 million and an increase in distributions from our equity investments of $15.3$157 million.
Cash paid for interest increased by $31.9In 2021, we spent a total of $151 million during the year ended December 31, 2019 comparedin capital expenditures and $138 million to the same period in 2018, primarily due to one-time fees incurred in 2019 amounting to $26.6 million associated with the financing of the Tribune merger.
Cash Flows – Investing Activities
Net cash used in investing activities during the years ended December 31, 2020, 2019 and 2018 were $39.8 million, $4.702 billion and $175.5 million, respectively.
In 2020, we acquired sevenacquire television stations, a digital business and certain non-license assets, and a product recommendations company for total cash consideration payments of $386.4 million. Our capital expenditures for the year ended December 31, 2020license assets. These decreases were $217.0 million, including $54.7 million related to station repack. We also made an equity investment in a live 24/7 streaming network business of $7.0 million. These uses of cash were partially offset by the proceeds from the disposal of two television stations and our sports betting information website business for $349.9 million and $12.9 million in cash, respectively, and reimbursements received from the FCC related to station repack of $57.3 million. We also received $98.0 million of cash proceeds from settlement of a litigation between Sinclair and Tribune and Mission collected its loan receivable of $49.0 million from Marshall.
In September 2019, we completed our acquisition of Tribune for a total cash purchase price of $7.187 billion, less $1.306 billion of cash and restricted cash acquired. This was partially offset by the proceeds from the sale of 21 full power television stations in 16 markets for a total cash consideration of $1.353 billion which occurred concurrently with the Tribune acquisition. On November 29, 2019, Mission, a consolidated VIE, paid the outstanding principal balances of Marshall’s loans to third party bank lenders totaling $48.9 million. After making the payment, Mission became Marshall’s new lender. Marshall is a deconsolidated VIE due to its filing for bankruptcy protection in December 2019. As such, Marshall’s cash balance of $5.0 million was excluded from our consolidated financial statements.
During the year ended December 31, 2019, we spent $197.5 million in capital expenditures, including $79.3 million related to station repack and $7.2 million related to relinquishment of certain spectrum. These investing cash outflows were partially offset by the proceeds from reimbursements of spectrum repack amounting to $70.4 million, proceeds frombusiness units and asset disposals of $4.4$20 million, and distribution from our equity investments of $2.2 million.
In 2018, we completed our acquisition of Likqid Media Inc. (“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$20 million and proceeds from disposaldeposits received associated with the sale of real estate assets of $4.3$13 million.
60
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.Cash Flows—Financing Activities
Cash Flows – Financing Activities
Net cash used in financing activities for the yearyears ended December 31, 20202023, 2022 and 2021 was $1.294 billion, compared to net cash provided by financing activities$899 million, $1,515 million and $945 million, respectively.
In 2023, the Company repaid scheduled principal maturities of $4.388 billion in the same period in 2019. During the year ended December 31, 2018, net cash used in financing activities was $531.9 million.
In 2020, we made payments on the outstanding principal balance$125 million of our term loans, of $1,284 million (including $980.0 million in Nexstar’s debt prepayments, Mission’s full repayment of its term loan B of $226.2 million and Mission’s full repayment of Shield’s term loan A of $20.7 million). Also, we redeemed our $900.0 million 5.625% Notes due 2024 and paid $25.1 million premium on such redemption. Additionally, we repurchased shares of our Class A common stock for a total price of $281.9 million, paid dividends to our common stockholders of $101.0$191 million ($0.561.35 per share during eachper quarter), paid deferred financing costsrepurchased common shares of $10.7$605 million, associated with our new $1.0 billion 4.75% Notes due 2028, paid cash for taxes in exchange for shares of common stock withheld of $6.8$24 million resulting from net share settlements of certain stock-based compensation, and paid for finance lease andcapitalized software obligations of $14.5$19 million. These decreasesoutflows were partially offset by thea contribution from noncontrolling interests amounting to $62 million. We also borrowed $20 million under our revolving credit facilities which was repaid in full in 2023.
In 2022, we received $2,420 million of proceeds (net of capitalized lenders’ fees of $5 million) from the issuance of a Term Loan A, due June 2027 and used $2,414 million to repay our new $1.0 billionthen outstanding Term Loan A, due October 2023, Term Loan A, due September 2024, Term Loan B, due January 2024 and a portion of Term Loan B, due September 2026. We prepaid a portion of the outstanding principal balance of our Term Loan B of $333 million, made scheduled principal payments on term loans of $84 million, repurchased and cancelled $71 million of our senior unsecured notes issued at par and from Mission’s drawing from its revolving credit facility of $327.0 million.
In 2019, we issued term loans, net of debt discount, of $3.711 billion, issued an initial $1.120 billion in 5.625% Notes due 2027 at par, and issued an additional $665.0 million in 5.625% Notes due 2027, plus a premium of $27.4 million. We incurred and paid total financing costs of $72.1 million for issuing these loans in 2019. The proceeds from the term loans and the initial 5.625% Notes due 2027 were used to partially fund our merger with Tribune in September 2019. The proceeds from the additional 5.625% Notes due 2027 were used to redeem in full our two senior unsecured notes with a total principal balance of $675.0 million, plus total premium of $10.1 million. We also made prepayments and scheduled principal payments of its existing term loans totaling $227.3 million,all funded by cash on hand. In 2019, wehand, paid dividends to our common stockholders of $82.8$142 million ($0.450.90 per share eachper quarter), repurchased our treasurycommon shares for $45.1of $881 million, made payments on our finance lease and capitalizedpaid for software obligations of $9.2$16 million, paid contingent consideration in connection with a past acquisition of $14 million, and paid cash for taxes in exchange for shares of common stock withheld of $9.8$13 million resulting from net share settlements of certain stock-based compensation. These decreases were partially offset by contribution from noncontrolling interests of $30 million. Mission also drew $62 million under its 2022 revolving credit facility and utilized the proceeds to repay all of its $62 million of outstanding borrowings under its then outstanding 2018 revolving loan.
In 2021, we prepaid a portion of the outstanding principal balance of our Term Loan B, due January 2024 of $280 million and purchased a noncontrolling interestmade scheduled principal payments on our Term Loan A, due September 2024 of $6.4$21 million, paid dividends to our common stockholders of $118 million ($0.70 per share during each quarter), repurchased common shares of $537 million, paid cash for taxes in exchange for shares of common stock withheld of $11 million resulting from net share settlements of certain stock-based compensation, and paid finance lease and software obligations of $18 million. These outflows were partially offset by the proceeds from the exercise of stock options during the year amounting to $2.4$8 million.
In 2018, we Mission also received $299 million (net of $2 million discount) from its new Term Loan B, due June 2028 and utilized $268 million to repay a portion of its revolving loans. We also borrowed $44.0$20 million under our revolving credit facilityfacilities which was repaid in full in 2021.
41
Material Cash Requirements
The Company is a party to partially fund our acquisitionmany contractual obligations involving commitments to make payments to third parties. Certain contractual obligations are recorded on the Consolidated Balance Sheet as 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 our 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 of $5.6 million. In October 2018, we amended our 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 of $150.0 million. These transactions were partially offset by repayments of outstanding obligations under our revolving credit facility of $44.0 million, repayments of outstanding principal balance underDecember 31, 2023, while others are considered future commitments. The following summarizes the Company’s term loanscontractual obligations as of $401.6 million, purchases of treasury stock of $50.5 million, payments of dividendsDecember 31, 2023, and the effect such obligations are expected to our common stockholders of $68.6 million ($0.375 per share each quarter),have on the Company’s short-term and long-term liquidity and capital resource needs (in millions):
|
|
|
|
| Payments Due by Period |
| ||||||||||||||
|
| Total |
|
| 2024 |
|
| 2025 - 2026 |
|
| 2027 - 2028 |
|
| Thereafter |
| |||||
Recorded contractual obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Nexstar senior secured credit facility |
| $ | 3,804 |
|
| $ | 122 |
|
| $ | 1,803 |
|
| $ | 1,879 |
|
| $ | - |
|
Mission senior secured credit facility |
|
| 354 |
|
|
| 2 |
|
|
| 6 |
|
|
| 346 |
|
|
| - |
|
5.625% senior unsecured notes due 2027 |
|
| 1,714 |
|
|
| - |
|
|
| - |
|
|
| 1,714 |
|
|
| - |
|
4.75% senior unsecured notes due 2028 |
|
| 1,000 |
|
|
| - |
|
|
| - |
|
|
| 1,000 |
|
|
| - |
|
Operating lease obligations |
|
| 369 |
|
|
| 60 |
|
|
| 86 |
|
|
| 70 |
|
|
| 153 |
|
Finance lease obligations |
|
| 21 |
|
|
| 2 |
|
|
| 2 |
|
|
| 3 |
|
|
| 14 |
|
Broadcast rights current cash commitments(1) |
|
| 160 |
|
|
| 135 |
|
|
| 25 |
|
|
| - |
|
|
| - |
|
Other(2)(3) |
|
| 25 |
|
|
| 13 |
|
|
| 12 |
|
|
| - |
|
|
| - |
|
Unrecorded contractual obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Network affiliation agreements(4) |
|
| 1,915 |
|
|
| 789 |
|
|
| 1,126 |
|
|
| - |
|
|
| - |
|
Cash interest on debt(5) |
|
| 1,665 |
|
|
| 455 |
|
|
| 973 |
|
|
| 237 |
|
|
| - |
|
Executive employee contracts(6) |
|
| 127 |
|
|
| 58 |
|
|
| 65 |
|
|
| 4 |
|
|
| - |
|
Broadcast rights future cash commitments(7) |
|
| 1,110 |
|
|
| 169 |
|
|
| 305 |
|
|
| 276 |
|
|
| 360 |
|
Other |
|
| 182 |
|
|
| 59 |
|
|
| 89 |
|
|
| 34 |
|
|
| - |
|
|
| $ | 12,446 |
|
| $ | 1,864 |
|
| $ | 4,492 |
|
| $ | 5,563 |
|
| $ | 527 |
|
Future Sources of Financing and Debt Service Requirements
liabilities have been recorded.
