NEXSTAR MEDIA GROUP, INC. The following discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and related Notes included elsewhere in this Quarterly Report on Form 10-Q and the Consolidated Financial Statements and related Notes contained in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . As used in this Quarterly Report on Form 10-Q and unless the context indicates otherwise, "Nexstar" refers toNexstar Media Group, Inc. and its consolidated subsidiaries; "Nexstar Broadcasting " refers toNexstar Broadcasting, Inc. , our wholly-owned direct subsidiary; "Nexstar Digital" refers toNexstar Digital LLC , our wholly-owned direct subsidiary; the "Company" refers toNexstar and the variable interest entities required to be consolidated in our financial statements; and all references to "we," "our," "ours," and "us" refer toNexstar . As a result of our deemed controlling financial interests in the consolidated VIEs in accordance withU.S. GAAP, we consolidate their financial position, results of operations and cash flows as if they were wholly-owned entities. We believe this presentation is meaningful for understanding our financial performance. Refer to Note 2 to our Condensed Consolidated Financial Statements for a discussion of our determinations of VIE consolidation under the related authoritative guidance. Therefore, the following discussion of our financial position and results of operations includes the consolidated VIEs' financial position and results of operations.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q 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 (the "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 COVID-19 pandemic,
including, for example, expectations regarding the impact of COVID-19 on our
businesses 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"); any projections or expectations of earnings,
revenue, financial performance, liquidity and capital resources or other
financial items; the impact of pending or future litigation; the effects of
governmental regulation and future regulation on broadcasting; competition from
others in our broadcast television markets; volatility in programming costs; 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 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 the inherent risks and uncertainties, including those
described in our Annual Report on Form 10-K for the year ended December 31, 2019
and in our other filings with the United States Securities and Exchange
Commission ("SEC"). The forward-looking statements made in this Quarterly Report
on Form 10-Q 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.
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Executive Summary 2020 Highlights
• During the second quarter of 2020, net revenue increased by
or 40.9% compared to the same period in 2019. The increase was primarily
due to the incremental revenue from acquisitions of
increase in distribution revenue and political advertising revenue of our
legacy stations of
increases were partially offset by a decrease in revenue from core
advertising of our legacy stations of
business disruptions caused by COVID-19 and change in the mix between our
core and political advertising as 2020 is an election year, a decrease in
net revenue from station divestitures of
net decrease in digital revenue of our digital businesses and legacy
stations primarily due to the combined effect of business disruptions
caused by COVID-19 and realigned digital business operations. Our
deconsolidation of
but also decreased the Company's operating expenses by $5.5 million .
• During the six months ended June 30, 2020 , we repurchased a total of
950,000 shares of our Class A common stock for $72.6 million , funded by
cash on hand. As of
share repurchase authorization was
made.
• During the three and six months ended
our 31.3% equity method investment in TV Food Network.
• For each of the first two quarters of 2020, our Board of Directors declared
and paid cash dividends of $0.56 per share of our outstanding Class A
common stock, or total dividend payments of $51.0 million .
• On
between Tribune and Sinclair in connection with their terminated merger
agreement. We acquired Tribune through a merger on
part of the resolution, Sinclair has agreed to sell to us television
station
Sinclair formalized this proposed acquisition and entered into a definitive
agreement to acquire the station for
working capital adjustments. The proposed acquisition by us of this station
is subject to
to close at the end of 2020. Sinclair has also sold to us certain
non-license assets associated with television station
cash. We and Sinclair have also modified an existing agreement regarding
carriage of certain of Sinclair's digital networks by certain stations that
we own. Finally, on January 28, 2020 , Sinclair made a $98.0 million cash
payment to us.
2020 Acquisitions
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. On March 2, 2020 , we completed
our acquisition of Fox affiliate television station WJZY and MyNetworkTV
affiliate television station WMYT in the Charlotte, NC market from Fox for $45.3
million in cash. The acquisition from Fox allowed us entry into the Charlotte,
NC market.
2020 Dispositions
On January 14, 2020 , the Company sold its 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).
On March 2, 2020 , Nexstar completed the sale of Fox affiliate television station
KCPQ and MyNetworkTV 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, including working
capital adjustments. Our proceeds from the sale of the stations were partially
used to prepay our term loans.
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Future Acquisitions
OnJanuary 27, 2020 , Sinclair agreed to sell toNexstar television stationWDKY-TV in theLexington, KY DMA (see Note 15, "Commitment and Contingencies"). OnJuly 15, 2020 , Sinclair andNexstar formalized this proposed acquisition and entered into a definitive agreement to acquire the station for$18.0 million in cash, subject to working capital adjustments. The proposed acquisition byNexstar of this station is subject toFCC approval and other customary approvals and is expected to close at the end of 2020. OnMarch 30, 2020 , Mission, a VIE that we consolidate, entered into an asset purchase agreement to acquire certain assets of the three television stations currently owned byMarshall : KMSS serving theShreveport, Louisiana market, KPEJ serving theOdessa, Texas market and KLJB serving theDavenport, Iowa market. The purchase price for the acquisition is approximately$49.0 million , which will be applied againstMarshall's existing loans payable to Mission on a dollar-for-dollar basis. The purchase price is subject to customary adjustments. The proposed acquisition was approved by theBankruptcy Court for the Southern District of Texas but is also subject toFCC and other customary approvals and is expected to close in 2020. OnJuly 8, 2020 ,Nexstar assigned to Mission its option to purchase CW affiliate WPIX in theNew York, NY market from Scripps. On the same date, Mission notified Scripps of its exercise of the option for a purchase price of$75.0 million , subject to customary adjustments, plus accrued interest pursuant to the option agreement. Mission expects to fund this acquisition through a new borrowing that is also expected to be guaranteed byNexstar .Nexstar previously acquired WPIX through a merger with Tribune but simultaneously sold the station to Scripps onSeptember 19, 2019 . UnderNexstar's sale agreement with Scripps,Nexstar was granted an assignable option to purchase the station. Debt Transactions
• During the six months ended
million in principal balance under our term loans, funded by cash on hand.
