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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Nexstar Media Group, Inc.    NXST

NEXSTAR MEDIA GROUP, INC.

(NXST)
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NEXSTAR MEDIA : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/06/2020 | 03:31pm EST
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 ended
December 31, 2019.

As used in this Quarterly Report on Form 10-Q and unless the context indicates
otherwise, "Nexstar" refers to Nexstar Media Group, Inc. and its consolidated
subsidiaries; "Nexstar Broadcasting" refers to Nexstar Broadcasting, Inc., our
wholly-owned direct subsidiary and which on October 1, 2020 was renamed Nexstar
Inc.; "Nexstar Digital" refers to Nexstar Digital LLC, our wholly-owned direct
subsidiary; the "Company" refers to Nexstar and the variable interest entities
("VIE") required to be consolidated in our financial statements; and all
references to "we," "our," "ours," and "us" refer to Nexstar.

As a result of our deemed controlling financial interests in the consolidated
VIEs in accordance with U.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 third quarter of 2020, net revenue increased by $454.6 million,

or 68.5% compared to the same period in 2019. The increase was primarily

due to the incremental revenue from acquisitions of $367.7 million and an

increase in distribution revenue and political advertising revenue of our

legacy stations of $87.3 million and $77.9 million, respectively. These

increases were partially offset by a decrease in revenue from core

advertising of legacy stations of $35.3 million, primarily due to the

business disruptions caused by COVID-19 and change in the mix between core

and political advertising as 2020 is an election year, a decrease in net

revenue from station divestitures of $27.4 million and a $7.3 million 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

Marshall decreased the Company's revenue by $4.6 million but also decreased

       the Company's operating expenses by $5.3 million.



• On September 1, 2020, our Board of Directors approved an additional $300

million in our share repurchase authorization to repurchase our Class A

common stock. During the three and nine months ended September 30, 2020, we

repurchased a total of 1,300,000 shares and 2,250,000 shares of our Class A

common stock for $125.0 million and $197.6 million, respectively, funded by

cash on hand. As of September 30, 2020, the remaining available amount

       under our share repurchase authorization was $259.2 million, net of all
       repurchases made.



• During the three and nine months ended September 30, 2020, we received a

total of $9.9 million and $207.0 in million cash distributions,

respectively, from our 31.3% equity method investment in TV Food Network.

• For each of the first three 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 $76.4 million.



• On October 1, 2020, Nexstar Broadcasting 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, Nexstar

merged its two primary operating subsidiaries, Nexstar Inc. and Nexstar

Digital, LLC, with Nexstar Inc. surviving the merger as the single

operating subsidiary of Nexstar. Accordingly, the broadcasting, networks

and digital businesses are now operating under the Nexstar Inc. umbrella.





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 Broadcasting Group Inc. ("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 Television Stations, LLC ("Fox") for $45.3 million in cash.
The acquisition from Fox allowed us entry into the Charlotte, NC market.



On September 1, 2020, Mission Broadcasting, Inc. ("Mission"), one of our
consolidated VIEs, completed the acquisition of certain assets of the three
television stations formerly owned by Marshall Broadcasting Group, Inc.
("Marshall"): KMSS serving the Shreveport, Louisiana market, KPEJ serving the
Odessa, Texas market and KLJB serving the Quad Cities, Iowa/Illinois market
which allowed it entrance into these markets. 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.



On September 17, 2020, we completed the acquisition of WDKY-TV, the Fox
affiliate in the Lexington, KY market, from Sinclair for $18.0 million in cash,
funded by cash on hand. The acquisition from Sinclair allowed us entry in the
Lexington KY market.




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2020 Dispositions

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).




On March 2, 2020, we 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.



Future Acquisitions



On July 8, 2020, Nexstar assigned to Mission its option to purchase CW
affiliated station 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
pursuant to the option agreement. On August 28, 2020, Mission signed a purchase
agreement to acquire WPIX. The acquisition is subject to FCC approval and other
customary conditions and Mission expects it to close at the end of 2020. Mission
expects to fund this acquisition through a new borrowing that is to be
guaranteed by Nexstar. Upon Mission's acquisition of WPIX, Nexstar intends to
enter into a local service agreement and option agreement. 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 August 7, 2020, Nexstar assigned to Mission its option to purchase the assets
of WNAC, the Fox affiliated full power television station serving the
Providence, Rhode Island market, from WNAC, LLC. On the same date, Mission
entered into an Assignment and Assumption Agreement with Nexstar and notified
WNAC, LLC of its exercise of the option. The purchase price is equal to a base
purchase price, plus an escalation amount per day from the date of the option
agreement until the completion of the acquisition, minus a credit for an
outstanding loan (all defined in the option agreement). Mission expects to fund
this acquisition through new borrowing that is to be guaranteed by Nexstar. The
proposed acquisition has received FCC approval and Mission expects it to close
in the fourth quarter of 2020. Nexstar currently provides services to WNAC under
an LMA which it intends to continue with Mission upon its completion of the
acquisition. Nexstar also intends to enter into an option agreement to purchase
WNAC from Mission.



On August 7, 2020, Nexstar also assigned to Mission its option to purchase KASY,
KWBQ and KRWB from Tamer. KASY (MNTV affiliated), KWBQ (CW affiliated) and KRWB
(CW affiliated) are full power television stations serving the Albuquerque, New
Mexico market. On the same date, Mission entered into an Assignment and
Assumption Agreement with Nexstar and notified Tamer of its exercise of the
option. The purchase price is equal to a base purchase price, plus an escalation
amount per year from the date of the option agreement until completion of the
acquisition, minus a fixed monthly credit from the date of the option agreement
until completion of the acquisition (all defined in the option agreement).
Mission expects to fund this acquisition through new borrowing that is to be
guaranteed by Nexstar. The proposed acquisition has received FCC approval and
Mission expects it to close in the fourth quarter 2020. Nexstar currently
provides services to these stations under an SSA which it intends to continue
with Mission upon its completion of the acquisition. Nexstar also intends to
enter into an option agreement to purchase the stations from Mission.