In January 2024, we entered into a multi-year time brokerage agreement with KAZT, L.L.C., the owner of television station KAZT-TV in Phoenix, Arizona, and acquired the station’s non-license assets.
From January 1 to February 27, 2024, we repurchased 190,297 shares of our common stock for $32 million, funded by cash on hand. As of the date of filing this Annual Report on Form 10-K, the remaining available amount under the share repurchase authorization was $620 million.
On January 26, 2024, our board of directors approved a 25% increase in the quarterly cash dividend to $1.69 per share of our common stock beginning with the dividend declared for the first quarter of 2024. The dividend was paid on February 23, 2024 to stockholders of record on February 9, 2024.
In February 2024, we received $40 million in cash in connection with Broadcast Music Inc.’s sale to New Mountain Capital.
42
Long-term debt
As of December 31, 2023, the Company had total outstanding debt of $7.668$6.8 billion, net of unamortized financing costs, discounts and premium, which represented 75.3%74.8% 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.
61
|
| As of December 31, |
| |||||
(dollars in millions) |
| 2023 |
|
| 2022 |
| ||
Nexstar senior secured credit facility |
| $ | 3,804 |
|
| $ | 3,925 |
|
Mission senior secured credit facility |
|
| 354 |
|
|
| 358 |
|
5.625% Notes, due July 2027 |
|
| 1,714 |
|
|
| 1,714 |
|
4.75% Notes, due November 2028 |
|
| 1,000 |
|
|
| 1,000 |
|
Total outstanding principal |
|
| 6,872 |
|
|
| 6,997 |
|
Less: Unamortized financing costs, discounts and premium, net |
|
| (35 | ) |
|
| (46 | ) |
Total outstanding debt |
| $ | 6,837 |
|
| $ | 6,951 |
|
|
|
|
|
|
|
| ||
Unused revolving loan commitments under senior secured credit facilities (1) |
| $ | 544 |
|
| $ | 543 |
|
The following table summarizes
|
| Total |
|
| 2021 |
|
| 2022-2023 |
|
| 2024-2025 |
|
| Thereafter |
| |||||
Nexstar senior secured credit facility |
| $ | 4,630,557 |
|
| $ | 21,429 |
|
| $ | 597,070 |
|
| $ | 1,367,742 |
|
| $ | 2,644,316 |
|
Mission senior secured credit facility |
|
| 327,000 |
|
|
| - |
|
|
| 327,000 |
|
|
| - |
|
|
| - |
|
5.625% Notes due 2027 |
|
| 1,785,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,785,000 |
|
4.75% Notes due 2028 |
|
| 1,000,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,000,000 |
|
|
| $ | 7,742,557 |
|
| $ | 21,429 |
|
| $ | 924,070 |
|
| $ | 1,367,742 |
|
| $ | 5,429,316 |
|
We (excluding The CW) guarantee full payment of all obligations incurred under Mission’s senior secured credit facility in the event of its default. Mission is a guarantor of our senior secured credit facility, our 5.625% Notes, due July 2027 and our 4.75% Notes, due November 2028. 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 2024 and 2033) 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 make semiannual interest payments on the 5.625% Notes, due July 2027 on January 15 and July 15 of each year. We make semiannual interest payments on our 4.75% Notes, due November 2028 on May 1 and November 1 of each year. Interest payments on our and Mission’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 and Mission’s senior secured credit facilities, as well as the indentures governing our 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028, limit, but do not prohibit us or Mission from incurring substantial amounts of additional debt in the future. Our senior secured credit facilities and the indentures governing our existing notes may limit the amount of dividends we may pay to stockholders and share repurchases we may make over the term of the agreement.
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 $95.7 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, 2020. The Company’s ability to access funds under its senior secured credit facilities depends, in part, on ourits 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. As discussed above, the ultimate outcome of the COVID-19 pandemic is uncertain at this timeAny future adverse economic conditions, including those resulting from heightened and may significantly impactsustained inflation and higher interest rates, could adversely affect our future operating performance, liquidityresults and financial position. Any adverse impact of the COVID-19 pandemiccash flows and may cause us to seek alternative sources of funding, including accessing capital markets, subject to market conditions. Such alternative sources of funding may not be available on commercially reasonable terms or at all.
During 2020, we repurchased a total of 3,085,745 shares of our Class A common stock for $281.8 million, funded by cash on hand. On January 27, 2021, our Board of Directors approved a new share repurchase program authorizing us to repurchase up to $1.0 billion of our Class A common stock. The new $1.0 billion share repurchase program increased our existing share repurchase authorization, of which $174.9 million remained outstanding as of December 31, 2020.
On January 27, 2021, our Board of Directors declared a quarterly dividend of $0.70 per share of our Class A common stock. The dividend was paid on February 26, 2021 to stockholders of record on February 12, 2021.
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 ourthe Company’s combined results. The Mission amended credit agreement does not contain financial covenant ratio requirements but does provide for default in the event we do not comply with all covenants contained in our credit agreement. As of December 31, 2020,2023, we were in compliance with our financial covenant.covenants. We believe Nexstar and Missionthe Company will be able to maintain compliance with all covenants contained in the credit agreements governing theits senior secured facilities and the indentures governing ourNexstar’s 5.625% Notes, due July 2027 and ourNexstar’s 4.75% Notes, due November 2028 for a period of at least the next 12 months from as of the filing date of this Annual Report on Form 10-K.December 31, 2020.
43
Off-Balance Sheet Arrangements
As of December 31, 2020,2023, we did not have any relationships with unconsolidated entities or financial partnerships, (except as described below), such as entities often referred to as structured finance or variable interest entities,VIEs, 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.
As of December 31, 2020,2023, we have outstanding standby letters of credit with various financial institutions amounting to $23.7 million, of which $20.3 million was assumed from the merger with Tribune primarily in support of the worker’s compensation insurance program.$20 million. The outstanding balance of standby letters of credit is deducted against our unused revolving loan commitment under our senior secured credit facilitiesfacility and would not be available for withdrawal.