We also made an additional prepayment of
balance of term loans pursuant to the mandatory prepayment requirement of
the amended credit agreement of
prepayment resulted from the disposition of certain television station
assets in the Seattle, WA and Milwaukee, WI markets to Fox.
• During the six months ended
maturities of $40.3 million under its term loans.
Impact of COVID-19 Pandemic
In March 2020 , the World Health Organization declared the outbreak of
Coronavirus Disease ("COVID-19") 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 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 has 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, for an indefinite period
of time. To support the health and well-being of our employees, business
partners and communities, a vast majority of our employees worked remotely since
mid-March 2020 until the end of April 2020 when we partially resumed our normal
onsite workplace setting. On May 1, 2020 , the shelter-in-place orders in the
state of Texas were lifted and we fully resumed our normal corporate workplace
setting, subject to continuous monitoring.
33
-------------------------------------------------------------------------------- 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 in 2020. This was followed by a significant improvement in our financial results in the remaining part of the second quarter in 2020 as certain areas throughoutthe United States permitted the re-opening of non-essential businesses. As ofJune 30, 2020 , we remained profitable. Our current year results were also higher than our prior year results primarily due to contribution from our acquisition of Tribune inSeptember 2019 . As ofJune 30, 2020 , there have been no material changes in our customer mix, including our advertisers, multichannel video programming distributors and online video distributors. The disruptions from COVID-19 did not have a material impact on our liquidity. As ofJune 30, 2020 , our unrestricted cash on hand and positive working capital were$664.6 million and$720.5 million , respectively, both of which increased from ourDecember 31, 2019 levels of$232.1 million and$404.2 million , respectively. 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$139.7 million and$3.0 million under the respectiveNexstar and Mission revolving credit facilities (with a maturity date ofOctober 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 Quarterly Report on Form 10-Q. We currently estimate that overall revenue and operating results for the remainder of fiscal 2020 will be lower than initially anticipated at the beginning of fiscal 2020, despite that 2020 is an election year. The full extent of the impact of 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 and impact of the COVID-19 pandemic, and any additional preventative and protective actions that theU.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 OnMarch 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, deferment 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 to 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. We intend to continue to review and consider any available potential benefits under the CARES Act for which we qualify, including those described above. TheU.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. The CARES Act is not expected to have a material impact on the Company's Condensed Consolidated Financial Statements. 34
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Overview of Operations
As ofJune 30, 2020 , we owned, operated, programmed or provided sales and other services to 196 full power television stations, including those owned by VIEs, and one AM radio station in 114 markets in 38 states and theDistrict of Columbia . The stations are affiliates ofABC ,NBC ,FOX ,CBS , The CW, MNTV and other broadcast television networks. Through various local service agreements, we provided sales, programming and other services to 36 full power television stations owned by independent third parties, of which 32 full power television stations are VIEs that are consolidated into our financial statements. See Note 2-Variable Interest Entities to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for a discussion of the local service agreements we have with these independent third parties. We guarantee full payment of all obligations incurred under Mission's and Shield's senior secured credit facilities in the event of their default. Mission is a guarantor of our senior secured credit facility, our 5.625% Notes due 2024 and our 5.625% Notes due 2027. Shield does not guarantee any debt within the group. In consideration of our guarantee of Mission's senior secured credit facility, Mission has granted us purchase options to acquire the assets and assume the liabilities of each Mission station, subject toFCC 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 underU.S. GAAP to have controlling financial interests in these entities because of (1) the local service agreementsNexstar has with their stations, (2) our guarantees of the obligations incurred under Mission's and Shield's senior secured credit facilities, (3) our power over significant activities affecting these 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 such VIE which permitNexstar to acquire the assets and assume the liabilities of each of these VIEs' stations at any time, subject toFCC consent. In compliance withFCC regulations for all the parties, each of the consolidated VIEs maintains complete responsibility for and control over programming, finances and personnel for its stations. InDecember 2019 ,Marshall , a VIE previously consolidated by us and the owner of three television stations, filed a voluntary petition for Chapter 11 protection in theU.S. Bankruptcy Court for the Southern District of Texas . Effective onDecember 6, 2019 , the bankruptcy court ordered the cancellation of certain contracts between us andMarshall , including the JSAs. As a result of these developments, we evaluated our business arrangements withMarshall and determined that we no longer have the power to direct the most significant economic activities of the entity and thus we no longer meet the accounting criteria for a controlling financial interest in the entity. Thus, we deconsolidatedMarshall's assets, liabilities and equity effective inDecember 2019 . The SSAs between us andMarshall are currently active. OnMarch 30, 2020 , Mission (currently the lender ofMarshall ) entered into an asset purchase agreement to acquire certain assets of the three television stations currently owned byMarshall : KMSS serving theShreveport, Louisiana market, KPEJ serving theOdessa, Texas market and KLJB serving theDavenport, Iowa market. The purchase price for the acquisition is approximately$49.0 million , which will be applied againstMarshall's existing loans payable to Mission on a dollar-for-dollar basis. The purchase price is subject to customary adjustments. The proposed acquisition was approved by theBankruptcy Court for the Southern District of Texas but is also subject toFCC and other customary approvals and is expected to close in 2020.
See Note 2-Variable Interest Entities to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.