On August 10, 2020, Nexstar assigned to Mission its options to purchase WXXA-TV,
the Fox affiliate in the Albany, NY market, and WLAJ-TV, the ABC affiliate in
the Lansing, MI market, from Shield ("Shield Stations"). On the same date,
Mission entered into an Assignment and Assumption agreement with Nexstar and
notified Shield of its exercise of the options to purchase the stations. The
purchase price of these stations was $20.8 million. Mission expects to fund this
acquisition through new borrowing that is to be guaranteed by Nexstar. The
proposed acquisition of the Shield Stations has received FCC consent and Mission
expects to close it in the fourth quarter of 2020. Nexstar currently provides
services to the Shield Stations under JSAs and SSAs which it intends to continue
with Mission upon its completion of the acquisition. Nexstar also intends to
enter into an option agreement to purchase the stations from Mission.






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Debt Transactions

• During the nine months ended September 30, 2020, we prepaid a total of

$480.0 million in principal balance under our term loans, funded by cash on

hand. We also made an additional prepayment of $200.0 million in principal

balance of term loans pursuant to the mandatory prepayment requirement of

the amended credit agreement of Nexstar Broadcasting. The mandatory

prepayment resulted from the disposition of certain television station

       assets in the Seattle, WA and Milwaukee, WI markets to Fox.



• During the nine months ended September 30, 2020, we repaid scheduled

       principal maturities of $53.3 million under our term loans.




    •  On September 3, 2020, Nexstar and Mission amended their respective credit

agreements. The amendments provide for a new senior secured first lien

revolving credit facility (the "2020 Revolving Facility") in an aggregate

principal amount of $280.0 million, of which $30.0 million was initially

allocated to Nexstar and $250.0 million was initially allocated to Mission.

This is in addition to the $139.7 million and $3.0 million unused revolving

credit facilities under Nexstar Broadcasting and Mission's existing credit

       agreements, respectively.



• On September 3, 2020, Mission reallocated its $3.0 million available

capacity under its existing revolving credit facility to Nexstar. Mission

also drew upon $225.0 million under the 2020 Revolving Facility and used

the proceeds to repay in full its outstanding principal balance under its

       term B loan amounting to $224.5 million.




     •  On September 25, 2020, Nexstar Broadcasting issued $1.0 billion 4.75%

senior unsecured notes due 2028 at par ("4.75% Notes due 2028"). The net

proceeds from the issuance were used to redeem the $900.0 million 5.625%

senior unsecured notes due 2024 "(5.625% Notes due 2024") in full and pay

related premiums equal to 102.813% of the principal amount, accrued

interest and fees and expenses. The remainder of the proceeds was used for

        general corporate purposes.




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 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. 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.




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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 and in the third quarter of 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. As of September 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 and revenue
from political advertising in 2020. As of September 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 of September
30, 2020, our unrestricted cash on hand and positive working capital were $409.9
million and $669.5 million, respectively, both of which increased from our
December 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 $172.7 million and $25.0 million under the respective Nexstar and Mission
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
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 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 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, 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 elected not to
defer the remaining 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. The CARES Act is
not expected to have a material impact on the Company's Condensed Consolidated
Financial Statements.




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Overview of Operations


As of September 30, 2020, we owned, operated, programmed or provided sales and
other services to 197 full power television stations, including those owned by
VIEs, and one AM radio station in 115 markets in 39 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 36 full power television
stations owned by independent third parties, of which 35 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 4.75% Notes due 2028
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, exclusive of stations in the
Shreveport, Louisiana, Odessa, Texas and Quad Cities, Iowa/Illinois markets, to
acquire the assets and assume the liabilities of each Mission station, subject
to FCC consent. These option agreements, which expire on various dates between
2021 and 2028, are freely exercisable or assignable by us without consent or
approval by Mission or its shareholders. We expect these option agreements to be
renewed upon expiration.



We do not own the consolidated VIEs or their television stations. However, we
are deemed under U.S. GAAP to have controlling financial interests in these
entities because of (1) the local service agreements Nexstar has with their
stations, (2) our guarantees of the obligations incurred under Mission's and
Shield's senior secured credit facilities, (3) our power over significant
activities affecting these VIEs' economic performance, including budgeting for
advertising revenue and, in some cases, advertising sales and hiring and firing
of sales force personnel and (4) purchase options granted by each such VIE,
exclusive of Mission stations in the Shreveport, Louisiana, Odessa, Texas and
Quad Cities, Iowa/Illinois markets, which permit Nexstar to acquire the assets
and assume the liabilities of each of these VIEs' stations 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.

In December 2019, Marshall, a VIE previously consolidated by us and the owner of
three television stations, filed a voluntary petition for Chapter 11 protection
in the U.S. Bankruptcy Court for the Southern District of Texas. Effective on
December 6, 2019, the bankruptcy court ordered the cancellation of certain
contracts between us and Marshall, including the JSAs. As a result of these
developments, we evaluated our business arrangements with Marshall and
determined that we no longer had the power to direct the most significant
economic activities of the entity and thus we no longer met the accounting
criteria for a controlling financial interest in the entity. Thus, we
deconsolidated Marshall's assets, liabilities and equity effective in December
2019.