62
Contractual Obligations
The following summarizes the Company’s contractual obligations as of December 31, 2020,
Issuer and the effect such obligations are expected to have on the Company’s liquidity and cash flow in future periods (in thousands):
|
| Total |
|
| 2021 |
|
| 2022-2023 |
|
| 2024-2025 |
|
| Thereafter |
| |||||
Recorded contractual obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nexstar senior secured credit facility |
| $ | 4,630,557 |
|
| $ | 21,429 |
|
| $ | 597,070 |
|
| $ | 1,367,742 |
|
| $ | 2,644,316 |
|
Mission senior secured credit facility |
|
| 327,000 |
|
|
| - |
|
|
| 327,000 |
|
|
| - |
|
|
| - |
|
5.625% senior unsecured notes due 2027 |
|
| 1,785,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,785,000 |
|
4.75% senior unsecured notes due 2028 |
|
| 1,000,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,000,000 |
|
Operating lease obligations |
|
| 350,464 |
|
|
| 47,181 |
|
|
| 93,067 |
|
|
| 70,878 |
|
|
| 139,338 |
|
Finance lease obligations |
|
| 20,667 |
|
|
| 1,843 |
|
|
| 3,621 |
|
|
| 3,712 |
|
|
| 11,491 |
|
Broadcast rights current cash commitments(1) |
|
| 201,977 |
|
|
| 105,522 |
|
|
| 83,528 |
|
|
| 12,927 |
|
|
| - |
|
Other(2)(3) |
|
| 46,996 |
|
|
| 14,789 |
|
|
| 31,674 |
|
|
| 533 |
|
|
| - |
|
Unrecorded contractual obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network affiliation agreements |
|
| 2,636,307 |
|
|
| 1,143,735 |
|
|
| 1,481,348 |
|
|
| 11,224 |
|
|
| - |
|
Cash interest on debt(4) |
|
| 1,628,681 |
|
|
| 276,711 |
|
|
| 547,688 |
|
|
| 459,218 |
|
|
| 345,064 |
|
Executive employee contracts(5) |
|
| 83,625 |
|
|
| 36,412 |
|
|
| 45,972 |
|
|
| 1,241 |
|
|
| - |
|
Broadcast rights future cash commitments(6) |
|
| 194,376 |
|
|
| 74,904 |
|
|
| 84,085 |
|
|
| 35,387 |
|
|
| - |
|
Other |
|
| 79,554 |
|
|
| 30,054 |
|
|
| 49,500 |
|
|
| - |
|
|
| - |
|
|
| $ | 12,985,204 |
|
| $ | 1,752,580 |
|
| $ | 3,344,553 |
|
| $ | 1,962,862 |
|
| $ | 5,925,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
63
Guarantor Summarized Financial Information
Nexstar Media Inc.’s (a wholly-owned subsidiary of Nexstar and herein referred to as (the “Issuer”) is the “Issuer”)issuer of 5.625% Notes, due July 2027 and 4.75% Notes, due 2028November 2028. These notes are fully and unconditionally guaranteed, (the “Guarantees”), jointly and severally, by Nexstar Media Group, Inc. (“Parent”), Mission (a consolidated VIE) and certain of Nexstar Inc.’s restricted subsidiaries (collectively, the “Guarantors”Subsidiary Guarantors (as defined below). The Issuer, Subsidiary Guarantors, Parent and together with the Issuer,Mission are collectively referred to as the “Obligor Group”). for the 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028. “Subsidiary Guarantors” refers to certain of the Issuer’s restricted subsidiaries (excluding The GuaranteesCW) that guarantee these notes. The guarantees of the notes are subject to release in limited circumstances upon the occurrence of certain customary conditions set forth in the indentures governing the 5.625% Notes, due July 2027 and the 4.75% Notes, due November 2028. The Issuer’s 5.625% Notes, due July 2027 and 4.75% Notes, due November 2028 are not registered with the SEC.
The following combined summarized financial information is presented for the Obligor Group after elimination of intercompany transactions between Parent, Issuer, Subsidiary Guarantors and GuarantorsMission in the Obligor Group and amounts related to investments in any subsidiary that is a non-guarantor. This information is not intended to present the financial position or results of operations of the consolidated group of companies in accordance with U.S. GAAP.
In November 2020, we merged our two primary operating subsidiaries, Nexstar Inc.Summarized Balance Sheet Information for the Obligor Group as of December 31 (in millions):
| December 31, 2023 |
|
| December 31, 2022 |
| ||
Current assets – external(1) | $ | 1,246 |
|
| $ | 1,358 |
|
Current assets – due from consolidated entities outside of Obligor Group |
| 7 |
|
|
| 39 |
|
Total current assets | $ | 1,253 |
|
| $ | 1,397 |
|
Noncurrent assets – external(1)(2) |
| 9,429 |
|
|
| 9,748 |
|
Noncurrent assets – due from consolidated entities outside of Obligor Group |
| 75 |
|
|
| 74 |
|
Total noncurrent assets | $ | 9,504 |
|
| $ | 9,822 |
|
Total current liabilities(1) | $ | 818 |
|
| $ | 742 |
|
Total noncurrent liabilities(1) | $ | 8,775 |
|
| $ | 8,994 |
|
Noncontrolling interests | $ | - |
|
| $ | - |
|
Summarized Balance Sheet Information(in thousands) – Summarized balance sheet information$1,119 million as of December 31, 2023 and 2022, respectively, in unconsolidated investees. These unconsolidated investees do not guarantee the 4.75% Notes, due November 2028 and 5.625% Notes, due July 2027. For additional information on equity investments, refer to Note 6 to our Consolidated Financial Statements included in Part IV, Item 15(a) of the Obligor Group is as follows:this Annual Report on Form 10-K for additional information.
| 2020 |
|
| 2019 |
| ||
Current assets - external | $ | 1,205,580 |
|
| $ | 1,347,456 |
|
Current assets - due from consolidated entities outside of Obligor Group |
| 35,572 |
|
|
| 45,952 |
|
Total current assets | $ | 1,241,152 |
|
| $ | 1,393,408 |
|
Noncurrent assets - external(1) |
| 10,676,397 |
|
|
| 10,971,539 |
|
Noncurrent assets - due from consolidated entities outside of Obligor Group |
| 53,292 |
|
|
| 40,761 |
|
Total noncurrent assets | $ | 10,729,689 |
|
| $ | 11,012,300 |
|
Total current liabilities | $ | 727,557 |
|
| $ | 942,832 |
|
Total noncurrent liabilities | $ | 10,123,544 |
|
| $ | 10,973,364 |
|
Noncontrolling interests | $ | 6,951 |
|
| $ | 7,186 |
|
44
|
|
Summarized Statements of Operations Information for the Obligor Group (in thousands)millions):
| Year Ended |
| |
| December 31, 2020 |
| |
Net revenue - external | $ | 4,486,469 |
|
Net revenue - from consolidated entities outside of Obligor Group |
| 17,198 |
|
Total net revenue |
| 4,503,667 |
|
Costs and expenses - external |
| 3,104,595 |
|
Costs and expenses - to consolidated entities outside of Obligor Group |
| 19,493 |
|
Total costs and expenses |
| 3,124,088 |
|
Income from operations | $ | 1,379,579 |
|
Net income | $ | 741,244 |
|
Net income attributable to Obligor Group | $ | 741,244 |
|
Income on equity method investments | $ | 70,154 |
|
64
| Year Ended |
| |
| December 31, 2023 |
| |
Net revenue – external | $ | 4,694 |
|
Net revenue – from consolidated entities outside of Obligor Group |
| 19 |
|
Total net revenue |
| 4,713 |
|
Costs and expenses – external |
| 3,683 |
|
Costs and expenses – to consolidated entities outside of Obligor Group |
| 37 |
|
Total costs and expenses |
| 3,720 |
|
Income from operations | $ | 993 |
|
Net income | $ | 450 |
|
Net income attributable to Obligor Group | $ | 450 |
|
Income from equity method investments, net | $ | 104 |
|
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.and related disclosures. On an ongoing basis, we evaluate our estimates, including those related to business acquisitions, goodwill and intangible assets, property and equipment, broadcast rights, distribution revenue, 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.circumstances. Actual results may differ from those estimates.estimates, and any such differences could be material to our Consolidated Financial Statements.
For an overviewa summary of our significant accounting policies, we refer you to Note 2 to our Consolidated Financial Statements in Part IV, Item 15(a) of this Annual Report on Form 10-K.
We believe the following critical accounting policiesestimates 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 and the 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)(i) local service agreements we have with the stations they own, (2) our(ii) Nexstar’s (excluding The CW) guarantee of the obligations incurred under Mission’s senior secured credit facility, (3)(iii) 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)(iv) purchase options granted by each consolidated VIE which permit Nexstar to acquire the assets and assume the liabilities of all but three of these 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 20212024 and 2028.2033. We expect to renew these option agreements upon expiration. Therefore, these VIEs are consolidated into these financial statements.
45
Valuation of Goodwill and Intangible Assets
Intangible assets represented $8.8$8.0 billion, or 65.9%66.2%, of our total assets as of December 31, 2020.2023. Intangible assets consist primarily of goodwill, indefinite-lived intangible assets (such as FCC licenses,licenses), and definite-lived intangible assets (such as network affiliation agreements, developed technology, brand value, and customer relationships arising from acquisitions.agreements).
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 replacement cost approach and other.other income, market or cost approaches.
The estimatedestimated fair value of an FCC license acquired in a business combination is calculated using a discounted projected cash flow model referred to as the Greenfield Method. The Greenfield Method attempts to isolate the income that is attributable to the license alone. This approach is based upon modeling a hypothetical start-up station and building it up to a normalized operation that, by design, lacks an affiliation with a network (commonly known as an independent station), lacks inherent goodwill and whose other assets have essentially been added as part of the build-up process. The Greenfield Method assumes annual cash flows over a projection period model. Inputs to this model include, but are not limited to, (i) a four-year build-up period for a start-up station to reach a normalized state of operations, (ii) television market long-term revenue growth rate over a projection period, (iii) estimated market revenue share for a typical market participant without a network affiliation, (iv) estimated profit margins based on industry data, (v) capital expenditures based on the size of market and the type of station being constructed, (vi) estimated tax rates in the appropriate jurisdiction, and (vii) an estimated discount rate using a weighted average cost of capital analysis. The Greenfield Method also includes an estimated terminal value by discounting an estimated annual cash flow with an estimated long-term growth rate.