35
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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, theFCC reinstated a previously adopted rule providing that a television station licensee which sells more than 15 percent of the weekly advertising inventory of another television station in the same DMA under a JSA is deemed to have an attributable ownership interest in that station. Parties to existing JSAs that were deemed attributable interests and did not comply with theFCC 's local television ownership rule were given untilSeptember 30, 2025 to come into compliance. InNovember 2017 , theFCC adopted an order on reconsideration that eliminated the rule. That elimination became effective onFebruary 7, 2018 . OnSeptember 23, 2019 , a federal court of appeals vacated theFCC 'sNovember 2017 order on reconsideration. The court later denied petitions for en banc rehearing; onNovember 29, 2019 its decision became effective; and onDecember 20, 2019 theFCC issued an order that formally reinstated the rule. The court's decision has been appealed to theU.S. Supreme Court . 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. TheFCC has repurposed a portion of the broadcast television spectrum for wireless broadband use. In an incentive auction which concluded inApril 2017 , certain television broadcasters accepted bids from theFCC 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. InJuly 2017 , the Company received$478.6 million in gross proceeds from theFCC 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 inApril 2020 and one that went off the air inNovember 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. Sixty one (61) full power stations owned byNexstar and 17 full power stations owned by VIEs were assigned to new channels in the reduced post-auction television band. All of these stations have ceased operating on their former channels and are operating on their new assigned channels, although the Company will continue to incur costs to convert certain stations from interim to permanent facilities on their new 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 three and six months endedJune 30, 2020 , the Company spent a total of$13.0 million and$29.9 million , respectively, in capital expenditures related to station repack which were recorded as assets under the property and equipment caption in the accompanying Condensed Consolidated Balance Sheets. During the three and six months endedJune 30, 2019 , the Company spent a total of$22.6 million and$36.4 million , respectively, in capital expenditures related to station repack which were recorded as assets under the property and equipment caption in the accompanying Condensed Consolidated Balance Sheets. During the three and six months endedJune 30, 2020 , the Company received$25.7 million and$38.5 million , respectively, in reimbursements from theFCC related to these expenditures which were recorded as operating income in the accompanying Condensed Consolidated Statements of Operations. During the three and six months endedJune 30, 2019 , the Company received$19.4 million and$33.6 million , respectively, in reimbursements from theFCC related to these expenditures which were recorded as operating income in the accompanying Condensed Consolidated Statements of Operations. As ofJune 30, 2020 , approximately$52.8 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 theFCC 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 national and regional political election campaigns and certain events such as theOlympic Games or theSuper 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 when advertising airs during theOlympic Games . As 2020 is an election year, we generally expect an increase in political advertising revenue in 2020 compared to 2019. However, due to business disruptions caused by COVID-19, our revenue from political advertising may be less than we initially anticipated at the beginning of 2020 but the ultimate outcome is unknown at this time. Additionally, the rescheduling of the summerOlympics to 2021, also due to the COVID-19 pandemic situation, decreased our advertising revenue in 2020 but is expected to increase our advertising revenue in 2021. 36
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Historical Performance
Revenue
The following table sets forth the amounts of the Company's principal types of
revenue (in thousands) and each type of revenue as a percentage of total net
revenue:
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Amount % Amount % Amount % Amount %
Core advertising
76,907 3.8 4,464 0.3
Distribution revenue 536,544 58.7 314,268 48.4
1,086,260 54.1 628,242 49.2 Digital 46,661 5.1 56,237 8.7 103,101 5.1 109,072 8.6 Other 8,663 0.9 3,625 0.6 18,815 1.1 7,489 0.6 Trade revenue 2,959 0.3 4,114 0.6 5,753 0.3 6,937 0.5
Total net revenue
Results of Operations
The following table sets forth a summary of the Company's operations (in
thousands) and each component of operating expense as a percentage of net
revenue:
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Amount % Amount % Amount % Amount %
Net revenue $ 914,633 100.0 $ 649,012 100.0 $ 2,006,455 100.0 $ 1,275,659 100.0
Operating expenses
(income):
Corporate expenses 35,399 3.9 31,821 4.9 88,873 4.4 62,586 4.9
Direct operating
expenses,
net of trade 413,742 45.2 292,162 45.0 855,523 42.6 581,594 45.6
Selling, general
and administrative
expenses, excluding
corporate 157,844 17.3 112,237 17.3 322,754 16.1 223,832 17.5
Depreciation 35,770 3.9 28,090 4.3 71,176 3.5 55,527 4.4
Amortization of
intangible assets 69,512 7.6 36,357 5.6 140,095 7.0 73,095 5.7
Amortization of
broadcast rights 35,740 3.9 13,935 2.2 72,948 3.7 28,297 2.2
Trade expense 2,897 0.3 3,882 0.6 6,175 0.3 7,313 0.6
Reimbursement from
the FCC related to
station repack (25,716 ) (2.8 ) (19,416 ) (3.0 ) (38,474 ) (1.9 ) (33,603 ) (2.6 )
Change in the
estimated fair
value of contingent
consideration
attributable to a
merger 3,933 0.4 - - 3,933 0.2 - -
Gain on
relinquishment ofspectrum (10,791 ) (1.2 ) - - (10,791 ) (0.5 ) - - Loss (gain) on disposal of stations and entities, net 50 - - - (7,025 ) (0.4 ) - - Total operating expenses 718,380 499,068 1,505,187 998,641 Income from operations$ 196,253 $ 149,944 $ 501,268 $ 277,018 37
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Three Months Ended
The period-to-period comparability of our consolidated operating results is affected by acquisitions. For each quarter we present, our legacy stations include those stations that we owned or provided services to for the complete quarter in the current and prior years. For our annual and year to date presentations, we combine the legacy stations' amounts presented in each quarter.