On March 30, 2020, Mission, a VIE consolidated by Nexstar, entered into an asset
purchase agreement to acquire certain assets of the three television stations
previously owned by Marshall: KMSS serving the Shreveport, Louisiana market,
KPEJ serving the Odessa, Texas market and KLJB serving the Quad Cities,
Iowa/Illinois market. On April 1, 2020, the acquisition was approved by the
Bankruptcy Court for the Southern District of Texas. On September 1, 2020,
Mission completed this acquisition which allowed it entrance into these markets.
(See "Executive Summary-2020 Acquisitions" above for additional information).
Upon closing of the acquisition, the SSAs between Nexstar and Marshall were
terminated. On September 1, 2020, Mission entered new SSAs with Nexstar for the
stations it acquired from Marshall.

See Note 2, "Variable Interest Entities" to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for additional information on VIEs.




                                       44

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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, the FCC 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 the FCC's local 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. The court's decision has been appealed to the U.S. Supreme
Court, which has granted certiorari and will review the decision. 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.

The FCC has repurposed a portion of the broadcast television spectrum for
wireless broadband use. In an incentive auction which concluded in April 2017,
certain television broadcasters accepted bids from the FCC to voluntarily
relinquish 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.

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. 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 nine months ended September 30, 2020, the Company spent a total of
$19.4 million and $49.3 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 nine months ended September 30, 2019, the Company spent a total of
$19.9 million and $56.3 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 nine months ended September 30, 2020, the Company received $12.9
million and $51.3 million, respectively, in reimbursements from the FCC related
to these expenditures which were recorded as operating income in the
accompanying Condensed Consolidated Statements of Operations. During the three
and nine months ended September 30, 2019, the Company received $20.4 million and
$54.0 million, respectively, in reimbursements from the FCC related to these
expenditures which were recorded as operating income in the accompanying
Condensed Consolidated Statements of Operations. As of September 30, 2020,
approximately $36.8 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 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 national and regional political
election campaigns and certain events such as the Olympic Games or the Super
Bowl. Advertising revenue is generally highest in the second and fourth quarters
of each year, due in part to increases in consumer advertising in the spring and
retail advertising in the period leading up to, and including, the holiday
season. In addition, advertising revenue is generally higher during
even-numbered years, when state, congressional and presidential elections occur
and when advertising airs during the Olympic 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 2020 Summer Olympics 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 if the Summer Olympics
are to occur when scheduled.

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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 September 30,                        Nine Months Ended September 30,
                                 2020                       2019                       2020                        2019
                          Amount           %         Amount          %          Amount           %          Amount           %
Core advertising        $   381,929        34.1     $ 290,213        43.7     $ 1,097,548        35.1     $   809,668        41.7
Political advertising       132,387        11.8        10,899         1.6         209,294         6.7          15,363         0.8
Distribution revenue        538,376        48.1       294,808        44.4       1,624,636        52.0         923,050        47.6
Digital                      55,231         4.9        58,137         8.8         158,332         5.1         167,209         8.6
Other                         8,160         0.9         5,670         0.9          26,975         0.8          13,159         0.7
Trade revenue                 2,120         0.2         3,848         0.6           7,873         0.3          10,785         0.6
Total net revenue       $ 1,118,203       100.0     $ 663,575       100.0     $ 3,124,658       100.0     $ 1,939,234       100.0




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 September 30,                        Nine Months Ended September 30,
                                2020                       2019                       2020                        2019
                         Amount           %         Amount          %          Amount           %          Amount           %
Net revenue            $ 1,118,203       100.0     $ 663,575       100.0     $ 3,124,658       100.0     $ 1,939,234       100.0
Operating expenses
(income):
Corporate expenses          39,699         3.6        63,252         9.5    

128,572 4.1 125,838 6.5 Direct operating expenses,

 net of trade              420,929        37.6       318,043        47.9       1,276,452        40.9         899,637        46.4
Selling, general and
administrative
expenses, excluding
corporate                  186,845        16.7       119,831        18.1         509,599        16.3         343,663        17.7
Depreciation                36,611         3.3        29,363         4.4   

107,787 3.4 84,890 4.4 Amortization of intangible assets

           69,265         6.2        42,443         6.4    

209,360 6.7 115,538 6.0 Amortization of broadcast rights

            31,968         2.9        18,452         3.0    

104,916 3.3 46,749 2.3 Trade expense

                2,162         0.2         4,284         0.6           8,337         0.3          11,597         0.6
Reimbursement from
the FCC related to
station repack             (12,873 )      (1.2 )     (20,417 )      (3.1 )       (51,347 )      (1.6 )       (54,020 )      (2.8 )
Goodwill and
intangible assets
impairment                       -           -        63,317         9.5               -           -          63,317         3.3
Change in the
estimated fair value
of contingent
consideration
attributable to a
merger                           -           -             -           -           3,933         0.1               -           -
Gain on
relinquishment of
spectrum                         -           -             -           -         (10,791 )      (0.3 )             -           -
Loss (gain) on
disposal of stations
and entities, net                -           -       (96,608 )     (14.6 ) 
      (7,025 )      (0.2 )       (96,608 )      (5.0 )
Total operating
expenses                   774,606                   541,960                   2,279,793                   1,540,601
Income from
operations             $   343,597$ 121,615$   844,865$   398,633


                                       46

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Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