65
The assumptions used in estimating the fair value of a network affiliation agreement acquired in a business combination are similar to those used in the valuation of an FCC license. The Greenfield Method is also utilized in thisthe valuation of network affiliation agreements except that the estimated market revenue share, estimated profit margins, capital expenditures and other assumptions reflect a market participant premium based on the programming of a network affiliate relative to an independent station. This approach would result in an estimated collective fair value of the collective FCC license and a network affiliation agreement. The excess of the estimated fair value in this model over the estimated value of an FCC license of an independent station under the Greenfield Method represents the estimated fair value of a network affiliation agreement.
Goodwill represents thethe excess of the purchase price of a business over the fair value of the net assets acquired.
Subsequent to acquisition, goodwill and FCC licenses are tested for impairment in the fourth quarter each year, or more frequently whenever events or changes in circumstances indicate that such assets might be impaired. For purposes of goodwill impairment tests, the Company has one aggregated television stations reporting unit, because of the stations’ similar economic characteristics, one cable network reporting unit and onetwo digital business reporting unit.units. The Company’s impairment review for FCC licenses is performed at the television station market level.
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. WeThe Company first assessassesses the qualitative factors to determine the likelihood of our goodwill and FCC licenses being impaired. OurThe qualitative impairment test 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 its respective carrying amount, no further testing will be required. Otherwise, we will apply the quantitative impairment test method.method is applied.
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,values, using the Greenfield Method of discounted cash flow analysis. An impairment is recorded when the carrying value of an FCC license exceeds its fair value.
46
We test our finite-liveddefinite-lived intangible assets and other long-lived assets to be held and used for impairment whenever events or circumstances indicate that their carrying amount may not be recoverable, relying on a number ofcertain factors including operating results, business plans, economic projections and anticipated future cash flows. Impairment in theThe carrying amountvalue of a finite-lived intangiblelong-lived asset or asset group is recognizedconsidered impaired when the expectedprojected future operatingundiscounted cash flow derivedflows to be generated from the operations to whichasset or asset group over its remaining life, or primary asset’s life, plus any proceeds from the asset relates iseventual disposition are less than its carrying value. The Company measures impairment based on the amount by which the carrying value exceeds the estimated fair value of the long-lived asset or asset group. The fair value is determined primarily by using the projected future cash flows discounted at a rate commensurate with the risk involved as well as market valuations.
In the fourth quarter of 2020,2023, using the qualitative impairment test, the Company performed its annual impairment testassessment on goodwill attributable to its aggregated television stations andreporting unit. Based on the results of such qualitative impairment tests, the Company concluded that it was more likely than not that the reporting unit’s fair value would sufficiently exceed the related carrying amount. As of December 31, 2020,
With respect to goodwill allocated to the cable network reporting unit and the two digital reporting unit’s goodwill is attributableunits, the Company elected to BestReviews, a consumer product recommendations company we acquired on December 29, 2020.perform quantitative impairment tests due to recent performance and uncertain economic conditions.
As of December 31, 2020, ourThe Company’s assessment indicated that the cable network reporting unit’s goodwill balancefair value exceeded the related carrying amount by approximately 14%, therefore no impairment was $400.0recorded. Goodwill allocated to this reporting unit was $400 million representing approximately 13%as of December 31, 2023. The fair value estimate is management’s estimate based on a valuation report prepared by a third-party valuation firm who used a combination of an income approach, which employs a discounted cash flow model, and a market approach, which consider earnings multiples of comparable publicly traded businesses and comparable market transactions. The income approach was based on a five-year projection model which included assumptions regarding continued growth of viewership at a declining rate of growth over time and monetization thereof, continued growth in distribution revenues and annual increases in operating expenses. The income approach utilized the Company’s income tax rate, a 10% discount rate based on an analysis of comparable companies and a modest terminal growth rate typical of mature cable network businesses. The market approach market based the valuation on earnings multiples of comparable publicly traded businesses with cable networks and comparable cable network transactions. The likelihood of a material impairment is mitigated by the maturity of the consolidated carrying amount. We acquired this business in September 2019 through our merger with Tribune. In September 2020, our cable network launched NewsNation, a national news program during prime time and currently expandingits significant contractual distribution revenue.
With respect to provide news programs in other day parts. Indigital reporting units, the fourth quarter of 2020, management completed a quantitative impairment test of its cable network reporting unit goodwill. The results of this impairment testCompany’s assessment indicated that one of the digital reporting unit fair valueunits exceeded the carrying amount by approximately 70%2.5%, and therefore no goodwill impairment was identified. Goodwill associated with this reporting was $69 million as of December 31, 2023. The quantitative impairment test was performed usingfair value estimate is management’s estimate based on a valuation report prepared by a third-party valuation firm who used a combination of an income approach, which employs a discounted cash flow model, and market approaches,approach. The income approach was based on a three-year projection model which considersincluded assumptions regarding the recovery of the business from a low in 2023 due to market and other factors to a full recovery to 2022 levels between year 2 and year 3 and then growth thereafter. The income approach utilized the Company’s income tax rate, a 11.5% discount rate based on an analysis of comparable companies and a modest terminal growth rate typical of mature digital businesses. The market approach based the valuation on earnings multiples of comparable publicly traded digital media businesses and recent market transactions. In estimating the fair value using the income approach, the discounted cash flow model assuming an asset purchase was utilized. This method uses asset tax bases at fair value and results to a higher depreciation and amortization, lower income taxes on cash flows and ultimately increases the estimated fair value of the reporting unit. The significant assumptions in estimating fair value included: (i) annualnet revenue growth rates, (ii) operating profit margins, (iii) discount rate, (iv) selectionmultiples of comparable public companiesdigital media transactions. The likelihood of a material impairment is mitigated by the amount of goodwill recorded.
In the second digital reporting unit, the Company identified a goodwill impairment of $19 million (and $16 million impairment on definite-lived intangible assets) and related implied EBITDA multiples in such company’s estimated enterprise values; (v) selectiona goodwill impairment of comparable recent observable transactions for similar assets and the related implied EBITDA multiple; (vi) selection of recent comparable observable transactions for similar assets and the related implied value per subscriber.
In$91 million (and $5 million impairment on definite-lived intangible assets) during the fourth quarter of 2020,each calendar years 2023 and 2022. As of December 31, 2023, this second digital reporting unit has no remaining goodwill and no material long-lived intangible assets balance.
Our quantitative goodwill impairment tests are sensitive to changes in key assumptions used in our analysis. In our income approach models, if our projections of revenue growth rates and margins are not realized, if market factors outside of our control, such as increases in discount rates, occur, or if management’s expectations or plans change, including changes to a reporting unit’s long-term operating plans, the Company’s goodwill and other key assets could be impaired in the future. With respect to net revenue and earnings multiples, the key uncertainties are determining the reporting unit’s comparable public companies, comparable transactions and the selection of the market multiples.
The Company also performed its annual impairment testassessment on FCC licenses for each television station market using the qualitative impairment test. Except for ninethree station markets that indicated unfavorable trends, the Company concluded that it was more likely than not that their fair values have exceeded the respective carrying amounts. For the station marketsstations that indicated unfavorable trends, management extended its procedures and performed a quantitative impairment test. As of December 31, 2020,2023, the FCC licenses of these stations had a total balance of $172.8$64 million, representing approximately 6%none of the consolidatedsuch individual FCC licenses had carrying amount. Ourvalue that were material. The Company’s quantitative impairment test of these assets indicated that each of their estimated fair values (Greenfield Method) exceeded the respective carrying amounts and no such individual FCC license had carrying values that were material.amounts. Thus, no impairment was recorded.
66
We47
The Company also performed quantitativeevaluated its definite-lived intangible assets and qualitative tests to determineother long-lived assets whether our finite-livedevents or changes in circumstances indicate that such assets are recoverable.may be impaired. Based on our estimate of undiscounted future pre-tax cash flows expected to result from the use and eventual disposition of these assets, wethe Company determined that the carrying amounts are recoverable asother than the long-lived intangible assets of December 31, 2020. a digital reporting unit for which an impairment was recognized (discussed above). No other events or circumstances were noted in 20202023 that would indicate impairment.
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.
Due to the continued impact of COVID-19 pandemic subsequent to December 31, 2020, the Company will actively monitor and evaluate its indefinite-lived intangible assets, long-lived assets and goodwill to determine if an impairment triggering event will occur in future periods. Any further adverse impact of COVID-19 or the general market conditions on the Company’s operating results could reasonably be expected to negatively impact the fair value of the Company’s indefinite-lived intangible assets and its reporting units as well as the recoverability of its long-lived assets and may result in future impairment charges which could be material.