Revenue Core advertising revenue was$298.3 million for the three months endedJune 30, 2020 , compared to$267.6 million for the same period in 2019, an increase of$30.7 million , or 11.4%. The increase was primarily due to incremental revenue from Tribune stations and other businesses we acquired in 2019 of$129.7 million and current year station acquisitions of$3.7 million , partially offset by a decrease in revenue from station divestitures of$10.7 million . Our legacy stations' core advertising revenue decreased by$90.4 million , primarily due to the business disruptions caused by COVID-19 and changes in the mix between our core and political advertising. Our deconsolidation ofMarshall inDecember 2019 also resulted in a$1.6 million decrease in revenue. Our largest advertiser category, automobile, represented approximately 13% and 22% of our core advertising revenue for the three months endedJune 30, 2020 and 2019, respectively. Overall, including past results of our newly acquired stations, automobile revenues decreased by approximately 9% during the quarter. The other categories representing our top five were attorneys, which increased in 2020, and medical/healthcare, furniture and fast food restaurants, which decreased in 2020. We currently estimate that overall core advertising revenue for the remainder of fiscal 2020 will continue to be negatively impacted by the business disruptions caused by COVID-19. 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 theU.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 summerOlympics to 2021, also due to the COVID-19 pandemic situation, decreased our advertising revenue in 2020 but is expected to increase our advertising revenue in 2021. Political advertising revenue was$21.6 million for the three months endedJune 30, 2020 , compared to$3.2 million for the same period in 2019, an increase of$18.4 million , as 2020 is an election year. Of the$18.4 million increase,$5.3 million was attributable to incremental revenue from Tribune stations we acquired in 2019, and$13.0 million was attributable to our legacy stations. We generally expect an increase in political advertising revenue in 2020 compared to 2019. However, due to business disruptions caused by COVID-19, our revenue from political advertising may be less than we initially anticipated at the beginning of 2020, but the ultimate outcome is unknown at this time. Distribution revenue was$536.5 million for the three months endedJune 30, 2020 , compared to$314.3 million for the same period in 2019, an increase of$222.2 million , or 70.7%. The increase was primarily due to incremental revenue from Tribune stations and other businesses we acquired in 2019 of$183.2 million (including$12.3 million revenue from copyright royalty received in 2020) and current year station acquisitions of$11.3 million , partially offset by a decrease in revenue from station divestitures and deconsolidation ofMarshall of$16.4 million and$4.4 million , respectively. Our legacy stations' revenue increased by$48.5 million primarily 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) and contributions from distribution agreements with OVDs. We anticipate continued increase of retransmission fees until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers. Digital media revenue, representing advertising revenue on our stations' web and mobile sites and other internet-based revenue, was$46.7 million for the three months endedJune 30, 2020 , compared to$56.2 million for the same period in 2019, a decrease of$9.5 million , or 17.0%. Our digital businesses' revenue decreased by$7.6 million primarily due to the business disruption caused by COVID-19 and realigned digital business operations. Our legacy stations' revenue from web and mobile sites also decreased by$6.9 million primarily due to the business disruption caused by COVID-19. These decreases were partially offset by incremental revenue from Tribune stations we acquired in 2019 of$6.1 million , less a decrease in revenue from station divestitures of$1.3 million .
Operating Expenses
Corporate expenses, related to costs associated with the centralized management of our stations, were$35.4 million for the three months endedJune 30, 2020 , compared to$31.8 million for the same period in 2019, an increase of$3.6 million , or 11.2%. This was primarily attributable to an increase in stock-based compensation due to new equity incentives granted and an increase in legal fees primarily attributable to the ongoing litigation inherited from Tribune, partially offset by a decrease in payroll and bonuses and professional fees. 38
-------------------------------------------------------------------------------- Station direct operating expenses, consisting primarily of news, engineering, programming and station selling, general and administrative expenses (net of trade expense) were$571.6 million for the three months endedJune 30, 2020 , compared to$404.4 million for the same period in 2019, an increase of$167.2 million , or 41.3%. The increase was primarily due to expenses associated with Tribune stations and other businesses we acquired in 2019 of$174.3 million (including network and programming costs of$117.1 million ) and our current year station acquisitions of$9.8 million , partially offset by decrease in expenses from our station divestitures and the deconsolidation ofMarshall of$16.1 million and$3.7 million , respectively. In addition, our legacy stations' programming costs increased by$29.1 million , primarily due to network affiliation renewals and annual increases in our network affiliation costs and an increase in selling, general and administrative expenses. These increases were partially offset by a$24.2 million decrease in the operating expenses of our digital products due to lower revenue. Depreciation of property and equipment was$35.8 million for the three months endedJune 30, 2020 , compared to$28.1 million for the same period in 2019, an increase of$7.7 million , or 27.3%, primarily due to incremental depreciation from the Tribune stations and other businesses we acquired in 2019 and current year station acquisitions, partially offset by station divestitures, and increased depreciation from newly capitalized assets related to station repacking activities. Amortization of intangible assets was$69.5 million for the three months endedJune 30, 2020 , compared to$36.4 million for the same period in 2019, an increase of$33.2 million , or 91.2%. This was primarily due to increased amortization from the Tribune stations and other businesses we acquired in 2019 and current year station acquisitions, partially offset by decreases in amortization from certain fully amortized assets and divested stations. Amortization of broadcast rights was$35.7 million for the three months endedJune 30, 2020 , compared to$13.9 million for the same period in 2019, an increase of$21.8 million , or 156.5%. The increase was primarily due to incremental amortization from the Tribune stations and other businesses we acquired in 2019 and current year station acquisitions, less decreases from station divestitures. This increase was partially offset by a reduction 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 assigned to new channels ("repack") in connection with theFCC 's process of repurposing a portion of the broadcast television spectrum for wireless broadband use. These stations have vacated their former channels by the prescribedFCC deadline ofJuly 13, 2020 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, theFCC reimburses television broadcasters, MVPDs and other parties for costs reasonably incurred due to the repack. During the three months endedJune 30, 2020 and 2019, we received a total of$25.7 million and$19.4 million , respectively, in reimbursements from theFCC which we recognized as operating income. During the three months endedJune 30, 2020 , we completed a station's conversion to a VHF channel completing our final relinquishment of spectrum pursuant to theFCC '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.
Income on equity investments, net
Income on equity investments, net was$11.3 million for the three months endedJune 30, 2020 , compared to a$665 thousand loss on equity investments for the same period in 2019, an increase of$12.0 million . The increase was primarily attributable to our 31.3% equity in earnings of TV Food Network, less the amortization of basis difference. OnSeptember 19, 2019 , we acquired our 31.3% ownership stake in TV Food Network through our merger with Tribune.
Pension and other postretirement plans credit, net
Pension and other postretirement plans credit, net was$10.8 million for the three months endedJune 30, 2020 , compared to$1.4 million for the same period in 2019, an increase of$9.4 million , primarily attributable to pension plans and other postretirement benefits we assumed through our merger with Tribune onSeptember 19, 2019 . Interest Expense, net Interest expense, net was$82.3 million for the three months endedJune 30, 2020 , compared to$51.4 million for the same period in 2019, an increase of$30.9 million , or 60.1%. The increase was primarily due to interest incurred on term loans issued onSeptember 19, 2019 and 5.625% Notes due 2027 issuedJuly 3, 2019 which were both related to the financing ofNexstar's acquisition of Tribune, partially offset primarily by a decrease in interest expense in conjunction withNexstar's redemption of 6.125% and 5.875% Notes and a decrease in interest expense on our legacy term loans due to the combined effect of reduction in principal and the London Inter-Bank Offered Rate ("LIBOR"). 39
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Loss on Extinguishment of Debt
During the three months endedJune 30, 2020 , there was no loss on extinguishment of debt as there were no debt prepayments or transactions that would result in the recognition of a loss during the quarter. During the same period in 2019, we made prepayments of our term loans amounting to$100.0 million and we recognized$2.0 million of loss on extinguishment as a result of such prepayments.