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 $382.0 million for the three months ended September
30, 2020, compared to $290.2 million for the same period in 2019, an increase of
$91.8 million, or 31.6%. The increase was primarily due to incremental revenue
from Tribune stations of $135.4 million and current year station acquisitions of
$5.9 million, partially offset by a decrease in revenue from station
divestitures of $12.4 million. Our legacy stations' core advertising revenue
decreased by $35.3 million, primarily due to the business disruptions caused by
COVID-19 and changes in the mix between our core and political advertising. Our
deconsolidation of Marshall in December 2019 also resulted in a $1.8 million
decrease in revenue. Our largest advertiser category, automobile, represented
approximately 18% and 23% of our core advertising revenue for the three months
ended September 30, 2020 and 2019, respectively. Overall, including past results
of our newly acquired stations, automobile revenues decreased by approximately
34% during the quarter. The other categories representing our top five were
medical/healthcare and home repair/manufacturing, which increased in 2020,
attorneys, which decreased in 2020, and insurance which remained flat. 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 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 situation, decreased our advertising revenue in
2020 but is expected to increase our advertising revenue in 2021.

Political advertising revenue was $132.4 million for the three months ended
September 30, 2020, compared to $10.9 million for the same period in 2019, an
increase of $121.5 million as 2020 is an election year. Of the $121.5 million
increase, $39.4 million was attributable to incremental revenue from Tribune
stations we acquired in 2019, $4.9 million was attributable to current year
station acquisitions, and $77.9 million was attributable to our legacy stations.
We expect an increase in political advertising revenue in 2020 compared to 2019.

Distribution revenue was $538.4 million for the three months ended September 30,
2020, compared to $294.8 million for the same period in 2019, an increase of
$243.6 million, or 82.6%. The increase was primarily due to incremental revenue
in 2020 from Tribune acquisition in September 2019 of $160.5 million and current
year station acquisitions of $12.9 million, partially offset by a decrease in
revenue from station divestitures and deconsolidation of Marshall of $12.8
million and $4.3 million, respectively. Our legacy stations' revenue increased
by $87.3 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), contributions
from distribution agreements with OVDs and increase in revenue in 2020 resulting
from the temporary disruption of distribution agreements with AT&T/DirecTV from
July 2, 2019 to August 29, 2019. 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 $55.2 million for the three
months ended September 30, 2020, compared to $58.1 million for the same period
in 2019, a decrease of $2.9 million, or 5.0%. Our digital businesses' revenue
decreased by $4.0 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 $3.2 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 $5.5 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 $39.7 million for the three months ended September 30,
2020, compared to $63.3 million for the same period in 2019, a decrease of $23.6
million, or 37.2%. This was primarily attributable to a decrease in severance
and payroll-related costs, audit, legal and professional fees and stock-based
compensation associated with our acquisition of Tribune in 2019.


                                       47

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Station direct operating expenses, consisting primarily of news, engineering,
programming and station selling, general and administrative expenses (net of
trade expense) were $607.8 million for the three months ended September 30,
2020, compared to $437.9 million for the same period in 2019, an increase of
$169.9 million, or 38.8%. The increase was primarily due to expenses associated
with Tribune stations and other businesses we acquired in 2019 of $153.0 million
(including network and programming costs of $104.5 million) and our current year
station acquisitions of $13.2 million. In addition, our legacy stations'
programming costs increased by $26.2 million, primarily due to network
affiliation renewals and annual increases in our network affiliation costs and
an increase in selling, general and administrative expenses. In the third
quarter of 2020, we also recorded a $13.1 million provision for uncollectible
amounts due from Marshall. These increases were partially offset by a decrease
in expense from our station divestitures of $11.8 million, a decrease in expense
due to our deconsolidation of Marshall in December 2019 of $3.8 million and a
$29.6 million decrease in the operating expenses of our digital products due to
lower revenue.

Depreciation of property and equipment was $36.6 million for the three months
ended September 30, 2020, compared to $29.4 million for the same period in 2019,
an increase of $7.2 million, or 24.7%, 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
deconsolidation of Marshall, and increased depreciation from newly capitalized
assets related to station repacking activities.

Amortization of intangible assets was $69.3 million for the three months ended
September 30, 2020, compared to $42.4 million for the same period in 2019, an
increase of $26.8 million, or 63.2%. 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, divested stations and
deconsolidation of Marshall.

Amortization of broadcast rights was $32.0 million for the three months ended
September 30, 2020, compared to $18.5 million for the same period in 2019, an
increase of $13.5 million, or 73.3%. 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 the FCC's process of
repurposing a portion of the broadcast television spectrum for wireless
broadband use. These stations have vacated their former channels by the
prescribed FCC deadline of July 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, the FCC reimburses television broadcasters, MVPDs and other
parties for costs reasonably incurred due to the repack. During the three months
ended September 30, 2020 and 2019, we received a total of $12.9 million and
$20.4 million, respectively, in reimbursements from the FCC which we recognized
as operating income.

Income on equity investments, net


Income on equity investments, net was $15.9 million for the three months ended
September 30, 2020, compared to $3.2 million for the same period in 2019, an
increase of $12.7 million. The increase was primarily attributable to our 31.3%
equity in earnings of TV Food Network, less the amortization of basis
difference. On September 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 ended September 30, 2020, compared to $2.6 million for the same
period in 2019, an increase of $8.2 million, primarily attributable to pension
plans and other postretirement benefits we assumed through our merger with
Tribune on September 19, 2019.

Interest Expense, net




Interest expense, net was $77.3 million for the three months ended September 30,
2020, compared to $93.2 million for the same period in 2019, a decrease of $15.9
million, or 17.1%. The decrease was in conjunction with Nexstar's redemption of
6.125% and 5.875% Notes and a decrease in interest expense on our term loans due
to the combined effect of reduction in principal and London Interbank Offered
Rate ("LIBOR").