Valuation of Investments
We account for investments in which we own at least 20% of an investee’s voting securities or we have significant influence over an investee under the equity method of accounting. We record equity method investments at cost. For investments acquired in a business combination, the cost is the estimated fair value allocated to the investment.
We evaluate our equity method investments for other-than temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.
In each of2023, the quarters of 2020, weCompany evaluated ourits equity method investments for other-than-temporary impairment (“OTTI”) due to the eventsOTTI and circumstances surrounding the COVID-19 pandemic. Based on the results of the review, we determined that no impairments existed that required further assessment. We may experience future declines in the fair value of our equity method investments, and we may determine an impairment loss will be required to be recognized in a future reporting period. Such determination will be based on the prevailing facts and circumstances, including those related to the reported results and financial statement disclosures of the investees as well as the general market conditions. Wenone was identified. The Company will continue to evaluate ourits equity method investments for OTTI in future periods to determine if an OTTI has occurred.periods.
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, 2020, the carrying amounts of our current cash broadcast rights were $50.2 million and our non-current cash broadcast rights were $57.2 million.
Pension plans and other postretirement benefits
A determination of the liabilities and cost of the Company’sNexstar’s pension and other postretirement plans (“OPEB”) 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’sNexstar’s own experience to determine that its assumptions are reasonable. The assumptions used in developing the required estimates include the following key factors:
|
|
|
|
|
|
|
|
| • expected contributions |
67
As of December 31, 2020,2023, the effective discount rates used for determining pension benefit obligations range from 2.15%were 4.78% to 2.29%4.79%. During 2020,2023, the assumptions utilized in determining net periodic benefit credit on our pension plans were (i) 5.45%5.53% to 5.75%6.38% expected rate of return on plan assets and (ii) 3.08%4.98% to 4.99% effective discount rates. As of and forDecember 31, 2023, our pension plans’ benefit obligations were $1.7 billion. For the year ended December 31, 2020,2023, our pension plans’ benefit obligations and related net periodperiodic benefit credit was $2.553 billion and $45.9 million, respectively.$36 million. As of December 31, 2020,2023, a 1% change in the discount rates would have the following effects (in thousands)millions):
|
| 1% Increase |
|
| 1% Decrease |
| 1% Increase | 1% Decrease | ||||||||
Projected impact on net periodic benefit credit |
| $ | 13,162 |
|
| $ | (16,094 | ) | $ | 2 | $ | (3) |
| |||
Projected impact on pension benefit obligations |
|
| (240,557) |
|
|
| 277,856 |
| (132) |
| 154 | |||||
For additional information on our pension and OPEB, see Note 1110 to our Consolidated Financial Statements included in Part IV, Item 15(a) of this Annual Report on Form 10-K.
Distribution Revenue
We earn revenues from local cable providers, DBS services and other MVPDs and OVDs for the retransmission of our broadcasts and the carriage of WGN America.NewsNation. These revenues are generally earned based on a price per subscriber of the distributor within the retransmission or the carriage 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. Adjustments associated with the resolution of such estimates have, historically, been inconsequential.inconsequential.
48
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 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.
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. The estimate of the Company’s tax liabilities relating to uncertain tax positions requires management to assess uncertainties and to make judgments about the application of complex tax laws and regulations. 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.
68Item 7A. Quantitative and Qualitative Disclosures About Market Risk
|
|
Interest Rate Risk
OurThe Company’s exposure to market risk for changes in interest rates relates primarily to ourits long-term debt obligations.
The term loan borrowings under the Company’s senior secured credit facilities bear interest at rates ranging from 1.89%6.85% to 2.89%7.85% as of December 31, 2020,2023, which representedrepresent (i) the base rate, or LIBOR,the SOFR plus (ii) a credit spread adjustment, and (iii) the applicable margin, as defined. The revolving loans bear interest at LIBOR plus the applicable margin, ranging from 1.89% to 2.39% at December 31, 2020. Interest is payable in accordance with the credit agreements.
If LIBOR were toBased on the outstanding balances of the Company’s senior secured credit facilities (term loans and revolving loans) as of December 31, 2023, an increase in each of SOFR by 100 basis points or one percentage point, from the December 31, 2020 level, the Company’s annual interest expense would increase and cash flow from operations would decrease by $46.3 million, based on the outstanding balance of its credit facilities as of December 31, 2020. An increase in LIBOR of 50 basis points (one-half of a percentage point) would result in a $23.2 million increase in the Company’sour annual interest expense and decrease our cash flow from operations by $42 million (excluding tax effects). A decrease in cash flows from operations. If LIBOR were to decrease eithereach of SOFR by 100 basis points or 50 basis points, the Company’swould decrease our annual interest would decreaseexpense and increase our cash flowsflow from operations would increase by $6.7 million.$42 million (excluding tax effects). Our 5.625% Notes due July 2027 and 4.75% Notes due November 2028 are fixed rate debt obligations and therefore are not exposed to market interest rate changes. As of December 31, 2020, we have2023, the Company has no financial instruments in place to hedge against changes in the benchmark interest rates on ourits senior secured credit facilities.
Impact of Inflation
We believe that our results of operations are not affected by moderate changes in the inflation rate. However, the COVID-19 pandemic has created great uncertainty about the path of the economy and society in the years ahead. Recent supply and demand shocks and dramatic changes in fiscal policy may lead to higher levels of inflation in future periods.
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. |
|
None.
49
Item 9A. Controls and Procedures
|
|
Evaluation of Disclosure Controls and Procedures
Nexstar’s management, with the participation of its Chairman and Chief Executive Officer along with its President, Chief Operating Officer and 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 Chairman and Chief Executive Officer and its President, Chief Operating Officer and Chief Financial Officer concluded that as of December 31, 2020,2023, 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 Chairman and Chief Executive Officer and its President, Chief Operating Officer and 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. Nexstar has not experienced any significant impact to its internal controls over financial reporting related to the COVID-19 pandemic. Nexstar is continually monitoring and assessing the COVID-19 situation on its internal controls to minimize the impact on their design and operating effectiveness.
69
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 assessed the effectiveness of our internal control over financial reporting as of December 31, 20202023 based upon the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013).
Based on management’s assessment, we have concluded that our internal control over financial reporting was effective as of December 31, 2020.2023.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 20202023 as stated in their report which appears herein.
Item 9B. Other Information Rule 10b5-1 Trading Plans On December 26, 2023, Perry Sook, our Chairman and Chief Executive Officer, adopted a 10b5-1 Trading Plan (“Sook Sales Plan”) that is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. The Sook Sales Plan provides for the exercise and sale of 100,000 stock options (such stock options were awarded on January 14, 2015 and are scheduled to expire on January 14, 2025). The Sook Sales Plan, which was entered into during an open trading window under the Company’s insider trading policy, will be in effect until the earlier of (a) November 13, 2024, and (b) the date on which the total shares subject to the Sook Sales Plan have been sold. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 50
|
|
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
|
|
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 20212024 Annual Meeting of Stockholders (the “Proxy Statement”) or in an amendment to this Annual Report on Form 10-K under the headings “Directors”“Directors,” “Corporate Governance,” and “Delinquent Section 16(a) Report”Report,” 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“Independent Registered Public Accounting Firm Fees and Other Matters,” which information is incorporated herein by reference.
71
PART IV
Item 15. Exhibits and Financial Statement Schedules
|
|
(a) Documents filed as part of this report:
|
|
|
|
| (3) 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. 52 Exhibit Index
53
54
55
+ 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. 56 SIGNATURES
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.
Dated: 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
57 NEXSTAR MEDIA GROUP, INC. INDEX TO FINANCIAL STATEMENTS
F-1 Report of Independent To the Board of Directors and Stockholders of Nexstar Media Group, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Nexstar Media Group, Inc. and its subsidiaries (the “Company”) as of December 31, 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,
Basis for Opinions The 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. 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. F-2 Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Uncertain Tax Position Related to the Chicago Cubs Transactions As described in The principal considerations for our determination that performing procedures relating to the Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls /s/ PricewaterhouseCoopers LLP Dallas, Texas February 28, 2024 We have served as the Company’s auditor since 1997. F-3 NEXSTAR MEDIA GROUP, INC. CONSOLIDATED BALANCE SHEETS (in
The accompanying Notes are an integral part of these Consolidated Financial Statements.
NEXSTAR MEDIA GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (in
The accompanying Notes are an integral part of these Consolidated Financial Statements. F-5 NEXSTAR MEDIA GROUP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY For the Three Years Ended December 31, (in
The accompanying Notes are an integral part of these Consolidated Financial Statements. F-6 NEXSTAR MEDIA GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in
The accompanying Notes are an integral part of these Consolidated Financial Statements.