Income Taxes
Income tax expense was$37.4 million for the three months endedJune 30, 2020 compared to$26.6 million for the same period in 2019. The effective tax rates were 27.6% and 27.4% for each of the respective periods. The increase in the effective tax rate between the two periods was primarily due to changes in state income taxes and other permanent adjustments, or a 0.2% increase to the effective tax rate. The Company calculates its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income or loss and adjusts the provision for discrete tax items recorded in the period. Future changes in the forecasted annual income projections, including changes due to the impact of the COVID-19 pandemic, could result in significant adjustments to quarterly income tax expense in future periods.
Six Months Ended
The period-to-period comparability of our consolidated operating results is affected by acquisitions. For each quarter we present, our legacy stations include those stations that we owned or provided services to for the complete quarter in the current and prior years. For our annual and year to date presentations, we combine the legacy stations' amounts presented in each quarter.
Revenue
Core advertising revenue was$715.6 million for the six months endedJune 30, 2020 , compared to$519.4 million for the same period in 2019, an increase of$196.2 million , or 37.8%. The increase is primarily due to our incremental revenue from Tribune stations and other businesses we acquired in 2019 of$322.5 million , and an increase in revenue from our current year station acquisitions of$6.1 million , partially offset by a decrease in revenue from station divestitures of$20.6 million . Our legacy stations' core advertising revenue decreased by$108.6 million , primarily due to the business disruptions caused by COVID-19 since mid-March of 2020 and changes in the mix between our core and political advertising. Our deconsolidation ofMarshall inDecember 2019 also resulted in a$3.2 million decrease in revenue. Our largest advertiser category, automobile, represented approximately 16% and 22% of our core advertising revenue for the six months endedJune 30, 2020 and 2019, respectively. Overall, including past results of our newly acquired stations, automobile revenues decreased by approximately 6% in 2020. The other categories representing our top five were attorneys, which increased in 2020, and medical/healthcare, furniture and fast food restaurants, which decreased in 2020. We currently estimate that overall core advertising revenue for the remainder of fiscal 2020 will continue to be negatively impacted by the business disruptions caused by COVID-19. 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 theU.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 summerOlympics to 2021, also due to the COVID-19 pandemic situation, decreased our advertising revenue in 2020 but is expected to increase our advertising revenue in 2021. Political advertising revenue was$76.9 million for the six months endedJune 30, 2020 , compared to$4.5 million for the same period in 2019, an increase of$72.4 million , as 2020 is an election year. Of the$72.4 million increase,$28.7 million was attributable to the incremental revenue from Tribune stations we acquired in 2019, and$43.1 million was attributable to our legacy stations. We generally expect an increase in political advertising revenue in 2020 compared to 2019. However, due to business disruptions caused by COVID-19, our revenue from political advertising may be less than we initially anticipated at the beginning of 2020, but the ultimate outcome is unknown at this time. Distribution revenue was$1.086 billion for the six months endedJune 30, 2020 , compared to$628.2 million for the same period in 2019, an increase of$458.0 million , or 72.9%. The increase is primarily due to incremental revenue from Tribune stations and other businesses we acquired in 2019 of$376.1 million (including$12.3 million revenue from copyright cable royalty received in 2020) and our current year station acquisitions of$15.9 million . Our legacy stations' revenue increased by$108.1 million , primarily due to scheduled annual escalation of rates per subscriber, renewals of smaller contracts providing for higher rates per subscriber (contracts generally have a three-year term) and contributions from distribution agreements with OVDs. The increase is partially offset by a decrease in revenue due to station divestitures of$33.2 million and deconsolidation ofMarshall of$8.8 million . We anticipate continued increase of retransmission fees until there is a more balanced relationship between viewers delivered and fees paid for delivery of such viewers. 40 -------------------------------------------------------------------------------- Digital revenue, representing advertising revenue on our stations' web and mobile sites and other internet-based revenue, was$103.1 million for the six months endedJune 30, 2020 , compared to$109.1 million for the same period in 2019, a decrease of$6.0 million , or 5.5%. Our digital businesses' revenue decreased by$18.9 million primarily due to a decrease in our social media platform and the business disruption caused by COVID-19 since mid-March of 2020. Our legacy stations' revenue from web and mobile sites also decreased by$2.0 million primarily due to the business disruption caused by COVID-19 since mid-March of 2020. These decreases were partially offset by incremental revenue from Tribune stations and other businesses we acquired in 2019 of$17.3 million , less a decrease in revenue from station divestitures of$2.2 million . Operating Expenses Corporate expenses, related to costs associated with the centralized management of our stations, were$88.9 million for the six months endedJune 30, 2020 , compared to$62.6 million for the same period in 2019, an increase of$26.3 million , or 42.0%. This was primarily attributable to an increase in payroll, bonuses and severance of$7.4 million primarily associated with Tribune's corporate expenses that wound down towards the end of the first quarter in 2020, an increase in stock-based compensation of$5.7 million due to new equity incentives granted, and an increase in legal fees of$3.9 million primarily attributable to the ongoing litigation inherited from Tribune. Station direct operating expenses, consisting primarily of news, engineering, programming and station selling, general and administrative expenses (net of trade expense) were$1.178 billion for the six months endedJune 30, 2020 compared to$805.4 million for the same period in 2019, an increase of$372.9 million , or 46.3%. This was primarily due to expenses associated with the Tribune stations and other businesses we acquired in 2019 of$372.4 million (including network and programming costs of$248.4 million ), and expenses associated with our current year station acquisitions of$13.3 million , partially offset by decreases in expenses from our station divestitures and the deconsolidation ofMarshall of$32.1 million and$7.5 million , respectively. In addition, our legacy stations' programming costs increased by$58.7 million , primarily due to network affiliation renewals and annual increases in our network affiliation costs. These increases