Loss on Extinguishment of Debt


During the three months ended September 30, 2020, loss on extinguishment of debt
was $37.4 million primarily due to loss on redemption of our $900.0 million
5.625% Notes due 2024, and prepayments on our term loans of $250.0 million.
There was no loss on extinguishment of debt as there was no debt prepayment or
transaction that would result in recognition of such loss during the same period
in 2019.

                                       48

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Income Taxes




Income tax expense was $65.2 million for the three months ended September 30,
2020 compared to $39.5 million for the same period in 2019. The effective tax
rates, which decreased in the current year, were 25.6% and 115.1% for each of
the respective periods. In 2019, Nexstar recorded an income tax expense of $12.8
million attributable to nondeductible goodwill written off as a result of the
Nexstar Divestitures related to the merger with Tribune (See Note 3), or a 37.3%
decrease to the effective tax rate in 2020. Additionally, the goodwill
impairment loss recorded in 2019 was not deductible for purposes of calculating
the tax provision and resulted in an income tax expense of $11.1 million in
2019, or a 32.3% decrease to the effective tax rate in 2020. Also, certain
transaction and severance costs that Nexstar incurred in connection with its
merger with Tribune in 2019 (See Note 3) were determined to be nondeductible for
tax purposes. This resulted in an income tax expense of $6.0 million in 2019, or
a 17.6% decrease to the effective tax rate in 2020.



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.



Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

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 $1,097.5 million for the nine months ended
September 30, 2020, compared to $809.7 million for the same period in 2019, an
increase of $287.8 million, or 35.6%. The increase is primarily due to our
incremental revenue from Tribune stations and other businesses we acquired in
2019 of $457.9 million, and an increase in revenue from our current year station
acquisitions of $11.9 million, partially offset by a decrease in revenue from
station divestitures of $33.0 million. Our legacy stations' core advertising
revenue decreased by $143.9 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 of Marshall in December 2019
also resulted in a $5.0 million decrease in revenue. Our largest advertiser
category, automobile, represented approximately 17% and 22% of our core
advertising revenue for the nine months ended September 30, 2020 and 2019,
respectively. Overall, including past results of our newly acquired stations,
automobile revenues decreased by approximately 36% in 2020. The other categories
representing our top five which decreased in 2020 were attorneys,
medical/healthcare, furniture and fast food restaurants. 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
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 situation, decreased our advertising revenue in 2020 but is
expected to increase our advertising revenue in 2021.

Political advertising revenue was $209.3 million for the nine months ended
September 30, 2020, compared to $15.4 million for the same period in 2019, an
increase of $193.9 million, as 2020 is an election year. Of the $193.9 million
increase, $68.2 million was attributable to the incremental revenue from Tribune
stations we acquired in 2019, $5.8 million was attributable to our current year
station acquisitions, and $120.9 million was attributable to our legacy
stations. We expect an increase in political advertising revenue in 2020
compared to 2019.

Distribution revenue was $1,624.6 million for the nine months ended September
30, 2020, compared to $923.1 million for the same period in 2019, an increase of
$701.6 million, or 76.0%. The increase is primarily due to incremental revenue
in 2020 from Tribune acquisition in September 2019 of $536.9 million (including
$12.3 million revenue from copyright cable royalty received in second quarter of
2020) and our current year station acquisitions of $28.8 million. Our legacy
stations' revenue increased by $195.4 million, primarily due to 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 increase in revenue in 2020 resulting
from the temporary disruption of distribution agreements with AT&T/DirecTV from
July 2, 2019 to August 29, 2019. These increases were partially offset by a
decrease in revenue due to station divestitures of $46.1 million and
deconsolidation of Marshall of $13.1 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.

                                       49

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Digital revenue, representing advertising revenue on our stations' web and
mobile sites and other internet-based revenue, was $158.3 million for the nine
months ended September 30, 2020, compared to $167.2 million for the same period
in 2019, a decrease of $8.9 million, or 5.3%. Our digital businesses' revenue
decreased by $22.9 million primarily due to the business disruption caused by
COVID-19 since mid-March of 2020 and realigned digital business operations. Our
legacy stations' revenue from web and mobile sites also decreased by $5.3
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 $22.7 million,
less a decrease in revenue from station divestitures of $3.5 million.



Operating Expenses



Corporate expenses, related to costs associated with the centralized management
of our stations, were $128.6 million for the nine months ended September 30,
2020, compared to $125.8 million for the same period in 2019, an increase of
$2.7 million, or 2.2%. This was primarily attributable to an increase in payroll
and bonuses of $1.7 million, an increase in stock-based compensation of $3.2
million due to new equity incentives granted, and increase in legal fees of $5.4
million primarily attributable to the ongoing litigation inherited from Tribune,
and an overall increase in overhead costs, including property rentals, hardware,
communications and software licenses, of $13.4 million. These increases were
partially offset by decreases in severance and professional fees of $9.6 million
and $11.3 million, respectively, primarily associated with the Tribune
acquisition in 2019.



Station direct operating expenses, consisting primarily of news, engineering,
programming and station selling, general and administrative expenses (net of
trade expense) were $1,786.1 million for the nine months ended September 30,
2020 compared to $1,243.3 million for the same period in 2019, an increase of
$542.8 million, or 43.7%. This was primarily due to expenses associated with the
Tribune stations and other businesses we acquired in 2019 of $525.4 million
(including network and programming costs of $352.9 million), and expenses
associated with our current year station acquisitions of $26.6 million. In
addition, our legacy stations' programming costs increased by $84.1 million,
primarily due to network affiliation renewals and annual increases in our
network affiliation costs. In the third quarter of 2020, we also recorded a
$13.1 million provision for uncollectible amounts due from Marshall. These
increases were partially offset by a decrease in expense from our station
divestitures of $43.9 million, a decrease in expense due to our deconsolidation
of Marshall in December 2019 of $11.3 million and a $59.5 million decrease in
the operating expenses of our digital products due to lower revenue.