NEXSTAR MEDIA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1: Organization and Business Operations As used in these Consolidated Financial Statements and unless the context indicates otherwise, “Nexstar” refers to Nexstar Media Group, Inc., a Delaware corporation, Nexstar is a leading diversified media company with television broadcasting, television network and digital media
Note 2: Summary of Significant Accounting Policies Principles of Consolidation The Consolidated Financial Statements include the accounts of Nexstar, subsidiaries consolidated through voting interests and Liquidity
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
Variable Interest Entities Nexstar may determine that an entity is a VIE as a result of local service agreements entered into with F-8 Consolidated VIEs Nexstar consolidates entities in which it 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 The following table summarizes the various local service agreements Nexstar had in effect as of December 31,
Nexstar’s ability to receive cash from
As of December 31, 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
F-9
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
Nexstar has an outsourcing agreement with Cunningham Broadcasting Corporation (“Cunningham”), which continues through December 31, Nexstar has determined that it has a variable interest in WYZZ. Nexstar has also 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. Basis of Presentation Certain prior year financial statement amounts have been reclassified to conform to the current year presentation. These reclassifications had no effect on net income or stockholders’ equity as previously reported. 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, but are not limited to, those relating to allowance for F-10 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 The Company’s accounts receivable
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 multichannel video programming distributors (“MVPDs”) and 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 Revenue Recognition
The Company recognizes revenues when control of the promised goods or services is transferred to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company’s revenue is primarily derived from the sale of advertising and the compensation received from traditional Core and Political Advertising Revenues—The Company generates revenue by delivering advertising on the Company’s television stations, cable
Distribution Revenues—The Company’s retransmission consent and carriage agreements with MVPDs and OVDs generally
Digital Revenues— Contract Costs—The Company does not capitalize costs incurred to obtain contracts for advertising due to their short-term nature. Additionally, the incremental benefit from efforts in acquiring these contracts is not considered Contract Liabilities—The Company’s contract liabilities, which are included in its Consolidated Financial Statements as other current liabilities, consist primarily of customer payments received for products or services before the transfer of control to the customer occurs (deferred revenue). The performance primarily involves the delivery of advertisements to the customers. The Company does 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. See Note
Investments The Company accountsfor investmentsin which it ownsat least20
Leases The
See Note F-12 Broadcast Rights and Broadcast Rights Payable The Company acquires licenses to broadcast programs from national program syndicators and from certain production companies. The Company records The Company also acquired exclusive rights to broadcast various live sports games in exchange for rights fees paid over the season associated with the live sports games. The Company amortizes these programming rights as an expense over each season based upon contractually stated rates which align with the projected revenue over the contractual term. Amortization is evaluated periodically, based on revenue projections, and adjusted as necessary. For the years ended December 31, 2023, 2022 and 2021, amortization of broadcast rights of $453 million, $193 million and $121 million, respectively, were included in Depreciation and amortization expense in the accompanying Consolidated Statements of Operations and Comprehensive Income. Property and Equipment, Net Property and equipment is stated at cost or at estimated fair value if acquired 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, brand value 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 the income approach, such as discounted projected cash flows, The estimated fair value of an FCC license acquired in a business combination is calculated using a discounted projected cash flow model referred to as the Greenfield Method. The Greenfield Method attempts to isolate the income that is attributable to the license alone. This approach is based upon modeling a hypothetical start-up station and building it up to a normalized operation that, by design, lacks an affiliation with a network (commonly known as an independent station), lacks inherent goodwill and whose other assets have essentially been added as part of the build-up process. The Greenfield Method assumes annual cash flows over a projection period model. Inputs to this model include, but are not limited to, (i) a four-year build-up period for a start-up station to reach a normalized state of operations, (ii) television market long-term growth rate over a projection period, (iii) estimated market revenue share for a typical market participant without a network affiliation, (iv) estimated profit margins based on industry data, (v) capital expenditures based on the size of market and the type of station being constructed, (vi) estimated tax rates in the appropriate jurisdiction, and (vii) an estimated discount rate using a weighted average cost of capital analysis. The Greenfield Method also includes an estimated terminal value by discounting an estimated annual cash flow with an estimated long-term growth rate. The assumptions used in estimating the fair value of a network affiliation agreement acquired in a business combination are similar to those used in the valuation of an FCC license. The Greenfield Method is also utilized in the valuation of network affiliation agreements except that the estimated market revenue share, estimated profit margins, capital expenditures and other assumptions reflect a market participant premium based on the programming of a network affiliate relative to an independent station. This approach would result in an estimated collective fair value of the F-13 Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired. During the measurement period, which may be up to one year from the acquisition date of a business, 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. The Company’s goodwill and FCC licenses are considered to be indefinite-lived intangible assets. Subsequent to acquisition, these assets For purposes of goodwill impairment tests, the Company has 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 Determining the fair value of reporting units and FCC licenses requires management to make The Company tests F-14 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. Debt 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. Advertising Expense The cost of advertising is expensed as incurred. The Company incurred advertising costs in the amount of
Pension plans and postretirement benefits A determination of the liabilities and cost of The net periodic benefit credit, which consists of Stock-Based Compensation Nexstar maintains stock-based employee and non-employee compensation plans which are described more fully in Note 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 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. F-15 Income Per Share Basic income per share is computed by dividing the net income attributable to Nexstar 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
The Company has outstanding stock options and restricted stock units to acquire Segment Presentation The Company assesses its operating segments in accordance with Recent Accounting Pronouncements New Accounting Standards Adopted In
New Accounting Standards Not Yet Adopted In
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses for all public entities. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments in ASU 2023-07 retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the potential impacts ASU 2023-07 may have on its Consolidated Financial Statements upon its adoption on the effective date as it relates to future segment disclosures. F-16 Note 3: Acquisitions
On 2022 Acquisition of The CW On September 30, 2022, Nexstar acquired a 75.0% ownership interest in The CW from affiliates of Paramount Global and Warner Bros. Discovery (collectively the
The transaction was accounted for under the acquisition
Programming costs and accrued programming costs pertain to The CW’s costs of acquiring programming from the Sellers and were valued using the replacement cost method as of Nexstar’s acquisition due to their short-term nature.
The intangible assets are amortized over an estimated The
F-17
2021 Acquisitions Acquisition of
On
The
Unaudited Pro Forma Financial Information
The following unaudited pro forma financial information has been presented for the periods indicated as if Nexstar’s acquisition of
The unaudited pro forma financial information The unaudited pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition of
Proposed Acquisition On F-18 Note 4: Property and Equipment Property and equipment consisted of the following, as of December 31 (dollars in
For the years ended December 31, 2023, 2022 and 2021, depreciation expense of $176 million, $160 million and $167 million, respectively, was included in Depreciation and amortization expense in the accompanying Consolidated Statements of Operations and Comprehensive Income.