were partially offset by a$29.9 million decrease in the operating expenses of our digital products due to lower revenue. Depreciation of property and equipment was$71.2 million for the six months endedJune 30, 2020 , compared to$55.5 million for the same period in 2019, an increase of$15.7 million , or 28.2%. The increase was primarily due to incremental depreciation from Tribune stations and other businesses we acquired in 2019 and current year station acquisitions, partially offset by station divestitures, and increased depreciation from newly capitalized assets related to station repacking activities. Amortization of intangible assets was$140.1 million for the six months endedJune 30, 2020 , compared to$73.1 million for the same period in 2019. This was primarily due to increased amortization from Tribune stations and other businesses we acquired in 2019 and current year station acquisitions, partially offset by decreases in amortization from certain fully amortized assets and divested stations. Amortization of broadcast rights was$72.9 million for the six months endedJune 30, 2020 , compared to$28.3 million for the same period in 2019, an increase of$44.6 million , or 157.8%, The increase was primarily due to incremental amortization from Tribune stations and other businesses we acquired in 2019 and current year station acquisitions, less decreases from station divestitures. This increase was partially offset by a reduction 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 repacked in connection with theFCC 's process of repurposing a portion of the broadcast television spectrum for wireless broadband use. These stations have vacated their former channels by theFCC -prescribed deadline ofJuly 13, 2020 and are continuing to spend 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 thanJuly 13, 2020 . Subject to fund limitations, theFCC reimburses television broadcasters, MVPDs and other parties for costs reasonably incurred due to the repack. During the six months endedJune 30, 2020 and 2019, the Company received$38.5 million and$33.6 million , respectively, in reimbursements from theFCC which it recognized as operating income. InApril 2020 , we completed a station's conversion to a VHF channel representing our final relinquishment of spectrum pursuant to theFCC '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. 41
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Income on equity investments, net
Income on equity investments, net was$25.5 million for the six months endedJune 30, 2020 , compared to a$1.2 million loss on equity investments for the same period in 2019, an increase of$26.6 million , primarily attributable to our 31.3% equity in earnings of TV Food Network, less amortization of basis difference. OnSeptember 19, 2019 , we acquired a 31.3% ownership stake in TV Food Network through our merger with Tribune.
Pension and other postretirement plans credit, net
Pension and other postretirement plans credit, net was$21.5 million for the six months endedJune 30, 2020 , compared to$2.8 million for the same period in 2019, an increase of$18.7 million , primarily attributable to the pension plans and other postretirement benefit plans we assumed through our merger with Tribune onSeptember 19, 2019 . Interest Expense, net Interest expense, net was$183.5 million for the six months endedJune 30, 2020 , compared to$104.3 million for the same period in 2019, an increase of$79.2 million , or 75.9%. The increase was primarily due to interest incurred on term loans issued onSeptember 19, 2019 and on 5.625% Notes due 2027 issuedJuly 3, 2019 which were both related to the financing ofNexstar's acquisition of Tribune, partially offset primarily by a decrease in interest expense in conjunction withNexstar's redemption of 6.125% and 5.875% Notes and a decrease in interest expense on our legacy term loans due to the combined effect of reduction in principal and the London Inter-Bank Offered Rate ("LIBOR").
Loss on Extinguishment of Debt
Loss on extinguishment of debt was$7.5 million for the six months endedJune 30, 2020 , compared to$3.7 million for the same period in 2019, an increase of$3.8 million , primarily due to an increase in prepayments on our term loans of$350.0 million in 2020 compared to the prior period. Income Taxes Income tax expense was$101.8 million for the six months endedJune 30, 2020 compared to$43.1 million for the same period in 2019. The effective tax rates were 28.5% and 25.2% for each of the respective periods. The increase in the effective tax rate between the two periods was primarily due to nondeductible goodwill written off as a result of divestitures and a decrease in the deduction for excess tax benefits. The Company recognized an income tax expense of$8.1 million attributable to nondeductible goodwill written off as a result of divestitures, or a 2.3% increase to the effective tax rate. Additionally, the Company recognized a decrease in the excess tax benefit related to stock-based compensation of$2.3 million , or a 2.3% increase to the effective tax rate. These increases were offset by a 0.8% decrease in the impact of permanent differences on the effective rate. 42
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Liquidity and Capital Resources
The Company is leveraged, which makes it vulnerable to changes in general
economic conditions. The Company's ability to repay or refinance its debt will
depend on, among other things, financial, business, market, competitive and
other conditions, many of which are beyond the Company's control, for instance,
uncertainties surrounding the business outlook caused by Coronavirus Disease
2019 ("COVID-19"). In December 2019 , COVID-19 was reported and has spread
globally, including to every state in the United States . In March 2020 , the
World Health Organization declared COVID-19 a pandemic and the United States
government declared a national emergency with respect to COVID-19. COVID-19 has
created and may continue to create significant uncertainty in global financial
markets, which may reduce demand for our advertising, retransmission, and
digital services, impact the productivity of our workforce, reduce our access to
capital, and harm our business and results of operations.
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 in 2020. This
was followed by a significant improvement in our financial results in the
remaining part of the second quarter in 2020 as certain areas throughout the
United States permitted the re-opening of non-essential businesses. As of June
30, 2020 , we remained profitable. Our current year results were also higher than
our prior year results primarily due to contribution from our acquisition of
Tribune in September 2019 . As of June 30, 2020 , there have been no material
changes in our customer mix, including our advertisers, multichannel video
programming distributors and online video distributors. The disruptions from
COVID-19 did not have a material impact on the Company's liquidity. As of June
30, 2020 , the Company's unrestricted cash on hand amounted to $664.6 million and
the Company had positive working capital of $720.5 million , both increased from
the December 31, 2019 levels of $232.1 million and $404.2 million , respectively.