Depreciation of property and equipment was $107.8 million for the nine months
ended September 30, 2020, compared to $84.9 million for the same period in 2019,
an increase of $22.9 million, or 27.0%. 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 $209.4 million for the nine months ended
September 30, 2020, compared to $115.5 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 $104.9 million for the nine months ended
September 30, 2020, compared to $46.7 million for the same period in 2019, an
increase of $58.2 million, or 124.4%, 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 the FCC's process of repurposing a portion of the
broadcast television spectrum for wireless broadband use. These stations have
vacated their former channels by the FCC-prescribed deadline of July 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, the FCC reimburses
television broadcasters, MVPDs and other parties for costs reasonably incurred
due to the repack. During the nine months ended September 30, 2020 and 2019, the
Company received $51.3 million and $54.0 million, respectively, in
reimbursements from the FCC which it 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.

                                       50

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Income on equity investments, net


Income on equity investments, net was $41.4 million for the nine months ended
September 30, 2020, compared to $2.1 million for the same period in 2019, an
increase of $39.3 million, primarily attributable to our 31.3% equity in
earnings of TV Food Network, less amortization of basis difference. On September
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 $32.3 million for the nine months ended September 30, 2020, compared to $5.4 million for the same period in 2019, an increase of $26.9 million, primarily attributable to the pension plans and other postretirement benefit plans we assumed through our merger with Tribune on September 19, 2019.



Interest Expense, net



Interest expense, net was $260.8 million for the nine months ended September 30,
2020, compared to $197.5 million for the same period in 2019, an increase of
$63.3 million, or 32.0%. The increase was primarily due to interest incurred on
term loans issued on September 19, 2019 and on 5.625% Notes due 2027 issued July
3, 2019 which were both related to the financing of Nexstar's acquisition of
Tribune and have full nine months-worth of expense in 2020, partially offset
primarily by a decrease in interest expense in conjunction with Nexstar'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
LIBOR.


Loss on Extinguishment of Debt




Loss on extinguishment of debt was $44.8 million for the nine months ended
September 30, 2020, compared to $3.7 million for the same period in 2019, an
increase of $41.1 million, primarily due to loss on redemption of our $900.0
million 5.625% Notes due 2024, and an increase in prepayments on our term loans
of $500.0 million in 2020 compared to the prior period.



Income Taxes



Income tax expense was $166.9 million for the nine months ended September 30,
2020 compared to $82.6 million for the same period in 2019. The effective tax
rates, which decreased in the current year, were 27.3% and 40.3% for each of the
respective periods. In 2019, Nexstar recorded an income tax expense of $12.8
million attributable to nondeductible goodwill written off as a result of the
Nexstar Divestitures related to the merger with Tribune (See Note 3), or a 6.3%
decrease to the effective tax rate in 2020. Additionally, the goodwill
impairment loss recorded in 2019 was not deductible for purposes of calculating
the tax provision and resulted in an income tax expense of $11.1 million in
2019, or a 5.4% decrease to the effective tax rate in 2020. Also, certain
transaction and severance costs that Nexstar incurred in connection with its
merger with Tribune in 2019 (See Note 3) were determined to be nondeductible for
tax purposes. This resulted in an income tax expense of $6.0 million in 2019, or
a 2.9% decrease to the effective tax rate in 2020.


                                       51

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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.



In the third quarter in 2020, our financial results continued to improve 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. As of September 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 and revenue from political advertising in 2020. As of September
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 September 30, 2020, the Company's unrestricted
cash on hand amounted to $409.9 million and the Company had positive working
capital of $669.5 million, both increased from the December 31, 2019 levels of
$232.1 million and $404.2 million, respectively. As of September 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 $172.7 million and $25.0 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):



                                                         Nine Months Ended September 30,
                                                          2020                    2019
Net cash provided by operating activities            $       877,488       $          315,982
Net cash provided by (used in) investing
activities                                                   260,362               (4,582,153 )
Net cash provided by (used in) financing
activities                                                  (960,012 )      

4,455,085

Net increase in cash, cash equivalents and
restricted cash                                      $       177,838       $          188,914
Cash paid for interest                               $       290,250       $          178,882
Income taxes paid, net of refunds                    $       201,979       $           68,627




                                                     As of September      As of December 31,
                                                           30,
                                                          2020                   2019
Cash, cash equivalents and restricted cash           $       426,516     $  

248,678

Long-term debt, including current portion                  7,882,540        

8,492,588

Unused revolving loan commitments under senior
secured credit facilities (1)                                197,662                  142,662



(1) Based on covenant calculations as of September 30, 2020, all of the $172.7

    million and $25.0 million unused revolving loan commitments under the
    respective Nexstar and Mission senior secured credit facilities were
    available for borrowing.


                                       52

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Cash Flows - Operating Activities


Net cash flows provided by operating activities increased by $561.5 million
during the nine months ended September 30, 2020, compared to the same period in
2019. This was primarily due to increases in revenue (excluding trade) of
$1,188.3 million,  distributions from our equity investments in TV Food Network
of $207.0 million, source of cash resulting from timing of accounts receivable
collections of $38.7 million, and collection of copyright cable royalty
receivable of $13.9 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 $525.9 million, cash
paid for interest of $111.4 million, payments for broadcast rights of $100.1
million, use of cash resulting from timing of payments to our vendors of $13.9
million, and higher tax payments of $133.4 million.