Note 5: Intangible Assets and Goodwill
The decrease in For the years ended December 31, 2023, 2022 and 2021, amortization expense of $311 million, $309 million and $301 million, respectively, was included in Depreciation and amortization expense in the accompanying Consolidated Statements of Operations and Comprehensive Income. 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,
F-19 The changes in the carrying amounts of goodwill and FCC licenses for the years ended December 31,
As discussed in Note 2, the Company has In the fourth quarter of
With respect to goodwill allocated to the cable network reporting unit and the two digital reporting
With respect to In the second digital reporting unit, the Company identified a goodwill impairment of $19 million (and $16 million impairment on definite-lived intangible assets) and
The Company’s 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
F-20 The Company performed its annual impairment assessment on FCC licenses for each television station market using the The Company also evaluated its definite-lived intangible assets and Note 6:
Investments in the Company’s Consolidated Balance Sheets as of December 31 consisted of the following (in
Equity Method Investments
Income from equity method investments, net reported in the Company’s Consolidated Statements of Operations and Comprehensive Income for the years ended December 31 consisted of the following (in millions):
At acquisition date, the Company measured its estimated share of the differences between the estimated fair values and carrying values (the “basis difference”) of the investees’ tangible assets and amortizable intangible assets had the fair value of the investments been allocated to the identifiable assets of the investees in accordance with ASC Topic 805, “Business Combinations.” Additionally, the Company measured its estimated share of the basis difference attributable to investees’ goodwill. The Company amortizes its share of the basis differences attributable to tangible assets and intangible long-lived assets of investees, including TV Food Network, and records the amortization (the “amortization of basis difference”) as a reduction of income from equity method investments, net in the accompanying Consolidated Statements of Operations and Comprehensive Income. The Company’s share in these basis differences and related amortization is primarily attributable to its investment in TV Food Network (discussed in more detail below). There were no other-than-temporary impairments (“OTTI”) during the years ended December 31, 2023, 2022 and 2021. Investment in TV Food Network Nexstar acquired its 31.3% equity investment in TV Food Network through TV Food Network
F-21 The partnership agreement governing TV Food Network provides that the partnership shall, unless certain actions are taken by the partners, dissolve and commence winding up and liquidating TV Food Network upon the first to occur of certain enumerated liquidating events, one of which is a specified date of December 31,
Nexstar had the following transactions related to its investment in TV Food Network during the years ended December 31, 2023, 2022 and 2021, respectively:
received cash distributions totaling $270 million, $249 million and $239 million, • recognized shares in TV Food Network’s net income of $177 million, $227 million and $253 million, and • recorded amortization of basis difference (expense) of $69 million, $70 million and $125 million. Summarized financial information for TV Food Network is as follows (in
Note Accrued expenses consisted of the following, as of December 31 (in
F-22 Note Long-term debt consisted of the following, as of December 31
On December 6, 2023, Nexstar borrowed $20 million under its revolving credit facility used for additional working capital, which it repaid in full on December 19, 2023, funded by cash on hand. On June 6, 2023, Nexstar and Mission, an independently owned VIE consolidated by Nexstar, amended their respective credit agreements. The amendments to the respective credit agreements pertain to replacement of the London Interbank Offered Rate (“LIBOR”)-based interest rate applicable to the Term Loan B, due September 2026 of Nexstar and Term Loan B, due June 2028 of Mission with the term Secured Overnight Financing Rate (“SOFR”)-based interest rate. Under each amendment, the term SOFR is defined to mean the sum of the term SOFR screen rate published by the CME Group Benchmark Administration Limited term SOFR administrator and a spread adjustment of 0.11448% for an interest period of one month’s duration, 0.26161% for an interest period of three months’ duration and 0.42826% for an interest period of six months’ duration. The term SOFR is subject to a floor of 0%. In addition, during the year ended December 31,
Interest rates are selected at Nexstar’s or Mission’s option, as applicable, and the applicable margin is adjusted quarterly as defined in
6.85% and 5.86% in 2023 and 2022, respectively, for Nexstar’s Term Loan A, due June 2027 (based on an • 7.85% and 6.89% in 2023 and 2022, respectively, for Nexstar’s Term Loan B, due September 2026 (based on an • 7.85% and
• 6.85% and 5.86% in 2023 and 2022, respectively, for Mission’s 1.50%)
5.625% Notes, due July 2027 On July 3, 2019, Nexstar completed the sale and issuance of On November 22, 2019, Nexstar completed the issuance and sale of
Upon the occurrence of a change of control (as defined in the 5.625% Indenture due 2027), each holder of the 5.625% Notes, due July 2027 may require Nexstar to repurchase all or a portion of the notes in cash at a price equal to The 5.625% Notes, due July 2027 contain 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
Interest on the 4.75% Notes, due November 2028 is payable semiannually in arrears on May 1 and November 1 of each year. The 4.75% Notes, due November 2028 are guaranteed by Nexstar, Mission and certain of Nexstar’s and Mission’s existing and future restricted subsidiaries, subject to certain customary release provisions. The 4.75% Notes, due November 2028 are senior unsecured obligations of Nexstar and the guarantors, rank equal in right of payment with our and the guarantors’ existing and future senior indebtedness, including Nexstar’s 5.625% Notes, due Nexstar has the option to redeem all or a portion of the 4.75% Notes, due November 2028 at any time prior to November 1, 2023 at a price equal to 100% of the principal amount redeemed plus accrued and unpaid interest, if any, to, but excluding, the redemption date plus a make-whole premium as of the date of redemption. At any time prior to November 1, 2023, Nexstar may also redeem up to 40% of the aggregate principal amount at a redemption price Upon the F-24 The 4.75% Notes, due November 2028 Indenture contains covenants that limit, among other things, Nexstar’s and the guarantors’ 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) transfer or sell assets, (5) create liens, (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) guarantee certain indebtedness and (8) engage in transactions with affiliates. The 4.75% Notes, due November 2028 Indenture provides for customary events of default (subject in certain cases to customary grace and cure periods), which include nonpayment, breach of covenants, 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 and is continuing, the trustee or holders of at least 25% in principal amount of the then outstanding 4.75% Notes, due November 2028 may declare the principal of, premium, and accrued but unpaid interest, including additional interest, on all the 4.75% Notes, due November 2028 to be due and payable. Upon such a declaration, such principal, premium and accrued and unpaid interest will be due and payable immediately. Unused Commitments and Borrowing Availability
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, In consideration of Nexstar’s guarantee of the Mission senior secured credit facility, Mission has granted Nexstar purchase options 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 amended credit agreement does not contain financial covenant ratio requirements but does provide for default in the event Nexstar does not comply with all covenants contained in its credit agreement. As of December 31, Debt Maturities The scheduled principal maturities of the Company’s debt
F-25 Note The Company as a Lessee The Company has operating Supplemental balance sheet information related to operating leases as of December 31 was as follows (in millions, except lease term and
Operating lease expenses for the year ended December 31, Operating lease expenses for the year ended December 31,
Cash paid for operating leases included in the operating cash $64 million, $60 million and $52 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Future minimum lease payments under non-cancellable leases as of December 31,
F-26
Note
The remaining pension obligations of $40 million relate to non-contributory unfunded supplemental executive retirement and ERISA Excess plans for which Nexstar’s policy is to fund the benefits as claims and premiums are paid. Nexstar also
As of and for the years ended December 31, the following table provides a reconciliation of the plans’ benefit obligations, plan assets and funded status, along with the related amounts that are recognized in the Consolidated Balance Sheets (in
In September
F-27 The plans’ benefit obligations were determined using the following assumptions:
The decrease in the discount rates from December 31, The increase
Net Periodic Benefit Cost (Credit) The following tables provide the components of net periodic benefit cost (credit) for the plans for the years ended December 31 (in
The net periodic costs for
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. For purposes of measuring the related postretirement health care costs for F-28 The following table provides a summary of
The asset allocation for
As the plan sponsor of the funded retirement plans, The investment • For plan assets with a total fair value of $1.2 billion as of December 31, 2023, the investment policy ranges are 8%-28% U.S. equity, 0%-16% non-U.S. equity, 0%-13% emerging market equity, 0%-17% global equity, 0%-17% opportunistic sub-asset classes, 50%-70% fixed income and • For plan assets with a total fair value of $287 million as of December 31, 2023, the Nexstar 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 investment 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:
international markets. Equity securities are invested broadly in U.S. and non-U.S. companies and are diversified across countries, currencies, market capitalizations and investment styles. These securities use the S&P 500 (U.S. large cap), Russell 2000 (U.S. small cap), Russell 2500 (U.S. mid cap) and MSCI All Country World Index ex-U.S. (non-U.S.) as their benchmarks. F-29 • 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. Fixed income securities are invested in diversified portfolios that invest across the maturity spectrum and include primarily investment-grade securities with a minimum average quality rating of A and insurance annuity contracts. These securities use the Barclays Capital Aggregate (intermediate term bonds), Barclays Capital Long Corporate and Barclays Capital Long Government/Credit (long bonds) U.S. Bond Indexes as their 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. Other investments include investments in real estate funds, emerging market debt, The following table sets forth, by asset category,
Registered investment companies are valued at exchange listed prices for exchange traded registered investment companies, which are classified in Level 1 of the fair value hierarchy. Common/collective trusts are valued on the basis of the relative interest of each participating investor in the fair value of the underlying assets of each of the respective common/collective trusts. Common/collective trusts contain underlying assets valued based on pricing from observable market information in a non-active market and are classified in Level 2 of the fair value hierarchy. Certain common/collective trusts, investment companies The pooled separate account represents an insurance contract under which plan assets are administered through pooled funds. F-30
Expected Cash Flows The following table includes amounts that are expected to be contributed to the plans by
Defined Contribution Plans The Company has established retirement savings plans under Section 401(k) of the Internal Revenue Code (the “401(k) Plans”). The 401(k) 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 401(k) Plans may be made at the discretion of management of the Company. During the years ended December 31, The Company has a Supplemental Income Deferral Plan for which certain employees, including executive officers, are eligible. The plan provides benefits to highly compensated employees in circumstances in which the maximum limits established under Note The Company measures and records in its Consolidated Financial Statements certain assets and liabilities at fair value. ASC Topic 820, “Fair Value Measurement and Disclosures,” establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). This hierarchy consists of the following three levels:
Level 1 – Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market.
Level 2 – Assets and liabilities whose values are based on inputs other than those included in Level 1, including quoted market prices in markets that are not active; quoted prices of assets or liabilities with similar attributes in active markets; or valuation models whose inputs are observable or unobservable but corroborated by market data.