As of June 30, 2020 , the Company was in compliance with its financial covenants
contained in the amended credit agreements governing its senior secured credit
facilities. The Company believes it has sufficient unrestricted cash on hand and
has availability to access additional cash up to $139.7 million and $3.0 million
under the respective Nexstar and Mission revolving credit facilities (with a
maturity date of October 2023 ) to meet its business operating requirements, its
capital expenditures and to continue to service its debt for at least the next
12 months as of the filing date of this Quarterly Report on Form 10-Q. The
Company also believes its leverage is well positioned to withstand the current
challenges as the nearest maturity of its outstanding debt will not occur until
October 2023 . The Company will continue to evaluate its liquidity, its best use
of operating cash flow and the market conditions to determine if further steps
are necessary.
Overview
The following tables present summarized financial information management
believes is helpful in evaluating the Company's liquidity and capital resources
(in thousands):
Six Months Ended June 30,
2020 2019
Net cash provided by operating activities $ 717,298 $ 236,400
Net cash provided by (used in) investing
activities 321,852 (36,856 )
Net cash used in financing activities (606,594 ) (264,735 )
Net increase in cash, cash equivalents and
restricted cash $ 432,556 $ (65,191 )
Cash paid for interest $ 171,348 $ 98,103
Income taxes paid, net of refunds $ 7,686 $ 52,419
As of June 30, As of December 31,
2020 2019
Cash, cash equivalents and restricted cash $ 681,234 $ 248,678
Long-term debt, including current portion 8,038,068 8,492,588
Unused revolving loan commitments under senior secured credit facilities (1) 142,662 142,662
(1) Based on covenant calculations as of
and $3.0 million unused revolving loan commitments under the respective
Nexstar and Mission senior secured credit facilities were available for
borrowing.
43
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Cash Flows - Operating Activities
Net cash flows provided by operating activities increased by$480.9 million during the six months endedJune 30, 2020 , compared to the same period in 2019. This was primarily due to increases in revenue (excluding trade) of$732.0 million , distributions from our equity investments in TV Food Network of$197.1 million , an increase in source of cash resulting from timing of accounts receivable collections of$109.6 million , and an increase in source of cash resulting from lower tax payments of$44.7 million . These increases were partially offset by an increase in our corporate, direct operating and selling, general and administrative expense (excluding non-cash transactions) of$388.1 million , an increase in cash paid for interest of$73.2 million , an increase in payments for broadcast rights of$72.6 million and a use of cash resulting from timing of payments to our vendors of$75.9 million .
Cash Flows - Investing Activities
Net cash flows provided by investing activities were$321.9 million during the six months endedJune 30, 2020 , compared to net cash flows used in investing activities of$36.9 million in the same period in 2019. In 2020, we sold two television stations and our sports betting information website business for$349.9 million and$12.9 million in cash, respectively. We also received$98.0 million of cash proceeds from settlement of litigation between Sinclair and Tribune, which we acquired inSeptember 2019 . These increases were reduced by the cash payments we made to acquire two television stations and certain non-license assets for total cash consideration payments of$63.2 million . Our capital expenditures during the six months endedJune 30, 2020 were$115.7 million , an increase of$44.2 million compared to the same period in 2019, primarily due to increased capital expenditure requirements from Tribune stations and other businesses we acquired inSeptember 2019 , partially offset by station divestitures. Other activity included an increase in reimbursements from theFCC for station repack costs of$4.9 million .
Cash Flows - Financing Activities
Net cash flows used in financing activities increased by
In 2020, we made payments on the outstanding principal balance of our term loans of$470.3 million (including$430.0 million in prepayments), paid dividends to our common stockholders of$51.0 million ($0.56 per share during each quarter), repurchased common shares of$72.6 million , paid cash for taxes in exchange for shares of common stock withheld of$6.8 million resulting from net share settlements of certain stock-based compensation, and paid for finance lease and software obligations of$6.3 million . In 2019, we made payments on the outstanding principal balance of our term loans of$203.6 million , paid dividends to our common stockholders of$41.3 million ($0.45 per share each quarter), paid cash for taxes in exchange for shares of common stock withheld of$9.8 million resulting from net share settlements of certain stock-based compensation, completed our acquisition of the noncontrolling interest of station KHII for a cash payment of$6.4 million , paid for finance lease and software obligations of$5.0 million and received proceeds from the exercise of stock options of$1.5 million .
Our senior secured credit facility may limit the amount of dividends we may pay to stockholders over the term of the agreement.
Future Sources of Financing and Debt Service Requirements
As ofJune 30, 2020 , the Company had total combined debt of$8.0 billion , net of financing costs and discounts, which represented 78.7% of the Company's combined capitalization. The Company's high level of debt requires that a substantial portion of cash flow be dedicated to pay principal and interest on debt, which reduces the funds available for working capital, capital expenditures, acquisitions and other general corporate purposes.
The following table summarizes the principal indebtedness scheduled to mature
for the periods referenced as of
Total 2020 2021-2022 2023-2024 Thereafter
Nexstar senior secured credit
facility $ 5,198,049 $ 24,267 $ 203,021 $ 2,079,125 $ 2,891,636
Mission senior secured credit
facility 225,099 1,143 4,571 219,385 -
Shield senior secured credit
facility 21,238 575 3,903 16,760 -
5.625% Notes due 2024 900,000 - - 900,000 -
5.625% Notes due 2027 1,785,000 - -
- 1,785,000
$ 8,129,386 $ 25,985 $ 211,495 $ 3,215,270 $ 4,676,636
We make semiannual interest payments on our 5.625% Notes due 2024 on February 1
and August 1 of each year. We make semiannual interest payments on the 5.625%
Notes due 2027 on January 15 and July 15 of each year. Interest payments on our,
Mission's and Shield's senior secured credit facilities are generally paid every
one to three months and are payable based on the type of interest rate selected.
44
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The terms of our, Mission's and Shield's senior secured credit facilities, as
well as the indentures governing our 5.625% Notes due 2024 and 5.625% Notes due
2027, limit, but do not prohibit us, Mission or Shield, from incurring
substantial amounts of additional debt in the future.