Cash Flows - Investing Activities


Net cash flows provided by investing activities were $260.4 million during the
nine months ended September 30, 2020, compared to net cash flows used in
investing activities of $4,582.2 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 in September 2019, and collected Mission's loan
receivable of $49.0 million from Marshall. These increases were reduced by the
cash payments the Company made to acquire a total of six television stations and
certain non-license assets for total cash consideration payments of $132.3
million. In September 2019, we completed our acquisition of Tribune for a total
cash purchase price of $7.187 billion, less $1.289 billion of cash acquired.
Substantially concurrently with our Merger with Tribune, we sold the assets of
21 full power television stations in 16 markets for a cash consideration of
$1.353 billion, including preliminary working capital adjustments and net of
related fees. We also received $1.2 million in proceeds from disposal of assets.
Our capital expenditures during the nine months ended September 30, 2020 were
$170.2 million, an increase of $59.9 million compared to the same period in
2019, primarily due to increased capital expenditure requirements from Tribune
stations and other businesses we acquired in 2019, partially offset by station
divestitures. Other activity included a decrease in reimbursements from the FCC
for station repack costs of $2.7 million.

Cash Flows - Financing Activities

Net cash flows used in financing activities were $960.0 million during the nine months ended September 30, 2020, compared to net cash flows provided by financing activities of $4,455.1 million in the same period in 2019.


In 2020, we made payments on the outstanding principal balance of our term loans
of $957.8 million (including $680.0 million in Nexstar's debt prepayments and
Mission's full repayment of its term loan B of $224.5 million), redeemed our
$900.0 million unsecured senior notes and paid $25.3 million premium on such
redemption, paid dividends to our common stockholders of $76.4 million ($0.56
per share during each quarter), paid deferred financing costs of $10.7 million
associated with our new $1.0 billion senior unsecured notes, repurchased common
shares of $197.6 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
$12.7 million. These decreases were offset by the proceeds from the issuance of
our new $1.0 billion senior unsecured notes issued at par and from Mission's
drawing from the revolving credit facilities of $225.0 million.



In 2019, we issued $1.120 billion new 5.625% Notes due 2027, $670.4 million new
Term Loan A (net of lender fees), and $3.041 billion new Term Loan B (net of
lender fees) which were all used to partially fund the acquisition of Tribune
and received $1.75 million in proceeds from exercise of stock options. The cash
flow increases were partially offset by the repayment of term loans of $215.4
million, payments for debt financing costs of $70.7 million, payments of
dividend to our common stockholders of $62.1 million ($0.45 per share each
quarter), cash payment for taxes in exchange for shares of common stock withheld
of $9.8 million, payment for noncontrolling interest of KHII of $6.4 million,
payment for capital lease of $6.4 million and uses of cash from other financing
activities of $6.9 million.

Our senior secured credit facility may limit the amount of dividends we may pay to stockholders over the term of the agreement.

                                       53

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Future Sources of Financing and Debt Service Requirements




As of September 30, 2020, the Company had total combined debt of $7.9 billion,
net of financing costs and discounts, which represented 77.9% 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 September 30, 2020 (in thousands):


                                    Total           2020          2021-2022       2023-2024      Thereafter
Nexstar senior secured credit
facility                         $ 4,935,915$     5,357$    79,967$ 1,958,955$ 2,891,636
Mission senior secured credit
facility                             225,000               -               -         225,000               -
Shield senior secured credit
facility                              20,950             287           3,903          16,760               -
5.625% Notes due 2027              1,785,000               -               -               -       1,785,000
4.75% Notes due 2028               1,000,000               -               -               -       1,000,000
                                 $ 7,966,865$     5,644$    83,870$ 2,200,715$ 5,676,636




We make semiannual interest payments on the 5.625% Notes due 2027 on January 15
and July 15 of each year. We make semiannual interest payments on our 4.75%
Notes due 2028 on May 1 and November 1 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.

The terms of our, Mission's and Shield's senior secured credit facilities, as
well as the indentures governing our 5.625% Notes due 2027 and 4.75% Notes due
2028, 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 $197.7 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 September 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 July 8, 2020, Nexstar assigned to Mission its option to purchase the CW
affiliated station WPIX in the New York, NY market from Scripps. On the same
date, Mission notified Scripps of its exercise of the option to purchase the
station for a purchase price of $75.0 million, subject to customary adjustments,
plus accrued interest in accordance with the option agreement. On August 28,
2020, Mission signed a purchase agreement to acquire WPIX. Mission expects to
fund this acquisition through new borrowing that is to be guaranteed by Nexstar.
The proposed acquisition is subject to FCC approval and other customary
conditions and Mission expects it to close at the end of 2020. Upon Mission's
acquisition of WPIX, Nexstar intends to enter into a local service agreement and
option agreement.



On August 7, 2020, Nexstar assigned to Mission its option to purchase the assets
of WNAC, the Fox affiliated full power television station serving the
Providence, Rhode Island market, from WNAC, LLC. On the same date, Mission
notified WNAC, LLC of its exercise of the option and simultaneously entered into
an Assignment and Assumption Agreement with Nexstar. The purchase price is equal
to a base purchase price, plus an escalation amount per day from the date of the
option agreement until the completion of the acquisition, minus a credit for an
outstanding loan (all defined in the option agreement). Mission expects to fund
this acquisition through new borrowing that is to be guaranteed by Nexstar. The
proposed acquisition has received FCC approval and Mission expects it to close
in the fourth quarter of 2020. Nexstar currently provides services to WNAC under
an LMA which it intends to continue with Mission upon its completion of the
acquisition. Nexstar also intends to enter into an option agreement to purchase
WNAC from Mission.