The carrying values of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable, broadcast rights payable, and accrued expenses approximate fair value due to their short term F-31 As of December 31, the estimated fair values and carrying amounts of the Company’s
(1) The fair (2)
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 See Note Note 12: Common Stock The holders of 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. Nexstar’s senior secured credit facility provides limits on the amount of dividends the Company may pay to stockholders during the term of Nexstar’s credit agreement. On Share repurchases Nexstar utilizes available treasury stock or issues new shares of its common stock when options are exercised or restricted stock units vest. During the years ended December 31, During the years ended December 31, 2023, 2022 and 2021, total dividend payments were $191 million, $142 million, and $118 million, respectively. F-32 On June 13, 2022, Nexstar’s shareholders approved certain amendments to Nexstar’s certificate of incorporation (the “Original Certificate of Incorporation”) to eliminate Nexstar’s Class B common stock, par value $0.01 per share (the “Class B Common Stock”), and Class C common stock, par value $0.01 per share (the “Class C Common Stock”), which classes of common stock had no shares issued and outstanding prior to the date of shareholder approval of their elimination. The common stock (f/k/a Class A common stock) has been the only class of shares outstanding since 2013. On June 27, 2022, Nexstar filed a Certificate of Amendment No. 2 (the “Amendment”) to the Original Certificate of Incorporation with the Secretary of State of the State of Delaware to reflect the elimination of Nexstar’s Class B Common Stock and Class C Common Stock and make related changes. The Amendment became effective upon its filing with the Secretary of State of the State of Delaware on June 27, 2022. On June 15, 2023, Nexstar’s shareholders approved certain amendments to Nexstar’s certificate of incorporation to, among other things, declassify its board of directors beginning at the 2024 annual meeting. On June 20, 2023, Nexstar filed a Certificate of its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”) with the Secretary of State of the State of Delaware to reflect such amendments. The Amended and Restated Certificate of Incorporation became effective immediately upon its filing with the Secretary of State of the State of Delaware on June 20, 2023. For transactions and events involving the Company’s common stock after December 31, 2023, refer to Note 19. Note Stock-Based Compensation Expense
The Company recognized stock-based compensation expense of Stock-Based Compensation Plans As of December 31, At December 31, 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. As of December 31, F-33 The following table summarizes activity and information related to stock options for the year ended December 31,
Time-Based Restricted Stock Units The RSUs vest over a range of two to
Performance-Based Restricted Stock Units The vesting of the PSUs is contingent on the continued service of the grantee and the achievement of specific performance metrics (generally over a range of two to four
F-34 Note The income tax expense (benefit) consisted of the following components for the years ended December 31 (in
The following is a reconciliation of the federal statutory income tax rate to income tax expense for the years ended December 31 (in
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 F-35 The components of the net deferred tax asset (liability) were as follows, as of December 31 (in
As of December 31,
A reconciliation of the beginning and ending balances of the gross liability for uncertain tax positions is as follows (in
The Company’s liability for unrecognized tax benefits totaled As allowed by ASC Topic 740, the Company recognizes accrued interest and penalties related to uncertain tax positions in income tax expense in the accompanying Consolidated Statements of Operations and Comprehensive Income. The Company’s accrued interest and penalties related to uncertain tax positions were Although management believes its estimates and judgments are reasonable, the resolutions of the Company’s tax issues are unpredictable and could result in tax liabilities that are significantly higher or lower than 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. F-36 The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Tribune acquired entities are currently undergoing The Company has gross federal and state income tax NOL carryforwards of 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. Note 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.
Media Ownership FCC rules limit the Company’s ownership of television stations in local markets and nationally and govern certain local service agreements between Nexstar and third parties. In general, FCC rules prohibit Nexstar from owning two of the top four stations in a market in terms of audience share (unless a case-by-case exception is granted) and from owning stations that reach more than 39% of U.S. television households (as calculated using a prescribed FCC methodology). Nexstar is also prohibited from providing more than 15 percent of the programming of a non-owned television station through a TBA or LMA if Nexstar also owns a station in the same market, unless the applicable TBA or LMA was entered into prior to November 5, 1996. The FCC is required to review its media ownership rules every four years and to eliminate those rules it finds are no longer In
F-37
A broadcaster that elects retransmission consent waives its mandatory carriage rights, and the broadcaster and the MVPD must negotiate for carriage of the station’s signal. 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. FCC rules and federal statutory law require retransmission consent negotiations to be conducted in “good faith.” It is a per se violation of the duty to negotiate in good faith for a television broadcast station to negotiate retransmission consent jointly with another station in the same market if the stations are not commonly owned. Accordingly, the VIEs with which we have sharing agreements must separately negotiate their retransmission consent agreements with MVPDs for stations in markets where we also own a station. MVPD operators have actively sought to change the regulations under which retransmission consent is negotiated before both the U.S. Congress and the FCC
Note 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,
Guarantee of Mission Debt Nexstar F-38 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. Collective Bargaining Agreements As of December 31, Litigation From time to time, the Company is 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, the Company believes the resulting liabilities would not have a material adverse effect on its financial condition or results of operations. Local TV Advertising Antitrust Litigation—On March 16, 2018, a group of companies including Nexstar and Tribune (the “Defendants”) received a Civil Investigative Demand from the Antitrust Division of the Starting in July 2018, a series of plaintiffs filed putative class action lawsuits against the Defendants and others alleging that they coordinated their pricing of television advertising, thereby harming a proposed class of all buyers of television advertising time from one or more of the Defendants since at least January 1, 2014. The plaintiff in each lawsuit seeks injunctive relief and money damages caused by the alleged antitrust violations. 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. The Plaintiffs’ Consolidated Complaint was filed on April 3, The parties are in the discovery phase of litigation. The Court has not yet set a trial date. Nexstar and Tribune deny
F-39
In connection with Tribune Chapter 11 Reorganization On July 11, 2023, the Bankruptcy Court
Chicago Cubs On June 28, 2016, the Internal Revenue Service (“IRS”) issued Tribune a Notice of Deficiency which presented the IRS’s position that the gain with respect to the Chicago Cubs Transactions should have been included in Tribune’s 2009 taxable income. Accordingly, the IRS
On September 19, 2019, Tribune A bench trial in the U.S. Tax Court took place between October 28, 2019 and November 8, 2019, and closing arguments took place on December 11, 2019. The Tax Court issued a separate opinion on January 6, 2020 holding that the IRS satisfied the procedural requirements for the imposition of the gross valuation misstatement penalty. The judge deferred any On October 26, 2021, the Tax Court issued an opinion related to the Chicago Cubs As of December 31, 2023, Nexstar believes the tax impact of applying the Tax Court opinion to 2009 and its impact on subsequent tax years is not material to the Company’s accounting for uncertain tax positions or to its Consolidated Financial Statements. Although management believes its estimates and judgments are reasonable, the timing and ultimate resolution are unpredictable and could materially change. F-40 Revenue Agent’s Report on Tribune’s 2014 to 2015 Federal Income Tax Note
The Company evaluates the performance of its operating segments based on net revenue and segment profit (loss). Segment profit includes net revenue, direct operating expenses and selling, general and administrative expenses (excluding corporate) and payments for broadcast rights. Segment profit (loss) excludes depreciation and amortization, reimbursement from the FCC related to station repack, impairment charges, gain on disposal of assets and business divestitures and non-operating income statement items. The CW segment profit (loss) is also calculated in this manner except The CW includes amortization of broadcast rights and excludes payments for broadcast rights. Segment financial information is included in the following tables for the periods presented (in
F-41
(1) The CW’s segment loss presented at 75% during the years ended December 31, 2023 and 2022 (none in 2021). (2) Excludes amortization of The CW’s programming costs of $377 million and $90 million for the years ended December 31, 2023 and 2022, respectively, which is included in “The CW segment loss”. (3) Excludes payments for The CW’s broadcast rights of $329 million and $118 million for the years ended December 31, 2023 and 2022, respectively, which are not included in “The CW segment loss”. (4) While the Company’s investment in TV Food Network ($936 million at December 31, 2023 and $1.099 billion at December 31, 2022) has not been allocated to a Company reporting unit or operating segment, such asset has been included in the Company’s disclosure of Broadcast segment assets given the similar nature of the investment to that segment. For additional information on equity investments, see Note 6.
The following table presents the disaggregation of the Company’s revenue under ASC 606 for the periods
F-42 Advertising revenue The Company receives compensation from MVPDs and OVDs in return for the consent to the retransmission of the signals of its television stations and the carriage of
Note Allowance for
Note On January From January 1 to February 27, In January 2024, Nexstar borrowed $55 million under its revolving credit facility used for additional working capital, which In February 2024, we received $40 million F-43
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||