The Company does not have any rating downgrade triggers that would accelerate
the maturity dates of its debt. However, a downgrade in the Company's credit
rating could adversely affect its ability to renew the existing credit
facilities, obtain access to new credit facilities or otherwise issue debt in
the future and could increase the cost of such debt.
The Company had $142.7 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 June 30, 2020 . The Company's ability to
access funds under its senior secured credit facilities depends, in part, on our
compliance with certain financial covenants. Any additional drawings under the
senior secured credit facilities will reduce the Company's future borrowing
capacity and the amount of total unused revolving loan commitments. As discussed
above, the ultimate outcome of the COVID-19 pandemic is uncertain at this time
and may significantly impact our future operating performance, liquidity and
financial position. Any adverse impact of the COVID-19 pandemic 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.
On March 30, 2020 , Mission entered into an asset purchase agreement to acquire
certain assets of the three television stations currently owned by Marshall :
KMSS serving the Shreveport, Louisiana market, KPEJ serving the Odessa, Texas
market and KLJB serving the Davenport, Iowa market. The purchase price for the
acquisition is approximately $49.0 million , which will be applied against
Marshall's existing loans payable to Mission on a dollar-for-dollar basis. The
purchase price is subject to customary adjustments. The proposed acquisition was
approved by the Bankruptcy Court for the Southern District of Texas but is also
subject to FCC and other customary approvals and is expected to close in 2020.
On July 8, 2020 , Nexstar assigned to Mission its option to purchase the CW
affiliate WPIX in the New York, NY market from Scripps. On the same date,
Mission notified Scripps of its exercise of the option for a purchase price of
$75.0 million , subject to customary adjustments, plus accrued interest in
accordance with the option agreement. Mission expects to fund this acquisition
through a new borrowing that is also expected to be guaranteed by Nexstar . The
proposed acquisition is pending the execution of a purchase agreement and is
also subject to FCC approval and other customary conditions and Mission expects
it to close at the end of 2020. This acquisition will allow the Company entrance
into this market. Nexstar previously acquired WPIX through a merger with Tribune
but simultaneously sold the station to Scripps on September 19, 2019 . Under
Nexstar's sale agreement with Scripps, Nexstar was granted an assignable option
to purchase the station.
On July 15, 2020 , Nexstar entered into a definitive agreement to acquire
the assets of WDKY-TV , the Fox affiliate in the Lexington, KY market, from
Sinclair for $18.0 million in cash, subject to working capital adjustments. The
purchase price is expected to be funded through cash on hand. The proposed
acquisition is subject to FCC approval and other customary conditions and
Nexstar expects it to close at the end of 2020. This acquisition will allow
Nexstar entrance into this market.
On July 24, 2020 , our Board of Directors declared a quarterly cash dividend of
$0.56 per share of our Class A common stock. The dividend is payable on August
21, 2020 to stockholders of record on August 7, 2020 .
Debt Covenants
Our credit agreement contains a covenant which requires us to comply with a maximum consolidated first lien net leverage ratio of 4.25 to 1.00. The financial covenant, which is formally calculated on a quarterly basis, is based on our combined results. The Mission and Shield amended credit agreements do not contain financial covenant ratio requirements but do provide for default in the event we do not comply with all covenants contained in our credit agreement. As ofJune 30, 2020 , we were in compliance with our financial covenant. We believeNexstar , Mission, and Shield will be able to maintain compliance with all covenants contained in the credit agreements governing their senior secured facilities and the indentures governing our 5.625% Notes due 2024 and 5.625% Notes due 2027 for a period of at least the next 12 months fromJune 30, 2020 .
Off-Balance Sheet Arrangements
As ofJune 30, 2020 , we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or 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. 45
-------------------------------------------------------------------------------- As ofJune 30, 2020 , we have outstanding standby letters of credit with various financial institutions amounting to$23.7 million , of which$20.3 million was assumed from the 2019 Tribune acquisition primarily in support of the worker's compensation insurance program. The outstanding balance of standby letters of credit is deducted against our unused revolving loan commitment under our senior secured credit facility and would not be available for withdrawal.
Summarized Financial Information
Nexstar Broadcasting's (a wholly-owned subsidiary ofNexstar and herein referred to as the "Issuer") 5.625% Notes due 2024 and 5.625% Notes due 2027 are fully and unconditionally guaranteed (the "Guarantees"), jointly and severally, byNexstar ("Parent"), Mission (a consolidated VIE) and certain ofNexstar Broadcasting's restricted subsidiaries (collectively, the "Guarantors" and, together with the Issuer, the "Obligor Group "). The Guarantees are subject to release in limited circumstances upon the occurrence of certain customary conditions set forth in the indentures governing the 5.625% Notes due 2024 and the 5.625% Notes due 2027. The Issuer's 5.635% Notes due 2024 and 5.625% Notes due 2027 are not registered with theSEC . The following combined summarized financial information is presented for theObligor Group after elimination of intercompany transactions between Parent, Issuer and Guarantors in theObligor Group and amounts related to investments in any subsidiary that is a non-guarantor. This information is not intended to present the financial position or results of operations of the consolidated group of companies in accordance withU.S. GAAP. Summarized Balance Sheet Information (in thousands) - Summarized balance sheet information as ofJune 30, 2020 andDecember 31, 2019 of theObligor Group is as follows: June 30, 2020 December 31, 2019 Current assets - external$ 1,500,711 $ 1,291,730 Current assets - due from consolidated entities outside of Obligor Group 174,190
171,344
Total current assets$ 1,674,901 $
1,463,074
Noncurrent assets - external(1) 10,409,213
10,869,745
Noncurrent assets - due from consolidated entities outside of Obligor Group 305,457 92,494 Total noncurrent assets$ 10,714,670 $ 10,962,239 Total current liabilities$ 799,539 $ 904,811 Total noncurrent liabilities$ 10,485,945 $ 10,733,488 Noncontrolling interests $ 6,391 $ 6,250
(1)
unconsolidated investees. These unconsolidated investees do not guarantee the
5.625% Notes due 2024 and 5.625% Notes due 2027. For additional information
on equity investments, refer to Note 6 to our Condensed Consolidated
Financial Statements.
Summarized Statements of Operations Information for the
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