                                       54
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On August 7, 2020, Nexstar also assigned to Mission its option to purchase KASY,
KWBQ and KRWB from Tamer. KASY (MNTV affiliated), KWBQ (CW affiliated) and KRWB
(CW affiliated) are full power television stations serving the Albuquerque, New
Mexico market. On the same date, Mission notified Tamer of its exercise of the
option and simultaneously entered into an Assignment and Assumption Agreement
with Nexstar. The purchase price is equal to a base purchase price, plus an
escalation amount per year from the date of the option agreement until
completion of the acquisition, minus a fixed monthly credit from the date of the
option agreement until completion of the acquisition (all defined in the option
agreement). Mission expects to fund this acquisition through new borrowing that
is to be guaranteed by Nexstar. The proposed acquisition has received FCC
approval and Mission expects it to close in the fourth quarter of 2020. Nexstar
currently provides services to these stations under an SSA which it intends to
continue with Mission upon its completion of the acquisition. Nexstar also
intends to enter into an option agreement to purchase the stations from Mission.



On August 10, 2020, Nexstar assigned to Mission its options to purchase WXXA-TV,
the Fox affiliate in the Albany, NY market, and WLAJ-TV, the ABC affiliate in
the Lansing, MI market, from Shield. On the same date, Mission notified Shield
of its exercise of the options to purchase the stations and simultaneously
entered into an Assignment and Assumption Agreement with Nexstar. The purchase
price of these stations was $20.8 million. Mission expects to fund this
acquisition through new borrowing that is to be guaranteed by Nexstar. The
proposed acquisition of the Shield stations has received FCC consent and Mission
expects it to close in the fourth quarter of 2020. Nexstar currently provides
services to the Shield Stations under JSAs and SSAs which it intends to continue
with Mission upon its completion of the acquisition. Nexstar also intends to
enter into an option agreement to purchase the stations from Mission.

On September 1, 2020, Nexstar's Board of Directors approved $300 million in
Nexstar's share repurchase authorization to repurchase its Class A common stock.
As of September 30, 2020, the remaining available amount under the share
repurchase authorization was $259.2 million, net of all repurchases made. Share
repurchases may be made from time to time in open market transactions, block
trades or in private transactions. There is no minimum number of shares that
Nexstar is required to repurchase and the repurchase program may be suspended or
discontinued at any time without prior notice.



On October 9, 2020, Nexstar contributed $34.8 million in cash to the Tribune
qualified pension plans. Nexstar projects no additional cash contribution to its
qualified pension plans during the remainder of 2020.



On October 19, 2020, Nexstar acquired 2,927,522 shares in Series A Preferred
Stock of VENN, a live 24/7 streaming network for gaming and entertainment based
in Los Angeles, CA, for a total cash consideration of $7.0 million.



On October 21, 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 November 20, 2020 to stockholders of record on November 6, 2020.

On October 30, 2020, Nexstar prepaid $300.0 million of the outstanding principal balance under its term loans, funded by cash on hand.

Debt Covenants


Our credit agreement contains a covenant which requires us to comply with a
maximum consolidated first lien net leverage ratio of 4.25 to 1.00. The
financial covenant, which is formally calculated on a quarterly basis, is based
on our combined results. The Mission and Shield amended credit agreements do not
contain financial covenant ratio requirements but do provide for default in the
event we do not comply with all covenants contained in our credit agreement. As
of September 30, 2020, we were in compliance with our financial covenant. We
believe Nexstar, 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 2027 and 4.75%
Notes due 2028 for a period of at least the next 12 months from September 30,
2020.

Off-Balance Sheet Arrangements


As of September 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.

As of September 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.


                                       55

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Summarized Financial Information




Nexstar Broadcasting's (a wholly-owned subsidiary of Nexstar and herein referred
to as the "Issuer") 5.625% Notes due 2027 and 4.750% Notes due 2028 are fully
and unconditionally guaranteed (the "Guarantees"), jointly and severally, by
Nexstar Media Group, Inc. ("Parent"), Mission (a consolidated VIE) and certain
of Nexstar 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
2027 and the 4.75% Notes due 2028. The Issuer's 5.625% Notes due 2027 and 4.75%
Notes due 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 and Guarantors 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.



Summarized Balance Sheet Information (in thousands) - Summarized balance sheet
information as of September 30, 2020 and December 31, 2019 of the Obligor Group
is as follows:



                                                     September 30, 2020       December 31, 2019
Current assets - external                           $          1,304,636     $         1,291,730
Current assets - due from consolidated entities
outside of Obligor Group                                         175,487                 171,344
   Total current assets                             $          1,480,123     $         1,463,074
Noncurrent assets - external(1)                               10,358,163    

10,869,745

Noncurrent assets - due from consolidated entities
outside of Obligor Group                                         292,843                  92,494
   Total noncurrent assets                          $         10,651,006     $        10,962,239
Total current liabilities                           $            649,443     $           904,811
Total noncurrent liabilities                        $         10,334,777     $        10,733,488
Noncontrolling interests                            $              6,391     $             6,250



(1) Excludes Nexstar Broadcasting's equity investments of $1.313 billion and

$1.477 billion as of September 30, 2020 and December 31, 2019, respectively,

in unconsolidated investees. These unconsolidated investees do not guarantee

    the 4.75% Notes due 2028 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 Obligor Group (in thousands):

© Edgar Online, source Glimpses

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